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Edited Transcript of 700.HK earnings conference call or presentation 18-Mar-20 12:00pm GMT

Q4 2019 Tencent Holdings Ltd Earnings Call

Shenzhen Mar 24, 2020 (Thomson StreetEvents) -- Edited Transcript of Tencent Holdings Ltd earnings conference call or presentation Wednesday, March 18, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chi Ping Lau

Tencent Holdings Limited - President & Executive Director

* Huateng Pony Ma

Tencent Holdings Limited - Co-Founder, Chairman & CEO

* James Gordon Mitchell

Tencent Holdings Limited - Chief Strategy Officer & Senior EVP

* Jane Yip

Tencent Holdings Limited - Assistant General Manager of IR & Global Communications

* Shek Hon Lo

Tencent Holdings Limited - CFO & Senior VP

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Conference Call Participants

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* Alicia Yap

Citigroup Inc, Research Division - MD and Head of Pan-Asia Internet Research

* Eddie Leung

BofA Merrill Lynch, Research Division - MD in Equity Research and Analyst

* Hyungwook Choi

Daiwa Securities Co. Ltd., Research Division - Head of Hong Kong & China Internet and Regional Head of Small/Mid Cap

* Thomas Chong

Jefferies LLC, Research Division - Equity Analyst

* Wai Yan Wong

HSBC, Research Division - Head of Internet Research of Asia Pacific & Analyst

* Xiaoguang Zhao

Barclays Bank PLC, Research Division - VP

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to Tencent 2019 Fourth Quarter and Annual Results Announcement conference call. (Operator Instructions)

I'd now like to hand the conference over to your speaker/host today, Ms. Jane Yip. Thank you. Please go ahead, ma'am.

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Jane Yip, Tencent Holdings Limited - Assistant General Manager of IR & Global Communications [2]

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Thank you. Good evening. Welcome to our 2019 fourth quarter and annual results conference call. I'm Jane Yip from the IR team of Tencent.

Before we start the presentation, we would like to remind you that it includes forward-looking statements which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. Non-IFRS measures, formally referred as non-GAAP measures, are intend to reflect our core earnings by excluding certain onetime or noncash items. For a detailed discussion of risk factors and known IFRS measures, please refer to our disclosure documents on the IR section of our website.

Let me introduce the management team on the call tonight. Our Chairman and CEO, Pony Ma, will kick off with a short overview; President Martin Lau will discuss our strategy review; Chief Strategy Officer, James Mitchell, will speak about the business review; and Chief Financial Officer, John Lo, will conclude with financial review before we open the floor for questions.

I will now turn the call over to Pony.

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Huateng Pony Ma, Tencent Holdings Limited - Co-Founder, Chairman & CEO [3]

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Thank you, Jane. Good evening, everyone. Thank you for joining us.

During 2019, we reinforced our leadership in consumer Internet and extend our presence in industrial Internet while sustaining healthy operating and financial metrics. Let me update you on our key achievement in our 4 strategic areas.

In Social, Weixin ecosystem became increasingly vibrant and better-connected users with services. Annual transaction volume via Mini Programs of RMB 800 billion. As it related to QQ, we ramped the products with enhanced chat features and friend recommendation as well as expanded entertainment use cases via Mini Programs, increasing QQ's popularity among young generations.

In Online Games, we extend our China leadership while expanding internationally via popular games, including PUBG Mobile, Brawl Stars and Call of Duty Mobile. Our international revenue rose to 23% of online game revenue in the fourth quarter of 2019.

In content and advertising, video subscriptions exceed 100 million milestone in the year. We innovated our business model and increased operating efficiencies of our long-form video business, significantly reducing its 2019 operating loss to below RMB 3 billion, much lower than industry peers.

Despite macro headwinds, we achieved robust advertising revenue growth, progressively realizing the long-term potential in moments and expanding our mobile ad network.

In FinTech and business services, average daily commercial payment transactions exceed 1 billion in the fourth quarter as we deepened penetration amount off-line merchants. We consistently expand our market share in cloud with revenue grossing RMB 17 billion in 2019. Number of paying customers surpassed 1 million.

Now let me go through the headline financial numbers, and John will provide more detailed discussion in the financial section. Total revenue was RMB 106 billion, up 25% year-on-year and 9% quarter-on-quarter. Quarterly revenue for the first time exceeds RMB 100 billion, both including and excluding Supercell contributions.

Gross profit was RMB 46 billion, up 31% year-on-year and 9% quarter-on-quarter. Our non-IFRS operating profit was RMB 30 billion, up 35% year-on-year and 6% quarter-on-quarter. Non-IFRS net profit attributable to equity holders was RMB 25.5 billion, up 29% year-on-year and 4% quarter-on-quarter.

Moving to platform update, in Social, combined MAU of Weixin and WeChat increased 6% year-on-year to 1.165 billion. Smart devices MAU of QQ declined 7.5% year-on-year to 647 million as we proactively cleaned up spamming and bots accounts. In Games, we solidified our #1 position in China with Peacekeeper Elite popularity and extend our international success with the launch of Call of Duty Mobile and Teamfight Tactics during the year.

In Media, music subscription growth accelerate, benefiting from the pay-for-streaming model.

In FinTech, we operate the largest mobile payment platform in China by DAU and transaction volumes.

In Cloud, we continue to outgrow peers with increasing scale and higher operating efficiency.

In Utilities, we maintain our industry leadership in mobile security, mobile browser and Android App store in China.

I will invite Martin to discuss strategy review.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [4]

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Thank you, Pony, and good evening, and good morning, everybody. As we headed into the year of 2020, I believe all of us are facing the massive challenges of the coronavirus pandemic which is profoundly impacting China as well as globally. I would like to say our hearts go out to the people, the families that are affected, and we hope that conditions will improve and their difficulties will go away soon.

Now at Tencent, we rose up to the challenge and we tried to provide relief and help to people in need in a number of different ways. We established an emergency fund of RMB 1.5 billion to procure and donate medical supplies and equipment, to offer relief, support and sponsor pandemic-related programs development as well as to sponsor medical research to try to solve this problem.

At individual level, our employees volunteered to help deliver donated resources on the ground to the troubled area of Hubei. Thousands of our employees also worked around the clock to develop a number of pandemic-related online products to serve over 1 billion users in China.

To help efficiently combat the outbreak, our technologies and smart solutions play a crucial role to digitalize public services rapidly, generating over 1,000 related Mini Programs in municipal services, health care and education. Leveraging our high DAU platforms, authorities can deliver pandemic-related news and timely information, promoting public awareness and educating preventive measures. Our reliable and smooth light broadcast system enabled schools to move courses online and helped students to resume their studies.

For Enterprises, we've upgraded our remote working and collaboration solutions to help mitigate interruptions to their business. We also helped retailers to leverage Mini Programs to move online in order to recover sales. Successful retailers have seen their sales do Mini Programs increasing by tenfolds and some, even more.

For Internet users, our free online courses and rich digital content enriched their leisure time at home. Our communication and social platforms connect users with their friends and family, including when they are under quarantine. We believe these efforts fully embody our mission, which is Value for Users, Tech for Good.

Now the outbreak also presented short-term impact to some of our businesses which I would like to summarize for all of you. For mobile payment, offline commercial transactions and revenue declined significantly as many restaurants and store did not open after Chinese New Year. The volume rebounded quickly after work resumed. During this time, we reduced marketing expenses, and therefore net-net, we expect limited negative impact of mobile payment on our profitability.

For online advertising, despite some advertisers' reduced spending during this period, our performance-based advertising is sustaining robust year-on-year growth rates, driven by our high ROI as well as our healthy and diversified advertising mix.

For cloud services, there's a short-term negative impact on revenue due to delayed implementation of projects. However, we believe that coronavirus outbreak capitalized the expansion in industry demand and addressable market for long-term as enterprises embraced digital upgrades.

For smart industries, increased adoption by consumers and enterprises led to growth in users and traffic to our WeChat Work, Tencent Meeting, Tencent Health and Tencent Education services.

For Mini Programs, as an easy to deploy digitization tool, it is used by many merchants and institutions to move their services online rapidly. Therefore, DAU, daily visits and number of Mini Programs surged especially in fresh food and grocery delivery services, municipal services, remote working, online health care services and online education.

For digital entertainment, it is not only an alternative to out-of-home activities but also helped to reduce people's anxiety during such a difficult time. Users are increasing their time spent on a whole range of digital content services, including our online games, video and reading services.

We believe challenges are transitory, that user behavior and enterprise mindset change are structural. We are well-positioned to accelerate the digitization of industries for the future.

So that concludes the discussion focused on the COVID outbreak. Now let's move on to some strategic areas that we are pioneering the industry evolution and also facilitating the digital upgrade.

In the area of Smart Healthcare, leveraging our AI and cloud technologies, we are committed to bringing convenient and professional health care services to users and institutions. During the outbreak, our Tencent Health, Tencent Medipedia and Health Code services helped prevent the spread of coronavirus and also acquired large number of users.

First, on Tencent Health. It is our all-in-one entry point for online medical services. Over 300 million Weixin users use it as an important access to real-time data and information as well as conduct online consultation. During the outbreak, we launched AI-powered tools to enable users to self-diagnose via chatbots. These services and tools were also built into our smart solution, facilitating 40 medical institutions to deliver prompt and timely services to help contain the spread of coronavirus.

Second, Tencent Medipedia provides reliable and professional medical information resource, covering knowledge graph of over 10,000 diseases. We developed pandemic-related content and distribute it via our multiple high-traffic platforms such as Weixin and Tencent News, attracting over 600 million page views. We also launched free online consultation to enable access to over 10,000 doctors from our ecosystem partners, such as WeDoctor and Doctorwork.

Third, Health Code becomes the most used e-pass for verifying health and travel history during the outbreak, leveraging our extensive reach of Weixin and easy-to-use Mini Programs. Health Code rapidly covered 900 million users across more than 300 cities and counties with 8 billion total visits since early February.

Now moving on to remote working, which has gained strong momentum recently as more users and organizations are using remote working as their main type of working. Tencent Meeting, which is our dedicated business video conference app, has recorded over 10 million DAU within 2 months since launch in last December and has become the largest stand-alone app for cloud conferencing in China. In particular, we saw strong demands from business, government and education sectors and helped employees work from home and student resume their studies. Our product delivers secure, stable and high-definition video experience, leveraging our advanced security, cloud and AI technologies. Users can join meeting via multiple channels across platforms and devices such as mobile app, Weixin Mini Programs, PC and phone calls. Our team responded swiftly to customer feedback and upgraded the product frequently, releasing 14 versions in the recent 40 days. With infrastructure and sales team support from Tencent Cloud, we're able to enhance Tencent Meetings' performance and efficiency.

For WeChat Work, it has become a leading hub for teamwork in China with millions of enterprises adopting it to resume working, and usage surged tenfold recently. Our unique proposition lies in integration with Weixin, which facilitates business, customers management and sales conversion via Weishi Moments, Mini Programs and Weixin Pay in addition to providing a collaboration tool for the employees internally. This helps us attract clients and increase engagement. Meanwhile, as we expanded our client base, we encountered differentiated needs from some industries. For example, government and financial institutions prefer private cloud deployment because of the security. Therefore, WeChat Work now can be deployed flexibly on both public and private cloud to cater to different customer needs. Our customers can also select and configure specialized solutions among our rich office tool offerings provided by over 20,000 SaaS providers, allowing tailor-made system to better serve business operations.

Now moving to consumer Internet, our mini video app, Weishi, achieved rapid growth and presented strong momentum, leveraging our social platforms. During -- using Weishi, users can create and share 30-second videos to Weishi Moments. They can also use Weishi and QQ plug-ins to discover talk of the town videos in a timely basis. These initiatives contributed to the quarter-on-quarter growth of more than 80% in daily active users and over 70% in daily uploads for the fourth quarter for Weishi.

To engage users, we made Weishi attractive and fun by introducing certain innovative and interactive features. For instance, we launched Weishi Challenge, a 30-second challenge for interesting acts led by celebrities and imitated by users. Tens of millions of users participated in uploaded video to compete with both KOLs and friends during the past half year. We also creatively added Red Envelope feature in Weishi, which can be shared to Weixin and QQ. During the Spring Festival of 2020, users exchanged 1.6 billion Weishi video Red Envelopes.

We also constantly enhance technologies for content creation, curation and recommendation. We provide AI-powered cameras for Weishi users to lower difficulties in creating content. Our advanced video recognition system accurately tag and classify the content to be ready for recommendation to users. And by deep learning users' interest graph, the smart recommendation engine is able to facilitate content discovery for them.

In terms of content, we leverage our rich in-house IPs to expedite unique content creation by KOLs and MCNs. For example, we allow KOLs and MCNs to repurpose our high-quality content from Tencent Video and Tencent Sports to produce clips and highlights for mini video. We encourage star players of Honor of Kings and other Tencent games to share their weekly moments on Weishi. In addition, Weishi and Tencent Animation & Comics also produced popular mini drama series Tong Ling Fei, which was converted into unique mini videos for Weishi by MCNs and KOLs and has attracted large number of video views.

Moving on to our online games business, especially on online mobile games. We have made significant breakthroughs in self-developed games for international markets. For example, PUBG Mobile has become the most popular international mobile game in terms of DAU and MAU. Call of Duty Mobile was the largest new launch by downloads and was crowned as the Best Mobile Game of the year in 2019 by TGA, The Game Awards. Moreover, Supercell's Brawl Stars was one of the best-performing original IP mobile titles in 2019.

If you look at the global chart, we've developed 5 of the top 10 most popular international mobile games. The proven success globally demonstrate our accumulated capabilities built up over many years. First, our know-how in mobile game development, our in-house studio group, Timi, Lightspeed & Quantum, representing the highest level of mobile game development capability, have delivered authentic PC and console game quality on mobile.

Second, advanced technological know-how. Leveraging our strategic partnership with Epic Games, we have deep technical experience in the industry-leading game engine. And our heavy investment in AI and cloud technology over the years ensure a good in-game experience as well as reliable and high-speed access to our games.

Thirdly, our long-term business cooperation with partners over the years have paved the way for our smooth and in-depth communication along the topics of IP development, gameplay design, international user insights, global publishing as well as operational experiences exchange.

Last but not least, expertise in operating large-scale social networks and games, we're experiencing curating social experiences to players to promote their enjoyment and engagement. We also organized top global e-sports tournaments to further popularize our games.

Going forward, we'll strengthen our technology service and platform to position ourselves to capture the opportunities from an expanding addressable game market and long-term digital upgrades in various industries.

So with that, I'll pass to James to talk about our business review.

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [5]

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Thank you, Martin. Good evening or good morning, everyone.

For the fourth quarter of 2019, our total revenue grew 25% year-on-year. VAS represents 50% of our revenue within which online games were 29% and social network is 21%. FinTech and Business Services represented 28% of total revenue and Online Advertising, 19%.

For Value-Added Services, segment revenue was CNY 52.3 billion in the quarter, up 20% year-on-year and up 3% quarter-on-quarter. In Social Networks, our total VAS subscriptions were 180 million at the end of 2019, up 12% year-on-year. Growth in video and music subscriptions was driven by self-commissioned Chinese animated series, our paid music content library and bundled subscription offerings. Total video subscriptions were 106 million, up 19% year-on-year.

Our social network revenue increased 13% year-on-year to CNY 22 billion, among which live broadcast services and music subscriptions revenue grew strongly year-on-year. Social network revenue was flat quarter-on-quarter as a seasonal decline of in-game item sales offset digital content revenue growth.

Turning to online games. Revenue grew 25% year-on-year and grew 6% quarter-on-quarter to CNY 30.3 billion. Non-China markets contributed 23% of our game revenue, benefiting from key titles such as PUBG Mobile and Call of Duty Mobile as well as the consolidation of Supercell.

The smartphone games total revenue rose 37% year-on-year to CNY 26 billion, driven by titles such as Honor of Kings and Peacekeeper Elite as well as rapid growth from international markets. Sequentially, smartphone games revenue increased 7% as consolidation of Supercell offset soft seasonality in China.

For PC client games, revenue decreased 7% year-on-year and fell 10% quarter-on-quarter to CNY 10.4 billion. Paying users in DnF declined, while global revenue from League of Legends increased.

Diving into Social Networks. Within our Weixin ecosystem, we focused on facilitating service and commerce connections. After the outbreak of COVID-19, we added a dedicated health care section within Weixin Pay's public service entry point which has been used by more than 300 million people. We're beta testing live broadcast in Mini Programs and launched tools which enable merchants to increase sales conversion and encourage social sharing of their shows in Mini Programs.

For QQ, we enabled AI-based recommendation for stickers and elevated the entertainment experience within QQ Mini Programs. As a result, QQ user engagement increased and daily messages sent per QQ use grew at a mid-teens percentage year-on-year and the quarter. We optimize features for QQ School + Home groups, which have served over 120 million users since the COVID-19 outbreak began. Schools can attend -- or students can attend live broadcast, curriculum courses and online tutoring programs, leading educational content providers. We offer online classroom management tools for teachers to handle school routines such as homework assignment.

For online games, in China, we enhanced the vitality of our key smartphone game franchises with high-quality content updates, such as the inclusion of the Auto Chess Mode in Honor of Kings and new game systems for Peacekeeper Elite. For PC client games, a record number of viewers watched League of Legends World Championship in Paris. Tie-in marketing activities and item sales increased League of Legends' paying users and revenue quarter-on-quarter. However, Dungeon & Fighter paying users decreased in the fourth quarter due to content challenges. And Martin has already called out some highlights of our international game business.

Moving to Online Advertising. Our total advertising revenue was CNY 20.3 billion in the quarter, up 19% year-on-year and up 10% quarter-on-quarter. Our Social and Others advertising revenue was CNY 16.3 billion, up 37% year-on-year and up 11% quarter-on-quarter, underpinned by healthy demand from verticals including at e-commerce, education and games. We believe our Weixin Moments advertising provides highly attractive ROIs, and we added a fourth hour ad unit per user day in Weixin Moments during the e-commerce promotional periods in the fourth quarter, which generated positive advertisers sell-through and consumer engagement. We have permanently implemented the fourth ad load from mid-February.

For our mobile ad network, we signed up high-traffic media partners such as entertainment and social media services and added more rewarded video ad inventories. Our mobile ad network revenue more than doubled year-on-year and the quarter and was the largest contributor to our sequential advertising revenue growth which we believe testifies to our increasing ad tech capabilities even on non-Tencent sites.

Our media advertising revenue for the fourth quarter was CNY 4 billion, down 24% year-on-year and up 8% quarter-on-quarter. While we generated relatively low advertising revenue around NBA basketball games in the fourth quarter, our video and news advertising revenue each increased quarter-on-quarter.

Looking at FinTech and Business Services, revenue was CNY 29.9 billion in the fourth quarter, up 39% year-on-year and up 12% quarter-on-quarter. FinTech services revenue grew robustly year-on-year and quarter-on-quarter as our platforms and services are increasingly adopted by consumers, merchants and wealth management partners. As Pony mentioned, commercial payments activity recorded a new high with over 1 billion average commercial transactions per day, exceeding the major global card networks, and average value per transaction also increased.

For Wealth Management, our active customer base more than doubled year-on-year as we expanded into the mass market and our aggregated customer assets increased over 50% year-on-year. And for Lending, WeiLiDai originated loan balances increased.

Within Business Services, our cloud services revenue sustained rapid growth, driven by increased volumes of key contracts and clients. Gross margins improved as we continue to optimize supply chains and expand our business scale. We exceeded 1 million paying cloud customers as we expanded sales teams for different regions and industries and deepened our partnership with systems integrators. And we enhanced our enterprise software as a service offerings via our first-party work apps, notably Tencent Meeting and WeChat Work as well as partnerships with third-party software providers.

And I'll now pass to John to discuss the financial metrics.

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Shek Hon Lo, Tencent Holdings Limited - CFO & Senior VP [6]

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Thank you, James. Hello, everyone.

For the fourth quarter of 2019, total revenue was CNY 105.8 billion, up 25% year-on-year or 9% quarter-on-quarter. Excluding the impact from consolidating the Supercell consortium group, I'll refer it as Supercell afterwards for simplicity, total revenue would have been 21% year-on-year or 6% quarter-on-quarter.

Gross profit was CNY 46.1 billion, up 31% year-on-year or 9% quarter-on-quarter. Net other gains was CNY 3.6 billion compared to net loss other losses of CNY 2.1 billion in the fourth quarter of 2018 and up 289% quarter-on-quarter. The year-on-year change was mainly due to non-IFRS items, including one-off expenses relating to share issuance to a TMU strategic partnering in quarter 4 last year, and net favorable gains from certain investee companies. Sequentially, the increase was mainly due to the increase in fair value gains of certain investees, which were also non-IFRS adjusted.

Operating profit was CNY 28.6 billion, up 65% year-on-year or 11% quarter-on-quarter. Net finance costs were CNY 2.8 billion, up 102% year-on-year or 58% quarter-on-quarter. The year-on-year increase was mainly due to greater interest expense results from higher amount of indebtedness.

Share of losses of associates and joint ventures for the fourth quarter of 2019 was CNY 1.3 billion compared to share of profit in the fourth quarter of 2018 and the third quarter on a non-IFRS basis. Share of profit decreased from CNY 1.9 billion a year ago and CNY 2.1 billion a quarter ago to CNY 1.3 billion this quarter partly due to the consolidation of Supercell, which was sale and associates.

Okay. Let me walk you through non-IFRS financial numbers. For the fourth quarter, operating profit was CNY 30.3 billion, up 35% year-on-year or 6% quarter-on-quarter. Net profit after NCI was CNY 25.5 billion, up 29% year-on-year or 4% quarter-on-quarter. For the full year 2019, operating profit was CNY 114.6 billion, up 24%. Operating margin was 30.4%, up 0.8 percentage points. Net profit of the NCI was CNY 94.4 billion, up 22%.

Turning to segment gross margin. Gross margin for VAS was 50.1%, down 3.3 percentage points year-on-year or 1.7 percentage points quarter-on-quarter. The year-on-year decrease was primarily impacted by continuous revenue mix shift from higher-margin PC client games to lower-margin smartphone games. The Q-on-Q decrease was mainly due to increased cost from major e-sports tournament in the quarter.

Gross margin for online advertising was 54.3%, up 17.7 percentage points year-on-year or 5 percentage points quarter-on-quarter, 5.5% in first quarter. Fourth quarter year-on-year and quarter-on-quarter increases primarily reflected lower content cost for video advertising as well as revenue mix shift from media advertising to higher-margin shows and advertising.

Gross margin for FinTech and business services was 28.1%, up 3.6 percentage points year-on-year or 0.4 percentage points quarter-on-quarter. The year-on-year increase was mainly driven by a revenue mix shift from social payments to higher-margin commercial payments. Benefiting from increased loyalty, users were more willing to retain funds in our ecosystems and increasingly utilizing more FinTech services, such as wealth management and micro loan services on our platform. This led to improved margin year-on-year.

On operating expenses, selling and marketing expenses were CNY 6.7 billion, up 17% both year-on-year and quarter-on-quarter. The year-on-year increase mainly reflected greater marketing spending on FinTech and cloud services, smartphone games and digital content services as a percentage of revenues.

Selling and marketing expense decreased from 6.7% in the fourth quarter of 2018 to 6.3% in the quarter, mainly due to the reduction of advertising and promotional expenses as a result of internal initiative to reduce less effective marketing campaigns. Sequentially, increase in selling and marketing expenses mainly reflected seasonally higher marketing spending on smartphone games and digital content services as well as expenses attributable to Supercell commencing this quarter.

G&A expense were CNY 16 billion, up 41% year-on-year or 18% quarter-on-quarter, mainly due to increases in R&D expenses, staff costs as well as expenses attributable to Supercell commencing this quarter. Within G&A, R&D expenses were CNY 8.9 billion, up 49% year-on-year or 12% quarter-on-quarter. G&A and R&D represented 15.1% and 8.4% of revenues, respectively. As of quarter end, we had approximately 63,000 employees, up 16% year-on-year or 3% quarter-on-quarter.

For whole year 2019, selling and marketing expenses were CNY 21.4 billion, down 12% and represented 5.7% of revenues. R&D expenses were CNY 30.4 billion, up 32% and represented 8.1% of revenue. Total G&A expenses, excluding R&D expenses was CNY 23 billion, up 24% and represented 6.1% of revenue.

Let's take a look at the margin ratios. For the fourth quarter 2019, gross margin was 43.6%, up 2.2 percentage points year-on-year or broadly stable quarter-on-quarter. Non-IFRS operating margin was 28.7%, up 2.3 percentage points year-on-year or down 0.7 percentage points quarter-on-quarter. Non-IFRS net margin was 25.2%, up 1.4 percentage points year-on-year or down 0.6 percentage point quarter-on-quarter.

For the full year 2019, gross margin was 44.4%, down 1.1 percentage point. Non-IFRS operating margin was 30.4%, up 0.8 percentage points. Non-IFRS net margin was 25.9%, up 0.2 percentage points.

For 2019, on IFRS basis, basic EPS was CNY 9.856 and diluted EPS was CNY 9.643. Non-IFRS basic EPS was CNY 9.966 and diluted EPS was CNY 9.729.

Subject to the approval of shareholders at the Annual General Meeting to be held on 13th of May 2020, we are proposing an annual dividend of HKD 1.2 per share, payable to shareholders on 29th of May 2020. This represents an increase of 20% from last year.

Finally, I'll now share with you several key financial metrics for the quarter. Total CapEx was CNY 16.9 billion, an increase of 270% year-on-year and 154% quarter-on-quarter. Within which operating CapEx almost doubled to CNY 7.1 billion, mainly due to advanced procurement on servers for business growth in 2020.

Nonoperating CapEx increased significantly to CNY 9.8 billion, mainly reflected the land use rights acquired for a new project.

For 2019, total CapEx was CNY 32.4 billion, up 35% within which operating CapEx was up 6% year-on-year. As at quarter end, free cash flow was CNY 37.9 billion, up 27% year-on-year or stable quarter-on-quarter. For 2019, free cash flow was CNY 220.3 billion, up 37%.

Net debt position was CNY 15.6 billion. The sequential increase primary reflective payments for our M&A initiatives and media and content and consolidation of Supercell's indebtedness, partly offset by a strong free cash flow generation.

The fair value of our shareholdings and listed investee companies, excluding subsidiaries, was approximately USD 60.2 billion at year-end compared to roughly USD 50 billion last quarter and roughly USD 34.7 billion last year.

Thank you. We shall now open the floor for questions.

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Questions and Answers

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Jane Yip, Tencent Holdings Limited - Assistant General Manager of IR & Global Communications [1]

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Thank you. And we are sorry for the technical -- the system technical problems that we just encounter. We shall now open the floor for questions.

(Operator Instructions) Please invite the first question.

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Operator [2]

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(Operator Instructions) Our first question comes from the line of Binnie Wong from HSBC.

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Wai Yan Wong, HSBC, Research Division - Head of Internet Research of Asia Pacific & Analyst [3]

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My question is on the advertising. We see the revenue from social network actually further reaccelerate to 37% since 2Q. With this reacceleration and also considering the competition, do you see that what is the competitive edges in Tencent's ad network versus peers? And what are the drivers to propel us into 2020?

And then with that, can I also ask a question about the short-form video? Given that I think in the press release you mentioned that we are in the early stage of a multiyear investment and you said that experience from overcoming a later start of a long-form video give you the confidence, what are the applicable experience you learn and the challenges you see?

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [4]

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Binnie, thank you for the question. So I think your first question was around our social advertising revenue growth and what do we see as our competitive advantages. People looking at Tencent from the outside are often of the view that our key competitive advantage is we have a large amount of traffic for our applications, and that's certainly true. But if you look at the biggest contributors to the quarter-on-quarter revenue growth, it was actually our ad network business, which is ads on other people's applications. And so I think that speaks to the fact that we're increasingly competitive from a technology perspective because of the investment we have made across the platform. We're obviously very competitive from a targeting perspective because of the data we aggregate on users.

We're also competitive in terms of conversion, specifically conversion from the impression to the transaction. I think that there's many different services in China that can convert traffic impression into a click or even an app download. But because we integrate the advertising platform and the payment platform together, we're actually quite capable of converting the impression into a transaction. And so that's why if you look at the advertiser categories that are doing particularly well for us, it includes businesses like -- activities like e-commerce, education and games. And all of which, really, when they're buying ads, they're less focused on the impression or even on the app install, they're most focused on the actual ad revenue generation. And we think that over the long term, more and more advertisers will feel the same way, and that will play more and more to our benefit.

So anyway, that's some of the reasons why our ad network business is doing particularly well. More broadly, our social advertising business benefits from all of the factors above plus the fact that we have roughly 1 billion daily active users across our properties, which is uniquely broad in China. Plus the fact that we have content information on our users because we serve them in video, music, news feed, literature and so forth, games as well as serving them for communications, social and commerce.

So all in all, we think that our social and other advertising is a very strong portfolio of properties, a very strong technology platform. We have seen particularly good growth and continuing to see very good growth from segments such as e-commerce, games and education. And we believe that we will strongly outperform the market.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [5]

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Yes. In terms of Weishi and short video, I would say if you look at Tencent's history, right, there have been a few products that we came to find and then we actually became the absolute industry leader. And I would say games is in such a category and our news and our payment platform and most recently, the long-form video. And I think in each one of these instances, right, we have -- first of all, have to build up the capability that's specific to that product vertical. And after that, we can actually start leveraging our unique Tencent resources and capabilities.

So in this short video, right, what are our unique Tencent advantages? I would say in the prepared remarks, we have point to some of them, including our product innovation on the product side, integration with our social network that can bring traffic as well as sharing experiences for our users as well as our long-standing investment in various kinds of contents, be it games and long video and literature or the IP-related content. I think these are all important Tencent advantages that we can bring to bear in the future. And well, so far, we have been doing that, but then in the future, we can actually do it even more.

But what are the key important vertical expertise that we need to build? I would say it's mainly the recommended engine for -- the recommendation engine for this kind of short and mini videos as well as a system that would actually bring in a very large number of content providers, which is somewhat different from the long-form video, right, in which you have a small number of very professional providers of content.

Now I think this is something that we have to build over time. I think we have achieved some success. And at the same time, if you look at the recent success of what James talk about, which is our ad tech, right? And that is actually a tech which is very similar to the recommendation engine of mini videos. And if you look at the large number of content providers that we need to manage, that's actually somewhat similar to the official accounts as well as mini programs that we are curating.

So I think we have pockets of expertise in each one of these areas. It's just an important time for us to bring it into the Weishi product and integrate it in such a way that we can actually build up the vertical expertise within that product and at the same time, start leveraging our unique resources in a more prominent way. So that's why we believe this is a battle that we would definitely continue to play in. And we're actually quite confident that over time, we'll make a significant headway into that industry.

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Operator [6]

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Your next question comes from the line of Eddie Leung from Bank of America.

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Eddie Leung, BofA Merrill Lynch, Research Division - MD in Equity Research and Analyst [7]

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I have a question on your consumer Internet strategy. So Tencent is developing more use cases about services. So that's pretty obvious, not just about entertainment. So obviously, there's a competitive advantage. But on the other hand, it seems like some leading video traffic platforms are entering more and more digital entertainment services. We have seen news about games, literature, music, like (inaudible) et cetera. So I just wonder how would that affect your strategy and perhaps the industry's cost structure in running digital entertainment.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [8]

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Yes, I will take that question. And I think every now and then you would see this kind of news, right? And if you track the evolution of the China Internet industry history, this is something that repeats every few years, right? And in each one of the sector that you talk about, there have been many, many players in a market. Take the example of games, for example, right, where there have been many different players, and it's far from being a winners-take-all market.

And so I think it's actually completely fine for different players to want to go into these different verticals. But I think the important thing is actually what do we do, right? I think what we try to do is actually to be the best-in-class player in each one of these verticals.

So I would take games as an example, right? So games, it has always been a market with many, many different players. And Tencent actually came from the very behind and, step by step, now became the leader in the market in China and now expanding our presence all around the world.

And I would say there are a number of things that we have to do right. We have done right in the past and we will continue to do and invest in those areas in the future. And this includes, one, I would say just we have a very strong franchise over some of the most important genres. If you look at mobile as an example, if you look at tactical tournament as an example, these are game genres in which we have an absolute leadership position in. And they have essentially become both genre-defining as well as small social networks for such type of gamers, right? So I think that has a very strong franchise, and we'll continue to be the innovator in those genres.

Secondly, I would say in the game industry, it's about development capability. And development capability rests both within creativity as well as technical know-how. And I think we have gone pretty deep into describing what are the technical know-hows that we have. And over the years, by being successful in different genres, I think we have demonstrated our creativity. And I think those are the things that we have to continue to do well and do better on.

And thirdly, I would say is the relationship that we have with game IP and game companies around the world, and a lot of the leading game companies are our partners or are invested companies, right? And these are built over a very, very long term. And as a result, we can actually work with the other game companies and bring exciting new games in different formats to the market.

And I would say we also have a very strong presence in social network, and that has a strong synergy with our game business because games are, by nature, especially online games -- mobile online games, by nature, are social networks, right? You want to play with your friends or you want to play with your game mates, right? So by having a social network that actually can connect with all your friends as well as new friends from the games, it actually give us a very specific advantage.

And I would say, finally, we actually have a very strong ancillary ecosystem around games, right? If you look at e-sports, if you look at streaming platforms, all these places where people discover games and engage with KOLs on games as well as with their friends.

So I would say these are all the advantages that we have and we have invested for a long time in this vertical to be the leader, and we'll continue to do better. If we have newcomers into the market, it would actually incentivize us to do even better.

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Operator [9]

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Our next question comes from the line of Joe Choi from Daiwa.

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Hyungwook Choi, Daiwa Securities Co. Ltd., Research Division - Head of Hong Kong & China Internet and Regional Head of Small/Mid Cap [10]

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My first question is actually on your recent remote working initiative. It seems like we're getting a very strong momentum, as you mentioned. How does the management see the long-term (inaudible) of revenue? And what's current receptiveness from the users when it comes to subscription or billing?

And a follow-up on the online video costing cost for 2020. How does the management see this and how will this impact profitability?

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [11]

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What was the product you're referring to when you say it's doing well?

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Hyungwook Choi, Daiwa Securities Co. Ltd., Research Division - Head of Hong Kong & China Internet and Regional Head of Small/Mid Cap [12]

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The remote working products, like Tencent Meeting and WeChat Work.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [13]

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Okay. Well, I'll take that question. So I think we have actually talked quite a bit about this category of products. And I would say, one, the fact that we have actually invested in this category is that we feel that there is a trend but increasing digitization of various businesses and institutions. We feel that this is definitely the future trend. But I think because of the coronavirus pandemic, it actually expedited that -- or necessitated that conversion, right? So during the time when nobody goes to work on location as well as schools are not open, then clearly, there's only online solutions that is available for people.

I think when the market actually reopens, then a lot of the use cases will shift back to offline. Then I think this consumer habit education have already taken place and people would shift a part, or retain a part of their usage habit online. So -- and they also would discover the efficiency, right? If you don't have to travel 2 hours to attend 1 hour of class meeting, maybe that's a better and more efficient way of doing it. So I think this does capitalize our long-standing vision on the trend within a short period of time.

Now with respect to the products that we talk about, right? So we have been building WeChat Work for a while. And I would say WeChat Work is a product which works with established organizations. So if you have a company or if you have an organization, if you have a school, then you can adopt that solution and then it can actually help you to do internal collaboration. And you can actually start stacking in other kind of the star solutions onto and help that organization to be more online.

Now what we discover as an additional important and pretty unique feature of our WeChat Work, in addition to just being an internal collaboration tool, is that with integration to Weixin, it actually allows a lot of the companies not only to engage in internal communication, but also, it can become a good CRM tool for them to engage with their consumers over WeChat. So I think that is an additional advantage of WeChat Work.

Now with respect to Tencent Meeting, right, it's a completely different proposition. It's actually very easy-to-use application than anybody can form a group and start video conferencing. So it actually covers use cases in which it -- like people within different organizations can actually convene the meeting very conveniently. So as a result, you can see during the coronavirus, the adoption of Tencent Meeting is actually very high, especially in terms of sign-up new users. I think for a product like WeChat Work, and also a product like Ding Ding, right, you can cater to the internal needs of enterprises. And for the enterprises you have already signed up, you actually suddenly can have more activity within those sign-up accounts.

But then for Tencent Meeting, it actually allows people to download the app and immediately be able to connected to each other. So we felt that they cover different use cases and both of them are going to be our flagships for enterprise collaboration development for the future.

At this point in time, I think we are very focused on market coverage, and we're not worried about monetization yet. We felt that if it gets a lot of users -- in the same line of logic that we have been using as Tencent, right, in many, many of our products, we invest initially to get the users and eventually the monetization would come.

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [14]

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On the Tencent video content cost questions, so 2019 was obviously a challenging year for all long-form video services, including our own. But we actually feel that we've made substantial efficiency gains. If you look at the full year results, out of all of the long-form video platforms, we're the leader by revenue. But we also lost far less than our peers. Our full year operating loss was under CNY 3 billion. And that speaks partly to the fact that we have been quite disciplined about content spending.

Now looking forward, we think this remains a growth market. Therefore, we'll continue to invest aggressively and invest more each year in long-form video content. And one of the reasons we're comfortable with doing that is that we're uniquely vertically integrated. A substantial chunk not only of our own drama series but also of our competitors' drama series derives from other companies within the Tencent Group. And it could be intellectual properties based on novels from China literature. Or it could be a drama series that are produced by new classic media. In the fourth quarter of 2019, I think the most popular drama series, both on our own platform and on our competing platform was actually both, it was China Literature IP and a new classic media T-drama series.

So given we're currently the most efficient in the industry and given we're the most vertically integrated and given we think that the value of content will appreciate over time, we'll continue to invest, hopefully intelligently, in growing our long-form video content portfolio.

Perhaps we can take the next question?

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Operator [15]

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Next question comes from the line of Alicia from Citigroup.

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Alicia Yap, Citigroup Inc, Research Division - MD and Head of Pan-Asia Internet Research [16]

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Congratulation on finishing a solid 2019. A couple of questions. Number one is on the FinTech business, you mentioned it will be negatively impacted by the outbreak. While we believe the offline transaction is intact, but we also see the increase in online transaction, like the smart retail and also the online grocery purchase. That should help to offset the decline in the offline transaction. So I think on directionally, how serious is the sequential decline of the FinTech transaction? If you could help us frame the magnitude of the impact in the first quarter, that will be helpful.

And then second question is related to the strong demand on the Tencent Meeting and also the WeChat Work. Understand it's a limited opportunity, short term in terms of monetization, but then any big-picture outlook that you could help us to think about in terms of the future opportunity, how that would translate enterprises, think about the IT demand, IT upgrade, and how that will help your cloud and business services growth opportunity in the future years to come. And just quickly on cost component, any spike of this bandwidth that we'll be concerned about...

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [17]

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Alicia, we'll cap it at 2 questions.

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Alicia Yap, Citigroup Inc, Research Division - MD and Head of Pan-Asia Internet Research [18]

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Okay.

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [19]

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Yes. So Alicia, why don't I answer the first question on the FinTech impact? So I think the heart of your question was that a substantial chunk of payment transactions are online, and therefore, that should mitigate the negative impact from lower offline transactions. So I want to be clear about this. We generate over 1 billion payment transactions per day. That's a gigantic number. It's more than Visa and Mastercard put together.

Within that 1 billion-plus, there is a number of online transactions, e-commerce transactions, movie ticketing transactions, traveler transactions and so forth. But it's far from a majority. When you're handling 1 billion transactions a day, almost by definition, the majority are off-line transactions.

And so what we saw in February and the early part of March is that there was a very substantial negative impact on offline transactions, both from a supply perspective, meaning that the merchants, particularly the smaller merchants who accept QR code payment, were not actually at work and therefore not accepting payment. And then in addition, from the demand side, consumers were generally staying at home and so not out and about making payments.

As we moved into March, we have seen that, first of all, the POS merchants recovered relatively quickly as consumers began to work and began to go out and about again. And then more recently, we have seen the QR code transaction volume also picking up as the small and medium-sized merchants returned to work. So we are seeing a recovery, but I want to emphasize that the negative impact in the period after Chinese New Year was quite substantial.

Now when I talk about the negative impact, I'm really talking about the negative impact on revenue. From a profit perspective, a, as Martin mentioned, we optimized our marketing and other expenses during the downtime. So the lost revenue was not necessarily flowing through into lost profits. And then b, within our FinTech portfolio, one chunk of the profit flows from the payment business, but another chunk flows from the asset management and lending businesses. And the asset management business, in particular the wealth management, has continued to grow at quite a healthy pace. And that's naturally a relatively profit-generative business. So more of an impact on revenue than on profits.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [20]

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So on the business solutions, I will answer the 3 questions. One is, in terms of monetization, there's actually very little monetization at that time with Tencent Meeting and WeChat Work.

Now in terms of the future, I think I actually dedicated a whole page as well as I talked pretty much at length on what we feel holds in the future, right. We felt basically Tencent Meeting is a great way for people to have a cross-organization business type of video collaboration and video conference versus WeChat for work holds the future for helping internal collaboration for enterprises as well as for consumer-facing enterprises to do CRM. So there's actually sort of a very bright future for both applications. And I think we're just at the beginning of this big wave of digital transformation for enterprises and institutions.

And finally, because there is no revenue at this point in time, we do carry costs in terms of human capital investment as well as the bandwidth. And especially the bandwidth for Tencent Meeting is actually quite a bit because the usage traffic is actually quite a lot.

But on the other hand, right, we do have a very strong CDN capability built over the years to optimize the cost associated with this kind of traffic. And to some extent, relative to what we're spending on content, this is a small amount of money on a relative basis. So that's why we'll take it. And I think it's a worthy investment for the future.

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Operator [21]

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Our next question comes from the line of Thomas Chong from Jefferies.

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Thomas Chong, Jefferies LLC, Research Division - Equity Analyst [22]

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Congratulation on a solid set of result. My question is about the FinTech business. Given the coronavirus, can management comment about our strategy in terms of the take rate improvement? Or would we actually slow down the take rate improvement to help the merchants to power through this challenging period?

And also on the wealth management side, James just mentioned that is going healthily. Can we understand about the different wealth management products like insurance, microlending, money products? How we should think about the product innovations for this year?

And a very quick follow-up is on the overseas gaming strategy. Given the fact that we have over 20% of the gaming revenue from overseas, what's the long-term goal that we are looking into and our strategies in ramping up the overseas contribution would be great?

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Jane Yip, Tencent Holdings Limited - Assistant General Manager of IR & Global Communications [23]

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Thomas, Martin will address your question first. Thank you.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [24]

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So in terms of the FinTech business, I think during the coronavirus, we see a lot of the offline businesses that we serve have seen their business basically shuttered due to the lockdown. So I think what we are trying to do -- our best bet is actually to help alleviate their difficulties. And some of it is basically helping them to try to get some businesses online, right?

I think in some cases, some merchants have been able to leverage mini programs as well as other means, right, even forming a group, for example, to sell their products online and some of them actually achieve quite encouraging results. And at the same time -- I think over time, we will try to build tools so that the merchants can actually manage their operations more efficiently and at the same time, try to get more users to do online and offline transactions.

So those are going to be the focus for us. We have never wanted to run our FinTech payment business based on heavy monetization model. That has never been our vision, right? What we want to do is actually make it convenient. And at the same time, we try to be able to add value to the people, the merchants we serve. And over time, we are able to get some monetization out of the additional value that we provide. So that's our strategy.

Now in terms of wealth management, as you talk about, the -- well, in terms of our FinTech solutions, right, there's wealth management, there is our loan and consumer loan -- microloan business. And then over time, we are going to build some more presence in insurance.

I think in each one of these services, right, we have always tried to bring some innovations as well as additional value proposition for our users. I think a big part of it is centered around just reducing the entire customer acquisition cost and engagement cost in the industry and along the way, right, pass some of the savings back to the consumers.

Another broad-stroke strategy is in terms of leveraging technologies and our data analytics to get better in terms of risk management, right, so when the risk is actually reduced, then again, there's some savings that we can actually create, and that can be shared with the users as well as with our partners. So I think a lot of the innovations will be around these principles. And we actually find a lot of opportunities to have innovation. We can't go through it one by one, but I think in broad stroke, these are the areas that we find we can add most value on.

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [25]

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For our international gaming strategy, I think Martin spoke about that in some detail in his 6th slide, so I'd refer you back to that slide. But I do just want to emphasize that ultimately, it is some kind of product-driven business and the best product come from the best studios. And we believe that within the Tencent family now, there's a number of really extremely successful studios.

Just to pick one at random, if you look at Riot Games, their pipeline, including games like VALORANT, including games like Runeterra, including games like Wild Rush, it's one of the best pipelines of any game studio in the world, and their existing product, League of Legends, is the biggest and best PC game in the world.

But it's not just Riot. It's TiMi, which has global success with Call of Duty Mobile, it's Quantum that has global success with PUBG Mobile, it's Supercell that has had very recent global success with Brawl Stars and other products coming out this year.

So there's a number of elements to the strategy, but people sometimes forget the importance we place on the core studio expertise. And the 4 studios I just mentioned are best-in-class studios globally.

Next question, please.

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Jane Yip, Tencent Holdings Limited - Assistant General Manager of IR & Global Communications [26]

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I'm sorry. Due to the time constraint, may we have the last question, please?

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Operator [27]

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Last question comes from the line of Gregory Zhao from Barclays.

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Xiaoguang Zhao, Barclays Bank PLC, Research Division - VP [28]

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So just a quick follow-up on the COVID-19. So we think some of your investment company should also see some impacts during the epidemic situation. We just want to understand what kind of support you can provide to these companies, for example, traffic or technology support to (inaudible) to understand the dynamics of entertainment-related services, such as live streaming, music, literature and long or short video services.

And how shall we think about COVID-19's impact and how has that reshaped our users' long-term behavior?

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James Gordon Mitchell, Tencent Holdings Limited - Chief Strategy Officer & Senior EVP [29]

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So the second question on the long-term impact of -- potential long-term impact of COVID-19 on the digital entertainment industry. Clearly, people who are under quarantine situation or people who can't go to school or work are spending more time at home. And that's unfortunate but it's a necessary reality. And when they're at home, there's a number of activities they can partake in -- a limited number of activities they can partake in. And some of those you mentioned, including music, watching films, watching short video content, playing games, therefore, see increased usage.

Now as and when the COVID-19 situation normalizes, then one would expect people to venture out of home and participate more in out-of-home activities once again. But I think that said, even with the SARS crisis, which was on a much lesser scale, there was clearly a structural change in consumer behavior where pre-SARS compared to post-SARS, people spend more time on digital entertainment. That may again be the case here.

But I want to emphasize that from our perspective, that's probably the less structural change. The greater structural change will be enterprises recognizing the importance of remote working and sort of recognize the importance of being able to sustain contact with their consumers even if their storefronts are offline or closed.

And that's why it's so important for us that we invest the money and invest time in really making our enterprise-facing apps be all that they can be. And we gave the example of the Tencent Meeting video conferencing service that's enjoyed spectacular growth, and that's partly because it's in the right place at the right time and serving a real need. But that's also partly because I think we have rushed out 14 updates in 40 days, which is incredibly fast an update pace for any app and difficult to get through the app stores actually.

So anyway, we think that there will be some temporary changes in consumer behavior, revert to normal relatively quickly, but there'll also be some structural changes to consumer and especially enterprise behavior that will be longer lasting.

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Chi Ping Lau, Tencent Holdings Limited - President & Executive Director [30]

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Okay. On your first question, it took me a little bit to think about it because, sadly, I have to say we actually work with our invested companies and provide them the best support throughout their life cycle. And there are all kinds of different technologies and management expertise as well as traffic and product cooperations that we actually do with them during normal times. So our support for them has always been sort of ongoing.

But in relation to the pandemic right now, I actually felt we have not provided any specific support to our investee companies. And the reason I think about it is basically I think all of our investee companies are actually best-in-class companies in their own right. And instead of asking for help, I think they are offering help. So all of us, during this difficult time, is actually not think about what incrementally we can do better for ourselves, but more thinking about how we can do to help the general society.

So I have to say I can think about all our investee companies basically spending their effort in trying to, in their own industries, provide support to their business partners or their users or government entities that need help.

In a way, the people who need help are not our investee companies, it's actually the general public. And I think I'm proud to say a lot of our investee companies have rise to that challenge and dedicate their resources to help them and play an important role in fighting against the coronavirus.

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Jane Yip, Tencent Holdings Limited - Assistant General Manager of IR & Global Communications [31]

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Thank you. We are closing the call now. If you wish to check out our press release and other financial information, please visit the IR section of our company website at www.tencent.com. The replay of this webcast will also be available soon.

Once again, we apologize for the disruptions caused by the system technical problems for tonight. And we hope everybody stay healthy. Look forward to connecting with you again next quarter.

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Operator [32]

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Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.