Tencent Music Entertainment Group ("TME," or the "Company") (NYSE: TME and HKEX: 1698), the leading online music and audio entertainment platform in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2023.
Fourth Quarter 2023 Financial Highlights
Full Year 2023 Financial Highlights
Mr. Cussion Pang, Executive Chairman of TME, commented, "2023 marked a pivotal transition at TME. As we continue to shape and propel the music industry's robust development, we are excited about its vibrant growth potential for years to come. The fourth quarter recorded accelerated year-over-year growth in music subscription revenue, anchored by consistent increases in subscribers and ARPPU. Online music services' strong performance mitigated headwinds from social entertainment services and contributed to expanded quarterly net profits. Looking ahead, we are well positioned to capture more multi-faceted opportunities, underpinned by our content and platform dual engines and supported by the online music business' relatively counter-cyclical nature
Looking ahead, we are well positioned to capture more multi-faceted opportunities, underpinned by our content and platform dual engines and supported by the online music business' relatively counter-cyclical nature
Mr. Ross Liang, CEO of TME, continued, "Our laser focus on execution resulted in a year of efficiency. Deeper insights into users and content not only enhanced our operational efficiency but also allowed us to make music journeys more personalized for our users. Expanded user privileges, together with AI-empowered products and tools, contributed positively to subscriber conversion and retention. For 2024, we remain dedicated to delivering a more compelling user experience and easier access to music across a broader range of use cases." 
" 
Fourth Quarter 2023 Operational Highlights 
Robust online music growth underpinned by our content leadership, with expansive and differentiated content offerings.
Strengthened platform value proposition and elevated user experiences through product and technology innovation.
AIGC application enhanced user experience and fostered artists' music creation.
Fourth Quarter 2023 Financial Review
Total revenues decreased by RMB532 million, or 7.2%, to RMB6.89 billion (US$971 million) from RMB7.43 billion in the same period of 2022.
Cost of revenues decreased by 14.6 % year-over-year to RMB4.25 billion (US$599 million), mainly due to decreased revenues from social entertainment services leading to lower revenue sharing fees, partially offset by the increase in content costs of royalties and advertising agency fees.
Gross margin increased by 5.3 percentage points to 38.3% from 33.0% in the same period of 2022, primarily due to the strong growth of revenues from music subscriptions and advertising services, and the ramp-up of our own content.
Total operating expenses decreased by 7.0% year-over-year to RMB1.27 billion (US$178 million). Operating expenses as a percentage of total revenues were 18.4% and 18.3% for the period of 2023 and 2022, respectively.
Driven by improved operating efficiency and effective cost controls, our operating profit grew to RMB1.71 billion (US$241 million) in the fourth quarter of 2023, representing an increase of 23.5% year-over-year.
Effective tax rate for the fourth quarter of 2023 was 17.3% compared to 12.2% in the same period of 2022. The increase in effective tax rate was mainly driven by the accrual of withholding income tax in the fourth quarter of 2023.
For the fourth quarter of 2023, net profit was RMB1.41 billion (US$198 million) and net profit attributable to equity holders of the Company was RMB1.31 billion (US$184 million). Non-IFRS net profit was RMB1.68 billion (US$236 million) and non-IFRS net profit attributable to equity holders of the Company was RMB1.58 billion (US$222 million). Please refer to the section in this press release titled "Non-IFRS Financial Measure" for details.
Basic and diluted earnings per American Depositary Shares ("ADS") for the fourth quarter of 2023 were RMB0.84 (US$0.12) and RMB0.83 (US$0.12), respectively; non-IFRS basic and diluted earnings per ADS were RMB1.02 (US$0.14) and RMB1.00 (US$0.14), respectively. The Company had weighted averages of 1.55 billion basic and 1.57 billion diluted ADSs outstanding, respectively. Each ADS represents two of the Company's Class A ordinary shares.
As of December 31, 2023, the combined balance of the Company's cash, cash equivalents and term deposits amounted to RMB32.22 billion (US$4.54 billion), compared with RMB30.96 billion as of September 30, 2023.
Full Year 2023 Financial Review
Total revenues decreased by RMB587 million, or 2.1%, to RMB27.75 billion (US$3.91 billion) from RMB28.34 billion in 2022.
Cost of revenues decreased by 8.2% year-over-year to RMB17.96 billion (US$2.53 billion). The decrease was mainly due to decreased revenues from social entertainment services leading to lower revenue sharing fees, partially offset by the increase in content costs of royalties, advertising agency fees and payment channel fees.
Gross margin increased by 4.3 percentage points to 35.3% from 31.0% in 2022, primarily due to the strong growth of revenues from music subscriptions and advertising services, and the ramp-up of our own content.
Total operating expenses decreased by 9.7% year-over-year to RMB5.02 billion (US$707 million). Operating expenses as a percentage of total revenues decreased to 18.1% from 19.6% in 2022.
Driven by improved operating efficiency and effective cost controls, our operating profit grew to RMB6.06 billion (US$853 million) for the full year of 2023, representing an increase of 36.4% year-over-year.
For the full year of 2023, net profit was RMB5.22 billion (US$735 million) and net profit attributable to equity holders of the Company was RMB4.92 billion (US$693 million). Non-IFRS net profit was RMB6.22 billion (US$876 million) and non-IFRS net profit attributable to equity holders of the Company was RMB5.92 billion (US$834 million). Please refer to the section in this press release titled "Non-IFRS Financial Measure" for details.
Basic and diluted earnings per American Depositary Shares ("ADS") for the full year of 2023 were RMB3.15 (US$0.44) and RMB3.11 (US$0.44), respectively; non-IFRS basic and diluted earnings per ADS were RMB3.79 (US$0.53) and RMB3.74 (US$0.53), respectively. The Company had weighted averages of 1.56 billion basic and 1.58 billion diluted ADSs outstanding, respectively.
Share Repurchase Program
Under the US$500 million Share Repurchase Program announced on March 21, 2023, as of December 31, 2023, we had repurchased 25.3 million ADSs from the open market with cash for a total consideration of US$174.5 million.
Social Responsibilities
In the fourth quarter, we collaborated with local governments and conducted a series of music events to promote cultural and economic development in ethnic minority regions. For example, we partnered with Tencent Charity to organize the 2023 Shenzhen-Linzhi Music Festival, leveraging offline music performances to help rejuvenate the rural economy with increased tourism. These initiatives further expanded music's positive impact across geographies and industries, maximizing its social value and potential
These initiatives further expanded music's positive impact across geographies and industries, maximizing its social value and potential
Exchange Rate
This announcement contains translations of certain RMB amounts into U. 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 RMB7.0999 to US$1.00, the noon buying rate in effect on December 29, 2023, 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
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 period, which is a non-IFRS financial measure, in evaluating its operating results and for financial and operational decision-making purposes. TME 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 period. TME believes that non-IFRS net profit for the 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
TME believes that non-IFRS net profit for the 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 period should not be considered in isolation or construed as an alternative to operating profit, net profit for the 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 period and the reconciliation to its most directly comparable IFRS measure. Non-IFRS net profit for the 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. TME encourages investors and others to review its financial information in its entirety and not rely on a single financial measure
TME 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 period represents profit for the period excluding amortization of intangible and other assets arising from business acquisitions or combinations, share-based compensation expenses, net losses/gains from investments and related 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 period to its net profit for the period.
About Tencent Music Entertainment
Tencent Music Entertainment Group (NYSE: TME and HKEX: 1698) is the leading online music and audio entertainment platform in China, operating the country's highly popular and innovative music apps: QQ Music, Kugou Music, Kuwo Music and WeSing. TME's mission is to create endless possibilities with music and technology. TME's platform comprises online music, online audio, online karaoke, music-centric live streaming and online concert services, enabling music fans to discover, listen, sing, watch, perform and socialize around music. For more information, please visit ir.tencentmusic.com
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Safe Harbor Statement
This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U. 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 and the HKEX. 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
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 ContactTencent Music Entertainment Group[email protected]+86 (755) 8601-3388 ext. 818415
SOURCE Tencent Music Entertainment Group
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