Tencent Music Entertainment Group (TME) 2024 Q2 法說會逐字稿

Good evening, and good morning, and welcome to Tencent Music Entertainment second-quarter 2024 Earnings Conference Call. I'm Millicent Tu, Head of IR.

晚上好，早安，歡迎參加騰訊音樂娛樂2024年第二季財報電話會議。我是 IR 主管 Millicent Tu。

We announced our quarterly financial results earlier today before the US market opened. The earnings release is now available on our IR website, and via PRNewswire services. During today's call, you will hear from Mr. Cussion Pang, our Executive Chairman; and Mr. Ross Liang, our CEO, who will share an overview of our company strategies and business updates. Then Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions.

今天早些時候，我們在美國市場開盤前公佈了季度財務業績。收益報告現已在我們的投資者關係網站和美通社服務上發布。在今天的電話會議中，您將聽到我們的執行主席彭嘉信先生的演講；我們的執行長梁羅斯先生將分享我們公司策略和業務動態的概述。然後，我們的財務長胡雪莉女士將在我們開始提問之前討論我們的財務表現。

Before we continue, I refer you to the safe harbor statement in our earnings release, which applies to this call as we'll make forward-looking statements. Please note that we'll discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and filings with the SEC.

在我們繼續之前，我請您參閱我們的收益發布中的安全港聲明，該聲明適用於本次電話會議，因為我們將做出前瞻性聲明。請注意，我們今天將討論非 IFRS 衡量標準，這些衡量標準將與我們在收益發布和向 SEC 提交的文件中根據 IFRS 報告的最具可比性的衡量標準進行更徹底的解釋和協調。

All participants are mute at this time. After management's remarks, there will be a Q&A session, and please to be advised that today's call is being recorded. With that, I'm very pleased to turn the call over to Cussion, Executive Chairman of TME. Cussion?

此時所有參與者都保持沉默。管理層發言後，將舉行問答環節，請注意，今天的電話會議正在錄音。至此，我很高興將電話轉給 TME 執行主席 Cussion。罵人？

Thank you, Millicent. Hello, everyone, and thank you for joining our call today. We are excited to report another solid quarter underpinned by a 28% year-over-year growth in online music services as well as a 26% year-over-year growth increase in adjusted net profit.

謝謝你，米利森特。大家好，感謝您今天加入我們的電話會議。我們很高興地報告又一個穩健的季度，線上音樂服務年增 28%，調整後淨利潤年增 26%。

The outstanding net addition of over 10 million music subscribers in the first half of 2024, coupled with a rise in ARPPU, once again demonstrated our strong ability to bring new brands within China's streaming landscape.

2024年上半年音樂用戶淨增加超過1,000萬，加上ARPPU的上升，再次證明了我們在中國串流媒體領域引進新品牌的強大能力。

We remain optimistic about the music industry's long-term potential, and are committed to our mid to long-term goals. In the meantime, we are consistently adjusting ourselves to better adapt to changing external environment, evolving user mindset, and our different business development stage to continuously innovate and achieve sustainable growth at a healthy pace and with the right balance.

我們對音樂產業的長期潛力保持樂觀，並致力於我們的中長期目標。同時，我們不斷調整自己，以更好地適應不斷變化的外部環境、不斷變化的用戶思維以及不同的業務發展階段，不斷創新，以健康的步伐和適當的平衡實現可持續增長。

Let me now share some recent highlights on our expansive content ecosystem, which is getting increasingly rewarding. First of all, we continue to expand and reinforce partnerships with artists and record labels to enrich our music library, and to bring the best content available to our users.

現在讓我分享我們廣闊的內容生態系統的一些最新亮點，該生態系統的回報越來越大。首先，我們繼續擴大和加強與藝術家和唱片公司的合作夥伴關係，以豐富我們的音樂庫，並為我們的用戶帶來最好的內容。

Our long-standing and extensive win-win partnerships with music labels enable us to secure more content-centric privileges for users, including but not limited to early access to the latest hits.

我們與音樂唱片公司建立了長期、廣泛的雙贏合作關係，使我們能夠為用戶確保更多以內容為中心的特權，包括但不限於搶先體驗最新熱門歌曲。

This quarter, we extended our collaborative licensing agreements with some well-known Chinese bands, such as Sodagreen, [Su Daliu], and a top Korean label, CJ ENM, which represents the highly popular K-pop boy band, ZEROBASEONE.

本季度，我們延長了與一些知名中國樂團的合作授權協議，例如蘇打綠、[蘇大力]，以及韓國頂級廠牌 CJ ENM（代表廣受歡迎的韓國流行男孩樂團 ZEROBASEONE）。

All these contract renewals include a 30-day head start pre-phase of their new songs. Overall, we are pleased to see that such pre-phase has effectively improved membership's conversion and engagement.

所有這些續約合約都包括 30 天的新歌前期準備期。總的來說，我們很高興看到這樣的前期活動有效地提高了會員的轉換和參與。

Second, we continue to explore more engaging ways for users to enjoy music. During the quarter, we combined the proprietary fan-artist interaction benefits, such as live video calls, digital album releases, and it effectively increased sales. (spoken in Mandarin), the new digital album of a popular Chinese singer, [Zhou Shen], is a recent success.

其次，我們不斷探索更多吸引用戶享受音樂的方式。本季度，我們結合了專有的粉絲藝術家互動優勢，例如即時視訊通話、數位專輯發布，有效增加了銷售額。中國流行歌手[週深]的全新數位專輯（普通話）最近取得了成功。

It features artists in the in-app declarations and virtual souvenirs, and exceeded 1 million copies in sales within three months of release, ranking as a top seller year-to-date on our platform. We have also seen solid digital album sales results from other artists, such as Chinese singer, Lay Zhang, Zhang Yixing, and the popular K-pop girl group, aespa.

它在應用程式內聲明和虛擬紀念品中以藝術家為特色，發布後三個月內銷量超過 100 萬份，在我們的平台上排名今年迄今為止最暢銷。我們也看到其他藝人的數位專輯銷售業績強勁，例如中國歌手張藝興、張藝興以及流行的韓國流行女子組合 aespa。

Third, as the demand for offline live performances continues to surge, we stepped up our efforts to host concerts and music festivals with more value-added services.

第三是隨著線下現場演出需求持續激增，我們加大力度舉辦更多加值服務的音樂會、音樂節。

In July, we host our upgraded flagship annual event, TMEA, Tencent Music Entertainment Awards 2024 in Macau. We broadened our horizons this time, featuring A-listed domestic singers and rising musicians, as well as international idols.

7 月，我們在澳門舉辦升級版旗艦年度活動 TMEA，2024 騰訊音樂娛樂盛典。這次我們拓寬了視野，有國內一線歌手和新晉音樂人，也有國際偶像。

Notably, over 60 household names, including Zhou Shen, [Yiwei and Dawei], [Jingjang], [ Zhang Liangying ], and the K-pop girl group, BABYMONSTER, performed at this year's event. TMEA 2024 sparked billions of social media buzz, showcasing our elevated industry input.

值得注意的是，包括週深、【一偉和大偉】、【靖江】、【張靚穎】以及韓流女團BABYMONSTER在內的60多位家喻戶曉的明星在今年的活動中進行了表演。 TMEA 2024 引發了數十億社群媒體熱議，展示了我們提升的產業投入。

We are also bolstering our capabilities to organize large-scale concerts for top noted singers. For instance, we hosted TIA RAY's landmark concert tour, and helped her also achieve a milestone of over 10,000 attending fans. We are happy to see a significant year-over-year growth in our revenues from offline performances in the second quarter.

我們也加強為頂級歌手舉辦大型音樂會的能力。例如，我們舉辦了TIA RAY具有里程碑意義的巡迴演唱會，並幫助她實現了粉絲人數超過10,000人的里程碑。我們很高興看到第二季線下演出收入較去年同期大幅成長。

This quarter, as a new initiative, we customized the event-themed artist merchandise for Karen Mok, Mo Wenwei, [concerts] have started sales on our platform. We also provide our subscribers with member-only access to the online premier concerts of a popular Chinese band, (spoken in Mandarin), as a remarkable benefit.

本季度，我們又推出了新舉措，為莫文蔚、莫文蔚定制了活動主題藝人商品，【演唱會】已在我們平台開始銷售。我們還為訂戶提供會員專屬的中國流行樂隊（普通話）線上首演音樂會的訪問權限，這是一項顯著的福利。

Fourth, our self-produced content continue to win popularity and boost user conversion. We strategically leveraged our extensive resources as an advantage in TV, films, IPs and artists to elevate production, promotion and success of our self-produced content.

第四，自製內容持續贏得熱度，提升用戶轉換。我們策略性地利用我們在電視、電影、IP和藝術家方面的廣泛資源優勢，提升自製內容的製作、推廣和成功。

For example, we invited popular artists, [Zhou Shen, Andy Wu, and Big Girl] to form the original soundtracks for Tencent, blockbuster TV series, Joy of Life 2 (spoken in Mandarin), and The Tale of Rose, (spoken in Mandarin).

For example, we invited popular artists, [Zhou Shen, Andy Wu, and Big Girl] to form the original soundtracks for Tencent, blockbuster TV series, Joy of Life 2 (spoken in Mandarin), and The Tale of Rose, (spoken in國語).

The self-produced songs master over 200 million streams in total on our platform within three months of release, ranking top 3 on OST charts until today. In addition, our self-produced pop songs, Heard of You, (spoken in Mandarin), and Who Am I, (spoken in Mandarin), went viral on short video platform soon after they had featured on the national music variety show, The Treasured Voice Season 5, (spoken in Mandarin), which significantly boosted streams on our platform.

自製歌曲上線三個月內累積播放量超過2億，至今穩居OST排行榜前三名。此外，我們自製的流行歌曲《聽說過你》、《我是誰》在登上全民音樂綜藝節目《我是誰》後，很快就在短視頻平台上瘋傳。普通話），顯著增加了我們平台上的流量。

Our high-quality original content combined with unique fan-artist interactions fulfills diverse music tastes and entertainment needs, bolstering an increasingly dynamic content ecosystem. We always strive to inspire society and share our love through music.

我們的高品質原創內容與獨特的粉絲藝術家互動相結合，滿足了多樣化的音樂品味和娛樂需求，並支撐著日益活躍的內容生態系統。我們始終致力於透過音樂激勵社會並分享我們的愛。

In the second quarter, we jointly launched another Little Red Flower Concert with Tencent Charity, partnering with volunteer artists and teachers to support the local education for children in rural areas through online and offline performances.

第二季度，我們與騰訊公益聯合推出了另一場小紅花音樂會，與志願藝術家和老師合作，透過線上和線下的表演來支持當地農村兒童的教育。

We amplified its online reach and social influence this time by deeply collaborating with Weixin Video Accounts to live stream the concerts.

這次我們透過與微信視訊號深度合作直播演唱會，擴大了網路影響力和社會影響力。

In summary, we record a solid second quarter performance, finishing the first half of the year on a strong note, both operationally and financially.

總而言之，我們第二季的業績表現強勁，上半年在營運和財務方面均表現強勁。

We believe the power of our platform, the value of premium music content, and expanding members' privileges will have a snowball effect, leading to a healthy and sustainable growth.

我們相信，我們平台的力量、優質音樂內容的價值以及不斷擴大的會員特權將產生滾雪球效應，帶來健康、可持續的成長。

Guided by our long-term view, our goal is to lay a strong, solid foundation for future progress and to promote a vibrant win-win development of the industry.

我們的目標是立足長遠，為未來的進步打下堅實的基礎，推動產業充滿活力、共贏發展。

Now, I would like to turn the call over to Ross for more details on our overall platform development. Ross, please go ahead. Thank you.

現在，我想將電話轉給羅斯，以了解有關我們整體平台開發的更多詳細資訊。羅斯，請繼續。謝謝。

Thank you, Cussion. Hello, everyone. Our focus on user-centric innovation has effectively increased the music subscribers and enhanced retention during this quarter.

謝謝你，卡森。大家好。我們對以用戶為中心的創新的關注有效地增加了本季的音樂訂閱者並提高了保留率。

This reflected our ongoing efforts to advance our products and services, especially the focus on the high-value subscription plan, the Super VIP membership. Our approach to continuously delight users keeps us at the forefront of the streaming industry.

這反映了我們不斷努力推進我們的產品和服務，特別是對高價值訂閱計劃——超級 VIP 會員的關注。我們不斷取悅用戶的方法使我們始終處於串流媒體行業的前沿。

A few quarterly highlights to share. First, we further enhanced sound quality and the effects as part of our premium offerings. For example, QQ Music upgraded its self-developed audio 3D 2.0, (spoken in Mandarin), and the Kugou Music launched the Viper Ultra Sound, (spoken in Mandarin), all featuring ultra-clear sound quality.

分享一些季度亮點。首先，作為我們優質產品的一部分，我們進一步增強了音質和效果。例如，QQ音樂升級了自主研發的音訊3D 2.0（國語），酷狗音樂推出了Viper Ultra Sound（國語），均具有超清晰的音質。

We also presented users with new ways to enjoy the music, including sound quality for certain high end headphones and playlists with best-in-class audio quality. This improvements have led to not only higher user adoption, but also increased music consumption.

我們還為用戶提供了享受音樂的新方式，包括某些高階耳機的音質和具有一流音質的播放清單。這些改進不僅提高了用戶採用率，也增加了音樂消費。

Second, we meet the users' personalized needs. We have launched a series of benefits, including customized players and the ringtones based on well-known IPs and artists. These features resonate with users' desire for self-expression and proved effective in user conversion and retention.

第二，滿足使用者的個人化需求。我們推出了一系列福利，包括客製化播放器以及基於知名IP和藝術家的鈴聲。這些功能契合了使用者自我表達的願望，並在使用者轉換和留存方面被證明是有效的。

Third, our premium SVIP membership is gaining more traction, employing a holistic and seamless listening experience across various devices and multiple scenarios. SVIP integrates music with long-form audio and online karaoke services, always superior sound quality.

第三，我們的高級 SVIP 會員資格正在獲得越來越多的關注，在各種設備和多個場景中採用全面、無縫的聆聽體驗。 SVIP將音樂與長格式音訊和線上卡拉OK服務融為一體，始終保持卓越的音質。

It wins the hearts of our active members with comprehensive online and offline privileges, such as priority access to digital albums and the ticket booking for live music events, including our TMEA. We are pleased with the early progress of SVIP membership adoption and are looking forward to sharing more exciting news down the road.

它透過全面的線上和線下特權贏得了我們活躍會員的心，例如優先訪問數位專輯和現場音樂活動（包括我們的 TMEA）的門票預訂。我們對 SVIP 會員採用的早期進展感到高興，並期待在未來分享更多令人興奮的消息。

Next, our more personalized music discovery and optimized listening experiences. A few key (inaudible) to spotlight. We upgraded our recommendation middleware across our music apps, enabling users to discover songs better (inaudible) to their testing.

接下來，我們將提供更個人化的音樂發現和優化的聆聽體驗。一些需要重點關注的關鍵（聽不清楚）。我們升級了音樂應用程式中的推薦中間件，使用戶能夠更好地（聽不見）他們的測試發現歌曲。

During the quarter, nearly 40% of streams were generated from recommendations. With our evolving large audio models, we continue to import more essential music distribution and the discovery of new and long-tail content.

本季度，近 40% 的流量來自推薦。隨著我們不斷發展的大型音訊模型，我們繼續導入更重要的音樂發行以及新的長尾內容的發現。

We also elevated our platform's overall experience with AIGC applications. For example, we introduced a data saving, AI-enhanced SQ Lite Mode, (spoken in Mandarin). We are preserving superior sound quality and Kugou Music virtual DJ features, and QQ Music 3D avatar, offer users a sense of companionship.

我們也提升了我們平台在 AIGC 應用程式方面的整體體驗。例如，我們推出了節省資料的 AI 增強型 SQ Lite 模式（普通話）。我們保留了卓越的音質和酷狗音樂虛擬DJ功能，以及QQ音樂3D頭像，為使用者提供陪伴感。

On the visual side, we refined our streaming UI design to offer a more inviting and effortless experience. For example, QQ Music launched industry-first multi-device matching playback feature and a compact, half-screen music player. Users can now enjoy seamless music streaming when searching across different devices and applications.

在視覺方面，我們改進了串流 UI 設計，以提供更誘人、更輕鬆的體驗。例如，QQ音樂推出了業界首創的多裝置配對播放功能和緊湊型半螢幕音樂播放器。用戶現在可以在不同裝置和應用程式搜尋時享受無縫音樂串流。

Last but not least, we further expanded our rewards program to include more benefits, such as artist merchandise. Its growing popularity among users has effectively boosted music content consumption and increased user engagement.

最後但並非最不重要的一點是，我們進一步擴大了獎勵計劃，包括更多福利，例如藝術家商品。它在用戶中的日益普及有效地促進了音樂內容消費並提高了用戶參與度。

To sum up, all the above efforts contributed to a high stickiness on our platform, as reflected by both year-over-year and quarter-over-quarter increases in time spent per user in the second quarter.

綜上所述，所有上述努力都促成了我們平台的高黏性，第二季度每個用戶花費的時間同比和環比增長就反映了這一點。

Moving forward, we are committed to offering more competing services that better align with needs of diverse music lovers, ultimately expand our paying user base and increasing user loyalty.

展望未來，我們致力於提供更具競爭力的服務，更好地滿足不同音樂愛好者的需求，最終擴大我們的付費用戶群並提高用戶忠誠度。

With that, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials.

說到這裡，我想把電話轉給我們的財務長雪莉，讓她深入了解我們的財務狀況。

Thank you, Ross, and greetings to everyone. I will now turn to our financial results.

謝謝你，羅斯，並向大家問好。我現在談談我們的財務表現。

Our effective monetization of online music services and operational efficiency management continued to drive strong financial results in the second quarter of 2024. IFRS net profit increased by 33% year-over-year to CNY1.8 billion, and the non-IFRS net profit rose by 26% to CNY 2 billion. Our total revenues were CNY7.2 billion, down by 2% year-over-year.

我們線上音樂服務的有效貨幣化和營運效率管理持續推動 2024 年第二季強勁的財務業績。 % 至20 億元人民幣。我們的總收入為72億元，年減2%。

Revenues from online music service had strong growth, largely offsetting the decline in revenues from social entrainment and other services.

線上音樂服務收入強勁成長，很大程度上抵消了社交夾帶等服務收入的下降。

In the second quarter of 2024, our online music revenues increased by 28% to CNY5.4 billion on a year-over-year basis. This increase was driven by the strong expansion of our music subscription revenues supplemented by growth in advertising revenues as well as growth in revenues from offline performances.

2024年第二季度，我們的線上音樂收入年增28%至54億元。這一增長是由我們的音樂訂閱收入的強勁增長以及廣告收入的增長以及線下演出收入的增長所推動的。

Music subscription revenues in the second quarter of 2024 reached CNY3.7 billion, marking a 29% increase year-over-year and a 3% rise sequentially. Monthly ARPPU was CNY10.7, up from CNY 9.7 in the same period last year.

2024年第二季音樂訂閱收入達37億元人民幣，較去年同期成長29%，較上季成長3%。每月ARPPU為10.7元人民幣，高於去年同期的9.7元。

The number of online music paying users were 117 million, representing an 18% increase year-over-year with quarterly net adds of 3.5 million paying users. With a large scale of music subscribers, our focus is to manage music subscription revenue growth with the right balance and pace to achieve growth in both subscribers and monthly ARPPU.

線上音樂付費用戶規模達1.17億，年增18%，季度淨增付費用戶350萬。憑藉大量的音樂訂閱用戶，我們的重點是以適當的平衡和節奏管理音樂訂閱收入成長，以實現訂閱用戶和每月 ARPPU 的成長。

Our enriched content offerings and enhanced member privileges, such as QQ Music introducing Audio (inaudible) ,2.0 and Kugou Music rolling out to Viper Ultra Sound, have made our products more attractive and improved user stickiness. And our SVIP membership program is our strategic focus operationally and will lead to ARPPU improvement in the long run.

我們豐富的內容和增強的會員特權，例如QQ音樂推出音訊（聽不清楚）、2.0以及酷狗音樂推出Viper Ultra Sound，使我們的產品更具吸引力並提高了用戶黏性。我們的 SVIP 會員計畫是我們營運的策略重點，從長遠來看將導致 ARPPU 的提高。

Advertising revenues also had a strong year-over-year growth, primarily due to the growth in ad-supported advertising.

廣告收入也較去年同期強勁成長，這主要是由於廣告支援廣告的成長。

We provided more attractive interactive features to our users, which helped improving (inaudible) reach for our ad-supported advertising. Promotions for the 6/18 mid-year shopping festival also contributed to increased advertising revenues.

我們為用戶提供了更具吸引力的互動功能，這有助於提高（聽不清楚）我們廣告支援的廣告的覆蓋範圍。 6/18年中購物節的促銷活動也促進了廣告收入的成長。

Moreover, our interactive rewards program opened new avenues for commercialization in advertising for our users. Additionally, we continued to innovate and diversify our product offerings and advertising for mass, while deepening the integration of brand sponsorships with our offline performances.

此外，我們的互動獎勵計劃為用戶的廣告商業化開闢了新的途徑。此外，我們繼續創新和多樣化我們的產品供應和大眾廣告，同時深化品牌贊助與線下表演的結合。

Social entertainment services and other revenues were CNY1.7 billion, down by 43% year-over-year. We will continually monitor market conditions, the competitive landscape, regulatory environment and our product features for social entertainment services.

社交娛樂服務及其他收入為17億元人民幣，較去年同期下降43%。我們將持續關注社交娛樂服務的市場狀況、競爭格局、監管環境以及我們的產品功能。

Our gross margin for Q2 reached 42%, marking an increase of 7.7 percentage points year-over-year due to the following factors. First, the expansion in paying user base and improved monthly ARPPU for online music as well as increased advertising revenues had a favorable impact on our gross margin.

第二季毛利率達42%，年增7.7個百分點，主要得益於以下因素。首先，付費用戶群的擴大、線上音樂每月 ARPPU 的增加以及廣告收入的增加對我們的毛利率產生了有利的影響。

Second, we have been focused on ROCE as a key metric to manage our costs. Third, the ramping up of our own content continued to help improve our gross margin. Lastly, we have enhanced monetization of recent membership and advertising within social entertainment, which positively impact our gross margin. All above factors have collectively enabled us to move to a healthy margin.

其次，我們一直將 ROCE 作為管理成本的關鍵指標。第三，我們自己內容的增加繼續有助於提高我們的毛利率。最後，我們加強了社交娛樂領域近期會員資格和廣告的貨幣化，這對我們的毛利率產生了積極影響。所有上述因素共同使我們能夠實現健康的利潤率。

Moving on to operating expenses, in the second quarter of 2024, they amounted to CNY1.1 billion, representing 16% of our total revenues compared with 17.2% in the same period of last year.

至於營運費用，2024 年第二季營運費用為 11 億元人民幣，占我們總收入的 16%，去年同期為 17.2%。

Selling and marketing expenses were CNY210 million and remained relatively stable comparing with the same period of last year.

銷售及行銷費用為2.1億元，與去年同期相比保持相對穩定。

We continue to maintain ROI-focused approach for promotion expenses and will continue to invest in areas such as online music with a long-term growth perspective as well as in content promotions.

我們將繼續保持以投資回報率為中心的促銷費用，並將繼續投資於具有長期成長前景的線上音樂以及內容促銷等領域。

General and administrative expenses were CNY938 million, down by 10% year-over-year, primarily driven by lower employee-related expenses.

一般及管理費用為 9.38 億元，年減 10%，主要是因為員工相關費用減少。

Our effective tax rate for Q2 was 19.4% compared to 12.2% in the same period of 2023. This increase was primarily attributable to the accrual of withholding tax of CNY111 million related to the earnings to be remitted by our PRC subsidiaries to offshore entities. Additionally, changes in preferential tax risk for certain entities also impact our effective tax rate.

我們第二季的有效稅率為 19.4%，而 2023 年同期為 12.2%。此外，某些實體的優惠稅務風險的變化也會影響我們的有效稅率。

For Q2 2024, our net profit and net profit attributable to equity holders of the company were CNY1.8 billion and CNY1.7 billion, respectively. Non-IFRS net profit and non-IFRS net profit attributable to equity holders of the company were CNY2 billion and CNY1.9 billion, respectively.

2024年第二季度，我們的淨利潤和歸屬於公司股東的淨利潤分別為18億元和17億元。非國際財務報告準則淨利及歸屬於公司股東的非國際財務報告準則淨利分別為人民幣20億元及人民幣19億元。

Our diluted earnings per ADS reached a record high this quarter at CNY 1.07, up 30% year-over-year. Non-IFRS diluted earnings per ADS increased to CNY1.19, up 23% year-over-year. These results underscore our robust financial performance, enhanced operating efficiency, and the beneficial impact of our share repurchase program.

本季我們每股美國存託股攤薄收益創歷史新高，達到1.07元人民幣，較去年同期成長30%。非國際財務報告準則攤薄每股美國存託股收益增至 1.19 元，年增 23%。這些結果凸顯了我們強勁的財務表現、提高的營運效率以及我們的股票回購計畫的有益影響。

As discussed during Q1 2024 earnings call, we declared a new cash dividend for the fiscal year 2023 in May and have made a payment of USD212 million in June 2024.

正如 2024 年第一季財報電話會議中所討論的那樣，我們在 5 月宣布了 2023 財年的新現金股息，並於 2024 年 6 月支付了 2.12 億美元。

As of June 30, 2024, our combined balance of cash, cash equivalents, term deposits and short-term investment were CNY35 billion as compared with CNY34.2 billion as of March 31, 2024. This combined balance was also affected by changes in the exchange rate of CNY to USD at different balance (inaudible) base.

截至2024年6月30日，我們的現金、現金等價物、定期存款和短期投資的合併餘額為350億元人民幣，而截至2024年3月31日為342億元人民幣。餘額（聽不清楚）基礎的人民幣兌美元匯率。

Looking forward, we will continue to focus on high-quality growth in our music business, such as expanding SVIP membership as well as operating efficiency improvement. We will continue to invest in high-quality content, original content production as well as innovative technologies to further improve user engagement and enhance user experience.

展望未來，我們將繼續專注於音樂業務的高品質成長，例如擴大SVIP會員以及提高營運效率。我們將持續投資優質內容、原創內容製作以及創新技術，進一步提升用戶參與度，提升用戶體驗。

This concludes our prepared remarks. We are now ready to take your questions.

我們準備好的演講到此結束。我們現在準備好回答您的問題。

(Event Instructions)

（活動須知）

Alicia Yap, Citigroup.

艾莉西亞葉 (Alicia Yap)，花旗集團。

I'm going to ask in Chinese first, then I translate myself. (spoken in Mandarin)

我先用中文問，然後我自己翻譯。 （以國語發言）

So can management share with us past the second half this year, second half '24 outlook for the top line growth, profitability trend, and also the online music growth rate? Will the net add or the ARPPU to be the more important growth driver? Thank you.

那麼管理層能否與我們分享今年下半年、24 年下半年的營收成長、獲利趨勢以及線上音樂成長率的前景？淨增還是ARPPU將成為更重要的成長動力？謝謝。

Okay. Thank you so much, Alicia, for your questions. And our view and outlook for the year 2024 actually remains unchanged, which means that we are expecting to achieve a healthy and positive revenue and profit growth this year.

好的。非常感謝艾莉西亞提出的問題。而我們對2024年的看法和展望實際上保持不變，這意味著我們預計今年將實現健康、積極的收入和利潤成長。

For the online music businesses, as mentioned, we have over 10 million net subscriber adds in the first half of 2024, and also the ARPPU has reached CNY 10.7, up from CNY 9.7 in the same quarter last year, which laid a very good foundation for us, and we are confident that our online music growth will continue to be solid, fueled by both of the net adds and also the ARPPU expansion. So over the past few quarters, our net adds comes in much better than expected primarily due to the accelerated increase of the paid content and also the effective marketing strategies.

對於線上音樂業務，如同前面提到的，我們2024年上半年淨新增用戶超過1000萬，ARPPU也從去年同季度的9.7元上升到了10.7元，這奠定了很好的基礎。 ，我們相信，在淨增加量和ARPPU 擴張的推動下，我們的線上音樂成長將繼續保持穩健。因此，在過去的幾個季度中，我們的淨增量比預期要好得多，這主要歸功於付費內容的加速成長以及有效的行銷策略。

So as the pace of the net asset, we will return to a normal level and grow in a steadier pace, we will be more focusing on growing the ARPPU, which expected to have a faster growth than the net adds.

因此，隨著淨資產的成長速度，我們將恢復到正常水平並以更穩定的速度成長，我們將更加關注ARPPU的成長，預計其成長速度將快於淨資產的成長。

One of the good news that, we are pleased with seeing that our enriched privileges and holistic service offerings have started to gain more popularity among our existing users. So our SVIP plan has very good momentum and which gives us confidence on the ARPPU growth in the future.

好消息之一是，我們很高興看到我們豐富的特權和全面的服務產品已開始在現有用戶中越來越受歡迎。所以我們的 SVIP 計畫有著非常好的勢頭，這讓我們對未來 ARPPU 的成長充滿信心。

So as a result, in the near term, I think that the net adds in the second half of 2024 will be smaller compared to the first half, but the ARPPU will expand as a more noticeable case moving into the 2025, which help to further improve our margin as well. In terms of the advertising revenue, I think it's expected to have a good performance in the coming quarters due to the growth in the ad-support advertising (inaudible) and also the sponsorships of the offline event, et cetera.

因此，短期內，我認為 2024 年下半年的淨增加量將比上半年小，但 ARPPU 將作為一個更引人注目的案例進入 2025 年，這有助於進一步也提高了我們的利潤率。就廣告收入而言，我認為由於廣告支援廣告（聽不清楚）以及線下活動的贊助等方面的成長，預計未來幾季會有良好的表現。

For the social entertainment side, we expect to have continuous challenges from the competition, macro and other factors. But with this contribution to our total revenue becomes much smaller, impact will be largely offset by the solid growth from online music business.

對於社交娛樂方面，我們預計將面臨來自競爭、宏觀等因素的持續挑戰。但隨著這對我們總收入的貢獻變得越來越小，影響將在很大程度上被線上音樂業務的穩健成長所抵消。

So in terms of the profitability, our strategy is to focus on the high-quality growth, and proven to be effective, and we are now expected a slightly better full year net profit than the previous forecasted.

所以在獲利方面，我們的策略是聚焦高品質成長，而且事實證明是有效的，我們現在預計全年淨利會比之前的預測稍微好一些。

Lincoln Kong, Goldman Sachs.

林肯·孔，高盛。

Congrats on the solid quarter. I just want to follow up in terms of the net adds. In the ARPPU, I think currently you mentioned we will have a more meaningful increase into the second half.

恭喜季度業績穩定。我只想跟進淨增加情況。在 ARPPU 方面，我認為您目前提到我們下半年將有更有意義的成長。

So could management just elaborate a bit more on, in what way we would plan to do that in terms of price hike, promotion, reduction or can we elaborate a bit more in terms of the Super VIP progress or other high value-added service here?

那麼管理層是否可以詳細說明一下，我們計劃以何種方式在提價、促銷、降價方面做到這一點，或者我們可以在超級 VIP 進度或其他高附加值服務方面詳細說明一下嗎？

What kind of the magnitude of the increase we expect ARPPU and would that result in any sort of higher trend of the members because of this increase, I mean, this overall weak backdrop? Thank you.

我們預計 ARPPU 的成長幅度是多大？謝謝。

(spoken in Mandarin)

（以國語發言）

(interpreted) Thank you for your question. Yes, indeed, I think the key driver of the future ARPPU growth in H2 of this year truly rest with the SVIP plan we are going to launch. In the SVIP plan, besides providing the content privilege, we also hope that we're going to offer other privilege, providing higher value to our members.

（翻譯）謝謝你的提問。是的，確實如此，我認為今年下半年未來 ARPPU 成長的關鍵驅動力確實取決於我們即將推出的 SVIP 計劃。在SVIP計劃中，除了提供內容特權外，我們還希望能夠提供其他特權，為我們的會員提供更高的價值。

We're talking about the key drivers of SVIP business. There are three points. The first point is that our existing digital outbound business allows SVIP to enjoy the start (inaudible) listening privilege.

我們正在討論 SVIP 業務的關鍵驅動因素。有三點。第一點是我們現有的數位外撥業務讓SVIP享有首發（聽不清楚）收聽的特權。

This can allow us to engage the high-value customers. If our SVIP customer, they'd like to hear certain music head of the start, that will be a great contribution to the value of the members.

這可以讓我們吸引高價值客戶。如果我們的SVIP客戶，他們希望聽到某些開頭的音樂，那將是對會員價值的巨大貢獻。

Well, my second point to that, for those high-value customers who SVIPs, they also pursue higher and better sound quality and sound effect. And we can also say that from our actual operational data, they also have a very high adoption rate for the high-quality sound and high-quality sand effect.

那麼我的第二點，對於那些SVIP的高價值客戶來說，他們也追求更高更好的音質和音效。而且我們也可以說，從我們的實際營運數據來看，他們對於高品質聲音和高品質沙子效果的採用率也是非常高的。

This is also what we are going to do in the near future, continue to upgrade the sound quality and sound effect.

這也是我們近期要做的事情，繼續升級音質和音效。

Well, from the application perspective, in H1 of this year, we launched the Dolby Atmos, and we also launched the Audio 3D 2.0. And in July, we just launched [ETS]. All those very premier sound quality will help to further contribute the value to our SVIP members.

那麼從應用的角度來說，今年上半年我們推出了杜比全景聲，我們也推出了Audio 3D 2.0。 7 月份，我們剛剛推出了 [ETS]。所有這些一流的音質將有助於進一步為我們的 SVIP 會員貢獻價值。

But at the same time, regarding the content creation for SVIP, we make sure they can enjoy the long-form audio content in their existing privilege. We provide them the premier service. In other ways, they can enjoy the seamless listening experience from device-to-device.

但同時，對於SVIP的內容創作，我們確保他們可以在現有的特權下享受長格式的音訊內容。我們為他們提供一流的服務。在其他方面，他們可以享受設備到設備之間的無縫聆聽體驗。

In other words, for SVIP on TME platform, they can enjoy the [mutant] content, the long-form video and also enjoy the seamless listening experience from device-to-device.

換句話說，對於TME平台上的SVIP來說，他們可以享受[變異]內容、長視頻，還可以享受設備到設備的無縫聆聽體驗。

You can say that for SVIP, the membership fees is around CNY40 per month and which is actually allow us to have more room to provide better benefits and more experience to the SVIP compared with normal subscribers.

可以說，對於SVIP來說，會員費在每月40元左右，這實際上是讓我們有更大的空間為SVIP提供比普通會員更好的福利和更多的體驗。

Where at the same time, for our paying users, they are still the majority of our user base. We're going to continue to refine the content and the operation and making sure they're going to have a steady growth within (inaudible). I believe, in next quarter's earnings call, we're going to share with you more data and more strategies within SVIP.

同時，對於我們的付費用戶來說，他們仍然是我們用戶群的大多數。我們將繼續完善內容和運營，並確保它們能夠穩定成長（聽不清楚）。我相信，在下個季度的財報電話會議中，我們將與您分享 SVIP 內的更多數據和更多策略。

Alex Poon, Morgan Stanley.

亞歷克斯潘，摩根士丹利。

(spoken in Mandarin) My question is related to Super VIP. How should we think about the penetration as a percentage of total paying user, the trajectory in the coming few years? Thank you very much.

（國語）我的問題是關於超級VIP的。我們應該如何看待滲透率佔付費用戶總數的百分比以及未來幾年的軌跡？非常感謝。

(interpreted) Thank you very much for the question. And I have to say that for SVIP and because, as I mentioned in the previous answer, because they ever upgrade the sound quality, the sound effect, along with other drivers, we will be able to maintain a relatively fast growth of the SVIP members.

（翻譯）非常感謝你的提問。而且我必須說，對於SVIP來說，因為正如我在之前的回答中提到的，因為他們不斷升級音質、音效以及其他驅動力，我們將能夠保持SVIP會員的較快增長。

Where at the same time, I have to say, we start SVIP almost from 0. So till now, we see the growth is pretty satisfactory. But I think we still need to give some time until we disclose further information to you.

同時，我必須說，我們的SVIP幾乎是從0開始的。但我認為我們還需要一些時間，才能向您透露更多資訊。

What I can share with you is that SVIP, the growth is still in line with our expectation. We're [look into] the future, as you just mentioned. Those used to be CNY8 a month user, has already been converted into Kugou user and QQ Music paying user, and they are now a majority of our user base.

我可以跟大家分享的是SVIP，成長還是符合我們預期的。正如您剛才提到的，我們正在[展望]未來。以前8元一個月的用戶，現在轉換為酷狗用戶和QQ音樂付費用戶，現在他們已經是我們用戶群的主體了。

This is what we see now. We are looking forward to the next 10 years or in the very long-term, I think maybe SVIP were going to be our future driver of the growth trajectory.

這就是我們現在所看到的。我們期待未來 10 年或從長遠來看，我認為 SVIP 可能會成為我們未來成長軌跡的驅動力。

We hope that we can still maintain a steady and solid growth of SVIP, but we're going to disclose the corresponding data in due time.

我們希望SVIP仍能維持穩定穩健的成長，但我們會適時揭露對應的數據。

Zhang Lei, Bank of America Merrill Lynch.

張磊，美銀美林。

(spoken in Mandarin) Congrats on the solid quarter. I want to follow up on membership net adds trend, is 3 million per quarter, [usual], I think we entered a steady growth stage, and how to look at our long-term paying user penetration?

（以國語發言）恭喜您季度表現穩定。我想跟進會員淨增趨勢，是每季300萬，[通常]，我認為我們進入了穩定成長階段，如何看待我們長期的付費用戶滲透率？

(interpreted) Thanks for your question. And I think Cussion has already shared in his remarks. And when we look into the graph, we hope that in the near future the growth would be much better than what we have on net adds.

（已翻譯）謝謝你的提問。我認為卡森已經分享了他的言論。當我們查看圖表時，我們希望在不久的將來成長會比我們的淨成長要好得多。

But to be sure, in H1 of this year, after a few holidays, we will see the top end [net adds] full growth, but in H2 of this year, we're still (inaudible) a very solid growth. And from the operational strategy perspective, we still would like to maintain a good growth of (inaudible), where naturally grow the net adds.

但可以肯定的是，在今年上半年，經過幾個假期後，我們將看到高端[淨增加]全面增長，但在今年下半年，我們仍然（聽不清楚）非常穩健的增長。從營運策略的角度來看，我們仍然希望保持良好的成長（聽不清楚），淨增量自然成長。

But the most important thing we have to keep in mind is always the revenue and the profit. We do hope that the revenue and the profit, as we discussed with all of you, would hit our full year target. If we will be able to do so, then we will be able to continue to grow our subscriber base in a quality approach. Then you can expect what the result might be. Well, from the operational strategy perspective, I think we have already made it very clear.

但我們必須牢記的最重要的事情始終是收入和利潤。正如我們與大家討論的那樣，我們確實希望收入和利潤能夠達到我們的全年目標。如果我們能夠做到這一點，那麼我們將能夠以高品質的方式繼續擴大我們的用戶群。然後你就可以預期結果會是什麼。那麼從營運策略來講，我想我們已經說得很清楚了。

We would like to maintain a steady good growth of our user base. Besides paying attention to that net adds, we should also pay attention to the user retention because only by having the high-quality growth of the subscriber, we will be able to maintain a very strong retention of our high-quality subscribers. That will help us to further grow our business substantially.

我們希望保持用戶群的穩定良好成長。除了關注淨增之外，我們還要關注用戶留存，因為只有用戶的高品質成長，我們才能維持非常強的優質用戶留存。這將幫助我們進一步大幅發展我們的業務。

Well, regarding the subscriber penetration rate, we still would like to maintain what we used to promise to the market. And we also have every confidence that we're going to hit our mid and long-term subscriber number.

那麼關於用戶滲透率，我們還是想維持先前對市場的承諾。我們也完全有信心能夠達到中長期用戶數。

Well, regarding H2 of this year, what we're trying to do is that besides growing our subscriber base, we will also continue to intensify the sales and the promotion strategy, making sure we will be able to engage new customers and then to grow our subscriber base even higher.

那麼今年下半年我們要做的就是除了擴大我們的用戶群之外，我們還會繼續加大銷售和促銷的力度，確保我們能夠吸引新的客戶，然後能夠增長。

And this is also what I mentioned. In the long-term, we are still very confident to hit our subscriber number and hope we will be able to honor our commitment to the market.

這也是我提到的。從長遠來看，我們仍然非常有信心達到我們的用戶數量，並希望我們能夠兌現我們對市場的承諾。

Wei Seow, UBS.

魏秀，瑞銀。

(spoken in Mandarin) My question is about our profitability and margin trend. Just wondering, can management share how should we think about the pace of gross margin expansion in the second half this year and next year?

（國語）我的問題是關於我們的獲利能力和利潤率趨勢。只是想知道，管理階層能否分享我們該如何看待今年下半年和明年的毛利率擴張速度？

And what's the level of the gross margin level that we might be achieving in the medium-term? For the net margin, how should we think about any further room for cost optimization as well as the net margin trend going forward?

中期我們可能達到的毛利率水準是多少？對於淨利率，我們應該如何思考成本進一步優化的空間以及未來的淨利率趨勢？

(interpreted) You can say the gross margin and the net margin of the company continued to grow for the past nine quarters consecutively. So overall speaking, we're still very confident we're going to have a good performance on the GP margin and net margin.

（解讀）可以說，公司的毛利率和淨利潤連續九個季度持續成長。總的來說，我們仍然非常有信心在毛利率和淨利潤率上取得良好的表現。

Regarding the growth of the GP margin, on one side, from the revenue perspective, you continue to see the subscription business and the advertising business, the revenue continued to grow.

關於GP利潤率的成長，一方面，從收入角度來看，你持續看到訂閱業務和廣告業務，收入持續成長。

But at the same time, in the near future, if our SVIP program could be well executed, it's also going to be another positive contribution to our GP margin.

但同時，在不久的將來，如果我們的 SVIP 計劃能夠很好地執行，這也將是對我們 GP 利潤率的另一個積極貢獻。

Another point is that from the cost perspective, we continue to be committed in the music industry, and we made a heavy investment in the industry. We also maintain very close cooperation with the copyright holder, where you can say that those substantial investments were yield with very fruitful results. And we also did the ROCE management over the copyright and IT, continue to improve the utilization rate and efficacy.

還有一點是，從成本的角度來看，我們繼續致力於音樂產業，並且我們在這個產業上進行了大量的投資。我們也與版權方保持非常密切的合作，可以說，這些大量的投入是非常豐碩的成果。我們也對版權和IT進行了ROCE管理，不斷提高使用率和功效。

A third point in that, the contribution from our self-produced content continue to grow, which will also positively benefit our GP margin.

第三點，我們自製內容的貢獻持續成長，這也將有利於我們的毛利率。

A fourth point, even if we see a slight decrease on the social business, but still are raising advertisement as well as the membership number continue to grow, which will also benefit the overall GP margin.

第四點，即使我們看到社交業務略有下降，但仍在增加廣告以及會員數量的持續增長，這也將有利於整體GP利潤率。

We are specifically talking about the operational cost. If we take a look at the sales expense, you can say that for the past few quarters, we will be quite self-disciplined and well-managed with the sales expenses, which also show very good result.

我們特別討論的是營運成本。如果我們看銷售費用的話，可以說這幾個季度我們對於銷售費用還是比較自律的，管理得也很好，也表現出了非常好的成績。

At the same time, we foresee for the market expenses for the year and the total contribution from the market expenses to the revenue would maintain the same as what we saw last year. But specifically, if we take a look at the G&A expenses, if you take a look at the H1 performance of this year, you can say still we registered a small decline compared with last year.

同時，我們預期今年的市場費用以及市場費用對收入的貢獻總額將與去年持平。但具體來說，如果我們看一下 G&A 費用，如果你看今年上半年的表現，你可以說我們與去年相比仍然有小幅下降。

We will continue to improve our operational efficiency and the expenses management efficiency. In other words, for this year, we believe the G&A expenses ratio to the total revenue would be lower than what we saw last year.

我們將繼續提高營運效率和費用管理效率。換句話說，我們認為今年的一般管理費用佔總收入的比例將低於去年。

So overall speaking, we believe, no matter for the GP margin or the net margin, we're going to have a good improvement compared with what we saw last year. But at the same time, the net profit and the net profit margin, the growth would be better than the GP margin.

所以總的來說，我們相信，無論是毛利率還是淨利潤率，與去年相比，我們都會有很好的改善。但同時，淨利潤和淨利潤率的成長會好於毛利率。

In the longer run, as our online music business continue to grow steadily and positively, we also have every confidence to the future growth of the GP margin and the net margin.

從長遠來看，隨著我們的線上音樂業務持續穩定、積極成長，我們對毛利率和淨利潤率的未來成長也充滿信心。

Thomas Chong, Jefferies.

托馬斯莊，杰弗里斯。

My question is about macro headwinds. Given that we have been seeing macro uncertainties these days, how should we think about the impact to our different business segments, subscription, advertising and social entertainment? And my second question is about competition. Are we actually seeing any changes in the competitive landscape?

我的問題是關於宏觀阻力。鑑於這些天我們一直看到宏觀不確定性，我們應該如何考慮對訂閱、廣告和社交娛樂等不同業務領域的影響？我的第二個問題是關於競爭的。我們真的看到競爭格局有任何變化嗎？

(spoken in Mandarin)

（以國語發言）

I'll take the first question regarding the macroenvironment. Thanks -- speaking, the downturn in the macroenvironment definitely will bring some challenges to different aspects of the business. But I think that for the TME's online music business is -- frankly speaking, is really value for the money, so which is -- frankly speaking is a really relatively low cost entertainment that is very affordable to all users.

我將回答關於宏觀環境的第一個問題。謝謝——也就是說，宏觀環境的低迷肯定會給業務的各個方面帶來一些挑戰。但我認為對於 TME 的線上音樂業務來說，坦率地說，確實物有所值，所以坦率地說，這是一種真正相對低成本的娛樂，所有用戶都可以負擔得起。

So you can see that of the subscription business for us, the online music what -- do not have very much impact by the macroenvironment. In terms of the advertising, we are also doing a great job in the two quarters.

所以你可以看到，對我們來說，訂閱業務、線上音樂什麼的——並沒有受到宏觀環境的太大影響。在廣告方面，我們這兩個季度也做得很好。

Even though some of the advertisers may have some impact in spending on their advertising dollars, but we are seeing that we are still doing a good job, especially in some of the sectors that is related to, for example, tourists and also event related to some of our offline concerts sponsorships.

儘管一些廣告商的廣告支出可能會受到一些影響，但我們看到我們仍然做得很好，特別是在一些與遊客和活動相關的領域。

So I think that the advertising besides the sponsorships, we're also doing some of the new formats of advertising as well, so which can help us to further grow our advertising business in a very good momentum. So I think that the overall macroenvironment do not have such a big impact to TME. And still, we have very confidence for the long-term at healthy goal of our business.

所以我認為廣告除了贊助之外，我們也在做一些新的廣告形式，這可以幫助我們以非常好的勢頭進一步發展我們的廣告業務。所以我認為整體宏觀環境對TME並沒有那麼大的影響。儘管如此，我們對我們業務的長期健康目標仍然充滿信心。

(interpreted) Respond to your second question regarding the online music, especially the competition landscape. I think everyone has been clear. We still have the players, or those players will usually stay in this market.

（解釋）回答你的第二個問題，關於網路音樂，特別是競爭格局。我想大家都已經清楚了。我們仍然有球員，或者這些球員通常會留在這個市場。

Well, regarding the competition, you can see that for this year, it marks our eighth anniversary of starting the business. So our focus is still to do the business right. We are still going to follow our strategy of having the content and the platform at the same time.

那麼關於這個比賽呢,大家可以看到,今年是我們創業八週年。因此，我們的重點仍然是正確地開展業務。我們仍然會遵循同時擁有內容和平台的策略。

So we firmly believe, as long as we continue to improve our content and improve our competition capacity, where at the same time to further refine and optimize the user experience, we're still going to keep our position in this market.

所以我們堅信，只要我們不斷完善我們的內容，提高我們的競爭能力，同時進一步細化和優化用戶體驗，我們仍然能夠保持我們在這個市場的地位。

Okay. Since there are no further questions in the queue, I would like to wrap up the call. Thank you, everyone, for joining us today. And if you have any further questions, please feel free to reach our IR team. And this concludes today's call. Thank you very much again, and look forward to speaking to you next quarter. Thank you, and goodbye.

好的。由於隊列中沒有其他問題，我想結束通話。謝謝大家今天加入我們。如果您還有任何其他問題，請隨時聯絡我們的 IR 團隊。今天的電話會議到此結束。再次非常感謝您，並期待下個季度與您交談。謝謝你，再見。

Thank you, goodbye.

謝謝你，再見。

Thank you.

謝謝。

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.

此文字記錄中標記（翻譯）的部分是由現場通話中的口譯員說出的。口譯員由贊助本次活動的公司提供。