AP NEWS
Press release content from PR Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from PR Newswire
Press release content from PR Newswire. The AP news staff was not involved in its creation.

Tencent Music Entertainment Group Announces Third Quarter 2019 Unaudited Financial Results

November 11, 2019

SHENZHEN, China, Nov. 11, 2019 /PRNewswire/ -- Tencent Music Entertainment Group (“Tencent Music,” “TME,” or the “Company”) (NYSE: TME), the leading online music entertainment platform in China, today announced its unaudited financial results for the third quarter ended September 30, 2019.

Financial and Operational Highlights

In the three months ended September 30, 2019:

“We continued our solid performance in the third quarter, driven by healthy growth from both online music and social entertainment services. We are particularly pleased to report accelerating growth of our online music paying users, representing a 42.2% year-over-year increase, as the net increase in the third quarter reached 4.4 million, achieving another quarterly high and outpacing the record growth in the second quarter. More importantly, the high quality of this growth was demonstrated by the ARPPU expansion of 3.5% quarter-over-quarter. This is a strong endorsement of our continuous efforts to unlock the intrinsic value of music through our integrated music platform, and to cultivate the willingness of users to pay for premium music services,” said Mr. Cussion Pang, Chief Executive Officer of Tencent Music. “Thanks to our vast user base, deep understanding of music trends and user insights, we continued to develop our platform as the go-to destination for artists to build a fan-based economy. This strength, coupled with further investment in various forms of content, technology and services, will solidify our platform as an all-in-one music entertainment destination.”

Mr. Tony Yip, Chief Strategy Officer of Tencent Music, said, “In the third quarter, we continued to invest in product innovations to further expand our user base and increase user engagement. We pioneered the introduction of short videos to music streaming pages for users to enjoy while listening to music. We also added new social and gamification features within our social entertainment applications to facilitate connections among users. In addition, we continued to enrich our content ecosystem to extend further beyond songs to include a wider range of offering, including long-form audio, PGC and UGC short videos, music-centric variety shows and original music for games, films and TV shows as well as from our musician program. From talent discovery, content distribution and promotion, to fan-based economy, our platform continues to benefit from the unique virtuous cycle of synergies between online music and social entertainment.”

“We delivered strong financial performance in the third quarter with a top-line growth of 31.0%, along with solid operating margins and cash flow,” commented Ms. Shirley Hu, Chief Financial Officer of Tencent Music. “Our online music subscription revenue increased significantly by 48.3% year-over-year, driven by strong growth of paying users and ARPPU expansion. New album releases boosted our revenue from digital albums to double in this quarter compared to the third quarter of last year. Our social entertainment and others revenues grew at a healthy rate of 32.9% as we continued to expand the paying user base of our social entertainment services. Our investments in premium content have not only resulted in sound financial return, but also solidified the leadership of our platform. Looking forward, we will strengthen the synergies between our online music and social entertainment businesses and continue to invest in long-term growth initiatives.”

Operational Highlights


3Q19

3Q18

YoY %

Mobile MAU - online music (million)

661

655

0.9%

Mobile MAU - social entertainment (million)

242

225

7.6%

Paying users - online music (million)

35.4

24.9

42.2%

Paying users - social entertainment (million)

12.2

9.9

23.2%

Monthly ARPPU - online music (RMB)

8.9

8.5

4.7%

Monthly ARPPU - social entertainment (RMB)

127.3

118.5

7.4%

[*] For the definitions of the above operating metrics, please refer to the introduction section in the Company's 20-F filed on April 19, 2019.

THIRD Quarter 2019 Financial Results

Revenues

Total revenues for the third quarter of 2019 increased by RMB1.54 billion, or 31.0%, to RMB6.51 billion (US$910 million) from RMB4.97 billion in the same period of 2018.

Cost of Revenues

Cost of revenues for the third quarter of 2019 increased by 42.9% to RMB4.30 billion (US$601 million) from RMB3.01 billion in the same period of 2018, primarily due to the increase in content expenses and revenue sharing fees. The increase in content expenses was mainly attributable to the increase in market prices and amount of licensed and original music content. The increase in revenue sharing fees reflected the growth in the Company’s social entertainment services.

Gross Profit

Gross profit for the third quarter of 2019 increased by 12.6% to RMB2.21 billion (US$309 million) from RMB1.96 billion in the same period of 2018. Gross margin was 34.0% for the third quarter of 2019.

Operating Expenses for the Period

Total operating expenses for the third quarter of 2019 increased by RMB260 million, or 26.6%, to RMB1.24 billion (US$173 million) from RMB977 million in the same period of 2018. Operating expenses as a percentage of total revenues was 19.0% in the third quarter compared with 19.7% in the same period of 2018.

Operating Profit for the Period

Operating profit increased by 11.9% to RMB1.19 billion (US$166 million) in the third quarter of 2019 from RMB1.06 billion in the same period of 2018.

Net Profit and Non-IFRS Net Profit for the Period

Net profit attributable to equity holders of the Company for the third quarter of 2019 was RMB1.03 billion (US$144 million), compared with RMB964 million in the same period of 2018. Non-IFRS net profit attributable to equity holders of the Company was RMB1.24 billion (US$173 million) for the third quarter of 2019, compared with RMB1.15 billion in the same period of 2018. Please refer to the section titled “Non-IFRS Financial Measure” for details.

Earnings per ADS

Basic and diluted earnings per American Depositary Shares (“ADS”) were RMB0.63 (US$0.09) and RMB0.62 (US$0.09), respectively, for the third quarter of 2019. Excluding amortization of intangible assets and other assets arising from business combinations, share-based compensation expenses, net losses from investments, fair value change on puttable shares and income tax effects, non-IFRS basic and diluted earnings per ADS were RMB0.76 (US$0.11) and RMB0.74 (US$0.10), respectively, for the third quarter of 2019. During the third quarter of 2019, the Company had weighted averages of 1.63 billion basic and 1.67 billion diluted ADSs outstanding, respectively. Each ADS represents two of the Company’s Class A ordinary shares.

Cash Flow

Net cash provided by operating activities for the third quarter of 2019 was RMB1.35 billion (US$189 million), compared with RMB1.64 billion of cash provided by operating activities during the same period of 2018. Net cash used in investing activities for the third quarter of 2019 was RMB680 million (US$95 million), primarily due to investments in term deposits and short-term investments during the quarter, compared with net cash provided by investing activities of RMB333 million during the same period of 2018.

Cash, Cash Equivalents and Term Deposits

As of September 30, 2019, the combined balance of the Company’s cash, cash equivalents and term deposits amounted to RMB21.14 billion (US$2.96 billion), compared with RMB19.90 billion as of June 30, 2019. The increase in cash, cash equivalents and term deposits was primarily due to cash flow generated from operations of RMB1.35 billion (US$189 million). The Company’s cash and cash equivalents balance was also affected by the change in the exchange rate of RMB to USD at different balance sheet dates. The exchange rate was 7.1477 to 1 on September 30, 2019, and 6.8650 to 1 on June 30, 2019.

Conference Call Information

Tencent Music’s management will hold a conference call on Monday, November 11, 2019, at 8:00 P.M. Eastern Time or 9:00 A.M. Beijing Time on Tuesday, November 12, 2019, to discuss the financial results. Listeners may access the call by dialing the following numbers:

United States Toll Free:

+1-888-317-6003

International:

+1-412-317-6061

Mainland China Toll Free:

400-120-6115

Hong Kong, China Toll Free:

800-963-976

Access Code:

3368975

The replay will be accessible through November 18, 2019, by dialing the following numbers:

United States Toll Free:

+1-877-344-7529

International:

+1-412-317-0088

Access Code:

10135231

A live and archived webcast of the conference call will also be available at the Company’s investor relations website at https://ir.tencentmusic.com/.

Exchange Rate

This announcement contains translations of certain RMB amounts into U.S. dollars (“USD”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 2019, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

Non-IFRS Financial Measure

The Company uses non-IFRS net profit for the year/period, which is a non-IFRS financial measure, in evaluating its operating results and for financial and operational decision-making purposes. Tencent Music believes that non-IFRS net profit helps identify underlying trends in the Company’s business that could otherwise be distorted by the effect of certain expenses that the Company includes in its profit for the year/period. Tencent Music believes that non-IFRS net profit for the year/period provides useful information about its results of operations, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by its management in its financial and operational decision-making.

Non-IFRS net profit for the year/period should not be considered in isolation or construed as an alternative to operating profit, net profit for the year/period or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review non-IFRS net profit for the year/period and the reconciliation to its most directly comparable IFRS measure. Non-IFRS net profit for the year/period presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data. Tencent Music encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.

Non-IFRS net profit for the year/period represents profit for the year excluding share-based compensation expenses, net loss from investments, amortization of intangible and other assets resulting from the business combinations, fair value change on liabilities of puttable shares and income tax effects.

Please see the “Unaudited Non-IFRS Financial Measure” included in this press release for a full reconciliation of Non-IFRS net profit for the year/period to its net profit for the year/period.

About Tencent Music Entertainment

Tencent Music Entertainment Group (NYSE: TME) is the leading online music entertainment platform in China, operating the country’s highly popular and innovative music apps: QQ Music, Kugou Music, Kuwo Music and WeSing. Tencent Music’s mission is to use technology to elevate the role of music in people’s lives by enabling them to create, enjoy, share and interact with music. Tencent Music’s platform comprises online music, online karaoke and music-centric live streaming services, enabling music fans to discover, listen, sing, watch, perform and socialize around music. For more information, please visit ir.tencentmusic.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.

Investor Relations Contact
Tencent Music Entertainment Group
ir@tencentmusic.com
+86 (755) 8601-3388 ext. 857811

The Piacente Group, Inc.
Brandi Piacente
Email: TME@tpg-ir.com
Tel: +1 (212) 481-2050

Ross Warner
Email: TME@tpg-ir.com
Tel: +86 (10) 6508-0677

Media Relations Contact
tme.pr@icrinc.com
+1 (646) 992-2986

TENCENT MUSIC ENTERTAINMENT GROUP

CONSOLIDATED INCOME STATEMENT


















Three Months Ended


Nine Months Ended




September 30, 2018


September 30, 2019


September 30, 2018


September 30, 2019




RMB


RMB


US$


RMB


RMB


US$




Unaudited


Unaudited


Unaudited


Unaudited


Unaudited


Unaudited




(in millions, except per share data)


(in millions, except per share data)

Revenues














Online music services



1,463


1,846


258


4,016


5,013


701

Social entertainment services and others



3,506


4,661


652


9,572


13,128


1,837




4,969


6,507


910


13,588


18,141


2,538

Cost of revenues



(3,006)


(4,296)


(601)


(8,147)


(11,956)


(1,673)

Gross profit



1,963


2,211


309


5,441


6,185


865















Selling and marketing expenses



(434)


(517)


(72)


(1,172)


(1,370)


(192)

General and administrative expenses



(543)


(720)


(101)


(1,448)


(1,956)


(274)

Total operating expenses



(977)


(1,237)


(173)


(2,620)


(3,326)


(465)

Interest income



82


154


22


182


442


62

Other (losses)/ gains, net



(6)


60


8


6


119


17

Operating profit



1,062


1,188


166


3,009


3,420


478















Share of loss of investments accounted for
using equity method



(4)


(2)


(0)


(11)


(10)


(1)

Finance Cost



(9)


(18)


(3)


(26)


(57)


(8)

Profit before income tax



1,049


1,168


163


2,972


3,353


469















Income tax expense



(85)


(145)


(20)


(265)


(416)


(58)

Profit for the period



964


1,023


143


2,707


2,937


411















Attributable to:














Equity holders of the Company



964


1,026


144


2,709


2,940


411

Non-controlling interests



-


(3)


(0)


(2)


(3)


(0)















Earnings per share for Class A and Class
B ordinary shares














Basic



0.31


0.31


0.04


0.89


0.90


0.13

Diluted



0.30


0.31


0.04


0.86


0.88


0.12















Earnings per ADS (2 Class A shares
equal to 1 ADS)














Basic





0.63


0.09




1.80


0.25

Diluted





0.62


0.09




1.76


0.25















Shares used in earning per Class A and
Class B ordinary share computation:














Basic



3,080,492,207


3,269,006,517


3,269,006,517


3,060,847,486


3,264,217,250


3,264,217,250

Diluted



3,169,894,362


3,331,806,938


3,331,806,938


3,139,115,477


3,342,280,671


3,342,280,671















ADS used in earnings per ADS
computation














Basic





1,634,503,259


1,634,503,259




1,632,108,625


1,632,108,625

Diluted





1,665,903,469


1,665,903,469




1,671,140,336


1,671,140,336

TENCENT MUSIC ENTERTAINMENT GROUP

UNAUDITED NON-IFRS FINANCIAL MEASURE


















Three Months Ended


Nine Months Ended




September 30, 2018


September 30, 2019


September 30, 2018


September 30, 2019




RMB


RMB


US$


RMB


RMB


US$




(in millions, except per share data)


(in millions, except per share data)

Profit for the period



964


1,023


143


2,707


2,937


411

Adjustments:














Amortization of intangible and other assets arising
from business combinations*



75


91


13


219


271


38

Share-based compensation



110


129


18


345


382


53

Losses/(gains) from investments



1


-


-


-


(1)


(0)

Fair value change on puttable shares **



9


9


1


26


27


4

Income tax effects***



(14)


(18)


(3)


(40)


(53)


(7)

Non-IFRS Net Profit



1,145


1,234


173


3,257


3,563


498















Attributable to:














Equity holders of the Company



1,145


1,237


173


3,259


3,566


499

Non-controlling interests



-


(3)


(0)


(2)


(3)


(0)















Earnings per share for Class A and Class B
ordinary shares














Basic



0.37


0.38


0.05


1.06


1.09


0.15

Diluted



0.36


0.37


0.05


1.04


1.07


0.15















Earnings per ADS (2 Class A shares equal to 1
ADS)














Basic





0.76


0.11




2.18


0.31

Diluted





0.74


0.10




2.13


0.30















Shares used in earnings per Class A and
Class B ordinary share computation:














Basic



3,080,492,207


3,269,006,517


3,269,006,517


3,060,847,486


3,264,217,250


3,264,217,250

Diluted



3,169,894,362


3,331,806,938


3,331,806,938


3,139,115,477


3,342,280,671


3,342,280,671















ADS used in earnings per ADS computation














Basic





1,634,503,259


1,634,503,259




1,632,108,625


1,632,108,625

Diluted





1,665,903,469


1,665,903,469




1,671,140,336


1,671,140,336

























































* Represents the amortization of identifiable assets, including intangible assets and prepayments for music content, resulting from Tencent's acquisition of CMC in
2016, our acquisition of Ultimate Music in 2017, and our acquisition of certain subsidiaries in 2018 and 2019.

** Represents the fair value changes on the put liability of certain shares issued in 2018

*** Represents the income tax effects of amortization of identifiable assets, including intangible assets and prepayments for music content, resulting from business
combinations

TENCENT MUSIC ENTERTAINMENT GROUP

CONSOLIDATED BALANCE SHEET










As at December 31, 2018


As at September 30, 2019



RMB


RMB


US$



Audited


Unaudited


Unaudited



(in millions)

ASSETS







Non-current assets







Property, plant and equipment


168


162


23

Intangible assets


1,763


1,637


229

Right-of-use assets


-


144


20

Goodwill


17,088


17,140


2,398

Investments accounted for using equity method


236


448


63

Financial assets at fair value through other comprehensive
income


3,331


3,448


482

Other investments


217


217


30

Prepayments and deposits


901


850


119

Deferred tax assets


123


129


18

Term deposits


-


500


70



23,827


24,675


3,452








Current assets







Inventories


35


32


4

Accounts receivable


1,483


1,734


243

Prepayments, deposits and other assets


1,823


2,811


393

Other investments


39


37


5

Short-term investments


42


16


2

Term deposits


-


600


84

Cash and cash equivalents


17,356


20,036


2,803



20,778


25,266


3,535








Total assets


44,605


49,941


6,987















EQUITY







Equity attributable to equity holders of the
Company







Share capital


2


2


0

Additional paid-in capital


33,776


34,310


4,800

Shares held for share award schemes


-


(29)


(4)

Other reserves


903


1,277


179

Retained earnings


3,040


5,980


837



37,721


41,540


5,812

Non-controlling interests


51


95


13








Total equity


37,772


41,635


5,825








LIABILITIES







Non-current liabilities







Other payables and other liabilities


241


346


48

Deferred tax liabilities


354


242


34

Lease liability


-


86


12



595


674


94








Current liabilities







Accounts payable


1,830


2,496


349

Other payables and other liabilities


2,742


3,085


432

Current tax liabilities


235


377


53

Lease liability


-


57


8

Deferred revenue


1,431


1,617


226



6,238


7,632


1,068








TOTAL LIABILITIES


6,833


8,306


1,162








Total equity and liabilities


44,605


49,941


6,987

TENCENT MUSIC ENTERTAINMENT GROUP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




Three Months Ended


Nine Months Ended



September 30, 2018


September 30, 2019


September 30, 2018


September 30, 2019



RMB


RMB


US$


RMB


RMB


US$



Unaudited


Unaudited


Unaudited


Unaudited


Unaudited


Unaudited



(in millions)


(in millions)














Net cash provided by operating activities


1,644


1,352


189


3,700


4,167


583

Net cash provided by/(used in) investing activities


333


(680)


(95)


(240)


(1,530)


(214)

Net cash provided by financing activities


-


37


5


2,855


42


6

Net increase in cash and cash equivalents


1,977


709


99


6,315


2,679


375

Cash and cash equivalents at beginning of the period


9,529


19,350


2,707


5,174


17,356


2,428

Exchange gains/(losses) on cash and cash equivalents


23


(23)


(3)


40


1


-

Cash and cash equivalents at end of the period


11,529


20,036


2,803


11,529


20,036


2,803

View original content: http://www.prnewswire.com/news-releases/tencent-music-entertainment-group-announces-third-quarter-2019-unaudited-financial-results-300955467.html

SOURCE Tencent Music Entertainment Group