Tencent Music (TME) Misses Q1 EPS by 1c, Revenues Beat

Tencent Music (NYSE: TME) reported Q1 EPS of $0.09, $0.01 worse than the analyst estimate of $0.10. Revenue for the quarter came in at $855 million versus the consensus estimate of $850.05 million.

• Revenues were RMB5.74 billion (US$855 million), an increase of 39.4% year-over-year.
• Operating profit was RMB1.15 billion (US$171 million), an increase of 22.9% year-over-year.
• Net profit attributable to equity holders of the Company increased by 17.4% year over year to RMB987 million (US$147 million).
• Non-IFRS net profit attributable to equity holders of the Company (excluding amortization of intangible assets and other assets arising from business combinations, share-based compensation expenses, net gains or losses from investments, and fair value change on puttable shares) increased by 14.9% year over year to RMB1.20 billion (US$179 million).

"We started 2019 with solid first quarter results and strong growth," stated Mr. Cussion Pang, Chief Executive Officer of Tencent Music. "Our businesses recorded healthy growth rates driven by product innovation, content diversification, and technological advancement. During the past few quarters, we constantly expanded our online music subscriber base while steadily increasing our subscriber retention rate. As our users increasingly consume music content through streaming services, we are riding on this trend to gradually transition into a pay-for-streaming model over the coming years. We also strengthened our market leadership in music-centric social entertainment by focusing on product innovation and enhancing user experience through data analytics. We remain committed to investing in the provision of premium content as well as innovative product features. We believe that these investments will significantly enhance the level of user engagement for our services and sustain our long-term growth going forward."

Mr. Tony Yip, Chief Strategy Officer of Tencent Music, remarked, "In the first quarter of 2019, both online music and social entertainment services maintained a healthy growth trajectory. Regarding content development, we not only forged additional partnerships with industry-leading music labels but also strengthened cooperation with other labels to promote and distribute original soundtrack music for popular movies and TV shows. We added additional video and long-form audio formats to our content offering. For product development, we continued to launch social media initiatives and additional lite versions of our apps to attract a broader group of users. We also developed innovative ways for users to enjoy personalization by consistently improving our music content tagging process and analyzing our platform's data repository to better fulfill users' music tastes and preferences. All of these initiatives are strategic, long-term investments that will improve our user experience, attract more customers, and increase monetization capabilities going forward."

"We delivered solid financial results in the first quarter with revenues growing 39.4% year over year to RMB5.74 billion, while non-IFRS net profit attributable to equity holders of the Company reached RMB1.2 billion," commented Ms. Shirley Hu, Chief Financial Officer of Tencent Music. "We generated RMB926 million in operating cash flow in the quarter and as of March 31, 2019, the combined balance of the Company's cash and cash equivalents and term deposits amounted to RMB18.1 billion. Our strong profitability and cash flow enable us to continue investing in our products and content offering. These investments will help to expand our user base and improve user engagement, both of which are vital to our sustainable growth. We are confident that such efforts will create long-term shareholder value as well as increase return on capital for investors."

For earnings history and earnings-related data on Tencent Music (TME) click here.

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