Table of Contents

2018 Business Higlights

Social
  • Weixin increasingly ubiquitous; Weixin Pay and Mini Programs penetrated more use cases, together with social video drove rapid user activity growth
  • Mobile QQ focused on young users, increasing user engagement via social/short videos and news feeds
  • Social and Others advertising revenue up 55% YoY
Games
  • #1 platform globally by users and revenue. Rich portfolio mix and industry-leading technical capabilities support multiple PC and mobile blockbusters
  • Internationally, operate highest-MAU PC game League of Legends and smart phone game PUBG MOBILE; partner with global leaders to foster industry innovation and growth
  • In China, sustained market leadership and implemented Healthy Gameplay System
Media & Content
  • Total digital content subscription counts rose 50% YoY to over 100 million
  • News feeds, short-video and mini-video views increased rapidly across Tencent News, QQ KanDian, Mobile QQ Browser and WeiShi
  • New Platforms and Content Group enables us to focus resources on systematic content creation and management, as well as algorithm enhancement
Ecosystem
  • Payment service expanded user and merchant adoption, contributing to growth of commercial transactions and FinTech businesses
  • Increased investments in cloud services, integrating AI and big data, to drive organic growth and assist digital transformation of industries
  • Provide customized solutions for smart industries by developing and integrating tools that leverage our social and technical capabilities

Financial Highlights

4Q2018
2018
Total Revenue
84.9 billion RMB
312.7 billion RMB
+28% YoY
+32% YoY
Net Profit attr. to Shareholders
Non-GAAP
Non-GAAP
19.7 billion RMB
77.5 billion RMB
+13% YoY
+19% YoY
GAAP
GAAP
14.2 billion RMB
78.7 billion RMB
-32% YoY
+10% YoY
Diluted EPS
Non-GAAP
Non-GAAP
2.065 RMB
8.097 RMB
+13% YoY
+19% YoY
GAAP
GAAP
1.489 RMB
8.228 RMB
-32% YoY
+10% YoY

Key Platforms Update

Weixin & WeChat
1,098 m, +11% YoY
QQ
Total:
807 m, +3% YoY
Smart Devices:
700 m, +2% YoY
Monthly Active Users as of 31 December 2018

Strategic Highlights

Weixin Mini Programs

  • Users
  • Service
    Providers
  • Talent
    Pool
  • Developers

Enhance user experience

  • Easy access to broad range of services via shortcuts embedded in chat interface
  • DAU grew robustly, with daily visits per user up 54% YoY
  • Broaden offerings to cover 200+ service sectors

Leverage mobile and social

  • Connect service providers to users online via Mini Programs QR Code
  • Drive transactions leveraging social sharing, advertising, payment and data analytics capabilities
  • 43% of daily visits went to long-tail Mini Programs

Popularize Mini Programs language

  • Add to computer programming curriculum in over 100 universities
  • 24% of developers are students

Increase development efficiency

  • Cross-platform development and instantaneous deployment
  • Cloud-based development kits for long-tail developers
  • Connect system integrators and service providers, promote sharing within developer community

Strategic Highlights

Weixin Pay

Scanner
POS machines for Meituan merchants
Scanner for Meituan merchants
QR code provided by Weixin Pay
QR code provided by system integrator
  • #1 mobile payment platform in terms of active users and number of transactions
  • Monthly active merchants increased over 80% YoY; deepened penetration in food and retail verticals leveraging Mini Programs, Scan-to-Buy solution and technology strengths
  • Total transaction volume exceeded 1 billion per day, within which commercial payment grew rapidly to represent over 50%; revenue more than doubled YoY for FY2018

Upsell FinTech services to under-served consumers at low cost

  • Wealth management platform LiCaiTong accumulated over RMB600 billion of customer assets
  • WeBank micro-loan product WeiLiDai outstanding loan balance increased rapidly
  • WeBank extended loan services to small and micro businesses through WeiYeDai

Strategic Highlights

Online Advertising

Once Upon A Bite x Carrefour
Honour of Kings x M.A.C. Cosmetics

Reorganization objectives

  • Merged sales team to provide customized marketing solutions to meet both brand building and performance marketing needs
  • Unified dashboard for advertisers to place ads across inventory types
  • Centralized platform to enhance targeting technologies and allocate dynamically between CPM and CPC ads

Advertising as a Service to support partners’ growth

  • Strengthen brand marketing impact with IP content partnership
  • Increase sales efficiency with our smart retail solutions
  • Enhance data management, analytics and security using our cloud services

Managing ad load for sustainable growth

  • Broad portfolio of inventories; healthy mix of advertisers across industries and budget ranges
  • Focus on enhancing ROI to deliver value to advertisers amid macro headwinds
  • Ad load still lower than most peers

Strategic Highlights

Cloud Services

  • FY2018 revenue increased over 100% to RMB9.1 billion
  • Paying customers more than doubled YoY in 4Q18
  • Expand customer reach and adoption via synergies with Mini Programs, Weixin Pay, social marketing, and online security capabilities

Leadership in key industries in China

Games + Video

  • Leverage operational expertise and solid infrastructure to develop industry-leading, customized solutions
  • Serve >50% of China-based games companies and expanding overseas

Internet services

  • Expand customer base rapidly via strategic partnership in verticals
  • Key categories include eCommerce, social media & community, handset manufacturer app stores, and smart transportation

Financial

  • Partner of choice for top banks including BOC, CCB and CMB
  • Serve majority of top online finance companies and insurance firms
  • Online security capabilities are a distinctive advantage

Retail

  • Strengthen consumer engagement via CRM and data analytics
  • Enhance marketing ROI via consumer targeting and anti-fraud technologies
  • Upgrade internal operations via smart solutions integrating AI, LBS and big data technologies

Strategic Highlights

Strengthen Ecosystem Through Investments

  • Portfolio covered over 700 companies
  • More than 100 investees each valued at over US$1 billion
  • Over 60 went public

Synergistic to our core businesses

  • By partnering with category leaders, allows management attention and company resources to concentrate on our own platforms
  • Enrich IP portfolio including games, video, music and literature via upstream investments
  • Broaden user reach and engagement via investments in vertical platforms

Capture emerging opportunities

  • Enrich offerings to meet evolving user needs
  • Accelerate adoption of enterprise-facing and enterprise-dependent services such as payment, advertising, cloud

Create value for investees

  • Access to our large user base
  • Provide infrastructure, technology and capital support, as well as experience sharing

Revenue Mix

4Q2018
2018
Social
Networks
Online
Games
Online
Advertising
Others

Value Added Services
Revenue

in billions, RMB
Online Games
Social Networks

Online Advertising
Revenue

in billions, RMB
Media
Social and Others

Segment Gross Margin

VAS (%)
Online Advertising (%)
Others (%)

Operating Expenses

S&M
in billions, RMB
R&D
in billions, RMB
G&A excl. R&D
in billions, RMB

Margin Ratios

GAAP Gross Margin (%)
Non-GAAP Net Margin (%)
Non-GAAP
Operating Margin (%)

Balance Sheet

2018

Total Assets

723.5 billion RMB
+30% YoY

Total Liabilities

367.3 billion RMB
+32% YoY

Total Equity

356.2 billion RMB
+29% YoY

CAPEX, Cash Flow and
Credit Metrics

4Q2018
2018
2018
Total CAPEX
4.6 billion RMB,
-8% YoY
Total CAPEX
23.9 billion RMB,
+76% YoY
Free Cash Flow
28.6 billion RMB,
+18% YoY
Free Cash Flow
83.4 billion RMB,
-11% YoY
Fair Market Value of Listed Associates & Available-for-sale Financial Assets
238.0 billion RMB
 
Net Debt
12.2 billion RMB
Debt to (adj.)
EBITDA ratio
1.52x  
(annualized)

Earnings per Share
and Dividend

Subject to shareholders’ approval at the AGM to be held on 15th May 2019, proposed 2018 annual dividend of HKD 1.00 per share.
4Q2018
2018

Non-GAAP
Basic EPS

2.087 RMB,
+13% YoY

Non-GAAP
Basic EPS

8.203 RMB,
+19% YoY

Non-GAAP
Diluted EPS

2.065 RMB,
+13% YoY

Non-GAAP
Diluted EPS

8.097 RMB,
+19% YoY
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