Highlights of the First Quarter of 2014:
Total revenues were RMB18,400 million (USD2,991 million2
), an increase of 8% over the
fourth quarter of 2013 (“QoQ”) or an increase of 36% over the first quarter of 2013 (“YoY”).
Operating 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-GAAP3
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.
Profit 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.
Basic earnings per share were RMB3.500. Diluted earnings per share were RMB3.449.
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."
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
Key platform statistics:
- Monthly active Instant Messaging (“IM”) user accounts were 848 million, an increase of
5% QoQ or an increase of 3% YoY.
- Peak simultaneous online IM user accounts were 199 million, an increase of 11% QoQ
or an increase of 15% YoY.
- Combined MAU of Weixin and WeChat were 396 million, an increase of 12% QoQ or
an increase of 87% YoY.
- Monthly active Qzone user accounts were 644 million, an increase of 3% QoQ or an
increase of 5% YoY.
- Fee-based VAS registered subscriptions were 88 million, a decrease of 1% QoQ or a
decrease of 16% YoY.
Total revenues were RMB18,400 million (USD2,991 million2
), an increase of 8% over the
fourth quarter of 2013 (“QoQ”) or an increase of 36% over the first quarter of 2013 (“YoY”).
Operating 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-GAAP3
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.
Profit 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.
Basic earnings per share were RMB3.500. Diluted earnings per share were RMB3.449.
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."
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
Key platform statistics:
- Monthly active Instant Messaging (“IM”) user accounts were 848 million, an increase of
5% QoQ or an increase of 3% YoY.
- Peak simultaneous online IM user accounts were 199 million, an increase of 11% QoQ
or an increase of 15% YoY.
- Combined MAU of Weixin and WeChat were 396 million, an increase of 12% QoQ or
an increase of 87% YoY.
- Monthly active Qzone user accounts were 644 million, an increase of 3% QoQ or an
increase of 5% YoY.
- Fee-based VAS registered subscriptions were 88 million, a decrease of 1% QoQ or a
decrease of 16% YoY.
