Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tencent Music Entertainment Group (TME, Financial) reported a 20% year-over-year growth in online music services revenue, contributing to a 29% increase in adjusted net profit.
- The company successfully renewed contracts with top Chinese labels and formed strategic partnerships with international artists, enhancing its music offerings.
- TME's SVIP membership program surpassed 10 million members, driven by enhanced privileges and high-quality audio features.
- The company reported a 35% year-over-year increase in IFRS net profit, reaching RMB1.7 billion.
- TME's gross margin improved to 42.6%, supported by an expanding user base and increased advertising revenues.
Negative Points
- Social entertainment services revenue decreased by 24% year over year, highlighting challenges in this segment.
- The effective tax rate increased to 17.7% from 12.2% in the previous year, due to withholding tax on earnings remitted by PRC subsidiaries.
- Despite the growth in SVIP memberships, the ARPPU (Average Revenue Per Paying User) did not perform as well as expected.
- The company faces ongoing challenges in stabilizing and growing its Monthly Active Users (MAUs), which have remained around 570 million.
- There is uncertainty regarding the future growth rate of gross profit margins, which may not match the growth seen in 2024.
Q & A Highlights
Q: What is the outlook for Q4 2024 and Q1 2025, especially regarding the Super VIP program?
A: Cussion Kar Shun Pang, Executive Chairman, stated that the Super VIP program has shown strong initial results with over 10 million subscribers. The focus will remain on expanding the paying user base and increasing ARPPU. The company is optimistic about growth prospects for 2025, expecting acceleration in topline growth driven by subscriber and ARPPU increases, assuming a stable external environment.
Q: Can you explain the reasons behind the better-than-expected subscriber growth in Q3?
A: Zhu Liang, CEO, explained that the growth was due to stable operational strategies and enhanced subscriber privileges. Marketing efforts during festivals like the Mid-Autumn Festival also contributed. The company plans to maintain tight control over marketing to ensure healthy growth and emphasize the value of their subscription content.
Q: How many Super VIP members were added in Q3, and what is the source of these members?
A: Zhu Liang, CEO, noted that most Super VIP members were upgraded from basic VIP accounts. The company is also focusing on engaging new customers. Many Super VIP users are young, indicating that the services and privileges align well with their interests.
Q: Despite the growth in Super VIP members, why is ARPPU not performing as expected?
A: Zhu Liang, CEO, mentioned that the growth in Super VIP members is a result of long-term efforts. The ARPPU is expected to respond positively as the Super VIP base grows to 20-30 million. The current ARPPU for Super VIPs is higher than that of basic subscribers.
Q: What are the key drivers for the Super VIP program, and which areas will you focus on to drive conversion?
A: Zhu Liang, CEO, highlighted that half of the Super VIPs come from QQ Music and half from Kugou. Key drivers include premium audio quality, long-form audio offerings, and exclusive digital album access. Future focus areas include enhancing user experience across devices and introducing family membership packages.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
