Tencent Announces 2020 Third Quarter Results
3Q2020 Key Highlights
Revenues: +29% YoY, non-IFRS[1] profit attributable to equity holders of the Company: +32% YoY
-
Total r
evenues were
RMB125,447 million (USD18,421 million [2]), an increase of 29% over the third quarter of 2019 ("YoY"). -
On a
n
on-IFRS basis
, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
- Operating profit wasRMB38,116 million (USD5 ,597 million), an increase of 34% YoY. Operating margin increased to 30% from 29% last year.
- Profit for the period wasRMB33 ,325 million (USD4,893 million ), an increase of 33% YoY. Net margin increased to 27% from 26% last year.
- Profit attributable to equity holders of the Company for the quarter wasRMB32 ,303 million (USD4 ,743 million), an increase of 32% YoY.
- Basic earnings per share wereRMB3.402 . Diluted earnings per share wereRMB3.314 .
-
On an IFRS basis:
- Operating profit wasRMB43,953 million (USD6,454 million ), an increase of 70% YoY. Operating margin increased to 35% from 27% last year.
- Profit for the period wasRMB38,899 million (USD5,712 million ), an increase of 85% YoY. Net margin increased to 31% from 22% last year.
- Profit attributable to equity holders of the Company for the quarter wasRMB38,542 million (USD5,660 million ), an increase of 89% YoY.
- Basic earnings per share wereRMB4.059 . Diluted earnings per share wereRMB3.964 .
-
Total cash were
RMB265,892 million (USD39,044 million ) at the end of the quarter.
[1] Non-IFRS adjustments (formerly referred as non-GAAP) excludes share-based compensation, M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets and impairment provision/(reversals), as well as income tax effects. |
[2] Figures stated in USD are based on |
Mr.
3Q 2020 Financial Review
Revenues from VAS increased by 38% to
Revenues from
Revenues from FinTech and Business Services increased by 24% to
Other Key Financial Information for 3Q 2020
EBITDA was
Capital expenditures were RMB8,684 million, up 31% YoY.
Free cash flow* was
As at
* Starting from 2020, free cash flow was adjusted by subtracting payments for media content and lease liabilities, in addition to subtracting payments for capital expenditure from the operating cash flow. Restated free cash flow was |
Operating Metrics
|
As at 3 0 September 2020 |
As at 30 September 2019 |
Year- on-year change |
As at 30 June 2020 |
Quarter-on- change |
|
(in millions, unless specified) |
||||
Combined MAU of Weixin and |
1,212.8 |
1,151.0 |
5.4% |
1,206.1 |
0.6% |
|
|
|
|
|
|
Smart device MAU of QQ |
617.4 |
653.4 |
-5.5% |
647.6 |
-4.7% |
|
|
|
|
|
|
Fee-based VAS registered |
213.4 |
170.6 |
25.1% |
203.4 |
4.9% |
Business Review and Outlook
Communication and Social
For Weixin, we are facilitating more convenient access to high frequency services within the Weixin Pay interface by regrouping such services into four verticals, namely Financial Services, Daily Services, Travel & Transportation, and
In QQ chats and groups, we enabled users to watch
Online Games
Our online game revenue increased year-on-year, driven by healthy growth in paying users in
We have a constructive view on PC game opportunities as the IP and influence of our major franchises remain notably robust.
Digital Content
Our fee-based VAS subscriptions increased 25% year-on-year to 213 million, primarily driven by video and music content subscriptions. Video subscriptions expanded 20% year-on-year to 120 million. Our self-commissioned drama and animated series such as Nothing But Thirty, The Song of Glory and The Land of Warriors Season 3 have attracted additional subscribers for
Following the COVID-19 outbreak, overall
For social and others advertising, Weixin properties achieved solid revenue growth year-on-year, driven by higher impressions and eCPM. Our mobile advertising network revenue grew rapidly year-on-year as advertisers responded favorably to our video formats, such as rewarded video advertisements.
For media advertising, the rate of revenue decrease moderated to minus 1% year-on-year. We captured sponsorship advertising demand via self-commissioned variety shows such as The Coming One Season 4 and drama series such as Nothing But Thirty.
FinTech
Our FinTech revenue grew healthily at a similar rate to prior quarters, led by the continued expansion of our commercial payment and wealth management businesses, while our social payment and micro lending businesses grew at moderate rates. Our TPV increased over 30% year-on-year as commercial payment DAU and transaction value per user grew robustly year-on-year, mainly driven by our deeper penetration in offline transactions and expansion of our Mini Programs transactions in retail categories such as grocery and apparel.
The number of our wealth management customers increased over 50% year-on-year, and our aggregated customer assets expanded at a similar rate. We believe that LiCaiTong's penetration rate among our payment users is still quite low, and we are seeking to further grow our wealth management customer base at a measured rate via long-term initiatives such as investor education programs and an expanded product offering.
Cloud and Other Business Services
During the quarter, cloud and other business services revenue were affected by the lingering impact from pandemic, causing delays in project deployment and new contract sign-ups, as well as by non-recurring adjustments to certain IaaS contracts. The year-on-year revenue growth rate was therefore lower than previous quarters, which we expect to be temporary in nature.
We saw rising demand for PaaS solutions, in particular security PaaS, from financial, healthcare and Internet services clients. We also upgraded our SaaS enterprise productivity toolkit which consists of three signature products, namely WeCom (the enterprise version of Weixin),
For other detailed disclosure, please refer to our website http://www.tencent.com/en-us/investors.html
, or follow us via Weixin Official Account (Weixin ID:
About
Our communication and social platforms, Weixin and QQ, connect users with each other and with digital content and services, both online and offline, making their lives more convenient. Our targeted advertising platform helps advertisers reach out to hundreds of millions of consumers in
For investor and media enquiries, please contact: IR#tencent.com
|
Tel: (86) 755 86013388 / (852) 3148 5100 ext. 888369 |
Email: cchan#tencent.com |
|
Tel: (86) 755 86013388 / (852) 3148 5100 ext. 850839 |
Email: wendyyhuang#tencent.com |
|
Tel: (86) 755 86013388 / (852) 3148 5100 ext. 868961 |
Email: janeyip#tencent.com |
PH Cheung |
Tel: (86) 755 86013388 / (852) 3148 5100 ext. 868919 |
Email: phcheung#tencent.com |
Non-IFRS Financial Measures
To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-IFRS financial measures (in terms of operating profit, operating margin, profit for the period, net margin, profit attributable to equity holders of the Company, basic EPS and diluted EPS), have been presented in this press release. These unaudited non-IFRS financial measures should be considered in addition to, not as a substitute for, measures of the Group's financial performance prepared in accordance with IFRS. In addition, these non-IFRS financial measures may be defined differently from similar terms used by other companies.
The Company's management believes that the non-IFRS financial measures provide investors with useful supplementary information to assess the performance of the Group's core operations by excluding certain non-cash items and certain impact of M&A transactions. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Group's major associates based on available published financials of the relevant major associates, or estimates made by the Company's management based on available information, certain expectations, assumptions and premises.
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 realised in future. Underlying the forward-looking statements is a lot 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 RMB in million, unless specified |
|||||
|
|||||
|
Unaudited |
|
Unaudited |
||
|
3Q2020 |
3Q2019 |
|
3Q2020 |
2Q2020 |
Revenues |
125,447 |
97,236 |
|
125,447 |
114,883 |
VAS |
69,802 |
50,629 |
|
69,802 |
65,002 |
FinTech and Business Services |
33,255 |
26,758 |
|
33,255 |
29,862 |
|
21,351 |
18,366 |
|
21,351 |
18,552 |
Others |
1,039 |
1,483 |
|
1,039 |
1,467 |
Cost of revenues |
(68,800) |
(54,757) |
|
(68,800) |
(61,673) |
Gross profit |
56,647 |
42,479 |
|
56,647 |
53,210 |
Gross margin |
45% |
44% |
|
45% |
46% |
Interest income |
1,864 |
1,674 |
|
1,864 |
1,749 |
Other gains, net |
11,551 |
932 |
|
11,551 |
8,607 |
Selling and marketing expenses |
(8,920) |
(5,722) |
|
(8,920) |
(7,756) |
General and administrative expenses |
(17,189) |
(13,536) |
|
(17,189) |
(16,499) |
Operating profit |
43,953 |
25,827 |
|
43,953 |
39,311 |
Operating margin |
35% |
27% |
|
35% |
34% |
Finance costs, net |
(1,945) |
(1,747) |
|
(1,945) |
(2,005) |
Share of profit/(loss) of associates and joint ventures |
2,630 |
234 |
|
2,630 |
(295) |
Profit before income tax |
44,638 |
24,314 |
|
44,638 |
37,011 |
Income tax expense |
(5,739) |
(3,338) |
|
(5,739) |
(4,557) |
Profit for the period |
38,899 |
20,976 |
|
38,899 |
32,454 |
Net margin |
31% |
22% |
|
31% |
28% |
Attributable to: |
|
|
|
|
|
Equity holders of the Company |
38,542 |
20,382 |
|
38,542 |
33,107 |
Non-controlling interests |
357 |
594 |
|
357 |
(653) |
|
|
|
|
|
|
Non-IFRS profit |
32,303 |
24,412 |
|
32,303 |
30,153 |
|
|
|
|
|
|
Earnings per share for profit attributable to |
|
|
|
|
|
- basic |
4.059 |
2.151 |
|
4.059 |
3.491 |
- diluted |
3.964 |
2.127 |
|
3.964 |
3.437 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME RMB in millions, unless specified |
|||
|
|||
|
Unaudited |
|
|
|
3Q2020 |
3Q2019 |
|
Profit for the period |
38,899 |
20,976 |
|
Other comprehensive income, net of tax: |
|
|
|
Items that may be subsequently reclassified to profit or loss |
|
|
|
Share of other comprehensive income/(loss) of associates and joint |
192 |
(21) |
|
Transfer of share of other comprehensive income to profit or loss upon |
- |
(3) |
|
Currency translation differences |
(5,731) |
2,069 |
|
Other fair value gains/(losses) |
169 |
(475) |
|
Items that will not be subsequently reclassified to profit or loss |
|
|
|
Net gains/(losses) from changes in fair value of financial assets at fair |
9,535 |
(3,213) |
|
Other fair value gains/(losses) |
202 |
(96) |
|
|
4,367 |
(1,739) |
|
Total comprehensive income for the period |
43,266 |
19,237 |
|
Attributable to: |
|
|
|
Equity holders of the Company |
43,082 |
18,885 |
|
Non-controlling interests |
184 |
352 |
|
O THER FINANCIAL INFORMATION RMB in millions, unless specified |
|||
|
|||
|
Unaudited |
||
|
3Q2020 |
2Q2020 |
3Q2019 |
EBITDA (a) |
45,055 |
40,525 |
35,378 |
Adjusted EBITDA (a) |
47,849 |
43,742 |
38,123 |
Adjusted EBITDA margin (b) |
38% |
38% |
39% |
Interest and related expenses |
1,855 |
1,822 |
2,086 |
Net cash/(debt) (c) |
6,363 |
7,212 |
(7,173) |
Capital expenditures (d) |
8,684 |
9,466 |
6,632 |
|
Note: |
(a) EBITDA is calculated as operating profit minus interest income and other gains/losses, net, and adding back depreciation of property, plant and equipment, investment properties as well as right-of-use assets, and amortisation of intangible assets. Adjusted EBITDA is calculated as EBITDA plus equity-settled share-based compensation expenses. |
(b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. |
(c) Net cash/(debt) represents period end balance and is calculated as cash and cash equivalents, plus term deposits and others, minus borrowings and notes payable. |
(d) Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment properties, land use rights and intangible assets (excluding video and music content, game licences and other content). |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
|
|||
RMB in millions, unless specified |
|
|||
|
Unaudited |
Audited |
||
|
As at
|
|
As at
|
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
56,153 |
|
46,824 |
|
Land use rights |
15,801 |
|
15,609 |
|
Right-of-use assets |
10,646 |
|
10,847 |
|
Construction in progress |
4,318 |
|
3,935 |
|
Investment properties |
628 |
|
855 |
|
Intangible assets |
137,135 |
|
128,860 |
|
Investments in associates |
247,985 |
|
213,614 |
|
Investments in joint ventures |
7,119 |
|
8,280 |
|
Financial assets at fair value through profit or loss |
168,926 |
|
128,822 |
|
Financial assets at fair value through other comprehensive income |
143,935 |
|
81,721 |
|
Prepayments, deposits and other assets |
23,423 |
|
23,442 |
|
Deferred income tax assets |
22,981 |
|
18,209 |
|
Term deposits |
31,664 |
|
19,000 |
|
|
|
|
|
|
|
870,714 |
|
700,018 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
1,164 |
|
718 |
|
Accounts receivable |
41,696 |
|
35,839 |
|
Prepayments, deposits and other assets |
38,237 |
|
27,840 |
|
Other financial assets |
1,650 |
|
375 |
|
Financial assets at fair value through profit or loss |
6,135 |
|
7,114 |
|
Term deposits |
75,692 |
|
46,911 |
|
Restricted cash |
2,250 |
|
2,180 |
|
Cash and cash equivalents |
152,491 |
|
132,991 |
|
|
|
|
|
|
|
319,315 |
|
253,968 |
|
|
|
|
|
|
Total assets |
1,190,029 |
|
953,986 |
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) |
||||
RMB in millions, unless specified |
|
|
||
|
|
|
||
|
|
Unaudited |
Audited |
|
|
|
As at
|
|
As at
|
EQUITY |
|
|
|
|
Equity attributable to equity holders of the Company |
|
|
|
|
Share capital |
|
- |
|
- |
Share premium |
|
44,804 |
|
35,271 |
Shares held for share award schemes |
|
(4,351) |
|
(4,002) |
Other reserves |
|
60,763 |
|
16,786 |
Retained earnings |
|
475,887 |
|
384,651 |
|
|
|
|
|
|
|
577,103 |
|
432,706 |
|
|
|
|
|
Non-controlling interests |
|
69,394 |
|
56,118 |
|
|
|
|
|
Total equity |
|
646,497 |
|
488,824 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
|
118,037 |
|
104,257 |
Notes payable |
|
127,375 |
|
83,327 |
Long-term payables |
|
3,057 |
|
3,577 |
Other financial liabilities |
|
6,846 |
|
5,242 |
Deferred income tax liabilities |
|
14,488 |
|
12,841 |
Lease liabilities |
|
8,105 |
|
8,428 |
Deferred revenue |
|
6,304 |
|
7,334 |
|
|
|
|
|
|
|
284,212 |
|
225,006 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
87,008 |
|
80,690 |
Other payables and accruals |
|
48,738 |
|
45,174 |
Borrowings |
|
14,117 |
|
22,695 |
Notes payable |
|
- |
|
10,534 |
Current income tax liabilities |
|
13,470 |
|
9,733 |
Other tax liabilities |
|
1,941 |
|
1,245 |
Other financial liabilities |
|
4,165 |
|
5,857 |
Lease liabilitiess |
|
3,454 |
|
3,279 |
Deferred revenue |
|
86,427 |
|
60,949 |
|
|
|
|
|
|
|
259,320 |
|
240,156 |
|
|
|
|
|
Total liabilities |
|
543,532 |
|
465,162 |
|
|
|
|
|
Total equity and liabilities |
|
1,190,029 |
|
953,986 |
RECONCILIATIONS OF IFRS TO NON-IFRS RESULTS |
||||||||
|
As
reported |
Adjustments |
Non-IFRS |
|
||||
RMB in millions, unless specified |
Share-based compensation (a) |
Net (gains)/losses from |
Amortisation of intangible assets (c) |
Impairment Provisions/(reversals) (d) |
Income tax effects (e) |
|
||
|
Unaudited three months ended |
|
||||||
Operating profit |
43,953 |
3,059 |
(8,703) |
905 |
(1,098) |
– |
38,116 |
|
Profit for the period |
38,899 |
3,770 |
(10,099) |
2,005 |
(973) |
(277) |
33,325 |
|
Profit attributable to equity |
38,542 |
3,517 |
(10,133) |
1,620 |
(1,026) |
(217) |
32,303 |
|
Operating margin |
35% |
|
|
|
|
|
30% |
|
Net margin |
31% |
|
|
|
|
|
27% |
|
|
Unaudited three months ended |
|
||||||
Operating profit |
39,311 |
3,507 |
(14,672) |
870 |
8,613 |
– |
37,629 |
|
Profit for the period |
32,454 |
4,225 |
(16,108) |
1,886 |
9,268 |
(505) |
31,220 |
|
Profit attributable to equity |
33,107 |
4,019 |
(15,436) |
1,503 |
7,310 |
(350) |
30,153 |
|
Operating margin |
34% |
|
|
|
|
|
33% |
|
Net margin |
28% |
|
|
|
|
|
27% |
|
|
Unaudited three months ended |
|
||||||
Operating profit |
25,827 |
2,745 |
(1,814) |
118 |
1,668 |
– |
28,544 |
|
Profit for the period |
20,976 |
3,568 |
(2,509) |
1,544 |
1,981 |
(474) |
25,086 |
|
Profit attributable to equity |
20,382 |
3,475 |
(2,444) |
1,491 |
1,971 |
(463) |
24,412 |
|
Operating margin |
27% |
|
|
|
|
|
29% |
|
Net margin |
22% |
|
|
|
|
|
26% |
|
|
Note: |
(a) Including put options granted to employees of investee companies on their shares and shares to be issued under investee companies' share-based incentive plans which can be acquired by the Group, and other incentives |
(b) Including net (gains)/losses on deemed disposals/disposals of investee companies, fair value changes arising from investee companies, and other expenses in relation to equity transactions of investee companies |
(c) Amortisation of intangible assets resulting from acquisitions |
(d) Impairment provisions/(reversals) for associates, joint ventures, goodwill and intangible assets arising from acquisitions |
(e) Income tax effects of non-IFRS adjustments |
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