Q4 2023 Tencent Music Entertainment Group Earnings Call
Unknown Executive: Thank you, Millicent. Hello, everyone, and thank you for joining our call today. 2023 marked an artificial transition at T&E, as we remained dedicated to driving growth and prosperity across our music ecosystem while propelling the development of the entire music industry. Notably, our subscriber count surpassed the 100 million milestone in 2023. We added 18.2 million subscribers for the full year and performed 12.3 million in 2022, a compelling testament to our content leadership, platform value, and high-quality user experience. These trends show consistent growth in music-paying users and per-user spans, anchoring our subscription revenues accelerating year-over-year growth throughout the year. In particular, in the fourth quarter of 2023, online music recorded faster than expected revenue growth, paying users, and ARTPU loans by over 20% year-over-year to 107,010.7 RMB, respectively. These results mitigate the top-line headwinds from the social entertainment business and riskily contributed to a lift in net profit for the quarter and the full year.
Hello, everyone and thank you for joining our call today.
101 is free mockup official the transition at <unk> as we remained dedicated to driving growth and prosperity across our music ecosystem, while compiling the development after entitlement industry.
Notably our subscriber costs supply costs of 100 million milestone in 2023.
We added $18 2 million subscribers for the full year.
All on 3 million and 202020 twos.
Powering Testament to our content leadership platform value and high quality user experience. These strengths will consistent growth in music paying users and per user spend.
And calling our subscription revenues accelerating year over year growth throughout the year.
Particular in the fourth quarter of 2023 online Lucy record a faster than expected revenue growth.
Paying users and <unk> rose by over 20% year over year to 107 million and $10 seven renminbi, respectively.
<unk> sells mitigate the top line headwinds on the social Entertainment. This is Andrew.
We believe contributed to a lift in net profit for the quarter and the full year.
Unknown Executive: Entering 2024, we are also seeing strong momentum in subscriber growth in the first quarter. Such solid performance is driven by our powerful content and platform dual engine. Now, I'd like to share these aspects of our content development efforts during this robust, sustainable growth. First, by leveraging and deepening partnerships with domestic and international record labels, we consistently reinforce our competitive edge with an ever-growing selection of copyrighted music. As a result, by the end of 2023, we had over 200 million music and audio tracks on our platform. In addition, self and co-producer content further differentiated our offering, increasing our popularity among. Lastly, our rich foundation of content and relationships with label partners empowered us to capture diverse opportunities across the music industry, amplifying content's value.
Entering 2024, we are also seeing strong momentum in subscriber growth in the first quarter.
Such solid performance was driven by our powerful content and platform dual engines.
Now I'd like to share this aspect of our content development efforts fueling this robust sustainable growth.
First.
By leveraging and deepening partnerships with domestic and international record labels.
Consistently being farmed out.
Our competitive edge with an ever growing collection of copyrighted music as.
As a result by the end of 2023, we had over 200 million music and audio tracks on our platform.
In addition.
Health and Coproduce content further differentiate our offerings, increasing our popularity among users.
Lastly, our rich foundation of content and relationships with labor partners and powered us to capture diverse opportunities across the industry and define contents then.
Unknown Executive: Let me walk you through some concrete examples of Content Coverage and Appeal. We recently renewed our multi-year partnership with Universal Music Group, UNG, to bring users ongoing access to its fast-growing music catalog, as well as a notable sound quality upgrade with new streaming in Dolby Atmos and high-definition formats. Taylor Swift's re-recorded album, 1989, Taylor's version, topped the All Charts in the first week of its release on our platform in October.
Speaker Change: Let me walk you through some concrete examples.
Speaker Change: On content companies and appeal.
Speaker Change: We recently renewed our multiyear partnership with Universal music group to bring users ongoing access to Reis class in rolling looser catalog as.
As well as our multiple Stan already upgrade with new streaming in Dolby Atmos at high definition format.
Speaker Change: <unk> recall that we record the album 19, <unk> tailored solutions partner.
Speaker Change: After all taxes in the first week of this relief on our platform in October.
Unknown Executive: We also capitalized on this success and further promoted fan engagement with a series of customized interactive song guessing content. In addition, we renewed the collaboration with Peacock Records, the record label for renowned still legend of Phoenix, Fenghuang Chuanqi, deepening cooperation across headstarted sound releases, musical albums, and various artists' artist related services. We further enhance our content appeal and leadership across pop, rock, and Chinese traditional style music genres, allowing us to better attract and retain young users. Next, we offer differentiated content offerings through in-house and collaborative creation. For me to long-tail music content, we leveraged our wealth of multi-faceted resources to enrich our offering and promote its prosperity. As of the year 2023, over 480,000 Indian musicians had contributed over 3 million songs across multiple genres on the Tencent Music platform.
Speaker Change: We also capitalized on the success and further promote the fan engagement with a series of customize the interactive some guests in context.
Speaker Change: In addition, we renewed our collaboration with peak car records.
Speaker Change: Our record label for <unk> Nugget do legend of Phoenix Foams longtime chief deepening cooperation across has started selling the leases.
Speaker Change: Physical albums and various August occupancy latest surfaces.
Speaker Change: We further enhanced our content appeal and leadership across pop rock and Chinese ancient style music genre.
Speaker Change: <unk> us to attract and retain users.
Next on differentiated content offerings, who in house and collaborative creation.
Speaker Change: For mid to long tail music content, we leverage our wealth of multifaceted resources to enrich our offering and promote is prosperity.
Speaker Change: As of the year of 2020 Street over 480000 in the acquisitions had contributed over 30 million songs across multiple genres on Tencent musician platform.
Unknown Executive: By providing comprehensive music training programs and art support, we effectively unlocked their creativity and nurtured their music careers. To accumulate our music assets in different genres, we are fortunate to have collaborations with our strategic partners. For these more mature artists, we boost their popularity and advance their career through increasingly tailored support. For example, this quarter, we assisted jazz singer Liu Lian with her EP production and release, greatly increasing her profile and strengthening the fan-artist relationship. Our in-house and collaborative content continues to grow from string to string. As a case in point, we had 10 songs showcased during China Media Group's 2024 Spring Festival Gala. Our self-produced song, She, Barbing in the Light, was one standout.
Speaker Change: Providing comprehensive music training programs and other support.
Speaker Change: Effectively adopt their creativity and nurtured to have music careers.
Speaker Change: To accumulate our music SaaS in different channels, we are fortunate in collaborations with our strategic plan is accurate.
Speaker Change: For these more mature artist we've pushed it out popularity and Theyre fine Theyre Korea food increasingly tailored the support for example, this quarter, we assessed that jazz singer you led with her <unk> production and relief quickly rising her profile and strengthening defense.
Speaker Change: Occupancy relationships.
Speaker Change: Our in house and collaborative content continue to grow from shrink and shrink as the casing point, we had 10 songs showcase of tooling, China Media Group 2020 for Spring Festival Gala.
Our self produced a song sheet popping into life since Oklahoma Top was one standout such performance has generated massive shuttle bus.
Unknown Executive: Such performances generated massive social buzz, pushing user engagement on our platform and quickly evaluating our national influence. Another notable example is ourself, which is a hit song, She Knows I Will Do It, performed by our strategic partner artist, Hailai Amu, and covered by our popular Chinese crosstalk performer, Yueyun Pan. This song went viral, totaling over 1 billion streams on our platforms as of March this year. Last but not least, maximizing content value through innovation to scale up our live performance business through diverse event formats in 2023. Capitalizing on the resurgence of offline music events, we host a growing number of offline music tours, festivals, and live house performances to meet strong demand. In the fourth quarter, we hosted the world-renowned DJ Alan Walker's six-city electronic music tour in China.
Speaker Change: Pushing user engagement on our platform and grizzly evaluating how quickly Appalachian our national influence.
Another notable examples is our self with you. So his song Casino I will do so.
Speaker Change: Formed by our strategic partner <unk> highlights.
Speaker Change: And couple of our popular China's cost half the farmer Union pump.
Speaker Change: Songbird fiber totaling over 1 billion streams on our platform as of March this year.
Speaker Change: Last but not least on maximizing continent value through innovation.
Speaker Change: Scale up our lives performance business food diverse events format in 2023 <unk>.
Capitalizing on the resurgence of offline music events, we host a growing number of offline music tools festivals and lighthouse performances to meet strong demand.
Speaker Change: In the fourth quarter, we hope that we'll win loss rebounded Dj's Edelbacher six city electronic music tour in China.
Unknown Executive: During the tour, we facilitated unique offline versus online services and Compassionate Interactive Fan Activities, Artist Merchandise, Ticket Sales, and Performance Managers, which in turn boosted our industry influence. In the fourth quarter, we collaborated with Hype Entertainment to launch a line of artist merchandise for K-pop bands such as Seventeen and Lee Jin, diversifying our offerings of content-related behavioral data in various formats. As a result, Western U from Arctis Merchandise registered a robust year-over-year growth. Moving on to our continued commitment to social responsibility, in the fourth quarter, in collaboration with local government agencies, we conduct a series of music events to promote cultural and economic development in ethnic minority regions.
Speaker Change: During the tour, we facilitated unique offline merged online services and compacting interactive fan activities.
Speaker Change: Artist merchandise ticket sales and performance management, which in turn boosted our industry influence.
Speaker Change: In the fourth quarter.
Speaker Change: Collaborator with height net entertainment to launch a line of August merchandise for K pop that is such a 17, Andy James diversifying our offerings of content related peripherals in various formats. As a result, <unk> from August merchandize record of robust.
Speaker Change: Year over year growth.
Speaker Change: Moving onto our continued commitment to social responsibility.
Speaker Change: The fourth quarter in collaboration with local government agencies.
Speaker Change: We conduct a series of music events to promote cultural and economic development in ethnic minority regions.
Unknown Executive: For example, we partnered with Tencent Charity to organize the 2023 Shenzhen Ningzhi Music Festival, leveraging offline music performances to help rejuvenate the rural economy through increased tourism. These initiatives not only broaden music's reach geographically but also expand its positive impact across the industry and maximize its societal value. In conclusion, we are excited about the rising growth of the music industry for the years to come; our powerful content and platform dual engine, underpinned by online music's relatively counter-skeptical nature, will enable us to capture more multi-faceted opportunities in 2024 and beyond. Now, I would like to turn the call over to Ross for more color on our platform development. Ross, please go ahead.
Speaker Change: For example.
Speaker Change: We partnered with Tencent charity to organize the 'twenty to 'twenty three sanction.
Speaker Change: <unk> music.
Speaker Change: Music Festival, leveraging offline music performances to help rejuvenate the rural economy with increased tourism.
Speaker Change: This initiative not only brought in new six which geographically, but also expand its positive impact across the industries maximize.
So sizable value.
In conclusion, we are.
Speaker Change: Cited at about a rising goal of the music industry for the years to come.
Speaker Change: Our powerful content and platform <unk> engines.
Speaker Change: Underpinned by online boutiques relatively Congress cyclical nature.
Speaker Change: Will enable us to capture more multi benefit opportunities in 'twenty 'twenty four and beyond.
Speaker Change: Now I would like to turn the call over to Ralph for more color on our platform development Ross. Please go ahead.
Ross: Thank you. Thank you. Our later focus on education resulted in a year of solid music growth and efficiency gains. Our platform's strengths, our insights into users and content, and our dedication to innovation were crucial in achieving this success, all translating into enhanced music journeys for users. Now I would like to elaborate on three areas we prioritized to enhance users' experiences. First up:
Thank you Hello, everyone.
Ralph: Our laser focus on execution resulted in a year of solid growth and the efficiency gains.
Ralph: Our platform's strengths or any insight into your search and content.
Ralph: Our dedication to innovation, we are crucial to achieving this success all translating into enhanced music journeys for users.
Ralph: Now I would like to elaborate on three areas.
Ralph: Prioritize Victoria Haynes Youll start.
Ralph: Spirit.
Ralph: Firstly.
Ross: The Funded Users' Privileges. This includes more industry-leading sound quality selection, rich sound effects, more personalized players, new skins, and additional interactive features. For example, We are China's largest Dolby Atmos music library, offering users a more immersive listening experience. Currently, our Dolby Atmos music service is available on mobile, in-car, and PC platforms, enabling higher quality music experiences across more comprehensive use cases. Furthermore, we hosted a dedicated online MV Premium event for J.Cho's new single, Christmas Star, promoting closer fan-artist bonding and a deeper sense of community. Millions of viewers signed up for the event within 24 hours of the registration opening.
Victoria Haynes: Very good fund data users privileges.
Victoria Haynes: This included a more industry, leading strong quality selections.
Victoria Haynes: Eric Salama effects more individualized players.
Victoria Haynes: <unk> and <unk>.
Victoria Haynes: These are known in the architectural features for.
Victoria Haynes: For example.
Victoria Haynes: We are milestone China, China's largest Dolby Atmos music library offering users a more immersive listening experience.
Victoria Haynes: Currently our Dolby Atmos music service is available on our mobile <unk> and PSA platforms MMO.
Victoria Haynes: Enabling a higher quality music experiences across more comprehensive yield use cases.
Victoria Haynes: Furthermore, we hosted our dedicated online I'm very premium event for <unk> single, Chris Loren Starr.
Victoria Haynes: Promoting closer fine artist bonding and deeper sense of community.
Victoria Haynes: Million software or sign up for the event within 24 hours of their registration offering.
Ross: We also launched an AI voice feature for this single to further boost user engagement. Thanks to these tailored activities and features, we have recorded a total of over 100 million streams from tens of millions of users.
Victoria Haynes: We'll also launch our AI wise.
Victoria Haynes: Felicia for the single for further both user engagement.
Victoria Haynes: Thanks to this tailored activities and the failures.
Victoria Haynes: <unk> recorded a total of over 100 million streams from tens of millions of users.
Ross: Second, we deepened connections with users through major upgrades across multi-device experiences. QQ Music launched a significant upgrade on mobile and PC in December last year, offering customized user interfaces and music players. As part of the Chinese Lunar New Year's offering, we introduced an annual music report feature that captures each user's unique music journey. Tens of millions of QQ Music users joined this annual review activity. This comprehensive report reflects the important personalized mutual bonds that we have built with users on a massive scale. They highlight how and when a user connected with us emotionally. From Special Moments Captured, Artists' Favorites.
Victoria Haynes: Second.
Victoria Haynes: We deepened our connections with users through made major upgrade across Marty device experiences.
Victoria Haynes: Kilkeel mills like lunch on significant upgrades on mobile and PC in December last year.
Victoria Haynes: Operating customize the user interfaces and the music players.
Victoria Haynes: As part of Chinese lunar new year's offerings.
Victoria Haynes: We introduced an annual newer liquid reports feature that our characters each users unique music journey.
Victoria Haynes: Tens of millions of <unk> users are drawn to this annual reveal activity.
Victoria Haynes: This comprehensive report refer lives the important personalized Milton bonds that are very high bills with users <unk>.
Victoria Haynes: <unk> scale.
They highlight the hull and <unk>, our user Conagra database us emotionally.
Victoria Haynes: From special moments captured artists to favor it.
Ross: Stories discovered and songs streamed to Tencent may also enhance in-car music entertainment services. For example, we recently upgraded QQ Music in-car app for Tesla, bringing users a more intelligent interface with better recommendations. Kugou Music recently added the Viper 3D Music Library by Kui She Quan Jing Sheng to its in-car offering, specializing in optimizing audio performance in a closed copying environment.
Victoria Haynes: <unk> discovery under staff trained to Thompson.
Victoria Haynes: We also enhanced the entire music and entertainment services.
Victoria Haynes: For example, we recently upgraded QQ and <unk> for Tesla.
Victoria Haynes: <unk> users are more intelligent interface despite her recommendations.
Victoria Haynes: <unk> newly <unk> music Library creation Cheng Cheng.
Victoria Haynes: It's Ian car offerings.
Victoria Haynes: So based on optimizing all the old performance.
Victoria Haynes: Cost cutting the environment.
Ross: Furthermore, we maintain our leadership in smart vocal coverage and recently renewed our partnership with Li Auto. [inaudible] Our technology infrastructure continues to play a vital role in content promotion, distribution, and discovery. More Accurate Recommendations Show Greater Content Consumption, effectively improving our user conversion and retention. We are pleased to share that in the fourth quarter, both QQ Music and Kugoo Music recorded another record high share of music streams from recommendations. Finally
Victoria Haynes: Furthermore, we maintained our leadership in smart local coverage and our recently renewed partnership with Li <unk>.
Victoria Haynes: Last about another base.
Victoria Haynes: Our technology infrastructure continued to play of lethal role in content and promotion distribution under discovery.
Victoria Haynes: More accurate recommendations Joel grade her content consumption.
Victoria Haynes: In fact, the improving our <unk> commercial under retention.
Victoria Haynes: We are pleased to share that is a fourth quarter.
Victoria Haynes: Both Kilkeel music and <unk> music recorded another record high share of music streams from recommendations.
Victoria Haynes: Finally AI.
Ross: We continue to expand AIGC applications to enhance user experience and foster artists' music creation while improving efficiency. On the product side, we integrated AITC into music streaming and creation, as well as viewing and socializing, creating an increasingly intelligent and personalized music experience for users and creators, for example. By enhancing QQ Music's AI, enabling the listening together feature with additional virtual DJs, each specializing in different music genres, may have made music discovery faster and more personalized. Furthermore, we launched an AI composition tool in Venice supporting artists' music creation using their original text promos or rhythm clips.
Victoria Haynes: We continue to expand Aig's say applications, so, hence youll start experience and a fourth of our artists music creation, while improving efficiency.
Victoria Haynes: On the product side, we integrated <unk> into our music streaming and accretion.
As well as the scene unless otherwise these lending, creating an increasingly intelligent and personalized music experience for users and creators.
Victoria Haynes: For example.
Victoria Haynes: <unk> AI and level leasing together face harvest and not additional radio Djs.
Victoria Haynes: If specializing in different music center, where <unk> made that music discovery faster and more personalized.
Victoria Haynes: Furthermore, they launch an AI compensation tool humana's supporting artists the meals exploration youll see their original types promos or rhythm clips.
Victoria Haynes: Luckily the integrated AI seen function into Google and the leasing initial resolve so gas is either user increasing willing to pay for this function.
Ross: Lastly, we integrated an AI Sync function into Kugoo and WeSync. Initial results suggest that users are increasingly willing to pay for this function as it enables easy creation of sound covers in multiple styles and languages on the operations side. We are using AIGC to make our advertising more efficient and effective, enabling us to better target and account convert users. We are also leveraging LLMs to better promote and distribute new songs. They help us analyze songs' audio characteristics and identify the content that resonates most with users.
Victoria Haynes: It enables easy equation of song powers, <unk> sales and the languages.
Victoria Haynes: On the operations side.
Victoria Haynes: Youll see in ITC to make all advertising more efficient and effective.
Victoria Haynes: Employing us to a bite her pocket and account calmart users.
Victoria Haynes: We are also leveraging our ams to better promote and distribute new songs.
Victoria Haynes: They have us analyze songs Aldo characteristics.
Victoria Haynes: <unk> content.
Victoria Haynes: That resonate most with users.
Charlene Liu: To sum up, we will continue to leverage technology to achieve more efficiency gains in the future. Our dedication and passion for serving hundreds of millions of music users will further inspire us to deliver more compelling music entertainment experiences, seamlessly across a broader range of user cases. With that, I will turn the call over to Charlene for a deep dive into our financials. Thank you a lot, and greetings to everyone.
Victoria Haynes: To sum up.
Victoria Haynes: Maybe I'll continue to leverage technology to achieve more efficiency gains in the future.
Our dedication and passion for serving hundreds of millions of music users.
Victoria Haynes: Further inspire us to deliver more compelling music entertainment experiences seamlessly across a broader range of user cases.
With that I will.
Charlene Liu: I will now turn to our financial results. Our strong financial results for the year 2023 reflected success in effective monetization for our music services and operational efficiency management, with accelerating year-over-year growth in subscription revenues throughout the year. Our online music services delivered faster than expected revenue growth, which largely mitigated the revenue decline in Social Entertainment Service and others. RFI's net profit and non-RFI's net profit were RMB 5.2 billion and RMB 6.2 billion, respectively, up by 36% and 27%, respectively, on a year-over-year basis.
Ill turn the call over to Shirley.
Shirley: Our sample for a deep dive into our financials.
Shirley: Thank you Ross and greetings to everyone.
Shirley: I will now turn to our financial results.
Shirley: I'll ask Jonathan nationally last full year 2023 reflected our success in effective monetization for our music services and operational management.
Shirley: Accelerating year over year growth in subscription revenue.
Shirley: Yeah.
Jonathan: So that is the name or the faster than expected to cause revenue growth with a largely mitigate the revenue decline in social and Timna surveys and others.
Jonathan: And if I had perfect and non <unk> net profit of RMB, five 2 billion and RMB seven 2 billion effectively.
Charlene Liu: In the fourth quarter of 2023, our total revenues were RMB 6.9 billion, down by 7% year over year, primarily due to the decline in revenues from social entertainment services and others. Our online music revenues in Q4 2023 increased by 41% to RMB 5 billion on a year-over-year basis. This surge was driven by the strong expansion of our music subscription and advertising business, supplemented by an increase in artist-related merchandise sales.
Jonathan: Up by 36% and <unk> statement potentially respectively.
Jonathan: The year over year basis.
Jonathan: In the fourth quarter of 2023, our total revenues were RMB six 9 billion down by 7% year over year, primarily due to a decline of revenues from social entertainment services and others.
Jonathan: Our online revenues in Q4, 2023 increased by 41% to RMB 5 billion on a year over year basis.
Charlene Liu: Delving deeper into our music subscription performance for Q4, music subscription revenues reached RMB 3.4 billion, which is a 45% increase year-over-year and a 7% rise sequentially. Our refined operation allowed us to extend our online music playing user base, this while enhancing monthly ARTPU. The number of online music paying users expanded to 160,000. 106.7 million, representing a 21% increase year-over-year, with quarterly net ads of 3.7 million users. The monthly ARTPU rose to RMB 10.7, up by 20% year over year and by 4% sequentially, marking the seventh consecutive quarter of growth and setting another record.
Jonathan: There's a surge was it driven by just the general expansion of our music subscription and advertising business.
Jonathan: <unk> maintained.
Jonathan: Great.
Jonathan: Is that related to merchandise sales.
Jonathan: Selling deeper into our music stops practicing performance for Q4 mill expansion revenues reached <unk> 4 billion, which is 45% increase year over year.
7% to drive accretion.
Jonathan: Our refund up leasing allowed us to extend our online music paying user base allowed enhancing mountainy absence EU.
Jonathan: The lumber online music paying users spending to 106.
Jonathan: 100, <unk>, six 7 million, representing 21% increase year over year quarterly net adds of safe to say that meaning users.
Charlene Liu: The continuous growth in our paying user base was largely attributable to our enriched content offerings, enhanced member privileges such as industry-leading sound quality selections, rich sound effects, more personalized players, new skins, and interactive product features such as in-car enhancement and interactive features for DSL's new theme, Christmas Star. Our advertising revenue also had strong growth year-over-year and sequentially, supported by our diversified product suite and enriching advertising format. Advertising supported, advertising delivered strong performance in the quarter as interest rates improved significantly. Additionally, the new double 11 e-commerce sales event generated a higher demand for advertising and contributed to a sequential increase in advertising revenue. Social entertainment services and other revenues were RMB 1.9 billion, down by 52% year-over-year.
Jonathan: The monthly <unk> rose to RMB 10, seven.
Jonathan: By 20% year over year and by 4% sequentially.
Jonathan: I think the savings.
Jonathan: Quarter of growth and the stage and not a record.
Jonathan: The continued growth in our pay user base was largely attributable to our English content offerings enhance the member prevaricate, such as industry, leading thunder product interactions with.
Jonathan: Tristan the impact more individualized players.
Jonathan: <unk> and <unk>.
<unk>, <unk> and <unk> or <unk> House, New thing Christian My staff.
Jonathan: Our advertising revenue also had a strong growth year over year and sequentially supported by our diversified cutback of Skus and innovate king advertising format.
Charlene Liu: This was mainly due to adjustments in certain live streaming interactive functions and more stringent compliance procedures as we implemented several service enhancements and risk control measures in the past couple of quarters. We continue to innovate for social entertainment services and have seen growth in advertising revenues and VIP membership revenues this quarter. Our gross margin for Q4 stood at 38.3%, 38.3%, marking an increase of 5.3 percentage points year-over-year and an increase of 2.6 percentage points sequentially. Increasing the user base, together with higher monthly ARPPU, growth in advertising revenues, as well as ramping up our own content, have enabled us to move to a healthier margin model. Additionally, we have built win-win relationships with labels and artists and managed content costs more efficiently using the ROC approach. These efforts have collectively resulted in an increase in our growth margin year over year. Moving on to operating expenses, in the fourth quarter of 2023, they amounted to RMB 1.3 billion, representing 18.4% of our total revenues compared with 18.3% in the same period of last year. Selling and marketing expenses were RMB 255 million, down by 4% year-over-year.
Jonathan: And if it has supported that.
Advertising anyway, John performance in the quarter.
Jonathan: As intense rate improve if they can even today.
Jonathan: Additionally.
Jonathan: A new tablet Elisa e-commerce sales.
Jonathan: <unk> generated a higher demand for advertising and that contributed to a sequential increase in advertising revenues.
Jonathan: Social and 10 minutes services and other revenues were RMB, one 9 billion down by <unk> <unk>.
Jonathan: 2% year over year. This was mainly due to adjustments in certain live streaming active function and more stringent company and personally Charles actively implementing several service enhancement and the vehicle control megawatts in the past the quarter.
Jonathan: We continue to innovate with social and chairman installation and have seen growth in <unk>.
<unk> revenue and wrap.
Jonathan: Membership revenues this quarter.
Jonathan: Our gross margin for Q4 stood at 38% of sales percent Citi Ada Conversely percent, marking an increase of five three percentage points year over year.
Jonathan: Increase of two point, let's take the presentation.
Shelly: And Shelly.
Shelly: Increasing user base together with the higher market absence EU growth in advertising revenues.
Charlene Liu: Our marketing strategy is ROI-focused, where we allocate the budget towards areas with long-term growth prospects. We strictly curtailed expenses for promotion channel fees associated with live streaming and increased expenses to promote our own content. As our music service continues to grow rapidly, we will continue to stand on channel promotions in this era. General and administrative expenses were RMB 1 billion, down by 8% year-over-year, primarily driven by low employee-related expenses, partially because we incurred expenses related to late audio acquisition in Q4 2022, but such expenses did not recur in Q4 2023. Our effective tax rate for Q4 2023 was 17.3% compared to 12.2% in the same period of 2022.
Shelly: As example of our own content.
Shelly: And never ask you to move to a handsome margin model.
Shelly: Additionally, we have built leading relationships with labels and artists and the magnitude of content cost.
Shelly: Youre seeing obviously approach with Apple.
Shelly: Collectively these outlet in the increase of our gross margin year over year.
Shelly: Moving onto operating expenses in the first quarter of 2023.
Shelly: It amounted to.
Shelly: And the $1 8 billion, representing 18, 4% of our total revenue compared with 18, 3% in the same period of last year.
Shelly: And the maximum the paintings were RMB 255 remaining down by 4% year over year.
Charlene Liu: This increase was primarily attributed to the accrual of withholding tax, which is imaged by our PRC subsidiaries to offshore entertainment. For Q4 2023, our net profit and net profit attributable to equity holders of the company were RMB 1.4 billion and RMB 1.3 billion, respectively. Non-authorized net profit and the non-authorized net profit attributable to equity holders of the company will be RMB 1.7 billion and RMB 1.6 billion, respectively. Our diluted earnings per ADS reached a record high this quarter, at RMB 0.83, up 15% year-over-year. Non-authorized diluted earnings per ADS increased to RMB 1, up 10% year-over-year.
Shelly: Our marketing is our eye focused well located a packet it towards areas with the long term growth prospect relationships currently curtailed expense for promotion channel fees associated associated with live streaming and the increase expenses to promote our own.
Shelly: <unk> as our music surveys to continue prudently, we will continue to spend.
Shelly: China promotion for these areas.
General and administrative expenses were RMB 1 billion down by 8% year over year, primarily driven by low employee related expenses, partially because we incurred expenses related to lays ordeal acquisition in Q4 2022.
Charlene Liu: These results demonstrated our robust financial performance, enhanced operating efficiency, and the positive impact from our share repurchase program as of December 34th, 2023. Our combined balances of cash, cash equivalents, and term deposits were RMB 32.2 billion as compared with RMB 31 billion as of September 30, 2023.
Shelly: And as such expenses did not recur in Q4 2023.
Shelly: Our effective tax rate for Q4 2020 slate.
Shelly: 17 point to save per cent compared to 10.2% in the same period of 2022 <unk>.
Shelly: This increase was the primary that's ability to to the core of withholding tax.
Charlene Liu: This combined balance was also impacted by changes in the exchange rate of the RMB to USD at different balance sheet states under the Share Repurchase Program announced in March 2023. As of December 31st, 2023, we had repurchased 25.3 million ADs. From the open market, for a total cash consideration of U.S. dollars 175 million, of which approximately US $ 72 million were repurchased in the fourth quarter. Next, I'll briefly discuss our performance for four years, 2023. Total revenues were RMB 27.8 billion, down by 2% year-over-year.
Shelly: The image by our PRC subsidiaries.
Shelly: <unk> Entertainment.
Shelly: For Q4, 2020 see our net profit and net profit attributable to equity holders of the company, while RMB, one 4 billion and RMB, one <unk> billion.
No I think not perfect and non <unk> net profit attributable to equity holders of the company while on the one.
Shelly: Steven billing and RMB, one 6 billion respectively.
Shelly: Our diluted earnings per ads reached a record high this quarter at RMB <unk> 83 up 15% year over year now I think diluted earnings per.
Shelly: Ads increased to RMB one.
Shelly: Up 10% year over year. This result, they must ticket our robust financial performance enhance the operating efficiency and the positive impact from our share repurchase program.
Charlene Liu: Revenues from online music services were RMB $17.3 billion, up by 39% year-over-year. The increase was driven by strong growth in music subscription revenues and revenues from advertising services, supplemented by growth in other music services. Our music subscription revenue will be $12.1 billion, up by 39% year-over-year, driven by growth in both paid users and monthly ARTPU. However, revenues from the social entertainment service declined by 34% year-over-year due to adjustments in certain live-streaming interactive functions and more stringent company-as-procedures as we implemented several service enhancements and risk control measures in the past couple of quarters.
Shelly: As of December 31.
Shelly: 2023, our combined balances of cash cash equivalents and term deposits were RMB 32 pointed toward beginning as compared with.
Shelly: So two 1 billion as of September.
Shelly: 32023.
Shelly: It's a confined balance was also impacted by changes in debt exchanges right.
Shelly: Between USD and disciplined balance sheet date.
Shelly: Under the share repurchase program announced in March 2023.
Shelly: As of December 31, 2020, we had repurchased 25 point the same meaning Apis.
Shelly: From the open market for total cash consideration of U S. Dollar 175, meaning how bleach approximately U S dollar.
Charlene Liu: Gross margin in 2023 was 35.3%, upped by 4.3% percent year-over-year due to the reasons discussed earlier. Total operating expenses for 2023 will be RMB 5 billion, up by 10% year-over-year. Selling and marketing expenses in 2023 will be $0.9 billion, down by 2020. Click to enlarge
Shelly: 72, meaning.
Shelly: Purchased in the fourth quarter.
Shelly: Next I'll briefly discuss our performance for full year 2023, total revenues were RMB seven 8 billion.
Shelly: And by 2% year over year.
Shelly: Revenues from online mills facilities were RMB 17 points of billing up by 39% year over year.
Charlene Liu: Year-over-year, largely due to more efficient ROI-focused promotional strategies. General and administrative expenses were only $4.1 billion, down by 7% year-over-year, primarily due to reduced employee-related expenses, including expenses related to the lazy audio acquisition and expenses related to the Hong Kong Secondary Listing Income in 2022. On, In 2023, we achieved the highest level of profitability in our company's history. Net profit and net profit attributable to equity holders of the company were RMB 5.2 billion, an amount of RMB each.
Shelly: The increase was driven by strong growth in music subscription revenues and revenues from advertising services.
Shelly: We maintain the baccarat that will add the music service base.
Shelly: Our music subscription revenue were RMB $12 1 billion up by 39% year over year to impact growth in both paying users and <unk> atrophy.
Shelly: Revenues from social Entertainment services declined by 34% year over year.
Shelly: Adjustments in certain lab screaming active functions and more to changing the company per Se Trust has implemented several servicing has a lunch and a great cultural match us in the past the quarter.
Shelly: Gross margin in 2023, it was 35, 3% up by four point to sleep.
Charlene Liu: 4.9 billion effective. The Long Average Net Profit Attributable to Equity Holders of the Company was RMB 6.2 Billion and RMB 5.9 Billion, respectively. Finally, I'll conclude with some remarks on our outlook for 2023. We're excited. We are excited about the growth of the music industry and the remaining Dedicated to driving growth across our music ecosystem, we will continue to focus on effective monetization and operational efficiency while exploring new growth opportunities and expanding our suite of monetization tools, such as customized artists' merchandise, concerts, etc. Additionally, we will continue to invest in high-quality content and original content production, as well as new products and technologies, such as AIGC. We are confident about the long-term healthy growth of the music industry and our company. We remain focused on providing high-quality investment returns for our shareholders. This concludes our prepared remarks. We are now ready to open the call for questions. Thank you, Shelly. If you are dialing in by phone, please press 5 to ask a question and then press 6 to unmute yourself.
Shelly: And a year over year due to the reasons discussed earlier.
Shelly: Total operating expenses for 2023 were RMB 5 billion down by 10% year over year.
Shelly: And the amount of expenses in 2002, when you say it will be narrower point 9 billion down by 2020.
Shelly: Perfect.
Shelly: Year over year, largely due to more efficient our eye focused that promotional stages.
Shelly: General and administration expenses were RMB, four 1 billion down by 7% year over year, primarily due to reduced employee related expenses, including the banking related to less ordeals of foundation and the expenses go naked into the Hong Kong listing incurred in 2022.
Shelly: In 2023, a share with the highest level of profitability in our company's history net profit and net profit attributable to equity holders of the company was RMB five 2 billion and RMB.
Shelly: $4 19, respectively.
Shelly: Now <unk> network, and then FX net profit attributable to equity holders of the company was RMB.
Operator: If you are accessing the call from the Tencent meeting or the Vogue meeting application, please click the raise hand button at the bottom left. On behalf of all participants in today's call, please leave your questions at this time, and if you have additional ones, you can re-enter the queue. If you ask your question in Chinese, please repeat it in English. And the first question comes from the line of Alex Poon from Morgan Stanley. Alex, please.
Shelly: Six 2 billion and RMB five point.
Shelly: 19, respectively.
Shelly: Finally, our conclude with some remarks on <unk>.
Shelly: For 2023 exciting.
Shelly: We are excited about the growth of the music industry and agreements.
Shelly: Dedicated to driving our growth across our music ecosystem, we will continue to focus on impacting monetization and operational efficiency.
Shelly: Exploring new growth opportunities and expanding our suite of my inclination to us.
Alex Poon: Time Management, congratulations on a very strong quarter. My question is regarding our 2024 and first quarter revenue growth expectations. Can you share some color, particularly about the music segment? Thank you so much.
Shelly: As customized merchandise concepts extra. Additionally, we will continue to neulasta in high quality content and Arlington our content production.
Shelly: As the new products and technologies, such as AI can speak.
Unknown Executive: Thanks, Alex, for your questions. And in the year 2023, I think our online music business will consistently deliver a very strong performance, and our total monthly subscribers have already reached 107 million, which is a new milestone for us. And the total revenue from the music subscriptions has 39% year-over-year growth. The reason behind this is basically due to the very efficient execution of TME's content and platform dual-engine strategy and the counter-cyclical nature of the music industry.
Shelly: We are confident about the long term health growth are familiar that couldn't basket and our company.
Shelly: We remain focused on providing high quality lifestyle for.
Shelly: For our shareholders.
This concludes our prepared remarks, we are now ready to open the call for questions.
Speaker Change: Thank you Shelly if youre dialing in by phone. Please press <unk> to ask a question and then six to 10, new yourself, if youre accessing the cocoa notice and when you think of as well.
Unknown Executive: We believe that the fourth quarter's accelerated growth in subscription revenue really lays a strong foundation for this year's growth. We are optimistic about the industry's future and believe that our users' essential operations and expertise will continue to drive the business forward. We are committed to building a popular all-in-one music and audio platform, and from the product point of view, we will use industry-leading technology and know how to provide the best user experience for our users. From the content point of view, we will continue to provide the best coverage of songs and also some of the newer formats like live performances of concerts and music festivals, et cetera.
Speaker Change: Application configuration patents.
Speaker Change: Bottlenecks.
Speaker Change: All participants on today's call, including staffing a question at this time and if you have additional ones you can re enter the queue.
Speaker Change: If you're asking a question in Chinese please repeat them in English and the first question comes from the line of Alex <unk> from Morgan Stanley Alex Please.
Speaker Change: Yes.
Alex: Hi management, congratulations on very strong quarter.
Alex: My question is regarding our 2024 and first quarter revenue growth expectation.
Can you share some color, particularly about the music segment. Thank you so much.
Speaker Change: Thank you Alex for your questions and.
Alicia Yap: So, in a nutshell, I think for this year, we are confident that the online music business will maintain solid growth, with subscription services serving as a primary driving force, while continuing to explore new opportunities in advertising and artist merchandise to grow the business. And as part of our holistic music ecosystem, our social entertainment side will focus on better serving the core users, and the revenue from this path will be relatively stable. We have another question coming from Alicia Yap from Citigroup. Alicia, please.
Speaker Change: In year 2023, I think our online music business has consistently delivered a very strong performance in our total monthly subscribers have reached 107 million already which is a new milestone to us and the total revenue from the music subscriptions.
Speaker Change: 39% year over year growth.
Speaker Change: The reason behind it basically due to the very efficient execution of <unk> content and platform dual engine strategy and Congress cyclical nature of the music industry. We believe that the fourth quarter's accelerated growth in subscription revenue really lay a strong foundation for this year's growth.
Unknown Executive: Hi, thank you. Good evening, management. Thanks for taking my questions. And also, congrats on a solid quarter. I have two very quick questions. One is just curious if management can elaborate a little bit in terms of the user profile for those that have recently converted to the membership sub for the past 12 months. Any color in terms of the geographic location, city, tier, age group, and the song library that they tend to prefer? You know, anything you can share would be helpful.
Speaker Change: We are optimistic about the industry's future and believe that our users our central operations and expertise you will continue to drive that business forward.
Speaker Change: Committed to build a popular all in one music and audio platform and from the power point of view, we will use the industry, leading technology and Knowhow to provide the best user experience for our users from CONTEMPO panel will be will continue to provide the best coverage of songs and also some of the new other formats like light performance.
Speaker Change: As of concert and music festival et cetera. So.
In a nutshell I think for this year, we are confident that the online music business will maintain a solid growth with subscription services, serving as the primary driving force, while continuing to explore the new opportunities in advertising and office merchandise with growth that business and as part of our holistic music ecosystem.
Unknown Executive: And then, very quickly, on the second question: if you can update on any upcoming strategies and expectations for the long form audio in terms of the user adoption rate and also the revenue trends. Thank you. Oh, I wonder. Because the entire user group of Baoyue is a business-scale user group, we are basically similar to the population structure. Thank you. Thank you very much.
Speaker Change: Our social entertainment side, we are focused on better serving the core users and the revenue from this part will be relatively straightforward to shift.
Speaker Change: Our next question coming from Alicia Yapp from Citigroup Alicia.
Alicia Yap: Hi, Thank you.
Alicia Yap: Hey management, Thanks for taking my questions and also congrats on the solid quarter.
Unknown Executive: Thanks for your question. Actually, our user base is already more than 100 million, as I mentioned in the presentation. So the demographic profile of our user base is very relative to the population demographic structure in China. But from a practical point of view, we are still the most active group, the largest group, which is still mostly between the ages of 18 to 30. Well, from the activity of the users, we can see that the most active user or the largest group of our users is still aged between 80 and 30 years old. [inaudible] And we can also say that our subscription user is also very active among all the user groups we have. Yes, the distribution in the cities is similar to the current population structure.
Alicia Yap: I'll hop back.
Alicia Yap: Very quick question one just.
Alicia Yap: If management can elaborate and database in terms of the user profile for those that newly comfort towards the membership.
Alicia Yap: For the past 12 months.
Alicia Yap: Any color in terms of geographic location city tier.
Alicia Yap: H.
Alicia Yap: And the follow up.
Alicia Yap: <unk>.
Alicia Yap: And anything you can share would be helpful. And then very quickly on the second question.
You can update on any upcoming strategy and expectation for the long form audio in terms about the user adoption rate and also the revenue trends. Thank you.
Alicia Yap: Yes.
Alicia Yap: Yes.
Alicia Yap: Okay.
Alicia Yap: Okay.
Alicia Yap: Awesome.
Alicia Yap: Yeah.
Alicia Yap: Local.
Unknown Executive: Although it may be more active in the first-tier cities, the larger ones may still be distributed in the second-tier and third-tier cities. Regarding the user profile and their geographical allocation, I think it is the same as the demographic allocation of China. And we may have more active users in the first tier cities, where the majority of our users are still distributed in tier 2 and tier 3 cities in China. In the following operation process, we will also focus on young users. Because this is still a very promising part of our development. Well, in our later operations, we're also going to keep an eye on and be more focused on the young user groups, because they are still the ones with the most potential to tap.
Alicia Yap: Oh I'm sorry.
Alicia Yap: Hello, everybody.
Alicia Yap: <unk>, Sean Quinn will then would you say well I'm keeping a high sugar again.
Alicia Yap: Got it in English jingle jangle, it shouldn't be adelphia, and Canada is slow.
Alicia Yap: Okay.
Sean Quinn: Thank you very much. Thanks for the question actually our user base is already more than 100 million Amtech I mentioned in the presentation.
Sean Quinn: Graphic profile of our user base is rather it relative to the population demographic structure in China.
Sean Quinn: As a woman songs you worry at all I call them in order to ensure our oilfield.
Sean Quinn: Boiler shrinkage I said I've been listening to you to answer yours.
Sean Quinn: Songs from oscillate, our financing, particularly in England.
Sean Quinn: Well from the activity that we can see the most active use that for <unk>.
Sean Quinn: And that is the growth of our user is still ache between <unk> to <unk>.
Unknown Executive: For Tencent Music, our current strategy is to work closely with QQ Music and Kugou Music. This strategy is very effective at the moment. Well, regarding your question about long audio, our current strategy is that we're going to make long audio fully integrated with our music platform like QQ Music and Kugou Music. And now we find out that this strategy is very effective.
Sean Quinn: Our agenda today.
Sean Quinn: Volume wouldn't handler for you. The you should probably also types of Polyone for diodes and <unk>.
Speaker Change: Similarly, where do you see some of that I was wondering if we don't garner.
Speaker Change: And we can also say that our subscription view that is also very active our market. We think is critical.
Speaker Change: We have contractual Chevron branch, but honestly guns, which analytical gmos shipyard can they sell larger cent <unk> consolidated Azure Greenland, we are direct in Ohio that.
Unknown Executive: We pay more attention to the ability of each long audio content to be active and variable as a whole. And based on ROC, we also purchase the hottest content on the market. Well, at the same time, we are also going to keep an eye on the long audio, and especially how active it is and the monetization capacity of this long audio. And we are also going to leverage ROC in order to source the most popular content in the market. At the same time, we are also paying attention to the promotion of long audio content in the car market because we are also very clear that long novels and other content in the car market are still very popular.
Speaker Change: Hydrogen for ourself assigned yet to mature.
Speaker Change: We're still regarding the user profile and their agitation geographically I think it is the same as the demographic allocation of China, and we may have a more active user in the first tier cities, where the majority of our user osteo distributing in kitchen and tier three cities in China.
Speaker Change: So you're going to want me away from them that you are going to rule.
Speaker Change: <unk>, which indeed.
Speaker Change: We'll then answer your woman.
Language Haneda and the final movement.
Speaker Change: Well in our later operations, we're also gonna take Eni and be more focused on the young user groups because they are scared in lung with the most the potentials to tap.
Unknown Executive: At the same time, for non-audio, we are also going to accelerate its penetration into the in-car market because we have clearly noticed that, indeed, content, like novels, is very popular for the in-car application. So, to sum up, in 2023, it should be a year of transformation for the long audio business in TME. It also achieved a result beyond our expectations. Basically, we can continue to promote long-form audio content on the entire music platform and its entire business efficiency in a relatively good business development situation in 2023. Well, at the same time, generally speaking, 2023 would be a very important year for long-form audio, or we call it 2023, the year of transformation. The result and performance of the long audio is also better than our expectations. So based upon our great performance in 2023, we hope that long audio, the audio can also continue its distribution and commercial efficiency improvement on our music platform. Thank you.
Speaker Change: So are you telling him P&I for women.
So I'm going to launch another Twilio is Oregon filament on good.
Speaker Change: Hydro <unk> hydro <unk> media for to the Flonase Homogenize accounting certificate on children with shell.
Speaker Change: Regarding the question of the known argue our common strategy is looking at you'll make the known audience fully integrate eight <unk>, our music platform as QQ music and cocoa music and again not with laid out the strategy. In this area is a key element of <unk> Gourmet <unk> Tung Ya Qin Nate on the tuck <unk>.
Speaker Change: Full year convention on Amit Rheology, I'll say, the John <unk> issued two lifecycle I'm, assuming on the role of Ano.
Speaker Change: But at the same time, we're also going to take keep an eye on the long haul gene and especially how activities and monetization capacity of inks.
Speaker Change: And we're also going into <unk> and audit and source most popular content in the market I don't know I mean, I wanted to triangulate onsite trailer I sure don't run the accretion year on year financing for Si.
Speaker Change: So that extra production out on time.
Speaker Change: Turning to our drawdown laid on uninsured financial plan.
Speaker Change: We are at the same time for the non <unk>. We're also going to accelerate the penetration into the in car market course liquidity now to answer that.
Lincoln Kong: The next question comes from the line of Lincoln Kong from Goldman Sachs. Thank you, management, for taking my question and congrats on the first round quarter. So my question is on the margin, especially the gross margin side. We have seen an accelerating gross margin expansion on a Q on Q basis, more than 200 basis points. Could management elaborate in terms of what are the reasons for that?
Speaker Change: Indeed, no content like Lenovo is a very popular for the entire application. So it's on the right hand, so R&R sanya in <unk>, sorry, a timing a year with ITI <unk> trends in the <unk>.
Moving on total mutually agreeable Jeet Mahal clients are San Diego, Shanghai, EBITDAR harder Youll financing larger so I really don't know tissues, you're tweaking triangulate on tires and growing European iron ore from volatile and hard to let us financially.
Unknown Executive: And when we're thinking about 2024, what will be the key drivers for further gross margin expansion in terms of output growth and operating leverage from content cost and minimum guarantee or our increasing mix of our self-produced content? What will be the ceiling or medium-term target for our music business gross margin under this context? Thank you.
Speaker Change: Well at the same time generally speaking that plenty plenty strengths with the very important here for them to inform audio only quake plenty of consciously a year of transformation the result and performance alone.
Speaker Change: So better than our expectation.
Speaker Change: Upon our great performance in Concertante shrink we hope that's novel.
Now that the whole data catalysts continued need for distribution and commercial efficiency improvement on our music platform.
Speaker Change: Thank you. The next question comes from the line of Ming can come from Goldman Sachs.
Unknown Executive: Yes, the growth margin was 38.3% in Q4, increased by 5.3% year-over-year. And the main factors are as follows. The first, music subscription revenues had significant growth. Higher monthly active users and paying user base growth both had a positive impact on our growth margin. And the robust growth of advertising revenues also had a favorable impact on our growth margin.
Ming: Thank you management for taking my question.
Ming: Congrats on a strong quarter. So my question is on the.
Ming: Market, especially the gross margin side.
Ming: We have seen in fourth quarter.
Ming: <unk> gross margin expansion on a Q on Q basis more than 200 basis points.
Unknown Executive: And third, we gradually ramp up our sales on content, which benefits our growth margin; own content increased rapidly in Q4. And we have been focused on RLC to manage content costs more efficiently and build win-win relationships with labels and artists. Our online music revenue growth ratio was faster than the natural ratio of content costs.
Speaker Change: Could you elaborate.
Speaker Change: And in terms of what are the.
Speaker Change: Reasons for that and we thank you for the Chinese market.
Speaker Change: Sure.
Speaker Change: It will be the key drivers for further gross margin expansion.
Speaker Change: Terms of.
Speaker Change: Gross.
Speaker Change: The operating leverage from the cost side minimum guarantee all of our increasing mix of self produced content will be the seating are immediate.
Unknown Executive: And for gross margin in the Q4 2024, we expect our gross margin will keep increasing and compare to the P's will be lower than the Q4 in 2023, but with our revenue from subscription revenue and advertising revenue also expected to have increased rapidly. So we think that the growth margin will keep increasing. Created in Q1 2024. The next question comes from the line of Fang Wei from New Zealand. Thank you for taking my questions and congrats on the print. I have an ARPU-related question.
Speaker Change: Okay.
Our music business gross margin.
Speaker Change: This context, thank you.
Speaker Change: Yes.
Speaker Change: Gross margin is 38.
Speaker Change: Putting us 3% in Q4 increased by five 3% year over year and the.
Speaker Change: Many factors as follows.
Speaker Change: First Nielsen subscription revenues I was thinking.
Speaker Change: And the growth.
Speaker Change: Higher monthly up and the paying user base growth both ER positive.
A positive impact on our gross margin and the robust growth of advertising revenues also helps with the favorable impact on gross margin and.
Unknown Executive: So looking at your music ARPU trajectory, right, you guys finished the year with 16% year-over-year growth, and I believe your largest period also delivered positive growth. But despite that, I think your paying user growth maintained a very solid expansion, right? So it looks like consumers are happily paying up.
Speaker Change: The third the third we gradually ramp up our sales on the content rich.
Turning to our gross margin and <unk>.
Speaker Change: We can see the piece of our Oh.
Speaker Change: All content is.
Unknown Executive: So I was just wondering if management can help elaborate on your techniques behind and is it fair to assume continued momentum into 2020? Yeah, I think for R2, we have adopted a holistic approach to grow subscription revenue with flexibility in balancing between subscriber growth and also the ARPPU expansion. So I think that we will have a strong start on the subs growth in Q1 2024, partially because of the impacted promotion during the Chinese New Year. And so marginal ARPPU fluctuation is to be expected.
Speaker Change: Gradually in Q4.
Speaker Change: And fourth we have been focused obviously to manage content attracts more innovation and build a lean lean relationships with labels and artists. Our online news because revenue is of course as ACO was faster than natural ratio of content cost.
And for our gross margin.
Speaker Change: The Q4 2024.
Our gross margin will keep increase and.
Speaker Change: Compared to the.
Speaker Change: Compared with the peers will be lower than Q.
Speaker Change: Q4 in 2028 and that with our revenue from.
Speaker Change: Subsequent examiner and the advertising revenue are also expected to have a increased.
Unknown Executive: But I think for the remaining quarters in 2024, overall, I think the trend should be slightly upward. So I think that we will monitor and also manage it very wisely to ensure that we have a good balance between the subscriber growth and also the ARPPU expansion. But you're right that we believe that the full number of years of education. I think that all the music lovers in China right now see the value of music, and they are willing to pay more in the future. The next question comes from Zhang Lei from Bank of America in New Orleans. Oh, hi, management. Thanks for taking my question. And congrats on a solid quarter.
Speaker Change: Increased debt.
Speaker Change: Increased rapidly solely.
Speaker Change: The gross margin will be in existence.
Speaker Change: Chris in Q.
Speaker Change: 1024.
Speaker Change: The next question comes from the line of sung <unk> from Mizuho.
Sung: Thank you for taking my questions and congrats on the print on the head.
Sung: Really the question so looking edge of music our trajectory right.
Sung: You guys finished the year with 16% unit growth and I believe your largest peer also delivered positive growth, but despite that.
Sung: I think you are paying user growth maintain a very solid expansion right. So it looks like consumers are happily paying up. So I was just wondering if management can help elaborate on your techniques behind and is it fair to assume continued momentum into 2024. Thank you.
Unknown Executive: Two questions here. First, I think you have a pretty good margin and cash flow trend. So do we consider any shareholder returns in the future? And secondly, it's about the user trend in Q4 which is a slight decline from Q2. So how should we look at the user trend for 2024? Didn't he just say that it's a return on investment?
Speaker Change: Yeah, I think for the op, who we have without the holistic approach to grow the subscription revenue with flexibility balancing between the <unk> and also with AARP to your expansion. So I think that we have a strong strong stock on the subscribers in Q1 2024.
Unknown Executive: Return on investment. He said it was a good return on investment. He said it was a return on investment. Okay.
Speaker Change: And partially.
Speaker Change: Partially because of the packet promotion during the Chinese new year, and so marginal arpus fluctuation is to be expected, but I think for the remaining quarters in 'twenty one quarter overall I think the trend distribute slightly uplift. So I think that we will monitor and also mentioned is very.
Unknown Executive: I think that for the share buybacks, we have been proactively doing this in the last... especially in Q4 for 2023. And we'll continue to do this under the current B500 million share buyback plan that we have. And I think that we have already achieved really good progress on that. And... so maybe Ross will talk about it.
Speaker Change: Wi Fi to ensuring that we have a good balance between the <unk> and also the opex to expansion, but you are right that <unk> that.
Unknown Executive: Oh, okay. This year, the trend of Q4 is the same as the trend of the previous few years, because of the decline in the opening of Q4. At the same time, we also see that the mobile end itself is also constantly affected by the short video, which means that the traffic itself also has a natural loss of pressure. Thank you very much.
Speaker Change: A number of years, our applications I think that after a music lovers in China, our way now to see the value of music and they are willing to pay more in the future.
Speaker Change: The next question comes from Channel from Bank of America Merrill Lynch.
Channel: Hi management, Thanks for taking my question and congrats on a solid quarter.
Channel: Question here first I think you have pretty good margin and cash flow Chad So do I consider any shareholder outreach.
Unknown Executive: And I'd like to say the same as a trend a few years ago in Q4, and actually, the key reason is because of the students going back to school as the school opens. Well, at the same time, we also see some impact from short-form video on our mobile end. Based on our analysis, in terms of the number of active days, the majority of our loss is mainly due to the group with the lowest number of active days.
Channel: And secondly is about.
Channel: The user count in Q4 always itself like Lake long too all the time, so how should we look at things either.
Unknown Executive: Basically, our group with the highest active days is still developing steadily. Well, from the data analytics, we can see that regarding the loss of users, actually, especially according to the days of the active users, the majority of them leaving us are actually those low active users. Still, we maintain our highly active users, and they are quite stable. In the past 23 years, our sales and marketing expenses have decreased, and we have reduced our promotion in the entire market.
Channel: Kind of our 10-K 10-K fault. Thank you.
Channel: Yeah.
Channel: That's a chance when they are working on clinical question gentlemen.
Speaker Change: Okay, I think that for the.
Speaker Change: Share buybacks, we have proactively doing this in the last.
Speaker Change: Especially in Q4 of 2023, and we will continue to doing this under the current <unk> 500 million share buyback plan that we have and I think that we have already achieved good progress in that.
Speaker Change: And.
So maybe also talks about okay.
So <unk> continuing on the <unk> on <unk>.
Unknown Executive: This is also an important factor in keeping M&A going. Well, from the practice, we can also say that in the year of 2023, we will further downsize marketing expenses. And that is the reason we also reduce channel promotion. And this is also another reason.
Speaker Change: To requeue celebration.
Speaker Change: Kgs, although you're going to shop AMA.
Speaker Change: So unless you want me to Colorado, you don't go and buy scenarios, where should you guys wrote atrophy Julien.
Speaker Change: Julian outbreaks haynesville sand neutral economy.
Speaker Change: Thank you very much and that can say the same type of trend a few years ago in Q4, and actually the key lanes and particularly with the students going back to school and Thats good okay.
Unknown Executive: And that can respond to your question. Apart from the mobile end, we also pay more attention to the development of new channels, such as PC, car, and IoT. We pay more attention to the scale of users in the whole channel in terms of operation. Well, at the same time, besides the mobile end, we are also keeping our eye on some traditional channels and emerging channels, including PCN, the in-car channel, and the IoT channel. Because regarding the operation, we would like to indeed have the omni-channel user base further improved. In terms of IoT, we have maintained a steady growth in IoT. In terms of PCs, Windows, and Mac, we have maintained a stable foundation, but we are also continuously releasing new versions to explore the opportunities on the PC side. Well, at the same time, you can also see that regarding IoT, and we still remain on very steady ground.
Speaker Change: Same time, we also see some impact from the shortfall.
Speaker Change: Our mobile business.
Speaker Change: So now I'm, CFO fashion icon, durum, which and the Tanger shuffle in California to Angela column notional.
Speaker Change: Total to a harsher sorry, Peter Coyote uncertainty, Japan, Underwhelmed golf, where the street is on a high share, but I'll, let Dane Nevada.
Speaker Change: And from that data analytics, we can say that regarding the lose at the user actually, especially according to the pace of Atkins and majority of them, leaving us actually there's no active users still we maintain our highly active users and they are quite stable.
Speaker Change: As I'm sure you're the mainline China economy, our son young women, so I'm going to I'll say.
Speaker Change: Shuttle NGL family I guess on the well, meaning if at all.
Speaker Change: I'll adjourn holidays converting Sheila.
Speaker Change: Children in Cleveland, and I assure you call on them, we can suddenly I mean, it will be our launch out so that you got a potent <unk>. They also want a useful.
Speaker Change: Well from the practice, we can also say that in <unk> 'twenty 'twenty sway with further downside the marketing expenses and that is the reason we also reduced the China promotion and debated wholesale another basin and that can respond to your question. Another woman seriously IR Guangzhou Joseph Tung garage you can go on the journey.
Unknown Executive: We're for the PC end, including the Windows and Mac systems, and we're also going to maintain our stability there. And we're also trying to roll out a new version to continue to explore new opportunities on the PC end. From the perspective of 2024, Q1 has the presence of the Spring Festival. This is a regular event, and people don't use music apps much. So in Q1, there is still a possibility that there will be a micro-drop due to the Spring Festival. At the same time, you can also say that regarding the trend of 2024, at the very beginning of 2024, we will be impacted by the Spring Festival in China. So during the Spring Festival, people seldom use music apps.
Joseph Tung: And I'm really glad women, yet shy of coming out of bundle band 12, a psa for towards either Iot those should all on the so you guys filed on SEDAR negotiation should order, but you can find out you won't see anti gun clinical Jon Kondo changed at all that I know you don't want agreements.
Joseph Tung: Well at the same time, besides the mobile and we are also keeping our eye on some of the traditional channels and emerging channels, including PC and the in car channel and Iot channel.
Joseph Tung: Regarding the operation where would that could indeed have the omnichannel to us I think to be further improved.
Unknown Executive: So that's the reason in Q1 of 2024, you're going to see the MUAUs being slightly decreased due to the Spring Festival holiday. However, as the big version of Q1 and Qoogle continue to be optimized, our marketing strategy will be improved based on the R&D cost of R&D in the next 23 years. So we will pay more attention to the channel part. We believe that there will be a certain rebound in the MUAUs in the following quarter.
Joseph Tung: So you want <unk> Iot enable an army of hydro poucher that'd be all but anyway sungard.
Joseph Tung: <unk> micro tables on women hired about Stewart box rates it will limit the internal EMEA.
Joseph Tung: Tricia <unk> abundant largely to transalta and pizza on the down in Chile.
Joseph Tung: But I think and you can also see that regarding Iot and we are still remains a very static grass where for the PC.
Joseph Tung: Including the Windows and Mac system and it also can include maintain our stability.
Joseph Tung: Okay.
Joseph Tung: And finally, while also trying to roll out a new version to continue to explore new opportunities on the PC and Florida honestly I'm not sure like to.
Unknown Executive: Well, in the following quarters, we are going to have a major version update regarding QQ Music, and we're also going to continue to improve the performance of Qoogle Music. So I do believe, compared with 2023, our marketing strategy is also going to have a ROI-based improvement. We're also going to pay more attention to the channel part, including the channel for new user engagement and the returning of the old user back to our platform. So in the upcoming quarters, we're also going to expect MUAU improvement.
Joseph Tung: <unk> hundred 28, any inflows from that but an interesting one where the dialog.
Joseph Tung: <unk>, we launched our largest single new obviously.
Joseph Tung: Sorry, if you either I may open a highway imager.
Joseph Tung: <unk> media.
Joseph Tung: But at the same time you can also say that regarding the trend Atlantic plentiful at the very beginning of 'twenty plentiful, we won't be impacted by the spring Festival in China. So given the spring festival people seldom used music apps. So that is always in Q1 of 'twenty 'twenty four youre going to say that <unk> is in slightly decreased due to the spring Festival.
Unknown Executive: Okay, in response to your first questions, besides the share buyback, we are also proactively looking into different possibilities as well. So we will be working on the detailed plan, and then we would like to improve shareholders' equity benefits in the future. The next question comes from the line of DACC, Xueqing, please. Thank you.
Joseph Tung: So as I say voluntary suitable men can only logical kill that you hold the turbine building <unk> in atopic asthma is a Google, but I didn't give hard extracellular youll bar sushi, a woman young chul tornado Shambhu, our son Nguyen.
Joseph Tung: You are either <unk> or <unk>.
Joseph Tung: But how do you feel you can still bring on Keystone. So I'm gonna have gone to which had already been though youre launching hopefully they'll know what assumption can honestly if all the CLO.
Joseph Tung: <unk> element and what I may opioid because when you go into the marketplace. We're in.
Funneling Cortes as Lachlan into has a major.
Joseph Tung: Regarding QQ music and also going to continue to improve the performance of cocoa music. So I believe come headwinds 20 contracts the way our marketing strategy also going to have a.
Unknown Executive: Thanks for taking my question. And also, congratulations on the strong culture. My question about AIGC, as you mentioned in the prepared remarks, PME has been using AIGC in many aspects. Circle management could elaborate a bit more about that, how you leverage AI in your business, and how AI-empowered products contribute to subscriber conversion and retention. Thank you. We attach great importance to and closely follow the development of voice AI and integrate large models into presentation, singing, composing, drawing, and social settings. Thank you very much.
Joseph Tung: Based on improvement, we're also going to pay more attention to the channel partners, including the channel new user engagement and are there any of that or is that back to our platform. So in the upcoming quarters will also going to expect the annual improvement.
Speaker Change: Okay in response to your first questions. Besides the share buyback. We are also proactively looking at the different possibilities as well so we'll be working on the detailed plan and then we would like to improve.
Unknown Executive: We have been closely monitoring the latest development of locked class language models and integrated them into music recommendations and creations, as well as seeing and socializing. Unlike other companies, we pay more attention to how to expand the use of large models on the application level. So this is the application scenario. We are currently divided into three levels.
Speaker Change: <unk> shareholders.
Speaker Change: Equity benefits in the future.
Speaker Change: Yeah.
TICC: Next question comes from the line of sight TICC shaky improves.
TICC: Okay. Thank you. Thanks for taking my question and also congratulations on this John Costello.
TICC: Gotcha.
TICC shaky: As you mentioned in the prepared remarks, Jamie has been working as you see in many aspects.
Unknown Executive: Well, because we're somewhat different from other companies, we're going to be more focused on the large language model application use case. So regarding the application use case, actually, I have three parts to share with you. On the one hand, we hope to improve the interesting and novel experience of the product through large models. Recently, we have also upgraded the function of listening together in the new version. Well, first of all, we would like to leverage the locked language model to make our product more appealing and more attractive to provide the user with a brand new experience. So that is the reason why in our latest version, we also updated the Listen Together functionality.
Speaker Change: So can management elaborate a bit more about.
Speaker Change: That's how you leverage AI in your opinion and how about adding power contracts contributed to the subscriber conversion I know the country. Thank you.
Speaker Change: They are well known Golar Tong shipping to Geneva, continuing or sometimes here in Nevada, John Thomas <unk>.
Speaker Change: <unk> phone, so much stronger liquids or so dollars hunting Jerome.
Speaker Change: Thank you very much we have been closely monitoring the latest in Nevada.
Speaker Change: Last question and thanks models and integrated it into music recommendations and quotations as well as <unk> and central Nike.
Speaker Change: So you should have a clinical a little on the hydro <unk> unions from China will go through the quarter. Tom was it mostly on the content. So it's two otter tail County, one language understanding spun out from here.
Unknown Executive: So, the user, in our QQ Music, will be able to draw and profile their avatars. And through this avatar, they will also be able to find the recommended music that really fits their mood and emotions. And then they are going to consume all content. In QQ Music's pet product, we also enhance the ability of our big models to chat so that users can have a very interesting chat with their pets and enhance the companionship of our pets. Well, at the same time, another product is actually the small pet in QQ Music.
Speaker Change: Yeah.
Because somewhat different from other companies, we're going to be more focused on the large language model application use case. So regarding application use case actually I have three parts to share with you.
Speaker Change: <unk>, so I'm talking about our most interest is wrong time in the chute. So you'll excuse me I'm going to a shipyard chinchillas, yet so on Virginia sure sorry, Simona Simona shown genome editing the silicone.
Speaker Change: Yeah.
Speaker Change: Well first of all that to leverage the knot language models to make our product more appealing and more attractive to provide I think is that the brand can extend us. So that is always changing our latest fashion. We also updated leasing together functionality. Thank you.
Unknown Executive: And we're also going to leverage a large-language model to improve the conversation and the dialogue between the user and the pet. So they are going to have some very interesting chats to continue to improve the sense of companionship for our users. The second part is to improve content creation efficiency. We provide musicians with a creative tool that can improve content creation efficiency. The second point I'm going to talk about is how we can leverage large-language models to improve the creation efficiency of content. We do provide effective tools for music creation to the creators. , the song's separation function basically, it can separate the life from the song, the composition from the song, and now it's popular among musicians. Well, you can say that recently we have already enabled the separation function in the Venice functions. So, generally speaking, it can directly separate the vocals from the entire composition of the song, which is very popular among musicians.
Speaker Change: Ryan who is our COO elementary it's I'd argue I assure you the Xinjiang.
Speaker Change: But conga quietly look at all the point of your feelings on above it on quite a bit with regeneron for her transaction. She is going to change and negotiate Peter <unk>.
Speaker Change: So they use that in our kitchen music, they won't be able to tool and profile of items and through this Nevada. There will also be able to find the recommended music library state into their mood and emotion and then theyre going to consume more content.
Speaker Change: But anyway.
Speaker Change: So I'm going to be I'm, sorry of healing of the tornado towards over time in EMEA EMEA homeworld choose some calm down marginally out handedly growing youll, Craig Another school geographies Honeywell Ciulla unallocated items like sudden Tom told around pay banner.
Speaker Change: Now at the same time, another product is actually to small pack in kicking music and we're also going into let's say July advantage model to improve the competition and the dialogue they tend to use that as a pet so theyre not going to have some very interesting chats to continued improved testing as a companion to our users.
Speaker Change: The other ones if you don't really need them Trumbo Shoney Omega entered she won't Patongo you don't go to <unk>.
Speaker Change: If you'll necessarily that you got from the wound.
Speaker Change: The second point I'm going to talk about is how we can leverage <unk> language model can improve the clinician efficiency to the content. We do provide that is such a thirst for music creation to the Hs.
Unknown Executive: At the moment, K-pop, Kugou, and K-pop Star have all introduced the ability to use their own tone to make songs in AI, allowing users to create works of different styles in different languages. In addition, we have also launched AI-based composition functionalities through WeSing and Venus as well as Kugoo. In other words, the user can actually create their own preferred sounds or compositions according to their preferred style. And we also found that it has very good business prospects. Users are actually willing to pay some of their money for those songs that have been produced with AI-enabled tools. In advertising, we use AIGC to generate different promotional materials.
Speaker Change: This is actually Michelle Linn.
Speaker Change: Now I'll go through those and we're full even though keybanc labor parts.
Speaker Change: There is no one can go to <unk>.
Speaker Change: Unfortunately, as you know you're still dollar year on year on a plane.
Speaker Change: I can't say that recently, we have already enabled a substantial function in Venice and functions. So generally speaking it can directly separates the vehicles from the Intel compensation at the Sun, which is very popular among mutation.
Speaker Change: Oh, I'm, sorry, I shouldn't make a cool cool golf <unk> shakedown Goldfields Fuller suite frequency the use of our agile economy longer okay to those who do the Louisiana put on chip when I'm talking.
Speaker Change: In addition, we also launched the AI based compensation functionality.
Speaker Change: We have seen and data as well as <unk> in other words that a user can actually create their own.
Speaker Change: <unk> pre sac tons or the compensation according to their perfect science.
Speaker Change: Or do they want me a function as you just heard you bill of it onshore that you're showing you the selling of the changing your wishes.
Speaker Change: Well it is basically it was a good payout for the grocery landfill to let's say they just for a minute.
Speaker Change: Well at the same time through those function and enablement. We also filed a very promising commercial prospects because they are actually willing to pay some of their money for the science that has been produced with AI enabled tools.
Unknown Executive: We also found that through this kind of promotional material, we can have a better conversion efficiency. Regarding customer acquisition, we can also leverage AIGC to generate different promotional materials. We found out after allocating those materials to the market, they can also help to boost the conversion rate.
Speaker Change: It's alcohol full quarter, our EMEA Kanwar Aig's Acos from transport, Canada to.
Speaker Change: To answer with Hyatt volatile fungi, Donald told onto Azure woman Natasha O'neil, you gotta be off allocation well regarding the customer acquisition. We can also landbank aig's scale to generate given the promotional materials.
Speaker Change: Right out of advocating does materialize through the market a catalyst at housekeepers getting the conversion rate.
Unknown Executive: We also found that by using big models, we can have better promotion of our music within the market. We can have a higher percentage of data improvement than before. Well, at the same time, we also found out after applying a large-language model, we will also have a very good grasp on the music recommendations within the app, a huge improvement compared with before.
Speaker Change: I apologize to wash your own time wishing him Angola elements I'll try another year or two longtime ago, but alcohol P. J I hope you. All you go golf believe that you're going to Sue do you think a few of them.
Speaker Change: Well at the same time platelets just laid out after applying not renters model with a wholesale has a very good crash regarding the music recommendations waiting to happen.
Speaker Change: A huge improvement compared with before.
Unknown Executive: So we believe that AIGC and the whole of Shenglong AI should play a good role in promoting our own products. We will also closely follow the latest technological developments in the industry, including Sonos, and apply them to our products as soon as possible. So, generally speaking, we do believe AIGC is benefiting our industry and helping to further improve the performance of our product. We're also going to keep an eye on the latest developments, including Sonar and other latest technology, and make sure they can also be adopted by our product as soon as possible. Thank you. And the next question comes from Thomas Chong in on behalf of Jeffrey. Hi, good evening.
Speaker Change: Amazon Haynesville aig's they saw their San Jose ads triggered some killer three women patients.
Speaker Change: <unk> holiday Eagle treating <unk> patients sorry above us on order here, John got a too high inventories in the <unk> quite a sizable minority of English.
Speaker Change: So generally speaking we do believe aig's during his time at 18 her industry and help to further improve the performance of our product. We're also going to keep an eye on the latest development, including <unk> and <unk> technology, and making sure. They could also be adopting to buy our product as soon as possible.
Speaker Change: And our next question comes from Thomas Chong from Jefferies.
Thomas Chong: Hi, Good evening, Thanks management for taking my questions and congratulations on the other we saw this as I talk to yourself.
Thomas Chong: Thanks management for taking my questions and congratulations on a very solid Slack talk result. I have a question regarding our music and NetEss. Given the solid performance that we are seeing in Q4, 3.7 million is better than the street expectation. What should we think about the NetEss trend coming into Q1 and 2024? And over the long run, how should we think about our music stocks? Thank you. Due to our many years of market education, users are getting used to our high-quality music. We are entering the harvest period.
Thomas Chong: A question regarding our people safe.
Thomas Chong: Given the solid performance that we are seeing in Q4 $3 7 million.
Thomas Chong: The street expectation.
We should be thinking about.
Thomas Chong: But that trend coming into Q1, and trying to turn the floor and over the long run how should we think about our music sucks number. Thank you.
Thomas Chong: Yes.
Speaker Change: Hello, Hi, Yoyo authentic Tony I know, there's I should tell you my.
Speaker Change: You'll recall I tell them to take on either the perverted she might need financial well known cases, the cellphone cheap.
Unknown Executive: Thank you very much. Thanks for your question. Well, you can say that because we provided a high-quality product to the market and after years of education to the user, and now they are happy to pay for the service and product, and the user is becoming more mature. And I think we are now stepping into the season of harvest.
Speaker Change: Thank you Mitra. Thanks for your question well you can see that it closely provided a high quality product to the market and after years of application to the user and now they're happy to pay for the service and product and the user is becoming more mature and I think we are now stepping into the phased into coffee.
Unknown Executive: In the next 20 years, we will take R&C as a precondition. We will add some promotion to make more high-tech users able to access and use our high-quality services. Then we will use our complete content library and platform to keep them. This is what we have done so far with NetApp.
Speaker Change: Personally I know, we're not going to go our seats as of late changing in Lesotho that Jack Cleveland I think are cheap.
My younger daughter got Chen from <unk>.
Speaker Change: So what's the hold up in the concept.
Speaker Change: Now you all know my son, the nasal swab collection attack Nicholas Jansen, many o'shaughnessy status of women, which NHI Ashland that you can't talk.
Unknown Executive: [inaudible] In the year 2024, we're going to keep an eye on ROC and also try to further improve our product and also with more marketing strategies. And we do hope those high-potential customers can get access to our high-quality service and product. And our very well-established content library and platform will retain those users with us. So this is indeed the strategy we have for this year.
Speaker Change: Yeah.
Speaker Change: <unk> hundred 94, we're going to keep an eye on RMC and also trying to further improve our product and wholesale a small marketing strategy and we still have those high potential customers can get access to our high quality service and production and that may well be sent content library and platform.
Speaker Change: We tend to invest with us. So this is indeed a strategy we have for this year.
Unknown Executive: After the outbreak of COVID-19 in 2020 and 2020, we have created a very good external environment due to the revival of commuting and offline music activities. In addition, the improvement of our operations and the powerful execution rate have allowed us to transfer and accumulate a large number of payment users much faster than we expected. Our annual membership growth has been well over two years, reaching 18.2 million.
Speaker Change: Danielle if there's somebody else that you can spend critical or not well then to <unk> question, but on the puzzle Cleveland Honda fit our heart I think of it like we're finding not just all or nothing.
Speaker Change: I think our Keystone clear you don't need as much Nina government people like me different climates, Aha Sheila Diana.
Speaker Change: Among women, Kenya, Luckily engines announced and so on in that number that you can buy the asset right now we want to close it up quite sharply in the kinds of Internet. Please.
Unknown Executive: This laid a very good foundation for us to expand our membership platform in the future, each one in 2023 after the reopening of the pandemic because travel has been allowed and the offline musical event has been restored, which creates a very enabling external environment for our business. Along with our very strong operational capacity and very robust execution, we will be able to accumulate many paying users based upon the enabling external environment and the fast conversion rate. So in the year of 2023, actually, the net added value for our subscription users reached 182 million, which will lay a very solid foundation for us to further expand the user base in the near future. In 2024, we will balance the development of NetEase and ARP.
Speaker Change: First of all that useful.
Speaker Change: H ones has plenty of tankage Duane after the reopening of the epidemic because it's a travel has been called out and it offline musical event as being wasteful, which grew eight seven enabling external environment for our business along.
Speaker Change: Along with our very strong operational capacity and robust execution, we will be able to accumulate many paying users.
Speaker Change: Based upon the enabling.
Environment and foster transaction late in the year has plenty of tankage to me actually and that indeed body for our subscription is that wages.
Speaker Change: 182.
Speaker Change: 182 median and originally a very solid foundation for us to further extend that they used I think in the near future.
Unknown Executive: We are confident that we will maintain a very healthy level of online music and paid income. Well, regarding the year 2024, we're going to finance NetAge and ARAC, and we have every confidence we will be able to maintain the online music business and the subscription revenue at a very healthy level. Since the beginning of 2024, we have benefited from the good experience brought by product innovation and the expansion of service rights and other operating strategies. In addition, we have cooperated with some operating promotion activities during the Spring Festival, and we have also seen some results that are higher than expected. We have established a strong foundation for health development for the next 20 years. Regarding the year of 2024, right after we entered the year of 2024, we benefited from our product innovation and user privilege expansion, along with our very robust execution strategy, and we offered a high-quality experience to the users. Along with our operational and promotion events during the Chinese Spring Festival, we see that performance is better than what we expected.
Speaker Change: Similar to our Australia, not women junk rated <unk> funding that anchor for Africa as again I think the phasma pneumonia are changing.
Speaker Change: So part of our soldiers surveyed said that yoplait hunker in conversation.
Speaker Change: Well regarding the yes, plenty plenty for logging into finance net H and L. A and we have every confidence we will be able to maintained online music business and the subscription revenue at a very healthy level.
Speaker Change: I mean, anthony into the kind of and I know when they saw no tenant in tungsten her fortune either caught up.
Speaker Change: It's really kind of how does it how.
Speaker Change: How they search yet number one.
Speaker Change: Just on peg alone in 'twenty than you say, even take on point of when they are kind of on a call you issued in Chicago.
Speaker Change: Are they asking it and I think the GM contract I'm thinking of cancellations.
Speaker Change: Regarding the year of 'twenty 'twenty four right. After we entered into thank you have plenty of plentiful MSA data from our product innovation and ease of privilege expansion along with our very robust execution strategy and we also had high quality experiments to that gives us along with our operational and promoting events chairman of Chinese Spring Festival.
Speaker Change: Say the performance is better than what we expected. It also made a very solid foundation for the healthy development of our business in 2024.
Unknown Executive: It also laid a very solid foundation for the healthy development of our business in 2024. Later, we will pay more attention to the development of these high-up members. In the next 24 years, we will mainly focus on the operation of these high-up members in other channels, including the vehicle part and the TV part. We also hope that through these methods, we can improve our music quality overall. But the most important thing we want to emphasize is that we still prioritize ensuring a more stable growth of our entire monthly income. Well, in the near future, we're also going to keep an eye on the operation and development of the super-users, or should I call them the high-operated users. Those users are the key.
Speaker Change: And then hopefully.
Speaker Change: Somebody open gagan, Guangzhou woman tall geopolitical opportunity elsewhere in Nevada.
Speaker Change: And to Usher <unk>, sorry, I should ask you at all about what's what I believe a key enabler in that April tables.
Speaker Change: Yeah, Sean somewhat partly a function of them go to chunk as you if you don't want.
Speaker Change: And so you do auto in Tangshan, the others wish element I'm sure because we don't yet know about elements and nobody here. So we're not gonna have agenda tundra.
Speaker Change: We're in the near future will also continue to keep an eye on a patient and he does that amendment since like your sense or.
Speaker Change: Or should I call the high op letting users those are the other key logging into wholesale Fedex candidate experience in other channels, including <unk> children's and PV users. They do have operating downtime well managed and a catalyst to help us to overly improve the I'll wrap for the music business and.
Unknown Executive: We're also going to further expand their experience in other channels, including the in-car experience and QV users. We do hope that by operating them and well-managing them, it can also help us to improve the outlook for the music business. But more importantly, I should also say that what we're going to prioritize is to make sure we have a steady and robust growth in subscription revenue.
Speaker Change: More importantly, I should also say that what we're going to prohibit your life is to make sure we have a steady and robust grass for subscription revenue.
Operator: Thank you. We are approaching the end of the conference call. I will now turn to questions for closing remarks. Okay, thank you everyone for joining us today. If you have any further questions, please feel free to contact EME's Investor Relations Team. This concludes today's call, and the company looks forward to speaking with you again next quarter. Thank you so much, and goodbye.
Speaker Change: Thank you.
Speaker Change: We are approaching the end of the conference call I'll now turn it over.
Speaker Change: Our passion for closing remarks, okay. Thank you everyone for joining us today. If you have any further questions. Please feel free to contact <unk> Investor Relations team.
Speaker Change: This concludes today's call and the company looks forward to speaking with you again next quarter. Thank you so much and good goodbye.
Speaker Change: Yeah.
Speaker Change: Yes.