Tencent Announces 2013 Third Quarter Results PR Newswire HONG KONG, Nov 13, 2013 HONG KONG, Nov 13, 2013 /PRNewswire/ -- Tencent Holdings Limited ("Tencent" or the "Company", SEHK 00700), a leading provider of comprehensive Internet services in China, today announced the unaudited consolidated results for the third quarter of 2013 ended September 30, 2013. Highlights of the Third Quarter of 2013: oTotal revenues were RMB15,535.1 million (USD2,526.9 million^1), an increase of 8.0% over the second quarter of 2013 ("QoQ") or an increase of 34.3% over the third quarter of 2012 ("YoY"). oRevenues from Value-Added services ("VAS") were RMB11,635.2 million (USD1,892.5 million), an increase of 8.2% QoQ or an increase of 24.9% YoY. oRevenues from online advertising were RMB1,390.1 million (USD226.1 million), an increase of 7.2% QoQ or an increase of 36.9% YoY. oRevenues from eCommerce transactions were RMB2,359.3 million (USD383.8 million), an increase of 7.3% QoQ or an increase of 108.1% YoY. oGross profit was RMB8,498.8 million (USD1,382.4 million), an increase of 9.0% QoQ or an increase of 25.4% YoY. Gross margin decreased to 54.7% from 58.6% of the third quarter of 2012. oOperating profit was RMB4,815.8 million (USD783.3 million), an increase of 5.5% QoQ or an increase of 16.8% YoY. Operating margin decreased to 31.0% from 35.7% of the third quarter of 2012. oNon-GAAP operating profit was RMB5,331.4 million (USD867.2 million), an increase of 5.6% QoQ or an increase of 20.0% YoY. Non-GAAP operating margin decreased to 34.3% from 38.4% of the third quarter of 2012. oProfit for the quarter was RMB3,876.2 million (USD630.5 million), an increase of 5.2% QoQ or an increase of 19.6% YoY. Net margin decreased to 25.0% from 28.0% of the third quarter of 2012. Non-GAAP profit for the quarter^2 was RMB4,411.7 million (USD717.6 million), an increase of 5.3% QoQ or an increase of 23.0% YoY. Non-GAAP net margin decreased to 28.4% from 31.0% of the third quarter of 2012. oProfit attributable to equity holders of the Company for the quarter was RMB3,866.7 million (USD628.9 million), an increase of 5.1% QoQ or an increase of 20.1% YoY. Non-GAAP profit attributable to equity holders of the Company for the quarter^2 was RMB4,375.7 million (USD711.7 million), an increase of 5.4% QoQ or an increase of 23.2% YoY. oBasic earnings per share were RMB2.105. Diluted earnings per share were RMB2.070. oKey platform statistics: oMonthly active Instant Messaging ("IM") user accounts were 815.6 million, a decrease of 0.4% QoQ or an increase of 4.0% YoY. oPeak simultaneous online IM user accounts were 178.2 million, an increase of 2.9% QoQ or an increase of 6.5% YoY. oCombined MAU of Weixin and WeChat were 271.9 million, an increase of 15.3% QoQ or an increase of 124.3% YoY. oMonthly active Qzone user accounts were 623.3 million, a decrease of 0.5% QoQ or an increase of 5.1% YoY. oPeak simultaneous online QQ Game Platform user accounts were 8.2 million, a decrease of 2.4% QoQ or a decrease of 12.8% YoY. oFee-based VAS registered subscriptions were 89.0 million, a decrease of 9.8% QoQ or a decrease of 17.2% YoY.  Figures stated in USD are based on USD1 to RMB6.1480  See "Non-GAAP Financial Measures" section for more details on the reasons for presenting these measures Mr. Ma Huateng, Chairman and CEO of Tencent, said, "In the third quarter, we achieved continued momentum operationally, strategically, and financially. Operationally, we launched a number of mobile games integrated with Mobile QQ and Weixin, which have become highly popular in China. Strategically, we invested into, and formed a strategic cooperation with Sogou, a leading search services, and look forward to providing our users with an enhanced search experience. Financially, we reported healthy growth in revenue, earnings, and free cash flow. We will continue to invest in our business and ecosystem through partnerships and strategic investments to create more value for our users, advertisers, developers and partners." Financial Review for the Third Quarter of 2013 VAS revenues increased 24.9% YoY to RMB11,635.2 million and represented 74.9% of our total revenues for the third quarter of 2013. Online games revenues increased 35.4% YoY to RMB8,424.3 million. This mainly reflected higher revenues from major domestic PC titles, contribution from new PC titles, and an increase in international revenues. Social networks revenues increased by 3.7% YoY to RMB3,210.8 million. This was primarily driven by growth in item-based sales within applications on our open platforms, partly offset by a decline in subscription revenues. Smart phone games integrated with Mobile QQ and Weixin also contributed to the revenue growth of our online games and social networks. Online advertising revenues increased 36.9% YoY to RMB1,390.1 million and represented 8.9% of our total revenues. This was primarily driven by significant growth in revenues from performance-based social advertising and online video advertising. Revenues from traditional brand advertising also increased. eCommerce transactions revenues increased 108.1% YoY to RMB2,359.3 million and represented 15.2% of our total revenues. This mainly reflected a significant growth in our principal eCommerce transactions. Fees generated from transactions on our marketplace also increased. Other Key Financial Information for the Third Quarter of 2013 Share-based compensation was RMB477.5 million for the third quarter of 2013 as compared with RMB446.6 million for the previous quarter. Capital expenditure was RMB1,620.9 million for the third quarter of 2013 as compared with RMB1,464.0 million for the previous quarter. The Company didn't repurchase any shares on the Stock Exchange during the third quarter of 2013 and as compared with 4,585,700 shares repurchased for an aggregate consideration of approximately HKD1,125.5 million in the previous quarter. As at September 30, 2013, net cash position totaled RMB34,400.4 million which excluded short-term borrowings of RMB6,007.0 million and long-term notes payable of RMB9,216.4 million. As at September 30, 2013, the total number of shares of the Company in issue was 1.859 billion. BUSINESS REVIEW AND OUTLOOK Overall Financial Performance In the third quarter of 2013, we achieved solid year-on-year growth in revenues and profits, while driving uptake of our smart phone applications and launching several smart phone games. oVAS. Our online game business benefited from the growth of our major PC titles and initial contributions from smart phone games integrated with Mobile QQ and Weixin. Our social network revenues grew as applications on our open platforms registered a significant increase in item-based sales, offsetting weakness in subscription services. oOnline advertising. Our online advertising business achieved a solid revenue increase compared to the same period last year, reflecting growth across brand display and performance display categories. Performance-based social advertising and online video advertising were the key growth drivers of the business. oeCommerce transactions. The third quarter of 2013 saw a significant year-on-year increase in revenues from principal eCommerce transactions as we improved our user experience and expanded our business coverage. Fees generated from transactions on our marketplaces also increased compared to the same period last year. Strategic Highlights In September 2013, we made a joint press announcement with Sohu and Sogou regarding the establishment of a strategic co-operation, under which we invested a net cash amount of USD448 million in Sogou and merged our SoSo search-related businesses and certain other assets with Sogou. Immediately after the transaction, we held 36.5% of Sogou's equity capital and 20.6% of the voting interest of Sogou, each on a fully-diluted basis. Sogou will continue to operate independently. We will work closely with Sogou on joint development, cross-promotion and integration related to products and services, while collaborating in areas of search technology, user insights and data sharing. Sogou's products will have direct access to the vast user base of our communities. We believe Sogou is the ideal partner for us to further develop search opportunities in China. The transaction reinforces our "open, win-win" philosophy of working with leading teams to create innovative products for users, and to build a healthy, diversified ecosystem for the industry. We believe that Sogou, benefiting from its combination with SoSo, will deliver superior search experiences to users on our social, browser and content platforms, especially on mobile devices. We expect that Sogou may also enjoy cost synergies and greater monetisation potential as a result of the economies of scale inherent in the search business. Divisional and Product Highlights Communications Platforms In the third quarter of 2013, the user base of QQ grew incrementally, with MAU increasing by 4.0% on a year-on-year basis to 815.6 million at the end of the quarter. Aggregate MAU was relatively stable quarter-on-quarter, while smart device MAU^3 grew by 10.1% quarter-on-quarter, reflecting increased user adoption of Mobile QQ as we enhanced its user experience and features. PCU for the quarter reached 178.2 million, representing year-on-year growth of 6.5%. Combined MAU of Weixin and WeChat increased by 124.3% on a year-on-year basis to 271.9 million at the end of the third quarter of 2013. The rapid active user expansion was supported by the launch of new services and features, such as games and online payment for Weixin, and improved user experience. In addition, WeChat benefited from marketing activities in international markets. Social Platforms Qzone's MAU increased by 5.1% on a year-on-year basis to 623.3 million at the end of the third quarter of 2013. On a quarter-on-quarter basis, while aggregate MAU remained broadly stable, smart device MAU^4 grew by 10.4% quarter-on-quarter, reflecting increased user adoption of Mobile Qzone.  Smart device MAU of QQ denotes the total number of QQ MAU that logged in via the Mobile QQ application on iOS or Android devices at least once during the last calendar month of the quarter. Aggregate MAU of QQ denotes the total number of user accounts that logged into QQ on any device at least once during the last calendar month of the quarter.  Smart device MAU of Qzone denotes the total number of Qzone MAU that logged in via the Mobile Qzone applications on iOS or Android devices at least once during the last calendar month of the quarter. Aggregrate MAU of Qzone denotes the total number of user accounts that logged into Qzone on any device at least twice during the last calendar month of the quarter. Media Platforms In the third quarter of 2013, we made significant progress in mobilising our media platforms. For example, Tencent News has significantly expanded its user base and reinforced its leading position via mobile applications as well as plug-ins on Mobile QQ and Weixin. We are exploring monetising Tencent News via splash screen advertisements and sponsored news feeds. VAS Our open platforms delivered significant year-on-year growth in paying users and revenues. During the quarter, we continued to focus on nurturing success for third-party developers and doubled the number of revenue-generating applications compared to the same period last year. We also strengthened our distribution capabilities, in order to enhance the reach of applications on our platforms. Our VAS subscription count continued to decline in the third quarter of 2013, primarily reflecting lower consumption of our paid subscriptions as users shift from PCs to mobile devices, due to fewer paid privileges on smart devices as compared to those on PCs or feature phones. In addition, stringent measures to clean up certain user accounts acquired through mobile channels with low possibility of fee collection impacted our subscription count. We are in the process of aligning our VAS subscription services with the mobile Internet opportunities, through smart-phone-oriented subscription services such as Super VIP. In the third quarter of 2013, our online game business benefited from the growth of our major domestic titles and higher contribution from international markets. QQ Game experienced a decline in PCU compared to the same period last year as increasing mobile usage resulted in a more dispersed user activity pattern, and as our open platforms impacted user activity. Since August 2013, we have introduced a number of smart phone games integrated with Mobile QQ and Weixin, many of which achieved first-ranked positions in application store rankings of game downloads in China. We believe such consistent performance demonstrates that our mobile platforms can achieve not only extensive user reach via Mobile QQ and Weixin game centers, but also viral adoption and enhanced user engagement by enabling game players to interact with their friends and families. We will expand our smart phone game portfolio for Mobile QQ and Weixin with both self-developed and third-party games. In our income statement, we allocate revenues from games integrated with Mobile QQ and Weixin to different revenue categories under the VAS segment. The portion attributable to the Mobile QQ and Weixin platforms is included in social network revenues, while the remaining portion, which is related to game operations and game development, is included in online game revenues. Online Advertising Our advertising business continued to expand in the third quarter of 2013, with revenue growth across the brand display and performance display categories. For brand display advertising, revenues from our online video platform achieved strong growth, riding on an expanded advertiser base and improved pricing. Our regional portals also registered revenue growth. For performance display advertising, revenues from our social platforms benefited from growth in impression volume and improved targeting, which enables advertisers to achieve competitive cost per click while yielding attractive revenue per thousand impressions for our platforms. For search advertising, we expect the integration between Sogou and SoSo to complete by the end of 2013. eCommerce Transactions The third quarter of 2013 saw a significant year-on-year growth in the volume of principal eCommerce transactions. This reflected our focus on enhancing user experience, broadening product categories and expanding geographic coverage. Our marketplaces also achieved revenue growth compared to the same period last year, with improved product selection and customer service. About Tencent Tencent uses technology to enrich the lives of Internet users. Every day, hundreds of millions of people communicate, share experiences, consume information, seek entertainment, and shop online through our integrated platforms. Our diversified services include QQ, Weixin and WeChat for communications; Qzone for social networking; QQ Game Platform for online games; QQ.com for information; as well as our eCommerce open platform. Our company was founded in Shenzhen in 1998 and went public on the Hong Kong Stock Exchange in 2004. We seek to evolve with the Internet by investing in innovation, providing a hospitableenvironmentfor our partners,andstaying close to our users. For more information, please visit www.tencent.com/ir For enquiries, please contact: Catherine Chan Tel: (86) 755 86013388 ext 88369 or (852) 31485100 Email: cchan#tencent.com Jane Yip Tel: (86) 755 86013388 ext 81374 or (852) 31485100 Email: janeyip#tencent.com Non-GAAP Financial Measures To supplement the consolidated results of the Company prepared in accordance with IFRS, certain non-GAAP financial measures, including non-GAAP operating profit, non-GAAP operating margin, non-GAAP profit for the period, non-GAAP net margin and non-GAAP profit attributable to equity holders of the Company, have been presented in this press release. These unaudited non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of the Company's financial performance prepared in accordance with IFRS. In addition, these non-GAAP financial measures may be defined differently from similar terms used by other companies. The Company's management believes that the non-GAAP financial measures provide investors with useful supplementary information to assess the performance of the Company's core operations by excluding certain non-cash items and certain impact of acquisitions. Forward-Looking Statements This press release contains forward-looking statements relating to the business outlook, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realized in future. Underlying the forward-looking statements is a large number of risks and uncertainties. Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website. CONSOLIDATED INCOME STATEMENT In RMB '000 (unless otherwise stated) Unaudited Unaudited 3Q2013 2Q2013 3Q2013 3Q2012 Revenues 15,535,112 14,384,521 15,535,112 11,565,556 VAS 11,635,168 10,752,102 11,635,168 9,317,244 Online advertising 1,390,145 1,297,257 1,390,145 1,015,266 eCommerce transactions 2,359,305 2,199,448 2,359,305 1,133,901 Others 150,494 135,714 150,494 99,145 Cost of revenues (7,036,286) (6,590,285) (7,036,286) (4,787,093) Gross profit 8,498,826 7,794,236 8,498,826 6,778,463 Gross margin 54.7% 54.2% 54.7% 58.6% Interest income 336,862 324,241 336,862 205,781 Other gains/(losses), net 67,111 81,687 67,111 (14,791) S&M expenses (1,465,936) (1,234,117) (1,465,936) (819,790) G&A expenses (2,621,080) (2,400,943) (2,621,080) (2,025,298) Operating profit 4,815,783 4,565,104 4,815,783 4,124,365 Operating margin 31.0% 31.7% 31.0% 35.7% Finance (costs)/income, net (22,483) 14,333 (22,483) (99,478) Share of profit/(losses) of 49,814 46,070 49,814 (21,188) associates Share of losses of jointly (12,119) (15,095) (12,119) (6,089) controlled entities Profit before income tax 4,830,995 4,610,412 4,830,995 3,997,610 Income tax expense (954,801) (926,157) (954,801) (756,465) Profit for the period 3,876,194 3,684,255 3,876,194 3,241,145 Net margin 25.0% 25.6% 25.0% 28.0% Attributable to: Equity holders of the 3,866,662 3,680,389 3,866,662 3,218,693 Company Non-controlling interests 9,532 3,866 9,532 22,452 Non-GAAP profit attributable to equity holders of the 4,375,718 4,152,001 4,375,718 3,551, 337 Company Earnings per share (GAAP) - basic (RMB) 2.105 2.009 2.105 1.759 - diluted (RMB) 2.070 1.976 2.070 1.727 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME In RMB '000 (unless otherwise stated) Unaudited Unaudited 3Q2013 2Q2013 3Q2013 3Q2012 Profit for the period 3,876,194 3,684,255 3,876,194 3,241,145 Other comprehensive income, net of tax: Items that may be reclassified to profit or loss Share of other comprehensive (106) 495 (106) - (losses)/income of associates Net gains/(losses) from changes in fair value of available-for-sale 2,233,412 367,783 2,233,412 (37,923) financial assets Currency translation differences 29,892 (28,407) 29,892 125 Total comprehensive income for the 6,139,392 4,024,126 6,139,392 3,203,347 period Attributable to: Equity holders of the Company 6,127,983 4,025,050 6,127,983 3,180,882 Non-controlling interests 11,409 (924) 11,409 22,465 OTHER FINANCIAL INFORMATION In RMB '000 (unless otherwise stated) Unaudited 3Q2013 2Q2013 3Q2012 EBITDA (a) 5,255,978 4,968,600 4,591,603 Adjusted EBITDA (a) 5,599,651 5,228,433 4,784,020 Adjusted EBITDA margin (b) 36.0% 36.3% 41.4% Interest expense 98,310 92,002 86,104 Net cash (c) 34,400,433 33,556,493 23,492,375 Capital expenditures (d) 1,620,864 1,464,020 1,132,314 Note: EBITDA consists of operating profit less interest income, and plus other a) losses/(gains), net,depreciation of fixed assets and investment properties and amortisation of intangible assets.Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses. b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. Net cash represents period end balance and is calculated as cash and cash c) equivalents, term deposits, and restricted cash pledged for secured bank borrowings, minus borrowings and long-term notes payable. Capital expenditures consist of additions (excluding business combinations) d) to fixed assets,construction in progress, land use rights and intangible assets (excluding game and other content licences). CONSOLIDATED STATEMENT OF FINANCIAL POSITION In RMB '000 (unless otherwise stated) Unaudited Unaudited 30 September 30 June 2013 2013 ASSETS Non-current assets Fixed assets 8,529,409 8,182,143 Construction in progress 1,310,208 918,776 Investment properties - 21,476 Land use rights 883,339 823,789 Intangible assets 4,870,541 4,798,610 Interests in associates 11,495,242 8,073,492 Investment in jointly controlled entities 9,256 8,742 Deferred income tax assets 175,370 174,135 Available-for-sale financial assets 8,756,251 6,282,289 Prepayments, deposits and other assets 1,201,334 1,060,129 Term deposits 13,620,000 13,081,000 50,850,950 43,424,581 Current assets Inventories 984,761 715,789 Accounts receivable 2,669,501 2,895,327 Prepayments, deposits and other assets 5,476,141 5,240,152 Term deposits 17,401,202 15,920,732 Restricted cash 3,437,669 3,165,791 Cash and cash equivalents 18,602,602 14,791,822 48,571,876 42,729,613 Total assets 99,422,826 86,154,194 EQUITY Equity attributable to the Company's equity holders Share capital 200 199 Share premium 2,533,575 2,193,289 Shares held for share award scheme (858,924) (674,674) Other reserves 2,813,403 584,071 Retained earnings 48,391,639 44,525,134 52,879,893 46,628,019 Non-controlling interests 806,931 823,757 Total equity 53,686,824 47,451,776 LIABILITIES Non-current liabilities Borrowings 3,442,880 2,471,480 Long-term notes payable 9,216,391 7,396,646 Deferred income tax liabilities 1,593,835 1,388,002 Long-term payables 1,546,136 1,535,840 15,799,242 12,791,968 Current liabilities Accounts payable 6,563,151 6,410,489 Other payables and accruals 8,210,724 7,546,012 Borrowings 2,564,100 368,935 Current income tax liabilities 1,197,483 869,441 Other tax liabilities 549,247 579,855 Deferred revenue 10,852,055 10,135,718 29,936,760 25,910,450 Total liabilities 45,736,002 38,702,418 Total equity and liabilities 99,422,826 86,154,194 RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS Adjustments Equity-settled Cash-settled Losses/(gains)on Amortisation Special deemed Impairment InRMB'000Unlessspecified Asreported share-based share-based of intangible provision(d) dividend Non-GAAP compensation compensation(a) disposal(b) assets (c) income(e) Unauditedthreemonthsended30September2013 Operating profit 4,815,783 343,673 133,871 - 38,058 - 5,331,385 - Profit for the period 3,876,194 343,673 133,871 - 57,969 - - 4,411,707 Profit attributable to equity 3,866,662 340,211 119,069 - 49,776 - - 4,375,718 holders Operating margin 31.0% 34.3% Net margin 25.0% 28.4% Unauditedthreemonthsended30June2013 Operating profit 4,565,104 259,833 186,744 - 38,784 - - 5,050,465 Profit for the period 3,684,255 259,833 186,744 - 58,628 - - 4,189,460 Profit attributable to equity 3,680,389 257,853 163,728 - 50,031 - - 4,152,001 holders Operating margin 31.7% 35.1% Net margin 25.6% 29.1% Unaudited three months ended 30 September 2012 Operating profit 4,124,365 192,417 24,860 5,150 38,494 448,000 (390,472) 4,442,814 Profit for the period 3,241,145 192,417 24,860 5,150 66,013 448,000 (390,472) 3,587,113 Profit attributable to equity 3,218,693 189,660 21,921 5,150 58,385 448,000 (390,472) 3,551,337 holders Operating margin 35.7% 38.4% Net margin 28.0% 31.0% Note: (a) Including put options granted to employees of investees on their shares and shares to be issued under investees' share-based incentive plans which can be acquired by the Group, and other incentives (b) Losses/(gains) on deemed disposal of previously held interests in associates (c) Amortisation of intangible assets resulting from acquisitions, net of related deferred tax (d) Impairment provision for associates and available-for-sale financial assets (e) Special dividend income from Mail.ru SOURCE Tencent Holdings Limited Website: http://www.tencent.com
Tencent Announces 2013 Third Quarter Results
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