Q1 2024 Tencent Holdings Ltd Earnings Call

May 14, 2024

Wendy Huang: Limited 2024 First Quarter Results Announcement Webinar. I'm Wendy Huang from the Tencent IR team. At this time, all participants are in a listen-only mode.

Wendy Huang: Limited 2024 First Quarter Results Announcement Webinar. I'm Wendy Huang from the Tencent IR team. At this time, all participants are in a listening-only mode.

People first quarter result announcement webinar.

I'm Wendy Wong from <unk> IR team.

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

Wendy Huang: After the management 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 group meeting application, please click the raise hand button at the bottom left.

Wendy Huang: After the management 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 5 on your telephone to raise your hand. If you are accessing from the Tencent meeting or group 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: For participants who are dialing in by phone if you wish to ask a question. Please press five on your telephone to raise your hand.

Speaker Change: If you are accessing from the Tencent meeting meeting application.

Speaker Change: Click the <unk> button at the bottom left and I think theater Bycatch today's webinar is being recorded.

Wendy Huang: And it seems to me 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 they 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 and non-IFRS measures, please refer to our disclosure documents in the IR section of our website.

Wendy Huang: And please hear the by-judge, today's webinar is being recorded. Before we start the presentation, we would like to remind you that it includes four forward-looking statements, which are underpinned by a number of risks and uncertainties, and they may not be realized in the future for various reasons. 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-IFRS measures, please refer to our disclosure documents in the IR section of our website.

Speaker Change: Before we start with a presentation, we would like to remind you that 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: Information about general market conditions is coming from a variety of sources outside of Tencent.

Speaker Change: This presentation also contains some unaudited non <unk> 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 five of our apps.

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

Wendy Huang: Let me now introduce the management team for the webinar tonight. Our Chairman and CEO, Pony Ma, will kick off with a short overview. President Martin Lau and Chief Strategy Officer, James Mitchell will provide a business review. Chief Financial Officer, Joan Lo, will conclude the financial discussion before we open up the floor for questions. I will now pass the floor to Pong Lin. Thank you, Wendy.

Wendy Huang: Let me now introduce the management team for the webinar tonight. Our Chairman and CEO, Pony Ma, will kick off with a short overview. President Martin Lau and Chief Strategy Officer, James Mitchell will provide a business review. Chief Financial Officer, Joan Lo, will conclude the financial discussion before we open up local questions. I will now pass the microphone to Peng Lin. Thank you, Wendy.

Speaker Change: Let me now introduce I mentioned team on the Webinar Tonight.

Speaker Change: Our chairman and CEO Pony MA will kick off with a short overview Craig.

Huateng Ma: President Martin Lau, Chief Strategy Officer, James Mitchell will provide a industry view.

Huateng Ma: Chief Financial Officer, John Lowe will conclude with financial discussion before we open up local questions.

Huateng Ma: I will now pass it to pony.

Huateng Ma: Thank you Wendy.

Peng Lin: Good evening. Thank you, everyone, for joining us. During the first quarter of 2024, several of our leading games in China and internationally started to benefit from the team organization we put in place, resulting in an increase in game growth receipts and creating a foundation for our game revenue to resume growth in future quarters. We continue to cultivate high-quality revenue streams, including advertising in video accounts and reaching search, mini-games, platform service fees, and e-commerce technology service fees, contributing to our growth and operating profit growth outpacing our revenue growth.

Huateng Ma: Good evening. Thank you, everyone, for joining us. During the first quarter of 2024, several of our leading games in China and internationally started to benefit from the team organization we put in place, resulting in increased in-game revenue receipts and creating a foundation for our games revenue to resume growth in future quarters. We continue to cultivate high-quality revenue streams, including advertising in video accounts and reaching such mini-games platform service fees, and e-commerce technology services, contributing to our growth and operating profit growth, outpacing our revenue growth.

Huateng Ma: Good evening, Thank you everyone for joining us.

Martin Lau: During the first quarter of 'twenty for several of our leading games in China and internationally start to benefit from <unk> organization, we put in place, resulting in increased again gross receipts and creating a foundation for our games revenue to resume growth.

Martin Lau: In future quarters.

Martin Lau: We continue to cultivate a high quality revenue streams, including advertising <unk> accounts.

Martin Lau: And reaching search mini games platform service fees.

Martin Lau: And E Commerce technology service fees.

Pivoting to our.

Martin Lau: Gross and operating profit growth outpacing our revenue growth.

Peng Lin: Executing on our commitment to return excess capital to shareholders, we started up our buyback plan and are on track to repurchase over 100 billion Hong Kong dollars of our shares in 2024, as well as paying an increased dividend, while investing in AI technology, platform enhancements, and high production value content, looking at our financial numbers for the quarter. Total revenue was 160 billion RMB, up 6% year-on-year and 3% quarter-on-quarter. Gross profit was 84 billion RMB up 23% year-on-year and 8% quarter-on-quarter. Non-IFRS operating profit was 59 billion RMB up 30% year-on-year and 19% quarter-on-quarter.

Huateng Ma: Executing on our commitment to return excess capital to shareholders, we started our buyback plan and are on track to repurchase over 100 billion Hong Kong dollars of our shares in 2024, as well as paying an increased dividend while investing in AI technology, platform enhancements, and high production value content. Looking at our financial numbers for the quarter, total revenue was 160 billion RMB, up 6% year-on-year and 3% quarter-on-quarter. Gross profit was 84 billion RMB, up 23% year-on-year and 8% quarter-on-quarter. Non-IFRS operating profit was 59 billion RMB, up 30% year-on-year and 19% quarter-on-quarter.

Martin Lau: Executing on our commitment to return excess capital to shareholders. We started up our buyback plan and are on track to repurchase over 100 billion Hong Kong dollars of our shares in 2024.

Martin Lau: As well as paying an increased dividend, while investing in AI technology platform enhancements and higher production value contract.

Martin Lau: Looking at our financial numbers for the quarter.

Total revenue was 160 billion RMB up 6% year on year, and 3% quarter on quarter.

Martin Lau: <unk> protein plus 84 feet at RMB up 23% year on year, and 8% quarter on quarter.

Martin Lau: Non <unk> operating profit was 59 beat at RMB up 30% year on year at 19% quarter on quarter non.

Huateng Ma: Non-IFRS net profit attributable to equity holders of 50 billion RMB at 54% year-on-year and 18% quarter-on-quarter. Turning to our key services for communication and social networks, combined MAU of reaching and re-chat groups increased year-on-year and quarter-on-quarter to 1.36 billion. For digital content, which reinforces our leadership in long-form video and music streaming, see Tencent Video and TME subscriptions here and here.

Martin Lau: Non <unk> net profit attributable to equity holders was 50 feet at RMB, 54% year on year, and 18% quarter over quarter.

Martin Lau: Okay.

Martin Lau: Turning to our key services for communication.

Martin Lau: And social networks, combined <unk> wishing and reach absolute year on year and quarter on quarter, two one points we succeeded.

Martin Lau: Our digital content.

Enforces our leadership in long form video and music streaming.

Martin Lau: Tencent video and <unk> subscriptions grew year on year.

Martin Lau: For games, we enable active adjustment, driving initial recovery for our flagship game in China and the international market. While several games in our portfolio achieved record highs in gross receipts during the quarter, for cloud, international, and domestic clients for media, entertainment, and live streaming industries. Increasingly Tencent cloud media service. Our Enterprise Fast Product, Recon, and Tencent Meetings at Hun Yuan powered functionalities and increased their adoption by enterprise customers. I will now hand over to Martin for a business review. Thank you, Puneet. Good evening and good morning to everybody.

Martin Lau: For games, we enable active adjustment, driving initial recovery for our flagship game in China and the international market. While several games in our portfolio achieved record highs in gross receipts during the quarter, for cloud, international, and domestic clients for media, entertainment, and live streaming industries. Increasingly Tencent cloud media service. Our Enterprise Fast Product, Recon, and Tencent Meetings, at Hun Yuan powered by functionalities and increased their adoption by enterprise customers. I will now hand over to Martin for a business review. Thank you, Puneet. Good evening and good morning to everybody.

Martin Lau: For games, we made proactive adjustments.

Martin Lau: Driving initial recovery recovery for our flagship KFC, China and international market.

Martin Lau: <unk> in our portfolio achieved revpar higher gross receipts during the quarter.

Martin Lau: For cloud international and domestic declines from media Entertainment and live streaming industry.

Martin Lau: Increasingly feels Tencent cloud media services.

Martin Lau: Our enterprise SaaS product recall and cancer meeting.

Martin Lau: At one year in pilot.

Martin Lau: And narratives.

Martin Lau: Increased adoption by enterprise customers.

Martin Lau: I will now hand over to margin for a business review. Thank you Paulette good evening and good morning to everybody.

Martin Lau: For the first quarter of 2024, our total revenue was up 6% year-on-year. That represented 49% of our total revenue, within which the social networks subsegment was 19%, the domestic games subsegment was 22%, and international games was 8%. Online advertising was 17% of total revenue, and FinTech and business services was 33% of total revenue.

Martin Lau: First quarter of 2024 hour total revenue was up 6% year on year Vas represented 49% of our total revenue within which social networks Subsegment was 19% domestic game segment was 22% and international games was 8% on.

Margin: Advertising was 17% of total revenue and Fintech and business services was 33% of total revenue.

Martin Lau: Our overall gross profit growth, which we consider as a key proxy for our organic growth, was 23% year-on-year in the first quarter, faster than the first half of 2021, when our revenue growth rates were much higher. This was driven by the rapid growth of high-margin revenue streams, including video accounts and WeChat search advertising, wealth management services, mini-games platform service fees, and e-commerce technology service fees. Improved cost efficiency in long form video and cloud businesses also contributed to higher gross profit.

Margin: Our overall gross profit growth.

Margin: We consider as a key proxy for our organic growth was 23% year on year in the first quarter faster than first half of 2021, when our revenue growth rates were much higher.

Margin: This was driven by the rapid growth of high margin revenue streams, including video accounts and <unk> search advertising wealth management services mini games platform service fees and E Commerce technology service fees.

Margin: Proved cost efficiency and a lower form video and cloud businesses also contributed to higher gross profit.

Martin Lau: By segment, Bass gross profit increased 5% year-on-year to $45 billion RMB, representing 54% of our total gross profit. Online advertising gross profit increased 66% year-on-year to $15 billion RMB, contributing 17% of total gross profit. And FinTech and business services gross profit increased 42% year-on-year to $24 billion RMB, contributing 28% of total gross profit. For value-added services, Sackman revenue was R$79 billion, down 1% year-on-year. The social network's revenue was down 2% year-on-year to 31 billion RMB.

Margin: By segment Vas gross profit increased 5% year on year to $2 45 billion RMB, representing 54% of our total gross profit on that advertising gross profit increased 66% year on year 215 billion RMB contributing 17% of total gross profit and <unk>.

Margin: Business services gross profit increased 42% year on year to 24 billion RMB contributing 28% of total gross profit.

Margin: For value added services segment revenue was 709 billion RMB by 1% year on year.

Margin: Social networks revenue was down 2% year on year to 31 billion RMB.

Martin Lau: Revenue from music subscriptions, video accounts for live streaming, mini games, and video subscriptions increased, while revenue from music and games related to live streaming services declined sharply. Long-form video subscription revenue increased 12% year-on-year. Average daily video subscriptions increased 8% year-on-year to $116 million, benefiting from popular self-commissioned drama series and animated series such as Blossoms Shanghai, The Hunter, and Perfect World Season 4. Music subscription revenue increased 39% year-on-year, reflecting growth in subscriptions in Apu. TME strengthened its collaboration with Tencent Video and released the original soundtrack of a popular drama series, The Legend of Shen Li.

Margin: Revenue from music subscriptions video accounts like streaming media games and leader subscriptions increased while revenue from music and games related live streaming services declined sharply.

Long form video subscription revenue increased 12% year on year.

Margin: Average daily video subscriptions increased 8% year on year to 116 billion benefiting from popular self commissioned to drama series and animated series, such as Blossom, Shanghai, The Hunter and perfect World season four.

Margin: Music subscription revenue increased 39% year on year, reflecting growth in subscriptions and our pool.

Margin: Tim you strengthen collaboration with Tencent video and released the original soundtrack of a popular drama series the legend of Shirley.

Martin Lau: Domestic games revenue was down 2% year-on-year to $35 billion RMB. Increased revenue from Valorant, Fight of the Golden Spatula, and Lost Ark was offset by decreased revenue from Honor of Kings and Peacekeeper Elite. As Honor of Kings faced a tough comparison against Chinese New Year of 2023 and Peacekeeper Elite, revenue in the quarter reflected weak monetizable content releases in the recent quarter. However, total gross receipts of domestic games in the first quarter increased 3% year-on-year, showing a general recovery trend.

Margin: Domestic games revenue was down 2% year on year to 35 billion RMB.

Margin: Increased revenue from <unk> site at the Goldman Spatula lost Ark was offset by decreased revenue from honour of Kings Peacekeeper elite as auto Kings faced a tough comparison against Chinese new year of 2023.

Margin: And peace typically lead to revenue in the first quarter reflected weak monetize a boe content releases in recent quarters.

Margin: However.

Margin: Total gross receipts of domestic games in the first quarter increased 3% year on year, showing a general recovery trend.

Martin Lau: International games revenue increased 3% year-on-year to 14 billion RMB, or stable in constant currency terms. On the other hand, those receipts increased by 34% year-on-year, driven by PUBG Mobile and Supercell Games' contributions. However, the growth rate of revenue lagged behind growth receipts due to long deferral periods for Supercell's gain.

International games revenue increased 3% year on year to 14 billion RMB or stable in constant currency terms.

Margin: On the other head.

Margin: Gross receipts increased by 34% year on year, driven by Tuck T mobile and supercell games contributions.

Margin: The growth rates of revenue lagged behind gross receipts due to loan deferral periods for our super sales gains.

Margin: Yeah.

Martin Lau: Moving on to communications and social networks, for Weixin, users are increasingly supplementing their stable consumption of social graph-supplied content in chat and moments with consumption of algorithmically recommended content in official accounts and video accounts, and engagement with many programs' diverse range of services. This trend benefits from our heavy investment in AI, which makes the recommendation better and better over time. For official accounts, which enable creators to share text and images on chosen topics with interested followers.

Margin: Moving on to communications and social networks <unk> users are increasingly supplementing their stable consumption of social graph supply to content in chat and moments.

Margin: With consumption of Algorithmically recommended content and official accounts BDO accounts and.

Margin: And engagement with many programs diverse range of services.

Margin: This trend benefits from our heavy investment in AI, which makes the recommendation better and better over time.

Margin: For official accounts, which enable creators to share text and images and chosen topics with interest of followers.

Martin Lau: It achieved healthy year-on-year pageview growth, as AI-powered recommendation algorithms allowed us to provide targeted high-quality content more effectively. Many programs have become an increasingly powerful platform for merchants and content providers to engage users online and offline. Total user time spent on mini-programs grew over 20% year-on-year in the first quarter, among non-game use cases.

Margin: It achieved healthy.

Margin: Patriot growth.

AI powered recommendation algorithms allow us to provide targeted high quality content more effectively.

Margin: Mini programs have become an increasingly powerful platform for merchants and content providers to engage users online and offline.

Margin: Total user time spent on mini programs grew over 20% year on year in the first quarter amount.

Margin: Among non game use cases.

Martin Lau: Daily activations increased at a double-digit rate year-on-year, particularly in productivity tools, dining services, and transportation. For many games, revenue receipts increased 30% year on year with notable growth from new releases, as well as games released for over three years. Video accounts user time spent grew 80% year-on-year in the first quarter.

Margin: Daily Activations increased at double digit rates year on year, particularly in the activity tools dining services and transportation.

Margin: For many games gross receipts increased 30% year on year with notable growth from new releases as well as games released for over three years.

Margin: Video accounts user time spent grew 80% year on year in the first quarter.

Martin Lau: Time spent on video accounts is now over two times that of moments. We also strengthened our live-streaming e-commerce ecosystem by diversifying merchandise categories and enabling more content creators to monetize through e-commerce activities. Now, with that, I'll pass to James.

Margin: Time spent on video accounts is now over two times that of moments.

Margin: We also strengthened our life streaming e-commerce ecosystem by diversifying merchandize categories, and enabling more content creators to monetize e-commerce activities.

Margin: Now with that I'll pass to James Thank you Martin moving onto domestic games for obviously, a flagship games, we highlighted last quarter proactive adjustments, we made in kitting spreading out the timing of high value virtual item sales through the year and enhancing content design, while the revenues declined in the first quarter. We can see these adjustments are starting to yield results.

James Gordon Mitchell: Moving on to domestic games, for our two flagship games, we highlighted last quarter proactive adjustments we made, including spreading out the timing of high-value virtual item sales through the year and enhancing content design. While their revenues declined in the first quarter, we can see these adjustments are starting to yield results, with gross receipts for each of Honor of Kings and Peacekeeper Elite increasing year-on-year in March. Meanwhile, several of our other games achieved notable milestones during the first quarter. Fight of the Golden Spatula delivered record DAU and ranked third by gross receipts across all mobile games in China during the quarter, driven by popular content updates, including new chibi champions and a customizable arena.

James Gordon Mitchell: Gross receipts for each of honour of Kings Peacekeeper elite increasing year on year in March.

James Gordon Mitchell: Several of our other games achieved notable milestones during the first quarter five of the Golden Spatula delivered record <unk> year and ranked third by gross receipts across all mobile games in China during the quarter driven by popular content updates, including new should be champions and a customizable arena.

James Gordon Mitchell: Crossfire Mobile achieved all-time highs in paying users in gross receipts this quarter, benefiting from new PVE content and an enhanced reward system, and Arena Breakout achieved new milestones in DAU, PANG users, and gross receipts as we released an enlarged map with vehicles and introduced armor and weapons inspired by ancient Chinese culture. We aim to release several high production value games this year, including DNF Mobile next week, Taris Land, Need for Speed Mobile, One Piece Mobile, and Delta Force Hawk Operation.

James Gordon Mitchell: <unk> mobile achieved all time highs in paying users and gross receipts this quarter benefiting from new pve content and enhance reward system.

James Gordon Mitchell: And arena breakout achieved new milestones in <unk> Pang users and gross receipts as we released in a large map with vehicles and introduced omron weapons inspired by ancient Chinese culture.

James Gordon Mitchell: We aim to release several high production value games, this year, including TNF Mobile next week, Paris, Slant need for speed mobile one piece mobile and Salta forceful operations.

James Gordon Mitchell: Among our international games, PUBG Mobile increased DAU and gross receipts by double-digit percentage rates year-on-year in the first quarter, benefiting from popular new modes and featured events, such as the Shadow Force mode and Golden Moon event. Notably, PUBG Mobile is evolving from a game product into a game platform, with increasing user time spent on new modes beyond the original Battle Royale, notably the extraction shooter mode Metro Royale.

James Gordon Mitchell: Among our international games up T mobile increased <unk> and gross receipts by double digit percentage rates year on year in the first quarter benefiting from popular new modes and featured events such as the shadow for Smart and Golden Moon event.

James Gordon Mitchell: Notably pop chemo buys evolving from a game product into a game platform with increasing user time spent on new modes beyond the original battle Royale us, notably the extraction shooter mode Metro right out.

James Gordon Mitchell: Brawl Stars averaged DAU more than doubled year-on-year and gross receipts more than quadrupled year-on-year in the first quarter. The game ranked the third highest mobile game by DAU globally, ex-China, in March. Supercell expanded its development team, enabling the creation of a new five versus five mode, a simplified reward system, and successful community events.

James Gordon Mitchell: Brawl stars averaged more than doubled year on year and gross receipts more than quadrupled year on year in the first quarter.

James Gordon Mitchell: The game ranked the third highest mobile game <unk> globally ex China in March <unk> expanded <unk> development team, enabling the creation of a new five vessels five mode, a simplified reward system and a successful community events.

James Gordon Mitchell: Warframe achieved record high gross receipts in the first quarter with the introduction of a new faster-moving Warframe, the Gauss Prime. For online advertising, our revenue was 26.5 billion renminbi in the quarter, up 26% year-on-year, benefiting from increased engagements and AI-powered ad targeting. Ad spend from all major categories except automotive increased year-on-year, particularly from games, internet services, and the consumer

James Gordon Mitchell: We'll frame a key record high gross receipts in the first quarter with the introduction of a new faster movement will frame the <unk> prime.

James Gordon Mitchell: During the quarter, we upgraded our ad tech platform to help advertisers manage ad campaigns more effectively, and we made generative AI-powered ad creation tools available to all advertisers. These initiatives enable advertisers to create ads more efficiently and to deliver better targeting. For Weixin, video account ad revenue grew over 100% year-on-year due to higher video views and click-through rates. Miniprograms' ad revenue grew over 40% year-on-year, benefiting, among other things, from Minigame's closed-loop effect, whereby Minigame developers both boost demand, being substantial advertisers themselves, but also create supply, as the Minigames provide high CPM rewarded video ad inventory.

James Gordon Mitchell: So online advertising our revenue was $26 5 billion renminbi in the quarter up 26% year on year benefiting from increased engagements and AI powered at targeting AD spend from all major categories, except automotive increased year on year, particularly from games Internet services and consumer goods sectors.

James Gordon Mitchell: During the quarter, we upgraded our AD tech platform to help advertisers manage AD campaigns more effectively and we may generative AI powered AD creation tools available to all advertisers. These initiatives enabled advertisers to create ads more efficiently and to deliver better targeting.

James Gordon Mitchell: <unk> video accounts AD revenue grew over 100% year on year due to higher video views and click through rates. Many programs that revenue grew over 40% year on year benefiting among other features from mini games closed loop effect, whereby many game developers, but Bruce demand.

James Gordon Mitchell: Being substantial advertises themselves, but also creates supply as the mini games provide high CPM rewarded video ad inventory.

James Gordon Mitchell: On content platforms, our long-form video ad revenue increased at a double-digit rate year-on-year, as popular self-commissioned drama series attracted marketing budgets. Looking at FinTech and business services, segment revenue is 52% of bid end revenue and is up 7% year on year. FinTech services revenue slowed to a single-digit year-on-year growth rate. For payments, commercial payment growth moderated due to slow offline consumption spending. Withdrawal fee revenue decreased year-on-year as consumers are increasingly funding commercial transactions with their wages and cash balances and placing these cash balances in money market funds rather than withdrawing the cash balances into bank accounts, which triggers the withdrawal fee revenue.

James Gordon Mitchell: <unk> content platforms, our long form video AD revenue increased at a double digit rate year on year as popular self commissioned drama series attracted marketing budgets.

James Gordon Mitchell: Looking at Fintech and business services segment revenue was 52 billion renminbi up 7% year on year Fintech.

James Gordon Mitchell: Fintech services revenue slowed to a single digit year on year growth rate of payments commercial payment growth moderated due to slow offline consumption spending withdrawal fee revenue decreased year on year as consumers increasingly funding commercial transactions with ablation cash balances and placing these cash balances in money market funds.

James Gordon Mitchell: Robin with growing the cash balance is to bank accounts, which triggers the withdrawal fee revenue.

James Gordon Mitchell: For wealth management, revenue grew robustly year on year, with rapid increases in the number of users and average fund investments per user, primarily invested in low-risk money market funds. Turning to business services, revenue grew at a teens rate year on year in the first quarter, benefiting from higher cloud services revenue and increased technology service fee contribution due to rising video accounts and e-commerce transactions. Business services gross profit more than doubled year-on-year due to increased contributions from higher-margin revenue streams, plus improved efficiency.

James Gordon Mitchell: Wealth management revenues grew robustly year on year with rapid increases in the number of users and average fund investments per user primarily invested in low risk money market funds.

James Gordon Mitchell: Turning to business services revenue grew at a teens rate year on year in the first quarter benefiting from higher cloud services revenue and increased technology service fee contribution due to rising video accounts E Commerce transactions business services gross profit more than doubled year on year due to increased contributions from higher margin revenue streams plus improve.

James Gordon Mitchell: Efficiency.

Shek Hon Lo: Domestic and international clients, especially from the media, entertainment, and live streaming industries, are increasingly adopting our integrated audio and video cloud solution for Tencent Cloud Media Services, which achieved over 50% year-on-year revenue growth. IDC recognized Tencent as the market leader in its sector for the sixth consecutive year. Among our enterprise SaaS products, such as WECOM, merchants are increasingly willing to pay for the use of customer communication functionality. As a result, WECOM revenue tripled year on year, for Tencent Meeting, driving adoption and upselling among enterprise clients, and Tencent Meeting revenue doubled year on year.

James Gordon Mitchell: Domestic and international clients, especially from the media, entertainment, and live streaming industries, are increasingly adopting our integrated audio and video cloud solution for Tencent Cloud Media Services, which achieved over 50% year-on-year revenue growth. IDC recognized Tencent as the market leader in its sector for the sixth consecutive year. Among our enterprise SaaS products, such as WECOM, merchants are increasingly willing to pay for the use of customer communication functionality. As a result, WECOM revenue tripled year on year, for Tencent Meeting, driving adoption and upselling among enterprise clients, and Tencent Meeting revenue doubled year on year.

James Gordon Mitchell: Domestic and international clients, especially from the media Entertainment and live streaming industries are increasingly adopting our integrated audio and video cloud solution for Tencent cloud media services, which achieved over 50% year on year revenue growth.

James Gordon Mitchell: <unk> recognized Tencent cloud media services as the market leader in its sector for the sixth consecutive year.

James Gordon Mitchell: Among our enterprise SaaS products and we come merchants are increasingly willing to pay for use of customer communications functionality. As a result, we come revenue tripled year on year.

James Gordon Mitchell: Tencent meeting, but driving adoption and upselling among enterprise clients and Samsung meeting revenue doubled year on year.

Shek Hon Lo: And for Hanyuan, the main model achieves significant progress as we've scaled up using the mixture of experts approach, and we're deploying Hanyuan in more of our services. Today, we announced that we're making a version of Hanyuan providing text-to-image generative AI available on an open-source basis. And with that, I'll pass to John.

James Gordon Mitchell: And for Hanyuan, the main model achieves significant progress as we've scaled up using the mixture of experts approach, and we're deploying Hanyuan in more of our services. Today, we announced that we're making a version of Hanyuan providing text-to-image generative AI available on an open-source basis. And with that, I'll pass to John.

James Gordon Mitchell: And for <unk>. The main model achieved significant progress with scaled up using a mixture of experts approach and we're deploying Honeywell and more about services today, we announced that we are making a version of <unk>, providing text to image generated NII available on an open source basis.

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

Shek Hon Lo: Thank you, James. Hi everybody. For the first quarter of 2024, total revenue was 159.5 billion renminbi, up 6% year on year, and gross profit was 83.9 billion renminbi, up 23% year on year. Operating profit was $32.6 billion per annum, up 38% year-on-year. Interest income was $4.2 billion per annum, up 43% year-on-year, driven by growth in cash reserves and high interest yield.

John Lowe: Thank you again, everybody for the <unk>.

John Lowe: First quarter of 2024 total revenue was $159 5 billion renminbi up 6% year on year gross profit was $83 9 billion renminbi up 23% year on year.

John Lowe: Operating profit was 32.

John Lowe: Okay.

Up 38% year on year.

John Lowe: Interest income was $4 2 billion renminbi, according to 3% year on year, driven by growth in cash receipts and higher interest yields.

Shek Hon Lo: Finance costs were $2.8 billion RMB, up 7% year-on-year due to higher interest expense; share of profit of Associates and JV was 2.2 billion RMB, up from profit of 0.1 billion renminbi in the same period last year; on and on I of RFP, share of profit was 5.5 billion renminbi versus loss of 0.1 billion renminbi last year, driven by better profitability at certain domestic associate Income tax expense grows by 24% year-on-year to $14.1 billion, primarily driven by operating profit growth and higher provision for withholding tax. I have RFNAP profit attributable to equity holders worth $41.9 billion RMB, up 62% year-on-year. Diluted EPS was 4.386 renminbi, up 66% year-on-year, on Non-Iovirus Financial Figures.

Shek Hon Lo: Finance costs were $2.8 billion RMB, up 7% year-on-year due to higher interest expense; share of profit of Associates and JV was 2.2 billion RMB, up from profit of 0.1 billion renminbi in the same period last year; on and on I of RFP, share of profit was 5.5 billion renminbi versus loss of 0.1 billion renminbi last year, driven by better profitability at certain domestic associate Income tax expense grows by 24% year-on-year to $14.1 billion renminbi, primarily driven by operating profit growth and higher provision for withholding tax. I have RFNAP profit attributable to equity holders worth $41.9 billion RMB, up 62% year-on-year. Diluted EPS was 4.386 renminbi, up 66% year-on-year, on Non-Iovirus Financial Figures.

John Lowe: Finance costs were $2 8 billion renminbi up 7% year on year due to higher interest expenses.

John Lowe: Share of profit of associates, and JV was $2 2 billion renminbi.

John Lowe: Profit up.

John Lowe: Zero one been renovated in the same period last year.

John Lowe: On a non <unk> basis share of profit was $5 <unk> versus last.

John Lowe: Zero, one bit that ran the last year.

John Lowe: Driven by better profitability at certain domestic associates and reduced losses at certain overseas associates.

John Lowe: Income tax expense rose by 24% year on year to $14 1 billion and then be.

John Lowe: Primarily driven by operating profit growth and higher provision for reporting.

I have IRS net profit attributable to equity holders was $41 9 billion renminbi.

John Lowe: Up 62% year on year.

John Lowe: Diluted EPS was $4 three a six <unk> up 66% year on year.

John Lowe: Our non <unk> financial figures.

Shek Hon Lo: Operating profit was 58.6 billion RMB, up 30% year-on-year. Net profit attributable to equity holders was 50.3 billion renminbi, up 54% year-on-year. The difference in year-on-year growth rates between operating profit and net profit was mainly due to non-IFRA share of profit from Associates and JVs, which amounted to 5.5 billion RMB this quarter, compared to lost share of loss of 0.1 billion RMB in the same quarter last year. The looted EPS was 5.263 RMB, up 57% year-on-year, outpacing non-iVirus net profit growth For the first quarter of 2024, our weighted average number of shares for calculating diluted EPS decreased by 1.8% year-on-year.

John Lowe: Operating profit was $38 6 billion renminbi up 30% year on year net.

John Lowe: Net profit attributable to equity holders was 54 3 billion renminbi up 54% year on year.

John Lowe: The difference in year on year growth rate between operating profit and net profit was mainly due to non <unk> share of profit from associates in JV, which amounted to $5 five day than a bit this quarter compared to loss share of loss of zero of 1 billion renminbi in the same quarter last year.

John Lowe: Diluted EPS was $5 263 renminbi.

John Lowe: 57% year on year, outpacing Dawn I, a virus that profit growth, mainly due to reduced share count from share buybacks.

John Lowe: For the first quarter of 2020 for a weighted average number of shares for calculating diluted EPS decreased by one 8% year on year.

John Lowe: Okay.

Shek Hon Lo: Moving on to Gross Market, the overall growth margin was 53%, up 7.3% on year, by segment. Fast gross margin was 57%, up 3%-ish pointy on you. This was due to growth in subscription revenues, an increase in high-margin mini-game platform service fees, and settlement content cost and operating cost savings. Online advertising growth margin increased to 55% of the 13% that they point to here, primarily driven by growth in our video accounts and Weixin's search advertising revenue.

John Lowe: Moving on to gross margins overall.

John Lowe: Overall gross margin was 53% up seven percentage points year on year.

John Lowe: By segment <unk>.

Gross margin was 57% up three percentage points year on year.

John Lowe: This was due to growth in subscription revenues and increasing high margin mini game platform service fees and seven content cause that operating cost savings.

John Lowe: Online advertising gross margin increased to 55% up 13%.

John Lowe: At this point year on year.

John Lowe: Brian were really driven by growth in our video accounts <unk> search advertising revenues.

Shek Hon Lo: FinTech and business services gross margin increased to 46%, up 11 percentage points year-on-year. This was driven by higher contribution from high-margin wealth management services revenues and e-commerce technology services, improved monetization of WeCal and other business services, and increased cost efficiency in our cloud business. Selling and marketing expenses were 7.5 billion RMB, up 7% year-on-year, driven by increased spending on promotion and advertising for new content release. The total represented 5% of revenues, stable year-on-year. R&D expenses were $15.7 billion randomly, up 3% year-on-year. G&A expenses excluding R&D were 9.1 billion RMB, down 3% year-on-year due to a lower staff force including share-based compensation expenses and reduced operating lease and office expenses.

John Lowe: Fintech and business services gross margin increased to 46% up 11 percentage points year on year.

John Lowe: This was driven by higher contribution from high margin wealth management services revenue.

John Lowe: And E Commerce technology service fee improved monetization of recall and other business services and increased cost efficiency in our businesses.

John Lowe: First quarter operating expenses.

John Lowe: And marketing expenses were $7 5 billion renminbi up 7% year on year, driven by increased spending on promotion and advertising or new content release.

John Lowe: The total represents 5% of revenues stable year on year.

John Lowe: R&D expenses were $15 7 billion renminbi up 3% year on year.

John Lowe: G&A expenses, excluding R&D were $9 1 billion renminbi.

John Lowe: 3% year on year due to lower staff costs, including share based compensation expenses and reduced operating lease and office expenses.

Shek Hon Lo: At quarter end, we had approximately 105,000 employees, down 1% both year-on-year and quarter-to-quarter. Now, let's look at our first quadrant on the IFRS Margin Ratio. So Niavara's operating margin was 37%, up 7 percentage points year on year. Similarly, an IFRS net margin was 32%, up 10 percentage points year on year. To conclude, I will highlight some key cash flow and balance sheet metrics. Operating capex for 6.6 billion RMB, up 557% year-on-year from a low base last year, mainly driven by investment in GPUs and servers to support our Huanyuan and AI app recommendation algorithms. On a quarter-and-quarter basis, operating capex was down 1%.

At quarter end, we had a presence at the 105000 employees down 1%, both year on year and quarter over quarter.

John Lowe: Let's look at our first quarter and on IRS margin ratios.

John Lowe: <unk> operating margin was 37% up seven percentage points year on year.

John Lowe: So in <unk> net margin was 32% up 10 percentage points year on year.

John Lowe: To conclude I will highlight some key cash flow and balance sheet metrics.

John Lowe: Operating Capex was $6 6 billion renminbi.

John Lowe: <unk>.

John Lowe: 557% year on year from a low base quarter last year, mainly driven by investment in Gpus on servers to support our one year.

Wendy Huang: Non-operating capex was 7.8 billion RMB, up 127% year-on-year due to the acquisition of land use rights during the border. As a result, total cutbacks was 14.4 billion RMB, up 2,226% year-on-year. Free cash flow was $31.9 billion RMB, largely stable year-on-year or up 52% quarter-on-quarter, primarily due to higher gross receipts from gains. Net cash position was 92.5% of revenue, up 69% year-on-year, reflecting strong pre-cash generation, partially offset by $13.5 billion cash outflow for share repurchase during the quarter. Thank you. Thank you, John. 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.

John Lowe: At recommendation algorithms.

John Lowe: On a quarter on quarter basis, upgrading capex was down 1%.

John Lowe: Non operating Capex was $7 8 billion renminbi up 127% year on year due to acquisition of land use rights during the quarter.

John Lowe: As a result total capex was $14 4 billion renminbi up 2226% year on year.

John Lowe: Free cash flow was $51 9 billion renminbi, largely stable year on year or up 52% quarter on quarter, primarily due to higher gross receipts for games.

John Lowe: Cash position was $92 5 billion renminbi up 69% year on year, reflecting strong free cash generation.

John Lowe: Partially offset by $13 5 billion cash outflow for share repurchase during the quarter. Thank.

Shek Hon Lo: Non-operating capex was 7.8 billion RMB, up 127% year-on-year due to the acquisition of land use rights during the border. As a result, total cutbacks was 14.4 billion RMB, up 2,226% year-on-year. Free cash flow was $31.9 billion RMB, largely stable year-on-year or up 52% quarter-on-quarter, primarily due to higher gross receipts from gains. Net cash position was 92.5% of revenue, up 69% year-on-year, reflecting strong pre-cash generation, partially offset by $13.5 billion cash outflow for share repurchase during the quarter. Thank you. Thank you, John. 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.

Speaker Change: Thank you.

Wendy Huang: If you are accessing from the Tencent meeting or group meeting application, please click the raise hand button at the bottom. We will take one main question after one follow-up question each. The first question comes from Kenneth Fong from UBS. Hi, good evening, management. Thanks for taking my question. My first question is about the online game.

Speaker Change: Thank you John.

Speaker Change: Now open the call for questions. If you are dialing in by phone and provide to raise a question.

Speaker Change: <unk>. So if you are accessing from the Kingdom meeting <unk> application can click a rating button at the bottom.

Unknown Executive: If you are accessing from the Tencent meeting or group meeting application, please click the raise hand button at the bottom. We will take one main question after one follow-up question each. The first question comes from Kenneth Fong from UBS. Hi, good evening, management. Thanks for taking my question. My first question is about the online game.

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

UBS: The first question comes from UBS.

Kenneth Fong: In our last quarter, we highlighted one of our key strategies to rejuvenate our key titles, which is showcasing a robust performance on a supercell game, the recovery of PUBG. Given our rich IP portfolio and strong experience in executing online games, can management share with us how to think about the potential and growth plan ahead and how we can replicate success on our other IPs and titles? And I have a follow-up question on the buyback side.

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

UBS: My first question is on the online game.

Last quarter, we highlight though one of our key strategy to rejuvenate our key titles.

UBS: That is showcasing the robust performance of the Super Bowl game the recovery of <unk>.

Management: Given our rich IP portfolio and strong experience in executing on liking can management share with us how to think about the potential and growth plan ahead, and how we can replicate the success to our other Ips entitles.

Kenneth Fong: In the last quarter, we committed at least $100 billion of buyback last quarter. Given our share price has been going up very meaningfully since last quarter, how should we think about the pace of the buybacks? Would it be more share price-dependent or any other factors that we should consider? Thank you. Hi Kenneth. Thank you for the questions. Perhaps I'll take the one on games and Martin on flyback.

Management: And I have a follow up question on buybacks.

Management: Buybacks sites.

Management: Last quarter, we are committed.

Management: At least 100 billion of buybacks last quarter, given our share price.

Speaker Change: It has been going up very meaningfully since last quarter, how should we think about the pace of the buybacks would it be more.

Speaker Change: Share price dependent or any other factors that we should consider thank you.

Unknown Executive: So for games, you know, as you observe, we have been in the process of, you know, rejuvenating some of our key games. And we believe that process is well underway now. We're confident in the progress of that process. And there are a couple of learnings that we derive from our experience along this journey. You know, what we classify as evergreen games truly do appear to be capable of growing new shoots and indeed rejuvenating themselves as evergreen trees should.

Martin Lau: Hi, Kevin. Thank you for the questions <unk> I'll take that one on games and Martin on buybacks.

Martin Lau: For games.

Martin Lau: As you observe we have been in the process of.

In our rejuvenation some of our key games.

Martin Lau: <unk>.

Martin Lau: We believe that process is.

Speaker Change: Well underway now and we are confident in the progress of that process.

Speaker Change: There's a couple of learnings.

Speaker Change: We derived from our experience along this journey one is that.

Speaker Change: What we classify as evergreen games truly do appear to be capable of.

Speaker Change: Growing new shoots and indeed, rejuvenate themselves as evergreen trees shirt.

Unknown Executive: And you know, a good example would be Brawl Stars, where we cited not only the quadrupling of gross receipts but also the doubling, more than doubling, of daily active users. A second learning is that in the event that, you know, a game which we believe should be an evergreen title is stagnating, then the problem is usually not with the nature of the game; it's with the nature of the team running the game. And we need to make changes to the team, and sometimes the changes are changing mindset; sometimes the changes are changing people.

Speaker Change: A good example would be <unk>, where we decided not only.

Speaker Change: Tripling of gross receipts, but also the doubling more than doubling of daily active users.

Speaker Change: Our second learning is that in the event that a game, which we believe should be an evergreen titles.

Mark Zuckerberg: Stagnating then the problem is usually not with the nature of the game, it's with the nature of the the team running the game and we need to make changes to the team and sometimes the changes are changing mindset, sometimes the changes the changing people.

Unknown Executive: And what we find is that when we make those changes, we see positive results flow quite quickly. And if we don't see the positive results flow, then we make further changes. But the games themselves, you know, these big competitive multiplayer games are inherently evergreen, just as key sports such as football and basketball are inherently evergreen.

Speaker Change: What we find just let me make those changes then we see positive results flow quite quickly and if we don't see the positive results flowed them, we make further changes, but the games themselves.

Speaker Change: These big competitive multiplayer games are inherently evergreen justice.

Key sports such as football basketball.

Speaker Change: Our inherently Africa Green and with.

Unknown Executive: And, you know, with the right people running the games, then we get the right results. In terms of the buyback, we have committed to buying back at least 100 billion Hong Kong dollars of our stock, as we announced last time. And since then, the buyback has been done on a pretty consistent basis. At this point in time, I don't think the buyback is share price dependent because, It is true that the share price has come up quite a bit, but you know, if you look at the share price when it was announced, it was pretty incredible.

With the right people running the games, then we get the right results.

Speaker Change: Okay.

Speaker Change: In terms of the buyback.

Speaker Change: We have committed to.

Speaker Change: Buying back at least a 100 billion.

Speaker Change: Hong Kong holders of our stock.

Speaker Change: Yes.

Speaker Change: Announced last time and since then the buyback has been done on a pretty consistent basis.

Speaker Change: At this point in time, I don't think the buyback.

Speaker Change: Share price dependent because.

Speaker Change: It is true that the share price have come up quite a bit but if you look at the share price when it was announced it was.

Speaker Change: Pretty incredible and.

Unknown Executive: And so even today, the share price is still attractive, given the fact that our profit has increased quite substantially, given the fact that the value of our investment portfolio has been increasing, and also given the fact that our long-term prospects are actually very good. So that's why, you know, we'll continue to pursue our share buyback at this point in time. Thank you, and congrats on a very strong set of results. Thank you. Thank you, Kenneth. Next, we will move to Thomas Chong from Jefferies. Hi, good evening.

Speaker Change: So even today without the share price is still attractive given the fact that.

Speaker Change: Our profit has increased quite substantially given the fact that the value of our investment portfolio has been increasing.

Speaker Change: And also given.

Speaker Change: The fact that our long term prospect is actually.

Speaker Change: Good so thats why we will continue to pursue our share buyback.

Speaker Change: At this point of time.

Speaker Change: Thank you and congrats on a very strong set of results.

Speaker Change: Thank you.

Ken: Thank you Ken is next.

Ken: Sure.

Thomas Chong: Thomas Chong from Jefferies.

Thomas Chong: Thanks, management, for taking my question and congratulations on a strong set of results. My first question is about our advertising business. We see a very good level of momentum in the first quarter.

Thomas Chong: Hi, Good evening, Thanks management for taking my question and congratulation on a strong set of results.

Thomas Chong: My first question is about our advertising business.

Thomas Chong: Good set of momentum in the first quarter, how should we think about our market share gain story and upgrade on the back of macro recovery.

Thomas Chong: How should we think about our market share gain story and the APAC upgrade on the back of the macro recovery? How are we actually seeing the ad sentiment as we come to June 18th? And on video, how should we anticipate the advertising growth momentum over the next few years and the strength of live streaming e-commerce GMB growth to drive our ad revenue? And my second question is about our high-quality growth strategy.

Speaker Change: Or are we actually seeing that sentiment SB come through to mid teens and <unk> accounts.

Alex: How should we we shouldn't be advertising growth momentum open Alex filled yet and the strength of live streaming E Commerce GMB both to drive our revenue.

Alex: And my second question is.

Alex: Our high quality equal strategy.

Thomas Chong: Given our high-quality growth strategy standout and our strong earnings growth momentum, how should we expect our earnings growth and margin trend over the next few years? Should we expect there might be some point that we need to go back to have more reinvestment? And in terms of OPREX, how should we think about S&M expenses over the next few quarters given that we have more content and new game releases? Thank you. Hi Thomas.

Speaker Change: Given our high quality growth our strategy stand out and our strong earnings momentum how should we expect our earnings growth and.

Speaker Change: And margin trend over the next few years should we expect there might be some point that we need to go back to.

Speaker Change: <unk> investment and in terms of Opex, how should we think about <unk> expenses over the next few quarters.

Thomas Chong: And in terms of OPREX, how should we think about S&M expenses over the next few quarters given that we have more content and new game releases? Thank you.

Speaker Change: Given that we have more content and new game releases. Thank you.

Unknown Executive: So on your first question about advertising, you know, I'd say that, as you would expect, given that the economy is mixed, advertiser sentiment is also quite mixed, and it's certainly a challenging environment in which to sell advertising. The first quarter for us is a slightly unusual quarter because it's a small quarter for advertising due to the Chinese New Year effect. And so sometimes the accelerations or the decelerations get magnified as a result.

Thomas Chong: Hi, Thomas So on your first question around advertising.

Thomas Chong: I would say that.

Thomas: As you would expect given the economy. It's mix Advertiser sentiment is also quite mixed and it certainly chat.

Thomas: Challenging environment.

Thomas: In which to start advertising.

Speaker Change: The first quarter for us is a slightly unusual quarter because it's up.

Speaker Change: A small quarter for advertising due to the Chinese new year effect and Sun sometimes.

Unknown Executive: So, you know, we would expect our advertising growth to be less rapid in subsequent quarters of the year than it was in the first quarter and more similar to consensus expectations for our advertising revenue growth for the rest of the year. But that said, we think that we are in a good position to continue taking a share of the market at a rapid rate, given we're very early in increasing our ad load on video accounts, which is currently around one quarter of the ad loads of our major competitors with short video products.

Speaker Change: Sometimes the acceleration so the deceleration get magnified as a result.

Speaker Change: So we would expect our advertising growth should be.

Speaker Change: Less rapid in subsequent quarters of the year than it was in the first quarter more similar to consensus expectations.

Speaker Change: Our advertising revenue growth for the rest of <unk>, but that said, we think that we are in a good position to continue taking share of the market at a rapid rates given.

Speaker Change: Early in increasing our AD load on video accounts.

Speaker Change: Which is currently around one quarter of Fiat loads of our major competitors with short video products and also given where aldi and capturing the benefits of deploying.

Unknown Executive: And also, given that we're early in capturing the benefits of deploying AI to our ad tech stack, and we think that we are benefiting from and will continue to benefit disproportionately from applying AI to our ad tech because, historically, as a social media platform, our click-through rates were low. And so starting from that lower base, we've seen we can double or triple click-through rates in a way that's not possible for ad services that are starting from much higher click-through rates.

Speaker Change: Hi, sure AD Tech stack and we think that we will we are benefiting and will continue to benefit disproportionately from applying AI to our AD tech because historically as a social media platform our click through rates.

Speaker Change: While low and so starting from that lower base, we can.

Aldi: We've seen we can double or triple click through rates in a way that is not possible for AG services that are starting from much higher click through rates. So overall, we remain quite constructive on.

Unknown Executive: So overall, we remain quite constructive about our ability to. We hope to grow our advertising revenue at a decent rate, and we believe we'll also continue to take market share, irrespective of the overall advertising market conditions. Thank you.

Unknown Executive: So overall, we remain quite constructive about our ability to, We hope to grow our advertising revenue at a decent rate, and we believe we'll also continue to take market share, irrespective of the overall advertising market conditions. Thank you. In terms of the high-quality growth strategy, I do want to clarify. That's it.

Speaker Change: Our ability to.

Speaker Change: To grow our advertising revenue.

Speaker Change: Right.

Speaker Change: And we believe we'll also continue to take market share.

Speaker Change: Irrespective of the overall advertising market conditions. Thank you.

Unknown Executive: In terms of the high-quality growth strategy, I do want to clarify. [inaudible] You know, we have always been pursuing a strategy and philosophy of investing in the platform and investing in our user experience and product.

Speaker Change: In terms of the high quality growth strategy I do want to clarify.

Speaker Change: That's.

Unknown Executive: We have always been pursuing a strategy and philosophy of investing in the platform and investing in our user experience and product. [inaudible] monetize on a graduated basis. So the fact that we can now unleash a lot of these growth drivers is not because we are milking our platform or harvesting our platform. It's because of the fact that we have always been investing in our platform, and this is a continuous process. So, I think, you know, that's actually very important.

Speaker Change: Yes.

Speaker Change: We have always been pursuing.

Speaker Change: Our strategy and philosophy of investing in the platform.

Speaker Change: Investing in our user experience and products.

Speaker Change: And.

Speaker Change: And monetize on a gradual basis. So so the fact that we can now I'll finish a lot of these growth drivers.

Unknown Executive: So, the fact that we can now unleash a lot of these growth drivers is not because we are milking our platform or harvesting our platform. It's because of the fact that we have always been investing in our platform, and this is a continuous action. So, I think, you know, that's actually very important.

Speaker Change: Not because we are milking or platform or harvesting our platform. It's because of the fact that we have always been investing in our platform and this will.

Speaker Change: Continuous.

Speaker Change: Action. So so I think that's actually very important.

Unknown Executive: That is the reason the high quality growth drivers become clear eyes because we have actually pruned our business of the lower quality products and services and the distractions, if you will, in our businesses so that we can actually focus on our core platforms and, at the same time, make the growth drivers more obvious and apparent. And we do believe that these growth drivers, be it video advertising, or equation search advertising, or value-added services on top of our payment platform, and, you know, over time, e-commerce services, have a pretty long runway going forward.

Speaker Change: The reason the high quality growth driver has become clearer eyes because.

Speaker Change: We have.

Speaker Change: We have actually prudent our business off the left.

Speaker Change: Quality.

Speaker Change: <unk> and services and the distractions, if you will in our businesses. So that we can actually focus on our core platforms and.

Speaker Change: At the same time make the growth drivers more rps and the parent.

Speaker Change: And we do believe that this growth.

Speaker Change: Drivers be it.

Speaker Change: Video accounts advertising or equation search advertising.

Speaker Change: Sure.

Speaker Change: Value added services on top of our payment platform.

Speaker Change: And.

Speaker Change: Over time, the ecommerce services at these sort of a pretty long runway going forward.

Unknown Executive: And, you know, we have always also been investing in new areas that can serve as growth drivers for the future, including AIs, new games, Weixin e-commerce, and SaaS products, just to name a few. So we felt that, over time, our growth margin should actually continue to benefit from the continued increase of these high-quality revenues. And that has a pretty long run.

Speaker Change: And we are always also been investing in new areas.

Ai: That can serve as growth drivers for the future including AI.

Speaker Change: Including new games, including <unk> E Commerce, and SaaS products just to name a few.

Speaker Change: So we felt over time, our gross margins should actually.

Speaker Change: <unk> to benefit from the continued increase of these high quality revenues.

Speaker Change: And that.

John: So a pretty long runway now in terms of sales and marketing I'll pass to John to answer that question.

Unknown Executive: Now, in terms of sales and marketing, I'll pass that question to John. Yeah, this well, to recap, you know, the selling and marketing expenses grew by 17% year on year. And we expect that the year-on-year growth will be at a lower rate, but somewhere from the low to mid tens in 2024. Having said that, promotion advertising expense is something that we can adjust up and down dynamically according to our needs, and if we can, if we identify some services or products that we need to invest in, we will definitely do it, but with the cost optimization culture and mechanism in mind, we will definitely assess the Thank you. Now, we will take the questions from Alicia Yap.

Shek Hon Lo: Now, in terms of sales and marketing, I'll pass that question to John. Yeah, this well, to recap, you know, the selling and marketing expenses grew by 17% year on year. And we expect that the year-on-year growth will be at a lower rate, but somewhere from the low to mid tens in 2024. Having said that, promotion advertising expense is something that we can adjust up and down dynamically according to our needs, and if we can, if we identify some services or products that we need to invest in, we will definitely do it, but with the cost optimization culture and mechanism in mind, we will definitely assess the Thank you. Now, we will take the questions from Alicia Yap.

Speaker Change: Yes.

John: To recap the selling and marketing expenses grew by 17% year on year, and we expect that the year on year growth will be at a lower rate, but somewhere from low to mid teens in 2020 for having.

Shea: Having said that Shea, who Moshe advertising spend is something that we can't adjust up and down diamond elite According to our needs and if we can.

John: If we identify some services or products that we need to invest we will adapt the day they do it.

Shek Hon Lo: But with the cost optimization culture and mechanism in mind, we would definitely assess the hour vigorously.

Shek Hon Lo: Thank you.

Shek Hon Lo: We will take a question from Alicia Yap Citigroup.

Alicia Yap: Hi, good evening, management. Thanks for taking my questions. Congratulations on a solid quarter.

Alicia Yap: Hi, good evening, management. Thanks for taking my questions. Congratulations on the solid quarter. Two questions.

Alicia Yap: Hi, Good evening management, Thanks for taking my questions. Congrats on the solid quarter two questions. Firstly on the gaming solidly positive growth in the growth of.

Alicia Yap: Two questions. First, on gaming. With the positive growth in the growth of HLK, Peacekeeper, and also Silver Games also achieved record high growth this quarter, the strong growth in the deferral should also bode well for the upcoming revenue growth in the coming quarters. Is there any outstanding adjustment that is still ongoing?

Alicia Yap: First, on gaming. So with the positive growth in the growth of HLK, Peacekeeper, and also Silver Games also achieved record high growth this quarter. So the strong growth in the deferral should also bode well for the upcoming revenue growth in the coming quarters. Is there any outstanding adjustment that is still ongoing?

Alicia Yap: Okay.

Alicia Yap: And also some of our games also achieving record high growth.

Alicia Yap: I think this quarter. So the strong growth in the deferred should also bode well for the upcoming revenue growth in the in the coming quarter is there any outstanding adjustments that is still ongoing or are there any risks or uncertainties on the gaming business that we will.

Alicia Yap: Brian or worry at all.

Alicia Yap: One question.

Alicia Yap: I'm wondering if there's any.

Alicia Yap: The team's application or does it come from application.

Brian: All other developers in China could see an improvement in the <unk>.

Speaker Change: For revenue sharing arrangement in the coming quarter.

Speaker Change: For the uptick in the gross margin for them.

Brian: Thank you.

Unknown Executive: Or are there any risks or uncertainty in the gaming business that we need to be concerned about or worry about? And the second question is wondering if there's any chance the games application or the digital content application by Tencent or other developers in China could see an improvement in the app store revenue sharing arrangement in the coming quarter that might support further uptake in the growth margin for the VAS. Thank you. Hi Alicia, thank you for your questions and for the congratulations. So on the first question around the games, then, yes, deferred revenue growth is a positive leading indicator for game reported revenue growth. But no, we don't see particular risks to call out.

Alicia Yap: Or are there any risks or uncertainty in the gaming business that we need to be concerned about or worry about? And the second question is wondering if there's any chance the games application or the digital content application by Tencent or other developers in China could see an improvement in the app store revenue sharing arrangement in the coming quarter that might support further uptake in the growth margin for the VAS. Thank you. Hi Alicia, thank you for your questions and for the congratulations. So on the first question around the games, then, yes, deferred revenue growth is a positive leading indicator for game reported revenue growth. But no, we don't see particular risks to call out.

Speaker Change: Hi, Thank you for your questions and for the.

Brian: Congratulations.

Speaker Change: On the first question around the games then yes, the deferred revenue growth is a positive leading indicator for game reported revenue growth no. We don't see particular risks to call out we believe with the structural changes. We've made we have somewhat derisked the game business and therefore looking forward focus.

Unknown Executive: We believe with the structural changes we have made, we have somewhat de-risked the game business. And therefore, looking forward, our focus will be on executing the new strategy for the existing games and successfully launching the several major new games we've identified in our pipeline. In terms of your second question around app store revenue sharing ratios, we do believe that app stores are currently over-earning at the expense of app providers, including ourselves, both in China and even more so internationally.

We: He will be on execution of the new strategy for the existing games and successfully launching the several major new games with identified in our pipeline.

We: In terms of your second question around App store revenue sharing ratios.

We: Then we do believe that App stores currently overrunning at the expense of.

Speaker Change: The app providers, including ourselves, but in China are and even more so internationally.

Speaker Change: But for the purposes of our business plan, we assumed that those.

Speaker Change: Revenue sharing arrangements remain as they are today. Thank you.

Speaker Change: Yeah.

Unknown Executive: But for the purposes of our business plan, we assume that those revenue sharing arrangements remain as they are today. Thank you. Alicia. Now, we will take the next question from Gary from Morgan Stanley. Gary, your line is open.

Alicia Yap: Alicia please.

Gary Yu: Our next question from Gary <unk> from Morgan Stanley.

Gary Yu: Yes.

Gary Yu: Thank you. Thank you, management, for taking my question and congratulations on a solid set of results. I have some follow-up questions on the game business. And thank you for the earlier comment regarding what we learned from the Evergreen games. On the same note, what have we learned in terms of whenever we see a potential new game launch? What's the management strategy to try to kind of cultivate games into the next Evergreen game?

Gary Yu: Okay.

Gary Yu: Thank you. Thank you management for taking my question and congratulation on the solid set of results.

Gary Yu: I have a follow up questions on the game business and thank you for the earlier comment regarding what we learn.

Gary Yu: From the evergreen games.

Management: On the same node.

Management: What have we learned in terms of whenever we see a potential new games launch.

Management: Whats the management strategy to try to kind of co debated games into.

Speaker Change: Our next Africa game, I think particularly on the domestic side, we have TNF mobile coming up and then on the international side. We have made we may have more games coming up so how should we look at the strategy for new games launched going forward.

Gary Yu: I think, particularly on the domestic side, we have DNF Mobile coming up, and then on the international side, we may have more games coming up. So how should we look at the strategy for new game launches going forward? And my second question is also a follow-up question on margin upside. Across these business segments, how should we look at the sustainable kind of margin level going forward, given it seems like the margin upside is across the board, across business segments? So how should we look at the kind of relative margin trend going forward for different segments? Thank you.

Management: And my second question is also a follow up question on margin upside.

Management: Across the business segments, how should we look at the sustainable kind of margin level going forward.

Management: It seems like the margin upside is across the board across business happens. So how should we look at the kind of relative margin trend going forward.

Gary Yu: So how should we look at the kind of relative margin trend going forward for different segments? Thank you. So in answer to your question about new games, the gaming industry is a challenging industry for new games because as the evergreen games become better and better, then every new game is competing not only against other new games released around the same time but also against every existing game or the best of all the existing games that have survived and evolved to become evergreen games.

Management: Four different segments. Thank you.

Unknown Executive: So in answer to your question about new games, the gaming industry is a challenging industry for new games because as the evergreen games become better and better, then every new game is competing not only against other new games released around the same time but also against every existing game or the best of all the existing games that have survived and evolved to become evergreen games. And so our response to that is to continually raise the bar on the new games we actually bring to market and focus on fewer but bigger and better new games.

Management: Yes, so on your question about new games.

Speaker Change: The game industry is challenging industry for new games, because as the evergreen games become better and better.

Speaker Change: Then every new game is competing not only against other new games released around the same time, but also against every existing game or the best of all the existing games that have.

unknown: Survived and evolve to become evergreen games, that's true on PC, It's true on mobile as true on constant it's true in China is increasingly true internationally as well where you can see that the time spent on the big consoles as more and more centered around the gigantic evergreen games like fortnite like for the future.

Gary Yu: And so our response to that is to continually raise the bar on the new games we actually bring to market and focus on fewer but bigger and better new games. As you mentioned, despite a fairly subdued start, it is now the third biggest mobile game in China behind two of our other games. So those are some of the thoughts we have and policies we have around new game launches. Gary, on your question around, you know, the sustainability of margins for each segment, it's pretty, you know, a number of factors are at play, including competitive conditions, macroeconomic conditions, you know, seasonality.

Speaker Change: And so our response to that is to continually raise the bar on the new games, we actually bring to market.

Speaker Change: Our focus on fewer but bigger and better and new games.

Speaker Change: Not every new game, we bring to market has a high probability of becoming evergreen there was some new games will bring to market with mature more consciously content driven games, which will have a cycle associated with them and that's fine they can still be.

Speaker Change: And a successful profitable games.

Speaker Change: Players enjoy and love.

Speaker Change: But for those games that we do.

Speaker Change: Spot to the status of evergreen games.

Speaker Change: And the metrics, we focus on not the metrics that you make.

Speaker Change: Most visible externally such as the hype the excitement.

Speaker Change #102: And of downloads that the first state revenues, rather we look at <unk>.

Speaker Change: <unk> supplier engagement, such as the retention rates and it is those leading indicators.

Speaker Change #100: Tell us when a game.

Speaker Change #102: It's a new game that has.

Speaker Change: Moderate launch.

Speaker Change: And we will fade away after a year or two versus.

Speaker Change: And when that's a new game that also have some moderate launch but goes from strength to strength.

Speaker Change: Because what we've seen with fight for the Gulf inspection.

Unknown Executive: As you mentioned, despite a fairly subdued start, it is now the third biggest mobile game in China behind two of our other games. So those are some of the thoughts we have and policies we have around new game launches. Gary, on your question around, you know, the sustainability of margins for each segment, it's pretty, you know, a number of factors are at play, including competitive conditions, macroeconomic conditions, you know, seasonality.

Speaker Change: Mentioned, despite a fairly subdued start is now the biggest mobile game in China behind two of our other games. So those are some of the thoughts we have policies, we have around new game launches.

Speaker Change: Okay.

Unknown Executive: But I think the most important factor over the longer term is the mix of products and businesses within that segment. And so you can see that, you know, all three of our big segments, but particularly for advertising and FinTech and business services, there's been, you know, positive mixed shifts underway, away from lower margin revenue streams and toward higher margin revenue streams. And as Martin articulated, you know, we see those positive mixed shifts continuing for years to come for all three of our segments. And therefore, we believe that, you know, both the margins where they are and also the upward margin trends are sustainable. Thank you, Gary.

Speaker Change: Ah Gary on your question around the sustainability of margins for each segment, it's very.

Gary Yu: And a number of factors at play including.

Gary Yu: Competitive conditions macroeconomic conditions seasonality, but I think the most important factor.

Gary Yu: Over the longer time is the mix of products and businesses within that segment and so you can see that.

Gary Yu: All three of our big segments, but particularly advertising in Fintech and business services, that's been a positive mix shifts underway.

Speaker Change: Okay.

Martin Lau: Way from lower margin revenue streams and toward higher margin revenue streams and as Martin articulated we see those positive mixed shifts continuing.

Martin Lau: Yes to come for all three of our segments and therefore.

Speaker Change: Belief that.

Speaker Change: The margins, where they are and also the upward margin trends are sustainable.

Unknown Executive: We will take the next question from Anna Zhang from Searcy. Hi, management. Thanks for taking my question. My name is Anna Zhang from Guoxin Zhongqian, and it's actually my first time to ask a question.

Gary Yu: Hey, Gary.

Gary Yu: We'll take the next.

Gary Yu: And in Johnstown.

Gary Yu: Thank you.

Johnstown: Hi management, Thanks for taking my question.

Anna Jones: My name is Anna Jones groundbreaking Jones.

Anna Jones: This is actually my first time to ask the question. So the first question I wanted to ask management.

Anna Zhang: So the first question I want to ask management is, we saw Meta improve their Advantage Plus advertising tool based on large language models, and we wonder if management can share more on how Tencent plans to use AI to improve the ad business. And also, in the future, do you think that under the AI development, our competitors, such as Byterdance or Alibaba, will also apply AI to their ad business?

Speaker Change #104: Some may have improved here.

Anna Jones: <unk> past advertising to based on the large bandwidth modules and we wonder if management can share more.

Anna Jones: <unk> plans to use AI to improve the AD business and also in the future do you think.

Management: I didn't mean like our competitors such as Baidu, Dan's, where Alibaba answer applies AI to your AD business. So how do you think that AI will jive to add market share to change in the longer term.

Anna Zhang: So how do you think that AI will drive the ad market shares to change in the longer term? So this is my first question. Thank you. Great. Well, welcome to joining our Q&A, Anna. I'll take the first question, although Martin may supplement.

Q&A moderator: This is my first question. Thank you welcome to joining up Q&A and I'll take the first question out there must be a supplement but.

Unknown Executive: But, you know, tools like Advantage Plus are extremely important in terms of helping social media companies, whether it's Meta or ourselves, grow into being all that they can be on the advertising front because they simplify and automate the advertising buying and advertising targeting processes so that the social media companies can deliver experiences to advertisers that are more competitive with those that have already been delivered by search engines and by e-commerce platforms, but with the advantage that the social media platforms have much greater time spent And so to the second part of your question: a number of competitors are obviously applying AI as well, and we believe that all of them will benefit from AI too.

Management: We believe that in a tools like advantage plus.

Alibaba: <unk> been extremely important in terms of helping.

Alibaba: Social media companies, whether it's metro or ourselves.

Speaker Change #109: Grow into into being all that I can be on the advertising front because a sim.

Speaker Change #108: Simplify and automate the advertising buying in advertising targeting processes. So.

Speaker Change #112: So that the social media companies can deliver experiences to advertisers that are more competitive with those that had already been delivered by search engines by e-commerce platforms, but with the advantage that the social media platforms have much greater.

Speaker Change #112: <unk> spent user engagements than us search engines or e-commerce platforms, and so to the second part of your question around.

Speaker Change #110: A number of competitors are obviously applying AI as well and we believe that all of them will benefit from AI too, but we think that the biggest beneficiaries will be those companies of which we have won that have very substantial under monetized time spent.

Unknown Executive: But we think that the biggest beneficiaries will be those companies, of which we are one, that have very substantial under-monetized time spent and are now able to monetize that time spent more effectively by deploying AI because the deployment of AI enables an upward structural shift in click-through rates, and that shift is most pronounced for those inventories where the click-through rates were lower to begin with, such as the social media inventory. Those tools also allow advertisers who previously were able to create advertisements for search, which are text in nature, but not create advertisements for social media, which are image and video in nature, to now use generative AI to create advertisements for social media.

Sundar Pichai: Now able to monetize that time spent more effectively by deploying AI because the deployment of AI enables an upward structural shift and click through rates and that shift is most pronounced those inventories whether kicked at rates lower to begin with such as social media inventory does.

Sundar Pichai: Tools also allow advertisers to previously.

Speaker Change #119: We're able to create advancements.

unknown: For such which are taxed in nature, but not to create advertisement for social media, which image and video in nature. So now used generative AI to create.

unknown: Advancements in social media. So in general, we think there'll be a reallocation of advertising spend.

Unknown Executive: So, in general, we think there'll be a reallocation of advertising spend toward those services which have high time spent, high engagement, and are now able to deliver increasing click-through rates, and increasing transaction volume more commensurate with the time spent and engagement superiority. Thank you. I see. Thank you so much.

Unknown Executive: So, in general, we think there'll be a reallocation of advertising spend toward those services that have high time spent, high engagement, and are now able to deliver increasing click-through rates, and increasing transaction volume, more commensurate with the time spent and engagement superiority. Thank you. Thank you so much.

unknown: Toward those services, which have high times spent a high engagement and are now able to deliver increase in click through rates, increasing transaction volume more commensurate with the time spent and engagement superiority. Thank you.

Anna Zhang: I do have a follow-up question, um, towards, um, uh, that recently I noticed actually Meta, they announced their, um, the Meta AI function, and it will roll out to all the Meta products such as WhatsApp and like Facebook Messenger, et cetera. And do you think that in the future, Tencent, because we have such a great network product environment, will we have a similar, um, like product like Meta AI Well, I think, you know, we do believe that with the right product.

unknown: Great. Thank you so much I do have a passion to work again.

Unknown Executive: I do have a follow-up question regarding that. Recently, I noticed actually Meta, they announced their Meta AI function, and they will roll it out to all the Meta products such as WhatsApp and like Facebook Messenger, et cetera. And do you think that in the future, Tencent, because we have such a great network product environment, will we have a similar product like Meta AI? Well, I think, you know, We do believe that with the right product.

unknown: Recently, I noticed actually May pass.

unknown: Now.

Speaker Change #115: The main function and digital out to automate how product such as Whatsapp and Facebook amassing drags that youre.

May: Do you think that in the future tense and because we have such a great network product environment, where we have a similar product.

Speaker Change #116: Well I think.

Speaker Change #117: We too believe.

Speaker Change #117: That.

Speaker Change #127: With the right product.

Unknown Executive: Then our WeChat platform and our other products, which have a lot of user engagement, would be great, would be great distribution channels for these AI products, you know, but I think at this point in time, everybody's actually trying out different products that may work. No one has really come up with a killer application yet, with the exception of probably OpenAI.

Anna Zhang: Then our WeChat platform and our other products, which have a lot of user engagement, would be great, would be great distribution channels for these AI products, you know, but I think at this point in time, everybody's actually trying out different products that may work. No one has really come up with a killer application yet, with the exception of probably OpenAI.

WeChat Platform: Then our wechat platform.

WeChat Team: And our other products, which have a lot of user engagement would be great.

Alex C. Yao: We'll be great distribution channels for these AI products, but.

Speaker Change #124: I think at this point of time, everybody has actually trying out.

WeChat Team: <unk>.

Open AI: <unk> that May work no one has really come up with the killer application, yet with exception of probably open AI.

Unknown Executive: [inaudible] you know, that question and answer from them. So I think you should be confident that we have been developing the technology, and we are having the best in class technology in Hunyuan. And at the same time, we are actively creating and testing out different products to see what would make sense for our existing products, and when the time comes, these products will be rolled out on our platform. I see. Thank you so much. I'm sorry, Dad, can I just have one more additional question?

Speaker Change #129: A question and answer so I think I think.

Speaker Change #118: You should be.

Open AI: Be confident that we have been developing the technology and we are having a best in class technology in <unk>.

Speaker Change #125: And at the same time, we are actively.

Speaker Change #120: Creating and testing out different products to see what would make sense for our existing products and as the time comes.

Speaker Change #121: These products will be rolled out on our platform.

Unknown Executive: Because we're really excited about Tencent. And recently, that might be in the interest that we need to say thank you for each. Thank you.

Anna Zhang: Because we're really excited about Tencent. And recently, that might be in the interest that we need to say thank you for each. Thank you.

Speaker Change #121: Thanks, Steve. Thank you so much I am sorry that Craig and I have one more additional question.

Craig: We are really excited for attending and have recently been hardly any interest that we EQM safer today.

Speaker Change #121: Thank you Ani Q4, okay. Thank you.

Unknown Executive: So we will take the next question from Joan Choi from Daiwa. Hey, um, well, thanks for taking my question. And congratulations on a great set of results.

Wendy Huang: So we will take the next question from Joan Choi from Daiwa. Hey, um, well, thanks for taking my question. And congratulations on a great set of results.

Speaker Change #121: So we would take the next question from John Choi from Daiwa.

Hyungwook Choi: I have a question about your business services on the cloud. I realized that, um, you know, some of the new business that we call revenue triple Tencent meeting also doubled. Are we seeing more of an acceleration trend in terms of our adapting our services? And in terms of, you know, given that the cloud business is also very sensitive to macro conditions, are your customers now opening up to or more warmed up to using our services? As a result, hopefully, we should see this trend accelerate towards, you know, the remaining part of the year.

Speaker Change #121: Hey.

Hyungwook Choi: Thanks for taking my question and congratulation on a great set of results I have a quick.

Hyungwook Choi: About your business services on cloud I realize that.

Hyungwook Choi: Some of the new business that we call revenue tripled Tencent meeting also doubled are we seeing a more of acceleration trend in terms of are adopting our services and in terms of given that cloud business is also very sensitive to macro conditions are your customers are now opening up or more warmed up using our services as a result.

Unknown Executive: And I have a quick follow-up question on your wealth management. I think, you know, this has been one of the key drivers of your growth and FinTech services. Can you kind of elaborate a bit more about our strategy here, what we do, where we need to invest and what kind of, you know, further areas, you know, in terms of margins, where you could, you know, benefit from this part of the business, but also the kind of investment that is required to further cultivate and, you know, further develop here?

Hyungwook Choi: And I have a quick follow-up question on your wealth management. I think, you know, this has been one of the key drivers of your growth and FinTech services. Can you kind of elaborate a bit more about our strategy here, what we do, where we need to invest and what kind of, you know, further areas, you know, in terms of margins, where you could, you know, benefit from this part of the business, but also the kind of investment that is required to further cultivate and, you know, further develop here?

Speaker Change #121: Hopefully we should see this trend accelerated towards.

Speaker Change #121: Remaining part of the year I have a quick follow up question on your wealth management I think.

Speaker Change #121: This has been one of the key drivers of your growth in Fintech services.

Huateng Ma: Can you kind of elaborate a bit more about our strategy here, what we where we need to invest in what kind of.

Speaker Change #141: Or are there areas in terms of margins would you get.

Speaker Change #130: The benefit from this part of the business, but also what kind of investments that is required to further cultivate further.

Speaker Change #130: Further development here. Thank you.

Unknown Executive: Thank you. Well, in terms of SaaS, I think what we have seen is our initial success in monetizing these products, which we have been offering as a free service for a long time, and that's actually off a relatively low base.

Hyungwook Choi: Thank you. Well, in terms of SaaS, I think what we have seen is our initial success in monetizing these products, which we have been offering as a free service for a long time, and that's actually off a relatively low base.

Speaker Change #130: Well in terms of size I think.

Speaker Change #130: What we have seen is.

Speaker Change #144: Our initial success in monetizing these products, which we have been offering as a free service for a long time.

Speaker Change #132: And that's actually off.

Speaker Change #134: Relatively low base.

Unknown Executive: So, I think we look at it more as a validation, an early validation of the fact that we can get paid for some SaaS services in China. So we really started from a base case where enterprises are not paying for software, which is very different from, you know, established markets like the U.S., and, you know, we're starting to monetize some value-added services offered to enterprises. But I think, you know, this is still an early stage.

Martin Lau: So, I think we look at it more as a validation, an early validation of the fact that we can get paid for some SaaS services in China. So we really started from a base case where enterprises are not paying for software, which is very different from, you know, established markets like the U.S., and, you know, we're starting to monetize some value-added services offered to enterprises. But I think, you know, this is still an early stage.

Speaker Change #132: So so.

Speaker Change #121: Thank you.

Speaker Change #121: We.

Speaker Change #146: You look at it more as a validation and early validation of the fact that we can get paid for some SaaS services in China.

Speaker Change #150: So we really started from.

Speaker Change #148: Our base case of enterprises are not paying for software.

Speaker Change #131: Which is very different from.

Speaker Change #149: Established markets like the U S.

Speaker Change #131: Ah.

Speaker Change #137: We are starting to monetize.

Speaker Change #133: Some value added services offered to enterprises.

Speaker Change #135: But I think this is still early stage this is stu.

Unknown Executive: This is still, you know, not a big amount of money that we're talking about compared to what the enterprise softwares have been able to achieve in the US. And I think, you know, it will continue to be a very long way for us to grow such revenue. So I don't think it's an acceleration of monetization. It's more of a validation of the initial case.

Martin Lau: This is still, you know, not a big amount of money that we're talking about compared to what the enterprise softwares have been able to achieve in the US. And I think, you know, it will continue to be a very long way for us to grow such revenue. So I don't think it's an acceleration of monetization. It's more of a validation of the initial case.

Speaker Change #139: Not not a big amount of money that we're talking about compared to.

Speaker Change #138: What to enterprise software as had been able to achieve in the U S.

Speaker Change #138: And I think it will continue to be very long.

Speaker Change #138: Sure.

Speaker Change #142: Way for us to to grow such revenue so I don't think its.

Speaker Change #135: Acceleration of.

Speaker Change #135: Monetization.

Speaker Change #155: More of a validation of the initial case and from their point on where we would go.

Unknown Executive: And from that point onward, we would grow it consistently. But we haven't really reached the inflection point yet. But, you know, we'll continue to invest in these soft services because we felt, you know, this is a great service in itself. It's actually providing a great connection for us with the enterprise customers, which we can co-sell other of our cloud and enterprise services. And at the same time, we felt that at some point in time, maybe not in the very near future, you know, that inflection point would come, and we want to be the most competitive and leading player at the time when that inflection point arrives.

Martin Lau: And from that point onward, we would grow it consistently. But we haven't really reached the inflection point yet. But, you know, we'll continue to invest in these soft services because we felt, you know, this is a great service in itself. It's actually providing a great connection for us with the enterprise customers, which we can co-sell other of our cloud and enterprise services. And at the same time, we felt that at some point in time, maybe not in the very near future, you know, that inflection point would come, and we want to be the most competitive and leading player at the time when that inflection point arrives.

Speaker Change #140: So it consistently but we haven't really reached the inflection point yet.

Speaker Change #140: But we will continue to invest in these soft services because we felt this a great service in itself, it's actually providing great.

Someone: Connection for us with the enterprise customers, which we can cross sell other of our cloud and enterprise services and at the same time, we felt as someone pointed time may be in.

Someone: Not.

Speaker Change #143: Very near future that inflection point would come and we want to be the most competitive and leading player at the time with the inflection point comes.

Unknown Executive: Now, in terms of the wealth management service, mainly, mainly our customers put their money into money market funds, which we offer alongside fund management companies. And so instead of, you know, our customers withdrawing the money into their bank accounts or spending the money, they actually, you know, put the money in money market funds. And we've seen an increasing trend around that, partly because there are many more use cases within our payment platform so that people are getting used to putting more money on the platform. And partly because, you know, there is a reduced willingness for consumers to spend. So they actually save more rather than spend more.

Martin Lau: Now, in terms of the wealth management service, mainly, mainly our customers put their money into money market funds, which we offer alongside fund management companies. And so instead of, you know, our customers withdrawing the money into their bank accounts or spending the money, they actually, you know, put the money in money market funds. And we've seen an increasing trend around that, partly because there are many more use cases within our payment platform so that people are getting used to putting more money on the platform. And partly because, you know, there is a reduced willingness for consumers to spend. So they actually save more rather than spend more.

Speaker Change #163: Now in terms of the wealth management service mainly.

Speaker Change #163: Mainly our customers putting their money into money market funds.

Speaker Change #164: In which we offered alongside with fund management companies.

Speaker Change #143: Yeah.

Speaker Change #151: So instead of.

Speaker Change #151: Yes.

Speaker Change #147: Customers withdrawing that.

Speaker Change #147: Money into their bank account or are spending the money they actually put these money in money market funds and.

Speaker Change #165: We have seen an increasing.

Speaker Change #154: Trend around that's partly because of the fact that there are many more use cases within our payment platform. So that people are getting used to putting more money within the platform.

Speaker Change #152: And partly because.

Speaker Change #169: There is a reduced willingness for consumers to spend so they actually save more rather than spend more.

Unknown Executive: And I think, you know, on this front, what we want to do is continue to build up our payment platform so that people are comfortable with entrusting us with more of their wealth and that they can have more use cases so that they can use it for different purposes. That would increase the propensity for people to park their money with us. And we'll continue to work with more fund management companies so that they can offer good money market as well as other wealth management products and services to our customers.

Martin Lau: And I think, you know, on this front, what we want to do is continue to build up our payment platform so that people are comfortable with entrusting us with more of their wealth and that they can have more use cases so that they can use it for different purposes. That would increase the propensity for people to park their money with us. And we'll continue to work with more fund management companies so that they can offer good money market as well as other wealth management products and services to our customers.

Speaker Change #170: And I think.

Speaker Change #153: On this front, what we want to do is continue to build up our payment platform.

Speaker Change #153: That people.

Speaker Change #158: Comfortable in.

Speaker Change #159: And trusting us with more of the well.

Speaker Change #159: And they can have more use cases, so that they can.

Speaker Change #161: Use it for different purposes.

Speaker Change #171: Would increase the propensity for people to.

Speaker Change #157: The money with us.

Speaker Change #162: And we will continue to work with more fund management companies so that they.

Speaker Change #172: Can offer good.

Speaker Change #156: Money market as well as other wealth management products and services to our customers, but at the same time, we also want to make sure that we invest heavily in our risk management so that.

Unknown Executive: But at the same time, we also want to make sure that we invest heavily in risk management so that we really have a very close look and watch over the safety of wealth for our customers. So all these things are being pursued at the same time.

Martin Lau: But at the same time, we also want to make sure that we invest heavily in risk management so that we really have a very close look and watch over the safety of wealth for our customers. So all these things are being pursued at the same time.

Speaker Change #160: We really have a very.

Speaker Change #178: Close look and watch over the safety of the wells for our customers. So all these things are being pursued at the same time. So if we can do all of these revenue. We believe this service will continue to grow on a consistent basis.

Unknown Executive: So, you know, if we can do all these things, we believe this service will continue to grow on a consistent basis. We will take the next question from Charlene Liu from HSBC and the E-Alliance Program. Charlene, can you hear us?

Martin Lau: So, you know, if we can do all these things, we believe this service will continue to grow on a consistent basis. We will take the next question from Charlene Liu from HSBC and the E-Alliance Program. Charlene, can you hear us?

Speaker Change #156: Okay.

HSBC: We will take the next question from shedding deals not HSBC.

Speaker Change #156: So the airline program.

Speaker Change #156: Yeah.

Speaker Change #166: Got it okay.

Charlene Liu: Okay, maybe we will move to the next section to Ronald Keung from Goldman Sachs. Thank you, Wendy, and thank you, Tony, Martin, James, and John, for your sharing. I have two questions.

Wendy Huang: Okay, maybe we will move to the next section to Ronald Keung from Goldman Sachs. Thank you, Wendy, and thank you, Tony, Martin, James, and John, for your sharing. I have two questions.

Speaker Change #156: Okay.

Speaker Change #156: Maybe we will move to the next question to run out come from Goldman Sachs.

Speaker Change #156: Okay.

Speaker Change #180: Thank you.

Speaker Change #156: Thank you Tony and my team's games and John for the sharing two questions. One is I asked about the <unk>.

Ronald Keung: One is, I asked about video accounts and mini programs last year in e-commerce. So I want to hear, where do we see us innovating most in terms of ad tech? We've read about, you talk about ad tech upgrades. So will we leverage video accounts, live streaming, and mini programs, maybe on any ROI-based ad product? [inaudible] Hi Ronald.

Tony: Video accounts mini program last year on E. Commerce, So wanted to hear where do we see we we are innovating most in terms of AD tech regret about talking about AD tech upgrades. So.

John: So we leverage video accounts like streaming and mini program, maybe on any ROI based.

John: And I have a follow up question.

Tony: Okay.

Unknown Executive: So, you know, in ad tech, we're innovating around the process of targeting ads using artificial intelligence. We're innovating around helping advertisers manage their advertising campaigns. And then most recently, we've been, and we are now deploying Kunyuan to facilitate advertisers creating their advertising content.

Ronald Keung: So, you know, in ad tech, we're innovating around the process of targeting ads using artificial intelligence. We're innovating around helping advertisers manage their advertising campaigns. And then most recently, we've been, and we are now deploying Kunyuan to facilitate advertisers creating their advertising content.

Ronald: Hi, Ronald so on AD Tech we're innovating.

Ronald: Around the process of targeting the ads using artificial intelligence, we're innovating around helping advertisers manage the advertising campaigns and then most recently we have been we are now deploying <unk> to facilitate advertisers.

Ronald: Creating the.

Ronald: Advertising content.

Unknown Executive: So those are three areas where we're driving innovation that are contributing to the rapid revenue growth you're seeing for our advertising business. Okay, and then my fourth question is on our investment portfolio, given it's a very sizable, nearly 130 billion US dollars in value. So, do we have any thinking on consistent or any distribution policies after the JD and Meituan distributions in the past?

Ronald: So those are three areas, where we're driving innovation.

Speaker Change #176: Contributing to the <unk>.

Speaker Change #186: Our rapid revenue growth, you're seeing for our advertising business.

Speaker Change #187: Okay and then my follow up question is on our investment portfolio, given it's a very sizable nearly 130 billion U S dollars.

Speaker Change #177: In values so do.

James Lee: Can we do we have any thinking on consistent or any distribution policies. After the J D. In Maitland distributions in the past.

Unknown Executive: I'm thinking about any predictable policies so that the market will even more actively value this part of the value given the substantial market value within Tencent. Well, on that front, you know, we have been working with some of our investee companies, and you know, many of them have been working unprompted by themselves to enhance their profitability. And so if you look at, you know, the non-IFRS Associated Income that we reported this quarter of, you know, a little over 5 billion renminbi, that's up very sharply year-on-year. And, you know, it annualizes to a number in the 20s of billions of renminbi.

Ronald: I think.

Speaker Change #173: I'm thinking about any predictable policies, so that the market will.

Speaker Change #191: Even more actively valued as part of the value given the substantial.

Speaker Change #173: Market value within Tencent. Thank you.

Speaker Change #199: On that front.

Tencent: We have been working with some of our invested companies many of them have been working unprompted by themselves to enhance their profitability.

Speaker Change #190: I'm sorry, if you look at it.

Speaker Change #192: The non ifr Ias.

Tencent: Associate income that we reported this quarter of a little over 5 billion renminbi, that's up very sharply year on year and Gino.

Gino: Annualized this to a number in the <unk>.

Gino: <unk> billions.

Unknown Executive: So, you know, to the extent that investors are valuing Tencent's overall earnings at a certain multiple, then implicitly, they're now valuing our investment portfolio at several hundred billion renminbi. But there is still a gap between that implicit valuation through our multiple and the associated income contributing to our multiple of several hundred billion renminbi versus the sort of intrinsic value or the market value of the portfolio, which is substantially higher But, you know, as the associates, you know, as companies like, like, Pinduoduo become steadily more profitable, then, you know, more and more that gap will narrow as the profitability of the associates gets directly reflected in our own net income. And at this point in time, we don't really have a plan to distribute any stocks for now.

Speaker Change #182: <unk> b so to the extent the investors are valuing.

Gino: <unk> overall earnings that assesses multiple with an implicitly valuing.

Speaker Change #198: <unk> investment portfolio.

Bass: Several hundred billion renminbi, there is still a gap between bass implicit valuation through our multiple and the associate income contributing to a multiple of several hundred billion renminbi versus the sort of intrinsic value or the market value of the portfolio.

Peng Lin: Which is substantially higher.

Speaker Change: You know as the associates as companies like Pandora become steadily more profitable than more and more that gap will narrow itself as the profitability of the associates get directly reflected in net income.

Bass: Thank you Jan at this point in time, we don't really have a plan to distribute.

Jan: And as stock for now.

Unknown Executive: And as a matter of fact, you can see in the past few years, we have been investing most of our cash flow into our investment portfolio. And that's at a time when the market was seeing very fast growth, and there were new companies being formed and growing to very large sizes. And as a result, we actually benefited a lot from investing in these companies.

Jan: As a matter of fact, you can see in the past few years right. We have been investing most of our cash flow into our investment portfolio.

Jan: And that's at a time when the market was seeing very fast growth and there are new companies being formed.

Speaker Change #205: Grow two very quick fast large size and as a result, we actually benefited a lot from investing in these companies.

Unknown Executive: And at the same time, the investment also helped us a lot in terms of building ecosystems on our core platforms. So if you look at, for example, games, we have been able to invest in a lot of game studios, which help us to get access to the international market as well as get a hold of a lot of evergreen and large titles. And in the music industry, for example, we have invested in Spotify and also upstream in order for us to establish a very strong position for TME in China.

Peng Lin: And at the same time.

Speaker Change #188: Investment also help us a lot.

Speaker Change #194: In terms of building ecosystems on our core platform. So if you look at for example games, we have been able to invest.

Speaker Change #184: Invest in a lot of game studios, which help us to get access to international market as well as <unk>.

Speaker Change #197: Get a hold of.

Speaker Change #189: A lot of evergreen.

Speaker Change #189: Large titles.

Speaker Change #189: And in the music industry. For example, we have invested in Spotify and also upstream in order for us to establish a very strong position with GM in.

Unknown Executive: And on the payment side, we have actually invested in companies that have actually contributed to a lot of use cases, right? So both strategically and financially, the investment portfolio has actually generated a lot of return for the shareholders. But now it has reached a very, you know, big size, and some of the companies are as mature as we actually distribute. And now, given the size of the portfolio, we don't actually think we're gonna have to put additional money into it.

GM: In China.

Peng Lin: And in the payment side, we have actually invested in companies, which actually contributed to a modest use cases, so both strategically and financially the investment portfolio has actually generated a lot of return for the shareholders.

Speaker Change #189: But now it has reached a very.

Speaker Change #189: Big size.

Speaker Change #189: And some of the companies as it matures would actually distribute.

Speaker Change #189: And.

Speaker Change #193: Now given the size of the portfolio, we don't actually ambition, we're going to have to put additional money into it.

Unknown Executive: You know, if we need to pursue new initiatives, we can actually recycle some of the investments. [inaudible] That's the way we think about it. Thank you very much. We have successfully reconnected with Charlene Liu from HSTC. Charlene, your line is open.

Speaker Change #196: If we need to pursue new.

Peng Lin: Initiatives, we can actually recycle some of the investments.

Peng Lin: Within the portfolio. So so the contribution to the <unk>.

Peng Lin: Shareholder value is that the free cash flow of the company that can actually be used for.

Speaker Change #196: Shareholder.

Peng Lin: Activities, such as a dividend paying patents share buyback.

Speaker Change #195: Got it I think the way we think about it.

Speaker Change #195: Yeah.

Speaker Change #195: Okay.

Speaker Change: Thank you and that we have successfully reconnected with Shenandoah.

Speaker Change: So maybe your line's open.

Charlene Liu: Thank you so much, Wendy. Really appreciate the opportunity. I have two questions. I think the first is about applications. We can't hear, can you repeat that question? Yeah, so management has been spooking quite extensively on how So Yuen can benefit as, Can we talk about applications of AI to the game business? How does management expect... Sorry, we can't hear you, sorry, we can't hear you.

Shenandoah: So we're trying to really appreciate the opportunity.

Speaker Change: I have two questions I think first.

Shenandoah: Sure.

Charlene Liu: Sorry. I'm sorry. Your line is not stable.

Speaker Change #195: Management.

Speaker Change #195: Okay.

Speaker Change #210: Can you repeat that question.

Speaker Change #195: Okay.

Speaker Change #195: Yes so.

Speaker Change #203: <unk> spoken quite extensively earn outs.

Speaker Change #195: Yes.

Speaker Change #208: Can you talk about applications.

Charlie: John This is Charlie.

John: I'm asking it.

Charlie: See I think.

Charlie: So we kept kyocera solar.

Unknown Executive: I'm sorry, your line is not stable. Maybe we will catch up offline and so... Is it better? Sorry, is it better? Yeah, one more try, maybe.

Speaker Change: We calculated 70, Elias not stable, maybe we would catch up offline.

Charlene Liu: Maybe we will catch up offline. And so... Is it better? Sorry. Is it better?

Charlie: And is it better.

Charlene Liu: Yeah. One more try, maybe. Okay. Sorry. Thank you so much. Really appreciate this. Can we talk about Hui Yuan's potential application in the game business and, you know, how does management expect that to play a larger role to help in game production? It doesn't... Okay. Sorry.

Speaker Change: Alright is it better yes, one more try maybe okay. Sorry. Thank you so much really appreciate this.

Charlene Liu: Okay, sorry. Thank you so much. I really appreciate this. Can we talk about Huiyuan's potential application in the game business and, you know, how does management expect that to play a larger role to help in game production? It doesn't...

Speaker Change #206: Can we talk.

Charlie: Honestly you answer.

Charlie: Actual application on the game business and in <unk>.

Speaker Change: How does management expect that to play a larger role to help in game production does.

Unknown Executive: Okay, sorry. Thank you. Thank you for the opportunity. I think for Huiyuan, you know, the... [inaudible] will be assisting the game business in multiple ways. Right now, the best contributor is actually on the customer service front. When Huanyuan is deployed to answer questions and be a customer service bot for a lot of our games, it's actually achieving a very high customer satisfaction level. And AI in general has already been deployed in our games, but not necessarily the generative AI technology yet.

Speaker Change: Okay, sorry. Thank you. Thank you.

Unknown Executive: Thank you. Thank you for giving me the opportunity. I think for Hui Yuan, you know, the... [inaudible] will be assisting the game business in multiple ways. Right now, the best contributor is actually on the customer service front. When Huanyuan is actually deployed to answer questions and be a customer service bot for a lot of our games, it's actually achieving a very high customer satisfaction level. And AI in general has already been deployed in our games, but not necessarily the generative AI technology yet.

Charlie: But when you're on.

Charlie: Yes.

Speaker Change #211: Okay great.

Speaker Change #211: It can.

Speaker Change #207: Be assisting game.

Peng Lin: And this in multiple ways right now.

Charlie: First.

Speaker Change #212: The best contributor is actually on the on the.

Speaker Change #204: The customer service front.

Peng Lin: This is actually deployed.

Peng Lin: To answer your questions and be customer service spot for a lot of our games is actually achieving very high customer satisfaction level.

Speaker Change #204: Level.

Peng Lin: And AI in general has already been deployed in in our games.

Peng Lin: But not necessarily the generative AI technology yet.

Unknown Executive: In terms of Hunyuan, I think over time, when we can actually move Hunyuan into a multi-model platform, and especially if we can start creating really high quality, high-fidelity videos, then that would actually be helpful. Before that happens, Hunyuan can actually be used in NPCs and create a certain sort of interactive experiences, but it's not going to be able to take over the very heavy growth of content creation in gaming yet.

Speaker Change: In terms of when you and I think over time, when we actually said it can move when you add into a multi model and especially if we can start creating really high quality high fidelity <unk>, then that would actually be helpful.

Speaker Change: Before that happens and when you can actually be using mpc's create.

Speaker Change: Certain sort of interactive experiences, but it's not going to be able to take over the very heavy.

Peng Lin: Growth of content creation in gaming yet.

Unknown Executive: I think it will probably be a couple more generations before it can be deployed for game production. Thank you, Charlene; we will follow up with you on your other questions. So next, we will move to Alex Yao from JPMorgan. Thank you, management team, for taking my question, and congratulations on a strong quarter. I have two questions.

Speaker Change: I think it will probably be a couple more generations before it can be deployed for game.

Speaker Change #204: Production.

Speaker Change: Thank you Shelly.

Speaker Change #204: It up with you on your other question. So next was a move to Alex Yao from Jpmorgan.

Speaker Change: Thank the management team for taking my question and congrats on a strong quarter.

Alex C. Yao: Number one is the fintech business. Can you elaborate on the slowdown in the fintech business, perhaps decomposing the business into payment and non-payments? And also, how should we think about the medium-term growth outlook for the fintech business as a whole?

Speaker Change: I have two questions number one is the theme parks business can you elaborate.

Peng Lin: Slowdown of the Fintech business.

Alex C. Yao: Haps decomposed the business into payment and non payments.

Speaker Change: And also how shall we think about the medium term growth outlook for the Fintech business.

Alex C. Yao: And the second question is on WeChat search, which seems to be picking up monetization momentum in recent quarters. Can you discuss the strategy to monetize WeChat search activities? It would be great if you could share with us some of the operating metrics just to help us understand the length of the runway.

Speaker Change: The Hull and the second question is on the wishing search which seems to be.

Speaker Change: Picking up monetization momentum in recent quarters can you discuss strategy to monetize wishing search activities.

Speaker Change: It will be great. If you can share with us some of the operating metrics just to help them.

Speaker Change: <unk> on a stand events off the wrong way. Thank you.

Unknown Executive: Thank you. In terms of FinTech, I think the most important reason for the slowdown is actually the headwind on offline consumption. And we felt this is... a phenomenon which you probably see across many other industries as well. [inaudible] You know, as a whole, the government is actually putting in a lot of stimulus to revive the economy, to revive consumer confidence. And at some point in time, we'll believe this headwind will actually turn.

Peng Lin: In terms of Fintech I think the most.

Peng Lin: Of the reason for the slowdown is actually.

Peng Lin: Headwind on <unk>.

Speaker Change #209: Flying consumption.

Speaker Change #209: And.

Peng Lin: We felt this is.

Speaker Change: Ah phenomena, which.

Peng Lin: Youll, probably see across many other industries as well.

Peng Lin: We felt.

Speaker Change: As a whole with the government is actually putting in a lot of stimulus.

Speaker Change: Two two.

The government: Revive the economy to revive consumption confidence and at some point of time, we believe this.

Speaker Change: Headwind will actually turn up but we are before it turns then I think our our fintech.

Unknown Executive: But before it turns, then I think our FinTech revenue on the payment side, which forms the bulk of the revenue of FinTech, would actually be slow in terms of its growth. And on the other hand, in terms of the withdrawal fee, I would say this is, anyway, a low-quality revenue. The withdrawal fee is essentially people pulling money out of the system, and that would be a one-time revenue, but then the money actually leaves the system. Withdraw less, and then the money would actually stay within our system for longer. It will not generate an immediate revenue, a point of withdrawal, but it will be turned into an asset under management and will continue to generate wealth management fees over time.

Peng Lin: Revenue on the payment side, which.

Peng Lin: <unk> the bulk of the revenue of Fintech would actually be slow in terms of its growth.

Peng Lin: And on the other hand in terms of.

Speaker Change: The withdrawal fee I would say this is.

Speaker Change: Anyway low quality revenue.

Speaker Change: With 12 volt is essentially people pulling money out of the system and that will be one time revenue, but then the money I shouldn't leave the system when people.

Speaker Change: Withdraw less than.

Peng Lin: And that the money would actually stay within our system for longer it will not generate an immediate rapid deal appoint withdrawal, but it will be turned into asset under management and will continue to generate.

Unknown Executive: So that actually turns into a longer-term, high-value added revenue. And in terms of wealth management services, I think it will continue to grow for the reasons that I talked about earlier. Now for loan and generation fees, I think, you know, we are getting a little bit more cautious, right, you know, as there is a macro headwind, and you know, we want to be very, very vigilant on risk management. So that's sort of, you know, how we look at the different components of the fintech revenue. Uh, and, uh, what was the other question?

Peng Lin: Wealth management fees over time, so with that actually turns into a longer term high value added.

Unknown Executive: So that actually turns into a longer-term, high-value added revenue. And in terms of wealth management services, I think it will continue to grow for the reasons that I talked about earlier. Now for loan and generation fees, I think, you know, we are getting a little bit more cautious, right, you know, as there is a macro headwind, and you know, we want to be very, very vigilant on risk management. So that's sort of how we look at the different components of FinTech revenue. Uh, and, uh, what was the other question?

The government: Revenue.

Peng Lin: And in terms of.

Speaker Change: Management services I think it will continue to.

Peng Lin: Grow for the reasons that I talked about earlier now four four.

Peng Lin: For loan.

Speaker Change: Generation fees I think we.

Peng Lin: Getting a little more cautious right.

Peng Lin: There is a macro headwind then we want to be very vigilant.

Peng Lin: Vigilant on risk management, so that's sort of how we look at the different components of the Fintech revenue.

Unknown Executive: Oh, in terms of Asian Search, uh, I think... It's a service which has been growing in terms of, you know, the usage and in terms of, the search volume at a very healthy rate. So the service itself is growing, and we have been monetizing that service on a relatively light basis. In fact, it was only last year that we started monetizing WeChat search. So with the combination of the fact that there is a very large engagement with Weixin and the fact that Weixin search itself is actually growing in volume, and that there is an expanding content ecosystem within Weixin, be it official accounts, be it mini programs, and then be it video accounts.

Speaker Change: And what was the other question relation or in terms of basic search I think.

Peng Lin: It's a service which has been growing in terms of.

Peng Lin: The usage and in terms of.

Speaker Change #214: The search volume.

Peng Lin: On a very healthy rate. So the service itself is growing and.

Peng Lin: We have been monetizing that service on a relatively light basis. In fact, it just started last year that we started monetizing wechat search.

Unknown Executive: And relatively early in the monetization cycle, all these factors will contribute to a pretty long runway in terms of our continued growth of search revenue on Weixin. Thank you. In the interest of time, we will take the last question from Robin Zhu from Bernstein. Robin, your line is open.

Peng Lin: So with the combination of the fact that there is a very large engagement.

Peng Lin: Ration and.

Peng Lin: The fact that we.

Peng Lin: <unk> search itself is actually growing in volume.

Peng Lin: And if there is an expanding.

Peng Lin: <unk> content ecosystem within ration B official accounts mini programs and <unk> video accounts.

Peng Lin: And with relatively early in the monetization cycle. All of these factors will contribute to a pretty long runway in terms of our.

Peng Lin: Continued growth of the search revenue on <unk>.

Speaker Change: Thank you in the interest time, we're going to take the last question from Robin Zhu from Bernstein.

Speaker Change: Your line is open.

Robin Zhu: Thank you. Hi management. Thanks for taking my questions. I guess just two, please.

Robin Zhu: Thank you Hi management, Thanks for taking my question I.

Speaker Change #214: I guess just two please one James I think at one point, you said that you thought.

Robin Zhu: One, James, I think at one point you said that you think video account monetization could be as big as moments. Now, video accounts. Engagement is two acts of moments. Could I get your thoughts on the intensity of ad revenues? Her engagement and, you know, is there any reason why the two couldn't equalize, meaning that actually, the total monetization of video accounts ends up being much larger than Melbourne? Bear in mind what you said a year or two ago now.

Speaker Change: Inc. Video accounts monetization could be as big as moments.

Speaker Change: The video comes to.

Peng Lin: The engagement is <unk> of moments.

Speaker Change: Could I get your thoughts on the intensity of AD revenues.

Peng Lin: Our engagement.

Peng Lin: Is there any reason why the two couldnt equalize, meaning the actually total monetization of video and Townsend, but much lower to the moments.

Speaker Change: But what you said I think a year or two ago now.

Unknown Executive: And yeah, so and secondly on games, I think different members of management have been critical about the internal game development process. And, you know, just wanted to get your thoughts on that. We have a pretty full pipeline that looks like for the rest of the year. Does that mean, or in your mind, do you think that the issues of the last few years are now resolved, and we should look forward to a more consistent launch pipeline in the second half and in future years? Thank you.

Speaker Change: And yes, so and then secondly on games.

Speaker Change: I think different members of management have been critical about the internal game development.

Peng Lin: Process and just wanted to get your thoughts on.

Peng Lin: We have a pretty full pipeline it looks like for the rest of the year does that mean or in your mind do you think the issues in the last few years are now resolved.

Peng Lin: We should look forward to a more consistent pipeline.

Peng Lin: In the second half in future years. Thank you.

Unknown Executive: Hi Robin, thank you for your question. So on the first sign, I mean, objectively, you can see from the results of companies like Meta that operate, [inaudible] you know, traditional feeds and also a short video feed that, over time, the monetization of the short video feed converges with or overtakes the monetization of the traditional social feed. And we feel that's the trajectory we're on as well. With regard to the second question, we do feel we've debugged some of the more obvious challenges. And no doubt there are other challenges we haven't identified or other challenges that will arise in the future. And so, you know, it is an iterative debugging process that will never stop.

Unknown Executive: So on the first sign, I mean, objectively, you can see from the results of companies like Meta that operate, [inaudible] you know, traditional feeds and also a short video feed that, over time, the monetization of the short video feed converges with or overtakes the monetization of the traditional social feed. And we feel that's the trajectory we're on as well. With regard to the second question, we do feel we've debugged some of the more obvious challenges, but no doubt there are other challenges we haven't identified or other challenges that will arise in the future. And so, you know, it is an iterative debugging process that will never stop.

Speaker Change: Hi, Robyn. Thank you for your question. So on the first sign I mean, yes, I think objectively you can see from the results of an accompanying slide match that all correct.

Speaker Change #214: Alright.

Peng Lin: Traditional feet and also a short video that over time that the monetization of the short video feed and convert just wait or if it takes the monetization of the traditional social feed and.

Peng Lin: That's the trajectory we're on as well.

Speaker Change: With regards to the second question, Dan, We do fair with deep bugged.

Speaker Change: Some of the more obvious challenges and no doubt that as other challenges, we haven't identified or other challenges that arise in the future and so it is a iterative debugging process that will never stop but we feel we've gone live with it.

Unknown Executive: But we feel we've resolved the big immediate challenges, and that is translating into both better engagements and monetization trends for our existing games and also to greater confidence in our pipeline of new games. You made a reference to our internal game development process, and I think that it's easy for outsiders looking at Tencent to assume that there is only one game development process. There is one game publishing process. There is one game operating mindset, and so forth. And I can understand why; two of them were created by teams in Los Angeles.

Speaker Change #214: Resolved to the big immediate challenges that is translating into both better engagements and monetization transferring our existing games and also true.

Speaker Change: Greater confidence in our pipeline of new games, you made a reference to our internal game development process and I think that it's an easy for outsiders looking at Tencent to assume that there is one.

Peng Lin: Game development process. There is one game publishing process. There was one in a game operating mindset and so forth.

Speaker Change: I understand why that.

Speaker Change #214: Relief exists, but in reality, it's a little bit like looking at Disney and assuming that the.

Speaker Change: Disney Animation studio to Pixar studio, the 20th century Fox studio all operate in a homogenous way, which is not the case. If you look at <unk> five biggest games than one of them is created by.

Peng Lin: A team in Chengdu one of them is created by a team in Shenzhen and one of them created by a team in Helsinki two of them are created by teams in Los Angeles'. So it's a truly global business.

Unknown Executive: So, you know, it's a truly global business, you know, globally distributed, globally different practices. And so, you know, there is no single unified, you know, internal game development process. Of course, you know, we try to share best practices and learnings between the big, you know, development studios that have created these enormously successful games. But equally, you know, each of those studios that I talked about, each in a different part of the country or the world, still has its own unique attributes.

Speaker Change: Globally distributed globally different practices and so there is not a single unified internal game development process of course, and if we try to share best practices and learnings.

Speaker Change: The bake in a development studios that have created these enormous be successful games.

Speaker Change: But equally each of those studios that I talked about in each in a different part of the country or the world still hazard zone.

Unknown Executive: And, you know, that's part of their strength, and those strengths we aim to reinforce over time. So that's what I'd say on the Game Process Debugging side. Yeah, I just want to add that you actually use the word critical on the game teams. I don't think that's really true. I think, You know, there are a lot of things our game teams have done right. But, you know, there's just

Peng Lin: Unique attributes and yet that's part of the best strengths and those strengths sweetly AME church.

Speaker Change: Reinforce overtime, so that's what I'd say on the.

Speaker Change: The game process debugging side, yes, I just wanted to add you actually use the word critical on the game teams I don't think Thats really true I think.

Speaker Change: There are a lot of things our game teams have done right.

Peng Lin: But.

Peng Lin: Yes.

Speaker Change: No perfect team so no perfect games.

Unknown Executive: So you can see that there are three teams, so no perfect games, and we are continuously going through the process of debugging, and we are kind of more transparent and honest about those efforts with the outside world. So that's the reason why we discuss what the changes that we have made to our game teams or to our games. And we also believe some of the major titles that we have are really evergreen titles, such that we don't necessarily blame it on the life cycle of a game when it doesn't work, but rather look at what exactly are the bugs or are the untapped potentials that we can actually sort of make changes so that we can actually get the games to be really evergreen titles.

Peng Lin: We are continuously going through the process to be bucket and we're.

Peng Lin: Kind of more more transparent and honest on those efforts.

Speaker Change: With the outside World. So so that's the reason why we discuss the policy what are the changes that we have.

Peng Lin: So our game teams or to our games.

Unknown Executive: And we also believe some of the major titles that we have are really evergreen titles, such that we don't necessarily blame it on the life cycle of a game when it doesn't work, but rather look at what exactly are the bugs or are the untapped potentials that we can actually sort of make changes so that we can actually get the games to be really evergreen titles. I think the reason why we have the largest number of evergreen titles and probably the highest proportion of evergreen titles in the industry. And we also.

Peng Lin: And we also believe.

Peng Lin: Some of the major titles that we have a really evergreen titles.

Peng Lin: Such that we don't necessarily play.

Peng Lin: Blame it on the.

Peng Lin: But the lifecycle of the game when it doesn't work, but rather look at what exactly.

Peng Lin: The box or are the.

Speaker Change: Untapped potential that we can actually sort of make changes. So that we can actually we can get the games to be really evergreen titles and that's.

Unknown Executive: I think the reason why we have the largest number of evergreen titles and probably the highest proportion of evergreen titles in the industry. And we also. Just to reiterate James' point, right, you know, diversity is actually very important. And so that's why, if you look at the Tencent game family, we actually sort of have probably the most diverse number of studios in the world. And all these studios would actually work in their own way to achieve success in their games. But at the same time, they can actually share experiences, too. So hopefully, collectively, they can actually sort of progress, you know, much faster than the rest of the industry.

Peng Lin: I think the reason why we have the largest number of evergreen titles and probably the most proportion of the offer.

Peng Lin: Evergreen titles in the industry.

Peng Lin: And we also.

Unknown Executive: Just to reiterate James' point, right, you know, diversity is actually very important. And so that's why if you look at the Tencent game family, we actually sort of have probably the most diverse number of studios in the world. And all these studios would actually work in their own way to achieve success in their games. But at the same time, they can actually share experiences, too. So hopefully, collectively, they can actually sort of progress, you know, much faster than the rest of the industry.

Speaker Change: Just to reiterate unchanged point right now with the diversity is actually very important and so that's why if you look at the Tencent games family, who actually said, yes, probably the most diverse number of studios in the world.

Peng Lin: And all these studios would actually work.

Speaker Change: In their own way to to achieve success in their games.

Speaker Change: But at the same time, they can actually share experiences too so hopefully collectively they can actually use of progress.

Peng Lin: Much faster than the rest of the industry.

Unknown Executive: Thank you everyone. We are now ending the webinar, and thank you for joining our results webinar 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 to you. Thank you. See you next quarter.

Wendy Huang: Thank you. Thank you, everyone. We are now ending the webinar, and thank you for joining us.

Peng Lin: Thank you.

Speaker Change: Thank you everyone. We are now in your Webinars and thank you for joining our results webinar today, if you wish to check out our press release and other financial information. Please visit the IR.

Speaker Change: Section of our company website Www Dot dot com.

Speaker Change: This webinar will also be a backwards.

Peng Lin: Thank you and the next quarter.

Q1 2024 Tencent Holdings Ltd Earnings Call

Request a DemoDemo

TCE

Tencent

Earnings