This presentation may contain forward-looking statements relating to the forecasts, targets, outlook, estimates of financial performance, opportunities, challenges, business developments, business plans and growth strategies of Tencent Holdings Limited (the “Company” or “Tencent”) and its group companies. These forward-looking statements are based on information currently available to Tencent and are stated here on the basis of the outlook at the time that this presentation was produced. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. The forward-looking statements are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. The forward-looking statements may prove to be incorrect and may not be realized in the future. Underlying the forward-looking statements are a large number of risks and uncertainties. Therefore you should not rely on any of these forward-looking statements. Please see our various other public disclosure documents for a detailed discussion of those risks and uncertainties.
This presentation also contains some unaudited non-GAAP financial measures which should be considered in addition to, but 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. For further explanation of our non-GAAP measures and reconciliations between our GAAP and non-GAAP results, please refer to our earnings announcement.
In addition, information relating to other companies and the market in general presented in these materials has been obtained from publicly available information and other sources. The accuracy and appropriateness of that information has not been verified by Tencent and cannot be guaranteed.
The reporting currency of the company is Renminbi. For the purpose of this presentation, all figures quoted in US dollars are based on the exchange rate of US$1 to RMB6.5342 for 4Q2017.
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Overview
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Strategic Highlights
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Business Review
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Financials
in billion RMB 4Q2017 YoY QoQ FY2017 YoY
Total Revenue 66.4 +51% +2% 237.8 +56%
Value Added Services 39.9 +37% -5% 154.0 +43%
Social Networks 15.6 +45% +2% 56.1 +52%
Online Games 24.3 +32% -9% 97.9 +38%
Online Advertising 12.4 +49% +12% 40.4 +50%
Media 4.1 +22% Stable 14.8 +30%
Social and Others 8.3 +68% +19% 25.6 +65%
Others 14.1 +121% +17% 43.4 +153%
Gross Profit 31.5 +33% -1% 116.9 +38%
Operating Profit 25.7 +85% +13% 90.3 +61%
Net Profit to Shareholders 20.8 +98% +16% 71.5 +74%
Non-GAAP*
Operating Profit 21.9 +46% +1% 82.0 +41%
Operating Margin 33% -1 ppt Stable 34% -4 ppt
Net Profit to Shareholders 17.5 +42% +2% 65.1 +43%
Online Games Platform
• #1 on PC and smart phone in China
• #1 online games company globally by revenue
Weixin & WeChat
• #1 smart phone community
• MAU at 989m
QQ IM
• Total MAU of 783 m
• Smart devices MAU of 683m(1)
Qzone
• Smart devices MAU of 554 m
Online Games
Mobile Payment
• #1 by MAU Payment
Social Communications
App Store
• #1 by MAU
Mobile Security
• #1 by MAU
Mobile Browser
• #1 by MAU
Utilities
Media
All above rankings refer to China market, unless otherwise stated. Company data as of 31 December 2017
1. Include smart device QQ users who logged in and sent a message or participated in certain activities such as Moments, Games, Interest Tribes, live broadcast, online music & literature
Key Platforms Update
5
Video
• #1 by mobile DAU and subscriptions
News
• #1 news services by MAU
Music
• #1 streaming platform
Literature
• #1 online content library
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Overview
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Strategic Highlights
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Business Review
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Financials
Games
Ecosystem
Media and Content
Social
• Weixin/WeChat combined MAU continued to grow and exceeded 1 billion in Lunar New Year
• Mini Programs gained popularity with enhanced features and Mini Games
• QQ deepened young users engagement via personalized news feed KanDian
• Social and Others advertising revenue up 65% YoY driven by strong growth in advertiser base
• Payment: daily offline commercial payment volume more than doubled YoY
• Cloud: continued rapid growth, expanded customer base in finance and government
• AI: deployment in medical imaging/diagnosis and translation
• Smart retail: decentralized approach to empower retailers to acquire users and upgrade shopping experiences
Annual Strategic Highlights
• On mobile, HoK achieved mass adoption in China and South East Asia; we increased market share in RPGs; we established leadership in strategy and racing genres
• On PC, operational expertise and content updates rejuvenated key titles, such as DnF
• Built foundation for survival shooting genre development; early success for PUBG mobile versions
• Video monthly subscriptions exceeded 56 million, driven by exclusive drama series, movies and self-commissioned content
• Tencent Music Entertainment Group operates the top three music apps in China by DAU
• Tencent Open Media Platform centralized content library and facilitated curation for distribution across news, browser and social properties
Mobile Payment
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#1 by MAU and DAU
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Social: total transaction volume increased YoY;
money transfer kept on growing but red
envelope gifting volume decreased
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Commercial: daily offline transaction volume
more than doubled YoY
•
Continue to strengthen relationship with key
channel partners; empower small merchants
with technologies to enhance efficiency, such as
business analytic tools
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Upsell Internet finance products leveraging our
payment platforms:
✓
LiCaiTong’s
total AUM exceeded RMB300
billion as of January 2018
Mini Programs
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Increased user engagement via:
-
Recently used Mini Programs on top of Weixin
chat interface
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Mini Games
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Offline Mini Program QR Codes
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Expanding use cases:
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Retail, eCommerce, lifestyle services, municipal
services, Mini Games
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Complementary to apps:
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A light feature integrated into Weixin interface,
which facilitates discovery of the standalone
apps and later download
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Well-suited for offline-online integration, a
sub-set of the most used app functions, and
low-frequency services
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Expanding user base quickly:
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Over 170m DAU
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580,000 Mini Programs available as of Jan 2018
Smart Retail
Facilitating Online-offline Integration
Retailers
Value Propositions
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Increasing online and
offline integration in
user behavior
Background
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Emergence of AI
and big data
technologies
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Widespread use of
mobile payment
offline
To consumers:
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Provide more
personalized
services
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Deliver seamless
online and offline
shopping
experiences
To retailers:
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Improve efficiency of
customer lifecycle
management and
personalized reach
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Enable retailers to
strengthen their
online presence
To Tencent:
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Enhance user targeting
and product
recommendation using
offline data
Smart Retail
Enhancing Customer Acquisition and Operational Efficiency
Acquire and retain customers:
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Bring users to offline stores
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Engage offline users online
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Enhance customer conversion by
personalized recommendation and
marketing
Enhance shopping experience:
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Instant access to product information
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Efficient check-out
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Superior last-mile delivery
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More convenient after-sale customer
services
Increase operational efficiency:
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Upgrade IT infrastructure by cloud services
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Data analysis to optimize marketing and
supply chain management
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Integrated CRM via Official Accounts, Mini
Programs and eLoyalty cards
Targeted push via Weixin Official Accounts
Scan product code in Weixin to add into cart and checkout online
“Find” Mini Program store when visiting physical store
2018
–
Increasing Investment for Building Future Value
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Long form and short form video content
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Infrastructure, talent, pricing
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Talent for research and application
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Capital investment, talent for deployment
Smart
Retail
Tencent Video
Tencent Cloud
Tencent AI
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Subsidies for merchants and users
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Overview
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Strategic Highlights
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Business Review
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Financials
24% 24% 47% 41% 18% 17% 11% 18% 2016 2017
24% 23% 23% 23% 25% 24%
24% 24% 25% 23%
24% 23% 59% 56% 54%
53% 53% 48% 45% 42% 46% 42% 41% 37% 12% 17% 19% 19% 15% 18% 19% 19% 14% 18% 17% 19% 5% 4% 4% 5% 7% 10% 12% 15% 15% 17% 18% 21%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
18.5
24.3
26.8
24.3
10.7
15.6
15.3
15.6
29.2
39.9
42.1
39.9
4Q16 4Q17 3Q17 4Q17
+32%
+45%
Social Networks
Online Games (in billion RMB)
70.8 97.9
37.0
56.1
107.8
154.0
2016 2017Online Games
• YoY increase was mainly driven by mobile games, whereas PC games were maturing
• PC games revenue declined QoQ due to smaller user base; mobile games revenue declined QoQ due to late launch of new titles, and decreased revenue from RPGs and shooting games
Social Networks
• Total VAS subscriptions grew by 22% YoY to 135 million, mainly driven by video and music services
• Exclusively licensed and self-commissioned content resulted in video subscriptions more than doubling YoY
• Video subscription and live broadcast drove YoY and QoQ revenue growth
-9%
+2%
+38%
+52%
+43% YoYValue Added Services
15 +37%
YoY
Weixin
ePass for local services
Allow users to bind various identity
cards to Weixin and handle the related
payment and administrative work on
mobile efficiently
Social security card Student campus card Driver’s license
AI-enabled Features
Launched AI-enabled features for users
to create funny photo-, audio- and
video-based messages
Dance studio CNY-themed messages in form of photo/ audio/ video
Book-Keeper
Facilitates offline small business
owners to track their in-store sales and
better manage their operations
KanDian
Continued to enhance
recommendation algorithm, increasing
time spent and video views
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FY17: RMB55.1 billion revenue, up 23% YoY
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4Q17: RMB12.8 billion revenue, up 13% YoY, down 13% QoQ;
Active users impacted by migration to mobile
Monetization impacted by fewer item-sales marketing
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PC game revenue likely under continued pressure due to mobile shift
Strengthen our position in a challenging market
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Focus on core gamers
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Popularize eSports and increase audience engagement - LoL league audience
time-spent increased 43% YoY
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Promote breakout new games e.g. PUBG, Fortnite
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Discover innovative games to strengthen our platform e.g. Subnautica
2018 Pipeline
–
focus on innovative gameplay
PUBG Fortnite Rocket League FIFA Online 4
PC Client Games
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FY17: RMB62.9 billion revenue, 64%
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4Q17: RMB16.9 billion revenue, up 59% YoY, down 7% QoQ
➢
CFM survival mode sharply expanded user base but no initial monetization
➢
Several RPG games entered post-launch user consolidation phase
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Released 5 mobile games in 4Q17, 3 in December
2018 Pipeline
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extending leadership in new genres
Smart Phone Games
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Launched 2 PUBG mobile games
➢
PUBG: Exciting Battleground achieves by
far the highest DAU within genre
➢
PUBG: Full Ahead solid DAU
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Not yet focused on monetization
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QQ Speed Mobile
➢
20 million DAU , ranks 2nd highest grossing
game title at iOS
4.9
8.3
6.9
8.3
3.4
4.1
4.1
4.1
8.3
12.4
11.0
12.4
4Q16 4Q17 3Q17 4Q17
+22%
+68%
Stable+19%
+49% YoYSocial and Others Media (in billion RMB)
* Based on previous classification, brand ad revenue was RMB 4.2 billion in 4Q17, up 33% YoY and 3% QoQ. Performance ad revenue was RMB8.2 billion, up 59% YoY and 17% QoQ.
15.6 25.6 11.4 14.8 27.0 40.4 2016 2017
+30%
+65%
Media
• Video revenue grew YoY and QoQ due to increased user traffic flowing from the self-commissioned variety shows and drama series
• News revenue decreased YoY and QoQ as we were still revamping the ad system
• Launched a unified ad placement platform for all news feed products
Social and Others
• Higher ad demand YoY due to enhanced targeting and more advertisers from partner platforms; QoQ growth benefitted from eCommerce seasonality
• Increased ad impressions in Weixin Moments, Official Accounts and mobile ad network
• Testing CPC-based ads in Official Accounts, linking to Mini Programs
137
m
+44%
YoY
Mobile DAU for 4Q17
56
m
+121%
YoY
Subscriptions as at 4Q17
Monthly ARPU per subscription for 2017: RMB13.9
RMB
2.2
b
+149%
YoY
Subscription revenue for 4Q17
RMB
2.7
b
+68%
YoY
Advertising revenue for 4Q17
Breakout Year for Tencent Video
#1 in mobile DAU and subscriptions
Content Strategy
• Original content: strengthened owned IP portfolio cooperating with China Literature and Tencent Games; proven production capability
• Licensed content: accumulated a rich exclusive content library
• Continue to invest in high-quality content
Platform Capability
• Large and highly engaged user base generated huge demand for
consumption and sharing
• Well-established content scheduling system enhanced user retention
• Fast-growing fans-celebrity social community Doki fostered user interactions, extending engagement and time spent
Industry Partnerships
• Made equity investments in top-tier content producers
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Overview
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Strategic Highlights
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Business Review
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Financials
in million RMB 4Q2017 YoY QoQ FY2017 YoY
Revenues 66,392 +51% +2% 237,760 +56%
COPS (34,897) +72% +4% (120,835) +79%
Gross profit 31,495 +33% -1% 116,925 +38%
Interest income 1,156 +77% +14% 3,940 +50%
Other gains, net 7,906 +674% +102% 20,140 +460%
Operating expenses (14,833) +30% +7% (50,703) +47%
Operating profit 25,724 +85% +13% 90,302 +61%
Finance costs, net (859) +78% +64% (2,908) +49%
Share of profit/losses of associates & JV (120) -77% -115% 821 -133%
Income tax expense (3,123) +30% -37% (15,744) +54%
Net profit 21,622 +105% +20% 72,471 +75%
Net profit to shareholders 20,797 +98% +16% 71,510 +74% Diluted EPS in RMB 2.177 +96% +15% 7.499 +73%
Non-GAAP:
Net profit to shareholders 17,454 +42% +2% 65,126 +43% Diluted EPS in RMB 1.827 +41% +2% 6.830 +43%
in million RMB GAAP
4Q2017 SBC
Net (gains)/losses
from investee companies*
Amortisation of intangible
assets
Impairment provision**
Non-GAAP 4Q2017
YoY change
QoQ change
Non-GAAP FY2017
YoY change
Operating profit 25,724 1,874 (6,281) 112 424 21,853 +46% +1% 82,023 +41%
Net profit 21,622 2,146 (6,229) 474 358 18,371 +48% +7% 66,404 +44%
Net profit to shareholders 20,797 2,084 (6,189) 442 320 17,454 +42% +2% 65,126 +43%
Operating margin 38.7% 32.9% -1.2 ppt Stable 34.5% -3.8 ppts
Net margin 32.6% 27.7% Stable +1.4 ppt 27.9% -2.4 ppts
* Including (gains) /losses on deemed disposals, disposals of investee companies and businesses, and fair value changes arisi ng from investments.
Non-GAAP Adjustments
23
65.3 66.2 64.2 63.7 65.6 66.7 65.2 63.2 60.9
60.6 59.9 59.3
7.0
10.6
18.1 20.4
21.9 22.4 20.3 22.8
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
39.0
51.9
48.9 51.3
43.7 45.3
36.3
46.6
34.8 37.8 36.3 37.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Online Advertising (%)
Others (%)
VAS (%)
64.8 65.1
60.1
48.8
42.9
36.7
2015 2016 2017
16.0
21.9
2016 2017
10.6 15.5 2016 2017 4.3 4.0 3Q17 4Q17 3.3 4.0 4Q16 4Q17 12.1 17.7 2016 2017 S&M
(in billion RMB)
-5% QoQ
G&A excl. R&D R&D
(in billion RMB)
(in billion RMB)
60.0 61.6 58.6 58.4 58.1
57.3
54.0 53.9 51.3
50.0 48.6 47.4
GAAP Gross Margin (%)
42.0 44.0 39.5 37.9 42.1 41.2 37.2
34.1 37.4 35.4 33.1 32.9
Non-GAAP Operating Margin (%)
32.6 34.5 31.8
29.6 31.7 32.2 29.5 28.3 29.0 29.1
26.3 27.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Non-GAAP Net Margin (%)
59.5
55.6
49.2
40.6 38.3
34.5
31.9 30.3
27.9
in RMB 4Q2017 FY2017
GAAP YoY Non-GAAP YoY GAAP YoY Non-GAAP YoY
Basic EPS 2.206 +97% 1.852 +41% 7.598 +73% 6.920 +43%
Diluted EPS 2.177 +96% 1.827 +41% 7.499 +73% 6.830 +43%
Subject to shareholders’ approval at the AGM to be held on 16 May 2018,
proposed 2017 annual dividend of HKD 0.88 per share
Earnings Per Share and Dividend
in million RMB 4Q2017 YoY QoQ FY2017 YoY
Operating CAPEX 3,848 +81% +69% 10,165 +55%
Non-operating CAPEX 1,127 +59% -7% 3,420 -38%
Total CAPEX 4,975 +75% +42% 13,585 +12%
Operating Cash Flow 28,594 +43% -6% 106,140 +62%
Less: CAPEX Paid 4,424 +56% 47% 12,768 +21%
Free Cash Flow 24,170 +41% -12% 93,372 +70%
Total Cash 148,237 +16% -2% 148,237 +16%
Less: Total Debt 131,905 +20% - 131,905 +20%
Net Cash 16,332 -10% -13% 16,332 -10%
Fair market value of our listed associates and Available-For-Sale financial assets
was approximately RMB210.8 billion* as at December 31, 2017
* Excluding subsidiaries
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Overview
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Strategic Highlights
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Business Review
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Financials
https://www.tencent.com/ir
