On May 13, Tencent holdings released its financial report for the first quarter of 2020 as of March 31, 2020. In the first quarter of 2020, the revenue is RMB 108 billion, the market is expected to be RMB 101.417 billion, the same period of last year is RMB 85.465 billion, a year-on-year increase of 26% ; in the first quarter of 2020, the net profit is RMB 29.4 billion, the same period of last year is RMB 27.856 billion, a year-on-year increase of 6%.
The revenue of value-added services increased by 27% to RMB in the first quarter of 2000 six hundred and twenty-four point two nine Billion yuan. Online game revenue increased by 31% to RMB three hundred and seventy-two point nine eight Billion yuan. (Note: at the end of the paper, a PDF of Tencent holding's financial report for the first quarter of 2020 is attached)
Summary of results for the first quarter of 2000
Total income: a year-on-year increase of 26%; profit attributable to equity holders of the company in accordance with non International Financial Reporting Standards: a year-on-year increase of 29%
The total revenue was 108 billion 65 million yuan (US $15 billion 252 million), an increase of 26% over the first quarter of 2019 ("year-on-year").
In accordance with non international financial reporting standards, the impact of a number of one-off and non cash items is eliminated to reflect the performance of core businesses:
-The operating profit was 35.575 billion yuan (US $5.021 billion), up 25% year on year; the operating profit margin was 33%, flat year on year.
-During the period, the profit was 27.984 billion yuan (US $3.95 billion), up 29% year on year; the net profit margin increased to 26% from 25% in the same period last year.
-During the period, the company's equity holders accounted for 27.079 billion yuan (US $3.822 billion), an increase of 29% year on year.
-The basic profit per share is 2.858 yuan, and the diluted profit per share is 2.817 yuan.
In accordance with international financial reporting standards:
-Operating profit was 37.260 billion yuan (US $5.259 billion), an increase of 1% year on year; operating profit margin decreased to 34% from 43% in the same period last year.
-During the period, the profit was 29.403 billion yuan (US $4.150 billion), up 6% year on year; the net profit margin decreased to 27% from 33% in the same period last year.
-During the period, the profit attributable to the equity holders of the company is RMB two hundred and eighty-eight point nine six 100 million yuan（ forty point seven eight Billion US dollars), up 6% year on year.
-The basic earnings per share is 3.049 yuan. Diluted earnings per share is 2.999 yuan.
The total cash at the end of the period was 220.584 billion yuan (US $31.134 billion)
"Novel coronavirus is facing the global solidarity," Ma Huateng, chairman and chief executive of the board said. "Tencent is ready to express heartfelt solicitude to all the people affected by the epidemic. In this difficult time, Tencent provides online services to keep people in close contact, get accurate information in time, work efficiently and get appropriate entertainment. So far, Tencent's business has demonstrated strong compression and ability to generate cash flow. This enables Tencent to further increase investment and practice the mission of "science and technology for the good". Tencent has devoted all its time and resources, including more than 2 billion yuan in donations, to contribute to the concerted efforts of China and the world to fight the epidemic. "
Financial analysis for the first quarter of 2000
The online advertising business increased by 32% year on year to RMB 17.713 billion. Social and other advertising revenue increased by 47% to RMB 14.592 billion, mainly reflecting the revenue growth of mobile advertising alliance and wechat friends circle due to the increase of advertising inventory and exposure. Media advertising revenue fell 10% year on year to 3.121 billion yuan. Due to the weak macro-economy and the suspension of sports events, the advertising revenue of video and news platforms decreased.
Other key financial information for the first quarter of 2000
EBITDA was 42.228 billion yuan, an increase of 26% year on year. Adjusted EBITDA was rmb45.190 billion, an increase of 27% year on year.
Capital expenditure was 6.151 billion yuan, an increase of 37% year on year.
Free cash flow * was rmb39.210 billion, up 133% year on year.
As at 31 March 2000, the company's net debt was $5.716 billion. The fair value of Tencent's equity in listed investment companies (excluding subsidiaries) totaled 410.299 billion yuan.
*From 2020, the free cash flow is adjusted as follows: the cash flow from operating activities is less the capital expenditure paid, then the media content expenditure paid and the lease liability. In the first quarter, the second quarter, the third quarter and the fourth quarter of 2019, the re presented free cash flows are RMB 16.8 billion, RMB 12.6 billion, RMB 28.1 billion and RMB 31.3 billion respectively.
Business Review and Outlook
In the first quarter of 2000, Tencent, with the power of technology, kept users in touch, provided users with timely and accurate information and appropriate entertainment, helped advertisers effectively reach the target audience, and helped enterprises achieve the continuity of services. In the face of these difficulties, Tencent has devoted a lot of time and resources, including charitable donations, to contribute to China's and even the global epidemic. Tencent has achieved stable operation and financial growth, showing the compression of Tencent's business model and Tencent's platform value. Looking forward to the future, Tencent expects that in game consumption activities will return to normal level to a large extent with resumption of work in various regions, and at the same time, it expects that the online advertising industry will also face challenges. The following are the key performances of Tencent's main products and businesses:
Communication and social
Wechat and QQ enable users to keep in touch with their relatives and friends during the home epidemic prevention period, and their total daily messages and use time have achieved double-digit growth year on year. Tencent's communication platform introduces new functions to meet the latest needs of users in different vertical fields. In terms of online education, teachers can use relevant small programs to personalize the toolbar of QQ group, such as joining online tests and homework collection tools, so as to manage online classes more efficiently; QQ home school group has become the mainstream online learning platform, providing services for tens of millions of teachers and parents every day. With the structural change of user behavior from offline to online, wechat is further integrated into daily life services through small programs, especially in the purchase of daily necessities and people's livelihood services. This has led to the rapid growth of APP users, with more than 400 million daily active accounts. In addition, with its extensive coverage of consumers and merchants, Tencent helps local governments and merchants distribute e-vouchers efficiently, thus helping to promote consumption recovery, especially in the retail and catering industries.
The game plays an important role in relieving users' worries and making them accompany each other, especially during the period of home epidemic prevention. In terms of mobile games, Tencent's studio launched fascinating game content, and the distribution team also held wonderful in game activities, thus increasing the number of daily active accounts. For example, the upgraded King's glory game engine greatly improves the audio and visual quality of props in the game; in addition, the new team playing method based on player positioning also effectively promotes user interaction. The cooperation between "peace elite" and rocket girl 101 (Tencent's idol girl group, from Tencent's popular variety show) is quite successful, which promotes the user's activity to reach a new high, and also shows the synergy effect of cross IP cooperation within Tencent. In terms of personal computer games, due to the suspension of many Internet cafes in China during the outbreak, and the poor performance of "dungeons and Warriors", the domestic business was affected. Internationally, the celebration of the second anniversary of pubg Mobile has been a great success. Tencent has also enhanced its localization ability to meet the diverse tastes of users in different regions. Wild fighting improves the user experience by optimizing the player matching algorithm. Riot Games launched the mobile game "game on the cloud top", which promoted the user retention rate and game duration of the hero League series; in April this year, it launched another card game "Legend of the land of runes" and began to test the new game "valorant". Looking forward to the future, Tencent expects that with the resumption of work in succession, the user use time and in-game consumption activities in the game industry will return to normal level, but Tencent also believes that the game industry has expanded its long-term audience and attraction structurally.
Tencent's online advertising revenue recorded a year-on-year growth, reflecting the increase in the use time of consumers in Tencent's main applications during the period of home epidemic prevention, and Tencent's attractive advertising efficiency for advertisers. The first quarter is the traditional off-season of marketing activities, so online advertising revenue fell month on month. As far as the industry is concerned, the consumption of games, Internet services and online education has increased during the period of home epidemic prevention, and the advertising expenditure of these industries on Tencent platform has increased, while that of FMCG, automobile and tourism industry has decreased.
Due to the increase in advertising exposure, especially in the circle of friends, social and other advertising revenue recorded year-on-year and month on month growth. Mobile advertising alliance traffic increased, and ECPM rose as video advertising accounted for more than a third of its advertising exposure, jointly driving its revenue growth. In terms of media advertising, due to the impact of budget cuts by advertisers, postponement of variety show shooting and suspension of NBA games, the sponsorship advertising revenue fell year-on-year and month on month. However, due to the popularity of the head TV series and the increase of users' demand for reliable news and information during the period of home epidemic prevention, the information flow advertising revenue of video and news platform recorded a year-on-year and month on month growth.
Looking forward to the future, Tencent believes that the advertising industry may face multiple obstacles, including consumers' Internet use time returning to the normal level, leading to a drop in the growth of advertising exposure; Internet service advertisers readjust the customer acquisition budget to reflect the revision of the customer's life cycle value assumption; and transnational brands are greatly reduced in their global promotion due to the impact of the local market epidemic Budget.
The income of financial science and technology services declined on a month on month basis, mainly due to the decrease of payment activities (especially offline transactions) and cash withdrawal during the Spring Festival and home epidemic prevention period. Despite the decline in revenue, the profit margin of the business remained stable, mainly due to the continued growth of high profit margin businesses such as financing platforms and loans, and Tencent's control over marketing and subsidies. In the last week of April, the average daily business volume of Tencent has been restored to the end of 2019. Tencent's financial management platform expanded its business steadily in the first quarter, and its asset holdings increased year-on-year and month on month. The loan status of micro credit keeps healthy, which reflects the prudent risk management principle of micro banks.
Cloud and other enterprise services
Affected by the epidemic, project delivery and new customer acquisition of cloud business were delayed, resulting in a decline in revenue on month basis. In spite of this, Tencent conference has made a breakthrough and has become a leading video conference application in China. Tencent enhanced the security of the product, and added a number of functions to facilitate user discussion and conference management. In March, Tencent also launched its international voov meeting. In addition, wechat optimizes its industry solutions, further strengthens its communication with wechat, and attracts more head customers, especially in the retail, education and public fields, which promotes a significant increase in the number of daily active accounts. Tencent has increased relevant investment to promote the above-mentioned remote office products and maintain Tencent's strong cloud infrastructure, so as to ensure the provision of safe and reliable services for users. Looking forward to the future, Tencent expects that the cloud industry will still face challenges in the short term, but in the long term, Tencent will continue to increase investment in this area, and it is expected that cloud services and enterprise software will accelerate the popularization of offline industries and public areas.