Tencent Announces 2014 First Quarter Results

                 Tencent Announces 2014 First Quarter Results

Revenue Increased 36% YoY, Non-GAAP Net Income[1] Increased 29% YoY

PR Newswire

HONG KONG, May 14, 2014

HONG KONG, May 14, 2014 /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
first quarter of 2014 ended March 31, 2014.

Highlights of the First Quarter of 2014:

  oTotal revenues were RMB18,400 million (USD2,991 million[2]), an increase
    of 8% over the fourth quarter of 2013 ("QoQ") or an increase of 36% over
    the first quarter of 2013 ("YoY").
  oOperating profit was RMB7,790 million (USD1,266 million), an increase of
    64% QoQ or an increase of 54% YoY.Operating margin increased to 42% from
    28% last quarter.
    Non-GAAP[3] operating profit was RMB6,477 million (USD1,053 million), an
    increase of 27% QoQ or an increase of 28% YoY.Non-GAAP operating margin
    increased to 35% from 30% last quarter.
  oProfit attributable to equity holders of the Company for the quarter was
    RMB6,457 million (USD1,050 million), an increase of 65% QoQ or an increase
    of 60% YoY.
    Non-GAAP profit attributable to equity holders of the Company for the
    quarter was RMB5,194 million (USD844 million), an increase of 17% QoQ or
    an increase of 29% YoY.
  oBasic earnings per share were RMB3.500.Diluted earnings per share were

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During the first quarter
of 2014, we substantially expanded our mobile ecosystem, providing new
services to users, generating value for our business partners, and enhancing
our own financial performance.Our smart phone games business achieved clear
market leadership, allowing us to achieve 29% year-on-year growth in our
non-GAAP net income while funding significant investments in various strategic
initiatives. We transformed our eCommerce strategy through our combination
with JD.com, China's leading online retailer; deepened our mobile games
pipeline via an in investment in CJ Games; and broadened our O2O offerings
through partnerships with category pioneers such as Dianping and Leju.We look
forward to continuing to balance our strategic investments in O2O services,
online payment and digital content with maintaining healthy financial returns,
and to developing new services for users as China's internet evolves."

[1] This refers to the Non-GAAP net profit attributable to equity holders of
[2] Figures stated in USD are based on USD1 to RMB6.1521
    Since the first quarter of 2014, we have included gains/losses on disposal
    of investees and businesses in the non-GAAP adjustments due to its
    increased significance. Previously, we only included gains/losses on
    deemed disposals of investees in the non-GAAP adjustments. Comparative
[3] figures have been restated to conform to the new presentation. We changed
    this policy in order to present clearly to investors the one-time nature
    of the gains on disposals of investees and businesses we generated during
    the first quarter of 2014. See "Non-GAAP Financial Measures" section for
    more details on the reasons for presenting these measures

Financial Review for the First Quarter of 2014

- VAS. VAS revenues increased 21% QoQ to RMB14,413 million and represented
78% of our total revenues for the first quarter of 2014.Online games revenues
increased 23% QoQ to RMB10,387 million.The growth was mainly driven by
increased revenues from smart phone games integrated with Mobile QQ and
Weixin, increased revenues from major PC titles which benefited from
promotional activities and positive seasonality, as well as contributions from
new PC game titles such as Blade & Soul.Social networks revenues increased
16% QoQ to RMB4,026 million.This mainly reflected an increase in platform
revenues from smart phone games integrated with Mobile QQ and Weixin.

- Online advertising. Online advertising revenues decreased 21% QoQ to
RMB1,177 million and represented 6% of our total revenues.This mainly
reflected the impact of weaker seasonality on advertisers' spending around the
Chinese New Year holidays, together with the transition in our eCommerce
strategy which affected eCommerce-related advertising revenues.

- eCommerce transactions. eCommerce transactions revenues decreased 24% QoQ
to RMB2,524 million and represented 14% of our total revenues.This was mainly
driven by weaker seasonality in the eCommerce industry and the transition in
our business strategy.Subsequent to the completion of the transaction with
JD.com in March 2014, we no longer recognise fee income generated from
physical goods transactions on our marketplaces.

Other Key Financial Information for the  First Quarter of 2014

Share-based compensation was RMB568 million for the first quarter of 2014 as
compared with RMB463 million for the previous quarter. 

Capital expenditure was RMB1,138 million for the first quarter of 2014 as
compared with RMB1,679 million for the previous quarter.

The Company didn't repurchase any shares on the Stock Exchange during the
first quarter of 2014 and the previous quarter.

As at March 31, 2014, net cash position totaled RMB34,245 million which
excluded borrowings of RMB9,035 million and long-term notes payable of
RMB9,232 million.

As at March 31, 2014, the total number of shares of the Company in issue was
1.864 billion.

Strategic Highlights

In the first quarter of 2014, we conducted several transactions to complement
our corporate strategy, including: (1) our transaction with JD.com for further
developing our eCommerce business; (2) our investment in and partnership with
CJ Games, which should bring more high quality mobile game experiences to our
users; and (3) our investment in and partnership with Leju, to broaden our O2O
offerings for real estate services.

On the financing side, we gained increased market recognition for our strong
credit profile and raised new funds.In March 2014, we received an upgrade
from Moody's on our issuer and senior unsecured debt ratings from Baa1 to A3.
In April 2014, we established a USD5 billion global medium term note programme
and completed the initial issuance of an aggregate principal amount of USD2.5
billion under the programme, which comprised USD500 million 3-year senior
notes at a 2.000% coupon and USD2 billion 5-year senior notes at a 3.375%
coupon.We are pleased that global institutional investors actively
participated in the initial issuance, showing their recognition of our market
leading position, history of stable growth and record of good corporate
governance. With our healthy cash generation and substantial net cash
balance, we are well-positioned to maintain our strong credit profile and we
remain committed to our prudent financial management approach.

Divisional and Product Highlights

  oKey platform statistics:

       oMonthly active Instant Messaging ("IM") user accounts were 848
         million, an increase of 5% QoQ or an increase of 3% YoY.
       oPeak simultaneous online IM user accounts were 199 million, an
         increase of 11% QoQ or an increase of 15% YoY.
       oCombined MAU of Weixin and WeChat were 396 million, an increase of
         12% QoQ or an increase of 87% YoY.
       oMonthly active Qzone user accounts were 644 million, an increase of
         3% QoQ or an increase of 5% YoY.
       oFee-based VAS registered subscriptions were 88 million, a decrease of
         1% QoQ or a decrease of 16% YoY.

Key Platforms

Both QQ and Qzone experienced significant expansion in their mobile user bases
and enhancement in user engagement on mobile.For QQ, aggregate MAU increased
by 3% year-on-year to 848 million at the end of the first quarter of 2014.
PCU benefited from improved user experience on smart phones and reached 200
million in April 2014. Mobile QQ enjoyed strong user growth as smart device
MAU increased by 52% year-on-year to 490 million.For Qzone, aggregate MAU
grew by 5% year-on-year to 644 million at the end of the first quarter of
2014.Qzone smart device MAU reached 467 million, representing a year-on-year
increase of 44%.

Combined MAU of Weixin and WeChat increased by 87% year-on-year to 396 million
at the end of the first quarter of 2014.During the quarter, we focused on
building an ecosystem for Weixin through measures including: (1) integrating
with Dianping and other services under Weixin Payment; (2) expanding the user
base of Weixin Payment via a significant subsidy programme, notably for
booking taxi rides; and (3) exploring mobile eCommerce with selected merchants
via their Official Accounts. Internationally, we continued to drive user
engagement for WeChat in selected countries.

As for our media platforms, Tencent News leveraged our strengths in mobile
platforms to consolidate its position as the leading mobile news application
in China.Tencent Video achieved a strong uplift in users and traffic during
the first quarter of 2014, riding on enriched content, platform integration
and enhanced user experience.While online video market shares are somewhat
driven by content rights and therefore volatile, we are pleased that iResearch
reported Tencent Video reached first place in terms of PC monthly unique
visitors among Chinese online video sites during March 2014, and comScore
reported Tencent Video reached first place in terms of PC monthly video views
during the same month.


In the first quarter of 2014, item-based sales on our open platforms
registered solid year-on-year growth, as we expanded the portfolio of
applications available to users and improved user experience.In aggregate,
our VAS subscription services remained weak compared to the same period last
year.However, QQ Membership, our longest-established subscription service,
achieved modest year-on-year revenue growth during the quarter, boosted by
integration of mobile with PC privileges, and we look forward to extending
mobile privileges to some of our other subscription services.

Our online games business achieved a healthy year-on-year increase in
revenues, with growth across PC client games and mobile games.For PC client
games, while our major titles and international business expanded organically,
new titles such as Blade & Soul made significant revenue contribution.For
mobile games, we expanded our portfolio of smart phones games integrated with
Mobile QQ and Weixin, and focused on leveraging the strengths of our platforms
to increase monetisation.For the first quarter of 2014, the paying user base
for these games more than doubled sequentially, and total revenues
approximately tripled sequentially, to over RMB1.8 billion. Six of these
games were ranked within the Top 10 Grossing Chart in China's iOS App Store at
some point during the quarter.To enrich our portfolio of smart phone games,
we added several international hit titles to our pipeline, such as Candy Crush
Saga and Taming Monster.

Online Advertising

Our online advertising business benefited from revenue growth across the brand
display and performance display categories.For brand display advertising,
revenues from our online video platform grew robustly year-on-year with higher
CPM and sell through rate, while traditional brand display advertising
registered more moderate growth.Contributions from brand display advertising
on our mobile news service expanded sequentially, albeit from a low base.For
performance display advertising, our social platforms benefited from higher
impression volume and cost per click, and achieved significant year-on-year
revenue growth. During the quarter, we continued to expand our inventories for
performance-based advertising and explore performance-based mobile advertising
opportunities on our platforms.

eCommerce Transactions

Our eCommerce transaction business registered revenue growth on a year-on-year
basis, against a backdrop of business strategy transition.Subsequent to the
completion of the transaction with JD.com in March 2014, we no longer
recognise fee income generated from physical goods transactions on our
marketplaces.Looking ahead, we believe the revenues and costs, of our
eCommerce transactions business may decline as we focus our resources on the
partnership with JD.com.

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 services.

Our company was founded in Shenzhen in 1998 and went public on the Main Board
of the Hong Kong Stock Exchange in 2004.The Company has been one of the 50
constituent stocks of the Hang Seng Index since June 10, 2008, under stock
code 00700.We seek to evolve with the Internet by investing in innovation,
providing a hospitable environment for our partners, and staying close to our

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:

Jerry Huang Tel: (86) 755 86013388ext65333 or (852) 31485100 Email:

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,
non-GAAP basic EPS and non-GAAP diluted EPS, 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

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.

RMB in millions, unless specified
                                       Unaudited        Unaudited
                                       1Q2014  4Q2013   1Q2014  1Q2013
Revenues                               18,400  16,970   18,400  13,548
 VAS                                14,413  11,932   14,413  10,666
 Online advertising                 1,177   1,497    1,177   850
 eCommerce transactions             2,524   3,324    2,524   1,914
 Others                             286     217      286     118
Cost of revenues                       (7,800) (8,198)  (7,800) (5,954)
Gross profit                           10,600  8,772    10,600  7,594
Gross margin                           58%     52%      58%     56%
Interest income                        375     377      375     277
Other gains, net                       1,607   405      1,607   351
Selling and marketing expenses         (1,855) (2,033)  (1,855) (963)
General and administrative expenses    (2,937) (2,770)  (2,937) (2,196)
Operating profit                       7,790   4,751    7,790   5,063
Operating margin                       42%     28%      42%     37%
Finance (costs) /income, net           (238)   6        (238)   (82)
Share of profit/(losses) of associates 45      (14)     45      131
Share of losses of joint ventures      (1)     (4)      (1)     (12)
Profit before income tax               7,596   4,739    7,596   5,100
Income tax expense                     (1,164) (808)    (1,164) (1,029)
Profit for the period                  6,432   3,931    6,432   4,071
Net margin                             35%     23%      35%     30%
Attributable to:
 Equity holders of the Company      6,457   3,911    6,457   4,044
 Non-controlling interests          (25)    20       (25)    27
Non-GAAP profit attributable to equity 5,194   4,440    5,194   4,038
 holders of the Company
Earnings per share (GAAP)
- basic (RMB)                          3.500   2.125    3.500   2.204
- diluted (RMB)                        3.449   2.092    3.449   2.166

RMB in millions, unless specified
                                                  Unaudited      Unaudited
                                                  1Q2014 4Q2013  1Q2014 1Q2013
Profit for the period                             6,432  3,931   6,432  4,071
Other comprehensive income, net of tax:
Items that may be subsequently reclassified to
profit or loss
Share of other comprehensive income of associates 8      48      8      -
Net losses from changes in fair value of          (37)   830     (37)   (606)
 available-for-sale financial assets
Currency translation differences                  17     (50)    17     (12)
Total comprehensive income for the period         6,420  4,759   6,420  3,453
Attributable to:
 Equity holders of the Company                 6,441  4,746   6,441  3,428
 Non-controlling interests                     (21)   13      (21)   25

RMB in millions, unless specified
                                    1Q2014         4Q2013        1Q2013
EBITDA (a)                          6,787          5,184         5,157
Adjusted EBITDA (a)                 7,121          5,467         5,438
Adjusted EBITDA margin (b)          39%            32%           40%
Interest expense                    112            105           98
Net cash (c)                        34,245         36,218        32,731
Capital expenditures (d)            1,138          1,679         1,035
(a) EBITDA consists of operating profit less interest income, and plus other
losses/ (gains), net, depreciation of
 fixed assets and investment properties and amortisation of intangible
 Adjusted EBITDA consists of EBITDA plus equity-settled share-based
compensation expenses.
(b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by
(c) Net cash represents period end balance and is calculated as cash and cash
equivalents, term deposits, and
 restricted cash pledged for secured bank borrowings, minus borrowings and
long-term notes payable.
(d) Capital expenditures consist of additions (excluding business
combinations) to fixed assets, construction in
 progress, land use rights and intangible assets (excluding game and other
content licenses).

 In RMB millions (unless otherwise stated)    Unaudited     Audited
                                               31 March 2014 31 December 2013
Non-current assets
Fixed assets                                  8,628                  8,693
Construction in progress                       2,214                  2,041
Investment properties                          272                    -
Land use rights                                806                    871
Intangible assets                              4,369                  4,103
Interests in associates                        24,928                 12,170
Investment in joint ventures                   19                     9
Deferred income tax assets                     352                    431
Available-for-sale financial assets            14,278                 12,515
Prepayments, deposits and other assets         1,291                  1,296
Term deposits                                  8,415                  11,420
                                               65,572                 53,549
Current assets
Inventories                                    939                    1,384
Accounts receivable                            3,103                  2,955
Prepayments, deposits and other assets         6,778                  5,365
Term deposits                                  17,574                 19,623
Restricted cash                                6,426                  4,131
Cash and cash equivalents                      26,523                 20,228
                                               61,343                 53,686
Total assets                                   126,915                107,235
Equity attributable to the Company's equity
Share capital                                  -                      -
Share premium                                  3,185                  2,846
Shares held for share award schemes
                                               (881)                  (871)

Other reserves                                 3,530                  3,746
Retained earnings                              58,681                 52,224
                                               64,515                 57,945
Non-controlling interests                      491                    518
Total equity                                   65,006                 58,463
Non-current liabilities

Borrowings                                     5,199                  3,323
Long-term notes payable                        9,232                  9,141
Deferred income tax liabilities                1,490                  1,441
Long-term payables                             1,624                  1,600
Deferred revenue                               4,147                  -
                                               21,692                 15,505
Current liabilities
Accounts payable                               8,006                  6,680
Other payables and accruals                    12,127                 10,246
Borrowings                                     3,836                  2,589
Current income tax liabilities                 725                    1,318
Other tax liabilities                          428                    593
Deferred revenue                               15,095                 11,841
                                               40,217                 33,267
Total liabilities                              61,909                 48,772
Total equity and liabilities                   126,915                107,235

                                  Equity-settled Cash-settled     (Gains)/Losses Amortisationof              Special
RMB  in  millions,    Asreported                                 on deemed                      Impairment
unless specified                  share-based    share-based      disposals/     intangible      provisio(d) dividend   Non-GAAP
                                  compensation                    disposals  (b)
                                                 compensation(a)                assets  (c)                  Income(e)
Unaudited three months ended 31 March 2014
Operating profit      7,790       334            234              (2,717)        16              820     -               6,477
Operating margin      42%                                                                                                35%
Profit for the period 6,432       334            234              (2,669)        55              820     -               5,206
Net margin            35%                                                                                                28%
Profit attributable   6,457       328            219              (2,682)        52              820     -               5,194
 to equity holders
 - Basic             3.500                                                                                              2.816
 - Diluted           3.449                                                                                              2.775
Unaudited three months ended 31 December 2013
Operating profit      4,751       283            180              (242)          24              87      -               5,083
Operating margin      28%                                                                                                30%
Profitfortheperiod 3,931       283            180              (58)           66              87      -               4,489
Net margin            23%                                                                                                26%
Profit attributable   3,911       278            160              (58)           62              87      -               4,440
 to equity holders
 - Basic             2.125                                                                                              2.413
 - Diluted           2.092                                                                                              2.375
Unaudited three months ended 31 March 2013
Operating profit      5,063       281            117              -              38              -       (438)           5,061
Operating margin      37%                                                                                                37%
Profit for the period 4,071       281            117              -              58              -       (438)           4,089
Net margin            30%                                                                                                30%
Profit attributable   4,044       278            104              -              50              -       (438)           4,038
 to equity holders
 - Basic             2.204                                                                                              2.200
 - Diluted           2.166                                                                                              2.163
(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) (Gains)/losses, net on deemed disposals of investees and disposals of investees and businesses
(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
Website: http://www.tencent.com/ir
Press spacebar to pause and continue. Press esc to stop.