Sina science and technology news, in the early morning of March 22, Beijing time, tencent Music (NYSE: TME) today announced its unaudited financial statements for the fourth quarter and full year of fiscal year 2021 as of December 31. The report shows that, Tencent Music The total revenue in the fourth quarter was 7.61 billion yuan (about 1.19 billion dollars), a decrease of 728 million yuan, or 8.7%, compared with 8.34 billion yuan in the same period last year; The net profit attributable to shareholders of the Company was 536 million yuan (about 84 million US dollars), compared with 1.2 billion yuan in the same period last year, a year-on-year decrease of 55%.
According to the data provided by Yahoo Finance, 10 analysts on Wall Street had expected that Tencent Music's earnings per share in the fourth quarter would reach US $0.07 based on non international financial reporting standards. The financial report shows that, excluding the comprehensive impact of intangible assets and other asset amortization, equity incentive expenditure, net investment loss/income, changes in the fair value of the putable shares and income tax impact, the diluted income of each American depositary share of Tencent Music in the fourth quarter under non international financial reporting standards was 0.50 yuan (about 0.08 dollars), Exceed analysts' expectations.
In addition, 12 analysts on Wall Street had expected Tencent Music's fourth quarter revenue to reach $1.23 billion on average. According to the financial report, Tencent Music's total revenue in the fourth quarter was 7.61 billion yuan (about 1.19 billion dollars), which failed to meet analysts' expectations.
According to the data provided by Yahoo Finance, 16 analysts on Wall Street had expected that Tencent Music's earnings per share in fiscal year 2021 would reach 0.35 US dollars based on non international financial reporting standards. The financial report shows that, excluding the comprehensive impact of intangible assets and other asset amortization, equity incentive expenditure, net investment loss/income, changes in the fair value of the putable shares and income tax impact, the diluted income per ADS of Tencent Music in the non IFRS fiscal year 2021 is 2.47 yuan (about US $0.39), Exceed analysts' expectations.
In addition, 22 analysts on Wall Street had expected Tencent Music's revenue in fiscal year 2021 to reach 4.95 billion US dollars on average. According to the financial report, Tencent Music's total revenue in fiscal year 2021 was 3.124 billion yuan (about 4.9 billion dollars), which failed to meet analysts' expectations.
Financial and operational highlights in the fourth quarter:
-The total revenue of Tencent Music in the fourth quarter was 7.61 billion yuan (about 1.19 billion US dollars), down 8.7% year on year;
-In the fourth quarter, Tencent Music's online music service revenue increased 4.3% year on year. Tencent Music's revenue from music subscription business in the fourth quarter was 1.95 billion yuan (about 306 million US dollars), up 23.5% year on year;
-The number of paid users of Tencent Music's online music service reached 76.2 million in the fourth quarter, up 36.1% year on year. On a month on month basis, the number of paying users increased by 5 million. The payment rate in the fourth quarter was 12.4%, compared with 11.2% in the third quarter and 9.0% in the fourth quarter of last year;
-The net profit of Tencent Music in the fourth quarter was 577 million yuan (about US $91 million), while the net profit attributable to shareholders of the company was 536 million yuan (about US $84 million);
-Excluding the comprehensive impact of intangible assets and other asset amortization, equity incentive expenditure, net investment loss/income, changes in the fair value of the putable shares and income tax impact arising from acquisition, the net profit of Tencent Music in the fourth quarter under non IFRS was 873 million yuan (about 137 million US dollars), The non IFRS net profit attributable to shareholders of the Company was 832 million yuan (about US $131 million).
Financial and operational highlights in 2021:
-The total revenue of Tencent Music in fiscal year 2021 is 31.24 billion yuan (about 4.9 billion US dollars), an increase of 7.2% compared with fiscal year 2020;
-The online music service revenue of Tencent Music in fiscal year 2021 increased by 22.7% year on year. Tencent Music's revenue from music subscription business in fiscal year 2021 was 7.33 billion yuan (about 1.15 billion dollars), an increase of 31.9% compared with fiscal year 2020;
-The net profit of Tencent Music in fiscal year 2021 is 3.22 billion yuan (about 505 million dollars), while the net profit attributable to shareholders of the company is 3.03 billion yuan (about 475 million dollars);
-Excluding the comprehensive impact of intangible assets and other asset amortization, equity incentive expenditure, net investment loss/income, changes in the fair value of the putable shares and income tax impact arising from acquisition, the net profit of Tencent Music in fiscal year 2021 under non IFRS is 4.33 billion yuan (about 680 million US dollars), The net profit attributable to shareholders of the Company was 4.15 billion yuan (about 651 million dollars).
Executive comments:
Peng Jiaxin, executive chairman of Tencent Music Entertainment Group, said: "In 2021, we will unswervingly deepen the implementation of the" one body and two wings "strategy of content and platform, and the overall business is full of vitality and resilience. Thanks to the record high of 76.2 million online music paying users throughout the year, our annual total revenue also continued to maintain a steady trend, with a year-on-year growth of 7%, and achieved sustainable profitability. Although our social entertainment service revenue slowed down in the fourth quarter due to multiple reasons, our online music subscription revenue still maintained a strong growth momentum. By continuously providing users with rich and high-quality music content, excellent music audio-visual experience and diversified and industry-leading platform functions, we have achieved a net growth of 5 million online music paying users in a single quarter. In the future, we will also continue to optimize the cost structure, improve the efficiency of business operations, and promote the sustainable and healthy development of the industry driven by innovation while providing users with a better experience. In addition, we are also pleased to see that our investment in the production system of original content has begun to reap good results, relying on self-developed tools and technologies, and more and more independent musicians have found a home on our Tencent musician platform. With perfect services across the content value chain, we will also continue to be committed to expanding our capacity in content production, operation, publicity and commercialization, and continue to improve the scale, quality and market influence of our music content ecology. Based on our confidence in the future development of the "one body and two wings" strategy of content and platform, the US $1 billion stock repurchase plan announced last year has been implemented by more than 50%, and the rest of the plan will be completed in 2022. In addition, in order to provide greater liquidity and more protection for our shareholders in the changing regulatory environment, we plan to make a secondary listing on the main board of the Stock Exchange of Hong Kong in the form of introduction with regulatory approval. "
Liang Zhu, CEO of Tencent Music Entertainment Group, said: "Based on the four pillars of music entertainment: listening, watching, singing and playing, we have made exciting and significant progress in the platform innovation strategy. QQ Music, Kugou Music and Kuwo Music have recently released heavy version upgrades, in terms of product concept, operation optimization UI design and technical innovation have been greatly updated. As an effective complement to our rich music content, the long audio MAU exceeded 150 million in the fourth quarter, with a year-on-year growth of 65%. In addition, we have further strengthened the linkage with the wider Tencent ecosystem, and gained multi-dimensional gains, including differentiated promotion channels, more content and tools available for the platform, and injected more vitality into our musician ecosystem. Looking ahead, we will continue to be committed to promoting product innovation and providing our users with a richer immersive music entertainment experience on the platform. "
Financial analysis of the fourth quarter:
Revenue:
The total revenue of Tencent Music in the fourth quarter was 7.61 billion yuan (about 1.19 billion US dollars), a decrease of 728 million yuan, or 8.7%, compared with 8.34 billion yuan in the same period last year.
-Tencent Music's revenue from online music services in the fourth quarter was 2.88 billion yuan (about 452 million US dollars), up 4.3% compared with 2.76 billion yuan in the same period last year. This growth was driven by the strong growth of music subscription revenue and long audio revenue, but the revenue from re licensing, digital album sales and advertising business declined. The revenue of Tencent Music's music subscription service in the fourth quarter was 1.95 billion yuan (about 306 million US dollars), an increase of 23.5% compared with 1.58 billion yuan in the same period of the previous year, mainly due to the 36.1% increase in the number of paying users, which was partially offset by the decrease in the average revenue per paying user from 9.4 yuan in the same period of the previous year to 8.5 yuan in the fourth quarter. The decline in average revenue per paying user was mainly due to the company's more promotional activities in the fourth quarter.
-In the fourth quarter, Tencent Music's revenue from social entertainment services and other businesses was 4.73 billion yuan (about 742 million dollars), down 15.2% from 5.58 billion yuan in the same period last year. This growth was mainly due to intensified competition from other pan entertainment platforms and changes in the macro environment, but the revenue of audio live broadcasting business achieved strong growth. Compared with the same period in 2020, the average revenue per paying user of the company's social entertainment services in the fourth quarter of 2021 increased by 1.7%, but the number of paying users decreased by 16.7%.
Revenue cost:
The revenue cost of Tencent Music in the fourth quarter was 5.42 billion yuan (about 850 million US dollars), a decrease of 4.0% compared with 5.64 billion yuan in the same period last year, mainly because the company's revenue from social entertainment services declined, resulting in a decrease in the total amount of revenue sharing expenses.
Gross profit and gross profit margin:
The gross profit of Tencent Music in the fourth quarter was 2.19 billion yuan (about $344 million), down 18.7% from the 2.7 billion yuan in the same period last year. The gross profit rate of Tencent Music in the fourth quarter was 28.8%, down 3.6% compared with 32.4% in the same period last year. The decrease in gross profit margin is mainly due to the increase in the revenue share of social entertainment services and the change in the revenue mix. The proportion of revenue from online music services in the total revenue has increased, while the gross profit margin of online music services is generally low.
Operating expenses during the period:
The total operating expenditure of Tencent Music in the fourth quarter was 1.82 billion yuan (about 285 million US dollars), an increase of 8.2% compared with 1.68 billion yuan in the same period last year. The percentage of operating expenses in total revenue rose from 20.1% in the same period of the previous year to 23.9% in the fourth quarter.
-The sales and marketing expenditure of Tencent Music in the fourth quarter was 750 million yuan (about 118 million US dollars), down 3.0% compared with 773 million yuan in the same period last year. This decline was mainly due to the company's use of internal organic user traffic to attract more users, which effectively reduced user acquisition costs, and thus improved operational efficiency.
-The general and administrative expenses of Tencent Music in the fourth quarter were 1.07 billion yuan (about 167 million US dollars), an increase of 17.8% compared with 906 million yuan in the same period last year. This growth is mainly due to the company's increased R&D investment to expand its competitive advantage in product and technological innovation, and the acquisition of Lazy Audio has brought about post acquisition incentives, equity incentive expenses and intangible asset amortization expenses.
Operating profit during the period:
Tencent Music's operating profit in the fourth quarter was 682 million yuan (about US $107 million), compared with 1.3 billion yuan in the same period last year.
Income tax expense:
The effective tax rate of Tencent Music in the fourth quarter was 11.5%, compared with 5.5% in the same period of 2020. The decrease in effective tax rate was due to the fact that some Chinese operating entities under the Company were eligible for certain tax incentives, and its cumulative impact was recorded in this quarter. The effective tax rate represents Tencent Music's specific estimate of the tax obligations and benefits applicable to the company each quarter.
Net profit during the period and non IFRS net profit:
The net profit attributable to shareholders of the Company in the fourth quarter was 536 million yuan (about 84 million dollars), compared with 1.2 billion yuan in the same period last year. The net profit attributable to shareholders of the Company in the fourth quarter under non IFRSs (excluding intangible assets and other asset amortization, equity incentive expenses, net investment loss/income, changes in the fair value of puttable shares and the comprehensive impact of income tax arising from acquisitions) was 832 million yuan (about $131 million), Compared with the same period last year, it was 1.35 billion yuan.
Loss per ADS:
The basic and diluted earnings per ADS of Tencent Music in the fourth quarter were 0.33 yuan (about US $0.05) and 0.32 yuan (about US $0.05), respectively. Excluding the comprehensive impact of intangible assets and other asset amortization, equity incentive expenditure, net investment loss/income, changes in the fair value of the putable shares and income tax impact arising from acquisition, the basic and diluted earnings per ADS of Tencent Music in the fourth quarter of the Non International Financial Reporting Standards were 0.51 yuan (about 0.08 dollars), respectively And RMB 0.50 (about USD 0.08). In the fourth quarter, Tencent Music's weighted average total outstanding ADSs (basic) and weighted average total outstanding ADSs (diluted) were 1.64 billion and 1.65 billion respectively. Each ADS of Tencent Music represents two Class A ordinary shares.
Cash flow:
The net cash provided by Tencent Music's operating activities in the fourth quarter was 822 million yuan (about US $129 million), compared with 1.86 billion yuan in the same period last year. This decline was mainly due to the increase in accounts receivable, most of which were settled in January 2022. The net cash provided by Tencent Music for investment activities in the fourth quarter was RMB 996 million (about US $156 million), compared with RMB 143 million used for investment activities in the same period in 2020. The fluctuation of cash flow from investing activities is mainly affected by the higher purchase amount and maturity of fixed deposits and short-term investments in this quarter. The net cash used by Tencent Music in financing activities in the fourth quarter was 286 million yuan (about 45 million US dollars), compared with 19 million yuan provided by financing activities in the same period in 2020. The cash flow used for financing activities in the fourth quarter was mainly due to the cash paid by the company to buy back ordinary shares.
In March 2022, Tencent Music won the bid for the right to use a piece of land in Shenzhen at a price of 1.05 billion yuan, and paid the first half of the consideration in the first quarter of 2022.
Cash, cash equivalents and term deposits:
As of December 31, 2021, the total amount of cash and cash equivalents, time deposits and short-term investments held by Tencent Music was 24.69 billion yuan (about 3.87 billion US dollars), compared with 24.46 billion yuan as of September 30, 2021. The increase in cash and cash equivalents, term deposits and total short-term investments was mainly due to the Company's cash flow from operating activities of RMB 822 million (about US $129 million), partially offset by cash used for acquisition of intangible assets and financing activities. The balance of cash and cash equivalents of the Company is also affected by the changes in the exchange rate of RMB against US dollar at different balance sheet dates. On December 31, 2021, the exchange rate of RMB against the US dollar will be 6.3726 to 1.
Share repurchase plan:
According to the 2021 stock repurchase plan announced on March 28, 2021, as of December 31, 2021, Tencent Music had repurchased about 49 million American depositary shares from the public market with cash, and the total consideration for repurchase activities was about $553 million.
Financial analysis in 2021:
Revenue:
The total revenue of Tencent Music in fiscal year 2021 was 31.24 billion yuan (about 4.9 billion dollars), an increase of 2.09 billion yuan, or 7.2%, compared with 29.15 billion yuan in fiscal year 2020.
-Tencent Music's revenue from online music services in fiscal year 2021 was 11.47 billion yuan (about 1.8 billion dollars), up 22.7% from 9.35 billion yuan in fiscal year 2020. This growth is due to the strong growth of music subscription revenue, and the growth of advertising business revenue and revenue from long audio also played a complementary role, but the revenue from digital album sales and re licensing declined. Tencent Music's music subscription revenue in fiscal year 2021 was 7.33 billion yuan (about US $1.15 billion), an increase of 31.9% compared with 5.56 billion yuan in fiscal year 2020, mainly due to the 38.9% increase in the number of paying users, which was partially offset by the decrease in the average revenue per paying user from 9.4 yuan in fiscal year 2020 to 8.9 yuan in fiscal year 2021. The decline in average revenue per paying user is mainly due to the company's more promotional activities in the second half of 2021.
-In fiscal year 2021, Tencent Music's revenue from social entertainment services and other businesses was 19.78 billion yuan (about 3.1 billion dollars), a slight decrease of 0.1% compared with 19.8 billion yuan in fiscal year 2020. This decline is mainly due to the intensified competition from other pan entertainment platforms and the change in the macro environment, but the strong revenue growth of the audio live broadcast business alleviates the above impact. On a year-on-year basis, the average revenue per paying user of social entertainment services in fiscal year 2021 increased by 13.4%, while the number of paying users decreased by 12.0%.
Revenue cost:
The revenue cost of Tencent Music in fiscal year 2021 is 21.84 billion yuan (about 3.43 billion dollars), an increase of 10.0% compared with 19.85 billion yuan in fiscal year 2020. This growth was mainly due to the company's increased investment in new products, original content production and content costs (such as Tencent Musician Platform and Long Audio) to enhance the competitiveness of the platform, but was partially offset by the decline in revenue sharing fees related to live broadcast services.
Gross profit and gross profit margin:
The gross profit of Tencent Music in fiscal year 2021 was 9.4 billion yuan (about 1.48 billion US dollars), an increase of 1.1% compared with 9.3 billion yuan in fiscal year 2020. The gross profit rate of Tencent Music in fiscal year 2021 was 30.1%, down 1.8% compared with 31.9% in fiscal year 2020. This decline is mainly due to the change of the revenue mix. The proportion of revenue from online music services in total revenue has increased, while online music services usually have low gross margins. In addition, this decline is also due to the company's investment in new products and content costs.
Annual operating expenses:
The total operating expenditure of Tencent Music in fiscal year 2021 was 6.69 billion yuan (about US $1.05 billion), an increase of 19.9% compared with 5.58 billion yuan in fiscal year 2020. The percentage of operating expenses in total revenue increased from 19.1% in FY2020 to 21.4% in FY2021.
The sales and marketing expenditure of Tencent Music in fiscal year 2021 was 2.68 billion yuan (about 420 million dollars), an increase of 8.2% compared with 2.48 billion yuan in fiscal year 2020. This growth is due to the company's increased spending on promoting its brands and existing products to enhance its competitiveness.
The general and administrative expenses of Tencent Music in fiscal year 2021 were 4.01 billion yuan (about 629 million US dollars), an increase of 29.3% compared with 3.1 billion yuan in fiscal year 2020. This growth is mainly due to the company's increased R&D investment to expand its competitive advantage in product and technological innovation, and the acquisition of Lazy Audio has brought about post acquisition incentives, equity incentive expenses and intangible asset amortization expenses.
Annual operating profit:
Tencent Music's operating profit in fiscal year 2021 was 3.8 billion yuan (about $596 million), compared with 4.71 billion yuan in fiscal year 2020.
Income tax expense:
The effective tax rate of Tencent Music in fiscal year 2021 is 11.5%, compared with 9.8% in fiscal year 2020.
Annual net profit and non IFRS net profit:
The net profit attributable to shareholders of the Company in fiscal year 2021 is 3.03 billion yuan (about 475 million dollars), compared with 4.16 billion yuan in fiscal year 2020. The net profit attributable to the shareholders of the Company in fiscal year 2021 (excluding intangible assets and other asset amortization, equity incentive expenses, net investment loss/income, changes in the fair value of the puttable shares and the comprehensive impact of income tax arising from acquisition) under non IFRS is 4.15 billion yuan (about 651 million dollars), In comparison, it is 4.95 billion yuan in fiscal year 2020.
Earnings per ADS:
The basic and diluted earnings per ADS of Tencent Music in fiscal year 2021 were 1.82 yuan (approximately US $0.29) and 1.80 yuan (approximately US $0.28), respectively. Excluding the comprehensive impact of intangible assets and other asset amortization, equity incentive expenditure, net investment loss/income, changes in the fair value of the putable shares and income tax impact arising from acquisition, the basic and diluted earnings per ADS of Tencent Music in the non IFRS fiscal year 2021 are RMB 2.50 (about US $0.39) respectively And 2.47 yuan (about 0.39 US dollars). In fiscal year 2021, the weighted average total outstanding ADSs (basic) and the weighted average total outstanding ADSs (diluted) of Tencent Music are 1.66 billion and 1.68 billion respectively.
Teleconferencing:
After the release of the financial report, the Tencent music management team will hold a financial report conference call at 8:00 p.m. on March 21 (8:00 a.m. on March 22, Beijing time). The phone number to listen to the conference call is as follows:
United States:+1-888-317-6003
International:+1-412-317-6061
Mainland China: 400-120-6115
Hong Kong, China: 800-963-976
Access code: 5337947
Before March 28, 2022, you can call the following numbers to listen to the conference call recording:
United States:+1-877-344-7529
International:+1-412-317-0088
Access code: 5421564
In addition, Tencent Music Investor Relations Channel https://ir.tencentmusic.com/will hold a teleconference for webcast and provide recording.
Stock price reaction:
On the same day, Tencent Music's share price fell by $0.41, or 8.10%, to close at $4.65 in regular trading on the New York Stock Exchange. In the subsequent after hours trading as of 5:59 p.m. EST on the 21st (5:59 a.m. Beijing time on the 22nd), Tencent Music's share price fell again by $0.16, or 3.44%, to $4.49. In the past 52 weeks, the highest price of Tencent Music was $32.25, and the lowest price was $2.95. (Tang Feng)
