Tencent Announces 2021 First Quarter Results

HONG KONG,May 20,2021 -- Tencent Holdings Limited ("Tencent" or the "Company",00700.HK),a leading provider of Internet value added services in China,today announced the unaudited consolidated results for the first quarter ("1Q2021") ended March 31,2021.

1Q2021 Key Highlights

Revenues: +25% YoY,non-IFRS[1] profit attributable to equity holders of the Company: +22% YoY

Total revenues were RMB135.3 billion (USD20.6 billion[2]),an increase of 25% over the first quarter of 2020 ("YoY").

On a non-IFRS basis,which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:

Operating profit was RMB42.8 billion (USD6.5 billion),an increase of 20% YoY. Operating margin decreased to 32% from 33% last year.

Profit for the period was RMB34.5 billion (USD5.3 billion),an increase of 23% YoY. Net margin remained stable at 26%.

Profit attributable to equity holders of the Company for the quarter was RMB33.1 billion (USD5.0 billion),an increase of 22% YoY.

Basic earnings per share were RMB3.481. Diluted earnings per share were RMB3.415.

On an IFRS basis:

Operating profit was RMB56.3 billion (USD8.6 billion),an increase of 51% YoY. Operating margin increased to 42% from 34% last year.

Profit for the period was RMB49.0 billion (USD7.5 billion),an increase of 67% YoY. Net margin increased to 36% from 27% last year.

Profit attributable to equity holders of the Company for the quarter was RMB47.8 billion (USD7.3 billion),an increase of 65% YoY.

Basic earnings per share were RMB5.020. Diluted earnings per share were RMB4.917.

Total cash were RMB258.8 billion (USD39.4 billion) at the end of the quarter.

[1]Non-IFRS adjustments (formerly referred as non-GAAP) excludes share-based compensation,M&A related impact such asnet (gains)/losses from investee companies,amortisation of intangible assets and impairment provision/(reversals),as well as income tax effects.

[2]Figures stated in USD are based on USD1 to RMB6.5713

Mr. Ma Huateng,Chairman and CEO of Tencent,said,"During the first quarter,we delivered solid growth across our businesses while continuing to enhance our products and services. As we look into the future,we see expanding opportunities in the various verticals in which we operate,enabled by technology innovation and increasing acceptance of digital solutions among users and businesses. As a result,we are stepping up our investment in areas including business services and enterprise software,high-production-value games,and short-form video. In addition,as a technology company serving a broad base of users and enterprises,we recognise our social responsibility and the opportunities to create significant social value through innovations. We believe that our recent strategic upgrade and establishment of a Sustainable Social Value Organisation will allow us to make an even more positive impact to the society,and usher in a new phase of development for Tencent."

1Q2021 Financial Review

Revenues from VAS increased by 16% to RMB72.4 billion for the first quarter of 2021 on a year-on-year basis. Games revenues grew by 17% to RMB43.6 billion,primarily due to revenue growth from our mobile games worldwide,including Honour of Kings,PUBG Mobile,and Peacekeeper Elite,as well as recently launched titles such as Moonlight Blade Mobile. Total mobile games revenues (including mobile games revenues attributable to our social networks business) were RMB41.5 billion and PC client games revenues were RMB11.9 billion for the first quarter of 2021. Social networks revenues increased by 15% to RMB28.8 billion,due to moderate growth from digital content subscriptions,as well as from in-game virtual item sales.

Revenues from Online Advertising increased by 23% to RMB21.8 billion for the first quarter of 2021 on a year-on-year basis,reflecting higher demand from categories such as eCommerce platforms,education and fast-moving consumer goods,as well as consolidation of Bitauto's advertising revenue. Social and others advertising revenues grew by 27% to RMB18.5 billion as we responded to increased advertiser demand for Weixin Moments and our mobile advertising network by offering more inventories. Media advertising revenues increased by 7% to RMB3.3 billion mainly due to higher advertising revenues from our music streaming apps.

Revenues from FinTech and Business Services increased by 47% to RMB39 billion for the first quarter of 2021 on a year-on-year basis. FinTech Services revenue growth partially reflected the stay-at-home impact in the first quarter of 2020 as well as a secular trend toward mobile payment usage. Business Services revenues increased year-on-year at a faster rate than in prior quarter,mainly due to resumed project deployment and rising demand from enterprise software and online video customers,as well as consolidation of Bitauto's Business Services revenue since the fourth quarter of 2020.

Other Key Financial Information for 1Q2021

EBITDA was RMB49.4 billion,up 17% YoY. Adjusted EBITDA was RMB52.9 billion,up 17% YoY.

Capital expenditures wereRMB7.7 billion,up 26% YoY.

Free cash flow was RMB33.2 billion,down 15% YoY.

As at March 31,2021,net cash position totalled RMB5.6 billion. Fair value of our stakes in listed investee companies (excluding subsidiaries) totalled RMB1,362.3 billion,compared to RMB1,204.9 billion as of December 31,2020,and RMB410.3 billion as of March 31,2020.

Operating Metrics

As at

31March

2021

As at

31March

2020

Year-

on-year

change

As at

31December

2020

Quarter-on-

quarter

change

(in millions,unless specified)

Combined MAU of Weixin and

WeChat

1,241.6

1,202.5

3.3%

1,225.0

1.4%

Mobile device MAU of QQ

606.4

693.5

-12.6%

594.9

1.9%

Fee-based VAS registered

subscriptions

225.7

197.4

14.3%

219.5

2.8%

Business Review and Outlook

We believe we sustained healthy operational and financial results during a period when the China Internet industry as a whole is undergoing a heavy investment phase. Our listed investment portfolio experienced meaningful value appreciation,while contributing mixed results to our associate income,with certain investees delivering wider associate losses due to their investments in new initiatives such as community group buying activities. Here are some highlights of our key products and business lines for the quarter:

Weixin

Weixin Video Accounts continued to gain user and content creator traction as we build the content ecosystem. We have increased our efforts in attracting and incubating content creators by providing customised onboarding services and ongoing operational support. Mini Programs' ecosystem is thriving with deeper penetration among small and medium-sized businesses. Our low-code development platform enables smaller businesses to develop Mini Programs more cost-effectively. We provided more tools to assist system integrators and the number of active Mini Programs they served more than tripled year-on-year.

QQ and Digital Content

We are leveraging technology to better integrate social and content consumption experiences at QQ,such as seamless experiences between instant messaging and games. Users can team up with QQ friends to start a multi-player game battle with one click. For in-game friends who are not on QQ,users can communicate with them synchronously via Game Center. They can also stay up-to-date with game events via QQ Mini Programs. Looking forward,QQ's new leadership team will seek to upgrade the service's technology,operations and content,and better serve the social and entertainment needs of young users.

Our fee-based VAS subscriptions grew 14% year-on-year to 226 million. Video subscriptions increased 12% year-on-year to 125 million,benefitting from adaptation of certain IPs,such as The Land of Warriors,into animated and live action drama series. Our self-commissioned variety shows such as Chuang 2021 and Roast Season 5 attained popularity. Music subscriptions increased 43% year-on-year to 61 million,primarily driven by better content,effective marketing campaigns and an improved retention rate.

We are merging the Tencent Video and WeiShi teams to upgrade their algorithmic recommendations,bring integrated viewing experiences to users,and enrich short video clips adapted from our long form video library. We have announced leadership changes in Tencent Music Entertainment Group,aiming to enhance the co-operation and synergies between our digital content services,as well as with our social communities.

Games

Our aggregate user engagement and user spending increased year-on-year despite the high base due to stay-at-home impact in the first quarter of 2020. We released Honour of Kings' biggest-ever update in January to improve its graphics and game experiences,and then launched appealing marketing campaigns with top-tier skins during the Chinese New Year,which drove the game's DAU and paying users to record highs in February. We reduced the application file size of PUBG Mobile and enhanced our local market operational capabilities,boosting PUBG Mobile's DAU in EMEA countries. League of Legends benefitted significantly from the release of bigger and better Lunar Revel content across PC and mobile devices,as well as across its core game mode and Teamfight Tactics.

We are also cultivating emerging genres beyond these large audience games. For example,our new titles Komori Life and The Walnut Diary ranked among China's top ten life simulation mobile games by DAU in April 2021. Our games pipeline covers a wide spectrum of genres,including Action,MOBA and Survival. For China,many of the new games are adapted from popular existing game and literature IPs. Internationally,we expect our substantial prior investments in best-in-class PC,console and mobile studios to begin contributing a range of genre-innovating games in the quarters to come.

Online Advertising

We enhanced the transaction capabilities of our advertising properties via linkage with Weixin Mini Programs and upgraded marketing solutions for key industries including games,retail and automobile-related verticals,delivering higher sales conversion and ROIs for advertisers. Advertisers' adoption of Mini Programs as landing pages increased substantially,demonstrating growing recognition of Weixin as a transaction-generating environment. Our mobile advertising network continued to benefit from increased video advertising inventories primarily within games,online reading and tool apps. For the rest of 2021,industry uncertainties include potential regulatory headwinds for K-12 education and potential delays to the release schedule of our video content.

FinTech

Our commercial payments volume benefitted from rising adoption of mobile payment in China due to consumption growth and an expanding digital economy. As people travelled less and consumed more during the Chinese New Year holiday,offline payment transactions increased sequentially,particularly in retail and dining services.

Weixin Pay has been assisting small and medium-sized merchants in China to grow and digitalise their businesses. We are committing significant subsidies,resources and services to small and medium-sized merchants,to further reduce their operating costs and enhance their operational efficiency.

Cloud and Other Business Services

Leveraging our strengths in security,communication and CRM solutions,we expanded our PaaS and SaaS businesses during the quarter. To better position ourselves for the opportunities in China's nascent SaaS market,we have established our SaaS ecosystem program to nurture the growth of SaaS providers and facilitate digitalisation of enterprise clients. We launched our Enterprise App Connector with unified login accounts and data flow across different SaaS products,allowing SaaS providers to develop and deliver their products more efficiently,while facilitating better coordination of multiple SaaS solutions by enterprise clients.

Investments for the Future

We believe that we are still in the early stage of the global digital transformation. The advance of technology will present ample opportunities for our Consumer Internet and Industrial Internet activities. Consequently,we are proactively increasing our rate of investment in new opportunities by investing a portion of our incremental profits for 2021,which we believe will deliver high returns in the long run. Incremental investments will include the following areas - business services,games and short-form video content.

Business Services: We will make further investments in areas such as headcount and infrastructure to support the rapid growth of our business. We will strengthen our productivity SaaS products and security software as well as partnerships with and investments in SaaS providers and Independent Software Vendors,supporting our clients' digital needs. Through enhancing our upsell and cross-sell capabilities in key verticals such as healthcare,retail,education and transportation,we will provide smart solutions for enterprises and consumer-facing products for users.

Games: We are stepping up our investments in game development,and in particular focusing on large-scale and high-production-value games that can appeal to users globally. We are also investing further in new types of games serving more targeted audiences,building up IP franchises and developing them across media,and investing in advanced technologies for next generation game experiences such as cloud games.

Short-Form Video Content: We are now incubating the content ecosystem for Video Accounts which connect users with real-life content and bridge high-quality content creators with their customers. We will provide production and monetisation tools to content creators,optimise social-driven recommendation,enrich knowledge-based content as well as add servers and bandwidth to support Video Accounts' solid growth. We are strengthening the synergies between our long-form and short-form video services. Through the merger of Tencent Video and WeiShi,we will empower long-form video leveraging our short-form capabilities. We will escalate self-commissioned production to further expand our IP content library,and provide video clips that can be adapted by our creator network.

As a technology company serving a broad base of users and enterprises,we recognise our social responsibility and the opportunities for us to create significant social value through innovations. Consequently,we integrated our Corporate Social Responsibility and charitable activities into a new Sustainable Social Value Organisation. We will invest an initial capital of RMB 50 billion,to be funded by our investment gains,in areas including basic science,education innovation,rural revitalisation,carbon neutrality,food/energy/water provision,assisting with public emergencies,technology for senior citizens and public welfare. This upgrade aims to implement our mission of Tech for Good and marks a new phase of development for the Company.

For other detailed disclosure,please refer to our website https://www.tencent.com/en-us/investors.html,or follow us via Weixin Official Account (Weixin ID: Tencent_IR.

About Tencent

Tencent uses technology to enrich the lives of Internet users.

Our communication and social services,Weixin and QQ,connect users with each other and with digital content and services,both online and offline,making their lives more convenient. Our targeted advertising service helps advertisers reach out to hundreds of millions of consumers in China. Our FinTech and business services support our partners' business growth and assist their digital upgrade.

Tencent invests heavily in talent and technological innovation,actively promoting the development of the Internet industry. Tencent was founded in Shenzhen,China,in 1998. Shares of Tencent (00700.HK) are listed on the Main Board of the Stock Exchange of Hong Kong.

Non-IFRS Financial Measures

To supplement the consolidated results of the Group prepared in accordance with IFRS,certain additional non-IFRS financial measures (in terms of operating profit,operating margin,profit for the period,net margin,profit attributable to equity holders of the Company,basic EPS and diluted EPS),have been presented in this press release. These unaudited non-IFRS financial measures should be considered in addition to,not as a substitute for,measures of the Group's financial performance prepared in accordance with IFRS. In addition,these non-IFRS financial measures may be defined differently from similar terms used by other companies.

The Company's management believes that the non-IFRS financial measures provide investors with useful supplementary information to assess the performance of the Group's core operations by excluding certain non-cash items and certain impact of M&A transactions. In addition,non-IFRS adjustments include relevant non-IFRS adjustments for the Group's major associates based on available published financials of the relevant major associates,or estimates made by the Company's management based on available information,certain expectations,assumptions and premises.

Forward-Looking Statements

This press release contains forward-looking statements relating to the business outlook,forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations,assumptions and premises,some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realised in future. Underlying the forward-looking statements is a lot of risks and uncertainties. Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.

CONSOLIDATED INCOME STATEMENT

RMB in millions,unless specified

Unaudited

1Q2021

1Q2020

Revenues

135,303

108,065

VAS

72,443

62,429

Online Advertising

21,820

17,713

FinTech and Business Services

39,028

26,475

Others

2,012

1,448

Cost of revenues

(72,668)

(55,271)

Gross profit

62,635

52,794

Gross margin

46%

49%

Interest income

1,614

1,636

Other gains,net

19,521

4,037

Selling and marketing expenses

(8,530)

(7,049)

General and administrative expenses

(18,967)

(14,158)

Operating profit

56,273

37,260

Operating margin

42%

34%

Finance costs,net

(1,367)

(1,684)

Shareof profit/(loss) of associates and joint ventures,net

1,348

(281)

Profit before income tax

56,254

35,295

Income tax expense

(7,246)

(5,892)

Profit for the period

49,008

29,403

Net margin

36%

27%

Attributable to:

Equity holders of the Company

47,767

28,896

Non-controlling interests

1,241

507

Non-IFRS profit

attributable to equity holders of the Company

33,118

27,079

Earnings per share for profit attributable to equity holders of the

Company

(in RMB per share)

- basic

5.020

3.049

- diluted

4.917

2.999

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

RMB in millions,unless specified

Unaudited

1Q2021

1Q2020

Profit for the period

49,403

Other comprehensive income,net of tax:

Items that may be subsequently reclassified to profit or loss

Share of other comprehensive income/(loss) of associates and joint

ventures

288

(30)

Transfer of share of other comprehensive income to profit or loss upon

disposal and deemed disposal of associates and joint ventures

(3)

-

Currency translation differences

(5,908)

1,315

Other fair value gains/(losses)

1,163

(1,357)

Items that will not be subsequently reclassified to profit or loss

Share of other comprehensive income of associates and joint ventures

381

-

Net gains/(losses) from changes in fair value of financial assets at fair

value through other comprehensive income

18,483

(7,850)

Currency translation differences

207

-

Other fair value losses

-

(54)

14,611

(7,976)

Total comprehensive income for the period

63,619

21,427

Attributable to:

Equity holders of the Company

63,756

21,020

Non-controlling interests

(137)

407

OTHER FINANCIAL INFORMATION

RMB in millions,unless specified

Unaudited

1Q2021

4Q2020

1Q2020

EBITDA(a)

49,355

42,872

42,228

Adjusted EBITDA (a)

52,927

46,533

45,190

Adjusted EBITDA margin(b)

39%

35%

42%

Interest and related expenses

1,726

1,766

2,006

Net cash/(debt) (c)

5,581

11,063

(5,716)

Capital expenditures (d)

7,734

9,659

6,151

Note:

(a)EBITDA is calculated as operating profit minus interest income and other gains/losses,net,and adding back depreciation of property,plant and equipment,

investment properties as well as right-of-use assets,and amortisation of intangible assets and land use rights. Adjusted EBITDA is calculated as EBITDA

plus equity-settled share-based compensation expenses.

(b)Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.

(c)Net cash/(debt) represents period end balance and is calculated as cash and cash equivalents,plus term deposits and others,minus borrowings and

notes payable.

(d)Capital expenditures consist of additions (excluding business combinations) to property,construction in progress,investment

properties,land use rights and intangible assets (excluding video and music content,game licences and other content).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

RMB in millions,unless specified

Unaudited

Audited

As at

March 31,2021

As at

December 31,2020

ASSETS

Non-current assets

Property,plant and equipment

61,833

59,843

Land use rights

16,073

16,091

Right-of-use assets

12,904

12,929

Construction in progress

5,118

4,939

Investment properties

563

583

Intangible assets

156,772

159,437

Investments in associates

323,145

297,609

Investments in joint ventures

7,672

7,649

Financial assets at fair value through profit or loss

183,926

165,944

Financial assets at fair value through other

comprehensive income

240,237

213,091

Prepayments,deposits and other assets

26,653

24,630

Other financial assets

510

4

Deferred income tax assets

24,052

21,348

Term deposits

33,219

31,681

1,092,677

1,015,778

Current assets

Inventories

816

814

Accounts receivable

51,676

44,981

Prepayments,deposits and other assets

49,182

40,321

Other financial assets

645

1,133

Financial assets at fair value through profit or loss

9,286

6,593

Term deposits

67,737

68,487

Restricted cash

2,493

2,520

Cash and cash equivalents

148,621

152,798

330,456

317,647

Total assets

1,423,133

1,333,425

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

RMB in millions,2020

EQUITY

Equity attributable to equity holders of the Company

Share capital

-

-

Share premium

51,853

48,793

Shares held for share award schemes

(4,747)

(4,412)

Other reserves

124,487

121,139

Retained earnings

590,219

538,464

761,812

703,984

Non-controlling interests

83,334

74,059

Total equity

845,146

778,043

LIABILITIES

Non-current liabilities

Borrowings

117,477

112,145

Notes payable

122,942

122,057

Long-term payables

10,895

9,910

Other financial liabilities

8,393

9,254

Deferred income tax liabilities

16,523

16,061

Lease liabilities

10,145

10,198

Deferred revenue

6,629

6,678

293,004

286,303

Current liabilities

Accounts payable

102,625

94,030

Other payables and accruals

43,065

54,308

Borrowings

12,818

14,242

Current income tax liabilities

16,369

12,134

Other tax liabilities

2,761

2,149

Other financial liabilities

4,844

5,567

Lease liabilities

3,891

3,822

Deferred revenue

98,610

82,827

284,983

269,079

Total liabilities

577,987

555,382

Total equity and liabilities

1,425

RECONCILIATIONS OF IFRS TO NON-IFRS RESULTS

As

reported

Adjustments

Non-IFRS

RMB in millions,

unless specified

Share-based

compensation (a)

Net (gains)/losses from

investee companies (b)

Amortisation of

intangible assets (c)

Impairment

Provision/(reversals) (d)

Income

tax effects (e)

Unaudited three months ended March 31,2021

Operating profit

56,273

3,704

(18,331)

1,062

50

–

42,758

Profit for the period

49,008

5,036

(22,231)

2,699

178

(187)

34,503

Profit attributable to equity

holders

47,767

4,855

(21,829)

2,352

178

(205)

33,118

Operating margin

42%

32%

Net margin

36%

26%

Unaudited three months ended December 31,2020

Operating profit

63,713

3,744

(34,652)

885

4,394

–

38,084

Profit for the period

59,369

4,896

(36,149)

2,260

4,407

(329)

34,454

Profit attributable to equity

holders

59,302

4,735

(36,928)

1,926

4,407

(235)

33,207

Operating margin

48%

28%

Net margin

44%

26%

Unaudited three months ended March 31,2020

Operating profit

37,260

3,435

(5,272)

639

(487)

–

35,575

Profit for the period

29,403

4,198

(6,992)

1,572

(18)

(179)

27,984

Profit attributable to equity

holders

28,896

3,957

(6,976)

1,338

(18)

(118)

27,079

Operating margin

34%

33%

Net margin

27%

26%

Note:

(a) Including put options granted to employees of investee companies on their shares and shares to be issued under investee companies' share-based incentive plans which can be acquired by the Group,and other incentives

(b) Including net (gains)/losses on deemed disposals/disposals of investee companies,fair value changes arising from investee companies,and other expenses in relation to equity transactions of investee companies

(c)Amortisation of intangible assets resulting from acquisitions

(d)Impairment provisions/(reversals) for associates,joint ventures,goodwill and other intangible assets arising from acquisitions

(e)Income tax effects of non-IFRS adjustments

View original content:/news-releases/tencent-announces-2021-first-quarter-results-301295804.html