Q4 2023 Tencent Holdings Ltd Earnings Call

March 20, 2024

[music].

Operator: Thank you for watching. Good evening. Thank you for standing by.

Yeah.

Sure.

Yes.

Right.

Operator: Good evening. Thank you for standing by.

And a good evening.

Thank you for standing by.

Wendy Huang: Welcome to Tencent Holdings Limited's 2023 Fourth Quarter and Annual Results Announcement Webinar. This is Wendy Huang from Tencent IRT. At this time, all participants are in a listen-only mode. After the management's presentation, there will be a question and answer session. For participants who dial in by phone, if you wish to ask a question, please press five on your telephone to raise your hand. If you are accessing from the Tencent meeting or Google meeting application, please click the raise hand button at the bottom left.

We'll come to chase and holding limited of 2023 fourth quarter and annual results announcement webinar.

This is Wendy Huang from Tencent IR team.

Speaker Change: At this time all participants are in a listen only mode. After.

Wendy Huang: After the management's presentation, there will be a question and answer session. For participants who dial in by phone, if you wish to ask a question, please press five on your telephone to raise your hand. If you are accessing the meeting from the Tencent meeting or Google meeting application, please click the raise hand button at the bottom left.

Speaker Change: After management's presentation, there will be a question and answer session.

Speaker Change: So participants who dialing in by phone if you wish to ask a question. Please press five oil telephone to raise their hands.

Speaker Change: If you are accessing from the Tencent meeting or GUL meeting application. Please click the raise hand button at the bottom left.

Wendy Huang: And please be advised that today's webinar is being recorded. Before we start the presentation, we would like to remind you that this includes four forward-looking statements, which are underpinned by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to but not as a substitute for measures of the group's financial performance calculated in accordance with IFRS. For a detailed discussion of risk factors in non-IFRS measures, please refer to our disclosure documents in the IR section of our website.

Wendy Huang: And please be advised that today's webinar is being recorded. Before we start the presentation, we would like to remind you that this includes four forward-looking statements, which are underpinned by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Tencent. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to but not as a substitute for measures of the group's financial performance presented in accordance with IFRS. For a detailed discussion of risk factors and non-IR measures, please refer to our disclosure documents in the IR section of our website.

And please be advised that today's webinar is being recorded.

Speaker Change: Before we started presentation, we would like to remind you that this includes forward looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons.

Speaker Change: Formation about general market conditions is coming from variety of sources outside of Tencent.

This presentation also contains some unaudited knife Irish financial measures that should be considered in addition to but not as a substitute for measures of the group's financial performance prepared in accordance with IRS.

Speaker Change: For a detailed discussion of risk factors and it <unk> measures. Please refer to our disclosure documents on the IR section of our website.

Wendy Huang: Now, let me introduce the management team on the webinar tonight. Our Chairman and CEO, Pony Ma, will kick off with a short overview. President Martin Lau will discuss the strategy review. Chief Strategy Officer, James Mitchell, will provide a business review. Chief Financial Officer, John Lo, will conclude with a financial discussion before we open the floor for questions.

Speaker Change: Now, let me introduce the management team on a webinar Tonight.

Wendy Huang: Now, let me introduce the management team on the webinar tonight. Our chairman and CEO Pony Ma will kick off with a short overview. President Martin Lau will discuss the strategy review. Chief Strategy Officer James Mitchell will provide a business review. Chief Financial Officer John Lo will conclude with a financial discussion before we open the floor for questions. Thank you, Wendy.

Our chairman and CEO Pony MA will kick off with a short overview.

Huateng Pony Ma: President Martin Lau will discuss strategy review chief.

Chi Ping Lau: Chief Strategy Officer, James Mitchell will provide a business review Chief Financial Officer, John Lo well call will conclude with financial discussion before we open the floor for questions.

Pony: I will now pass you to pony.

Huateng Ma: Wendy, good evening. Thank you everyone for joining us. In 2023, we sharpened our strategic focus and achieved substantial progress on our major products, following our high quality revenue growth model, notably Video accounts' total user time span more than doubled as we engage our short video content ecosystem. Our mini-games platform increased gross receipts by over 50% year-on-year. Our number of major hit games in China achieving both high DAU and substantial monetization increased from 6 in 2022 to 8 in 2023.

Pony: Thank you Wendy when see everything and thank you everyone for joining us.

Huateng Pony Ma: Good evening. Thank you, everyone, for joining us. In 2023, we sharpened our strategic focus and achieved substantial progress in our major products, following our high-quality revenue growth model. notably, video accounts' total user time spans more than doubled as we engage our short video content ecosystem. Our mini-games platform increased gross receipts by over 50% year-on-year. Our number of major hit games in China achieving both high DAU and substantial monetization increased from 6 in 2022 to 8 in 2023. And International Games achieved double-digit revenue growth and rose to 30% of games revenue. Tencent Video and Tencent Music extend their leadership with 117 and 107 million paid subscribers, respectively. WeCalm and Tencent Meeting strengthen their enterprise software leadership and increase monetization. And we also achieved significant technological breakthroughs. Our Tencent Hunyuan Foundation model is now among the top tier of large language models in China, with a notable strength in advanced logical reasoning.

Huateng Ma: And International Games achieved double-digit revenue growth and rose to 30% of Games revenue. Tencent Video and Tencent Music extended their leadership with 117 and 107 million paid subscribers, respectively. WeCalm and Tencent Meeting strengthened their enterprise software leadership and increased monetization. And we also achieved significant technological breakthroughs. Our Tencent Hunyuan Foundation model is now among the top tier of large language models in China, with a notable strength in advanced logical reasoning

Pony: In 2000.

Pony: <unk> for use with sharpening our strategic focus and achieved substantial progress in our major products.

Pony: Our higher quality revenue growth model.

Pony: Operator.

Pony: Video accounts total user time spend more than double as we reset our short video content ecosystem.

Pony: Our mini games platform increased gross receipts by over 50% year on year.

Pony: A number of major ship games in China, achieving both <unk> and substantial monetization increase from six in 2020 228 to 223.

Pony: And international <unk> achieved double digit revenue growth goes to 30% of games revenue.

Pony: Tencent video and Tencent music expand their industry leadership with the launch of <unk> and 107 million paid subscribers respectively.

Pony: <unk> com and Tencent meeting strengthening.

Enterprise software leadership and increased monetization.

Pony: And we also achieved a significant technology breakthroughs.

Pony: Our tensor.

Pony: <unk> model is now among the top tier of large language model in China.

Pony: With notable strength in.

Pony: Advanced vertical recently.

Huateng Ma: Our upgraded advertising AI model enabled us to deliver better ad marketing and higher revenue. We invest further in sustainable social value initiatives. For example, our digital platform helped with 3.8 billion RMB in public donations through 999 Giving Day in 2023; our new cornerstone investigators, and program support 104 scientists contributing to fundamental science research.

Huateng Pony Ma: Our upgraded advertising AI model enabled us to deliver better ad marketing and higher revenue; we will invest further in sustainable social value initiatives. Our digital philanthropy platform helped with 3.8 billion RMB in public donations through the 999 Giving Day campaign in 2023, and our new cornerstone investigators, and program support 104 scientists contributing to fundamental science research. Looking at our financial numbers for the quarter, total revenue was 155 billion RMB, up 7% year-on-year and stable quarter-on-quarter; gross profit was 78 billion RMB, up 25% year on year and 1%, quote unquote; Non-IFRS operating profit was 49 billion RMB, up 35% year-on-year, or down 5%; and non-IFRS net profit achievable to equity holders was 43 billion RMB, Thank you, Phony.

Pony: Our upgrades advertising AI model enabled us to deliver a better ad targeting and higher revenue.

Pony: Yeah.

Pony: We invest further in sustainable social value initiatives.

Pony: Our digital philanthropy platform helped raise three a period RMB in public donations to the 99, giving day up campaign in 2023.

Pony: Our new cornerstone investigator progress upon the 104 scientists contributing to fundamental science research.

Pony: Okay.

Martin Lau: Looking at our financial numbers for the quarter, total revenue was 155 billion RMB, up 7% year-on-year and stable quarter-on-quarter. Gross profit was 78 billion RMB, up 25% year-on-year and 1% quote-unquote. Non-IFRS operating profit was 49 billion RMB, up 35% year-on-year or down 5% quote-unquote; non-IFRS net profit achievable to equity holders was 43 billion RMB, 44% year-on-year or down 5% quote-unquote. Now I will hand over to Martin for the strategy review. Thank you, Phony.

Pony: Looking at our financial numbers for the quarter total revenue was 155 billion RMB up 7% year on year and stable quarter on quarter.

Gross profit was 70, a period RMB up 25% year on year and 1% quarter on quarter.

Pony: Non <unk> operating profit was 49 billion RMB.

Pony: 45% year on year or down 5% quarter on quarter.

Non <unk> net profit attributable to equity holders was <unk> 43, a period RMB up 44% year on year or down 5% quarter on quarter.

Pony: Now I will hand over to margin for the strategy review.

Martin Lau: Good evening and good morning to everybody. During the course of 2023, we have established a high-quality revenue growth model that will support our continued economic value creation. This, together with our increased focus on capital allocation discipline, will further enhance shareholder value. Starting with our financial performance, we have seen a healthy increase in revenue since the first quarter of 2023 by increasing high-quality revenue streams and reducing low-quality ones. Importantly, our gross profit growth has consistently surpassed revenue growth due to the margins of our incremental revenue being significantly higher than the 50% overall gross margins for the entire company.

Margin: Thank you Paul and good evening and good morning to everybody. During the course of 2023, we have established a high quality revenue growth model, which will support our continued economic value creation. This together with our increased focus on capital allocation discipline will further enhance shareholder value.

Chi Ping Lau: Good evening and good morning to everybody. During the course of 2023, we have established a high-quality revenue growth model that will support our continued economic value creation. This, together with our increased focus on capital allocation discipline, will further enhance shareholder value. Starting with our financial performance, we have seen a healthy increase in revenue since the first quarter of 2023 by increasing high-quality revenue streams and reducing low-quality ones. Importantly, our gross profit growth has consistently surpassed its revenue growth due to the margins of our incremental revenue being significantly higher than the 50% overall gross margins for the entire company. This incremental revenue is generated predominantly from our leading social and payment platforms, which have already been built and have their costs covered. We now consider gross profit growth as a key proxy, and frankly, a better proxy than revenue growth for our organic growth given this, All right, this shift in terms of the revenue mix. We further enhanced our operating profit growth from gross profit growth through operating leverage. First, we streamlined operations and prudently reduced aggressive marketing expenditures.

Margin: Starting with our financial performance, we have seen a healthy increase in revenue since the first quarter of 2023 by increase in high quality revenue streams, and reducing low quality months importantly, our gross profit growth has consistently surpassed its revenue growth due to the margins of our incremental revenue being significantly high.

Margin: Other than the 50% overall gross margins for the entire company.

Martin Lau: This incremental revenue is generated predominantly from our leading social and payment platforms, which have already been built and have their costs covered. We now consider gross profit growth as a key proxy, and frankly, a better proxy than revenue growth for our organic growth given this shift in terms of the revenue mix. We further enhanced our operating profit growth from gross profit growth through operating leverage. First, we streamlined operations and prudently reduced aggressive marketing expenditures.

Margin: This incremental revenue is generated predominantly from our leading social and payment platforms, which have already been built and have their costs covered.

Margin: I will now consider gross profit growth as a key proxy.

Margin: And frankly, a better proxy than revenue growth for our organic growth given this.

Margin: This shift in terms of the revenue mix.

Margin: We further enhanced our operating profit from gross profit growth through operating leverage first with streamlines operations and prudently reduced aggressive marketing expenditures.

Martin Lau: We perceive these measures as a less recurring strategy. Second, and more importantly, we're committed to operational efficiency and disciplined resource allocation, which includes thoughtful staff distribution and effective marketing expense management. This approach ensures a focused organization and a lean cost structure moving forward. In the next few slides, I will provide more details on the drivers for our earnings growth going forward. Weixin provides the first set of examples of how we nurture high-quality revenue streams.

Chi Ping Lau: We perceive these measures as a less recurring strategy. Second, and more importantly, we're committed to operational efficiency and disciplined resource allocation, which includes thoughtful staff distribution and effective marketing expense management. This approach ensures a focused organization and a lean cost structure moving forward. In the next few slides, I will provide more details on the drivers for our earnings growth going forward. Weixin provides the first set of examples of how we nurture high-quality revenue streams. The Weixin platform is delivering consistent growth in both DAU and daily time spent per user. New services within Weixin, such as video, minigames, and WeChat search, contribute to greater engagement and overall platform health while at the same time generating additional revenue at very high margins, given they are offered on top of a relatively stable platform cost base.

Margin: These measures as a less recruiting strategy second and more importantly, we're committed to operational efficiency and disciplined resource allocation, which includes thoughtful stock distribution and effective marketing expense management. This approach ensures a focused organization and a leaner cost structure moving forward.

Margin: <unk>.

Margin: And the next few slides I'll provide more details on the drivers for our earnings growth going forward.

Margin: <unk> provides the first set of examples of how we nurtured high quality revenue streams. The Asian platform is delivering consistent growth in both the EU and daily time spent per user new services with innovations such as <unk> accounts.

Martin Lau: The Weixin platform is delivering consistent growth in both DAU and daily time spent per user. New services within Weixin, such as video, minigames, and WeChat search, contribute to greater engagement and overall platform health, while at the same time generating additional revenue at very high margins, given they are offered on top of a relatively stable platform cost base. Going into each one of them, firstly, for video accounts, total user time spent more than doubled in 2023, driven by strong growth in DAU and time spent per user. Additionally, video account advertising revenue has substantially increased, thanks to increased traffic and improved ad targeting. Despite this, ad load was kept to a much lower level than industry peers, which then offers a better user experience overall.

Margin: The games and <unk> search contribute to greater engagement and overall platform health while at the same time generating additional revenue at very high margins. Given they are offered on top of a relatively stable platform cost base.

Chi Ping Lau: Going into each one of them, firstly, for video accounts, total user time spent more than doubled in 2023, driven by strong growth in DAU and time spent per user. Additionally, video account advertising revenue has substantially increased, thanks to the increased traffic and improved ad targeting. However, ad load was kept to much lower levels than industry peers, which then offers a better user experience overall.

Margin: Going into each one of them Firstly for video accounts total user time spent more than doubled in 2023, driven by strong growth in <unk> and time spent per user.

Margin: Video accounts advertising revenue has substantially increased thanks to the increased traffic and improved at targeting <unk>.

Margin: Despite at load was capped to a much lower levels than industry peers, which then offers a better user experience overall.

Chi Ping Lau: Secondly, minigames experienced a 50% increase in gross receipts in 2023, benefiting from more DAU and higher revenue per user. The growth in gross receipts drove an increase in high-margin platform fees for us. Weixin minigames are clearly an industry leader with its user retention rate and time spent per user notably higher than in peer services.

Martin Lau: Secondly, minigames experienced a 50% increase in gross receipts in 2023, benefiting from more DAU and higher revenue per user. The growth in gross receipts drove an increase in high-margin platform fees for us. Weixin minigames are clearly an industry leader with minigames user retention rate and time spent per user notably higher than in peer service. As a result, operations platform stickiness, well-developed ecosystems such as social sharing and notification, and our game technology know-how.

Margin: Secondly, many games experienced a 50% increase in gross receipts in 2023.

Margin: Benefiting from more and higher revenue per user.

Margin: The growth in gross receipts.

Margin: Increase in high margin platform fees for us.

Margin: Asia, meaning games at the clearly industry leader with many games user retention rate and time spent per user notably higher than empiric services. As a result operations platform stickiness, well developed ecosystem, such as social sharing and notification and our game technology Knowhow.

Chi Ping Lau: As a result of Weixin's platform stickiness, well-developed ecosystems such as social sharing and notification, and our game technology know-how. Thirdly, Weixin Search now achieves over 100 million daily active users, up over 20% year on year. And Weixin Search content QB grew over 30% year on year. Our search revenue grew multiple times year on year in 2023 as we ramped up monetization on this under-monetized asset. In addition, our FinTech services provide a second set of examples of high-quality revenue streams. We've spent many years building a solid base for fintech services in the form of our widely used payment services, with our straight adherence to regulatory requirements and with careful risk management. In recent months, we completed a comprehensive self-inspection and corresponding ratification process, upgrading our operational compliance capability.

Martin Lau: Thirdly, WeChat search now achieves over 100 million daily active users, up over 20% year-on-year, and WeChat search content QV grew over 30% year-on-year. Our search revenue grew multiple times year-on-year in 2023 as we ramped up monetization on this under-monetized asset. In addition, our FinTech service provides a second set of examples of high-quality revenue streams. We've spent many years building a solid base for fintech services in the form of our widely used payment services, with our straight adherence to regulatory requirements and with careful risk management. In recent months, we completed a comprehensive self-inspection and corresponding ratification process, upgrading our operational compliance capability.

Margin: Thirdly equation search now achieved over a 100 million teu up over 20% year on year, and we should search content <unk> grew over 30% year on year our search.

Margin: <unk> revenue grew multiple times year on year and 2023, as we ramp up monetization on this under monetized assets.

Margin: In addition, our Fintech service provide a second set of examples of high quality revenue streams.

Margin: We'll extend many years building a solid base for Fintech services in the form of a widely used to payment services.

Margin: With our straight adherence to regulatory requirements and with careful risk management in recent months, we completed a comprehensive self inspection and corresponding ratification process upgrading our operational compliance capability.

Martin Lau: We have also strengthened our payment ecosystem by improving user security, refining mini-program based transaction tools, and enhancing the cross-border payment experience. On top of this solid base, we're providing additional products and services in collaboration with licensed financial institutions, which generates high incremental margins, as these revenues are recorded on a net fee basis. In wealth management, we generate low tick rate but high margin fee income from a large and growing pool of aggregated customer assets by offering customers high quality products and superb convenience.

Chi Ping Lau: We have also strengthened our payment ecosystem by improving user security, refining mini-program-based transaction tools, and enhancing the cross-border payment experience. On top of this solid base, we're providing additional products and services in collaboration with licensed financial institutions, which generates high incremental margins, as these revenues are recorded on a net fee basis. In wealth management, we generate low tick rate but high margin fee income from a large and growing pool of aggregated customer assets by offering customers high-quality products and superb convenience. The products are primarily low-risk money market funds and, to a lesser extent, fixed-income mutual funds. In consumer loans, our partnership with WeBank and other licensed banks facilitates us in distributing small-sized cash loans and installment payment services. We keep the default rate low by applying stringent tech-enabled risk management procedures.

Margin: Also strengthened our payment ecosystem by improving user security refining mini program based transaction tools and enhancing cross border payment experience on.

Margin: On top of the solid base, we're providing additional products and services in collaboration with licensed financial institutions, which generates high incremental margins. As these revenues are recorded on a net fee basis in wealth management, which generate low take rate, but high margin fee income from our large and growing pool of <unk>.

Margin: Customer assets by offering customers high quality products and superb convenience the.

Martin Lau: The products are primarily low-risk money market funds and, to a lesser extent, fixed income mutual funds. In consumer loans, our partnership with WeBank and other licensed banks facilitates us in distributing small-sized cash loans and installment payment services. We keep the default rate low by applying stringent tech-enabled risk management procedures.

Margin: The products are primarily low risk money market funds and to a lesser extent fixed income mutual funds and.

Margin: In consumer loans, our partnership with <unk> Bank and other licensed banks facilitate us district building small size cash loans and installment payment services and kept the default rate lower by applying stringent tech enabled risk management procedures.

Martin Lau: For both wealth management and consumer loans, we offer substantially better economics for consumers, partners, and ourselves versus standalone fintech businesses as we reduce customer acquisition costs and credit charges. Now, moving on to games. Our domestic game business revenue was soft during 2023, but we expect it to improve in the second quarter of 2024. The reason for slow growth in 2023 was that our two biggest games, Honor of Kings and Peacekeeper Elite, maintained their leading positions in terms of DAU. But monetization has temporarily stagnated, which has caused us to take remedial action.

Chi Ping Lau: For both wealth management and consumer loans, we offer substantially better economics for consumers, partners, and ourselves versus standalone fintech businesses as we reduce customer acquisition costs and credit charges. Now moving on to games, our domestic game business revenue was soft during 2023, but we expect it to improve in the second quarter of 2024. The reason for slow growth in 2023 was that our two biggest games, Honor of Kings and Peacekeeper Elite, maintained their leading positions in terms of DAU, but monetization had temporarily stagnated, which caused us to take remedial action. For Peacekeeper Elite, we identified the need for more creative monetization strategies and revamped the leadership of its monetization team.

Margin: For both wealth management and consumer loans, we offer substantially better economics for consumers partners and ourselves versus Standalone fintech businesses, as we reduce customer acquisition costs and credit charges.

Margin: Now moving onto games, our domestic game business revenue has been soft during 2023, but we expect it to improve from the second quarter of 2020 for.

Margin: The reason for slow growth in 2023 was that our two biggest games on of Kings and Peacekeeper elite have maintained our leading positions in terms of PKU, but to monetization has temporarily stagnated, which caused us to take remedial actions.

Martin Lau: For Peacekeeper Elite, we identified the need for more creative monetization strategies and have revamped the leadership of its monetization team. We look forward to the game delivering more innovative and engaging experiences that would also help monetization. We're optimistic that our new monetization team can deliver on this front, given its sister product, PUBG Mobile's monetization team has already delivered a notable rebound in its monetization internationally. For Honor of Kings, our monetization activities have been overly concentrated within the Chinese New Year period in 2023. We're ruling out a more evenly distributed monetization strategy in the year 2024, which we expect to benefit year-round revenue generation.

Margin: Peacekeeper elite, we identified the need for more creative monetization strategies and have read them to the leadership of its monetization team.

Chi Ping Lau: We look forward to the game delivering more innovative and engaging experiences that would also help monetization. We're optimistic that our new monetization team can deliver on this front, given that its sister product, PUBG Mobile, has already delivered a notable rebound in its monetization internationally. For Honor of Kings, our monetization activities have been overly concentrated within the Chinese New Year period in 2023. We're ruling out a more evenly distributed monetization strategy in the year 2024, which we'd expect to benefit year-round revenue generation. Looking beyond these two games, several of our recent releases have performed well in terms of DAU and are now converting that DAU success into monetization. The number of major hit games in China increased from 6 in 22 to 8 in 23.

Margin: We look forward to the game delivering more innovative and engaging experiences that would also help on station.

Margin: We're optimistic that our new monetization team can deliver on this front and so given its sister product Tuck T. Mobile's team has already delivered a notable rebound in its monetization internationally.

Margin: For honour of Kings of monetization activities have been overly concentrated within the Chinese new year period in 2023.

Margin: We're rolling out a more evenly distribute our monetization strategy in a year or 2024, which we would expect to benefit year round revenue generation.

Martin Lau: Looking beyond these two games, several of our recent releases have performed well in terms of DAU and are now converting that DAU success into monetization. The number of major hit games in China increased from six in 22 to eight in 23. We define major hit games as games exceeding average quarterly DAU of five million for mobile and two million for PC and, at the same time, generating over four billion RMB annual gross receipts.

Margin: Looking beyond these two games several of our recent releases have performed well in terms of <unk> and are now converting that success into monetization.

Margin: The number of major hit games in China increased from six in 'twenty two to eight in 2003, we.

Chi Ping Lau: We define major hit games as games exceeding average quarterly DAU of 5 million for mobile and 2 million for PC and, at the same time, generating over 4 billion RMB annual gross receipts. We view these thresholds as indicative of a major and enduring hit, and games surpassing such DAU and revenue thresholds will contribute to long-term stability and growth of our game portfolio. Having a large and expanding portfolio of major hits illustrates our ability to continually develop new major hits and in operating multiple highly popular games at the same size. During the year, our new, major titles are one, Fight of the Golden Spatula.

Margin: We define major hit games as games exceeding average quarterly.

Margin: A $5 million for mobile and $2 million for PC and at the same time generating over 4 billion RMB annual gross receipts. We view these thresholds as indicative of a major enduring hit and games, surpassing such <unk> and revenue thresholds will contribute to long term stability and growth of our game portfolio.

Martin Lau: We view these thresholds as indicative of a major and enduring hit, and games surpassing such DAU and revenue thresholds will contribute to long-term stability and growth of our game portfolio. Having a large and expanding portfolio of major hits illustrates our ability to continually develop new major hits and in operating multiple highly popular games at the same time. During the year, our new, major titles are one fight of the golden spatula.

Margin: Having a large and expanding portfolio of major hits illustrates our ability and continually developing new major hits and in operating multiple highly popular games at the same site.

Margin: During the year our Nu.

Martin Lau: It has made a transition from a niche auto chess game to one of the most popular mobile games in the domestic market, ranking top five by the total time spent. Second, LOL Wild Rift now also ranks among the top five mobile games by total time spent and gross receipts in China. We expect to keep adding major hits to our portfolio during the course of this year. We're looking forward to releasing several major new games, which should also contribute to improving revenue trends through 2024.

Margin: Major titles are one fight of the Golden Spatula, It asset transitioned from a niche auto chess game to one of the most popular mobile consumer domestic market ranking top five by Q.

Chi Ping Lau: It has made a transition from a niche auto chess game to one of the most popular mobile games in the domestic market, ranking top five by DPU and total time spent. Second, LOL Wild Rift now also ranks among the top five mobile games by total time spent and gross receipts in China. We expect to keep adding major hits to our portfolio in the course of this year. We're looking forward to releasing several major new games, which should also contribute to improving revenue trends through 2024. DNF Mobile is a key title for us, given the success and longevity of DNF PC and given a general scarcity of successful action games on mobile. Gannett Mobile has just completed a major closed beta test successfully, with positive results.

Margin: Total time spent.

Margin: L. Wild tripped now also ranked among the top five mobile games by total time spend and gross receipts in China.

Margin: We expect to keep adding major hits to our portfolio.

Margin: In the course of this year.

Margin: We're looking forward to releasing several major new games, which should also contribute to improving revenue trends through 2024.

Martin Lau: DNF Mobile is a key title for us, given the success and longevity of DNF PC and given a general scarcity of successful action games on mobile. Gannett Mobile has just completed a major closed beta test successfully.

Margin: <unk> mobile is a key title for us.

Margin: Given the success and longevity of TNF, PC and given a general set scarcity of successful action games on mobile.

Margin: <unk> mobile has just completed a major closed beta test successfully and given the positive results.

Martin Lau: And given the positive results, we intend to launch the game in the second quarter of this year. Other high potential games in our portfolio for 2024 include Honor of Fight, Need for Speed Mobile, and One Piece Mobile. In 2023, we also made notable progress in core technologies, especially those involving AI that will serve as our growth multiplier going forward. After deploying leading-edge technologies such as the MOE architecture, our foundation model, Tencent Hunyuan, is now achieving top-tier Chinese-language performance among large language models in China and worldwide. The Enhanced Huanyuan excels particularly in multi-term conversations, logical inference, and numerical reasoning, areas which have been challenging for large language models.

Chi Ping Lau: We intend to launch the game in the second quarter of this year. Other high potential games in our portfolio for 2024 include Honor of Fight, Need for Speed Mobile, and One Piece Mobile. In 2023, we also made notable progress in core technologies, especially those involving AI that will serve as our growth multiplier going forward. After deploying leading-edge technologies such as the MOE architecture, our foundation model, Tencent Hunyuan, is now achieving top-tier Chinese language performance among large language models in China and worldwide. The Enhanced Hunyuan excels particularly in multi-term conversations, logical inference, and numerical reasoning, areas which have been challenging for large language models.

Margin: We intend to launch the game in the second quarter of this year.

Margin: Other high potential games portfolio.

Margin: Portfolio for 2024 include honored fight need for speed mobile and <unk> mobile.

Margin: In 2023, we also made notable progress in core technologies, especially those involving AI that will serve as our growth multiplier going forward after deploying leading edge technologies, such as the mixture of experts <unk> architecture.

Margin: Foundation module Tencent <unk> and is now achieving top tier Chinese language performance among large language models in China and a worldwide.

Margin: <unk> excels, particularly multi turn realizations logical inference and numerical reasonably areas, which has been challenging for large language models.

Martin Lau: But we scale the model up to the trillion parameter mark, leveraging the MOE architecture to enhance performance and reduce inference costs. And we are rapidly improving the model's text-to-picture and text-to-video capability. We're increasingly integrating Hundian to provide co-pilot services for enterprise SaaS products, including Tencent Meeting and Tencent Doc, and we are also developing new generation AI tools for effective content production internally. More generally, deploying AI technology in our existing businesses has begun to deliver significant revenue benefits.

Chi Ping Lau: We scaled the model up to the trillion parameter mark, leveraging the MOE architecture to enhance performance and reduce inference costs. And we are rapidly improving the model's text-to-picture and text-to-video capability. We're increasingly integrating Huangyuan to provide co-pilot services for enterprise SaaS products, including Tencent Meeting and Tencent Docs, and we are also developing new generation AI tools for effective content production internally. More generally, deploying AI technology in our existing businesses has begun to deliver significant revenue benefits. This is most obvious in our advertising business, where our AI-powered ad tech platform is contributing to more accurate ad targeting, higher ad click-through rates, and thus faster advertising revenue growth rates. We're also seeing earlier stage business opportunities from providing AI services to Tencent Cloud customers. Finally, with this high-quality revenue growth model, we have resources to keep investing in our businesses while at the same time returning more capital to our shareholders. Historically, we have continually paid cash dividends to our shareholders and periodically repurchased shares at times when we believed our share price was undervalued, which is particularly true today.

Margin: Web scale the model up to the Trillium parameter mark leveraging the Mou architecture to enhance performance and reduce interest costs.

Margin: And we are rapidly improving the models <unk>, two picture and text and video capabilities.

Margin: But increasingly integrating <unk> and to provide copilot services, while enterprise SaaS products, including Tencent meeting and Tencent docks.

Margin: And we are also developing new Gen AI tools for effective content production internally.

Margin: More generally deploying AI technology in our existing businesses have begun to deliver significant revenue benefits. This is most obvious in our advertising business, where our AI powered at tech platform is contributing to more accurate at targeting higher AD click through rates and thus faster advertising revenue growth rates.

Martin Lau: This is most obvious in our advertising business, where our AI-powered ad tech platform is contributing to more accurate ad targeting, higher ad click-through rates, and thus faster advertising revenue growth rates. We're also seeing early stage business opportunities from providing AI services to Tencent Cloud customers. Finally, with this high-quality revenue growth model, we have resources to keep investing in our businesses while at the same time returning more capital to our shareholders. Historically, we have continually paid cash dividends to our shareholders and periodically repurchased shares at times when we believed our share price was undervalued, which is particularly true today.

Margin: We're also seeing early stage business opportunities from providing AI services to Tencent cloud customers.

Margin: Okay.

Margin: Finally, with this high quality revenue growth model with resources to keep investing in our businesses. While at the same time, returning more capital to our shareholders. Historically continually have paid cash dividends to our shareholders and periodically repurchased shares at times when we believe our share price was undervalued.

Margin: Which is particularly true today.

Chi Ping Lau: With a record high and growing profit and cash flow, we propose to increase our upcoming cash dividend by 42% year-on-year to HK$3.4 per share, and we intend to at least double our buyback activity year-on-year from HK$49 billion in 2023 to at least HK$100 billion in 2024. We believe this commitment to return at least 132 billion Hong Kong dollars, or 16.9 billion U.S. dollars, to shareholders during the year is well supported by our free cash flow, which was 24 billion U.S. dollars for the full year of 2023, along with our gross cash position of 57 billion U.S. dollars, and our investment portfolio of 126 billion U.S. dollars. Now, with that, I will pass to James to talk about the business review. Thank you, Martin.

James Gordon Mitchell: With our record high and growing profit and cash flow, we propose to increase our upcoming cash dividend by 42% year-on-year to HK$3.4 per share, and we intend to at least double our buyback activity year-on-year from HK$49 billion in 2023 to at least HK$100 billion in 2024. We believe this commitment to return at least $132 billion Hong Kong dollars or $16.9 billion US dollars to shareholders during the year is well supported by our free cash flow, which was $24 billion US dollars for the full year of 2023, along with our gross cash position of $57 billion US dollars, and our investment portfolio of $126 billion US dollars. Now, with that, I will pass to James to talk about the business review. Thank you, Martin.

Margin: With a record high and growing profit and cash flow, we proposed to increase our upcoming cash dividend by 42% year on year to $3 for Hong Kong dollars per share and we intend to at least double our buyback activity year on year from $49 billion Hong Kong dollars in 2023 to at least $100 billion, Hong Kong dollars and 24.

Margin: We believe this commitment to return at least 132 billion, Hong Kong dollars or $16 $9 billion to shareholders. During the year is well supported by our free cash flow, which was $24 billion U S dollars for the full year of 23, along with our gross cash position of 57.

Margin: In U S dollars and our investment portfolio.

Margin: <unk> 26 billion U S dollars now with that I'll pass to James to talk about business review. Thank you Martin.

James Gordon Mitchell: For the fourth quarter of 2023, our total revenue was up 7% year-on-year. EAS represented 45% of our revenue, within which the social networks segment was 18%, domestic games was 18%, and international games 9%. Online advertising was 19% of our revenue, and FinTech and business services represented 35%. The value added services segment revenue was 69 billion renminbi in the fourth quarter, down 2% year on year. Social network revenue of 28 billion renminbi was also down 2% throughout the year.

James Gordon Mitchell: For the fourth quarter of 2023, our total revenue was up 7% year-on-year. EAS represented 45% of our revenue, within which the social network segment was 18%, domestic games were 18%, and international games 9%. Online advertising was 19% of our revenue, and FinTech and business services represented 35%. For value-added services, segment revenue was 69 billion renminbi in the fourth quarter, down 2% year-on-year. Social network revenue of 28 billion renminbi was also down 2% throughout the year.

James Gordon Mitchell: For the fourth quarter of 2023, our total revenue was up 7% year on year Aaas represented 45% of our revenue within which the social networks segment was 18% domestic games was 18% and international games, 9% online advertising was 19% of our revenue and Fintech and business services.

James Gordon Mitchell: This represents 35%.

James Gordon Mitchell: The value added services segment revenue was 69 billion renminbi in the fourth quarter down 2% year on year.

James Gordon Mitchell: Network revenue of 28 billion Renminbi was also down 3% year on year.

James Gordon Mitchell: Revenue from music-related and game-related live streaming services decreased, while revenue from the video account streaming service, music subscriptions, and minigames increased. Long-form video subscription revenue increased 1% year-on-year, driven by higher ARPU, although video subscriptions declined slightly to $117 million. Our self-commissioned drama series Blossoms Shanghai ranks first by video views across all online platforms in China year-to-date, extending Tencent Video's audience lead within the online video industry. Music subscription revenue increased 45% year-on-year on 21% growth in subscription counts and 20% growth in RP. Domestic games revenue was down 3% year-on-year to $27 billion.

Revenue from music related and game related live streaming services decreased revenue from the video accounts streaming service music subscriptions and mini games increased.

James Gordon Mitchell: Revenue from music-related and game-related live streaming services decreased, while revenue from the video account streaming service, music subscriptions, and minigames increased. Long-form video subscription revenue increased 1% year-on-year, driven by higher ARPU, although video subscriptions declined slightly to 117 million. Our self-commissioned drama series Blossoms Shanghai ranks first by video views across all online platforms in China year-to-date, extending Tencent Video's audience lead within the online video industry. Music subscription revenue increased 45% year-on-year on 21% growth in subscription counts and 20% growth in R3. Domestic games revenue was down 3% year-on-year to $27 billion.

Long form subscription long form video subscription revenue increased 1% year on year, driven by higher op. Although video subscriptions declined slightly to $117 million or South Commission drama series Blossom, Shanghai ranked stressed by video views across all online platforms in China year to date, extending <unk> audience.

James Gordon Mitchell: Within the online video industry.

James Gordon Mitchell: Music subscription revenue increased 45% year on year on 21% pricing subscription counts and 20% growth in off peak.

James Gordon Mitchell: Domestic games revenue was down 3% year on year to <unk> 7 billion Renminbi recently released PC games valence and loss stock contributed to PC game revenue, increasing but were offset by decreased revenue from honour of Kings Peacekeeper elite.

James Gordon Mitchell: International games revenue increased 1% year on year in renminbi terms decreased pumps in constant currency terms to 14 billion renminbi Super salvage repositioning some fixed games.

James Gordon Mitchell: Recently released PC games Valorant and Lost Ark contributed to PC game revenue increasing, but were offset by decreased revenue from Honor of Kings and Peacekeeper Elite. International games revenue increased 1% year-on-year in renminbi terms or decreased 1% in constant currency terms to 14 billion renminbi as Supercell was repositioning some of its games. PUBG Mobile extended its revenue recovery, and Valorant maintained solid growth. In aggregate, our domestic plus international game sub-segments reported revenue was down 2% year-on-year, although game gross receipts were slightly up year-on-year. We expect our domestic and international game revenue to improve from the second quarter of 2024 onwards as revamps for big existing games, such as Brawl Stars and Peacekeeper Elite, have started to yield results, and as we will be launching new games, including Dungeon and Fighter Mobile. Moving to communications and social networks, the Weixin video accounts on the content consumption side, time spent increased over 80% year-on-year in the fourth quarter, driven partly by DAU and mostly by time spent per user, benefiting from our enhanced content recommendation engine.

James Gordon Mitchell: T mobile extended its revenue recovery and battery maintained solid growth.

James Gordon Mitchell: In aggregate, our domestic plus international game sub segments reported revenue was down 2% year on year, Although again gross receipts were slightly up year on year we.

James Gordon Mitchell: We expect our domestic and international game revenue to improve from the second quarter of 2024 onwards as revamps for big existing games, such as Brawl Stars and Peacekeeper Elite, have started to yield results, and as we will be launching new games, including Dungeon and Fighter Mobile. Moving to communications and social networks, the Weixin video accounts on the content consumption side, time spent increased over 80% year-on-year in the fourth quarter, driven partly by DAU and mostly by time spent per user, benefiting from our enhanced content recommendation engine.

James Gordon Mitchell: We expect our domestic and international game reported revenues to improve from the second quarter of 2024 onwards, as revamps for big existing games, such as <unk> starts on Peacekeeper elite has started to yield results and as we will be launching new games, including Dungeons and fight of mobile.

James Gordon Mitchell: Moving to communications and social networks the way she video accounts on the content consumption side time spent increased over 80% year on year in the fourth quarter, driven partly by <unk> and mostly by time spent per user benefiting from our enhanced content recommendation engine.

James Gordon Mitchell: On the content creation side, daily video uploads grew rapidly year-on-year. We provided targeted traffic support for creators in key categories, such as knowledge-based content, lifestyle, and music, which contributed to a sharp increase in the number of creators with over 10,000 followers. And with more followers and better live streaming tools, the number of creators that directly generate revenue from their video accounts more than tripled year on year. For QQ, the number of active QQ channels grew at a double-digit rate quarter-on-quarter, and we launched a new version of QQ that features a refreshed user interface and enriched functionality. Moving on to some domestic game highlights, the release of Set 10 drove Fight of the Golden Spatula to double its average GAU year-on-year in the fourth quarter to a new high.

James Gordon Mitchell: On the content creation side daily video uploads grew rapidly year on year, we provided trapped targeted traffic support for creators in key categories, such as knowledge based content lifestyle and music, which contributed to a sharp increase in the number of creators with over 10000 followers and.

James Gordon Mitchell: And with more followers embedded live streaming tours the number of creators that directly generate revenue from that PDL accounts more than tripled year on year.

James Gordon Mitchell: At <unk> the number of active QQ channels grew at a double digit rate quarter on quarter, and we launched a new version of <unk> that features a refresh user interface and enriched functionalities.

James Gordon Mitchell: Moving on to some domestic games highlights the release of set 10 drove fight of the Gulf and spot shot to double its <unk> year on year in the fourth quarter to a new high.

James Gordon Mitchell: On the content creation side, daily video uploads grew rapidly year-on-year. We provided targeted traffic support for creators in key categories, such as knowledge-based content, lifestyle, and music, which contributed to a sharp increase in the number of creators with over 10,000 followers. And with more follow-ups and better live streaming tools, the number of creators that directly generate revenue from their video accounts more than tripled year on year. For QQ, the number of active QQ channels grew at a double-digit rate quarter-on-quarter, and we launched a new version of QQ that features a refreshed user interface and enriched functionality. Moving on to some domestic game highlights, the release of Set 10 drove Fight of the Golden Spatula to double its average year on year in the fourth quarter to a new high.

James Gordon Mitchell: Arena Breakout increased its gross receipts and average DAU each by over 30% year-on-year, driven by a new competitive PvE mode, an upgraded battle pass, and more appealing virtual items. And Arena Breakout is now the seventh biggest mobile game in China by total time spent. Naruto Mobile, an eight-year-old game developed by our MoreFun Studio, achieved record high gross receipts and average DAU in January, benefiting from extensive content updates. We view the success of Naruto Mobile as a positive leading indicator for our upcoming one-piece game, also developed by MoreFun.

James Gordon Mitchell: Irina breakout increased its gross receipts and averaged <unk> each by over 30% year on year, driven by a new competitive pve mode and upgraded battle pass and more appealing virtual items and arena breakout is now the seventh biggest mobile game in China by total time spent.

James Gordon Mitchell: <unk> <unk>.

James Gordon Mitchell: <unk>, an eight year old game developed by our more fund studio achieved record high crush receipts in average <unk> in January benefiting from extensive content updates we view the success of <unk> reached a positive leading indicator for our upcoming one piece game the offsets more fun.

James Gordon Mitchell: We launched our party game DreamStars in December. Party games aggregate a range of game modes, and we're still building out the number and variety of DreamStars game modes to compete with the game modes featured in incumbent party games, as well as releasing tools for players to create their own game modes.

James Gordon Mitchell: We launched a party gaming cream starts in December hockey games aggregator range of game modes, and we're still building out the number and variety of dream starts gain much compete with the game modes featured an incumbent party games as well as releasing towards suppliers to create their own game modes.

James Gordon Mitchell: We view party games as a genre that will require sustained effort over a long period, but we're encouraged that DreamStars ranked among the top 10 mobile games in China by DAU during the Chinese New Year. And we believe that DreamStars is already the industry leader in party games measured by DAU within certain game modes, such as social deduction and tower defense. Among our international games, PUBG Mobile increased its DAU and gross receipts year on year in the fourth quarter, benefiting from the introduction of the Frozen Kingdom theme mode and an innovative top-tier outfit with upgradable weapons.

James Gordon Mitchell: Media Party games. This is Sean Eddy will require sustained effort over a long period, but we're encouraged that dream stops ranked among the top 10 mobile games in China by <unk> during the Chinese new year, and we believe that <unk> is already the industry leader in policy gains as measured by <unk> against certain game months, such as social deduction and talent offense.

James Gordon Mitchell: Arena Breakout increased its gross receipts and average DAU each by over 30% year-on-year, driven by a new competitive PvE mode, an upgraded battle pass, and more appealing virtual items. And Arena Breakout is now the seventh biggest mobile game in China by total time spent. Naruto Mobile, an eight-year-old game developed by our MoreFun Studio, achieved record-high gross receipts and average DAU in January, benefiting from extensive content updates.

James Gordon Mitchell: Among our international games pop chemo power increased <unk> and gross receipts year on year in the fourth quarter benefiting from the introduction of the pricing Kingdom theme mode, and an innovative top tier outfit with upgradeable weapons.

James Gordon Mitchell: Nikkei released a new storyline and new characters, and, encouragingly, its average GAU reached a 2023-year high level in the fourth quarter. Supercell's five-year-old game, Brawl Stars, achieved record high gross receipts in DAU in February 2024 due to enhancements to its friend invitation system, the introduction of a new 5v5 game mode, and a complete redesign of its battle pass.

James Gordon Mitchell: <unk> released a new story and new characters and encouraging the case average <unk> reached a 2023 year high therefore in the fourth quarter.

James Gordon Mitchell: We view the success of Naruto as a positive leading indicator for our upcoming one-piece game, also from MoreFun. We launched our party game, DreamStars, in December. Party games aggregate a range of game modes, and we're still building out the number and variety of DreamStars game modes to compete with the game modes featured in incumbent party games, as well as releasing tools for players to create their own game modes.

James Gordon Mitchell: <unk> five year old game <unk> achieved record high gross receipts in DAA in February 2024, due to enhancements to its friend invitation system. The introduction of a new five five game mode and a complete redesign of its battle pass <unk> resurgence demonstrates the nascent franchise value of our rapid green titles and.

James Gordon Mitchell: The potential to ambition new product.

James Gordon Mitchell: We view party games as a genre that will require sustained effort over a long period. But we're encouraged that DreamStars ranked among the top 10 mobile games in China by DAU during the Chinese New Year. And we believe that DreamStars is already the industry leader in party games measured by DAU within certain game modes, such as social deduction and tower defense. Among our international games, PUBG Mobile increased its DAU and gross receipts year-on-year in the fourth quarter, benefiting from the introduction of the Frozen Kingdom theme mode and an innovative top-tier outfit with upgradable weapons. Nikkei released a new storyline and new characters, and, encouragingly, Nikkei's average GAU reached a 2023-year high level in the fourth quarter. Supercell's five-year-old game, Brawl Stars, achieved record high gross receipts in DAU in February 2024 due to enhancements to its friend invitation system, the introduction of a new 5v5 game mode, and a complete redesign of its battle pass.

James Gordon Mitchell: Moving to online advertising or AD revenue was 30 billion renminbi in the fourth quarter up 21% year on year benefiting from upgrades to our AD Tech platform and more advertising revenue in video accounts, we generated.

James Gordon Mitchell: Increased AD revenue from all major categories, except automotive with notable step ups in revenue from Internet services health care and consumer goods categories.

James Gordon Mitchell: We refined our ad targeting by utilizing more real-time data in the AI powering our ad tech, enabling us to match target users with more relevant ads in a more timely manner across both our own and our ad network properties. Thank you very much.

James Gordon Mitchell: We refined our AD targeting by utilizing more real time data NDA AI powering our AD tech, enabling us to match target users with more relevant ads in a more timely manner across both our <unk> and our off net but properties.

James Gordon Mitchell: Our video account stopped revenue more than doubled year on year, despite maintaining a very low AD load due to increased video views and upgraded at targeting.

James Gordon Mitchell: Weixin Search increased its revenue several-fold year-on-year in the quarter on growth in commercial queries and RPM. Overall, FinTech and business services segment revenue was 54 billion renminbi in the fourth quarter, up 15% year on year. FinTech Services revenues sustained a zero on year growth rate on increased commercial payment volume, wealth management fees, and consumer loan fees. Gross profit grew faster than revenue due to a shift from social to commercial payments. Within commercial payments, daily active users and transactions per user both increased. We enhanced mini program-based QR code and palm payments.

James Gordon Mitchell: <unk> such increases revenue several folds year on year end the quarter on pricing commercial queries in RPM.

James Gordon Mitchell: Summarizing Fintech and business services segment revenue was 54 billion renminbi in the fourth quarter up 15% year on year.

James Gordon Mitchell: In fact services revenue sustained at teens year on year growth rate on increased commercial payment volume wealth management fees and consumer loan fees.

James Gordon Mitchell: Broadstar's resurgence demonstrates the latent franchise value of our evergreen titles and their potential to unleash new growth. Moving to online advertising, our ad revenue was RMB30 billion in the fourth quarter, up 21% year-on-year, benefiting from upgrades to our AdTech platform and more advertising revenue in video accounts. We generated increased ad revenue from all major categories except automotive, with notable step-ups in revenue from internet services, healthcare, and consumer goods categories. We refined our ad targeting by utilizing more real-time data in the AI powering our ad tech, enabling us to match target users with more relevant ads in a more timely manner across both our own and our ad network properties. Thank you very much.

James Gordon Mitchell: Gross profit grew faster than revenue due to a shift from social to commercial payments.

James Gordon Mitchell: Within commercial payments daily active users in transactions per user both increased we enhanced many program based QR code and palm payments solutions, helping our find much Bruce repeat sales.

James Gordon Mitchell: Helping offline merchants boost repeat sales. For business services, revenue grew around 20% year-on-year in the fourth quarter, benefiting from higher cloud spending by industries such as retail and finance and increased technology service fees on video accounts and e-commerce transactions. Gross profit for business services more than quadrupled year-on-year due to those technology service fees as well as supply chain optimization initiatives. Among our enterprise software as a service products, we deployed AI for real-time content comprehension in Tencent Meeting, deployed AI for prompt-based document generation in Tencent Docs, and rolled out a paid customer acquisition tool for Wecom.

James Gordon Mitchell: For business services revenue grew around 20% year on year in the fourth quarter benefiting from higher cloud spending by industries, such as retail and finance and increased technology service fees on video accounts E Commerce transactions.

James Gordon Mitchell: Business services gross profit more than quadrupled year on year due to those technology service fees as well as supply chain optimization initiatives.

James Gordon Mitchell: Among our enterprise software as a service products, we deployed AI for real time content comprehension, and Tencent meeting deployed AI pumps based document generation and Tencent adults and rolled out a paid customer acquisition tool for <unk> com.

Shek Hon Lo: We deepened our enterprise SaaS penetration among domestic companies such as Vivo, as well as multinationals such as Novo Nordisk. As a result, our enterprise software revenue from week-on Tencent meetings and Tencent Docs together more than doubled year on year. And I'll now pass to John. Thank you, James. Hello, everyone.

James Gordon Mitchell: Weixin Search increased its revenue several-fold year-on-year in the quarter on growth in commercial queries and RPM. Summarizing FinTech and business services, segment revenue was 54 billion renminbi in the fourth quarter, up 15% year-on-year. FinTech Services revenue sustained a zero on year growth rate on increased commercial payment volume, wealth management fees, and consumer loan fees. Gross profit grew faster than revenue due to a shift from social to commercial payments. Within commercial payments, daily active users and transactions per user both increased. We enhanced our mini-program-based QR code and PAM payment solutions, helping offline merchants boost repeat sales.

James Gordon Mitchell: We deepened our enterprise SaaS penetration among domestic companies such as vivo.

James Gordon Mitchell: As well as multinationals such as nerve a notice as a result, our enterprise software revenue from <unk> Com, Tencent meeting and Tencent docs together more than doubled year on year.

James Gordon Mitchell: And I'll now pass to John.

Shek Hon Lo: Thank you James.

Shek Hon Lo: For quarter four 2023 and full year 2023, we have reclassified interest income from above to below the operating profit line. Additionally, investment-related gains and losses and donations, both previously included in either gains or losses net above the operating line, are now combined as net gains or losses from investments and others and presented below the operating profit line. The reclassification aims to better reflect the results of day to day operations.

Shek Hon Lo: Hello, everyone for quarter, four 2023, and full year 2023, we have reclassified interest income from above to below the operating profit line.

Shek Hon Lo: Additionally, investment related gains and losses and donations for previously included in the gains or losses net of the operating line and now combined net gains or losses from the investment in others and presented below the operating profit line.

Shek Hon Lo: The reclassification aims to better reflect the results update today operations.

James Gordon Mitchell: For business services, revenue grew around 20% year-on-year in the fourth quarter, benefiting from higher cloud spending by industries such as retail and finance and increased technology service fees on video accounts, e-commerce, and transactions. Gross profit for business services more than quadrupled year-on-year due to those technology service fees as well as supply chain optimization initiatives. Among our enterprise software-as-a-service products, we deployed AI for real-time content comprehension in Tencent Meeting, deployed AI for prompt-based document generation in Tencent Docs, and rolled out a paid customer acquisition tool for Wecom. We deepened our enterprise SaaS penetration among domestic companies such as Vivo, as well as multinationals such as Novo Nordisk. As a result, our enterprise software revenue from week-on Tencent meetings and Tencent Docs together more than doubled year-on-year, and our current pastor, John. Hello everyone.

Shek Hon Lo: Comparative figures have also been restated for the fourth quarter of 2020. Total revenue was 155.2 billion renminbi, up 7% year-on-year. Gross profit was 77.6 billion renminbi, up 25% year-on-year. Operating profit was 41.4 billion RMB, up 42% year-on-year. Net losses from investment and others were 6.7 billion renminbi, primarily refracting experimental visions against certain investigations. Interest income was 3.9 billion renminbi, up 52% year on year, driven by growth in cash reserves and improved use of term deposits.

Shek Hon Lo: Comparative figures have also been restated.

Shek Hon Lo: For fourth quarter 2023, total revenue was $155 2 billion renminbi up 7% year on year.

Shek Hon Lo: Finance costs were 3.5 billion RMB, down 3% year-on-year due to reduced Forex losses, partially offset by higher interest expense. Share of profit of Associates and JVs was $2.4 billion RMB versus a loss of $1.6 billion RMB in the same period last year. On and on out of our space, share of profit increased to 4.5 billion RMB, up from a profit of 3.1 billion RMB last year, driven by better profitability for certain domestic associates and a successful game released by an overseas video investor.

Shek Hon Lo: Gross profit was $77 6 billion renminbi up 25% year on year.

Shek Hon Lo: Operating profit was $41 4 billion renminbi up 42% year on year.

Shek Hon Lo: Net losses from investment and others were $6 7 billion renminbi.

Shek Hon Lo: Primarily reflecting impairment provisions again certain investees.

Shek Hon Lo: Interest income was $3 9 billion renminbi up 32% year on year, driven by growth in cash reserves and improved views on term deposits.

Shek Hon Lo: Finance costs were $3 5 billion renminbi down 3% year on year due to reduced forex losses, partially offset by higher interest expense.

Shek Hon Lo: Share of profit of associates, and JV was $2 4 billion renminbi versus loss of $1 6 billion renminbi in the same period.

Shek Hon Lo: Last year.

On a non <unk> basis ship profit increased to $4 5 billion.

Shek Hon Lo: R&D up from a profit of $3 1 billion renminbi last year, driven by better profitability of seven domestic associates NSS full game release by an overseas either investing.

Shek Hon Lo: For quarter four 2023 and school year 2023, we have reclassified interest income from above to below the operating profit line. Additionally, investment-related gains and losses and donations, both previously included in either gains or losses net above the operating line, are now combined as net gains or losses from investments and others and presented below the operating profit line. The reclassification aims to better reflect the results of day to day operations. Comparative figures have also been restated for the fourth quarter of 2020. Total revenue was RMB155.2 billion, up 7% year-on-year, and gross profit was RMB77.6 billion, up 25% year-on-year. Operating profit was 41.4 billion RMB, up 42% year-on-year. Net losses from investment and others were 6.7 billion renminbi, primarily reflecting impairment provisions against certain investors.

Shek Hon Lo: Income tax expense rose by 111% year-on-year to 9.7 billion RMB, driven by operating product growth and increased withholding tax pollution. IFRS net profit attributable to equity holders was 27 billion renminbi, down 75% year-on-year, primarily due to the 106.6 billion renminbi gain from the dim disposal of Meituan, recognized in the same quarter last year. The average EPS was 2.807 RMB, down 74% year-on-year. Now, I'll share our non-Iovirus financial figures.

Shek Hon Lo: Income tax expense rose by 111% year on year to $9 7 billion renminbi.

Shek Hon Lo: By operating profit growth and increase withholding tax provision.

Shek Hon Lo: <unk> net profit attributable to equity holders was 2000 7 billion renminbi down 75% year on year, primarily due to the $106 6 billion renminbi gain from the disposal of Mei Tuan.

Shek Hon Lo: Recognize in the same quarter last year diluted EPS was $2 807, renminbi down 74% year on year.

Shek Hon Lo: Now I'll share our non <unk> financial figures.

Shek Hon Lo: For Q4, operating profit was $49.1 billion RMB, up 35% year-on-year. Net profit attributable to equity holders was 42.7 billion RMB, up 44% year-on-year, and diluted EPS was 4.443 renminbi, a 46% year-on-year increase. Moving on to gross margin, for Q4, overall gross budget was 50%, up 7.4 percentage points year-on-year, and by statement, Gross margin for value-added services was 53.7%, up 3.9 percentage points year on year. This was due to a higher mix of high-margin minigames performed service-free and a reduced contribution from low-margin music and games-related live-streaming revenue, along with, of course, control measures.

Shek Hon Lo: For quarter four operating profit was $49 1 billion recipe up 35% year on year.

Shek Hon Lo: Net profit attributable to equity holders was $42 7 billion renminbi up 44% year on year.

Shek Hon Lo: Diluted EPS was $4 four pre renminbi, a 46% year on year.

Moving on to gross margins.

Shek Hon Lo: Quarter four overall gross margin was 50% up seven four percentage points year on year and by segment.

Shek Hon Lo: Gross margin for value added services was 53, 7% up three nine percentage points year on year.

Shek Hon Lo: This was due to higher mix of high margin mini games perform service fee and reduced contribution from low margin music and games related that streaming revenue.

Shek Hon Lo: The interesting sum was 3.9 billion renminbi, up 52% year-on-year, driven by growth in cash reserves and improved use of term deposits. Finance costs were 3.5 billion renminbi, down 3% year-on-year due to reduced forex losses, partially offset by higher interest expense. Share of profit of Associates and JVs was $2.4 billion, versus a loss of $1.6 billion in the same period last year. On and on out of our space, share of profit increased to 4.5 billion renminbi, up from 3.1 billion renminbi last year, driven by better profitability for certain domestic associates and a successful game released by an overseas video investor. Income tax expense rose by 111% year-on-year to $9.7 billion RMB, driven by operating profit growth and an increase in holding tax pollution.

Shek Hon Lo: Along with our cost control measures.

Shek Hon Lo: Growth margin for online advertising increased to 56.8%, up 12.6% six points year-on-year. As Martin highlighted, our high quality revenue streams, particularly video accounts, add revenue generated from our own traffic, with platform costs already paid for, contributing to our incremental margin. How efficiency efforts of the Lab 2 Margin improved. Gross margin for FinTech and business services was 43.9%, up 10.3 percentage points year on year. This was driven by margin enhancement following crowd business restructuring, emerging high quality revenues including video accounts, e-commerce, technology services, structural shift towards high margin products within FinTech services, and our efficiency initiatives, for a quarter full operating expense. Selling and marketing expenses were RMB$11 billion, up 75% year-on-year against a low base last year, driven by more spending on promotion and advertising to support.

Shek Hon Lo: Gross margin for online advertising increased to 56, 8% up 12, 6% six points year on year.

Shek Hon Lo: As Martin highlighted our high quality revenue streams.

Shek Hon Lo: Particularly video accounts at revenue generated from our own traffic with platform cost already paid for contributed to our incremental margins.

Shek Hon Lo: Our efficiency efforts also that to margin improvement.

Shek Hon Lo: Gross margin for Fintech and business services was 43, 9% up 10, three percentage points year on year. This was driven by margin enhancement for our business restructuring emerging and high quality revenues, including media accounts E Commerce technology service fee structural shift to us.

Shek Hon Lo: High margin product within Fintech surfaces, and our efficiency initiatives.

Shek Hon Lo: For quarter, four operating expenses selling.

Shek Hon Lo: Marketing expenses were 11 billion renminbi up 79% year on year at gains and low base last year, driven by more spending on promotion and advertising to support new content release.

Shek Hon Lo: It represented 7.1% of revenue.

Shek Hon Lo: IFRS net profit attributable to equity holders was RMB$27 billion, down 75% year-on-year, primarily due to the RMB$106.6 billion gain from the dim disposal of Meituan recognized in the same quarter last year. The average EPS was 2.807 RMB, down 74% year-on-year. Now I'll share our non-Iovirus financial figures. For Q4, operating profit was 49.1 billion RMB, up 35% year-on-year. Net profit attributed to equity holders was 42.7 billion RMB, up 44% year-on-year; diluted EPS was 4.443 renminbi, a 46% year-on-year increase. Moving on to gross margin, For Q4, the overall gross budget was 50%, up 7.4 percentage points year-on-year, and by that month, the gross margin for value-added services was 53.7%, up 3.9 percentage points year-on-year. This was due to a higher mix of high-margin minigames, platform service fees, and a reduced contribution from low-margin music and games-related live streaming revenue, along with our cost control measures.

It represented seven 1% of revenues.

Shek Hon Lo: R&D expenses were 16.4 billion renminbi, up 3% year-on-year. CNA expenses excluding R&D were 10.6% of revenue, down 6% year-on-year due to a lower staff force and optimized operating lease expense. At quarter end, we had approximately 105,000 employees, down 3% year-on-year of what

Shek Hon Lo: R&D expenses were $16 4 billion renminbi up 3% year on year.

Shek Hon Lo: G&A expenses, excluding R&D were $10 6 billion renminbi.

Shek Hon Lo: One 6% year on year due to lower staff cost and optimize operating lease expense.

Shek Hon Lo: At quarter end.

Shek Hon Lo: Had approximately 105000 employees down 3% year on year on a stable quarter on quarter.

Shek Hon Lo: One Year of Portly Stable Quarters and Quarters.

Shek Hon Lo: Let's look at our operating and net margin ratios. For fall quarter 2023, non-IFRS operating margin was 31.7%, up 6.6%-ish points year-on-year. Non-IFRS net margin was 28.2%, up 7.1%-ish points year-on-year.

Shek Hon Lo: Let's look at our operating and net margin ratios for quarter 2023, non <unk> operating margin was 31, 7% up six six percentage points year on year <unk> net margin was 28, 2% up seven one percentage points year on year.

Shek Hon Lo: Next, I will highlight some key cash flow and balance sheet metrics.

Shek Hon Lo: Next I will highlight some key cash flow and balance sheet metrics for quarter. Four total capex was $7 5 billion renminbi up 33% year on year within total Capex operating Capex was $6 7 billion renminbi or the triple year on year, driven by increased investment in Gpus and centers.

Shek Hon Lo: For Q4, total CapEx was 7.5 billion RMB, up 33% year-on-year. Within total CapEx, operating CapEx was 6.7 billion RMB, more than triple year-on-year, driven by increased investment in GPUs and servers. Non-operating capex decreased by 78% year-on-year to 0.8 billion renminbi.

Shek Hon Lo: Nonoperating capex decreased by 78% year on year 208 billion renminbi.

Shek Hon Lo: Pre-cash flow was $34.2 billion RMB for a quarter full of $40 billion a year. For full year 2023, as highlighted by Martin, free cash flow was 24 billion U.S. dollars or 167 billion renminbi, up 89% year-on-year. That cash position was $54.7 billion RMB, up 50% quarter-on-quarter, reflecting strong free cash flow generation, partly offset by cash outflows for share repurchases and strategic investment. To conclude, I'll discuss our share repertures and annual dividend.

Shek Hon Lo: Free cash flow was $34 2 billion renminbi for quarter, four up 40% year on year.

Shek Hon Lo: For full year 2023 as highlighted by market.

Shek Hon Lo: Free cash flow was 24% in U S dollars or 167 billion renminbi up 89% year on year.

Shek Hon Lo: Growth margin for online advertising increased to 56.8%, up 12.6% six points year-on-year. As Martin highlighted, our high quality revenue streams, particularly video accounts, add revenue generated from our own traffic, with platform costs already paid for, contributing to our incremental margin and how efficiency efforts of the Lab 2 Margin improved. Gross margin for fintech and business services was 43.9%, up 10.3 percentage points year-on-year. This was driven by margin enhancement following crowd business restructuring, emerging high-quality revenues including video accounts, e-commerce, technology services, a structural shift towards high-margin products within fintech services, and our efficiency initiatives, for a quarter full operating expense. Selling and marketing expenses were RMB11 billion, up 75% year-on-year against a low base last year, driven by more spending on promotion and advertising to support new content release. It represented 7.1% of revenue. R&D expenses were 16.4 billion RMB, up 3% year-on-year. CNA expenses excluding R&D were 10.6% and randomly down 6% year-on-year due to a lower staff force and optimized operating lease expense.

Shek Hon Lo: Net cash position was $34 7 billion renminbi up 50% quarter on quarter, reflecting strong free cash flow generation, partly offset by cash outflows for share repurchases and strategic investments.

Shek Hon Lo: To conclude I'll discuss our share repurchase and annual dividend.

Shek Hon Lo: For the full year of 2023, we purchased 152 million shares at a total consideration of 49 billion Hong Kong dollars. As a result, our total issue shares after accounting for employee share auctions and award issuance decreased by 0.9% year on year as at the end of 2023. The rated average number of shares for calculating 2023 by EPS also decreased by 0.9% year-on-year. Subject to the shareholders' approval at the upcoming 2024 AGM, we are proposing an annual dividend of HK$3.4 per share, a 42% increase from the previous year. This dividend will be payable to shareholders on the 31st of May 2024.

Shek Hon Lo: For the full year of 2023.

Shek Hon Lo: We purchased 152 million shares with a total consideration of $49 billion.

Shek Hon Lo: As a result, our total issued shares after accounting for employee share options that our issuance.

Shek Hon Lo: These by 049 percent year on year as at the end of 2023.

Shek Hon Lo: The weighted average number of shares for calculating our 2023 diluted EPS also decreased by zero by 9% year on year.

Shek Hon Lo: Subject to shareholders' approval at the upcoming 2024, AGM, we are proposing an annual dividend of $3 four Hong Kong dollars per share, reflecting a 42% increase from the previous year.

Shek Hon Lo: Dividend will be payable to shareholders on the trading as of May 2024. Thank you.

Operator: Thank you, John. We should now open the floor for questions. If you are dialing in by phone, please press 5 to raise that question, then press 6 to unmute yourself. If you are accessing from the chance meeting or meeting application, please click the raise hand button as important.

Operator: Thank you. Thank you, John. We should now open the floor for questions. If you are dialing in by phone, please press 5 to raise that question, then press 6 to unmute yourself. If you are accessing from the change-in-meeting or room-use application,

Speaker Change: Thank you John we shall now open for questions.

Speaker Change: Youre dialing in by phone.

Speaker Change: To raise a question then.

Speaker Change: Annuity yourself, if youre accessing from the Kingdom meeting.

Speaker Change: Vacation is kick the Raytheon button at the bottom.

Operator: We will take one main question after one follow-up question each. So we will take the first question from Kenneth Fong from UBS.

Speaker Change: We will take one main question and ask you one follow up question each time.

Speaker Change: Yes.

Ken: First question Ken.

Ken: Ken it's bolt on UBS.

Ken: Hi, Good evening management, Thanks for taking my question.

My first question is for online games as we highlight in our strategy online games, we will work on enhancing the flagship titles building emerging franchise scheme and launch of new titles.

Shek Hon Lo: At quarter end, we had approximately 105,000 employees, down 3% year-on-year on a stable quarter-to-quarter. Let's look at the operating and net margin ratios. For the fall quarter 2023, non-IFRS operating margin was 31.7%, up 6.6% each point year-on-year. Non-IFRS net margin was 28.2%, up 7.1% each point year-on-year. Next, I will highlight some key cash flow and balance sheet metrics. For Q4, total capex was RMB7.5 billion, up 33% year-on-year. Within total capex, operating capex was RMB6.7 billion, more than triple year-on-year, driven by increased investment in GPUs and servers. Non-operating capex decreased by 78% year-on-year to 0.8 billion renminbi.

Ken: Can management share with us the timing and when we should see it benefiting our overall online game group.

Ken: And for the industry top downs.

Kenneth Fong: We also see some gradual relaxation on the number of ban hao being approved, and also games with high commercial value. But at the same time, we also see some industry headwinds, like lower player spend with more competition. So, how should we think about the medium-term growth for online games in the future? And I have a follow-up question about live streaming e-commerce. Can management share with us some updates, like our current scale, the roadmap ahead, and how we are differentiating with our peers? Thank you.

Ken: Also see some gradual relaxation on the number of helping approved and also gain group of high commercial value.

Ken: And same time, we also see some industry headwinds like lower planned spend with more competition. So how should we think about the medium term growth forward.

Online game ahead, and I have a follow up question is for the life threatening e-commerce.

Ken: Last year, we made very meaningful progress and have to step up hiring and building a protein for luxury e-commerce.

Ken: Can management share with us some update.

Ken: And scale the roadmap ahead, and how we are differentiating with our peers. Thank you.

James Gordon Mitchell: Hi, Kenneth, perhaps I'll answer the online game question. So you identified a number of potential factors that could affect our growth, including banhao issuance. Lower player spends and, I think, more competition in reality. We don't think any of those are the key issues That we've been facing, you know. We've received a decent number of bans, certainly sufficient for our aspiration. Our games are generally much lower RPU than the industry, and therefore we haven't seen, and we wouldn't expect to see, lower player spend as an external macro factor.

Speaker Change: Hi, Kenneth <unk>.

Speaker Change: To the online game question.

Shek Hon Lo: Pre-cash flow was $34.2 billion RMB for a quarter full of $40 billion a year. For full year 2023, as highlighted by Martin, our free cash flow was 24 billion U.S. dollars, or 167 billion renminbi, up 89% year-on-year. That cash position was $54.7 billion RMB, up 50% quarter-on-quarter, reflecting strong free cash flow generation, partly offset by cash outflows for share repurchases and strategic investment. To conclude, I'll discuss our share repurchase program and annual deficit. For the full year of 2023, we repurchased 152 million shares for a total consideration of HK$49 billion. As a result, our total issued shares after accounting for employee share options and our warranty issuance decreased by 0.9% year-on-year as at the end of 2023. The weighted average number of shares for calculating our 2023 diluted EPS has also decreased by 0.9% year on year.

Speaker Change: You identified a number of potential.

Speaker Change: Factors that could affect our growth, including ban how issuance.

Kenneth: Lower player Spence and I think more competition reality, we don't think any of those are the key issues.

Kenneth: We have been facing and we've received a decent number of Fanhouse certainly sufficient aspiration.

Kenneth: Our games are generally much lower than the industry and therefore, we haven't seen them, we wouldn't expect to see our playoffs spend.

Kenneth: It's an external macro factor and then continued competition.

James Gordon Mitchell: And then, you know, continued competition is sort of an inevitability in an industry that's still a high growth, high returns industry. So, you know, we believe that, you know, the key challenge for us is just getting our own house in order.

Kenneth: Competition is sort of an inevitability in an industry that's still in a high growth high returns industry.

Kenneth: So we believe that the key challenge for US is just getting our own house in order.

James Gordon Mitchell: And, you know, we have three strategies that are underway now for getting our own house in order. One is revamping and changing the leadership for our existing games. And, you know, we did that with Brawl Stars, and we've seen a very sharp upturn in revenue for Brawl Stars, reaching new records and becoming the biggest super-sell game. We did that.

And we have three strategies that are underway now for getting our own house in order.

Shek Hon Lo: Subject to the shareholders' approval at the upcoming 2024 AGM, we are proposing an annual dividend of HK$3.4 per share, a 42% increase from the previous year. This dividend will be payable to shareholders on 30 May 2024. Thank you. Thank you, Joan. We shall now open the floor for questions. If you are dialing in by phone, please press five to raise a question, then press six to unmute yourself. If you are accessing from the Tencent meeting or Google application, please click the raise hand button at the bottom.

Kenneth: One is revamping changing the leadership for our existing games.

Kenneth: And we did that with <unk> and have seen a very sharp upturn in both stars revenue and reaching new record soon becoming the biggest supercell game, we've done that and we've made changes with <unk> mobile and <unk> seen a big upturn and more recently, we've made changes with <unk>.

James Gordon Mitchell: We've made changes to PubG mobile, and that's seen a big upturn. And more recently, we've made changes to PCCade for elite.

James Gordon Mitchell: So where we need to make changes, we're now making those changes. Secondly, we have, you know, a number of games that, over the last two to three years, have aggregated very substantial user bases. And, you know, now we're in the process of monetizing those games. And you can see that relatively clearly with Fight for the Golden Spatula, with Wild Rift, with Arena Breakout, among others.

Kenneth: For ALLETE.

Kenneth: So where we need to make changes we are now making those changes.

Kenneth: Secondly, we have a number of games that over the last two to three years have aggregated very substantial user base and now we are in the process of monetizing those gains and you can see that relatively clearly with fight physical dispatch it up with wild rift with arena breakup.

Operator: We will take one main question after one follow-up question each. So we will take the first question from Kenneth Fong from UBS. Hi, good evening, management. Thanks for taking my question. My first question is about the online game.

Operator: As we highlight in our strategy for online games, we will work on enhancing the flagship titles, building emerging franchise games, and launching new titles. Can management share with us the timing and when we should see it benefiting our overall online game growth? And for the industry top-down, we also see some gradual relaxation on the number of banh hao being approved and also games with high commercial value.

Kenneth: Among others and then thirdly, we have been focusing on bringing bigger budget.

James Gordon Mitchell: And then thirdly, we've been focusing on bringing bigger budget games that iterate on prior successes to market. And you'll see those coming through the rest of this year, including Dungeon and Fighter Mobile, where as a result of a very successful internal test, we've actually accelerated the launch date to be in the second quarter of this year over the next three months. And so, you know, as a result of the above, we believe that our game revenue will improve from the second quarter of this year onwards. And the extent of our success in those three strategies will determine the medium-term growth rate. Thank you.

Kenneth: James is right on prior successes to markets and you'll see those coming through the rest of this year.

Kenneth: Including Dungeon <unk> Fighter's mobile Wap as a result of a very successful internal test, we've actually accelerated the launch stage to be in the second quarter of this year.

Operator: But at the same time, we also see some industry headwinds, like lower player spend with more competition. So how should we think about the medium-term growth for online games in the future? And I have a follow-up question for live streaming e-commerce. Last year, we made very meaningful progress and stepped up the hiring and building of our team for live streaming e-commerce. Can management share with us some updates, like our current scale, the roadmap ahead, and how we are differentiating with our peers? Thank you. Hi Kenneth.

Kenneth: Over the next three months and so as a result of the above we belief that our game revenue will improve in the second quarter of this year onward.

Kenneth: The extent of our success in those three strategies will determine the medium term growth rate. Thank you.

Martin Lau: And in terms of live streaming and video accounts, and e-commerce, I think we have made very good progress in the course of 2023. But that's only the beginning of, nurturing this exciting opportunity in terms of GMB growth in the course of 2023 has grown a lot to more than 100 billion. [inaudible] To put it in context, it's still very small compared to the size of video accounts.

Kenneth: And in terms of the live streaming and video accounts E Commerce.

Kenneth: I think we have made very good progress in the course of 2023, but thats only the beginning of.

James Gordon Mitchell: Perhaps I'll answer the online game question. So you identified a number of potential, you know, factors that could affect our growth, including ban how issuance. [inaudible] Our games are generally much lower RP than the industry, and therefore, we haven't seen, and we wouldn't expect to see, lower player spend as an external macro factor. And then, you know, continued competition is sort of an inevitability in an industry that's still a high growth, high returns industry. So we believe that, you know, the key challenge for us is just getting our own house in order.

Kenneth: The nurturing of this exciting opportunity in terms of <unk> in the course of 2023 as gorilla lots to more than 100 billion.

Kenneth: But.

Speaker Change: Yeah to put it in context, it's still very small compared to the size of video accounts.

Martin Lau: And, you know, it's also a fraction of many programs, e-commerce, GMB. So, in order for us to really capture the very big opportunity within this business, we have a number of strategies that's ongoing. Number one, we want to really upgrade the management of the overall ecosystem, including improving the product quality control, improving the process through which we handle user complaints and user feedback. And overall, we want to improve the shopping experience for customers.

Speaker Change: <unk>.

Speaker Change: It's also a fraction of media programs E Commerce GMB.

Martin Lau: Second, is actually through better category management. We actually want to work through each one of the high potential product categories and make sure that we have high quality merchants and attractive products for the customers. And that actually requires very meticulous work, quite a bit of..., workforce addition, and also has to be rolled out one by one.

Speaker Change: So in order for us to really.

Speaker Change: Captured.

Speaker Change: The very.

Speaker Change: Very big.

James Gordon Mitchell: And, you know, we have three strategies that are underway now for getting our own house in order. One is revamping, changing the leadership for our existing games. And, you know, we did that with Brawl Stars, and we've seen a very sharp upturn in Brawl Stars revenue, reaching new records and becoming the biggest supercell game. We did that, and we made changes with, you know, PUBG Mobile, and that's seen a big upturn. And more recently, we've made changes to Peacekeeper Elite.

Speaker Change: Opportunity within this this.

The business, we have a number of strategies, but that's ongoing.

Speaker Change: Number one we wanted to really upgrade the management of the overall ecosystem, including improving the product quality control.

Speaker Change: Improving the.

Speaker Change: The process through which we handle user complains and user feedback.

Speaker Change: Overall, we want to improve the shopping experience for the customers Secondly is actually through better category management, we actually want to work through each one of the high potential product category and make sure that you have high quality merchants and attractive products.

James Gordon Mitchell: So where we need to make changes, we're now making those changes. Secondly, we have a number of games that, over the last two to three years, have aggregated very substantial user bases. And, you know, now we're in the process of monetizing those games. And you can see that relatively clearly with Fight for the Golden Spatula, with Wild Rift, with Arena Breakout, among others.

Speaker Change: For the customers.

Speaker Change: That actually requires.

Speaker Change: Very meticulous.

Speaker Change: <unk> work quite a bit of.

Speaker Change: Workforce edition and also have to be rolled out to one by one.

Martin Lau: We also want to work on better tools for merchants and brands so that they can do business and look at their business analytics, and help them to make pricing decisions better. So, so you know, there's a whole set of merchant tools that we're going to be adding, and overall, we also want to market this overall platform and the availability of these products to consumers who are on WeChat and who are using video accounts so that we can actually increase the awareness of the shopping experience within video accounts.

Speaker Change: We also want to work on better tools for our merchants and brands so that they can.

Speaker Change: Two business and look at there.

James Gordon Mitchell: And then thirdly, we've been focusing on bringing bigger budget games that iterate on prior successes to market. And you'll see those coming through the rest of this year, including Dungeon and Fighter Mobile, where as a result of a very successful internal test, we've actually accelerated the launch date to be in the second quarter of this year over the next three months. And so, you know, as a result of the above, we believe that our game revenue will improve from the second quarter of this year onwards, and the extent of our success in those three strategies will determine our medium-term growth rate. Thank you.

Speaker Change: Business analytics and help them to make pricing decisions better. So so there's a whole set of <unk>.

Speaker Change: Emergent tools that we're going to be.

Speaker Change: Adding.

Speaker Change: <unk>.

Speaker Change: Overall, we also want to market.

Speaker Change: This overall platform and the availability of these products.

Speaker Change: To the consumers.

Speaker Change: On Wechat and that's.

Speaker Change: Using video accounts, so that we can actually increase the awareness of <unk>.

Speaker Change: Offers shopping experience within video outcomes.

Martin Lau: And finally, we are looking to increase the integration between video accounts, shopping, the experience, and infrastructure and the mini programs that are already operated at scale by a lot of merchants. And we believe by doing a combination of the above, we can continue to grow the GMB of our video accounts e-commerce in a healthy way. And it's very important for us to build a very solid foundation for this platform at this point in time so that we can actually usher in a very long and significant growth track for this business going forward.

Speaker Change: And finally, we are looking to.

Chi Ping Lau: And in terms of live streaming and video accounts e-commerce, I think we have made very good progress in the course of 2023, but that's only the beginning of this exciting opportunity. In terms of GDP in the course of 2023, it has grown a lot to more than $100 billion. But to put it in context, it's still very small compared to the size of video accounts.

Speaker Change: Increase the integration between video accounts shopping experience and the infrastructure and the media programs that are already operated at scale by a lot of emotions.

Speaker Change: And we believe by doing.

The combination of the above we can continue to grow.

Speaker Change: The GMB of.

Speaker Change: Our video accounts e-commerce.

Speaker Change: <unk>.

Speaker Change: In the healthy way patents.

Chi Ping Lau: And, you know, it's also a fraction of many programs, e-commerce, GMB. So in order for us to really capture the very big opportunity within this business, we have a number of strategies that's ongoing. Number one, we want to really upgrade the management of the overall ecosystem, including improving the product quality control, improving the process through which we handle user complaints and user feedback. And overall, we want to improve the shopping experience for customers. Second, is actually through better category management.

Speaker Change: It's very important for us to be with a very solid foundation for this platform at this point in time, so that we can actually.

Speaker Change: In a very long.

Speaker Change: Significant growth track afford this business going forward.

William Henry Packer: Thank you. We will take the next question from William Packer from Exxon BMC.

Speaker Change: Thank you we will take.

Speaker Change: The next question from William Packer from Exane BNP.

Speaker Change: Okay.

William Henry Packer: Hi Management. Thanks for taking my questions.

William Henry Packer: Hi management, Thanks for taking my questions.

William Henry Packer: Firstly.

Domestic gaming growth, we couldnt during the 2021 'twenty two rectification payer and then last August you talked to.

James Gordon Mitchell: Firstly, domestic gaming growth weakened during the 2021-22 rectification period. And then last August, you talked about weaker Q2 trends reflecting seasonality and less commercial content. You're again talking about weak monetization at key games for Q4 and Q1. Should we think of these challenges as the new normal for evergreen domestic games?

William Henry Packer: Could Q2 trends reflecting.

William Henry Packer: Seasonality and less commercial content.

Chi Ping Lau: We actually want to work through each one of the high potential product categories and make sure that we have high quality merchants and attractive products for the customers. And that actually requires very meticulous work, quite a bit of..., workforce addition, and also has to be rolled out one by one. We also want to work on better tools for merchants and brands so that they can do business and look at their business analytics and help them to make pricing decisions better. So, you know, there's a whole set of merchant tools that we're going to be adding. And overall, we also want to market this overall platform and the availability of these products to consumers who are on WeChat and who are using video accounts so that we can actually increase the awareness of the shopping experience within video accounts.

William Henry Packer: Again talking to week monetization at key games for Q4 and Q1.

William Henry Packer: Should we think of these challenges is the new normal for evergreen domestic guidance.

James Gordon Mitchell: Does this reflect that these games are now in their growth phase? So you, therefore, need to rely on new releases. And then my follow-up question is regarding regulation. The market was somewhat alarmed in Q4 regarding new draft rules for the video games industry, which could curtail game monetization. Could you update us on the latest developments there? When should we expect a new draft? How should we think about the potential impact on your business? Thanks very much.

William Henry Packer: This is for fact that these gains and Alex growth. So you therefore need to rely on new releases.

William Henry Packer: And then my follow up question is regarding regulation the market was somewhat alarmed in Q4 regarding new draft rules for the video games industry.

William Henry Packer: Could curtail in game monetization.

William Henry Packer: Could you update us on latest developments there.

William Henry Packer: When should we expect a new draft, how should we think about the potential impact on your business. Thanks very much.

Speaker Change: Hi, well, so perhaps I'll start.

Speaker Change: On your first question.

Speaker Change: If you look at our commentary in Q2, what we reported in Q4 is actually sort of a.

Speaker Change: A consequence of the commentary in Q2, if you will in that as you may know for our two biggest games we have.

Speaker Change: Roughly 90, where you have a nine months.

Speaker Change: Amortization period from gross receipts into reported revenue.

Chi Ping Lau: And finally, we are looking to increase the integration between video accounts, the shopping experience, and infrastructure and the mini programs that are already operated at scale by a lot of merchants. And we believe by doing a combination of the above, we can continue to grow the GMB of our video accounts e-commerce in a healthy way. And it's very important for us to build a very solid foundation for this platform at this point in time so that we can actually usher in a very long and significant growth track for this business going forward. Thank you.

So we saw weak monetization, therefore weak grossing receipts.

Speaker Change: From Q2 onwards last year and that impacts us most heavily in Q4, because in Q4, we lose the benefit of relatively strong gross receipts from Q1.

James Gordon Mitchell: And, you know, that impacts us most heavily in Q4, because in Q4, we lose the benefit of relatively strong gross receipts from Q1. And, you know, as a result, that's why, if you look at the reported revenue for Q4, it was down year on year because of the lagged effect of weak monetization in Q2 and Q3. But if you looked at the gross receipts, the actual cash inflows, they were slightly up year on year in Q4. So, you know, what we saw in Q2 is, you know, the driver of what we saw in Q4, as opposed to being two sort of separate or contradictory phenomena.

Speaker Change: And as a result, that's why.

Speaker Change: If you look at the reported revenues for Q4 was down year on year because of the lagged effect of weak monetization in Q2 and Q3, but if you look at the gross receipts the actual cash inflows it was slightly up year on year in Q4.

Operator: We will take the next question from William Packer from Exxon BMC. Hi, management. Thanks for taking my questions.

Speaker Change: So what we saw in Q2.

Operator: Firstly, domestic gaming growth weakened during the 2021-22 rectification period. And then last August, you talked about weaker Q2 trends reflecting seasonality and less commercial content. You're again talking about weak monetization at key games for Q4 and Q1. Should we think of these challenges as the new normal for evergreen domestic games?

Speaker Change: The driver of what we saw in Q4 as opposed to being two sort of separate or contradictory phenomena and in terms of whether our big games are ex growth.

James Gordon Mitchell: And, you know, in terms of whether our big games are X growth, you know, we clearly don't think that's the case. You know, we're very active investors across the game industry. We can see that, you know, big games with longevity, with substantial user bases, enjoy the way they experience, you know, upswings and downswings, but over the longer term, they're only becoming more powerful, whether you look at a court of duty or a grand theft auto or a fortnight.

Speaker Change: We clearly don't think that's the case.

Speaker Change: Very active investors across the game industry, we can see that.

Speaker Change: And a big games with longevity with substantial user bases.

Speaker Change: Enjoy.

Speaker Change: No.

James Gordon Mitchell: And, you know, we certainly believe that that is the case in China; longevity is an asset rather than a liability, just as it is in the luxury goods industry. But I want to say that a luxury goods brand with longevity is inferior to a newly emerged luxury goods brand.

Wait.

Operator: Does this reflect that these games are now in their growth phase? So you, therefore, need to rely on new releases. And then my follow-up question is regarding regulation. The market was somewhat alarmed in Q4 regarding new draft rules for the video games industry, which could curtail in-game monetization. Could you update us on the latest developments there? When should we expect a new draft? How should we think about the potential impact on your business? Thanks very much.

Speaker Change: The experience in upswings and Downswings, but over the longer term there are only becoming more powerful whether unit put a quarter future Cobra.

Speaker Change: <unk> or a four times and we certainly believe that that is the case in China, the non cap with the DSO.

Speaker Change: Asset rather than a liability justice it is in the luxury goods industry amongst say that.

Speaker Change: Not treat goods brand with longevity.

Speaker Change: Inferior to a newly much luxury goods brand and so we can see it with our own games, we can see that upstream.

James Gordon Mitchell: And you know, we can see it with our own games. We can see that PUBG Mobile is now rebounding strongly. We can see that, for the stars, and also actually, the entire Supercell portfolio of games is rebounding strongly. We expect a number of our other games to also see substantial rebounds.

James Gordon Mitchell: I will. So perhaps I'll start, you know, with your first question. And if you look at our commentary in Q2, what we reported in Q4 is actually sort of a consequence of the commentary in Q2, if you will, in that, as you may know, for our two biggest games, we have roughly nine months of amortization period from gross receipts to reported revenue. And so, you know, we saw weak monetization, therefore weak gross receipts, you know, from Q2 onwards last year. And, you know, that impacts us most heavily in Q4, because in Q4, we lose the benefit of relatively strong gross receipts from Q1. And, you know, as a result, that's why, if you look at the reported revenue for Q4, it was down year on year because of the lagged effect of weak monetization in Q2 and Q3. But if you looked at gross receipts, the actual cash inflows, it was slightly up year on year in Q4.

Speaker Change: T mobile is now rebounding strongly we can see that in for the SaaS and also actually the entire supercell portfolio of games is rebounding strongly.

Speaker Change: We expect a number of fibrotic games to also.

Martin Lau: So you know again because of the time lag between cash inflows versus reported revenue, you know that will show up in our P&L from the second quarter. But we are already experiencing improvements in cash inflows. So that's the first question around, you know where we are with games and then maybe on the game regulation side. Yeah, on the regulation side, we actually don't know when the new draft will be released or whether it will be released.

Speaker Change: <unk> substantial rebounds.

So.

Speaker Change: Again, because of the time lag between cash inflows fastest reported revenue.

Speaker Change: That will show up in our P&L from the second quarter.

Speaker Change: But we are already experiencing improvements in cash influx. So that's on the first question around where we are with games and then maybe on the game regulation side, yes.

Speaker Change: Yeah on the recognition.

Speaker Change: We actually don't know when the new draft will be released to or whether it will be released but.

Martin Lau: But it's no longer our concern because, you know, one after the original draft was released, there was concern by the market, and I think, you know, the regulators have actually come out very explicitly in explaining that the purpose of the draft was actually to provide a healthy environment for growing the industry rather than constraining it. And two, we're actually very encouraged by the supportive measures that were unleashed after the initial concern was expressed by the market, including at the very beginning of this year, there was a single batch of domestic banhao, which is more than 100, including there's an expedited approval of imported game licenses, and also our flagship mobile game, DNF mobile, has been approved in that fact.

Speaker Change: It's no longer are concerned.

Speaker Change: <unk>.

Speaker Change: No one after the original draft was released.

Speaker Change: Concerned by the market and I think the regulators have actually come out very explicitly and explaining that the purpose of.

The drop was actually too.

James Gordon Mitchell: So, you know, what we saw in Q2 is, you know, the driver of what we saw in Q4, as opposed to being two sort of separate or contradictory phenomena. And, you know, in terms of whether our big games are X growth, we clearly don't think that's the case. You know, we're very active investors across the game industry. We can see that, you know, big games with longevity, with substantial user bases, you know, enjoy, you know, the way they do, they experience upswings and downswings. But over the longer term, they're only becoming more powerful, whether you look at a court of duty or a grand theft auto or a fortnight. And, you know, we certainly believe that that is the case in China, that longevity is an asset rather than a liability, just as it is in the luxury goods industry. I want to say that you know a luxury goods brand with longevity is inferior to a newly emerged luxury goods brand.

Speaker Change: They provide a healthy environment for growing the industry rather than constrained in the industry.

And two is actually very encouraged by the support its measures that.

Speaker Change: That were unleashed after the initial.

Speaker Change: Concern was expressed by the market, including <unk>.

Speaker Change: The beginning of this year there is.

Speaker Change: A single batch of domestic bond, how which is more than 100, and including Theres, a expedited approval of imported.

Speaker Change: Game license and.

Speaker Change: Also our flagship mobile game DNF mobile has been approved and that batch.

Martin Lau: And also, if you just look at what's the focus of people's concerns, right, it's about high APU gains, and that's really not relevant to us, because our APU is actually on the very low end of the overall industry. So I think, you know... To be fair, you know, it's no longer one of our concerns. Thank you, Marking.

Speaker Change: And also if you just look at whats.

Speaker Change: What's the focus of People's concern right, it's about a high <unk> games, and that's really not relevant to us because our output is actually on the very low end of the overall industry. So I think.

Speaker Change: Yeah.

To be fair.

No longer one of our concerns anymore.

Martin Lau: Thank you, Martin. Next, we will take the question from Alicia Yap from Citigroup. Hi, good evening.

Chi Ping Lau: Thank you Martin.

Chi Ping Lau: Next we will take the question from Alicia Yapp from Citigroup.

Alicia Yap: Hi, Good evening can you hear me management, thanks for taking my questions.

Alicia Yap: Can you hear me, management? Thanks for taking my questions. My main question is about the AI power functionality. So, in addition to enhancing and powering the internal advertising targeting capability, what is your expectation of the AI power functionality to generate these attractions of revenue from the external cloud and business services customers in the near-term? Or should we actually expect any near-term benefit more reflecting the continued improvement in advertiser ROI and also e-commerce merchants' conversion?

Alicia Yap: I have my main question is on.

Alicia Yap: On AI.

Alicia Yap: AI power functionality silicon validation to enhancing empowering the internal atwood harmful pocketing.

Alicia Yap: What is your expectation of the App functionality.

James Gordon Mitchell: So you know again because of the time lag between cash inflows versus reported revenue, you know that will show up in our P&L from the second quarter. But we are already experiencing improvements in cash inflows. So that's the first question around, you know where we are with games and then maybe on the game regulation side. Yeah, on the regulation side, we actually don't know when the new draft will be released or whether it will be released.

Alicia Yap: Based on projections of revenue from the cloud.

Alicia Yap: In business services customer.

Speaker Change: Tom or should we actually expect any near term.

Speaker Change: Reflecting on the continual improvement on the appetizer Albemarle and also.

Speaker Change: E Commerce merchants combustion right.

Alicia Yap: Second, a very quick follow-up: I understand the user profile for mini-games is quite different from the mobile APP game user, but I'd be curious to see if there's any preference shift or cannibalization of the time span from the APP games to the mini-games that will also contribute to the slower growth of domestic games in the past few quarters. Thank you.

Speaker Change: Second of all a very quick follow up.

Chi Ping Lau: But it's no longer our concern because, you know, one after the original draft was released, there was concern by the market, and I think, you know, the regulators have actually come out very explicitly in explaining that the purpose of the draft was actually to provide a healthy environment for growing the industry rather than constraining it. And two, we're actually very encouraged by the supportive measures that were unleashed after the initial concern was expressed by the market, including, at the very beginning of this year, there was a single batch of domestic banhao, which is more than 100, including there's an expedited approval of imported game licenses, and also our flagship mobile game, DNF Mobile, has been approved in that batch.

Speaker Change: I understand.

Speaker Change: User profile for me.

Speaker Change: Differently from the mobile ATP in wholesale but just curious.

Speaker Change: If if any.

Speaker Change: Proppant sheep, all cannibalization of the tank bottom from the ATP to the new loans that we also contribute to fulfill work Ralph domestically in the past few quarters. Thank you.

Martin Lau: In terms of the AI short-term benefits, I think.

Speaker Change: Yes in terms of the.

Speaker Change: AI.

Short term benefits I think.

Martin Lau: Your financial benefits should be much more, indexed toward the advertising side, because if you think about the size of our advertising business as quoted at 100 billion RMB a year, and if you can just, you know, have a 10% increase, right, that's, that's 10 billion RMB and mostly profit. Right.

Speaker Change: The financial benefits should be much more.

Speaker Change: Indexed towards the advertising side, because if you.

Speaker Change: Think about the size of our advertising business.

Speaker Change: Call It 100 billion RMB a year if.

Speaker Change: If you can just have a 10% increase this rate that's.

Chi Ping Lau: And also, if you just look at what's the focus of people's concerns, right, it's about high-APU games, and that's really not relevant to us, because our APU is actually on the very low end of the overall industry. So I think, you know... To be fair, you know, it's no longer one of our concerns. Thank you, Martin. Next, we will take the question from Alicia Yap from Citigroup. Hi, good evening.

Speaker Change: 10 billion RMB.

Speaker Change: Mostly profit, but so so that's.

Martin Lau: So, you know, the scale of the [inaudible] business, and when we add in the video accounts, e-commerce, and ecosystem, you know, that just has a very long track of growth potential. And also the low ad load right now within video accounts. But on the other hand, if you look at the cloud and business services customers, then you're really facing a relatively nascent market; you still have to sell to these customers.

Speaker Change: The scale of.

Speaker Change: The benefits on the advertising side, especially as we see continued growth of our advertising business.

Speaker Change: <unk>.

Speaker Change: Add in the video accounts.

Speaker Change: E Commerce.

Speaker Change: Ecosystem.

Speaker Change: That just has a very long track of growth potential.

Operator: Can you hear me, management? Thanks for taking my questions. My main question is about the AI power functionality. So, in addition to enhancing and powering the internal advertising targeting capability, what is your expectation of the AI power functionality to generate these attractions of revenue from the external cloud and business services customers in the near-term? Or should we actually expect any near-term benefit more reflecting the continued improvement in advertiser ROI and also e-commerce merchants' conversion? Second, a very quick follow-up: I understand the user profile for minigames is quite different from the mobile APP game user, but I'd be curious to see if there's any, you know, preference, shape, or cannibalization of the time span from the APP games to the mini Thank you.

Speaker Change: And also the low ad.

Speaker Change: Load right now within video accounts.

Speaker Change: But on the other hand, if you look at that.

Speaker Change: Cloud and business services customers, then you are really facing.

Speaker Change: Relatively nascent market you still have to sell to these customers that we spend a lot of time working with all of the customers in different industries and trying to figure out what's the best way of leveraging.

Martin Lau: We spend a lot of time working with all the customers in different industries and trying to figure out what's the best way of leveraging AI for their business. And then you have to go through a long sales cycle. And then at the same time, it's competitive because your competitors will actually come in and say, oh, they can also provide a similar service. And despite us believing we have a superior technology and product, you know, it's actually very cutthroat, and your competitors actually sort of come in and say, oh, they're going to cut prices, even though there's an inferior product.

Speaker Change: AI for their business and then you have to go through a long sell cycle and then at the same time, it's competitive because your competitors will actually come in and say Oh. They can also provide a similar service.

Speaker Change: And despite we believe we have superior technology and product it's actually.

Speaker Change: Very cutthroat and competitive actions that would come in and say are they going to cut prices, even though there is an inferior product. So all these things.

Chi Ping Lau: In terms of the AI short-term benefits, I think financial benefits should be much more indexed toward the advertising side because if you... think about the size of our advertising business as quoted at 100 billion RMB a year. And if you can just, you know, have a 10% increase, right, that's, that's, 10 billion RMB and mostly profit, right? So that's, you know, the scale of.

Martin Lau: So all these things, you know, all the low margin, highly competitive, and long selling cycle of the 2B business would actually come into play in that side of the business. So when you compare the two sides of the equation, you can actually clearly see that ramping up advertising is actually going to be much more profitable in the short term. Of course, you will continue to do both, right, and we believe that, you know, the value that we provide to our customers is not just measured in how much profit we make from that but also in how much improvement we make to their business over the long run.

Speaker Change: Or the low margin highly competitive and low sales cycle of the <unk> business would actually come in to play in that.

Speaker Change: That side of the business. So when you compare the two sides of the equation you can actually clearly see that.

Speaker Change: <unk> advertising is actually going to be much more.

Speaker Change: Profitable from the short term of course, so I think we'll continue to do both right now and we believe that the value that we provide to our customers and not just measured in how much profit we make from that but also in how much improvement that we make to their business over the long run.

Chi Ping Lau: [inaudible] ecosystem, you know, that just has a very long track record of growth potential. And also the low ad load right now within video accounts. But on the other hand, if you look at the cloud and business services customers, then you're really facing a relatively nascent market. You still have to sell to these customers, We spend a lot of time working with all the customers in different industries and trying to figure out what's the best way of leveraging AI for their business. And then you have to go through a long sales cycle. And then at the same time, it's competitive because your competitors will actually come in and say, oh, they can also provide a similar service. And although we believe we have a superior technology and product, it's actually very cutthroat.

Martin Lau: And we believe as China moves into an economy which is much more focused on productivity and as the cost of human capital actually sort of increases, some of the dynamics of the U.S. market in having a more profitable business services business would actually come in, but that would take quite some time to realize. And on your question about whether our mini-games cannibalize time spent or revenue generation for our app-based games, you know, we're very confident that, you know, our mini-games are not a tribe of cannibals. They're a tribe of pioneers and explorers and developers of a new territory.

Speaker Change: We believe as China move into.

Speaker Change: The.

Speaker Change: Economy, which is much more focused on productivity and as the <unk>.

Speaker Change: Cost of.

Speaker Change: Human costs actually sort of can you keep might increase right. So some of the dynamics of the U S market in having a more profitable business services business would actually come in but that will take quite some time to to realize.

Speaker Change: And on your question about whether mini games cannibalizing time spent to revenue generation for our App based games.

Chi Ping Lau: And your competitor may actually come in and say, oh, they're going to cut prices, even though there's an inferior product. So all these things, all the low margin, highly competitive, and long selling cycle of the 2B businesses would actually come into play in that side of the business. So when you compare the two sides of the equation, you can actually clearly see that ramping up advertising is actually going to be much more profitable in the short term. Of course, we'll continue to do both. I believe that the value that we provide to our customers is not just measured in how much profit we make from them but also in how much improvement we make to their business over the long run.

Speaker Change: We're very confident that many games and other tribe of cannibals thereof, the tribe of pioneers and explorers and developers of new territory and I say that because from a time spent perspective, our app based games have been performing fine and you can see that.

Martin Lau: And I say that because from a time-spent perspective, our app-based games have been performing fine. And you can see, you know, the increased time spent for games like, fight for the Golden Spatula Arena breakout while refra substantial. And we've discussed previously that only less than half of the minigame MAU are also app-based game MAU. When we look at it from a user spend perspective, there's an even starker illustration because only a teens percentage of the minigame paying users are also app-based game-paying users. and only a single-digit percentage of the app-based game-paying users. So we don't believe that there's any cannibalization taking place between minigames and app-based games.

Speaker Change: The increased time spent for games like fight for the Golden spot should have arena breakout what refresh substantial.

Speaker Change: And we have discussed previously that on the.

Speaker Change: That's in half of the <unk>.

Speaker Change: Any game MA overall, so app based game Ma.

Speaker Change: Let me look at it from a user spend perspective.

Chi Ping Lau: And we believe as China moves into an economy which is much more focused on productivity and as the cost of human capital actually sort of increases, some of the dynamics of the U.S. market in having a more profitable business services business would actually come in, but that would take quite some time to realize. And, you know, on your question about whether minigames are cannibalizing time spent or revenue generation for our app-based games, we're very confident that, you know, our minigames are not a tribe of cannibals. They're a tribe of pioneers and explorers and developers of new territory.

Speaker Change: There's an even stopped her illustration because funding.

Speaker Change: Teens percents nature of the mini game paying users or ASO App base game paying users and only a single digit percentage of the App based game.

And users around so many games paying users.

Speaker Change: We don't believe that that's cannibalization, taking place between mini games and App based games.

Speaker Change: Thank you we'll take the next question from Robert <unk> from Goldman Sachs.

Ronald Keung: Thank you. We will take the next question from Ronald Keung from Goldman Sachs.

Ronald Keung: Thank you. Thank you, Tony, Martin, James, John, and Wendy.

Thank you Martin and John and Wendy.

Robert: Two questions one is we've read about.

James Gordon Mitchell: I have two questions. One is we've read about the shareholder return. So compared with just regular dividends, buybacks, and we used to have some distribution in kind, how should we view 2024 and maybe the medium-term upside potential to a total annual kind of shareholder return, let's say in dollar terms or in percentage of market cap. Which one will we usually kind of assess more? And how do we plan to reward shareholders maybe around the investment portfolio value? And then my second question is on video accounts e-commerce. Martin, you mentioned video accounts e-commerce and looking into combining them with the mini program e-commerce.

Robert: Router returned so compared with regular dividends buybacks than we used to have some distribution SBC, how should we view 2024, and maybe in the medium term upside potential to a total annual shareholder return that in dollar terms or percentage of market cap, which which one will be usually kind of assess more.

James Gordon Mitchell: And I say that because from a time spent perspective, our app-based games have been, you know, performing fine. And you can see, you know, the increased time spent for games like Fight for the Golden Spatula, Arena Breakout, Wild Rift, and Racist Stanchial. And we've disclosed previously that only less than half of the minigame MAU are also app-based game MAU. When we look at it from a user spend perspective, there's an even starker illustration because only a teens percentage of the minigame paying users are also app-based game paying users. And only a single digit percentage of the app-based game paying users are also minigame paying users.

Robert: And how do we plan to reward shareholders, maybe around the investment portfolio value and then my second question is on video accounts E. Commerce. Martin you mentioned about the video accounts E Commerce and looking at combining with many program E. Commerce is it fair to say we are eventually building a more open platform.

Ronald Keung: Is it fair to say we are eventually building a more open platform for transactions, not forcing every transaction throughout?

Robert: In transactions not forcing every transaction through our own kind of shop infrastructure, because many program as monarch platform.

Martin Lau: every transaction through our own kind of shop infrastructure because Mini Program is more like a platform. So would that look more like meta, which is like a Facebook style open platform building that e-commerce system versus the very close system in the shop on video platforms? Thank you.

James Gordon Mitchell: So we don't believe that there is cannibalization taking place between minigames and app-based games. Thank you. We will take the next question from Ronald Keung from Goldman Sachs. Thank you. Thank you, Tony, Martin, James, John, and Wendy. I have two questions.

Robert: So that would.

Robert: Look more like meta, which is like a Facebook style open platform building bidding that e-commerce system versus the very close system in the short form video platforms. Thank you.

James Gordon Mitchell: Hi Ronald. So on the shareholder return question, we assess the total return dynamically. Now, for the dividends and the buyback, you see those more programmatic in nature versus the distributions, which are somewhat more opportunistic in nature. But overall, with the intent to return very substantial capital to shareholders during the course of this year. In terms of the role of the investment portfolio, then actually, over the last two years, the investment portfolio has returned substantially more capital to shareholders than it has absorbed.

Speaker Change: Hi Ronald.

Operator: One is we've read about shareholder return. So compared with just regular dividends, buybacks, and we used to have some distribution in kind, how should we view 2024 and, maybe, the medium term upside potential to a total annual kind of shareholder return? Let's say in dollar terms or in percentage of market cap, which one will we usually kind of assess more and how do we plan to reward shareholders, maybe around the investment portfolio value?

Speaker Change: Shareholder return question.

First the total return dynamically.

Ronald: Now, but the dividends and the buyback.

Ronald: As most of the programmatic in nature versus distributions.

Ronald: Somewhat more opportunistic in nature.

Ronald: But.

Ronald: Overall.

Ronald: What's the incentive returned substantial capital to shareholders train. The course of this year in terms of the road of the investment portfolio than actually over the last two years the investment portfolio because.

Operator: And then my second question is on video account e-commerce. Martin, you mentioned video account e-commerce and were looking to combine it with mini program e-commerce. Is it fair to say we are eventually building a more open platform for transactions, not forcing every transaction through our own kind of shop infrastructure because Mini Program is more like a platform? So that would look more like Meta, which is like a Facebook style open platform building that e-commerce system versus the very closed system in the shop on video platforms. Thank you. Hi Ronald.

James Gordon Mitchell: And even if you exclude the JD and then Meituan distributions, the investment portfolio has been self-funding, meaning new investments that have been made have been funded by divestments, dividends, or distributions from what we already own in the investment portfolio.

Ronald: <unk> substantially more capital to shareholders than it has.

Ronald: Sure.

Ronald: Even if you exclude.

Ronald: B J D and then May 'twenty distributions.

Ronald: The investment portfolio has been self funding new investments we've made have been funded by.

Martin Lau: And looking at 2024, at this point in time, our expectation is that the investment portfolio will be, once again, self-funding and therefore, a source of cash rather than the use of cash. In terms of the video accounts and e-commerce, I would say, I think that's a good question. And we actually had a lot of discussion on that topic.

Ronald: Divestments or dividends or distributions from what we already own in the investment portfolio.

Ronald: Looking at 2024 at this point in time.

Chi Ping Lau: So, on the shareholder return question, we assess the total return dynamically. Now, for the dividends and the buyback, those are more programmatic in nature versus the distributions, which are, you know, somewhat more opportunistic in nature. But, you know, overall, with the intent of returning substantial capital to shareholders during the course of this year. In terms of the role of the investment portfolio, then actually, over the last two years, the investment portfolio has returned substantially more capital to shareholders than it has absorbed. And even if you exclude the JD and then Meituan distributions, the investment portfolio has been self-funding, meaning new investments made have been funded by divestments or dividends or distributions from what we already own in the investment portfolio.

Our expectation is that the investment portfolio will be once again self funding and therefore.

Ronald: Source of cash from use of cash.

Ronald: In terms of the video.

Ronald: Accounts E Commerce I would say.

Speaker Change: I think thats a good question.

Speaker Change: And.

Speaker Change: We actually had a lot of discussion on that topic.

Martin Lau: And in the sense that, you know, what's the architecture of, you know, the e-commerce activities that should be happening on the platform given we have media, a mini-program, eCommerce, and that actually is a very significant platform already. And I think, you know, our view is that, going forward, we have actually both open platform and closed platform, and they serve actually different purposes. The Open Platform is along the line of mini programs, and these are actually much more suitable for brands which are actually well recognized.

Speaker Change: The sense that what's the architecture of.

Speaker Change: The e-commerce activities that should be happening on the platform given we have medial mini program.

Speaker Change: E Commerce and that actually is a very significant platform already.

Speaker Change: And I think our view is that going.

Speaker Change: Going forward have actually both open platform closed platform.

And they serve actually different purposes open platform.

Speaker Change: Along the line of mini programs and <unk>.

James Gordon Mitchell: And, you know, looking at 2024, at this point in time, our expectation is that the investment portfolio will be, once again, self-funding and therefore a source of cash rather than the use of cash. In terms of the video accounts and e-commerce, I would say, I think that's a good question. And we actually had a lot of discussion on that topic in the sense that, you know, what's the architecture of, you know, the e-commerce activities that should be happening on the platform given we have a mini-program, eCommerce, and that actually is a very significant platform already. And I think our view is that, going forward, we have actually both an open platform and a closed platform, and they serve actually different purposes. The Open Platform is along the line of mini programs, and these are actually much more suitable for brands, which are actually well recognized, self-channels for promoting mini-programs.

Speaker Change: These are actually much more suitable for <unk>.

Martin Lau: They actually have a very large self-channel for promoting mini programs. For example, if they have a very large chain of offline stores, they can actually ask their customers to add the mini programs and then shop online. And at the same time, they need to have pretty strong brand recognition for the consumers to keep coming back to the mini programs. But the shortcoming of the mini program is that the merchants basically have it very hard for them to get new customers online; they can only rely on their own channel.

Speaker Change: Brands, which actually are well recognized that they actually have a very large.

Speaker Change: Self channel for promoting media programs for example, if they have a very large chain of offline stores. They can actually ask their customers too.

Speaker Change: To add the media programs and then shop.

Speaker Change: And online and at the same time, they need to have pretty strong brand recognition for the consumers to keep coming back to the mini programs.

Speaker Change: Sure.

Speaker Change: But the short coming of the mini program is that the merchants basically it's very hard for them to get new customers online. They can only rely on their own channels, but even with that the mini programs E. Commerce platform has actually grown to a very large size now on the other.

Martin Lau: But even with that, you know, the mini programs; the e-commerce platform has actually grown to a very large size. Now, on the other hand, when we look at video accounts, the live streaming platform at the new platform is actually a closed platform, in the sense that we actually want to put in much more active management of the ecosystem so that the shopping quality is actually very much better than an open platform, you know, especially for merchants who are not well-known, right?

Speaker Change: And when we look at video accounts live streaming.

Speaker Change: <unk> platform at the new platform is actually.

Speaker Change: <unk> platform.

Speaker Change: In the sense that we actually want to put in much more active management of the ecosystem. So that the shopping quality is actually.

Speaker Change: Very much better than an open platform.

Chi Ping Lau: For example, if they have a very large chain of offline stores, they can actually ask their customers to add the mini-programs and then shop online. But at the same time, they need to have pretty strong brand recognition for the consumers to keep coming back to the mini-programs. But the shortcoming of the mini-program is that the merchants, basically, it's very hard for them to get new customers online. They can only rely on their own channel.

Speaker Change: Especially for merchants, which are not well known right now because if these are smaller merchants white local merchants than we want to make sure that the products actually exceed a certain level.

Speaker Change: So that.

Speaker Change: It would create a good experience for the users.

Martin Lau: Because, you know, if these are smaller merchants, white-label merchants, then we want to make sure that their products actually exceed a certain level so that, you know, it would create a good experience for the users. And it also has access to the video account traffic so that it can actually acquire new customers. Now, over time, we're going to connect the open platform with the closed platform; we will provide a curated connection so that the open platform can actually benefit from the traffic of the video account.

Speaker Change: And it also have the access to the video accounts traffic so that it can actually acquire new customers now.

Speaker Change: Over time, we're going to connect.

Chi Ping Lau: But even with that, the mini programs and e-commerce platform have actually grown to a very large size. Now, on the other hand, when we look at video accounts and live streaming platforms, the new platform is actually a closed platform in the sense that we actually want to put in much more active management of the ecosystem so that the shopping quality is actually very much better than an open platform, especially for merchants that are not well-known, because if these are smaller merchants, white-label merchants, then we want to make sure that the products actually exceed a certain And it also has access to the video accounts traffic so that it can actually acquire new customers. Now, over time, we're going to connect.

Speaker Change: The open platform with the closed platform will provide a curated connection so that the open platform can actually benefit from the traffic of the video accounts, while at the same time.

Martin Lau: While at the same time, small merchants can actually also benefit from their private domain, you know, when they actually start selling on our platform. So, you know, when we curate the connection between the open platform mini programs with video account shops, then I think, you know, we can actually get the best in the world and help different types of merchants maximize their sales and maximize their exposure to consumers on the platform. while at the same time making sure that our users actually have a great shopping experience on our platforms, either on the open platform or on the closed platform.

Speaker Change: The small merchants can actually also benefit from.

Speaker Change: The private domain when they actually start selling on those so.

Speaker Change: So when we curate the connection between the open platform mini programs with BDO account shops than I think we can actually get the best at <unk> and help different types of merchants to maximize their sales and maximize the exposure to consumers on the platform while at the same time.

Speaker Change: Making sure that our users actually has a great shopping experience on our platforms either on the open platform on the close platform.

Chi Ping Lau: The open platform with the closed platform will provide a curated connection so that the open platform can actually benefit from the traffic of the video account while, at the same time, small merchants can actually also benefit from their private domain when they start selling on our platform. So when we curate the connection between the open platform mini programs with video account shops, then I think we can actually get the best of both worlds and help different types of merchants maximize their sales and maximize their exposure to consumers on the platform while at the same time making sure that our users actually have a great shopping experience on our platforms, either on the open platform or the closed platform. I got it.

Martin Lau: Got it. Thank you, Martin and James.

Speaker Change: Got it thank you Martin and James.

Robin Zhu: Thank you. The next question comes from Robin Zhu from Bernstein. Thank you, Matt.

Speaker Change: Thank you. The next question comes from Robin Zhu from Bernstein.

James Gordon Mitchell: One on AI, I mean, there's been, you guys have talked a lot about ads and fintech and so on. But gaming is commonly thought to be one of these areas where, you know, generative AI could potentially have quite a big impact, potentially when it comes to game design, production, AI NPCs, and so on. There are different views on how much is hype and how much is reality. Be curious where you stand on how quickly you want to move on some of these areas.

Robin Zhu: Thank you, management, for taking my question. I have a couple of questions, please.

Robin Zhu: Thank you management for taking my question.

Robin Zhu: A couple of questions. Please.

Robin Zhu: One of them.

Speaker Change: You guys have talked a lot about.

Robin Zhu: Fintech and so on.

Robin Zhu: Gaming is commonly thought to be one of these areas were generative.

Robin Zhu: <unk>.

Robin Zhu: Quite a big impact potentially when it comes to game design.

Robin Zhu: Function.

Robin Zhu: MPC Mpc's and so on.

Robin Zhu: There's been different views on how much is hope and how much is reality, but curious where you stand on how quickly you want to move.

On some of these areas and then I'll follow up again on gaming is I think a.

James Gordon Mitchell: And then a follow up on gaming. I think a couple of quarters ago, you mentioned that there was a period of kind of slowdown in the productivity of AAA game development. Just wanted to get your thoughts on where you are on that. You know, the aspiration to do kind of a new big title on the level of your top games every so often every few years, and the aspiration to do console and PC beyond just mobile.

Robin Zhu: A couple of quarters ago.

You mentioned that there was a periodic kind of slow down.

Robin Zhu: The productivity of a AAA game development just wanted to get your thoughts on where you are on.

Operator: Thank you. Thank you. The next question comes from Robin Zhu from Bernstein.

Robin Zhu: The aspiration to do kind of.

Robin Zhu: It's a new big title on the level of your top games every so often every few years.

Operator: Thank you, management, for taking my question. I have a couple of questions, please. One on AI, I mean, there's been, you guys have talked a lot about ads and fintech and so on. But gaming is commonly thought to be one of these areas where, you know, generative AI could potentially have quite a big impact, potentially when it comes to game design, production, AI NPCs, and so on. There are different views on how much is hype and how much is reality. Be curious where you stand on this, and how quickly you want to move on some of these areas.

Robin Zhu: Duration to do console and PC beyond just the mobile ecosystem.

Speaker Change: Thank you.

James Gordon Mitchell: I think in terms of the application of AI to games, then, you know, like many things, the boundary between, you know, hype and reality is a function of how far forward one's willing to look, and, you know, we're willing to look very far forward. And, you know, all of the areas you mentioned, such as AI-powered NPCs, AI-accelerated graphical content generation, and graphical asset generation, are areas that will benefit meaningfully from the deployment of AI in the years to come, not in the months to come.

Speaker Change: So I think in terms of the application of AI to game spend like many things the boundary between a hide from reality as a function of how far forward one swing similar trends.

Speaker Change: Turning to the bright far forward and all of the areas you mentioned such as AI powered MPC, such as AI et cetera right.

Speaker Change: Graphical content generation basket asset generation.

Speaker Change: Our areas.

Speaker Change: The years to come out over the months to come will benefit meaningfully from the deployment of AI and <unk>.

James Gordon Mitchell: And then a follow up on gaming. I think a couple of quarters ago, you mentioned that there was a period of kind of slow down in the productivity of AAA game development. Just wanted to get your thoughts on where you are on that. You know, the aspiration to do kind of a new big title on the level of your top games every so often every few years, and the aspiration to do console and PC beyond just the mobile ecosystem. Thank you.

James Gordon Mitchell: And I think it's also fair to say that, you know, the game industry has always been a mixture of, on the one hand, innovation around gameplay techniques, and, on the other hand, the deployment of enhanced content, and renewed content into existing gameplay, and it's reasonable to believe that AI will be most beneficial for the second of those activities. But it will continue to require very talented individuals and teams to focus on the first of those opportunities, which is the creation of innovative gameplay.

Speaker Change: It's also fair to say that.

Speaker Change: Industry has always been a mixture of on the one hand innovation around gameplay techniques and on the other hand.

Speaker Change: Deployment of enhanced content renewed content in 10 existing game play.

Speaker Change: It's reasonable to believe that AI will be most beneficial for the second of those activities, but we will continue to require very talented individuals.

Speaker Change: And teams to <unk>.

James Gordon Mitchell: I think in terms of the application of AI to games, then, you know, like many things, the boundary between, you know, height from reality is a function of how far forward one's willing to look, and, you know, we're willing to look very far forward. And, you know, all of the areas you mentioned, such as AI-powered NPCs, such as AI-accelerated graphical content generation, graphical asset generation, you know, are areas that will benefit meaningfully from the deployment of AI in the years to come. And I think it's also fair to say that, you know, the game industry has always been a mixture of, on the one hand, innovation around gameplay techniques, and, on the other hand, the deployment of enhanced content, and renewed content into existing gameplay, and it's reasonable to believe that AI will be most beneficial for the second of those activities.

Speaker Change: Focus on the first if those opportunities which is the creation of innovative game play.

James Gordon Mitchell: You know, secondly, in terms of productivity related to AAA game development, then I think that, for our international studios, there were some bumps due to COVID in the current game development cycle, but those are now largely behind us.

Secondly in terms of.

Speaker Change: Productivity related to AAA game development, and I think that.

Speaker Change: Our international studios and establish some bumps due to COVID-19.

Speaker Change: In the current game development cycle loans, those are now largely behind us and so we believe that and our productivity is now on a more normal for a change.

James Gordon Mitchell: And so, you know, we believe that, you know, productivity is now on a more normal footing. And, you know, looking forward, we have a number of, you know, what we expect to be, you know, substantial hits in the pipeline, both domestically and internationally, and, you know, we're doing, you know, something's the same as before and something's differently. You know, on the other side, we're focusing on fewer bigger budget gains. Typically, we're, you know, seeking to make the biggest bets around games that either iterate on a successful IP, such as, you know, the Honor of King's fighting game around the Honor of King IP, or games that are iterating around proven gameplay success within a niche and taking those to a more mass market.

Speaker Change: And now looking forward.

Speaker Change: We have a number of what we expect to be.

Speaker Change: And a substantial hits and the pipeline, both domestically and internationally and we're doing some things the same as before and some things differently on the differently side with <unk>.

Speaker Change: Focusing on <unk>.

Speaker Change: A few a bigger budget games.

Speaker Change: Typically where.

Speaker Change: Seeking to.

Speaker Change: Make the biggest steps around games to either iterate on a successful IP such as honour of Kings fighting game around the honour of Kings IP or games that are iterating around.

James Gordon Mitchell: But it will continue to require very talented individuals and teams to focus on the first of those opportunities, which is the creation of innovative gameplay. You know, secondly, in terms of productivity related to AAA game development, then I think that, for our international studios, there were some bumps due to COVID in the current game development cycle, but those are now largely behind us.

Speaker Change: Proven gameplay success within a niche and taking those to a more mass market and so.

James Gordon Mitchell: And so, you know, a stereotypical example would be moving the Dark Souls combat into Eldon Ring. In our case, as I mentioned earlier, we have the learnings from games such as Naruto that will be updated with state-of-the-art graphics and technology for games such as One Piece. In addition, on the marketing front, you know, we now cooperate with a range of platforms, including Doyen, both in terms of user-generated content marketing, as well as in paid advertising marketing. So overall, we think those enhance our position, those changes in enhance our position in AAA game releases, and we look forward to the results. Thank you.

Speaker Change: A typical example would be moving the dark souls comeback into out and ring in our case as I mentioned earlier.

Charlene Liu: Thank you. Next question from Charlene Liu from HSEC.

We have the learnings from games, such as <unk> and reach out that will be updated.

James Gordon Mitchell: And so, you know, we believe that, you know, productivity is now on a more normal footing. And, you know, looking forward, we have a number of, you know, what we expect to be, you know, substantial hits in the pipeline, both domestically and internationally. And, you know, we're doing some things the same as before and some things differently. On the differently side, we're focusing on fewer, bigger budget gains. Typically, we're, you know, seeking to make the biggest bets around gains to either iterate on a successful IP, such as, you know, the Honor of Kings fighting game around the Honor of Kings IP, or games that are iterating around proven gameplay success within a niche and taking those to a more mass market. And so, you know, a stereotypical example would be moving the Dark Souls combat into Elden Ring.

Speaker Change: State of the art graphics and technology, but for games such as one piece. In addition on the marketing fronts.

Speaker Change: Now cooperate with a range of platforms, including though in both in terms of the user generated content marketing as well as sandy paid advertising marketing. So overall, we think those enhance our position those changes enhanced position in.

Speaker Change: In a AAA game releases.

Speaker Change: We look forward to the results. Thank you.

Speaker Change: Thank you James.

Speaker Change: Thank you.

Speaker Change: Question from sharing deals on existing fleet.

Charlene Liu: Shelby, your line is open. Okay, yeah, we can hear you. Go ahead. Great. Thank you so much. I have two questions.

Speaker Change: Kevin Your line is open.

Speaker Change: Yes.

Kevin: Yes, we can hear you go ahead. Thank you so much I have two questions first is on <unk>.

Charlene Liu: So I have two questions. The first is about FinTech. Recently, Tenpeng has raised registered capital. I would like to find out a little bit more on how that may be used on consumer loans or perhaps overseas business, and how that would affect Tencent's balance sheet and whether the management can update us on the growth strategy for the FinTech segment in 2024. Can we better understand the benefits which we have been able to reap on the cost front from AI adoption and how much more upside we can expect to see from here, and how long it will take for Tencent to realize these gains? Thank you.

Kevin: Recently <unk> has listed registered capital I would like to find out a little bit more.

Kevin: How that may be used on.

Kevin: Consumer loans are perhaps overseas business, and how would that affect <unk> balance sheet and whether the management can update us on the growth strategy on syntax sentiment in 2024. So that's the first one the second one.

James Gordon Mitchell: In our case, as I mentioned earlier, we have the learnings from games such as Naruto that will be updated with state-of-the-art graphics and technology for games such as One Piece. In addition, on the marketing front, we now cooperate with a range of platforms, including Douyin, both in terms of user-generated content marketing as well as paid advertising marketing. So overall, you know, we think those changes enhance our position in AAA game releases, and we look forward to the results. Thank you. Thank you. Next question from Charlene Liu from HSEC. Chevy, your line is open, Capital.

Kevin: Would be related to AI developments.

Kevin: Obviously, we've seen developments in AI created new revenue streams and cost optimization.

Kevin: For overseas Internet <unk> management has already discussed.

Kevin: Some of the monetization opportunities like Kent.

Kevin: Can we better understand benefit, which we have been able to weak on the cost front from AI adoption and how much more upside we can expect to see from here and how long will it take for Tencent to realize these gains. Thank you.

Operator: I would like to find out a little bit more on how that may be used on consumer loans or perhaps overseas business and how that would affect Tencent's balance sheet and whether the management can update us on the growth strategy for the FinTech segment in 2024. So that's the first one. The second one would be related to AI developments. Obviously, we've seen developments in AI create new revenue streams and cost optimization for overseas internet platforms. The management has already discussed where some of the monetization opportunities lie. Can we better understand the benefits which we have been able to reap on the cost front from AI adoption and how much more upside we can expect to see from here, and how long will it take for Tencent to realize these gains? Thank you. In terms of the syntax side,

Martin Lau: In terms of the syntax side, so Tempe has been approved to increase the registered capital. The money is actually going to be moving from Tencent's balance sheet to Tempe's balance sheet. So since Tempe is actually a consolidated entity, it's not going to change our consolidated balance sheet. And I would say this capital increase is essentially a recognition of the increased size of Tempe's business and also a sign of approval for future development of the company. So we viewed it very positively.

Kevin: In terms of.

Kevin: The Fintech side.

So <unk> has been approved to increase that registered capital.

Substantially.

Kevin: If the money is actually going to be moving from Tencent balance sheet too tempeh balance sheets. So since temporary it's actually consolidated MTT. So it's not going to change our consolidated balance sheet.

I would say this capital increase is essentially.

Kevin: Our recognition.

Kevin: The increased size of <unk> business and also a sign of approval for future development of.

Kevin: The company.

Chi Ping Lau: So Tempe has been approved to increase the registered capital substantially, and the money is actually going to be moving from Tencent's balance sheet to Tenpay's balance sheet. So since Tenpay is actually a consolidated entity, it's not going to change our consolidated balance sheet. And I would say this capital increase is essentially a recognition of the increased size of Tenpay's business and also a sign of approval for future development of the company. So we viewed it very positively.

Kevin: So we view that very positively now in terms of.

Martin Lau: Now, in terms of, you know, our FinTech strategy, I think the FinTech strategy centered around the payment platform. We will continue to build out our payment platform and improve its basic services reliability as a platform that would support economic activities and consumption for the economy. It will continue to roll out new functionalities and better functionalities, including improving the mini programs payment ecosystem so that we not only provide a payment service at the spot for the merchants, right, but we actually also help to establish a link between the merchants and the consumers so that in the future, the merchants and consumers can further interact. Maybe the consumers can actually do repeat purchases; the merchants can do future engagement with the consumers, and they can also provide after-sales service.

Kevin: Our fintech strategy, I think that fintech strategy centered around the.

Kevin: The payment platform.

Kevin: We.

We'll continue to build out our payment platform and to improve its basic services reliability as.

Platform that would support economic activities.

Kevin: And consumption.

Chi Ping Lau: Now, in terms of, you know, our fintech strategy, I think the fintech strategy centered around the payment platform. We will continue to build out our payment platform and improve its basic services reliability as a platform that would support economic activities and consumption for the economy. We'll continue to roll out new functionalities and better functionalities, including improving the mini-programs payment ecosystem so that we not only provide a payment service at the point for the merchants, but we actually also help to establish a link between the merchants and the consumers so that, in the future, the merchants and consumers can further interact. Maybe the consumers can actually do repeat purchases; the merchants can do future engagement with the consumers, and they can also provide after-sales service.

Kevin: For the economy will continue to drill it out.

Kevin: New functionality is embedded functionality, including improving the mini programs.

Kevin: Payment.

Kevin: Ecosystem, so that we not only provide.

Kevin: A payment.

Kevin: As at the spot for.

Kevin: The merchants right now we actually also helped to establish a link between the merchants and the consumers so that in the future the merchants and consumers can further interact with maybe the consumers can actually do repeat purchase the merchants and into future engagement with the consumers and it can also.

Kevin: Provide after sales service. So I think there's a lot that we can do.

Chi Ping Lau: So I think there's a lot that we can do to improve the overall payment experience. We'll provide more tools to SMEs so that they can increasingly digitize their business and gain efficiency. We'll roll out new payment technologies like Palm Payment, for example, in order to increase the convenience of the payment service.

Martin Lau: So I think there's a lot that we can do to improve the overall payment experience. We will provide more tools to SMEs so that SMEs can increasingly digitize their business and gain efficiency. We'll roll out new payment technologies like palm payment, for example, in order to increase the convenience of the payment service. And we'll also improve the payment experience for foreigners in China so that it can help to foster an even more vibrant tourism industry in China.

Kevin: Two.

Kevin: Proof the overall payment experience.

Kevin: We'll provide more tools to smes to that Smes can increasingly digitized business and gaining efficiency.

Kevin: Wrote out new payment technologies like Palm payment for example in order to increase the convenience of the payment service and will also improve the payment experience for foreigners in China right. So that can help to foster EBIT mobile aprons tourism industry in China.

Chi Ping Lau: And we'll also improve the payment experience for foreigners in China so that it can help to foster an even more vibrant tourism industry in China. So if we continue to do that, the payment platform will continue to grow with the economy, grow with consumption, and grow with cashless penetration in China. So on top of that, we also felt that we could actually roll out value-added financial information services such as wealth management, such as loan services, such as installment services that I actually described in the prepared remarks. And these are very high-margin, high-value-added services that we can offer alongside licensed financial institutions. Overall, I think the philosophy for us to grow in the fintech business is that, you know, one, we want to be fully compliant. Two is that we want to make sure that we manage risk in the absolute, in a high-quality manner. We want to create more value than capturing value for merchants and consumers. And at the same time, we want to work on constructive relationships only with licensed financial institutions.

Kevin: Without if we continue to do that the payment platform will continue to grow its economy to grow with consumption and grow with the cashless penetration in China.

Martin Lau: So if we continue to do that, the payment platform will continue to grow with the economy, grow with consumption, and grow with cashless penetration in China. So on top of that, we also feel that we can actually roll out value-added financial information services such as wealth management, such as loan services, such as installment services that I actually described in the prepared remarks. And these are very high-margin, high-value-added services that we can offer alongside licensed financial institutions.

Kevin: So on top of that we also felt that we can actually rolled out our value added <unk>.

Kevin: Information services, such as wealth management, such as loan Servicers, such as installment service that I actually use it.

Kevin: <unk> described in the prepared remarks, and these are very high margin high value added.

Kevin: Services that we can offer alongside with licensed financial institutions overall, I think the philosophy for us to grow in.

Martin Lau: Overall, I think the philosophy for us to grow in the fintech business is that, you know, one is that we want to be fully compliant. Two is that, you know, we want to make sure that we manage risk absolutely.

Kevin: The Fintech business is that one is we want to be fully compliant too is that we want to make sure that we manage risk in the absolute.

Kevin: A high quality manner, we want to create more value within capturing value for merchants for consumers and at the same time, we want to work on constructive relationships with licensed financial institutions and if we can keep on doing all of these radio then the Fintech business will continue to thrive.

Chi Ping Lau: And if we can keep on doing all of these things, then the fintech business will continue to thrive. On the AI question and the cost benefit, then, as you would expect, we are increasingly going to be deploying AI, including generative AI, in areas such as accelerating the creation of animated content, which is a big business for Tencent Video and a profitable business for Tencent, in terms of game content, as we discussed earlier, and potentially in terms of creating code in general. But the benefit will show up not in substantial cost reductions; it will show up in more rapid content creation and, therefore, more rapid monetization and revenue generation. And not to repeat the same point too many times, but the immediate benefit and the biggest benefit are really around the advertising revenue uplift. Martin gave the example of if we can improve click-through rates by 10%, then that's 10 billion renminbi in incremental revenue, probably 8 billion renminbi in incremental growth and operating profit. In reality, you should view 10% as being in the nature of a floor, not a ceiling.

James Gordon Mitchell: [inaudible] On the AI question and, you know, the cost benefit, then, you know, as you would expect, we are increasingly going to be deploying AI, including generative AI, in areas such as accelerating the creation of animated content, which is a big business for Tencent video and a profitable business for Tencent video, in terms of, you know, game content, as we discussed earlier, and potentially in terms of, you know, But, you know, the benefit will show up, not in, you know, substantial cost reductions; it will show up in more rapid content creation and, therefore, more rapid monetization and revenue generation.

Kevin: On the AI question.

Kevin: <unk> benefit.

Kevin: And as you would expect we are increasingly going to be deploying AI and city generative AI in areas such as accelerating the creation of animated content Big business with Tencent video and a profitable business with Tencent video and.

Kevin: In terms of game concepts as we discussed earlier.

Kevin: Potentially in terms of creating code in general.

Kevin: But the benefit will show up not in substantial cost reductions that will show up in more rapid content creation, and therefore more rapid monetization and revenue generation.

James Gordon Mitchell: And, you know, not to repeat the same point too many times, but the immediate benefit and the biggest benefit is really around the advertising revenue uplift. Martin gave the example of if we can improve kick-through rates by 10%, then that's $10 billion in revenue. Being incremental revenue, you know, probably eight billion dollars being incremental gross and operating profit. In reality, you should view ten percent as being in the nature of a floor, not a ceiling.

Kevin: And not to repeat the same point too many times, but the immediate benefit and the biggest benefit is really around the advertising revenue uplift Matson gave the example that if we can improve kick through rates by 10% and Thats attempt again, renminbi and incremental revenue, probably 8 billion renminbi inning.

Kevin: Incremental gross and operating profit in reality, you should view, 10% as being.

Kevin: In the nature of a floor not a ceiling Facebook has seen a substantially bigger improvements in click through rates for some of our most important inventories, we've actually seen uptick to rates and increased <unk> by 100% in the past 18 months. So when we're thinking about where the financial benefits of AI.

James Gordon Mitchell: You know, Facebook has seen substantially bigger improvements in click-through rates. For some of our most important inventories, we've actually seen our click-through rates increase by 100% in the past 18 months. So, when we're thinking about where the financial benefits of AI are, then, you know, it's advertising click-through rates and, therefore, advertising revenue first and foremost, and that's a very high flow-through business for us.

James Gordon Mitchell: Facebook has seen a substantially bigger improvement in click-through rates. For some of our most important inventories, we've actually seen our click-through rates increase by 100% in the past 18 months. So when we're thinking about where the financial benefits of AI will be, then it's advertising click-through rates and, therefore, advertising revenue first and foremost, and that's a very high flow-through business for us. Thank you. Thank you.

Kevin: Then it's advertising click through rates and therefore appetite some revenue first and foremost and that's just very high flow through business for us.

Kevin: Okay.

Speaker Change: Thank you.

Speaker Change: Thank you we will take the next question from Alex Yao from JP Morgan.

Alex C. Yao: Thank you. We will take the next question from Alex Yao from JP Morgan.

Alex C. Yao: management for taking my question. My first question is regarding the recent partnership with Douyin, which we believe had quite a ripple effect on the whole game live streaming and gaming industry. What are the changes you have seen this partnership brought to us? So that's the first one.

Alex C. Yao: And management for taking my question.

Operator: We will take the next question from Alex Yao from JP Morgan. Thank you management for taking my question. My first question is regarding the recent partnership with Douyin, which we believe has quite a ripple effect on the whole game live streaming and gaming industry. What are the changes you have seen this partnership brought to us? So that's the first one.

Alex C. Yao: My first question is regarding the recent partnership with Boeing.

Alex C. Yao: We believe.

Alex C. Yao: Quite a bit reporting package to the whole.

Alex C. Yao: Game live streaming and gaming industry.

Alex C. Yao: One of the changes have you seen this partnership has brought to us. So that's the first one.

Operator: And then the second one is on the path of video account monetization. Clearly, I think the industry incumbent has demonstrated the short video monetization capability across advertising, e-commerce, and local services. What are your thoughts and strategy on video account making inroads into local services? Thank you. Hi Alex.

James Gordon Mitchell: And then the second one is on the path of video account monetization. Clearly, I think the industry incumbent has demonstrated the short video monetization capability across advertising, e-commerce, and local services. What are your thoughts and strategy on video account making inroads into local services? Thank you.

Alex C. Yao: The second one is on the powerful video accounts monetization and clearly I think.

Alex C. Yao: Those tree incumbent that demonstrates the short video monetization capability across advertising e-commerce and local services.

Alex C. Yao: How are your thoughts and strategy on.

Speaker Change: We do account, making inroads into local services. Thank you.

Martin Lau: Hi Alex, maybe I'll answer the first question on marketing our games through additional channels, including Doyin. So, you know, as I mentioned with regard to Robyn's question, we are doing that.

Speaker Change: Hi, Alex So maybe I'll answer the first question on.

James Gordon Mitchell: So maybe I'll answer the first question on marketing our games through additional channels, including Douyin. So, you know, as I mentioned, with regard to Robin's question, we are doing that; we're providing more content that the users then virally share on short video platforms, including video accounts, Kuaishou, Bilibili, Douyin, and so forth. And we're also investing in advertising our games more actively on short video services. So that's on the game marketing side.

Speaker Change: Marketing out games.

Speaker Change: Through additional channels, including <unk>.

Speaker Change: So as I mentioned with regard to structure Robin's question.

Speaker Change: We are doing that we are providing more.

James Gordon Mitchell: We're providing more, you know, content that the users then virally share on short video platforms, including video accounts, Quichaudi, Biddy, Doy, and so forth. We're also investing in advertising our games more actively on short video services. So that's on the game marketing side. Well, in terms of, you know, live streaming e-commerce, I think we have discussed it in detail. And I think it's very, very synergistic with the video accounts, with live streaming, as well as with the advertising that sits within the video accounts.

Speaker Change: Content that the user spend by already shallow and short video platforms, including video accounts quite sharp at EBIT dollar yen and so forth and for us.

Speaker Change: And investing in advertising our games more activity on short video services.

Speaker Change: So that's on the.

Speaker Change: Game marketing side.

Chi Ping Lau: In terms of... You know, live streaming e-commerce, I think we have discussed it in detail. And I think it's very, very synergistic with the video accounts, with live streaming, as well as with the advertising that sits within the video accounts. And if we can actually have a closed loop in terms of knowing who are the merchants, what are the products that were sold, and what was the user experience after the sales, then the ability for us to improve the conversion rate on a full chain basis is actually much stronger. So that's why it's very important for us to build out the e-commerce infrastructure and ecosystem in anticipation of supporting a very long and significant growth in our video accountants advertising Now, on the other hand, I think, you know, local services are actually not something that, you know, we are focused on at this point in time.

Speaker Change: In terms of.

Speaker Change: Life streaming E Commerce, I think we have discussed it in details.

Speaker Change: I think it's very very synergistic with.

Speaker Change: The BDO accountants.

Speaker Change: With life streaming as well as with the advertising that sits within.

Video accounts.

James Gordon Mitchell: And, you know, if we can actually have a closed loop in terms of knowing what merchants, what products that were sold, what the user experience after the sales, then the ability for us to improve the conversion rate on a full chain basis is actually much stronger. So that's why it's very important for us to build out the e-commerce infrastructure and ecosystem in anticipation of supporting a very long and significant growth in our video advertising business.

Speaker Change: And.

Speaker Change: If we can actually have a closed loop.

Speaker Change: In terms of knowing what our merchants what are the products that were so what's the use experience after the sales.

Then the ability for us to.

Speaker Change: Improve.

Speaker Change: The conversion rates.

Speaker Change: On the food chain basis is actually much stronger. So that's why it's very important for us to build out.

Speaker Change: The e-commerce infrastructure and ecosystem.

Speaker Change: In anticipation of supporting.

Speaker Change: <unk> long.

Speaker Change: Significant growth on our <unk> advertising business now on the other thing I think.

James Gordon Mitchell: Now, on the other hand, I think, you know, local services are actually not something that, you know, we are focused on at this point in time. Local services, from our perspective, are actually much more of a provision of content. So along that line, you know, we actually would consider working with our partner, some other partners, For example, Meituan, who have been our close partner for a long time, to actually have them generate the content, and we actually help them to promote the local service.

Speaker Change: The local services is actually not something that we are focused on at this point of time local services from our perspective is actually much more of a.

Chi Ping Lau: You know, local services, from our perspective, are actually much more of a provision of content. So along that line, you know, we actually would consider working with our partner, some other partners, For example, Maytuan, who have been our close partner for a long time, to actually have them generate the content, and we actually help them to promote the local service. Thank you.

Speaker Change: Provide a provision of content so along that line.

Speaker Change: We actually would consider working with our.

Speaker Change: Partner some other partners.

Speaker Change: For example, matewan who happened.

Speaker Change: Are those partner for a long time.

Speaker Change: To actually help them generate the content and we actually help them to promote the local services.

Martin Lau: In the interest of time, we will take the last question from James Lee from Google.

Speaker Change: Thank you in the interest of time, we will take the last question from Gen Z from Mizuho.

Operator: In the interest of time, we will take the last question from James Lee from Google. Thanks for taking my question. Yeah. Go ahead. Yeah, we can hear you.

Speaker Change: Yeah.

James Lee: Thanks for taking my question. Yeah, go ahead. Can you hear me? Yeah, we can hear you.

Gen Z: Thanks for taking my question.

James Lee: Yeah, great. Great. Thanks for taking my questions. On the cloud side, I think a competitor recently announced a pretty large-scale price discount for their cloud offering. So, I'm just curious, what are you seeing in terms of enterprise demand, and probably most importantly, price elasticity? Now, on AI, how should we think about your positioning in the large-language model? Just curious, what stage are you in now?

Gen Z: Okay great.

Gen Z: Thanks for taking my questions. My questions are on cloud and AI on the cloud side I think a competitor recently announced a pretty large scale price discount for their cloud offering. So just curious why are you seeing in terms of enterprise demand and probably most importantly price elasticity.

Operator: Yeah, great. Great. Thanks for taking my questions.

Gen Z: Now ill.

Gen Z: How should we think about your positioning in large language model just curious like what stage are you in now can the model handle multiple modalities of data input and output.

Operator: My question is about the cloud and AI. On the cloud side, I think a competitor recently announced a pretty large-scale price discount for their cloud offering. So, just curious, what are you seeing in terms of enterprise demand, and probably most importantly, price elasticity? Now, on AI. How should we think about your positioning in the large-language model? Just curious, what stage are you in now? Can the model handle multiple modalities of data input and output? And just curious about that position.

Speaker Change: I'm just curious.

Speaker Change: That position at this point thanks.

James Gordon Mitchell: Can the model handle multiple modalities of data input and output? And I'm just curious about that position. Maybe I'll start with the cloud. So, you know, for better or worse, the cloud industry is an industry where input prices are always falling. And so naturally, cloud service providers are always reducing the cost they pass on to their customers. So, you know, price cuts have always existed and will always be the trend within the cloud services industry for as long as, you know, Moore's Law continues to drive down the cost of computing. And we don't see a dramatic change in the competitive situation, just as we didn't see a dramatic change when there was a round of high-profile but low impact price cuts for SMBs a year ago.

Speaker Change: Maybe I'll start with cloud.

Cloud: For better or worse for cloud industry is an industry, where input prices are always falling and so naturally.

Speaker Change: The cloud service providers.

Speaker Change: As always.

Speaker Change: Reducing the cost say Hasan so that customers.

Speaker Change: Price cuts.

Speaker Change: I have always existed and will always be the trend within the service industry for as long as Moore's law continues to drive down the cost of compute.

James Gordon Mitchell: Maybe I'll start with the cloud. So, you know, for better or worse, the cloud industry is an industry where input prices are always falling. And so naturally, you know, cloud service providers are always reducing the costs they pass on to their customers. So, price cuts have always existed and will always be the trend within the cloud services industry for as long as, you know, Moore's Law continues to drive down the cost of computing. And we don't see a dramatic change in the competitive situation, just as we didn't see a dramatic change when there was a round of high-profile but low impact price cuts.

Speaker Change: And we don't see a dramatic change in the competitive situation just as we didn't see a dramatic change.

Speaker Change: Around high profile, but low impact price cuts.

Speaker Change: For Smbs.

James Gordon Mitchell: You know, what matters is, first of all, being cost competitive, and in order to be cost competitive, one needs scale, which, you know, several companies in China are at a similar scale, including us, and one needs supply chain optimization. And, you know, we've been very active in supply chain optimization in the last several quarters. And as we optimize the supply chain, we bring down our input costs faster, and, you know, we can cut our output costs further as a result.

Speaker Change: And what does matter is the festival being cost competitive in order to be cost competitive one need scale, which several companies in China are at similar scale, including us.

Speaker Change: <unk> supply chain optimization, and we have been very active on.

Speaker Change: Supply chain optimization in the last several quarters.

Speaker Change: We optimize the supply chain, we bring down our input costs faster and we can cut our costs.

James Gordon Mitchell: And then, you know, the second factor that matters is the ability to upsell from infrastructure into platforms, such as our security platform, our real-time communications platform, our database platform, as well as upsell into software as a service, including Tencent Meeting and Wecom and other enterprise SaaS products we've spoken about. So that's really where we're focused, delivering more value to our cloud customers by continually optimizing the supply chain and by continually upgrading the depth and complexity of services that we can provide. In terms of our Hoonion model, I think.

Martin Lau: And then, you know, the second factor that matters is the ability to upsell from infrastructure into platforms, such as our security platform, our real-time communications platform, our database platform, as well as upsell into software as a service, including Tencent Meeting and Wecom and other enterprise SaaS products we've spoken about. So that's really where we're focused. It focuses on delivering more value to our cloud customers by continually optimizing the supply chain and by continually upgrading the depth and complexity of services that we can provide.

The rest of the result.

Speaker Change: And then the <unk>.

Speaker Change: Second factor that matters, it's the ability to upsell from infrastructure and.

Speaker Change: Platforms, such as our security platform, our real time communications platform, our database platform as well as upside into software as a service, including Tencent meeting and incentive comp and other enterprise SaaS products, which spoke about so that's really where we're focused on.

Speaker Change: Delivering more value to our cloud customers by continually optimizing supply chain and by continually upgrading.

Speaker Change: At depth and complexity of services, we can provide.

Speaker Change: Okay.

Speaker Change: In terms of.

Martin Lau: In terms of our Konian model, I think you have a talk, actually I've talked about it quite a bit in our prepared remarks. So we believe Yuan is now performing at the top tier in the Chinese language among LLMs in China and worldwide. And we, This belief is supported by the very comprehensive testing that we have done internally. And, you know, from a technology perspective, this is a model that is leveraging the mixture of experts' architecture. That's already scaled up to the trillion parameter mark.

Speaker Change: <unk> model I think.

Chi Ping Lau: You actually have talked about it quite a bit in our prepared remarks. We believe Wen Yuan is actually now performing at the top tier in the Chinese language among LLMs in China and worldwide, and our belief is supported by the very comprehensive testing that we have done internally. And, you know, from a technology perspective, this is a model that leverages the mixture of experts architecture, which has already scaled up to the trillion parameter mark. And also, it's exhibiting very good performance in multi-trend conversations, logical inference, and numerical reasoning, which are some of the toughest areas to conquer in large language models. And at this point in time, we are actually very focused on the tech and technology because this is actually the fundamentals of the model. And from text, you know, we have built out text-to-picture, and from text, we have built out text-to-video capabilities. And the next important evolution is actually, you know, what we have seen with SORA, right?

Speaker Change: We have a hot topic, but actually have talked about it quite a bit in our prepared remarks, we believe.

Speaker Change: When you add actually is now.

Speaker Change: Performing at the top tier.

Speaker Change: And Chinese language, among Oems in China and worldwide.

Speaker Change: We.

Speaker Change: This belief is supported by the very comprehensive testing that we've done internally.

Speaker Change: And.

Speaker Change: From a technology perspective. This is a model that is leveraging the.

Speaker Change: Mixture of experts architecture.

Thats already scaled up to the trillion parameter mark.

Martin Lau: And also, you know, it's exhibiting very good performance in multi-trend conversations, logical inference, and numerical reasoning, which are some of the toughest areas to conquer in large language models. And at this point in time, we are actually very focused on the tech, and technology, because this is actually the fundamentals of the model. And from text, you know, we have built out text-to-picture, and from text, we have built out text-to-video capabilities. And the next important evolution is actually, you know, what we have seen with Sora, right? Sora has done an incredible job with the text-to-long video.

Speaker Change: And also.

Speaker Change: Exhibiting.

Speaker Change: Very good performance, a multi train conversations logical inference and numerical reasoning to some of the toughest areas to conquer in large language models.

And at this point of time.

Speaker Change: Actually very focused on the text.

Speaker Change: But the text.

Speaker Change: Technology, because this is actually the fundamentals of.

Speaker Change: Off of the model and from text, we have build out text to picture from <unk> build out text video capabilities and the next import.

Speaker Change: Important.

Speaker Change: Evolution is actually what we have seen with <unk> solar has done an incredible job with Tex two alone video ad.

Chi Ping Lau: SORA has done an incredible job with text-to-long video. And, you know, we, you know, this is something which will be developing in the next turn. When we continue to improve the text fundamental capability of Hunyuan, at the same time, we'll be developing the text-to-video capability because we think that this is actually very relevant to our core business, which is, you know, a content-driven business in the area of short video, long video, and games. And, you know, that's the area in which we'll be developing and moving our Hunyuan platform into. So, you know, if you look into the future, we feel Huanyuan will continue to be stronger and stronger in the fundamental model capability, and at the same time, it will start to develop better and better text-to-multimedia capability.

Martin Lau: And, you know, we, you know, this is something which we'll be developing in the next, next turn. When, when we continue to improve the text fundamental capability of Hunyuan, at the same time, we'll be developing the text-to-video capability, because we actually think that this is actually very relevant to our core business, which is, you know, content-driven business in the area of short video, long video, and games. And, you know, that's the area we'll be developing and moving our Hunyuan into.

Speaker Change: This is something which.

Speaker Change: With the developing.

And the next next turn.

Speaker Change: When we continue to improve.

Speaker Change: The textbook diminished bento capability when you add at the same time, we will be developing the text to video capability because we actually think that this is actually very relevant to our core business, which is.

Speaker Change: A content driven business in the area of short video long video games.

Speaker Change: And that's the.

The area in which we will be developing and moving our when you add into it.

Martin Lau: So, you know, if you look into the future without, when you will continue to be stronger and stronger in the fundamental modeling capability, and at the same time, it will start to develop better and better text to multimedia capabilities.

Speaker Change: If you look into the future. We felt when you would continue to be stronger and stronger in the fundamental module capability and at the same time <unk> is starting to develop.

Speaker Change: Better embedded text to multimedia capability.

Chi Ping Lau: Thank you. We are now ending the webinar. Thank you all for joining us for our results today. If you wish to check out our press release and other financial information, please visit the IR section of our company website at www.tencent.com. The replay of this webinar will also be available shortly. Thank you.

Operator: Thank you. We are now ending the webinar. Thank you all for joining us for our results today. If you wish to check out our press release and other financial information, please visit the IR section of our company website at www.tencent.com. The replay of this webinar will also be available shortly. Thank you.

Speaker Change: Thank you.

Speaker Change: We are now ending the webinar. Thank you all for joining our results today, if you wish to check out our press release and other financial information. Please visit the IR section of our company website.

Speaker Change: Www <unk> com.

Speaker Change: This webinar will also be available shortly thank you and see you next quarter.

Q4 2023 Tencent Holdings Ltd Earnings Call

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