Q3 2020 Tencent Holdings Ltd Earnings Call

Martin Lau: We enable more shared experiences among young users. For example, we allow them to watch Tencent videos together while video chatting, compete with friends in battle mode minigames, and to co-edit classwork via Tencent.com. We have been testing MiniWorld, a video and image feed service, within QQ since April. Contributors within MiniWorld can create images and videos shared beyond their existing friend circle, and users can explore content through recommendations.

[music].

Martin Lau: Mini World resonates well with the young audience and has enjoyed increasing popularity. These initiatives and growing adoption of real-time video chatting drove daily time spent per user within QQ up by a teens percentage year on year. Now, turning to our gaming business. For Smartphone Games, we leverage our industry expertise, user insight, and execution to deliver engaging experiences to large-scale audiences, enhancing the vitality and longevity of our existing titles, including blockbusters, as well as lesser-known games. We recently celebrated the 5th anniversary of Order of Kings, which exceeded 100 million average DAU for the first 10 months of 2020.

Martin Lau: We have expanded Honor of Kings' user base through constant innovation, user-centric operation, and robust technology infrastructure. We're realizing the potential of its IP by developing new games, animated series, and a live-action drama series. Investors are quite familiar with titles such as Honored Kings and Peacekeeper Elite, but we apply similar capabilities to lesser-known vertically specialized titles as well.

No one conference call at this time, all participants are in listen only mode. It.

It will be a presentation followed by a question and answer session. If you used to.

Martin Lau: For example, our self-developed game, Naruto Mobile, despite being released four years ago, has recently achieved all-time highs in BAU and revenue, driven by operational enhancements we have made over the years, such as an improved PVP mode. Naruto Mobile is now one of the most popular and revenue-generating games in the fighting genre in China. With respect to PC games, we continue to view the sector fairly favorably. While the PC game market has not experienced the same revenue growth as the mobile game market, PC games are highly influential.

[music].

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We used to cancel your question. Please press the pound or hash key I would now like to hand, the conference over to your host today Mr. Wendy Wong from 10 cents. Please go ahead and respond.

Hi, Good evening welcome to our third quarter 2020 results conference call.

I'm wondering one from Tencent IR team.

[noise] before we start the presentation, we would like to remind you that it includes forward looking statements.

Martin Lau: There's plenty of room for IP and product innovation within the PC platform to drive direct revenue contributions or broader platform benefits. For example, League of Legends launched a major thematic event, Spirit Blossom Festival, in the quarter, coordinating the release of new champions, skins, and event paths, which was popular both with users as well as revenue-generating. The recent League of Legends World Championship in Shanghai attracted a large and sizable global audience. We adapted Crossfire into a highly rated drama series and released a tie-in new game mode and skins, reviving the game's popularity and monetization.

Which you're on the line by a number of risks and uncertainties.

And it may not be realized in the future for various reasons.

People May show about general market conditions, it's coming from a variety of sold outside of Tencent.

This presentation contains some audited now as far as financial measures that should be considered in addition to but not as a.

Substitute for measures of the company's financial performance prepared in accordance with <unk>.

[noise] NYCDA bars measures are intended to reflect our core earnings by excluding certain one time and all non cash items.

For a detailed discussion of risk factors in it.

No I have ours measures. Please refer to our disclosure documents on the IR section of our website.

Martin Lau: In addition, new game Valorant has become a breakout hit in the tactical shooter genre in the Western market, with a wide audience on Twitch. Besides sustaining and extending existing game success, we continue releasing impactful new games. Moonlight Blade Mobile, a self-developed game based on the renowned novel by Yuan Xiaobo became the most successful MMORPG launch in China this year due to iOS growth

Let me introduce the management team on the core Tonight.

Our children to feel Pony my will kick off with a short overview.

President, marking law and a chief strategy Officer, Jim Mitchell.

I will provide a business review.

Chief Financial Officer Gene Lowe will conclude with my initial review before we open the floor for questions.

I will now turn the call over to Pony.

Thank you Wendy.

Where's everything thank you.

Well John it off from there.

James Gordon Mitchell: A mobile battle arena game based on LLIP is currently among the most downloaded mobile games across its available markets in Asia. With that, I'll pass on to James to talk about the rest of the business. Thank you, Martin.

This quarter marked the second.

Our strategic organization.

Which was intended.

Our strength in for sure but isn't there.

So our process industry industry.

James Gordon Mitchell: Moving on to advertising, revenue increased 16% year-on-year and 15% quarter-on-quarter to 21 billion renminbi. We believe China advertising has now largely recovered from the COVID-19 shock. Advertiser categories that have been experiencing rapid secular growth, such as education, internet services, and e-commerce, continue to grow quickly year-on-year on our platform during the third quarter. Ad spend from some cyclical advertising categories, such as automobiles and real estate, picked up year-on-year, and certain categories where ad spend dips due to COVID, such as financial services. Staples were flat this year on year in the quarter.

Well the approvals decides to bear fruit over the long long.

What I do see you should benefit.

So.

Such as consolidating our advertising services.

As you know our protocols and quantum cycle.

Our call and small businesses and building and I know open source code.

The phase of public health.

Medical economics.

Geopolitical challenges, we will suits will sharpen our focus.

Innovate and collaborate with our partners in order to better serve our users.

As a society at large.

James Gordon Mitchell: Internally, we executed on initiatives including upgrading our algorithmic ad buying, which delivered higher conversion for advertisers and attracted an increased share of budgets towards our services. We also provided incremental advertising inventory in casual game apps, eSports events, and live streaming platforms. For Thurston Utters Advertising, where should properties achieve solid revenue growth year-on-year, driven by higher... Our mobile ad network revenue grew rapidly year on year as advertisers responded favorably to video formats such as our rewarded video. For media advertising, after four quarters of steep year-on-year revenue declines, the rate of revenue decrease moderated to minus 1% year-on-year.

Now I will highlight the results will be achieved.

Okay.

Total revenue was.

135, you didn't RMB up 29% year on year, and 9% quarter on quarter.

Gross profit was 57 billion RMB.

3%.

Second quarter on quarter.

Our long.

Operating profit was a view that RMB up 34% year on year.

One.

Uh huh.

Non.

Net profit attributable to equity holders was 32 theaters on be up 32% year on year, 7% quarter on quarter.

Moving to our life cycle.

Social combined EMEA, you all wishing and we chat was 1.2.

James Gordon Mitchell: We captured sponsorship advertising demand via our self-sufficient variety shows, such as The Coming One Season 4, drama series, such as none of those. We upgraded the spaffed screen ads in Tencent Video, driving higher eCPMs and sequential revenue growth for our video advertising service. I'm sorry, but I'm looking now at FinTech and business. Segment revenue is 33 billion renminbi, up 24% year-on-year and up 11% quarter-on-quarter. FinTech services revenue grew healthily year-on-year and quarter-on-quarter, led by the continued robust expansion of our commercial payments and wealth management, while our social payments and microlending. For payment services, growth momentum continued through the quarter, and total payment volume increased over 30% year-on-year.

Peter.

Smart devices and there you can fuel was 617 muted.

In games, we expect our leadership extensive popularity all this stuff is the franchise and the success of newly these both China and international markets.

The media review and.

Using subscriptions increased as we reduce the cost to your content and add this falls within pay library.

In Fintech commercial payment transaction maintains a robust growth in our wealth management platform is bad.

The customer.

In public calls.

We saw rising demand for Pos solution and upgrade our spa enterprise productivity tool kit to capture opportunities emerging sector.

James Gordon Mitchell: Our commercial payment, daily active uses, and spending per use of both... rapid rate. Online transaction growth benefited from an accelerated shift from offline to online purchases due to the pandemic, as well as greater usage of mini programs for transactions in categories such as groceries and apparel. Payment operating margins remain stable. For our wealth management business, the number of active customers increased over 50% year-on-year, driving a similar growth rate in aggregated customer assets. For Business Services, the year-on-year revenue growth rate slowed down due to the lingering impact from the pandemic on project deployments and new contracts signed up, as well as non-recurring adjustments, and Infrastructure as a Sector.

In utilities, we mean, our industry leadership in mobile security and mobile browser in China.

By market and James.

Because business review.

Thank you for it.

Good evening and good morning for the third quarter of Twentytwenty, two revenue grew 29% year on year.

It's represented 56% of in total revenue.

Well rich social networks was 23% and online games was 33%.

Online advertising was 17% of total revenue Fintech and business services represented 26%, although total revenue.

James Gordon Mitchell: However, we saw rising demand for platform as a service. [inaudible] During the period, we upgraded our software as a service enterprise productivity toolkit, which consists of three signature products, Wecom, Tencent Meeting, and Tencent Dotcom. Customers increasingly adopt Wecom, previously known as Enterprise Weixin, for workplace communication and management. Despite most people returning to their workplaces, WECOM's GAU grew over 100% year-on-year during the quarter. Tencent Meeting now has over 100 million registered users. In September, we released an enterprise version to meet growing needs for customization.

[noise] for value added services segment revenue.

It was 70 billion RMB in the third quarter up 38% year on year and 7% quarter on quarter.

Social networks revenue was 28 billion RMB, representing 29% year on year, and 6% quote unquote, a growth mainly driven by engaging in sales and live streaming services.

Total bass.

Subscriptions grew 25% year on year to 213 million benefiting from digital content subscriptions.

Total video subscriptions increased 20% year on year to 120 million, primarily due to popular dramas and limited series, such as nothing but 30 and the land warrior.

James Gordon Mitchell: We integrated dot Tencent Docs, our cloud-based document processing, with other Tencent products, including QQ, QQ Browser, and our Customer Relationship Manager, to further explore. And with that, I'll pass it to John to go. Thank you, James.

Season three.

We successfully converted trial users acquired during summer promotions to record the bee deal subscribers.

Total music subscriptions grew 46% year on year to $52 million on an expanded pay library and a high retention rate.

Shek Hon Lo: For the third quarter, total revenue was 125.4 billion renminbi, an increase of 29% year-on-year.

Okay.

Airline games revenue increased 45% year on year, and 8% quarter on quarter to 41 billion RMB driven by growth in paying users and ARPU.

Shek Hon Lo: Year-on-year, or 9% quarter-on-quarter, gross profit was 56.6 billion renminbi, up

Shek Hon Lo: up 33% year-on-year or 6% quarter-on-quarter.

Shek Hon Lo: Net other gains worth 11.6 billion renminbi.

Total smartphone games revenue grew 61% year on year to 39 billion RMB.

Shek Hon Lo: This was mainly due to non-Iovirus-adjusted items representing increased vaccination rates.

Benefiting from robust growth of existing titles.

Shek Hon Lo: The education of certain investees in verticals such as electric vehicles, online games, and local services, as well as net gains on demand.

As well as recognition of deferred revenue from the stayed at home period.

Sequentially revenue grew 9%, but cash receipts slightly decreased.

Shek Hon Lo: of Sydney. Operating profit was 44 billion renminbi, up 70% year-on-year, or 12% quarter-on-quarter. Net finance costs were $1.9 billion RMB, up 11% year-on-year, or down 3% quarter-on-quarter. Year-on-year increased refracted recognition of foreign exchange loss during the quarter versus foreign exchange gain a year ago. Q1Q remained broadly stable.

As users returns to their offices and engage in activities normalized.

PC client games revenue was stable year on year.

At 12 billion RMB as increased revenue from league of legends globally, and you can balance in western markets offset decreased revenue from Benjamin fighter in China.

Revenue increased 7% quarter on quarter due to cross fire and full quarter contribution from Ballard.

Shek Hon Lo: Shea Parliament of Associates and a joint venture with 2.6 billion renminbi. Both year-on-year and quarter-on-quarter increased profits from enhanced performance.

Now I'll talk more about our social networks.

Fruition, we're focused on delivering convenience and efficiency for users.

To facilitate access to high frequency services within the way should pay interface.

Shek Hon Lo: Also refracted non-IFRs, just different items of certain associates.

We agreed that the list of services into four key verticals, namely financial services dailies.

Shek Hon Lo: on a non-IRB basis. We record a share profit of $3.2 billion before the quarter. The Income Tax Expense List.

Services transportation and travel as well as shopping and entertainment.

But the travel and transportation verticals, we expanded geographic coverage of mobility services to 10 provinces and municipalities in China.

Shek Hon Lo: 5.7 billion renminbi for Q3 2020, and if I could take it,

Shek Hon Lo: X-ray was 12.9. We of ours have proper attributable to equity holdings.

Mobility services connect to auto owners with.

Shek Hon Lo: was $38.5 billion RMB, up 89% year-on-year, or 16% quarter-on-quarter. Now Luton EPS was $3.964 billion RMB, up 86% year-on-year, or 15% quarter-on-quarter. Now, I'll share with you some of...

Cost of services, such as car washes and kind of insurance as well as general users with public transportation services, including Transicold.

And thus schedule checking.

To enhance the efficiency of content and service delivery.

Shek Hon Lo: For the first quarter, Operating Profit was $38.1 billion RMB, up 34% year-on-year or 1% quarter-on-quarter. Net Profit after NCI was $32.3 billion RMB, up 32% year-on-year or 7% quarter-on-quarter. Diluted EPS was $3.314 billion RMB, up 30% year-on-year or 6% quarter-on-quarter. Moving to the Settlement Growth Budget, the growth margin for

We enable more cross referencing within wishon profit.

Please.

For example in the check box users can press to search words and phrases that appear in messages after which Wayne will provide related content and services from Neely programs official accounts moments and other sources it.

Shek Hon Lo: [inaudible]

A moment will enable users to create cash tax in posts.

Readers of the post click these cash tax can then see related content from official occurs video feeds and H five pages.

Moving onto Q Q.

We keep on creating new experiences to strengthen stickiness of the youth community on the QQ platform.

Well April.

Two more shared experiences ammonia users for example, we allow them to watch Tencent video together while video chatting.

Shek Hon Lo: greater content costs associated with our online video business. Gross Margin for Online Advertising was $50,000.

To compete with friends in better mode mini games and to grow added clashed with few tens and docks.

We have been testing many world leader.

Shek Hon Lo: and bought this table, quarter and quarter. The year on year increase was mainly contributed by the industry.

And.

Image foodservice within QQ since April.

Contributors within media World can create images and videos shared.

Shek Hon Lo: by the industry-wide exemption of the cultural construction fee for this year.

Beyond the existing friend circle.

Shek Hon Lo: Gross margin for FinTech and business services was $27.9 billion.

And users can explore content through recommendation.

Shek Hon Lo: Lastly, stable year-on-year or down one percentage point, quarter-on-quarter. The sequential decrease was mainly due to greater...

Muni World resonates well with young audience and has enjoyed increased.

Leasing popularity.

These initiatives and growing adoption of real time video chatting drove daily time spent per user within QQ up by a teens percentage year on year.

Shek Hon Lo: Channel cars for payment-related services as offline merchants resume their businesses amid the pandemic. On operating expenses, selling and marketing expenses were 8.9 billion RMB, up 56% year-on-year or 15% quarter-on-quarter. On a year-on-year basis, marketing spending increased, particularly on online games.

Now turning to our gaming business.

For smartphone games will love.

Leverage our industry expertise user insight and execution to deliver engaging experiences to large scale audiences enhancing the totality and longevity of our existing titles, including blockbusters as well as the lesson games.

Shek Hon Lo: Weixi, as well as the sub-administration. The sequential increase was primarily driven by online games and business services.

Shek Hon Lo: That's a percentage of revenue. Selling and marketing expense was 7.1% for the quarter. GNA expenses were $17.2 billion RMB, up 27% year-on-year or 4% quarter-on-quarter, mainly

We recently celebrated the fifth anniversary.

We have owner of Kings, which exceeded 100 million average steer you for the first 10 months of Twentytwenty.

We have expended on of King's user base through constant innovation user centric operation and robust technology infrastructure.

Shek Hon Lo: may need you to create the R&D and staff force.

Shek Hon Lo: Within GNA, R&D expenses were at $9.9 billion for R&D, up 25% year-on-year.

We are realizing the potential of its IP by developing new game.

James animated series and a live action drama series.

Investors are quite familiar with titles such as on a kings and peacekeeper elite, but we apply similar capabilities to lesser known vertically specialized titles as well for example, our self developed games now rutile mobile.

Despite being released four years ago has recently achieved all time high NPU and revenue driven by operational enhancements, we have made over the.

The years, such as an improved PBP mode now.

Router mobile is now one of the most popular and revenue generated games in the fighting January in China.

With respect to key PC games, we continue to view the sector fade fairly favorably while.

While the PC game market has not experienced the same revenue growth as the mobile game market PC games are highly influential.

There is plenty of room for IP and product innovation within the PC platform to drive direct.

Revenue contributions or broader platform benefits for example did legends launched a major medical event Spirit Blossom Festival in the quarter coordinating the release of new champions skins, and even past, which was popular both with users as well as revenue generators.

Shek Hon Lo: [inaudible]

Shek Hon Lo: GNA and R&D represented 13.7% and 7.9% of revenues, respectively.

Recent lead of Legends World Championship, the Shanghai attracted lot large and sizable global audience too.

We adapted crossfire into a highly rated drama series and released a tie in new game mode and skins, reviving the games popularity and monetization.

Shek Hon Lo: revenues.

In addition, new game Ballard has become a breakout hit in the tactical shooter genre in western markets with a wide audience on Twitch.

Shek Hon Lo: We had approximately 77,600 employees, up 27% year-on-year or 10% quarter-on-quarter. For the third quarter of 2020, our growth margin was 45.2%, up 1.5 percentage points year-on-year or down 1.1 percentage points quarter-on-quarter. On a year-on-year basis, segment growth margin improvements go through increased branded growth margin, in particular from that level at the service. However, sequentially, margin decreased mainly reflecting lower vast gross margin compared to the last quarter. The non-IFRS operating margin was 30.4%, up 1% point year-on-year.

Shek Hon Lo: percentage point year-on-year or down 2.4 percentage points quarter-on-quarter. The NIAVRA SNAP margin was 26.6%, up 0.8 percentage point year-on-year or down 0.6 percentage point, quote-unquote. Finally, let me share with you several key financial metrics before

Shek Hon Lo: Social CapEx was 8.7 billion RMB, up 31% year-on-year, or down

Besides sustaining extending existing game success, we continue releasing impactful new games.

Moonlight late mobile.

Self developed game based on the renowned at Nava.

Novel became the most successful MMR PG launch in China this year by iOS grossing.

Needed legends while dripped.

A mobile Battle Arena game based on our IP is currently among the most downloaded mobile games across.

Oh, it's available markets in Asia.

With that I'll pass onto James to talk about the rest of the business review.

Thank you Mark and moving onto your advertising revenue increased 16% year on year, and 15% quarter on quarter to 21 billion Renminbi. We believe the China appetite is now largely recovered from the COVID-19.

Shek Hon Lo: of 8% quarter and quarter.

Shek Hon Lo: Operating cap has increased by 34% year-on-year to 7.8% annually, reflecting more expenditures on servers and network equipment to support our business growth. Non-operating cutbacks increased 12% yield.

Shek Hon Lo: We have increased 12% year-on-year to 901 million renminbi driven by planning on data center construction. For the current quarter, free cash flow was 28.1 billion RMB.

Shek Hon Lo: [inaudible] That cash position was at $6.40.

Shek Hon Lo: 6.4 billion renminbi, which decreased sequentially due to payments for M&E initiatives, partly offset by operating cash flow generation. Fair value of our shareholders and listed investors, excluding subsidiaries.

Shek Hon Lo: with approximately R891 billion or R131 billion US dollars as at the end of the quarter, compared to R799 billion.

Yes.

Hi category have been experiencing ground insect products, such as education and service.

Continued growth looking year on year on our platform during the third quarter.

Wendy Huang: Compared to $726 billion RMB or $103 billion U.S. dollars last quarter. Thank you. Thank you, John. Operator, let's open the floor to questions now. We will now begin the question and answer session. If you wish to ask questions, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Participants are allowed to ask one main question and one follow-up question at each time. The first question comes from the line of...

Operator: Kenneth Fong from Credit Suisse. (inaudible)

Our expenses and sector, but outside of that.

Such as automobiles and real estate.

Year on year.

On certain categories, our AD spend aptitude occurred such as financial services and consumer Staples was flattish year on year in the quarter.

Kenneth Fong: I have two questions on the game, please. So on the game, we noticed that recent new games like Jensen Impact and Rise of Kingdoms are launching through some game community platforms like Bili and TabTab to reach out to more like a target user base to avoid the high revenue sharing of Android. I remember that last year we said we were negotiating with the Android platform to lower the channel fee on a game by game basis.

And finally, we executed on initiatives, including upgrading our algorithmic advice solutions, which delivered higher investment appetizers and attracted increased share budgets towards our services.

We also provided incremental AD inventory and casual game apps sports events and live streaming platforms.

Kenneth Fong: Do you think the successful launch of these recent titles as well as the more like a mobile cloud platform like Huyao Youhua would open us up to more game distribution channels, and that would tilt the negotiating power towards us as a major game developer? So in other words, we will see more room for margin improvement by lowering the channel fee over time? Thank you.

As such that others advertising location properties achieved solid revenue growth year on year, driven by higher impressions and CTF, our mobile AD network revenue grew rapidly year on year with appetizers responded favorably to.

Yes formats, such as our rewarded video ads.

The media advertising up to four quarters year on year revenue declines the rate of revenue decreased moderated to minus 1%.

We captured sponsorship at Tysons alongside our south.

James Gordon Mitchell: Thank you for the question. So, you know, we've commented in the past that we felt that the game industry's economics were not ideal for game studios and that in many cases... The channel is for capturing a bigger share of profits in the studios themselves, and you know, we're a big enough company that we, uh... survived that, but there are many smaller companies which couldn't survive, and so we have been advocates of resetting the revenue share with the channel to more reasonable levels.

Shows like the common one season fall.

And drama series.

It is now.

We upgraded the splash screen asked in terms of video driving high Cts sequential revenue growth throughout the year.

Yes.

Let me.

Looking now in second business services segment revenue in study 3 billion renminbi up 24% year on year and up 11.

Quarter on quarter. Thanks.

Same sex services revenue grew a healthy year on year and quarter on quarter led by the continued robust expansion of our international payments and wealth management businesses, but our social payments in micro lending activities through at more moderate rights.

James Gordon Mitchell: And as you observe, there are a number of midsize game studios in China that have recently bypassed some of the traditional channels altogether and yet still brought their games to a high degree of popularity, which is impressive and commendable.

Payment services growth momentum continued through the quarter and total payment volume.

Increased over 30% year on year, our commercial payment daily active users and spending by use of both increased at a rapid rate online.

James Gordon Mitchell: For our part, as you know, we have been negotiating the account revenue shares to what we think are more sustainable levels, and you know that has and will continue to flow through over time into our game margin. We believe that there's room for many different participants to be successful, including small studios, large studios, as well as traditional channels and new channels. And so the fact that, you know, there are these different players experimenting with different channels is healthy for the industry.

Online transaction growth benefited from accelerated shift from offline to online purchases during the past dynamic as well as greater usage of many programs for transactions in categories, such as groceries and apparel.

Operating margins remained stable.

For our wealth management business the number of active customers increased 50% year on year, driving a similar growth rate in aggregate customer assets.

The business services year on year revenue growth by slow down due to the lingering impact in the pandemic project deployments.

Contract sign ups as well as nonrecurring adjustments to certain infrastructure as a service contracts. However.

James Gordon Mitchell: But as far as we ourselves are concerned, you know, we have a good relationship with the big traditional channels, and, you know, following some of the adjustments to the relationships with those big channels, we think that we're in a sort of healthy and sustainable position. And one thing I do want to add is that I think it's not just.

However, we saw rising demand for platform as a service and particular security pass in the financial health care and Internet service clients.

During the period, we upgraded our software as a service and price product.

The tool kit, which consists of three segments the products, we call Tencent meeting and Samsung Docs.

Customers increasingly adopt we previously known as enterprise way Shane for what type communication management.

James Gordon Mitchell: In terms of, you know, one figure, right, you know, in terms of revenue share, I think, you know, the important thing is actually structuring in such a way that, you know, it's a fair relationship, at the same time, the channel is actually incentivized to provide value, right, you know, so, so, I think, you know, that's the more important and this slight intricate part of the negotiation. You know, for example, if you really can deliver, you know, a promotion of new users, you know, that's, that's highly valued.

Despite most people were tenants that workplaces, we comped you grew over 100% year on year during the quarter.

Seventh and missing now has over 100 million registered users in September we released an enterprise sales handset leasing to meet growing needs for customization.

James Gordon Mitchell: If somebody else actually sort of, you know, is signing up users through other channels, but you're just going through an app store, then I think the value will be lower. So I think, you know, we're moving to an industry in which there's going to be a more delicate division of the value brought by different parties. And I think, you know, overall, it's going to be fairer economics, and it's going to be more healthy for everybody.

We integrated top 10 cents dogs, our cloud based document processing tool with other tencent products, including QQ, QQ browser and our customer relationship manager.

US to further expand its use cases.

And with that I'll pass to John to go through the financials. Thank you Jane for the first quarter total revenue was 125.4 billion renminbi increased 29% year on year or 9% quarter on quarter gross.

Gross profit was 36.6 billion renminbi.

It's up 33% year on year or 6% quarter on quarter.

Net other gains were 11.6% well MB. This was mainly due to non IRS as just an items representing increase valuations of certain investees in verticals, such as electric vehicles online game and local services.

Kenneth Fong: My follow-up question is on the overseas game. So, what is the revenue contribution by percentage now? And, except for, like, the U.S. and Japan, which Chinese operators have been focusing on, which market do you see has the biggest potential next? And then what are the challenges that we face so far that prevent us from replicating our success in these countries? Thank you.

Well as net gains on sales dispose offsetting that.

Operating profit was 44 billion renminbi up 17% year on year or 12% quarter on quarter.

Net finance costs were 1.9 billion renminbi up 11% year on year or down 3% quarter on quarter year on year increase.

James Gordon Mitchell: Sure, so we don't disclose that percentage on a quarter-by-quarter basis, but I believe the last quarter where we gave a point figure was the fourth quarter of last year, when we disclosed that 23% of our game segment revenue was international. And because, on the one hand, our international games have progressed very well in the last nine months, but on the other hand, our domestic game business has also grown nicely, the ratio in the third quarter was In terms of geographies, the global game business is truly global, and that's certainly true of our portfolio, meaning that, you know, aside from the U.S. and Japan and China, which you sort of called out.

Refrac to recognition of foreign exchange loss during the quarter versus a foreign exchange gain a year ago Q on Q remained broadly stable.

Yes, part of associates and joint venture was 2.6 billion renminbi.

Year on year and quarter on quarter increase benefited.

And hence performance of certain Investees and verticals, such as E Commerce and online gain year on year growth also reflected non I have is just an items of certain associate.

On a non IRS basis, we recorded a share of profit of 3.2 billion renminbi for the quarter.

Income taxes.

From Sandler.

5.7 billion renminbi for quarter, three 2020, and effective tax rate was 4.9%.

James Gordon Mitchell: There are very sizable game markets in other regions, and we have certain games that over-perform in certain markets. So, for example, the Supercell and Miniclip games tend to over-perform in continental Europe. League of Legends and Brawl Stars, for example, have over-performed in Korea, the big Asian market. PUBG Mobile has over-performed in certain Middle Eastern and emerging markets. Call of Duty Mobile has over-performed in Asia and South America. So, you know, we're actually quite fortunate in that, you know, with the range of games. In and around our portfolio, we now have experience of successful publishing or co-operation in many different geographies. Got it. Very clear. Thank you and congrats again.

I have our OSAT profit attributable to equity holders was 38.5 billion renminbi up 89% year on year or 16% quarter on quarter.

Operator: Thank you.

Diluted EPS was.

3.96 for R&D up 86% year on year or 13% quarter on quarter.

Well I'll share with you some of our northern Iowa is financial figures for the first quarter operating profit was 38.1 billion renminbi up 34% year on year.

Fall, 1% quarter on quarter.

Net profit after NCR was 32.3 billion revenue, Andy up 32% year on year or 7% quarter on quarter diluted EPS was 3.31 for Andy up 30% year on year or 6% quarter on quarter.

Moving to segment.

Gross margin.

Gross margin for bass was 32.6% slightly up 0.8 percentage points year on year or down 1.1 percentage points quarter on quarter.

On a year on year basis, we continue to benefit from the mix shift to higher margin self developed platform games.

Alex C. Yao: All questions come from the line of Alex Yao from JP Morgan. Please go ahead.

Financially but margin.

Martin Lau: Thank you for taking my question. Congratulations on a strong quarter. My question is regarding the change in the operating environment due to the policy introductions in the past one to two weeks, including both online micro-lenders and the guidelines for antitrust. What are the potential changes in operations that you guys are likely to introduce in light of those policy introductions? And my follow-up question is, can you give us an update on the FinTech growth strategy in light of these regulatory environment changes? Thank you.

Let me just due to greater content costs associated with our online video business.

Gross margin for advertising was 50.9% up 21 of 2.1 percentage points year on year and body stable quarter on quarter year on year increase was mainly contributed by that in.

Quickly why exemption of cultural construction theme for this year.

Gross margin for Fintech and business services was 27.9% plus.

Largely stable year on year or down one percentage point quarter on quarter.

Sequentially. The increase was mainly due to greater channel costs for payment related services.

As offline merchants resumed their businesses amid the pandemic.

Our operating expenses selling and marketing expenses were 8.9 billion, Randy up 56% year on year or 15% quarter over quarter on a year on year basis marketing spending increased flexibility on online.

Martin Lau: Well, thank you for your question. I think with respect to FinTech right now, the answer is, it will be... There will not be a lot of changes in our strategy. I think what we have been doing is steadily driving our fintech business, and this will be a strategy that will continue. If you look at the principles that we have adhered to in our fintech business, number one is really compliance with the regulations.

Okay ratio as well as the status.

Sequential increase was primarily driven by online games and business services.

As a percentage of revenue.

Selling and marketing expense was 7.1% for the quarter.

DNA expenses were seven.

Martin Lau: And this is something that we have done very methodically in the past. And if you look at the microloan regulation, it actually does not really impact our flagship microloan service, Weidi Dai, because Weidi Dai is actually offered by WeBank, which is a fully licensed bank.

10.2 billion renminbi up 27% year on year of 4% quarter on quarter, mainly due to greater R&D and sales force.

Within DNA.

Fences were 9.9 billion, Randy up 25% year on year or stable quarter to quarter.

DNA Eni and de represented 13.

Martin Lau: And it has been in full compliance with banking regulations, which is the regulated part of the entire industry. We have a lot of respect for risk management, and we prudently manage risk. And that includes deliberately controlling the scale of some of our financial products, including loans, wealth management products, and insurance, so that we optimize for quality rather than just going for scale. We focus on collaborating with industry partners within the financial industry, and, for example, in the microloan business, we actually work with more than 60 banks so that we can bring in our expertise in originating loans, but at the same time, we work with them so that they bring in their expertise to the business, and together we have a win-win outcome.

7.7%, 7.9% of revenues respectively.

As at quarter end.

We had approximately seven 7600 employees up 27% year on year or 10% quarter on quarter.

For the first quarter 2020 gross margin was 40.

5.2% up 1.5 percentage points year on year or down 1.1 percentage points quarter on quarter.

On a year on year basis segment gross margin improvement so through the increased blended gross margin.

In particular from that I would add to services support.

Sequentially margin decreased mainly reflecting lower that rough margin.

40 compared to the last quarter.

No and I have IRS operating margin was 30.4% up one percentage point year on year or down 2.4 percentage points quarter on quarter.

The Niobrara that margin was 26.6% ups 0.8 percentage point year on year or down 0.6 percentage point.

In coming quarters.

Finally, let me share with you several key financial metrics before we close our remarks.

Martin Lau: I think we also put a lot of focus on diversified revenue sources. If you look at our revenue, it's actually quite diversified between payment and the lending business, as well as wealth management, and the emerging part of insurance. And finally, I would say we focus a lot on creating unique value for users, as well as for our industry partners. We bring in technology solutions so that we reduce friction.

Total capex for Paypal, and set up that and Randy up 31% year on year or down 8% quarter on quarter.

Operating capex increased by 34% year on year too.

Quarter.

Reflecting more packages on servers and networking equipment to open our business growth.

Non operating Capex increased 4% year on year to 901 billion renminbi driven by Fannie on data centers construction.

Martin Lau: We increase engagement for our industry partners with users, and as a result, we have been growing our FinTech business at measured speed. And also, we control the size while at the same time developing our capabilities and improving our value proposition for both our users and industry partners. So, if you look at this entire strategy, I think it actually fits very well with the current regulatory environment. And I think we will be steadily continuing to drive our FinTech business forward.

For the current quarter.

Cash flow was 28.1 billion rather than be broadly stable, both year on year and quarter on quarter.

Our cash position was at 6.4 billion revenue, the which decreased sequentially due to payments for an M&A initiatives.

Partly offset by operating cash flow generation.

Fair value of our shareholders analysts and investors.

Excluding the theater is with approximately 891 billion revenue of 131 bit and what Paula as at the end of the quarter compared to 726000 around B or 103, but then what follows last fourth.

Thank you.

Thank you John operator, let's open the floor for questions now.

Operator: The next questions come from the line of...

We will now begin the question and answer session. If you wish to ask a question. Please press star one entre tiny fun anyway, what's your name to be announced if you wish to cancel your request. Please press the pound all hash key participants.

Operator: from the line of, from Morgenstern. Hi, thank you for the opportunity to ask questions and congratulations.

Operator: on the Strong Set of Results. I have one question.

Operator: I have one question related to the gaming business. Given the fact that we are currently under a normalization of COVID from the first half, which probably will see some slowdown in momentum, but then at the same time, we are also seeing quite strong in terms of new games in the pipeline. So how should we look at the sustainability of the gaming revenue growth momentum going forward, particularly when we go into 2021? Thank you. Thank you for the congratulations and the questions.

I'd Love to ask one main question and last last question at this time.

The first questions comes from the line of.

Kenneth Wong from Credit Suisse. Please go ahead.

Thank you.

Congratulations on the very strong set of results and thank you management for taking my questions.

Oh I have two questions on the game. Please so on game, we noticed a recent new games like a change in the impact of kingdoms on launching through something like game community platform might be the attempt to reach out to more like a target user base to avoid the high revenue sharing over enjoy all remember that last year.

James Gordon Mitchell: So, we mentioned in the prepared remarks that while our reported revenue from games increased quarter on quarter, that to some extent reflected the very conservative deferral and amortization policy of cash. So, during the third quarter, we saw the full benefit of the surge in cash receipts that we experienced in the first half of 2020. However, our cash receipts... did decline slightly quarter-on-quarter.

I'd be happy now negotiating with a into a platform to lower touch I know for you on the game by game basis do you think the successful launch of distribution titles as opposed to more like a mobile car platform like us who youre would open us up with more scheme distribution channel and Deadwood too so Nicole.

So using power towards us and see a major game developer. So in other words, we will see more rooms for margin improvement by lowering to try new fee overtime.

James Gordon Mitchell: So looking at the third quarter, we've already experienced a degree of normalization in cash receipts, and we assume that that will continue going forward with implications for the rate of growth of the reported revenue as well over time. Now, more broadly, I would say that we remain optimistic about the game business on a short, medium, and long-term perspective because, first of all, we continue to enhance our live operations. And as we talked about in the prepared remarks, I think that many investors are now aware of some of the live operations initiatives we put into our really flagship, highest-profile games like Honor of Kings, but they may be less aware of the extent to which we're also deploying those in more vertical, niche games such as Naruto.

Thank you. Thank you for that question. So what we've commented in the past that we felt that the.

The game industry economics.

Not ideal for the game studios in that in many cases.

The channels for capturing a bigger share of the profits in the studios themselves and you know, we're a big enough company that weekend.

Survives the us, but there are many smaller companies which couldn't survive.

Yes.

We have been advocates of resetting the revenue share with the channels to more reasonable levels and ask you about that's a number of midsize game studios in China that have recently bypass some of the traditional channels, all together and yet still brought that games to a high degree of popularity with.

It is impressive and commendable.

For our part as you know we have been in the process.

Negotiating the kind of revenue share as to what we think a more sustainable levels and that has and will continue to flow through over time into our gain margins.

James Gordon Mitchell: So that's in terms of live operations of existing games. And then, developed and already have their banhao, such as DNF Mobile and Call of Duty Mobile, some of which have been developed in other markets but pending a Banhawen launch in China, such as Wild Rift and Valorant.

We believe that there's room for many different participants to be successful, including small studios larger studios is why those up in a traditional channels and new channels.

James Gordon Mitchell: And then a large number of games, both own IP and licensed IP. Our big internal studios, including Timmy, Quantum, Morphine, and Aurora, which generally attract less external attention until the time that they are launched. The success of Moonlight Blade in the last... Those games can be very impactful and successful as well. So that's our view on the game. Okay, thank you.

So the fact that they're all these different players up experiment with different channels.

It's healthy for the industry, but as far as we ourselves are concerned we have a good relationship with the big traditional channels and in a falling.

Following some of the adjustments to ensure their relationships with those big channels, we think that we're in a sort of healthy and sustainable position.

Operator: That's very clear. My follow-up question is related to your online video businesses. We have observed some of the industry players have announced an increase in the monthly fee. How do we look at, you know, potential for further price increases from outside going forward? And, broadly speaking, how should we look at competition? Thank you.

One thing I.

I would add is I think it's not just.

In terms of.

One big revenue in terms of the revenue share I think the important thing is actually structuring in such a way that it's it's a fear.

Relationship.

At the same time, the channel is actually incentivized to provide value right. So.

Operator: Well, I remember, you know, this must have been seven or eight years ago when we launched what at the time was called a Hollywood VIP video subscription service. And, you know, it was called Hollywood VIP because 100% of the paid content was Hollywood movies. You know, literally every piece of content was either Warner Brothers or Viacom or, you know, Disney. And, you know, I thought it was one of the best products we'd ever launched, but the general user base didn't seem to agree with me.

So so.

I think that's the more important and.

Slide.

Intricate part of the negotiation new years for example, if you really can deliver.

Yes.

Promotion of new users, that's that's highly valued if.

Somebody else has actually sort of new is signing up.

Users to other channels, but do just going through.

James Gordon Mitchell: And, you know, we set the price at 20 renminbi per month, and we got to a certain subscriber base. But we realized that in order to grow the subscriber base, we should, you know, add more content. And that's what we've been progressively doing, initially adding, you know, drama series that were also available on terrestrial television, and then layering on domestic films, and then creating our own drama series, more recently creating our own variety shows, and creating our own animated TV programs, which have been very impactful.

An app store than I think the value will be lower so I think we're moving to an industry in which.

There's going to be more.

Should create a division of the value brought by different parties and I think overall, then it's going to be fair economics, and it's going to be more healthy for everybody.

Thank you and my follow up question is going to overseas game. So what is the revenue contribution by percentage now and except for like U.S.

Like Japan wish our Chinese operation have been focusing on so which market you see after because potential next and then one of the challenge that we faced so far that are preventing us from replicating also says that you do so countries. Thank you.

James Gordon Mitchell: And anyway, the net result is that, you know, the amount we invest in content now for our subscription video service is, you know, many magnitudes greater than it was when we set the 20 renminbi price point. And the range of high-quality content that's available, and in many cases, uniquely available, is, you know, infinitely larger than it was when we set the 20 renminbi price point. And of course, over time, you know, consumer price inflation in China means that that 20 renminbi price point has become steadily more and more affordable.

Sure. So we don't disclose that percentage on a quarter by.

Supportive basis, but I believe the last quarter, where we gave a point pick up what was the fourth quarter of last year. When we disclosed 23% about games segment revenue was international and because on the one hand, our international a game. So have progressed very well in the last nine months, but on the other hand drastic and businesses also.

James Gordon Mitchell: So we're very much of the view that, you know, the subscription video services in China are sort of underpriced. And, you know, in the right circumstances, then, you know, we're happy to look at the opportunities. Adjusted Pricing in a way that, you know, it's... [inaudible] the content industry.

By growing nicely the ratio in the third quarter was very similar to the ratio in the fourth quarter last year.

In terms of geographies than.

Yes.

The global game business is truly global and that's certainly true of our portfolio, meaning that you know aside from.

The U.S., and Japan, and China, which you sort of called out.

Ah the Dara up we did very sizable game markets and in other regions and you know we have certain games that okay.

Operator: Thank you. The next question comes from the line of John Choi from Daiwa. Please go ahead.

Okay. The overperform in certain markets and so for example, with a super Southern Minnesota.

Hyungwook Choi: A good evening, and thank you for taking my question and congratulations on a very strong set of results this quarter.

Hyungwook Choi: I think my question is about your online advertising.

Games tend to underperform in Continental Europe.

Hyungwook Choi: On your prepared remarks, management did mention that we're seeing, you know, gradually normalizing spending, but you also mentioned that, you know, you're seeing some increasing adoption of some of your algorithms and buying solutions. So I was wondering, like,

League of legends and grow stopped itself.

In Korea this vacation market in.

In a puppy mobile.

Formed in certain middle East and in emerging markets in accordance Judy mobile has overperformed in.

Hyungwook Choi: How much has this really helped us when it comes to capturing more ad dollars spending our

South America so.

So so we're actually quite fortunate in that but the range of games.

Or in and around our portfolio, we have experience not successful.

Hyungwook Choi: and others. And a quick follow-up here is on your cloud. We noticed...

Publishing or cooperation in many different geographies.

Operator: Thank you for joining us today.

Very clear thank you, saying congrats again.

Thank you.

Thank you. The next question comes from the line of Alex Yao from JP Morgan. Please go ahead.

Thank you I'm not sure what that came across from the congratulations on.

James Gordon Mitchell: So why don't I answer on the advertising, and Martin will pick up on the cloud? I think with the advertising industry, if you look globally, then there's an enormous shift in, you know, how advertisers are spending their money online. And generally speaking, there's a shift, you know, toward video format, and there's a shift toward, you know, retargeting. If you look at, let's say, Google's results for the third quarter, then I think that, you know, their search revenue grew by $1.something billion a year, which is great, but their YouTube revenue also grew by $1.something billion a year, which is amazing, given that YouTube is from a much smaller base than search.

The strong quarter.

My question is regarding the change in the operating.

Environment due to the policy introduction deposits went to two weeks, including both online Microlenders and.

The carton guideline for anti trust.

What about the potential changing accretion that you guys are likely to introduce in light of those in policy introductions and my follow up question is can you give us an update on the thing Tac growth strategy in light of these regulatory environment change. Thank you.

James Gordon Mitchell: And you know, that speaks to both of those phenomena, that YouTube's a natural home for video advertising, and in the last two years, Google has allowed advertisers to retarget from, you know, prior search queries and, you know, other sort of intent-based activities into advertising within, you know, YouTube. And you know, if you think about it and look at our platforms, then, you know, I believe that we're in a good position to benefit from video advertising, and you can see that, you know, very clearly in some of our feed products.

Well. Thank you for your question I think with respect to Fintech revenue I think [laughter]. The answer is it will be.

There would not be a lot of changes in our strategy right. What we have been doing is steadily driving or.

Our fintech business and.

And this will be a strategy that.

That will continue.

If you look at the approach.

The principle is that we have here too in our Fintech business number one is really compliance with regulations and this is something that we have done.

James Gordon Mitchell: You can see that very clearly in, you know, Tencent Video itself, and you can see that particularly clearly in recent quarters in our ad network, where there's been a big shift to video. And then I think we're also well-positioned to benefit from retargeting. You know, in the past, there was an enormous gulf between so-called intent-based advertising eCPMs versus every other eCPM, but the emergence of retargeting has really, you know, converged those price points.

Very.

Methodically in the past.

And.

If you look at the micro level regulation, it actually does not really impact our flex should make room service weighted I because Willy days actually offered by we bank, which is a fully licensed bank and it has been in full compliance with the banking regulations, which is the regulated apart.

James Gordon Mitchell: And, you know, we're not a big beneficiary of that because we were structuring... Short, intent-based advertising, intent-based, versus some of our peers for structurally long aggregate traffic. And, you know, of course, we're not the only company to benefit from those trends. I think, you know, ByteDance has very clearly been a beneficiary as well. But, you know, ByteDance and we are probably the two that, you know, most naturally benefit from the shift to video and the shift to retargeting.

Also of the entire industry.

We have a lot of.

Respect for risk management and we.

Prudently manage risk.

And that includes deliberately controlling the scale of some of our.

Okay.

<unk> financial.

Products, including loose a wealth management products and insurance, so that we optimize for quality right rather than just going for scale.

Martin Lau: Yeah, in terms of the cloud business right now, I would say, There are a number of reasons for the softer quarter, especially compared to peers. One is actually more specific to a few projects and contracts. So this is going to go away in the next quarter.

We focus on collaborating with industry partners within the financial industry and for.

For example in.

Hi, Mike.

Micro loan business, we actually work with more than 60 bags.

So that we actually bringing our expertise in originating loans, but at the same time, we actually work with them so that they bring into expertise.

Martin Lau: So it's more of a one-time, non-recurring event with the delay of certain projects and the restructuring of certain contracts. Now, the second one is, I would say when we're playing catch up, then we actually rely more on new projects. So during the pandemic, some of these new projects got delayed. And as a result, the catch-up process was kind of disruptive. And another reason is if you look at the growth that's driving the cloud business, especially during the pandemic.

To the business and together, we have a win win outcome.

I think we also.

The.

Put a lot of focus on diversified revenue source. If you look at our revenue, it's actually quite diversified between payment and the.

The lending business as well as wealth management.

And the emerging part of on the insurance.

And finally I would say.

We focus a lot on creating a unique value for users as well as for our industry partners would bring in technology solutions. So that though we reduced a frictional cost will increase in engagement for our our industry partners with the users.

Martin Lau: And after that, it's quite a bit of short videos, as well as games. And I would say in games, since a lot of the revenue is actually from our own games, right, you know, so it's, despite us providing the cloud service to our own games, it's not booked as revenue. And then on the short video front, there is a competitive reason for that. So these are all the factors why, you know, growth is softer than peers. But I think, you know, that the one-time adjustment will actually sort of, you know, end after this quarter, and we're catching up in terms of new projects, too. Operator, let's move to the next.

And.

As a result, we.

Have been growing our content business immense should speed and also we control the size while at the same time developing capabilities and improving our value proposition for both our users and industry partners. So if you look at this and tight.

Hi.

Strategy I think it's it actually fits very well with the current regulatory environment and I think we will be steadily.

Continuing driving our Fintech business forward.

[noise].

Thank you.

Operator: The next question comes from the line of Ham Joon Kim from Macau.

The next questions comes from the line of Gary Yu from Morgan Stanley. Please ask the question.

Operator: and Kim from Macquarie, please ask a question. Thank you for the opportunity to communicate with you guys today. I wanted to ask you guys about the wild rift for League of Legends and how that is interplaying with the PC version. So what kind of dynamicism are you seeing in terms of monetization on either sides or user behavior? And how do we think about the eventual commercial launch of it, the official commercial launch of it from the current beta phase into kind of a more official status and then the rollout into the other regions that it's not going to release into? And then I'll have a follow-up question after that.

Operator: So thank you for the question. And in terms of Wild Rift and user behavior, then, as you might expect, it's sort of a shorter, sharper experience than the full League of Legends. A full game takes roughly half as long as a full game on a PC. But, you know, the quality of the experience is extremely high.

Hi, Thank you for the opportunity to ask questions and congratulation on the first set of results I have one question is related to the gaming business.

Given the fact that we are currently under normalization of coal, but from first half.

Which probably may see some slowdown in momentum, but but then at the same time. We're also seeing quite strong in terms of new games in the pipeline. So how should we look at the sustainability.

The give me revenue growth momentum going forward, particularly when we go into 2021. Thank you.

Thank you for the congratulations and the questions. So we mentioned in the prepared remarks that while our reported revenue from games increased quarter on quarter that.

That reflects at the right conservative a deferral and amortization policy of top seeds. So during the third quarter we saw.

Full benefit of the such in cash receipts, we experienced in the first half Twentytwenty. However, our tax receipts did decline slightly quarter on quarter.

James Gordon Mitchell: And, you know, while, of course, Riot and we are biased, both Riot and we are extremely pleased. While it's taken a good amount of time to release a mobile incarnation of League of Legends, the final product is something that everyone is extremely satisfied with, at least internally. Based on the data we see from the previous beta tests in the Philippines and Brazil, as well as full launches across Southeast Asia and Japan, it appears that users feel the same way.

So looking at the third quarter.

Already experienced a degree of normalization in the cash receipts and.

We assume that that will continue going forward with implications for that rate of growth if the reported revenue as well as the time now.

Now more broadly I would say that yes.

We remain optimistic about the game business on a short and medium and long term perspective, because festival, we continue to enhance our life operations and as we talked about in the prepared remarks, I think that many investors are now aware of some of the life operations initiatives, we put in so already flagship highest profile.

James Gordon Mitchell: From a monetization perspective, then, you know, as with League of Legends itself, and indeed, as with every Riot game, the monetization is relatively back-end loaded, meaning that I think there'll be a relatively lengthier period of time between Wild Rift aggregating users versus Wargrift converting those users into monetization compared to a game such as Moonlight Blade where the users and the monetization arrive But, you know, that's fine by me. I think.

Games like on repayments, but they may be less.

Extension, which were also define deploying dollars in more vertical niche genre games such as.

So that sometimes life operations of existing games, and then in terms of new games.

We have a number of high profile Waikiki.

So just a titles in the pipeline some of which have already been developed set top that by now and a pending launch such as you know my bottom quarter, Judy mobile some of which have been developed and released and other markets, but hedging about how and launch in China, such as well.

James Gordon Mitchell: We have a broad portfolio of games, and it's healthy that, you know, different games have different monetization behaviors. And we know from the League of Legends experience that, over the long, long term, monetization is not a problem for this kind of game. Great, thank you.

Bout of rent and then a large number of games and IP and licensed IP from our big internal studios, including semi content more fun and Aurora that we'd be in a generally attract less external attention until that time, but that launch, but as you can see with.

Operator: In terms of just following up on that, like in terms of the rollout into the other regions and when, how should we think about the phased introduction, which is kind of global commercially today? Well, I think that Riot has disclosed some of its intent. Clearly, for the Chinese market, it depends on the Banhao issuance, but for other markets, it's under, you know, Riot's control. And, you know, from what I recall, they felt it was important to stagger the launches because, you know, this is the first time that Riot has released a major mobile game.

Success Myplate in that.

Those games can be very impactful as successful as well so thats our view on that.

Gain business forward.

Okay. Thank you that's very clear on my.

My follow up question is related to your online.

Ideal businesses, we have observed.

Somewhat.

The industry players that.

Operator: And given the number of current League of Legends PC players, the initial and ongoing user surge for Wild Rift is quite substantial, and that puts enormous pressure on bandwidth and server capacity, so it makes sense to stagger the launch of different geographies over time. But having successfully launched the game in different parts of Asia in the last couple of weeks, we're now, or Riot is now, gearing up to launch the game in Europe, which is a very big market for League of Legends PC, and progressively in Korea and the Americas and elsewhere, and selfishly, I do hope Hong Kong comes soon.

And that was an increase in the monthly fee how do we look at.

I still prefer to pay a.

Price I from outside going forward and broadly speaking how should we look at competition. Thank you.

Well I remember.

You know it's not.

Seen seven or eight years ago, when we launched a lot of the time its quota of Hollywood VIP videos.

Video subscription service and it was quoted Hollywood VIP, because 100% of the paid content was Hollywood movies.

Let it literally every content was either Warner brothers or Viacom or is he and I thought it was.

That's one of the best products, we'd have a little but the general use the best didn't seem to agree with me and you know we set the price at 20 Renminbi a month.

And we got to a certain subscriber base, we realized that in order to grow the subscriber base, we should add.

Operator: My second question is really just on the fintech part. We talked about 30% plus growth on the TPV and 50% growth on the wealth management. I presume revenue growth is above that, and I just want to confirm that. As a function of that, I would presume that our profitability has improved as well, so perhaps some commentary on the profit improvement on the fintech part would be appreciated. Thank you.

More contacts and that's what we've been progressed the doing initially adding.

Hi drama series that we are also available on terrestrial television and.

And then layering on a domestic films and then creating our own drama series more recently, creating our own variety shows, creating our own a animated TV programs.

But would you which have been very impactful and anyway.

Operator: Well, we don't give a lot of breakdown on that. We did say in the remark, I think if you look in the MD&A, we said that the revenue growth from fintech as a whole was quite similar to the previous quarter. So the de-federation you saw in the segment was due to business services, not to fintech services. And we did say that the profit margin on the payment business itself was relatively stable as well.

Anyway. The net result is that you know the amount we invest in content now for our subscription video service is in many magnitudes greater than it was when we set the ptwenty renminbi price points in the range of high quality content. That's available in many cases uniquely available is infinitely larger than it was when we set the ptwenty renminbi price points.

And of course over time in a consumer price inflation in China means that when she renminbi price point has become steadily more and more affordable. So so we're very much if the view that the.

Operator: So no great change in growth rates or margins. Yeah, and also, as we said, right, you know, we have actually pretty diversified streams of fintech revenue. So it's probably not, correct to tie the FinTech revenue directly to the TPB. So we don't separately disclose that, but just as an indication, I would like to point that out.

Subscription video services in China, a sort of underpriced.

And.

At the right circumstance.

This is Ben Ben what were happy to look at the opportunity to.

Adjusted pricing in a way that is faster to consumers.

As well as to that the content industry.

Operator: Thank you. The next question comes from the line of Thomas Chong.

Thomas Chong: From the line of Thomas Chong from Jeffries, please go ahead. Hi, good evening. Thanks, management, for taking my questions and congratulations on a strong set of results. My question is about our mini program. Given that we saw GMV experience very strong growth momentum during the year, and with digitization being the key industry trend, what are our strategies for digitization across different industries, such as smart retail and Smart Catering, and how our payments and cloud infrastructure can further speed up the migration? Thank you.

Thank you. The next questions comes from the line of John Choi from Daiwa. Please go ahead.

Good evening and thank you for taking my question and congratulations on a very strong set of results this quarter.

My question is on your online advertising I think on your prepared remarks management.

You had mentioned that you're seeing.

Actually our normalized spending but you also mentioned that you are seeing some are increasing adopting like on your algorithm in buying solutions. So I was wondering like how much has this really helped us when it comes to capturing more AD dollar spending arent platform is this the.

The primary reason why we're seeing strong growth or is it also a mix of the no on that higher impressions on easy pay down from the other inventories that you have and a quick follow up here is on your cloud we noticed that your cloud revenue growth was a little bit softer than expected and you mentioned like I guess, it's been delayed.

Martin Lau: Yes, we're actually quite excited about the GMV growth for mini programs, and we actually have as one of our strategic focus to increase our support within the Weixin ecosystem for transactions, and for particularly mini program transactions. So, if you look at the kind of things that we are doing right now, one part is actually increasing our support within Weixin for many programs and all the new content discovery, as well as the reorganization of our.

It was phone, but if you look at the industry wide right now, we're seeing a little bit above still relatively healthy growth. So I was wondering what are the challenges that we're facing and how.

Kind of growth should we be expecting going forward. Thank you.

So why did I answer on the appetite thing and Matson will pick up on the cloud.

I think with into the advertising industry. If you look globally. It then that's an enormous shift and how.

Martin Lau: Wallet entry point, as well as the launching of, for example, a live broadcast, right? All of them are the infrastructure that actually allows mini programs to be more powerful in facilitating transactions. So that's within the WeChat ecosystem.

How advertisers are spending online generally speaking that's a shift.

Toward video format and.

That's a shift toward it re targeting.

If you look at that's like Google with results for the third quarter than I think that as such revenue grew one point something billion dollars year on year, which is great. But that you keep revenue also grew one point something billion dollars year on year, which is which is amazing given you is from a much smaller base and such.

Martin Lau: On the other hand, I think, you know, the other part of the equation is really helping industry partners, helping different businesses, right, you know, to improve and upgrade their digitization, upgrade their tech infrastructure so that they can actually embrace the mini programs in a bigger way. And on that front, we obviously have got our smart retail team, we have our cloud service team, and sales team, who are helping these industry partners. But at the same time, we are also empowering a lot of ecosystem partners, for example, the SaaS providers, which can help these industry partners to embrace technology in a bigger way. So I think, you know, it's a process that's ongoing. It's actually progressing nicely, and it's also speeding up because there was a pandemic.

That speaks to both of those phenomena that you.

Uhhuh chips and natural home for video advertising and in the last two years, Google has allowed advertisers to reach hock edge.

From from prior search queries and other sort of intent based activities into advertising within you too and if you think about it and look at all.

Well half forms than I believe that we're in a good position to benefit from a video advertising and you can see that very clearly in some of the products you can see that very clearly and.

Tencent video itself and you can see that particularly in recent quarters, you know our AD network, where that's been a big shift of media and then I think for us.

Okay. Well addition to benefit from re targeting you know in the past there was an enormous gulf between.

Thomas Chong: So, you know, between improving our own ecosystem, between having our own team helping our industry partners and also empowering ecosystem partners to help the industry partners, I think all of them would contribute to continued growth in terms of the mini programs as a way for people to conduct transactions. Thank you. My follow-up question is on social advertising, in particular for moments and mobile advertising and networks. Should we expect there will be further increases in ad loads for moments in the coming quarters? And what should we think about the competition with short-form video players in video advertising? Thank you.

So called intent based advertising cpms versus every other ecpm, but the emergency re targeting has really converged.

Converge those price points, and we have not keeping a bit.

Beneficiary of that restructuring.

Yeah.

Short intent based advertising intent based opportunities somebody is structurally long aggregate traffic.

And of course, we're not the only company to benefit from those trends I think by John just makes it being a beneficiary as well, but but by Johnson we have publicly.

The two that you must not only benefit from the shift to video and shipped Retargeting.

Yes in terms of the cloud business revenue I would say.

James Gordon Mitchell: So, in terms of, you know, ad load in moments, then, you know, I think that we have been increasing inventory at a gradual and measured rate, and that will remain true, and, you know, as you're probably aware, Weixin Moments has a dramatically lower ad load percentage than many other highly popular internet services in China, including just the short video site you alluded to. With regard to the competition between short video and some of our inventory, then, I think we've talked about this a little bit before, but in general, I would say that both the short video sites and much of our inventory benefit from the trend toward videoization; both of them benefit from the trend toward retargeting.

There are a number of reasons for the softer quarter, especially compared to peers.

No one is actually more specific on a few products projects and contracts. So this is going to go away in the next quarter. So it's more of a onetime.

Nonrecurring.

The event on the delay of certain projects and restructuring of certain contracts.

Now the second one is I would say when we're playing catch up than we actually rely more on new projects. So during the pandemic. Some of these new projects get delayed.

And as a result.

The the catch up process, those kind of disrupted and another reason is.

If you look at the.

James Gordon Mitchell: From a price point perspective, short video sort of aggregates around a mid-20s REM and B-E CPM, and that is somewhat directly competitive with, for example, Tencent video advertising, and so that's part of the reason our media advertising was under pressure for four quarters. On the other hand, Weixin delivers a different, more affluent, audience and short video and therefore commands a higher eCPM on our [inaudible] operated at different prices.

So with that.

What's driving.

The cloud business, especially sort of June because they make and after that it's.

Quite a bit of short video as well as games and I would say in games since a lot of the games.

Revenue is actually from our own games radio so it's at.

Despite we're providing the cloud service to our own games is not booked as revenue and then on the short video front. There is a competitive reason for that so.

These are all the factors why.

The growth is softer than than peers, but I think.

You know that the onetime.

Adjustment would actually sort of new and after this quarter and we're catching up in terms of new projects to.

Operator, let's move to the next.

James Gordon Mitchell: Just one point to add with respect to differentiated inventory on Weixin, right, I think, you know, it's actually quite connected to what your first question was, you know, when you look at the mini programs and the GMV growth on mini programs, I would say, our Weixin inventories are differentiated in such a way that, you know, it's actually because of the ecosystem benefits, right, you know, it increases the conversion ratio for And two, when advertisers think about advertising on Weixin, they also think about not only in terms of the direct conversion of transactions but also think about, you know, how many users they can actually convert into their private domain user pool.

The next question is.

It's from the line of John Kim from Macquarie. Please ask your question.

Thank you Craig.

Looking for the opportunity to communicate with you guys say.

I wanted to ask you guys about the wild risks and there's a bunch and how that enter.

Playing with the PC version, so what kind of dynamics isn't that you're seeing in terms of kind of monetization on either sign sort of user behavior and how do we think about the eventual grown a commercial launch of the official commercial launch of that.

Some of the company that sales into kind of a animal.

My personal side and sort of the rollout into the other regions, that's not going to.

Okay, and then I'll have a follow up question I guess after that.

James Gordon Mitchell: And that is also valuable for them. So that's part of the reason why the eCPM is actually higher for Weixin compared to other forms of performance-based advertising. And as we continue to grow the infrastructure to support transactions within Weixin, I think that trend and that differentiation will continue to improve.

So I. Thank you for the question and in terms of wild rift and the user behavior than you.

You might expect it.

Sort of a shorter shop.

Experienced fully give that guidance.

Takes roughly half as long as a full game on a PC to give legends about the quality of the experience is extremely high.

What of course, right and we are biased both right and we are extremely pleased.

Operator: Thank you. The next question comes from the line of Gregory.

Operator: from the line of Gregory Chung from Baku. Hi Benjamin, thanks for taking my question and congratulations on Strong Quarter. I have only one question about your mobile gaming business. If you look at the top 10 mobile games ranking in the past two to three years, we can see actually that Tencent and NetEase mostly dominated the top 10 games in China with about eight or nine games. But today, if we take a look at the top 10 games in China, actually, several smaller studios have also launched.

Why is it taking a good amount of time chip release, my body and they give that guidance.

Final product something that everyone is extremely satisfied with these internally and based on the data we see from the previous beta tests in Philippines, and Brazil, as well as the mortgage.

Operator: Some very successful games. So meanwhile, Tencent United, which is a top 10 game, declined around four to five.

Launches across southeast Asia, and Japan. It appears that the users feel the same way.

From a monetization perspective than as with.

Legal actions itself and in fact last week with every riot games. The monetization is relatively backend loaded.

Meaning that I think there will be a resident.

Operator: We see the top 10 games declined to around 4-5 games, and the trend is a bit different from the street expectation of further market consolidation, so just want to understand how we should think about this kind of market dynamics and market competition going forward. Yeah, thank you for the question.

The lengthy period of time between large breadth.

Aggregating users.

Buses walgreen converting those used into monetization compared to a gain such as human by blade.

The uses and the monetization arrives simultaneously, but that's.

Fine I think we have a.

James Gordon Mitchell: So, you know, how we think about the market dynamic is that it's a very healthy development; our aspiration is not domination. And, you know, while the number of studios represented in the top 10 has diversified, you can see from our results. Despite that, we've been able to maintain very healthy revenue and earnings trends in our game business.

Broad portfolio of games.

Healthy deferred.

And James have different monetization behaviors, and we know that from league of legends experience the over the long long time.

The monetization is not it's not a problem is kind of game.

Thank you I in terms of just following up on that like in terms of the rollout into the other regions and when how should we think about the phased introduction, let's just kind of global commercial incident.

James Gordon Mitchell: We think that, you know, the diversification is good because it shows the market's becoming more dynamic and users are becoming more sophisticated. And there are new genres of games that are becoming popular and monetizable that, you know, Tencent historically didn't focus on, but we can now focus on, and that represent new opportunities for us. So, you know, that's at a general level. If I, you know, try to get a degree more granular and, you know, look at individual games, then, you know, earlier in the call, someone brought up the Ohio game and Genshin Impact's success.

Well I think that Rhiag has disclosed some of its intent.

City for the China market it depends.

On the ban how issuance but.

But for other markets and riot control and from.

From what I recall that day.

Felt it was important to stagger that launches because I.

This is the first time that riots released a major mobile game.

James Gordon Mitchell: And, you know, I think that has, you know, many lessons for the industry as a whole, all of them positive. One being that Chinese games are increasingly capable of expanding beyond China and capturing not only the wallets but also the sort of eyes or the hearts of users around the world, which is, you know, a good development. Another one is just how malleable and flexible plastic the game industry still is in terms of different models.

Given the number of.

Current league of Legends PC Fas lapsed league of legends PC by as people, who wants play league of legends, but that doesn't have a PC than the initial and ongoing use.

Such a log risk is quite substantial and that puts enormous pressure on.

Language himself at capacity so it makes sense to stagger the launch different geographies over time.

But you know having successfully launched a game in different parts of Asia.

James Gordon Mitchell: If you look at the Western world, then one of the really big trends has been games that were built around a single-player campaign mode like Call of Duty, moving over time into more of a multiplayer virtual item mode like Call of Duty Warzone. In China, we're seeing a progression in the opposite direction where a game like Genshin Impact historically would have focused completely on the virtual item monetized end-game PDP experience, but Mihoyo created a very attractive single-player campaign more akin to a traditional Japanese RPG that has the effect of drawing players in and preparing them for the end-game experience.

The last couple of weeks went out right now gearing up to launch the game in Europe, which is a very big market fatigue that guidance PC.

And progressively in Korea or another.

The Americas and elsewhere.

Got it and selfishly I do hope Hong Kong come soon.

My second question is really just on the Fintech part time, we talked about 30% plus.

Plus group on the TPV.

Groupon, that's local instruments I presume.

Revenue growth is above that and then just want to confirm that.

As a function of that.

But our profitability has improved as well so perhaps commentary on the profit improvement on the fact that it would be appreciated. Thank you.

Well, we don't give a lot of breakdown on that when we did say in the remarks I think you could have been the Mdna, we said that the revenue.

James Gordon Mitchell: So in terms of lessons for Tencent, particularly for our big four domestic game studios, then we continue to seek to innovate, we continue to seek to develop new genres and mix and match different genres, different business models to create something exciting and compelling, and we continue to increase our investment in games. Players' expectations for quality are rising and, to some extent, converging globally. And it's incumbent on us to really invest in the people, invest in the tools, to create games that can cut through the clutter, through innovation, and quality, and that's what we're seeking to do both for China and the international markets as well.

Right from fin Tech as a whole was quite similar to the previous quarter. So the deceleration you saw in the segment with future business. Obviously, it's not true in Tech services, and we did say that the profit margin on the payment business itself was relatively stable as well. So so no great no change in growth rates or margins.

Yes and no.

So as we said revenue we have actually a pretty diversified.

Streams off of a fintech revenue so.

It's probably not.

Correct two to tie the fintech revenue with directly to the TPV.

So we don't separately disclose that but they are just as an indication I would like to point that out.

Operator: Thank you. The next question comes from the line of William Packer from Exxon BNP Paribas; please go ahead.

Thank you. The next question comes from the line of Thomas Jones from Jefferies. Please go ahead.

William Henry Packer: Hi Management, thank you very much for taking my question and congratulations on the very strong numbers. The regulatory news flow has been significant and recent. Could you make any initial comments on the draft and... and how they could impact your business? Is it right to think that your video games and digital entertainment businesses are not likely to be a focus? Thank you.

Hi, good evening thanks.

Thank you again for taking my questions and congratulations on a strong set 12 so.

My question is about meaningful.

Even that we saw the GM, we experienced very strong growth momentum doing that here and there, but digitization is the key industry trends one of our strategies it.

Blended price Asian of course, it's always industries, such as much retail.

Martin Lau: Yeah, William, thanks for your question. And as you have pointed out, right, you know, the regulation, the consultation paper just came out not long ago. Obviously, we have reviewed the consultation paper regarding the platform economy. You know, we It would take some time to communicate with the regulatory authority to understand what they want to achieve fully, but from our initial thoughts, I would like to share a few thoughts. Number one is:

As much catering and how a pain meds and cloud infrastructure and further speed up the migration. Thank you.

Yes, we're actually quite excited about the GMB growth on the new programs and.

We actually put a as one of our strategic focus to increase our support within the racial ecosystem for transactions and.

For particularly newly program transactions.

Martin Lau: From our reading, the document emphasized the principles of fair competition and regulatory oversight, as well as the promotion of innovation and industry development, ensuring a balance of interests is achieved for all stakeholders. That's sort of the spirit of the paper. Secondly, our observation is that such regulation is not new, and it's also not unique to China. As technology companies become bigger and more important to the economy, I would say more regulations to reflect the new reality are needed. This is not just the case for China, but it's also the case globally.

So so if you look at the kind of things that we're doing radio. So one part is actually.

Increasing our our support within ration.

For.

For many programs and.

Or the.

Neil content discovery as well as.

The re arranging of of our.

Wallet.

Entry point as well as.

They are launching off of.

For example, a light broadcast revenue all of them actually are the infrastructure. The actually allows many programs that could be more powerful.

In facilitating transactions, so thats within the wage and ecosystem on the other hand.

Martin Lau: Thirdly, we believe that the government is still supportive of the internet and technology industry, especially the innovation that's driven by the industry, but the intention is to prevent misconduct and also ensure long-term healthy growth for the industry. Fourthly, I would like to reflect on Tencent's business, strategy, and philosophy, right? I would say it actually fits very well with the spirit of the regulatory framework. As you can see, our platforms are open in nature.

You know the the other part of the equation is really helping industry partners, helping different businesses right too.

Improve and upgrade their digitization upgrade their tech.

Infrastructure, so that they can actually embraced the new programs in a bigger way and on that front we.

We obviously have got smart retail.

Team, we have our cloud service team sales team, who are helping these industry partners, but at the same time, but we are also empowering a lot of ecosystem partners for example.

Martin Lau: We work with a lot of partners. We focus on providing great products and user value rather than very calculated business operations as well as monetization. And we also embrace competition, and, as a matter of fact, we thrive on competition, and sometimes, even internally, we compete, have multiple products competing with each other.

The SaaS providers, which can.

Help these industry partners to to embrace technology in a bigger way.

So I think it's a process thats ongoing it's actually progressing nicely and it's also speed up by the fact that there was a pandemic.

Martin Lau: Finally, I would say we'll work very constructively with the regulators to ensure our compliance with the paper. So, these are initial thoughts. Of course, as we interact with the regulators, we'll have more to add in the future, and we have more insights. Now, with respect to the different sectors, right, you know, I can't comment fully right now. But it looks like from the paper that it's more related to transaction platforms.

So that.

Between.

Improving our own ecosystem between.

Having our own team, helping our industry partners and also empowering.

Ecosystem partners to help the industry partners I think you ordered them would contribute to a continued growth in terms of.

The muni programs as a way for people to conduct transactions.

Thank you Mike.

My follow up question is on our social advertising in particular for moments and the mobile advertising network.

Martin Lau: So for games, which are essentially individual products rather than platforms, I think they are less of the focus. And in terms of the digital entertainment industry, I look at the video platform as an example. And as we talked about the video platform earlier, right, you know, it's actually quite a bit of a money-losing business right now. So, you know, it probably doesn't really fit into the focus of the regulator at this point in time as far as the consultation paper is concerned. Thank you very much for the detailed answer.

Should we expect there will be further increase in Lowe's, our moment in coming quarters, and how should we think about other competition.

With our slot for media appears in video advertising. Thank you.

So intense.

AD load in moments than.

I think that we have been increasing inventory at a gradual and measured rates and that will remain true and as you're probably aware waste.

In moments has a dramatically lower ad load percentage than many other highly popular so.

Instead services in China, including the short video sites.

William Henry Packer: My follow-up question, on a slightly different topic, you've got a... and a Strong Footprint and eCommerce via many programs, and Enterprise software via Tencent Meetings and related products. Thus far, it feels like monetization has lagged international peers. How should we think about the cadence of monetization going forward? Well, I think, you know, these are really businesses that are at the initial phase of development. We are really excited about the potential market that's ahead of us.

You alluded to.

With regards to the competition between short.

Short video and.

Some of our inventory than I think we've talked about this exhibit four but in general I would say that both the short video sites and much of our inventory benefit the trend towards video Ization both of them benefit from the trend toward re targeting.

From a price point perspective.

A short video.

Aggregates around mid Twentys renminbi CPM.

As yet that is somewhat directly competitive with for example, the Tencent video advertising and so thats part of the reason on media or advertising was under pressure a full quarters.

William Henry Packer: And as a result, we, It's actually quite a bit in the philosophy of Tencent. When there is market potential, when there is a user need that has a lot of potential, we tend to focus a lot on unlocking that potential and providing amazing products and user value first before moving into monetization. So at this point in time, I think both through mini programs and for our enterprise software, at this point in time, I think the focus is really delivering great products to increase the user base and to unlock the potential in the user market first before we really think about monetization.

On the other hand washing delivers a different and more affluent.

Our audience than short video and that will come on to higher CPM.

Our AD network and many of our other properties.

Offer a much lower CPM than short video, which is disproportionate leading to very poor.

Foreman space direct response advertisers so.

We have a range of different products, some of which compete relatively head on with short videos or price perspective, most which.

Operator at a different price points.

Thank you just one point to add with respect to this differentiated inventory on wishing I think it's actually quite connected to what youre.

William Henry Packer: Now on the mini programs, I think we do derive quite a bit of commercial benefit already through the fact that the mini program is actually enabling a lot of payment transactions within our system and also the mini program owners, who want to get traffic, are also doing advertising in our Western Economy. And that's part of the reason why our ECPM on vision advertising is actually higher than a lot of the industry's. So we are deriding the benefits, but in a somewhat indirect way.

Your first question was when you look at the media programs and the GMB growth on media programs I would say.

I wish in.

Inventories.

Our differentiated in such a way that it's actually because of the ecosystem benefits revenue it increases the convert.

Version race.

The ratio for a lot of the services to advertise on the wage and inventory and two is when advertisers think about advertising on wishing. They also think about not only in terms of the direct conversion on transactions, but also think about how much users they can actually convert into their price.

Operator: Thank you. The next question comes from the line of Zai He.

Operator: Please go ahead.

Operator: Thank you management for taking my questions. My first question is on our FinTech business. I want to discuss it from a pure payment perspective.

Domain.

User pool and that that is auto valuable for them. So that's part of the reason why.

That you CPM is actually higher for wasting compared to other forms of performance based advertising and as we continue to grow.

Infrastructure.

To support transactions within wish and I think that trend and that differentiates you will continue to improve.

Thank you.

Thank you. The next question comes from the line of Gregory Zhao from Barclays. Please go ahead.

All.

Hi, gentlemen, thanks for taking my question and congratulation on a strong quarter.

I have only one question about your mobile gaming business.

Jason you catch the top 10 mobile game ranking in the past or two to three years of growth.

I can see that retention on the Nike are mostly dominated the top 10 games in China.

About eight or nine again.

Perfect. Thank you could we could take a look at the top 10 games in China. So actually several small owners to reduce my also launched some very successful games. So Meanwhile, the tanks and that.

We see the top 10 games declined around the slogan filings.

Turning a bit different from the street expect.

Can I ask.

Further in market consolidation so.

Capital I'm sure I understand how shall we think about are these kind of some market dynamics and.

There is a market competition going forward. Thank you.

Yes. Thank you for the question. So how do we think about the market dynamic is that it's a very healthy.

These developments.

Our aspiration is not domination.

While the number of studios represents in the top 10 has diversified you can see from our results. Despite that we've been able to maintain.

Very healthy revenue and.

Earnings trends in our game business, we think that.

The diversification is good because it shows the model, becoming more dynamic and use to becoming more sophisticated and their new genres of games that are becoming popular and monetizable that tencent historically didnt focus on but we can now focus on and that represents.

New opportunities for us so that's it.

General that Oh, if I try to get a degree more granular and you know look at individual games than earlier in the call someone brought up the meeting the higher game attention impact success.

I think that has been in many that sales for the industry as a whole all of them.

One being said.

China games increasingly capable of expanding beyond China sales.

Capturing not only.

The wallets, but also the sort of isolate the hearts of users around the world, which is a good.

Good development and other one is just how.

Malleable flexible plastic the game industry studies in terms of different models seen if you look at the Western World. Then one of the really big trends has been games that were built around the single player campaign mode like call of duty.

Moving over time into more of a multi player but should item most like quarter beauty was up.

In China, we are seeing a progression sort of in the opposite direction again like.

Retention impact historically been a focus completely on the virtual item monetized endgame PDP experience butman higher created a very attractive in a single player campaign.

Our traditional Japanese ARPG.

Yeah, you bet drawing higher sand.

Preparing Doug.

Yes.

Yes, sorry.

So in terms of lessons.

Tencent Tropic for domestic game studios that we continue to see.

Right, we continue to seek to develop new genres, and you can mix and match different genres different business models to create something exciting and compelling.

We continue to increase our investments in game, because the player expectations again quality, our pricing and to some extent.

Touching globally.

And it's incumbent on us to really invest in the people invest in the tools to create games that can cut through the clutter through through renovation and three quality and that's what we're seeking to do both China and international markets as well.

Thanks very helpful.

Thank you. The next question comes from the line of PLM Tetco from and then BNP Paribas. Please go ahead.

Our management. Thank you very much taking my question congratulations on the very strong numbers.

Regulatory news flow has been significant in recent weeks could you make any initial comments on the draft antitrust rules on how they could impact your business is it right to think that your video games and digital pen to paper businesses are not likely to be a focus. Thank you.

[noise] Yeah, William Thanks for your question and that's yet.

I'd point out revenue at the the regulation the consultation paper just came out not too long ago. Obviously, we have reviewed the consultation paper.

Regarding the platform economy.

We will.

It would take some time to.

Communicate would be.

Directly to what according to you to understand.

What they want to achieve fully but our initial thoughts I would like to share.

Few thoughts number one is.

From a reading the document emphasize the principles of fair competition, and regulatory oversight as well as the promotion of innovation and industry development and shooting and balance of interests.

Is achieved for all stakeholders, that's sort of near the spirit of the.

The paper.

Secondly, our observation is that such regulation is not new and it's also not unique to China as technology companies become bigger and more important.

[laughter].

To the economy.

I would say more regulations to reflect the new reality I need it it's not just the case for China, but it's also the case globally.

Thirdly, we believe that the government is still supportive of the Internet and technology industry.

Expect lead innovation Thats driven by the industry.

But the intention is to prevent misconduct and also ensure long term healthy growth for the industries.

Fourthly.

Like to reflect on 10 cents.

This end strategy and philosophy I would say.

It actually fits very well with the spirit of the regulatory framework as you can see our platform's open in nature, we work with the water partners, we focus on providing great products and user value rather than.

Very calculated business operations as well as monetization and also embraced competition.

And as a matter of fact, we thrive on competition and sometimes even internally we compete have multiple products competing with each other so.

Finally, I would say, we will work very constructively with the regulators to ensure and compliance.

With what the paper.

So.

These are initial thoughts of course as we.

Interact with the regulators will have more to add in the future and we have more insights now with respect to the different sectors radio I can.

Comment fully right now, but it looks like right from the paper that it's more related.

Two transaction platforms, so for games, which had.

Essentially individual products rather than platforms I think.

A less of the focus and and in terms of the digital entertainment industry.

I look at the video platform as an example.

And as we talk about.

Video platform earlier, right, it's actually quite a bit of money losing.

Business right now so it probably doesn't really fit into the focus off.

The regulator at this point in time for as far as the consultation paper is concerned.

Thank you very much for the detailed answer just on US as my follow up question on a slightly different topic you've got to.

Difficult to strong footprint and E commerce, why many programs on any price software by attendance at meetings and related products. Thus far it feels like monetization has lacked international is how should we think about the K.

Cadence of monetization going forward. Thank you.

Well I think these are really businesses, which are at the.

Initial phase of development, we are really excited about.

The potential market.

Yes.

Thats ahead of us and as a result, we.

It's actually quite a bit but in the philosophy tens and revenue and there is.

A market potential when there is a user need that has a lot of potential we tend to focus a lot on unlocking them.

Casual and providing amazing products and user value first.

Before moving into monetization. So at this point of time I think both.

Both food nearly program grams and for our enterprise software at this point and I think the focus is really delivering great products to increase the user base and to to.

Unlocked to attend.

Potential in the user market first before we really think about monetization now on the mini programs I think we do.

The rise quite a bit of commercial benefit.

Benefit already through the fact that many programs actually enabling a lot of payment transactions within our.

Our system and also the Muni program owners, which once again traffic also doing advertising in our waste ecosystem.

That's part of the reason why are you CPM on rationed advertising is actually higher than a lot of the industry standard. So we are deriving the benefits, but somewhat indirectly.

Thank you.

Next questions comes from the line of say half from Macquarie.

Kerry. Please go ahead.

Thank you management for taking my question. My first question is on Austin Tex business.

I wanted to ask a from a pure payment.

Our transaction volume continues to rise.

On channel in the medium term would that increase our pure payments costs going forward as a lot of it payment expenses and the servicing spans all going through in the offline channel and also you in terms of among tides Asian improvement now the pure payment business can you in view of.

With the current at the competition and also caused from the banking channels could you give us some color in terms of the pure payment as a business imagine a in the medium to long term.

Thanks.

Yeah, well on all the offline.

Offline.

Sales and side.

It's actually generating revenue.

And are the major cost component is banking charges as well as.

ER as well as promotional.

Expenses right. So so I would say when we.

Look into the future it should be relatively stable in the sense that it does generate revenue for us.

And the.

The banking charges are relatively stable or for now and and.

And of course, it depends on the you know our our.

Collaboration with the banks.

So it is an unknown, but so far it has been relatively stable.

And the promotional expenses have gone through ups and downs due to years.

And a big part of it is really about how much of the industry peers Axeda about.

About the opportunity and how much money, they're putting into the system a lot of times, we are the market fall away in terms of promotional resources spending.

So far it looks like this year.

It has normalized to a more rational level compared to previous periods, where you know some of this.

Spending on very very high.

Okay I have a follow up question I'm thinking orphan type of business and we have seen some 2% all wealth management consumer gross this quarter up 50% year over year growth and yet our the Titans user base is still a penetration rate versus our payment user base is still very low <unk>.

You share with US a lot of new features to such a strong growth in our wealth management customer base and what are the strategies were implementing to ensure they won't be yet still maintain a very rapid growth in terms of these items consumers versus a penetration rate of course is how payment users.

Well I think we.

Once wrote this penetration is that right.

[music].

Yeah, we you know and and typically your wealth management.

ER business is a long term business or you try to establish a relationship for the long run with the users.

What we.

We typically do is it.

Lincoln Chen Tong right. So so when people deposit certain money into money market funds thats actually sort of the leading offered relationship and over time, we offer.

More wealth management products.

To the users.

I think.

So far we have been.

Again radio is consistent with our prudent and.

And measured way of growing our Fintech business, we have been quite.

A bit in self constrained in terms of offering well.

Management products that carries a slightly higher risk because we we do want to make sure that the consumers. The users actually well educated first before they know exactly what they are buying in terms of the wealth management products. So again this will be.

Longer term.

Cultivation of.

User education and overtime, we will start offering more differentiated wealth management products to our users.

And now we are not in a rush to two.

Two.

So a lot of.

Wealth management products to use just because we felt that it has to you.

Hum along with.

The education of the users with the further development of the financial markets. So that they are good wealth management products that we actually would choose and offered to our users. So it.

Speak a process through which it will grow but then I think the fact that we have the payment platform actually really help us to establish the initial relationship and as we continue to build our expertise in choosing products and educating our users than this will also grow naturally.

We have reached the end of <unk>.

Question and answer session I would like to have.

The conference back Dummies Hall for closing remarks.

Thank you operator, we are closing the core now if you wish to Checkouts press release in the financial information. Please visit the IR section of our company website at Www Dot Tencent a replay.

Tim This webcast will also be available a few hours.

Thank you and you next quarter.

That does conclude our conference for today. Thank you for participating Tencent Holdings Limited 2013 quarter results announcement conference call you may all disconnect.

[music].

[music].

Operator: [inaudible]

Operator: are going forward as a lot of payment expenses and service expenses are going through the offline channel. And also, in terms of monetization improvement on the pure payment business, can you, in view of the current competition and also costs from the banking channels, could you give us some color in terms of the pure payments business margin in the medium to long term?

Operator: Yeah, well, on the offline payment side. It's actually generating revenue.

Operator: And the major cost component is banking charges, as well as, as well as promotional expenses, right, you know. So I would say when we look into the future, it should be relatively stable in the sense that it does generate revenue for us, and, you know, the banking charges are relatively stable for now. And, of course, that depends on our collaboration with the bank. So it is an unknown, but, you know, so far it has been relatively stable.

Operator: And promotional expenses have gone ups and downs through the years. And a big part of it is really about, you know, how much the industry peers are excited about the opportunity and how much money they are putting into the system. A lot of times, we are the market follower in terms of promotional resources spending, but so far, it looks like this year it has normalized to a more rational level compared to previous periods, where some of the spending is very, very high.

Operator: Okay, I have a follow-up question.

Operator: We have seen 50% wealth management consumer growth this quarter, 50% year-over-year growth, and yet our detailed user base is still very low penetration rate versus our payment user base is still very low. Can you share with us what other new features led to such a strong growth in our wealth management and consumer base, and what other strategies we're implementing to ensure there will still be very rapid growth in terms of these high-tone consumers versus penetration rate versus our payment users?

Operator: Well, I think we want to grow this penetration steadily, right? You know, we, you know, and typically, you know, the wealth management business is a long-term business; you try to establish a relationship for the long run with the users. What we typically do is, you know, the Lin Qian Tong, right? So when people deposit certain money into money market funds, that's actually sort of the beginning of a relationship. And over time, we offer more wealth management products to the users. I think so.

Operator: So far, we have been, again, consistent with our prudence and measured way of growing our fintech business; we have been quite a bit of a self-constraint in terms of offering wealth management products that carry a slightly higher risk because we do want to make sure that the consumers, the users, are actually well educated first before they know exactly what they're buying in terms of the wealth management products. So again, this will be, you know, a longer-term cultivation of user education.

Operator: And over time, we'll start offering more differentiated wealth management products to our users. And we're not in a rush to sell a lot of wealth management products to users because we feel that it has to come along with the education of the users, with the further development of the financial markets, so that there are good wealth management products that we actually would choose and offer to our users. So it will take a process through which it will grow, but then I think the fact that we have the payment platform will actually really help us to establish the initial relationship. And as we continue to build our expertise in choosing products and educating our users, then this will also grow naturally.

[music].

Operator: We have reached the end of the question and answer session. I would like to hand the conference back to Ms. Huang for closing remarks. Thank you, operator. We are closing the call now. If you wish to check out the press release and other financial information, please visit the IR section of our company website at www.tencent.com. The replay of this webcast will also be available in a few hours. Thank you, and see you next quarter. That does conclude our conference for today. Thank you for participating in the Tencent Holdings Limited 2020 3rd Quarter Results Announcement Conference Call. You may all disconnect.

Operator: [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music

Operator: Thank you for standing by, and welcome to the Tencent Holdings Limited 2020 3rd Quarter Results Announcement Conference Call. At this time, all participants are in listen-only mode.

Operator: There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press star 1 on your telephone to join the question queue. Your name will be announced when it is your turn to ask a question. If you wish to cancel your question, please press the pound or hash key.

Operator: I would now like to hand the conference over to your host today, Ms. Wendy Huang from Tencent. Please go ahead, Ms. Huang. Good evening. Welcome to our third quarter 2020 results conference call. I'm Wendy Huang from Tencent IRT. Before we start the presentation, we would like to remind you that it includes four forward-looking statements, which are underpinned by a number of risks and uncertainties, and they may not be realized in the future for various reasons.

Operator: Information about general market conditions is coming from a variety of sources outside of Tencent. This presentation also contains some unaudited, non-IFRS financial measures that should be considered in addition to, but not as a substitute for, measures of the company's financial performance calculated in accordance with IFRS. Non-IFRS measures are intended to reflect our core earnings by excluding certain one-time and or non-cash items.

Operator: For a detailed discussion of risk factors in non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Let me introduce the management team on the call tonight. Our Chairman and CEO Pony Ma will kick off with a short overview. President Martin Lau and Chief Strategy Officer James Mitchell will then provide a business review. Chief Financial Officer Joan Lo will conclude with a financial review before we open the floor for questions. I will now turn the call over to Poni. Thank you, Wendy.

Operator: Good evening. Thank you for joining us tonight. This quarter marks the second anniversary of our strategic organization upgrade, which was intended to enhance our strength in consumer Internet and extend our presence to industrial Internet. While the upgrade was designed to bear fruit over the long run, we are already seeing initial benefits in areas such as consolidating our advertising services, rejuvenating our product and content platform, growing our cloud and SaaS businesses, and building an internal open source code base in the face of public health issues. Macroeconomics and Geopolitical Challenges

Operator: We will seek to sharpen our focus, innovate, and collaborate with our partners in order to better serve our users, customers, and society at large. Now, I will highlight the results we achieved in the third quarter. Total revenue was 125 billion RMB, up 29% year-on-year and 9% quarter-on-quarter. Gross profit was 57 billion RMB, up 33% year-on-year and 6% quarter-on-quarter. Our non-IFRS operating profit was 38 billion RMB, up 34% year-on-year and 1% quarter-on-year; non-IFRS net profit attributable to equity holders was 32 billion RMB, up 32% year-on-year and 7% quarter-on-quarter.

Operator: Moving to our online platform and Social, the combined MAU of WeChat and WeChat Plus was $1.2 billion. The Smart Devices MAU of QQ was 617 million. In Gaines, we expanded our leadership via the extensive popularity of established franchises and the success of new releases in both China and international markets. In media, video and music subscriptions increased as we released top-tier content and added songs to the pay library. In fintech, commercial payment transactions maintain robust growth, and our wealth management platform expands its aggregated customer base.

[music].

Operator: In public cloud, we saw rising demand for path solutions and upgraded our SaaS enterprise productivity to capture the opportunity. Emerging Experts. In utilities, we maintain our industry leadership in mobile security and mobile browser in China. I will invite Martin and James to discuss business with you. Thank you, Pony. Good evening and good morning.

Operator: For the third quarter of 2020, our total revenue grew 29% year-on-year. That represented 56% of our total revenue, of which social networks were 23% and online games were 33%. Online advertising was 17% of total revenue.

Operator: FinTech and business services represented 26% of our total revenue. For value-added services, segment revenue was 70 billion RMB in the third quarter, up 38% year-on-year and 7% quarter-on-quarter. Social networks revenue was 28 billion RMB, representing 29% year-on-year and 6% quote-unquote growth, mainly driven by in-game item sales and live streaming services. Total VAST subscriptions grew 25% year-on-year to $213 million, benefiting from digital content subscriptions. Total video subscriptions increased 20% year-on-year to 120 million, primarily due to our popular drama and animated series, such as Nothing But 30 and The Land of Warriors Season 3. Additionally, we successfully converted trial users acquired during summer promotions to regular subscribers.

Operator: Total music subscriptions grew 46% year-on-year to $52 million on an extended pay library and a higher retention rate. Online games revenue increased 45% year-on-year and 8% quarter-on-quarter to 41 billion RMB, driven by growth in paying users and operators. Total smartphone games revenue grew 61% year-on-year to $39 billion RMB, benefiting from robust growth of existing titles, as well as recognition of deferred revenue from the stayed-at-home period. Sequentially, revenue grew 9%, but cash receipts slightly decreased, as users returned to their offices and their in-game activities were no more.

Thank you for standing by and welcome to the 10 San Holdings. They meet the 2020 took what the results announcement conference call. At this time all participants are in listen only mode.

That will be up.

Followed by a question and answer session.

Last question you need to press Star one entre tirelessly to join the question queue.

And now if you'll turn to ask a question.

Okay. So your question. Please press the pound or hash key I would now like to hand the call.

Friends over to your host today Ms. Wendy Huang from 10 cents. Please go ahead.

Good evening welcome to our third quarter 2020 result conference call.

Operator: PC client games revenue was stable year-on-year at $12 billion RMB, as increased revenue from League of Legends globally and New Game Valorant in Western markets offset decreased revenue from Dungeon & Fighter in China. Revenue increased 7% quarter on quarter due to crossfire and full quarter contribution from Ballarat. Now I will talk more about our social network.

I'm wondering one from Tencent IR team.

Operator: For foundation, we're focused on delivering convenience and efficiency for users, to facilitate access to high-frequency services within the WeChat Pay interface. We grouped the list of services into four key verticals, namely financial services, daily services, transportation and travel, as well as shopping and entertainment. For the travel and transportation vertical, we expanded the geographic coverage of mobility services to 10 provinces and municipalities in China. Mobility services connect auto owners with car services, such as car washes and car insurance, as well as general users with public transportation services, including transit codes and bus schedule checking, to enhance the efficiency of content and service delivery. We enable more cross-referencing within Weishen property.

[noise] before we start the presentation.

Operator: For example, in the checkbox, users can press to search words and phrases that appear in messages, after which Weixin will provide related content and services for mini-programs, official accounts, moments, and other sources in moments when it allows users to create hashtags in posts. Readers of the posts who click these hashtags can then see related content from official accounts, video feeds, and H5 pages. Moving on to QQ, we'll keep on creating new experiences to strengthen the stickiness of the youth community on the QQ platform.

Patients, we would like to remind you that it includes forward looking statements.

Operator: We enable more shared experiences among young users. For example, we allow them to watch Tencent videos together while video chatting, to compete with friends in battle mode mini-games, and to co-edit classwork via Tencent.com. We have been testing MiniWorld, a video and image feed service within QQ since April. Contributors within MiniWorld can create images and videos shared beyond their existing friend circle, and users can explore content through recommendations.

Which you're on the line to buy a number of risks and uncertainties and it may not be realizing the future for various reasons.

Information about general market conditions, it's coming from a variety of sources outside of Tencent.

This presentation.

Content. Some are audited now as far as financial measures that should be considered in addition to but not as a substitute for measures of the company's financial performance prepared in accordance with <unk>.

[noise] neither bars measures are intended to reflect our core earnings by.

Certain one time and all non cash items.

For a detailed discussion of risk factors in it now I have ours measures.

Please refer to our disclosure documents on the IR section of our website.

Let me introduce the management team on the core Tonight.

Our children.

In a CEO pony malware kickoff with a short overview.

President Martin Law, and a chief strategy Officer, James Mitchell will provide a business review chief.

Operator: Mini World resonates well with the young audience and has enjoyed increasing popularity. These initiatives and growing adoption of real time video chatting drove daily time spent per user within QQ up by a teens percentage year on year. Now, turning to our gaming business. For Smartphone Games, we leverage our industry expertise, user insight, and execution to deliver engaging experiences to large-scale audiences. Enhancing the vitality and longevity of our existing titles, including blockbusters, as well as lesser known games. We recently celebrated the 5th anniversary of Order of Kings, which exceeded 100 million average DAU for the first 10 months of 2020.

Chief Financial Officer, John Lowe will conclude with my initial review before we open the floor for questions.

Operator: We have expanded Honor of Kings' user base through constant innovation, user-centric operation, and robust technology infrastructure. We're realizing the potential of its IP by developing new games, animated series, and a live-action drama series. Investors are quite familiar with titles such as Honor of Kings and Peacekeeper Elite, but we apply similar capabilities to lesser-known vertically specialized titles as well.

Operator: For example, our self-developed game, Naruto Mobile, despite being released four years ago, has recently achieved all-time highs in BAU and revenue, driven by operational enhancements we have made over the years, such as an improved PVP mode. Naruto Mobile is now one of the most popular and revenue-generating games in the fighting genre in China. With respect to PC games, we continue to view the sector fairly favorably. While the PC game market has not experienced the same revenue growth as the mobile game market, PC games are highly influential.

Operator: There's plenty of room for IP and product innovation within the PC platform to drive direct revenue contributions or broader platform benefits. For example, League of Legends launched a major thematic event, Spirit Blossom Festival, in the quarter, coordinating the release of new champions, skins, and event paths, which was popular both with users as well as revenue-generating. The recent League of Legends World Championship in Shanghai attracted a large and sizable global audience. We adapted Crossfire into a highly rated drama series and released a tie-in new game mode and skins, reviving the game's popularity and monetization.

Operator: In addition, new game Valorant has become a breakout hit in the tactical shooter genre in the Western market, with a wide audience on Twitch. Besides sustaining and extending existing game success, we continue releasing impactful new games. Moonlight Blade Mobile, a self-developed game based on the renowned novel by Need of Legends, became the most successful MMORPG launch in China this year due to iOS growth.

I will now turn the call over to Pony.

And go.

Already was.

Good evening. Thank you.

For joining us today.

Operator: A mobile battle arena game based on LLIP is currently among the most downloaded mobile games across its available markets in Asia. With that, I'll pass on to James to talk about the rest of the business. Thank you, Martin.

This quarter marked the second anniversary of our strategic organization upgrades, which was intended to enhance our strength in consumer Internet.

Extend our process industry industry analysts.

Operator: Moving on to advertising, revenue increased 16% year on year and 15% quarter on quarter to 21 billion renminbi. We believe China advertising has now largely recovered from the COVID-19 shock. Advertiser categories have been experiencing rapid secular growth, such as education, internet services, and e-commerce, continue to grow quickly year on year on our platform during the third quarter. Ad spend from some cyclical advertiser categories, such as automobiles and real estate, picked up year-on-year, and certain categories where ad spend dips due to COVID, such as financial services. Staples were flat this year on year-end.

Yeah.

Operator was decide to bear fruit over the long run we are already seeing initial benefits in areas such as consolidating our advertising services.

Rejuvenating, our product and content platforms.

Oh, yeah, our cloud and SaaS businesses and building.

Thing and internal open source code base.

In the face of public health map.

Macroeconomic and geopolitical challenges, we will see to sharpen our focus innovate and collaborate with our partners in order to better serve our users customers and the society.

A lot.

Operator: Internally, we executed on initiatives including upgrading our algorithmic ad buying, which delivers higher conversion for advertisers and attracted an increased share of budgets towards our services. We also provided incremental advertising inventory in casual game apps, esports events, and live streaming platforms. For social and other advertising, where should properties achieve solid revenue growth year-on-year driven by higher, Our mobile ad network revenue grew rapidly year-on-year as advertisers responded favorably to video formats such as our rewarded video ads. Media advertising After four quarters of peak year-on-year revenue declines, the rate of revenue decrease moderated to minus 1% year-on-year.

Now I will highlight the results that we achieved in the third quarter of 10 certainty.

Total revenue was 125 billion RMB up 29% year on year, and 9% quarter on quarter.

Gross profit was 57 billion RMB up 33% year on year, 6% quarter on quarter.

Our non.

Operating profit was 38 billion RMB up 34% year on year, and 1% quarter on quarter.

Non-GAAP net profit attributable to equity holders for 32 billion RMB up 32% year on year, 7% quarter on quarter.

Moving to our online travel yeah.

Soja combined EMEA you off wishing and we chat was 1.2 billion.

Operator: We captured sponsorship advertising demand via our self-sufficient variety shows, such as the coming one, Season 4, and drama series, such as None. We upgraded the SPAF screen ads in Tencent Video, driving higher eCPMs and sequential revenue growth for our video advertising services. Looking now at Fintech and Business Services, segment revenue is 33 billion renminbi, up 24% year-on-year and up 11% quarter-on-quarter. FinTech services revenue grew healthily year-on-year and quarter-on-quarter, led by the continued robust expansion of our commercial payment and wealth management, while our social payments and micro-lending grew through it at a moderate rate.

Smart devices and they you can view was 617 meters.

In games, we expand our leadership via extensive popularity or establish their franchises.

For sales of newly leased impose China and international markets.

Media video and music subscriptions increased as we release the Pos your content and at his phone to the pay library.

In Fintech commercial payments has access maintained robust growth and our well.

And then something happens expanding his equity get a customer at that.

In public cloud, we saw rising demand for Pos solution and upgrade our spa enterprise productivity tool kit to capture opportunities emerging sector.

Operator: For payment services, growth momentum continued through the quarter, and total payment volume increased over 30% year-on-year. Our commercial payment, daily active users, and spending per user both... [inaudible] online transaction growth benefited from an accelerated shift from offline to online purchases due to the pandemic, as well as greater usage of mini programs for transactions in categories such as groceries and apparel. Payment operating margins remain stable. For our wealth management business, the number of active customers increased over 50% year-on-year, driving a similar growth rate in aggregated customer assets. For Business Services, the year-on-year revenue growth rate slowed down due to the lingering impact from the pandemic on project deployments and new contracts signed up, as well as non-recurring adjustments. Infrastructure as a sector

In utilities, we maintained our industry.

Our leadership in mobile security and mobile browser in China.

Our in biomarker and James to discuss business review.

Thank you Tony.

Okay.

Good evening and good morning for the third quarter of 20.

In <unk>, our total revenue grew 29% year on year.

As represented 56% of total revenue with rich social networks was 23% and online games was 33% on.

Online advertising was 17% of total revenue Fintech and business services represented 26%.

Operator: However, we saw rising demand for platform as a service. Thank you. Thank you.

Are you talking to them.

For value added services segment revenue was 70 billion RMB in the third quarter up 38% year on year and 7% quarter in quarter. So.

Operator: During the period, we upgraded our software as a service enterprise productivity toolkit, which consists of three signature products, Wecom, Tencent Meeting, and Tencent.com. Customers increasingly adopt Wecom, previously known as Enterprise Weixin, for workplace communication and management. Despite most people returning to their workplaces, WECOM's DAU grew over 100% year-on-year during the quarter. Tencent Meeting now has over 100 million registrants. In September, we released an enterprise version to meet growing needs for customization. We integrated dot Tencent Docs, a cloud-based document process, with other Tencent products, including QQ, QQ Browser, and our Customer Relationship Manager. And with that, I'll pass it to John to go. Thank you, James.

Social networks revenue was 28 billion RMB, representing 29% year on year, and 6% quote unquote to grow.

Mainly driven by in gaming revenue sales and live streaming services.

Total vas subscriptions grew 25% year on year to $213 million benefiting from digital content subscriptions.

Total video subscriptions increased 20% year on year to $120 million, primarily due to.

Popular dramas and limited series, such as nothing really in the land of Glorious season three.

We successfully convert a trial users are doing some promotions to recommend to the dealer subscribers.

Total music subscriptions grew 46% year on year to 52 mill.

Operator: For the first quarter, total revenue was 125.4 billion renminbi, up 29% year-on-year or 9% quarter-on-quarter. Gross profit was R$36.6 billion, up 33% year-on-year or $6.2 billion.

I mean on an expanded pay library and the higher retention rates.

Online games revenue increased 45% year on year, and 8% quarter on quarter to 41 billion RMB driven by growth in paying users and ARPU.

Operator: Incorporated. Net other gains were 11.6 billion renminbi. This was mainly due to non-IR virus adjustment items representing increased valuations of certain investees in verticals such as electric vehicles, online games, and local services, as well as net gains on dim disposal.

Total smartphone games revenue grew 61%.

Year on year to 39 billion RMB benefiting from robust growth of existing titles as well as recognition of deferred revenue from the stayed at home period.

Sequentially revenue grew 9%, but cash receipts slightly decreased.

Operator: Operating profit was 44 billion renminbi, up 70% year-on-year or 12% quarter-on-quarter. Net finance costs were $1.9 billion RMB, up 11% year-on-year or down 3% quarter-on-quarter. Year-on-year increased refracted recognition of foreign exchange loss during the quarter versus the foreign exchange gain a year ago. However, Q1Q remained broadly stable. Shea, a partner of Associates and a joint venture with 2.6 billion renminbi, both year-on-year and quarter-on-quarter increased benefit.

As users returns to their offices and in game.

Baby's normalized.

PC client games revenue was stable year on year at 12 billion RMB as increased revenue from league of legends globally, and you can be relevant in western markets offset decreased revenue from Benjamin fighter in China.

Revenue increased 7%.

Excellent quarter due to cross fire and full quarter contribution from Ballard.

Now I'll talk more about our social networks.

Fruition, we're focused on delivering convenience and efficiency for users.

Operator: Hence performance of certain industries in verticals such as e-commerce and online games. Year-on-year growth is also reflected in IFRs, just as items of certain associated.., on a non-IRB. We record a share profit of $3.2 billion before the quarter.

To facilitate access to high frequency services within the ration pay.

Interface.

We proved the list of services into four key verticals, namely financial services Daily services transportation and travel as well as shopping and entertainment.

For the travel and transportation vertical we expanded geographic coverage of mobility services.

Operator: 5.7 billion renminbi in Q3 2020.

Operator: and the effective tax rate was 12.9; iVirus' net profit attributable to equity holders was 38.5 billion RMB, up 89% year-on-year or 16%.

40, 10 provinces and municipalities in China.

Mobility services connect to auto owners with cost of services, such as car washes and kind of insurance as well as general users with public transportation services, including Transicold.

Operator: Inc. Inc. Inc. Diluted EPS was 3.964 RMB, up 8%.

Operator: R&D up 86% year-on-year or 15% quarter-on-quarter. Now, I'll share with you some of our North Iowa I...

And thus scheduled checking.

To enhance the if.

Efficiency of content and service delivery.

We enable more cross referencing within wishon properties.

Operator: For the first quarter, operating profit was 38.1 billion RMB, up 34% year-on-year overall.

For example in the check box users can press to search words and phrases that appear in messages after which Wayne will provide related content and services from Neely programs official.

Operator: One percent, quarter and quarter. Net profit after NCI was 32.3 billion RMB, up 32% year-on-year or 7% quarter-on-quarter. Diluted EPS was 3.314 RMB, up 30% year-on-year or 6% quarter-on-quarter. Moving to the Segment Growth Budget Growth margin for VAS was 52.6%, slightly up 0.8% year-on-year or down 1.1% quarter-on-quarter. On a year-on-year basis, we continue to benefit from the makeshift to higher-margin self-developed smartphone gains. sequentially, the VAS margin decreased due to greater content costs associated with our online video business.

Tense moments and other sources.

A moment will enable users to create cash tax in posts readers of the post click. These cash tax can then see related content from official occurrence video feeds and H five pages.

Moving onto Q Q well.

We keep on creating.

I think new experiences to strengthen stickiness of the youth community on the QQ platform.

We enable more shared experiences among young users for example, we allow them to watch Tencent video together while video chatting.

To compete with friends Embeda mode mini games and to grow added.

Operator: Gross Margin for Online Advertising

Classwork via Tencent docs.

We have been testing many world a video and image foodservice within QQ since April.

Operator: The year-on-year increase was mainly contributed by the industry-wide exemption of the cultural construction fee for this year. Gross margin for fintech and business services was 27.9%, largely stable year-on-year or down one percentage point quarter-on-quarter. The sequential decrease was mainly due to greater channel costs for payment-related services, as offline merchants resumed their businesses amid the pandemic. On operating expenses, selling and marketing expenses were 8.9 billion RMB, up 56% year-on-year or 15% quarter-on-quarter. On a year-on-year basis, marketing spending increased, particularly on online games.

Contributors within media World can create images and videos shared.

Beyond the existing friend circle.

And.

Users can explore content through recommendation.

Mainly word resonates well with young audience and has enjoyed increasing popularity.

These initiatives and growing adoption of real time video churning drove daily time spent per user within QQ up by a teens percentage year on year.

Now turning to our gaming business.

For smartphone games will leverage our industry expertise user insight and execution to deliver engaging experiences to large scale audiences enhancing the totality and longevity of our existing titles, including blockbusters as well as the.

Operator: Weixi, as well as the seven. Sequential increase was what I'm really

Operator: is really driven by online games and business services.

Operator: That's a percentage of revenues.

The lesson on games.

Operator: Selling and marketing expense was 7.1% for the quarter. GNA expenses were $17.2 billion in renminbi, up 27% year-on-year or 4% quarter-on-quarter.

We recently celebrated the fifth anniversary of owner of Kings, which exceeded 100 million average peer you for the first 10 months of Twentytwenty.

We have expanded on a king's user base at some constant innovation user centric operation and robust technology infrastructure.

Operator: for the mainly due to great R&D and samples.

Operator: Within GNA, R&D expenses were at $9.9 billion rent-on-fee, up 25% year-on-year of stable quote-unquote. GNA and R&D represented 13.7% and 7.9% of revenues respectively.

Sure.

We are realizing the potential of its IP by developing new games animated series and a life action drama series.

Investors are quite familiar with titles such as on a kings and peacekeeper elite, but we apply similar capabilities to lesser known vertically specialized.

Operator: 7,600 employees, up 27% year-on-year or 10% quarter-on-quarter. For the third quarter of 2020, gross margin was 45.2%, up 1.5 percentage points year-on-year on

Drugs as well for example, our self developed games now rutile mobile despite being released four years ago has recently achieved all time high in beer, you and revenue driven by operational enhancements, we have made over the.

Operator: or down 1.1 percentage points quarter-on-quarter. On a year-on-year basis, segment growth margin improvements flow through the increased rendered growth margin.

The years, such as an improved PBP mode now.

Rumo is.

Now one of the most popular and revenue generator games in the fighting January in China.

Operator: in particular from valuable adversaries. Frequently, margins decrease, mainly reflecting lower vast gross margins compared to the last quarter. Non-IFRS operating margin was 30.4%.

With respect to key PC games, we continue to view the sector fade fairly favorably.

While the PC game market has not experienced the same revenue growth as the mobile game market PC games are highly influenced.

Operator: Up 1 percentage point year-on-year or down 2.4 percentage points quarter-on-quarter. The Niavara SNAP margin was 26.6%, up 0.8 percentage point year-on-year or down 0.6 percentage point quarter-on-quarter.

Sure there.

There is plenty of room for IP and product innovation within the PC platform to drive direct revenue contributions of broader platform benefits for example needed legends launched a major medical event Spirit Blossom Festival in the quarter coordinating the release of new champions schemes and event.

Operator: Finally, let me share with you several.

Operator: We're going to go through several key financial metrics before we close our remarks. Social CapEx was 8.7 billion renminbi, up 31% year-on-year or down 8% quarter-on-quarter.

Let us which was popular both with users as well as revenue generators.

Operator: Operating capacity

The recent lead of Legends World Championship. The show attracted lot large and sizable global audience too.

Operator: by 34% year-on-year to 7.8% year-on-year, reflecting more expenditures on servers and network equipment to support our business growth. Non-operating CapEx increased 12% year-on-year to 901 million renminbi driven by failure on data centers' construction. For the current quarter, the cash flow was 28.1 billion RMB, broadly stable both year-on-year and quarter-on-quarter. That cash position was at...

We adapted crossfire into a highly rated drama series and really.

Plus the tie in new game mode, and skins, reviving the games popularity and monetization.

In addition, new game downloads has become a breakout hit in the tactical shooter genre in western markets with a wide audience on Twitch.

Operator: 6.4 billion renminbi, which decreased sequentially due to payments for M&E initiatives, partly offset by operating cash flow generation. Fair value of our shareholdings and listed investees, excluding subsidiaries with approximately $800,000.

Besides sustaining.

Landing existing game success, we continue releasing impactful new games.

Moonlight made mobile self developed game based on the renowned at Nava.

Novel became the most successful animal RPG launch in China. This year by Io has grossing.

Operator: $191 billion in renminbi or $131 billion US dollars as of the end of the quarter.

Neither diligence while Britt.

Correct.

A mobile Battle Arena game based on our IP is currently among the most downloaded mobile games across its available markets in Asia.

Operator: as at the end of the quarter, compared to $726 billion RMB or $103 billion U.S. dollars last quarter. Thank you. Thank you, John. Operator, let's open the floor to questions now. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key.

With that I'll pass onto James to talk about the rest of the business review.

Thank you Mark and moving onto your advertising revenue increased 16% year on year.

Thanks, and 15% quarter on quarter to 1 billion Renminbi, We believe China advertising is now largely recovered from the COVID-19 show.

Hi categories have been experiencing rapid secular growth.

Operator: Participants are allowed to ask one main question and one follow-up question at each time. The first question comes from the line of Kenneth Fong from Credit Suisse. Please go to hate.

Education and service.

<unk> continues to grow quickly year on year on our platform during the third quarter.

<unk> expenses and six separate appetite for batteries, such as automobiles and real estate picked up year on year.

And certain categories, our AD spend aptitude economies, such as financial services and consumer Staples was flattish year on year in the quarter.

Operator: I have two questions on the game, please. So on the game, we noticed that recent new games like Jensen Impact and Rise of Kingdoms are launching through some game community platforms like Bili and TabTab to reach out to more like a target user base to avoid the high revenue sharing of Android. I remember that last year we said we were negotiating with the Android platform to lower the channel fee on a game-by-game basis.

And finally, we executed on initiatives, including upgrading our algorithmic advice.

Conditions, which delivered higher national advertisers and attracted increased share of budgets towards our services.

We also provided incremental advertising inventory in casual game apps sports events and live streaming platforms.

Operator: Do you think the successful launch of these recent titles as well as the more like a mobile cloud platform like Huyao, Youhua would open us up to more game distribution channels, and that would tilt the negotiation power towards us as a major game developer? So, in other words, we will see more room for margin improvement by lowering the channel fee over time? Thank you.

It's less than others advertising location properties achieved solid revenue growth year on year driven by.

Our impressions any CTF.

Mobile AD network revenue grew rapidly year on year with appetizers responded favorably to video formats, such as our rewarded.

Yes.

The media advertising up four quarters year on year revenue declines the rate of revenue decreased moderated to minus 1% year on year, we captured.

Sponsorship advertising demand far south cheese variety shows such as the common one season fall and drama series such as now.

Operator: Thank you for the question. So, you know, we've commented in the past that we felt that the game industry's economics were not ideal for game studios in many cases. The channel is for capturing a bigger share of profits in the studios themselves, and you know, we're a big enough company that we can, [inaudible] more reasonable levels. And as you observe, there are a number of midsize game studios in China that have recently bypassed some of the traditional channels altogether and yet still brought their games to a high degree of popularity, which is impressive and commendable.

We upgraded the splash screen ads and Tencent video driving high Cpms sequential revenue growth throughout the year.

Let me.

Looking now.

Our insect business services segment revenue was 33 billion renminbi up 24% year on year and up 11% quarter on quarter since.

Fintech services revenue grew healthily year on year and quarter on quarter led by the continued robust expansion of our commercial payments and wealth management businesses, while our social payments and micro lending active.

But more moderate rights.

The payment services growth momentum continued through the quarter and total payment volume increased over 30% year on year, our commercial payment daily active users in spending by use of both increased at a rapid rate online.

Operator: For our part, as you know, what we have been through the process. We believe that there's room for many different participants to be successful, including small studios, large studios, as well as traditional channels and new channels. And so the fact that, you know, there are these different players experimenting with different channels is healthy for the industry. But as far as we ourselves are concerned, you know, we have a good relationship with the big traditional channels, and, you know, following some of the adjustments to the relationships with those big channels, we think that we're in a sort of healthy and sustainable position. And one thing I do want to add is that I think it's not just.

Online transaction growth benefited from an accelerated shift from offline to online purchases due.

The dynamic as well as greater usage of many programs for transactions in categories, such as groceries and apparel payment.

Segment operating margins remained stable.

For our wealth management business the number of active customers increased over 50% year on year, driving a similar growth rate in aggregate customer assets.

Business services year on year revenue growth by slow down due to the lingering impact in the pandemic on project deployments and new contract sign ups as well as nonrecurring adjustments to certain infrastructure as a service contracts.

However, we saw rising demand for platform as a service and particular security passed in the.

The financial health care in Internet service clients.

During the period, we upgraded our software as a service enterprise productivity tool kit, which consists of three signature products, we call Tencent meeting and Tencent docs cuts.

Customers increasingly adopt we Tom previously known as enterprise way Shinn for workplace communication and managed.

Operator: In terms of, you know, one figure, right, you know, in terms of revenue share, I think, you know, the important thing is actually structuring it in such a way that, you know, it's a fair relationship. At the same time, the channel is actually incentivized to provide value, right, you know, so, so, I think, you know, that's the more important and this slight, intricate part of the For example, if you really can deliver a promotion to new users, that's highly valued. If somebody else is actually signing up users through other channels, but you're just going through an app store, then I think the value will be lower.

Despite most people returned as their workplaces, we comps da you grew over 100% year on year during the quarter.

10 cent missing now has over 100 million registered users in September we released an enterprise version of Tencent meeting to meet growing needs for customization.

We integrated top 10 cent docs.

Our cloud based document processing tool with other tencent products, including QQ, QQ browser and our customer relationship management SaaS to further expand its use cases.

And with that I'll pass to John trajectory to financials. Thank you James for the first quarter total revenue was 125.4 billion Rand.

And then the increased from 29% year on year or 9% quarter on quarter.

Operator: So I think we're moving to an industry in which there's going to be a more delicate division of the value brought by different parties. And I think, overall, then it's going to be fairer economics, and it's going to be more healthy for everybody. Thank you.

Gross profit was 56.6 billion renminbi up 33% year on year or 6% quarter on quarter net.

The gains were 11.6 billion renminbi. This was mainly due to non IOF hours of just an items.

Representing increase valuations absurd to invest these in verticals such as electric vehicles, and then gain and local services as well as net gains on disposal of certain investees.

Operator: My follow-up question is on the overseas game. So, what is the revenue contribution by percentage now? And, except for the U.S. and Japan, which Chinese operators have been focusing on, which market do you see has the biggest potential next? And then what are the challenges that we face so far that prevent us from replicating our success in these countries? Thank you.

Operating profit was 44 billion renminbi up 17% year on year or 12% quarter over quarter.

Net Finance Corps.

Close to 1.9 billion renminbi up 11% year on year or down 3% quarter on quarter year on year increase a refrac to recognition of foreign exchange loss during the quarter versus a foreign exchange gain a year ago Q on Q remained broadly stable.

Operator: Sure, so we don't disclose that percentage on a quarter-by-quarter basis, but I believe the last quarter where we gave a point figure was the fourth quarter of last year when we disclosed that 23% of our game segment revenue was international. And because, on the one hand, our international games have progressed very well in the last nine months, but on the other hand, our domestic game business has also grown nicely. The ratio in the third quarter was very similar to the ratio in the fourth quarter last year.

Yes.

Associates and joint venture with 2.6 billion renminbi.

Both year on year and quarter on quarter increase benefited from and hence performance of certain investees in verticals, such as E Commerce and online gains year on year group. All also reflected in one I have is just on items of certain associates.

Operator: In terms of geographies, then, you know, the global game business is truly global, and that's certainly true of our portfolio, meaning that, aside from the U.S. and Japan and China, which you sort of called out, there are very sizable game markets in other regions, and we have certain games that clearly overperform in certain markets. And so, for example, the Superstar and Miniclip games tend to overperform in continental Europe.

On a non IRS basis, we recorded a share of profit of 3.2 billion renminbi for the quarter.

The income tax expense was.

5.7 billion renminbi for quarter, three 2020, and the effective tax rate was 12.9%.

I have our net profit attributable to equity holders.

Obviously at 38.5 billion renminbi up 89% year on year or 16% quarter on quarter.

Diluted EPS for 3.96 for revenue to be up 86% year on year or 15% quarter on quarter.

Operator: League of Legends and Brawl Stars, for example, have overperformed in Korea, the big Asian market. PUBG Mobile has overperformed in certain Middle Eastern and emerging markets. Call of Duty Mobile has overperformed in the Middle East and South America. So, you know, we're actually quite fortunate in that, you know, with the range of games. In and Around Our Portfolio, we have experience now of successful publishing or co-operation in many different geographies. Got it. Very clear. Thank you and congrats again.

Now I'll share with you some of our northern Iowa is financial.

All the figures for the first quarter operating profit was 38.1 billion renminbi up 34% year on year or 1% quarter on quarter net.

Net profit after NCR was 32.3 billion renminbi up 32% year on year or 7% quarter on quarter dilute.

EPS was 3.3 went for revenue to be up 30% year on year or 6% quarter on quarter.

Moving to segment gross margin growth.

Gross margin for fast was 52.6% slightly up 0.8 percentage point year on year or down 1.1 percentage points quarter on quarter.

Operator: Thank you. The next question comes from the line of Alex Yao from JP Morgan. Please go ahead.

On a year on.

Yeah basis, we continue to benefit from the mix shift to higher margin self developed smartphone games sequentially, but margin decreased due to greater content costs associated with our online video business.

Operator: Thank you, Mr. Chairman, for taking my question. Congratulations on a strong quarter. My question is regarding the change in the operating environment due to the policy introductions in the past one to two weeks, including both online micro-lenders and the guidelines for antitrust. What are the potential changes in operations that you guys are likely to introduce in light of those policy introductions? And my follow-up question is, can you give us an update on the FinTech growth strategy in light of these regulatory environment changes? Thank you. Well, thank you.

Gross margin for advertising was 50.9% up 21 of 2.1%.

Six points year on year and body stable quarter on quarter.

Year on year increase was mainly contributed by the industry wide exemption of cultural construction fee for this year.

Gross margin for Fintech emphasis services was 27.9%.

Largely stable year on year or down one.

And to finish points quarter on quarter sequential decrease was mainly due to greater channel cause for payment related services as offline merchants resumed their businesses amid the pandemic.

On operating expenses, selling and marketing expenses were 8.9 billion renminbi up 56%.

Operator: Well, thank you for your question. I think with respect to FinTech right now, the answer is, it will be... There will not be a lot of changes to our strategy. I think what we have been doing is steadily driving our fintech business. And this will be a strategy that will continue. If you look at the principles that we have adhered to in our fintech business, number one is really compliance with the regulations.

But on year or 15% quarter over quarter on a year on year basis marketing spending increased flexibility on online games, we she as well as the services.

Sequential increase was primarily driven by online games and business services.

As a percentage of revenues.

Selling.

Marketing expense was 7.1% for the quarter.

DNA expenses were 17.2 billion renminbi up 27% year on year or 4% quarter on quarter, mainly due to create an R&D and sales force.

Operator: And this is something that we have done very methodically in the past. And if you look at the microloan regulation, it actually does not really impact our flagship microloan service, Weidi Dai, because Weidi Dai is actually offered by WeBank, which is a fully licensed bank. And it has been in full compliance with the banking regulations, which is the regulated part of the entire industry, respect for risk management, and we prudently manage risk.

Within DNA R&D expenses were 9.9.

I've been in renminbi up 25% year on year or stable quarter on quarter.

G.N. Eni and de represented 13.7% and 7.9% of revenues respectively.

As at quarter end, we had approximately seven to 7600 employees up 27% healing.

Year or 10% quota quota.

For the first quarter 2020, gross margin was 45.2% up 1.5 percentage points year on year or down 1.1 percentage points quarter on quarter on.

Operator: And that includes deliberately controlling the scale of some of our financial products, including loans, wealth management products, and insurance, so that we optimize for quality rather than just going for scale. We focus on collaborating with industry partners within the financial industry, and, for example, in the microloan business, we actually work with more than 60 banks so that we can bring in our expertise in originating loans, but at the same time, we work with them so that they bring in their expertise to the business, and together we have a win-win outcome.

On a year on year basis segment gross margin improvement and flow through to increase branded growth.

Don't get impacted.

In particular from that it will add to services sequentially.

Sequentially margin decrease mainly reflecting lower gross margin compared to last quarter.

On IRS operating margin was 30.4% up one percentage point year on year or down 2.4 percentage points quarter on quarter.

No.

Hi virus that margin was 26.6% up to your 0.8 percentage point year on year or down 0.6 percentage point quarter in court.

Finally, let me share with you several key financial metrics before we close our remarks.

Operator: I think we also put a lot of focus on diversified revenue sources. If you look at our revenue, it's actually quite diversified between payment and the lending business, as well as wealth management, and the emerging part of insurance. And finally, I would say we focus a lot on creating unique value for users, as well as for our industry partners. We bring in technology solutions so that we reduce friction.

Total Capex was 8.7 billion renminbi up 31.

1% year on year or down 8% quarter on quarter.

Operating capex increased by 34% year on year choose driven plenty for their revenue, reflecting more expenditures on servers and networking equipment to open our business growth.

Operating capex increased 12% year on year to 901 in.

Reminbi driven by finding on data centers constructions.

Operator: We increase engagement for our industry partners with users, and as a result, we have been growing our FinTech business at measured speed. And also, we control the size while at the same time developing our capabilities and improving our value proposition for both our users and industry partners. So, if you look at this entire strategy, I think it actually fits very well with the current regulatory environment. And I think we will be steadily continuing to drive our FinTech business forward.

For the current quarter free cash flow was 28.1 bed in renminbi broadly stable, both year on year and quarter on quarter.

Net cash position was at 6.4 billion renminbi, which decreased sequentially due to payments for M&A initiatives.

Partly offset by operating cash flow generation.

Fair value of our shareholdings in this city Investees extruding subsidiaries with approximately 891 billion renminbi or 131 bit and west policy as at the end of the quarter compared to 700.

In 2016 around B or 103 billion, what's called a soft fourth thank you.

[noise]. Thank you John operator, let's open the floor for questions now.

Operator: Thank you. The next question comes from the line of...

He would now be gained a question and answer session. If you wish to ask a question. Please press star.

Operator: from the line of Gary Yu from Morgan Stanley. Please ask him the question.

On on Chinese funds and what's your name to be announced if you wish to cancel your request. Please press the pound all hash key.

Operator: Hi, thank you for the opportunity to ask questions and congratulations on the strong set of results. I have one question related to...

Operator: I have one question related to the gaming business. Given the fact that we are currently under a normalization of COVID from the first half, which probably will see some slowdown in momentum, but then at the same time, we are also seeing quite strong in terms of new games in the pipeline. So how should we look at the sustainability of the gaming revenue growth momentum going forward, particularly when we go into 2021? Thank you. Thank you for the congratulations and the questions.

This means a lot to ask my main question and one last question at this time.

The first questions comes from the line of Cana from from Credit Suisse.

Well he's going to he.

Thank you Oh, congratulations on the very strong said they'll be toast and thank you management for taking my question I have two questions on the game. Please so on game, we noticed that the recent new games like a GE has an impact rice of kingdoms are launching through something like game community platform.

The untapped up to reach out to more like a target user base to avoid the high revenue sharing over enjoy all remember that last year. We said we have been negotiating move into a platform to lower to try new for you on a game by game basis do you think the successful launch of these recent titles I summarize to more like.

Operator: So we mentioned in the prepared remarks that while our reported revenue from games increased quarter on quarter, that to some extent reflected the very conservative deferral and amortization policy of cash. So during the third quarter, we saw the full benefit of the surge in cash receipts we experienced in the first half of 2020. However, our cash receipts... did decline slightly quarter on quarter.

Mobile cloud platform like Us, who Youre would open us up with more game distribution channel and Deadwood, two to a negotiating power towards us and see a major game developer. So in other words, we will see more rooms for margin improvement by lowering to attend no fee overtime.

Operator: So looking at the third quarter, we've already experienced a degree of normalization in cash receipts, and we assume that that will continue going forward with implications for the rate of growth of the reported revenue as well over time. Now, more broadly, I would say that we remain optimistic about the game business on a short, medium, and long-term perspective because, first of all, we continue to enhance our live operations. And, you know, as we talked about in the prepared remarks, I think that many investors are now aware of some of the live operations initiatives we've put into our really flagship, highest profile games like Honor of Kings, but they may be less aware of the extent to which we're also deploying those in more vertical, niche genre games such as Naruto.

Thank you. Thank you for that question. So what we've commented in the past that we felt that the.

The game industry economics.

Not ideal for the game studios in that in many cases.

The channel was capturing a bigger share of the profits in the studios themselves and you know we're a big enough.

Not compete at weekend.

To survive.

There are many smaller companies, which could survive.

So we have been advocates of resetting the revenue share with the channels to more reasonable levels and actually what's up.

That's a number of midsize game studios.

China recently bypass some of the traditional channels, all together and yet still brought that games to a high degree of opted RC which is impressive and commendable.

Operator: So that's in terms of the live operations of existing games. And then in terms of new games, we have a number of, you know, very high profile, widely discussed titles in the pipeline, some of which are already developed and already have their banhal and a pending launch, such as DNF mobile and Call of Duty mobile. Some of which have been developed in other markets but pending a Banhawen launch in China, such as Wild Rift and Valorant.

For all parties do you know what we have been in the process of negotiating the kind of revenue share as to what we think a more so.

Anibal levels and you know that has and will continue to flow through over time.

To our game margins.

We believe that there's room for many different participants to be successful, including small studios large studios as weathers.

Operator: And then a large number of games, both own IP and licensed IP. Our big internal studios, including Timmy, Quantum, Morphine, and Aurora, which generally attract less external attention until the time that they are launched. The success of Moonlight Blade in the last... Those games can be very impactful and successful as well. So that's our view on the game. Okay, thank you.

Traditional channels and new channels.

So the fact that there are these different players.

Experiment with different channels.

It's healthy for the industry, but as far as we ourselves are concerned we have a good relationship with the big traditional channels and in a falling.

Following some of the adjustments to just.

That relationships with those big channels, we think that we're in a healthy and sustainable position.

Operator: That's very clear. My follow-up question is related to your online video businesses. We have observed some industry players have announced an increase in the monthly fee. How do we look at the potential for further price hikes from outside going forward? And, broadly speaking, how should we look at competition? Thank you.

One thing I do want to add is I.

I think it's not just.

In terms of.

Uh huh.

One thing I do in terms of the Red.

Revenue share I think you know the important thing is actually structuring essentially that it's it's a fear.

Relationship at the same time, the channel is actually incentivized to provide value right.

Operator: Well, I remember, you know, this must have been seven or eight years ago when we launched what at the time was called a Hollywood VIP video subscription service. And, you know, it was called Hollywood VIP because 100% of the paid content was Hollywood movies. You know, literally every piece of content was either Warner Brothers or Viacom or, you know, Disney. And, you know, I thought it was one of the best products we'd ever launched, but the general user base didn't seem to agree with me.

So, yes, I think that's the more important and.

Right.

Intricate part of the negotiation are you for example, if you really can deliver a promote.

Promotion of new users you know that's that's highly valued if.

Somebody out was actually sort of new is signing up.

Users through other channels, but they were just going through.

Operator: And, you know, we set the price at 20 renminbi per month, and we got to a certain subscriber base. But we realized that in order to grow the subscriber base, we should, you know, add more content. And that's what we've been progressively doing, initially adding, you know, drama series that were also available on terrestrial television, and then layering on domestic films, and then creating our own drama series, more recently creating our own variety shows, and creating our own animated TV programs, which have been very impactful.

An app store it and I think the value will be lower so I think we're moving to an industry in which there's.

Theres going to be more dedicate a division of the value brought by different parties and I think overall, then it's going to be fair economics, and it's going to be new healthy for everybody.

[noise].

Thank you and my follow up question is on the overseas game. So what is the revenue contribution by percentage now and except for like U.S., Japan wish our Chinese operator have been focusing on so which market you see after because potential next and then what are the challenge that we face so far that are preventing us on replicating our successes.

Operator: And anyway, the net result is that, you know, the amount we invest in content now for our subscription video service is, you know, many magnitudes greater than it was when we set the 20 renminbi price point. The range of high-quality content that's available, and in many cases, uniquely available, is, you know, infinitely larger than it was when we set the 20 renminbi price point. And of course, over time, you know, consumer price inflation in China means that that 20 renminbi price point has become steadily more and more affordable.

Into these countries. Thank you.

Sure. So we don't disclose that a percentage on a quarter by quarter basis, but I believe the last quarter, where we gave.

What was the fourth quarter loss here, let me just.

3% gain segment revenue with international.

Yes.

Because on the one hand, our international games have progressed very well in the last nine months, but on the other hand drastic that business is also growing nicely the ratio in the third quarter was very similar to the ratio in the fourth quarter last year and.

Operator: So we're very much of the view that, you know, the subscription video services in China are sort of underpriced. And, you know, in the right circumstances, then, you know, we're happy to look at the opportunities. Adjusted Pricing in a way that, you know, it's... [inaudible] the content industry.

In terms of geography is then.

Yep.

The global game business is truly global and that's certainly true of our portfolio, meaning that you know aside from.

The U.S., and Japan, and China, which you sort of called out.

That wraps up we did.

Operator: Thank you. The next question comes from the line of John Choi from Daiwa. Please go ahead.

Sizable game markets and in other regions and you know we have certain games.

Ah activity over perform.

Operator: A good evening, and thank you for taking my question and congratulations on a very strong set of results this quarter.

Certain markets and so for example.

Super Southern mini kit games tend to outperform in Continental Europe.

Operator: I think my question is about your online advertising; I think about your prepared remarks.

You know league of legends and gross stuff.

Operator: Management did mention that we're seeing, you know, gradually normalizing spending.

In Korea, this big Asian market.

Operator: but you also mentioned that, you know, you're seeing some increases.

T mobile.

Formed in certain middle East and in emerging markets and it could have Judy mobile has overperformed in south.

South America or so so we're actually quite fortunate in that you know, but the range of games.

Or in and around our portfolio.

Have experience not.

So publishing or cooperation in many different geographies.

Got it very clear, thanks, and congrats again.

Thank you.

Operator: The [inaudible] was a little bit softer than expected, and you mentioned IAS has been delayed or postponed. But if you look at the industry-wide right now, we're seeing a bit of still relatively healthy growth. So I was wondering, what are the challenges that we're facing, and what kind of growth should we be expecting going forward? Thank you.

Thank you. The next question comes from the line of.

Yeah from JP Morgan. Please go ahead.

[noise] thinking and that's really what that came across from the congratulations on a strong quarter. My question is regarding the trenching be accreting, you burn them to do to be a policy introduction in the past a one to two weeks.

Operator: So why don't I answer on advertising, and Martin will pick up on the cloud. I think with the advertising industry, if you look globally, then there's an enormous shift in, you know, how advertisers are spending online. And generally speaking, there's a shift, you know, toward video format. And there's a shift toward, you know, retargeting. Well, if you look at, let's say, Google's results for the third quarter, then I think that their search revenue grew by $1.something billion a year, which is great.

Including both online Microlenders and.

Cartoon Gardline for anti Trust I wonder what the potential changing accretion that you guys are likely to introduce in light of those policies.

Tomlinson introductions and my follow up question.

<unk> as a.

Can you give us an update on the thing talk a growth strategy in light of these are regulatory environment change. Thank you.

Operator: But their YouTube revenue also grew $1.something billion a year, which is amazing given that YouTube is from a much smaller base than search. And, you know, that speaks to both of those phenomena that YouTube's a natural home for video advertising. And in the last two years, Google has allowed advertisers to retarget from, you know, prior search queries and, you know, other sort of intent-based activities into advertising within YouTube.

Well. Thank you for your question I think with respect to Fintech revenue I think [laughter].

The answer is it will be there.

There was not.

To be a lot of changes in our strategy I didn't hear what what we have been doing is steadily driving our our fintech business and and this will be a strategy that that will continue.

Operator: And, you know, if you think about it and look at our platforms, then, you know, I believe that we're in a good position to benefit from video advertising. And you can see that, you know, very clearly in some of our e-products. You can see that, you know, very clearly in, you know, Tencent Video itself.

If you look at the.

Principle is that we have here too in our Fintech business.

Number one is really compliance with regulations and this is something that we have done.

Very.

Operator: And you can see that particularly clearly in recent quarters in our ad network, where there's been a big shift to video. And then I think we're also well positioned to benefit from retargeting. In the past, there was an enormous gulf between so-called intent-based advertising, eCPMs, versus every other eCPM.

Methodically in the past and.

If you look at the micro level regulation, it actually does not really impact our flagship microloans.

Service weighted I, because really dies actually offered by we bank, which is a fully licensed bank and it has been in full compliance with the banking regulations, which is the regularly that part of the entire industry.

We have a lot of.

[music].

Respect for risk management and we.

[music].

Prudently manage risk.

And that includes deliberately controlling the scale of some of our.

Of our some of our financial.

Products, including loans wealth management products and insurance, so that we optimize for quality.

Right, rather than just going for scale.

Operator: But the emergence [inaudible] Yeah, in terms of the cloud business right now, I would say There are a number of reasons for the softer quarter, especially compared to peers. One is actually more specific to a few projects and contracts. So this is going to go away in the next quarter.

We focus on collaborating with industry partners within the financial industry and.

For example in the.

Micro loan business, we actually work with more than 60 banks. So.

So that we actually bring in our expertise in originating loans, but at the same.

Same time, we actually work with them so that they bring in their expertise to the business and together we have a win win outcome.

Operator: So it's more of a one-time, non-recurring event with the delay of certain projects and the restructuring of certain contracts. Now, the second one is, I would say when we're playing catch up, then we actually rely more on new projects. So during the pandemic, some of these new projects got delayed. And as a result, the catch-up process was kind of disruptive. And another reason is if you look at the growth that's driving the cloud business, especially during the pandemic.

I think we also.

Put a lot of focus on diversified revenue source. If you look at our revenue it's actually quite diversified.

In payment and.

The lending business as well as wealth management.

And the emerging product on the insurance.

And finally, I would say, we focus a lot on creating a unique value for users as well as for our industry partners would bring in Texas.

Technology solutions, so that that would reduce the frictional cost we increased in engagement for our our industry partners with the users.

Operator: And after that, it's quite a bit of short videos, as well as games. And I would say in games, since a lot of the revenue is actually from our own games, right, you know, so it's, despite us providing the cloud service to our own games, it's not booked as revenue. And then on the short video front, there is a competitive reason for that. So these are all the factors why, you know, growth is softer than peers. But I think, you know, the one-time adjustment would actually sort of, you know, end after this quarter, and we're catching up in terms of new projects, too. Operator, let's move to the next.

And.

As a result, we have been growing our our fintech business Umesh at speed and also we can show the size.

While at the same time, developing our capabilities and improving our value proposition for both our users and industry partners. So if you look at this and higher strategy.

Strategy I think it's it actually fits very well with the counter pillar twoa environment and I think we will be.

Steadily.

Continuing driving our Fintech business forward.

Thank you.

Operator: The next question comes from the line of Ham Joon Kim from Macau.

The next questions comes from the line of Gary Yu from Morgan Stanley. Please ask the question.

Operator: Kim from Macquarie, please ask a question. Thank you for the opportunity to communicate with you guys today. I wanted to ask you guys about the wild rift for League of Legends and how that is interplaying with the PC version. So what kind of dynamicism are you seeing in terms of monetization on either sides or user behavior? And how do we think about the eventual commercial launch of it, the official commercial launch of it from the current beta phase into kind of a more official status and then the rollout into the other regions that it's not been released into? And then I'll have a follow-up question after that.

Hi, Thank you for the opportunity to ask questions and congratulation on the first set of results I have one question related to the gaming that's not given the fact that we are currently under normalization of cope with from first half.

Which probably may see some.

Low down in momentum, but but then at the same time. We're also seeing quite strong in terms of new games in the pipeline. So how should we look at the sustainability of the gaming revenue growth momentum going forward, particularly when we go into 2021. Thank you.

Thank you for that congratulations.

Question, So as we mentioned in the prepared remarks that water.

Operator: So, thank you for the question. And in terms of Wild Rift and user behavior, then, as you might expect, it's sort of a shorter, sharper experience than the full League of Legends. The full game takes roughly half as long as a full game on the PC version. But, you know, the quality of the experience is extremely high.

On our reported revenue from games increased quarter on quarter.

That to some extent reflects at the.

Right Conservative.

ROE and amortization policy.

It seems so during the quarter we saw.

The benefit of other such in cash receipts, we experienced.

Operator: And, you know, while of course Riot and we are biased, both Riot and we are extremely pleased. While it's taken a good amount of time to release a mobile incarnation of League of Legends, the final product is something that everyone is extremely satisfied with, at least internally. Based on the data we see from the previous beta tests in the Philippines and Brazil as well as full launches across Southeast Asia and Japan, it appears that users feel the same way.

Hi, Angie however, our tax receipts did decline slightly quarter on quarter, So looking at the third quarter.

We have already experienced a degree of normalization in cash receipts.

And if we assume that that will continue going forward.

Implications.

Right.

Reported revenue as well, but.

Now.

More broadly I would say that you know we remain optimistic about the game business on a short and medium and long term perspective, because festival, we continue to enhance our life operations.

Operator: From a monetization perspective, then, you know, as with League of Legends itself, and indeed, as with every Riot game, the monetization is relatively back-end loaded, meaning that I think there will be a relatively lengthier period of time between Wild Rift acquiring users versus Wargrift converting those users into monetization compared to a game such as Moonlight Blade where the users and the monetization arrive simultaneously. But that's fine, I think.

I talked about in the prepared remarks, I think that many investors are now aware of some of the life operations initiatives, we put into already flagship highest profile games like on hurricanes, but they may be less at.

The extent to which were also decline deploying dollars in more vertical niche genre games such as <unk>.

So that sometimes live operations and existing games and then in terms of new games.

We have a number of.

Hi profile lighting discussed titles in the pipeline some of which have already been developed said that already have that on how and pending launch such as.

Operator: We have a broad portfolio of games, and it's healthy that different games have different monetization behaviors. And we know from League of Legends' experience that over the long, long term, monetization is not a problem for this kind of game. Great, thank you.

We took my bottom sort of Judy mothball, some of which are being developed and released and other markets, but anything about how and launch in China, such a widespread bout of rent and then a large number of games.

I see and licensed IP from Opic internal studios, executing chimie launch and more fun and Aurora.

Operator: In terms of just following up on that, like in terms of the rollout into the other regions and when, how should we think about the phased introduction, which is kind of global commercially? Well, I think that Riot has disclosed some of its intent. Clearly, for the Chinese market, it depends on the Ban-Hao issuance, but for other markets, it's under, you know, Riot's control. And, you know, from what I recall, they felt it was important to stagger the launches because, you know, this is the first time that Riot has released a major mobile game.

We'd be in a generally attract less xtandi attention until that time to that launch, but as you can see with.

Accessed me my played in the last few weeks.

Games can be very impactful as successful as well so thats our view on.

The game business forward.

Okay. Thank you that's very clear Oh my follow up question is related to your online video businesses, we have observed.

Some of the industry players that are and that was a increase in the monthly fee. How do we look at the potential for further price price I from.

Operator: And given the number of current League of Legends PC players, the initial and ongoing user surge for Wild Rift is quite substantial, and that puts enormous pressure on bandwidth and server capacity, so it makes sense to stagger the launch of different geographies over time. But having successfully launched the game in different parts of Asia in the last couple of weeks, we're now, or Riot is now, gearing up to launch the game in Europe, which is a very big market for League of Legends PC, and progressively in Korea and the Americas and elsewhere. And selfishly, I do hope Hong Kong comes soon.

Oh side going forward and broadly speaking how should we look at competition. Thank you.

Well I remember you.

You know just must mean seven or eight years ago. When we launched vote at the time, what's called a Hollywood VIP.

Video subscription service and it was called Hollywood VIP.

He because 100% of the pay content was Hollywood movies.

Ah you, let it literally every content reside at Warner brothers, or Viacom or it's the end I thought it was one of the best products, we'd have a launch but the general use the best Didnt seem to agree with me and you know we set the price at 20 renminbi per month.

Tim we got to assess the subscriber base, we realized that in order to grow the subscriber base we should.

Operator: My second question is really just on the fintech part. We talked about 30% plus growth on the TPV and 50% growth on the wealth management. I presume revenue growth is above that, and I just want to confirm that. As a function of that, I would presume that our profitability has improved as well. So perhaps some commentary on the profit improvement on the fintech part would be appreciated. Thank you.

Add more content and that's what we've been progressed the doing initially adding.

Drama series that we are also available on terrestrial television.

And then layering on a domestic films and then creating.

Drama series more recently are creating our own variety shows, creating our own animated TV program.

Operator: Well, we don't give a lot of breakdown on that. We did say in the remark, I think if you look in the MD&A, we said that the revenue growth from fintech as a whole was quite similar to the previous quarter. So the deceleration you saw in the segment was due to business services, not fintech services. And we did say that the profit margin on the payment business itself was relatively stable as well.

But which have been very impactful and anyway. The net result is that you know the amount we invest in content now for our subscription video service is in many magnitudes greater than it was when we set the twins.

Right Renminbi price points in the range of high quality content. That's available in many cases uniquely available is infinitely larger than it was when we set the ptwenty renminbi price points and of course over time consumer price inflation in China means that when she renminbi price point has become steadily more and more affordable. So so we're very much.

Operator: So no great change in growth rates or margin. Yes. And also, as we said, right, you know, we have actually pretty diversified streams of fintech revenue. So it's probably not, correct to tie the FinTech revenue directly to the TPB. So we don't separately disclose that, but just as an indication, I would like to point that out.

Much of the view that.

The subscription video services in China, a sort of a underpriced.

And at the right circumstances than than what were happy to look at the opportunity to.

Adjusted pricing in a way that you know.

Yes.

Fat to consumers.

As what it is today.

The content industry.

Operator: Thank you. The next question comes from the line...

Operator: All questions come from the line of Thomas Chong from Jeffries. Please go ahead.

Thank you. The next question comes from the line of John Choi from Daiwa. Please go ahead.

Operator: Hi, good evening. Thank management for taking my questions and congratulations on a strong set of results. My question is about our mini program. Given that we saw GMV experience very strong growth momentum during the year and with digitization being the key industry trend, what are our strategies for digitization across different industries, such as smart retail? and Smart Catering, and how our payments and cloud infrastructure can further speed up the migration. Thank you.

Good evening and thank you for taking my question and congratulations on a very strong set of results this quarter Oh my.

My question is on your online advertising I think on your prepared remarks I imagine you did mention that we are seeing gradually normalize you spending but you also mentioned that you know you're seeing some are increasing adopting with.

Algorithm and buying solutions. So I was wondering like how much has this really helped us when it comes to capturing more AD dollars spending our platform is this the primarily reason where we're seeing some growth or is it also a mix of the higher.

Operator: Yes, we're actually quite excited about the GMV growth for mini programs, and we actually have as one of our strategic focus to increase our support within the Weixin ecosystem for transactions, and for particularly mini program transactions. So if you look at the kind of things that we are doing right now, one part is actually increasing our support for many programs and all the new content discovery, as well as the rearranging of our... Wallet entry point, as well as the launching of, for example, a live broadcast, right? All of them are the infrastructure that actually allows mini programs to be more powerful in facilitating transactions. So that's within the WeChat ecosystem.

Hi impressions on Ecpm from the other.

Interest.

Knowing that you have and a quick follow up here is on your cloud we noticed that your cloud revenue growth was a little bit softer than expected. Then you mentioned like I guess, it's been delayed or postponed but if you look at the industry wide right now we're seeing a little bit of a you know still relatively healthy growth. So I was wondering what are the choice.

Means that we're facing and how or what kind of growth should we be expecting way for it. Thank you.

So why don't I answer on the advertising and Austin, both pick up on the town I think with into the advertising industry. If you look globally than that's an enormous shift and you know how advertisers.

Presenting on line.

Generally speaking Thats a shift.

Toward video format.

And thats a shift toward re targeting.

If you look at that's like Google with results for the third quarter than I think the.

Operator: On the other hand, I think, you know, the other part of the equation is really helping industry partners, helping different businesses, right, you know, to improve and upgrade their digitization, upgrade their tech infrastructure so that they can actually embrace the mini programs in a bigger way. And on that front, we obviously have got our smart retail team, we have our cloud service team, and sales team, who are helping these industry partners. But at the same time, we are also empowering a lot of ecosystem partners, for example, the SaaS providers, which can help these industry partners to embrace technology in a bigger way. So I think, you know, it's a process that's ongoing. It's actually progressing nicely, and it's also speeding up because there was a pandemic.

As such revenue grew one point something billion dollars year on year.

Right, but that you keep revenue also grew one point something billion dollars year on year, which is which is amazing given you is from a much smaller base such as.

That speaks to both of those phenomena that you chips and natural home for video advertising and in the last two years, Google has allowed advertisers to reach hock edge.

I'm from prior.

Such queries and no other sort of intent based activities into advertising within Ah you true and if you think about it and look at our platforms that you know I believe that we're in a good position to benefit from a video advertising and you can see that you know by Kt and some of them.

He thought off so you can see that big city and Tencent video itself and you can see that particularly in recent quarters, you know our AD network, where that's been a big shift a video and then I think we're also well positioned to benefit from re targeting your into POS there was an enormous gulf between.

Operator: So, you know, between improving our own ecosystem, between having our own team helping our industry partners and also empowering ecosystem partners to help the industry partners, I think all of them would contribute to continued growth in terms of the mini programs as a way for people to conduct transactions. Thank you. My follow-up question is on social advertising, in particular for moments and mobile advertising networks. Should we expect there will be further increases in ad loads for moments in the coming quarters? And what should we think about the competition with short-form video players in video advertising? Thank you.

So called intent based.

Advertising he cpms versus every other he CPM, but the emergency re targeting has really converge.

Converge those price points I understand with not having a big beneficiary of that restructuring.

A short intent base Dod budget intent based opportunities some of our peers structurally long.

Aggregate traffic.

Of course, we're not the only company to benefit from those trends I think by John just keeping a beneficiary as well, but by Johnson, we are probably the two most naturally benefit from the shift to video and the shift to re targeting.

Yes. It is.

So if the cloud business revenue I would say.

Operator: So in terms of ad load in moments, then I think that we have been increasing inventory at a gradual and measured rate, and that will remain true, and, as you're probably aware, WeChat in moments has a dramatically lower ad load percentage than many other highly popular internet services in China, including the short video sites you alluded to. With regard to the competition between short video and, I think we've talked about this a little bit before, but in general, I would say that both the short video sites and much of our inventory benefit from the trend toward videoization. Both of them benefit from the trend toward retargeting. From a price point perspective, short video sort of aggregates around.

Yeah, there are a number of reasons for the softer quarter, especially compared to peers. One is actually more specific on a few prod projects and contracts. So this is going to go away in the next quarter or so it's.

It's more of a a onetime nonrecurring.

The events on the delay of certain projects and the restructuring of certain contracts.

The second one is a I would say when we're playing catch up then we actually rely more on new projects. So you're doing different dynamics. Some of these new branches globally.

Delayed and as a result.

The the catch up prices of those kind of disrupted.

And another reason is if you look at the.

So with.

That's driving.

The cloud business, especially sort of mute.

June because they make and after that it's.

Quite a bit of short video as well as games and I would say in games seems a lot of the games revenue is actually from our own games radio so it's at.

Despite we're providing the cloud service to our own games, it's not booked as revenue and then on the short video.

There is a competitive reason for that so.

These are all the factors why I think the growth is softer than than peers, but I think.

You know that the onetime.

Adjustment would actually sort of new and after this quarter and we're catching up in terms of new projects to.

Operator, let's move to the next.

The next questions comes from the line of John Kim from Macquarie. Please ask your question.

[noise]. Thank you great. Thank.

Thank you for the opportunity to communicate with the fact that.

I wanted to ask you guys about.

The wild refs filling a legend and how that enter playing with the PC version, so what kinda dynamicism, you're seeing in terms of kind of monetization on either the signs are kind of user behavior and how do we think about the eventual goal a commercial launch of the official commercial launch of it.

On the computer assays into kind of a minimum operational status and there's a whole lot into the other regions that smoking groups.

I'll have a follow up question I guess after that.

So I. Thank you for the question and then in terms of wild risk and the user behavior.

As you might expect it's sort.

Sure to shop.

Experience than the fully deflections full game takes roughly half as long as a full game on.

Can you give legends.

But the quality of the experience is extremely high and what of course right and we are.

It's both right and we are extremely pleased.

Yeah.

Why it's taken a good amount of time to release mobile in combination with league of legends.

The final product something that everyone is extremely satisfied with at least internally and based on the data we see from the previous.

Hey to tests in Brazil.

That said as well as the more pieces of.

Oh launches across southeast Asia, and Japan. It appears that the users feel the same way off from a monetization perspective that adds with the.

The batches itself I asked with every riot games the monetization.

It's relatively back end loaded meaning.

Meaning I think there will be a relatively lengthy period of time between Watercress Act.

Aggregating use us.

Buses Walgreen Buddy.

Budding those units into monetization compared to a gain such as human Nightlight.

Well.

He uses and the monetization of rights single tenancy, but that's fine I think we have a broad portfolio of games.

Healthy.

And James have different monetization behaviors, and we know that from league of legends experience the over the long long time.

Yes.

Monetization is not it's not a problem is kind of game.

Great. Thank you I in terms of just following up on that like in terms of the roll up into the other regions and when when how should we think about the phased introduction, let's just kind of global commercialization.

Well.

That rhiag has disclosed some of its intent.

Clearly for the China market it depends on the ban how issuance.

But for other markets, it's Andrea riot control and.

From what I recall that day.

Okay.

Felt it was important to stagger that launches because it's the first time that riots released a major mobile game.

Given the number of.

Current you give madsen's PC players lapse league of legends PC players people, who want to play league of legends, but that doesn't have a PC than the initial.

Well, that's an ongoing use a such a walk risk is quite substantial and that puts enormous pressure on bandwidth and so the capacity. So it makes sense to stagger the launch different geographies over time.

But you know having successfully launch the game in different parts of Asia in the last couple of weeks.

You know went out right now gearing up to launch the game in Europe, which is a very big market fatigue that guidance PC, a and C progressively in Korea or another.

The Americas and elsewhere.

Got it and selfishly I do hope uncle him soon.

My second question is really.

Stan the Fintech part time, we talked about 30% plus growth on the TPV growth on the wealth management circulation revenue growth is above that I just want to confirm that.

As a function of that I would presume that our profitability has improved as well so perhaps commentary on the profit improvement on the fact that part will be appreciated.

Please.

Well, we don't give a lot of breakdown on that when we did say in the remarks I think you could have condemned DNA, we said that the revenue growth fintech as a whole was quite similar to the previous quarter. So the deceleration you saw in the second biggest future business. Obviously, it's not true in Tech services, and we did say that the profit.

Marching on the payment business itself was relatively stable as well so so no great change in growth rates or margins.

Yes.

Also as we said revenue we have actually a pretty diversified.

Streams off of a fintech revenue so.

It's.

It's probably not.

Correct two to tie the fintech revenue with directly to the TPV.

So we don't separately disclose that but they are just as an indication I would like to point that out.

Thank you. The next question comes from the line of Thomas Jones from Jefferies. Please go ahead.

Hi, Good evening sales management for taking my questions and congratulations on a strong thats why we so my.

My question is about a meaningful well.

Given that you sold at year end, we experienced very strong.

<unk> momentum doing that here and there, but digitization is the key industry trends one of our strategies.

Digitization of course, if what industries, such as smart retail.

As much catering and how a pain meds and cloud infrastructure and further speed.

Long term our equation. Thank you.

Yes, we're actually quite excited about the GMB growth on many programs and so we actually put a as one of our strategic focus to increase our support within the racial ecosystem for transactions and four.

Particularly merely program transactions.

So so if you look at the kind of things that we're doing radio. So one part is actually.

Increasing our our support within ration.

For.

For many programs and.

Or the.

[music].

Up new.

Content discovery as well as.

At the re arranging of of our.

Wallets entry point as well as.

Launching off of.

For example, a light broadcast revenue the order them actually are the infrastructure the ex.

Lets many programs that could be more powerful in facilitating transactions, so thats within the wage and ecosystem on the other hand, I think the the other part of the equation is really helping industry partners, helping different businesses revenue too.

Improve and upgrade their digitized.

Lynn upgrade their tech.

Infrastructure, so that they can actually embraced the muni programs in a bigger way and on that front, we obviously have got smart retail.

Tim we have a cloud.

Service team sales team.

Helping bees industry partners.

Shame side, but we are also empowering a lot of ecosystem partners for example.

The SaaS providers, which can help these industry partners to to embrace technology in a bigger way.

So I think it's a process thats ongoing it's actually progressing.

Moving nicely and it's also speeding up by the fact that there was a pandemic.

So that.

Between.

Improving our own ecosystem between.

Having our own team, helping our industry partners and also empowering.

Ecosystem partners too.

Help the industry partners I think your order them would contribute to a continued growth in terms of.

The muni programs as a way for people to conduct transactions.

Thank you Mike.

My follow up question is on our social advertising in particular, our moments and our mobile on advertising on that.

Should we expect there will be further increase in at Lowe's or moments in coming quarters, and how should we think about the competition.

Short form video peers in we do advertising. Thank you.

Okay.

So in terms of Adler.

Load in moments than I thought.

That we have been increasing inventory at a gradual and measured rates and that will remain true and as you're probably aware ration moments has a dramatically lower ad load percentage than many other.

Highly popular.

Internet services in China, including.

The short video sites.

Alluded to.

With regards to the competition between.

In a short video and.

Some of our inventory then I think we've talked about this sort of it for that but in general I would say that both the short video sites and much of our inventory.

Benefit from the trend towards video Ization, both of them benefit from the trend toward re targeting.

From a price point perspective.

In a short video sort of aggregate surrounded midpoint.