Shulou(Shulou.com)11/24 Report--

According to the news on the evening of November 16, Tencent Holdings today released its third financial report for 2022. According to the financial report, the company's third-quarter revenue was 140.1 billion yuan, down 2% from the same period last year, while net profit was 39.94 billion yuan, up 1% from the same period last year. Under non-international financial reporting standards, net profit was 32.25 billion yuan, up 2% from the same period last year.

After the announcement, senior executives including Ma Huateng, chairman and CEO of Tencent, Liu Chiping, president, James Michelle, chief strategy officer, and Luo Shuohan, CFO, held a conference call to interpret the main points of the results and answer analysts' questions.

The following is the main content of the question and answer session of the analyst in this conference call:

William Packer: first of all, the progress in cost has provided an important support for the company to restore profit growth. I also see that general and administrative expenses are still growing. does the increase in this expenditure include one-time restructuring costs related to layoffs and other savings? May I ask the management to disclose the cost of this one-time operation? This will be more helpful to our understanding of the potential cost increase. The second question is about the domestic game business, does revenue growth seem to slow again, and when does management expect the business to resume revenue growth? Need to apply for regulatory approval to release more game products? Or is it a favorable factor to adjust the portfolio of underage-related games to form revenue growth?

Luo Shuohan: yes, the one-time restructuring cost includes an increase in general and administrative expenses, as well as an increase in expenditure on R & D personnel, a year-on-year low-digit growth.

James Mitchell: with regard to the domestic gaming business, you mentioned three factors: measures to protect minors, the lack of new game version numbers-which is very important for the gaming industry-and the challenging macro environment. On the question of how the company can boost the growth of domestic game business, it has been a year since the policy of online games to protect minors was introduced in September this year, and the impact of the policy on the company's business has also been amortized to the income statement. So from the perspective of cash flow, the impact on us is not very great. In order to achieve substantial and sustainable revenue growth, at least one of the other two influencing factors needs to be improved. We expect to get more game version numbers and more products on the market, and this change will happen soon, and we can't predict it at the macro level, of course, if all three things improve, our revenue growth will accelerate, and if only one factor improves, and considering the less obvious policy effects, it will be enough to boost our revenue growth.

Bank of America Merrill Lynch analyst Eddie Leung: how does the company deal with the reduction in version numbers? Do you consider adjusting the development strategy of the existing game new expansion to extend the life cycle and value of the product? In addition, with regard to the company's video number advertising business, what is the current customer feedback? What is the return on investment? What other areas need to be improved?

James Mitchell: we did adjust our game development strategy, and of course the effect of these adjustments may take a few more quarters to show. First of all, we focus our resources on several large, more influential, more valuable new products that are aimed at the global market, not just specific markets. Second, we devote more resources and time to upgrades to existing games, such as crossing the line of fire (CrossFire), which I mentioned at length earlier. Third, we are also convinced that new version numbers will be issued in the near future to alleviate the adverse factors posed by the development of the game industry.

With regard to your question about advertisers' feedback on embedded ads on Wechat video numbers, the most noteworthy point is that the audience of video ads is different from those of other types of advertisements. They do not consume other types of short videos, while users of other platforms in the industry usually have obvious overlap, so our advertisers, especially for FMCG, high-end brand customers. I like advertising on the video platform very much, because these ads can reach an audience that they can't reach on other platforms, and our service rates are very good. This also includes premiums placed on the company's other service platforms, such as Wechat moments. In terms of product optimization feedback from customers, the most critical point at present is that they want to buy more advertising inventory and want us to provide more inventory, and we are indeed increasing the inventory level on a regular basis, which is still in short supply.

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