Tencent Music (TME) Tops Q2 EPS by 1c, Revenues Beat

August 12, 2019 4:34 PM EDT

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Tencent Music (NYSE: TME) reported Q2 EPS of $0.10, $0.01 better than the analyst estimate of $0.09. Revenue for the quarter came in at $859 million versus the consensus estimate of $843.01 million.

Financial and operational Highlights in the three months ended June 30, 2019:

  • Online music paying users reached a record 31.0 million, an increase of 33.0% year-over-year, with 2.6 million net addition which represented the largest net addition since the first quarter of 2018.
  • Total revenues were RMB5.90 billion (US$859 million), an increase of 31.0% year-over-year.
  • Operating profit was RMB1.09 billion (US$158 million), an increase of 7.0% year-over-year.
  • Net profit attributable to equity holders of the Company was RMB927 million (US$135 million), an increase of 2.5% year-over-year.
  • Basic and diluted earnings per American Depositary Shares ("ADS") were RMB0.57 (US$0.08) and RMB0.55 (US$0.08), respectively, for the second quarter of 2019.
  • Excluding amortization of intangible assets and other assets arising from business combinations, share-based compensation expenses, net losses from investments, and fair value change on puttable shares, non-IFRS basic and diluted earnings per ADS were RMB0.69 (US$0.10) and RMB0.67 (US$0.10), respectively, for the second quarter of 2019.
  • During the second quarter of 2019, the Company had weighted averages of 1.63 billion basic and 1.67 billion diluted ADSs outstanding, respectively. Each ADS represents two of the Company's Class A ordinary shares.
  • 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 5.5% year-over-year to RMB1.13 billion (US$164 million).

"We are pleased with second quarter results driven by the strength of both our online music and social entertainment businesses," said Mr. Cussion Pang, Chief Executive Officer of Tencent Music. "The growth in our online music paying users accelerated during the quarter, with 2.6 million paying users added sequentially. We continued to expand our music content leadership by partnering with more music labels, as well as adding more content including music-centric variety shows, short-form videos and long-form audio such as audio books and podcasts. We strengthened our alliances to produce and distribute more high-quality original soundtracks, including our partnerships within the Tencent ecosystem to develop original music content for games, films and TV shows. In social entertainment, we not only effectively broadened our user base through mini-program and a lite version app, but also improved user engagement by adding new product features, especially social features with high user participation. We are pleased with our progress and confident that these initiatives will lead to further growth in the second half of the year."

Mr. Tony Yip, Chief Strategy Officer of Tencent Music, said, "For online music services, we pride ourselves in expanding our promotional capabilities to help an increasing number of both prominent and up-and-coming artists distribute digital albums, which are instrumental in helping artists gain popularity and build strong bonds with their fans. In order to provide users a consistent and cohesive listening experience, we are forging Internet of Things (IoT) partnerships with leading manufacturers of cars, smart speakers and smart watches, which will provide further channels for user acquisition. As part of our internationalization strategy, we are also looking to expand our social entertainment services outside of China, as we take initial steps to explore overseas opportunities for WeSing in South East Asia. These small steps we are pursuing will enable us to better serve users and expand our reach at both home and abroad."

"We achieved steady growth in the second quarter as our total revenues increased by 31% year-over-year to RMB5.9 billion," commented Ms. Shirley Hu, Chief Financial Officer of Tencent Music. "We have been firmly executing our strategy of investing in our products and content offerings, while improving our operating efficiency. Our efforts resulted in the growth of both our paying online music users and paying social entertainment services users. At the same time, we were able to maintain a healthy profit level as our non-IFRS net profit attributable to equity holders of the Company reached RMB1.13 billion in the quarter. In the second half of the year, we will build on this momentum of quality growth with effective execution as we strive to achieve long-term sustainable growth."

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



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