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Tencent Music Q1 profit jumps 17%, beats estimates

Tencent Music Entertainment Group (TME) reported a 17.4% jump in earnings for the first quarter of 2019 helped by product innovation, content diversification, and technological advancement. Both online music and social entertainment services maintained a healthy growth trajectory. The results exceeded analysts’ expectations.

Net profit attributable to equity holders grew by 17.4% year-over-year to $147 million. Excluding items, non-IFRS net profit attributable to equity holders increased by 14.9% to $179 million. Earnings per American Depositary Shares (ADS) were $0.09 for the first quarter and non-IFRS earnings excluding items were $0.11 per ADS.

Total revenues jumped by 39.4% year-over-year to $855 million. This was driven by higher revenue from online music services as well as an increase in revenue from social entertainment services.

Revenue from online music services climbed by 28% helped by increased revenues from user subscriptions, sublicensing music content to third-party platforms to other companies, including third-party music platforms and Tencent Group, and sales of digital music albums to users. Revenue from social entertainment services and others soared by 44.3% driven by the revenue growth in both the company’s online karaoke and live streaming services.

During the first quarter, the number of Mobile Monthly Active Users (MAU) for the online music service advanced 4.6% year-over-year to 654 million, while the Mobile MAU for social entertainment moved up 0.4% to 225 million. While the Mobile average revenue per paying user (ARPPU) for the social entertainment segment rose sharply by 28.1%, online music Mobile ARPPU dropped 1.2%.

Also read: Apple Q2 earnings report

During the past few quarters, Tencent Music has constantly expanded its online music subscriber base while steadily increasing its subscriber retention rate. As users increasingly consume music content through streaming services, the company is riding on this trend to gradually transition into a pay-for-streaming model over the coming years.

The company believes that its strong profitability and cash flow will enable it to continue investing in its products and content offering. These investments could help to expand its user base and improve user engagement, both are vital to sustainable growth. The company remained confident about the efforts that will create long-term shareholder value as well as increase return on capital for investors.

In a separate release, the company said Guomin Xie has tendered his resignation as co-president and director due to personal reasons, effective June 6, 2019. Also, Tencent Music has named Zhenyu Xie, co-president and board member, as chief technology officer (CTO). Linlin Chen, a group vice president, has been appointed to oversee the company’s Kugou business and Lixue Shi, a group vice president, has been named to oversee the company’s Kuwo business.

Swedish music entertainment platform and rival Spotify (SPOT) last month reported a narrower loss in the first quarter of 2019, supported by a 33% revenue growth as well as lower costs and expenses.

Shares of Tencent Music ended Monday’s regular session down 3.61% at $16 on the NYSE. The stock has risen over 14% since the IPO while it has fallen over 12% in the past month.

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