2018 Second Quarter and

Interim Results Presentation

Aug 15, 2018
Cautionary Note
This presentation may contain forward-looking statements relating to the forecasts, targets, outlook, estimates of
financial performance, opportunities, challenges, business developments, business plans and growth strategies of
Tencent Holdings Limited (the “Company” or “Tencent”) and its group companies. These forward-looking
statements are based on information currently available to Tencent and are stated here on the basis of the outlook
at the time that this presentation was produced. The Company undertakes no obligation to publicly update any
forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new
information, future developments or otherwise. The forward-looking statements are based on certain expectations,
assumptions and premises, some of which are subjective or beyond our control. The forward-looking statements
may prove to be incorrect and may not be realized in the future. Underlying the forward-looking statements are a
large number of risks and uncertainties. Therefore you should not rely on any of these forward-looking
statements. Please see our various other public disclosure documents for a detailed discussion of those risks and
uncertainties.

This presentation also contains some unaudited non-GAAP financial measures which should be considered in
addition to, but not as a substitute for, measures of the Company's financial performance prepared in accordance
with IFRS. In addition, these non-GAAP financial measures may be defined differently from similar terms used by
other companies. The Company's management believes that the non-GAAP financial measures provide investors
with useful supplementary information to assess the performance of the Company’s core operations by excluding
certain non-cash items and certain impact of acquisitions. For further explanation of our non-GAAP measures and
reconciliations between our GAAP and non-GAAP results, please refer to our earnings announcement.

In addition, information relating to other companies and the market in general presented in these materials has
been obtained from publicly available information and other sources. The accuracy and appropriateness of that
information has not been verified by Tencent and cannot be guaranteed.

The reporting currency of the company is Renminbi. For the purpose of this presentation, all figures quoted in US
dollars are based on the exchange rate of US$1 to RMB6.6166 for 2Q2018.

2
• Overview
• Strategic Highlights
• Business Review
• Financials
• Q&A
Financial Highlights
in billion RMB 2Q2018 2Q2017 YoY 1Q2018 QoQ

Total Revenue 73.7 56.6 +30% 73.5 -

Value Added Services 42.1 36.8 +14% 46.9 -10%
Social Networks 16.9 12.9 +30% 18.1 -7%
Online Games 25.2 23.9 +6% 28.8 -12%
Online Advertising 14.1 10.1 +39% 10.7 +32%
Media 4.7 4.1 +16% 3.3 +43%
Social and Others 9.4 6.0 +55% 7.4 +27%
Others 17.5 9.7 +81% 15.9 +10%
Gross Profit 34.4 28.3 +22% 37.0 -7%
Operating Profit 21.8 22.6 -3% 30.7 -29%
Net Profit to Shareholders 17.9 18.2 -2% 23.3 -23%

Non-GAAP*
Operating Profit 22.3 20.0 +11% 25.3 -12%
Operating Margin 30.2% 35.4% -5.2 ppt 34.4% -4.2 ppt
Net Profit to Shareholders 19.7 16.4 +20% 18.3 +8%

* Please refer to slide 20 for details of non-GAAP adjustments

4
Key Platforms Update
Online Games Platform Video
• #1 on PC and smart phone in China • #1 by mobile DAU and subscriptions
Online
• #1 online games company globally by Games News
revenue • #1 portfolio of news services by MAU
Music
Media • #1 music services platform
Literature
• #1 online content library and
publishing platform
Weixin & WeChat
• #1 smart phone community Communications
• MAU at 1,058m & Social Mobile Payment
QQ & Qzone Fintech
• #1 by MAU and DAU
• QQ smart devices MAU of
709m (1)
• Qzone smart devices MAU of
543m App Store
• #1 by MAU
Utilities Mobile Security
• #1 by MAU
Mobile Browser
• #1 by MAU

All above rankings refer to China market, unless otherwise stated. Company data as of 30 June 2018
1. Includes users who logged in and sent a message or participated in certain activities such as QQ Moments, games, Interest Tribes, live broadcast, online music & literature

5
• Overview
• Strategic Highlights
• Business Review
• Financials
• Q&A
Strategic Highlights
User Engagement Deepened Across Platforms
Weixin
Solid growth YoY in users,
time spent and activities
• Communication: DAU and
per user messages increased
• Moments and Mini Games
drove up time spent per user
per day
• Adoption of Mini Programs
and growth of Weixin Pay
help Weixin diversify into
more vertical use cases
Tencent Video
Consumption continues to
ramp up, driven by premium
IP and original content
• Mobile DAU up 24% YoY
• Mobile daily video views up
53% YoY
• Total user time spent on
mobile app up 39% YoY
Media Feeds
Better algorithm and
enhanced content offering
enabled us to increase hit
rates of our recommended
feeds stream within our
large DAU products
In particular, for KanDian and
Mobile QQ Browser:
• Total daily page views up
55% YoY
• Total daily short video views
up more than 3 times YoY
7
Weixin Mini Programs
+ +
Development interface using Mini Programs language
Platform proposition:
• An innovative and fast-growing developer
platform within Weixin, facilitating discovery
and consumption of services and products
• Powerful features; easy programming
• Scan and execute with QR codes,
connecting offline services to online
engagement
• Supported by Weixin Pay, as well as
advertising and cloud capabilities
Tencent
Weixin
Pay
Cloud
Ads
Weixin Pay, Tencent Cloud and advertising
capabilities to support Mini Programs
Rapid adoption:
• A growing community of developers and
system integrators developing Mini Programs
• DAU grew to 200m, benefitting from an
expanding range of services, Mini Games
and tools
• Social sharing facilitates user acquisition;
Mini Games accelerate adoption
• Generate traffic and download for
corresponding native mobile apps
8
Weixin Mini Programs
Expanding Penetration Across Multiple Use Cases

• To public transport companies: high • To merchants: shorten check-out time, take

processing efficiency, reduce cost, feed
usage data to assist transport planning
• Public transport operators in
over 90 cities have adopted
Smart Transit QR Code,
while some have their own
Mini Programs to serve
Transport
commuters
online orders, product recommendations and
promotions in connection with Official
Accounts, ongoing interaction with customers
• Scan-to-buy is increasingly
adopted in shopping malls,
supermarkets and
convenience stores,
supporting retailers moving
Retail
to mobile

• To restaurants: increase • To game developers:

operational efficiency, expand user reach,
reduce labor cost, reward targets short
loyal customers via e- engagement time,
Restaurant Mini Games
coupons and loyalty additional revenue
program sources
• Widely adopted in fast food • Ads revenue up 5 times QoQ
chains and cafes across China

9
• Overview
• Strategic Highlights
• Business Review
• Financials
• Q&A
Business Review

22% 24%

18% 21%

17% 14%
19%
17%
15% 19%

18%
15%
12% 14%

10% 19%
19% 39%
7%
5% 18% 41% 34%
15% 37%
4% 19% 42%
4% 19% 46%
5%
12% 17% 42%
45%
48%
53%
53%
54%
59% 56%
25% 23%
24% 23%
25% 23%
24% 24%
23% 25% 24%
24% 23% 23%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

Social Networks Online Games Online Advertising Others

11
Value Added Services
+14% -10%
YoY QoQ
46.9
42.1 42.1
36.8
18.1
+30% 16.9 -7% 16.9
12.9

+6% 25.2 28.8 -12% 25.2

23.9

2Q17 2Q18 1Q18 2Q18

Social Networks Online Games (in billions, RMB)

Social Networks Online Games

• Total VAS subscriptions up 30% YoY to 154 million,
driven by video subscriber acquisition via self-produced
original content
• Video subscription revenue doubled and music live
broadcast services increased monetization, driving YoY
revenue growth
• Reduced sales from game-related items offset growth in
digital content services, resulting in QoQ revenue decline
• Revenue growth decelerated to 6% YoY, and quarterly
revenue decreased 12% during weak season. Non-
monetization of popular tactical tournament games in
China was the main reason behind YoY and QoQ
slowdown
• DAU of smart phone games grew double-digit
percentage YoY
• AoV and PUBG MOBILE built up substantial user bases
in overseas market with increasing monetization
12
Social Networks
Weixin Pay
• Mobile payment MAU exceeded 800
million
• Average daily transaction volume up
over 40% YoY
• Commercial payment transactions
accounted for over half of total
transaction volume for the first time, in
which offline commercial payment
volume increased 280% YoY
• Expanding use cases in China and
overseas markets
WeiShi
• Mini video content platform, providing
quality content for users’ direct access in
our large DAU products
• Daily video views saw strong growth
across media feed verticals within
Mobile QQ and WeiShi app
• Appealing content, such as popular IP, to
generate higher user traffic
• Added innovative features, e.g., AI-
based beautifying tools, online voting
function to deepen celebrity-fans
interaction
13
Digital Content - Video

• 74 million subscriptions, up 121% YoY; #1 in China

• Among non-game apps, ranked #1 in China and #2 in Global iOS Top Grossing Charts

Exclusive Content in Key Verticals

• Drama: Legend of Fuyao, a top China Literature IP, is #1 exclusive drama series by VV in 1H18
• Variety Show: Produce 101 achieved phenomenal success; #1 online variety show by VV
• Chinese Anime: strong IPs expanded audience and potential subscriber base, helping category
traffic to more than double YoY; #1 industry wide by VV

Legend of Fuyao Produce 101 Land of Warriors Subscription gift card

Creative Promotional Initiatives

• Social referral: users can gift subscription cards or day-trial services via red envelopes to Weixin
and QQ friends
• Cross promotion: a) bundling subscriptions with partners’ membership packages; b) subscribers
can purchase China Literature content at discount

14
Smart Phone Games
• 2Q18: RMB17.6 billion revenue, up 19% YoY, down 19% QoQ

• Revenue declined sequentially due to

➢ Users shifted time to non-monetized tactical tournament games
➢ 5 out of 7 new games launched after mid-May
➢ Existing games prioritized operation and user engagement over monetization in 2Q

• In China, DAU and time spent both gained market share YoY and QoQ

Initiatives to drive future growth

New Games in High
Overseas Expansion Existing Games
ARPU Categories

AOV HoK launched survival MT4 consistently

• 13 million DAU across
85 markets
• Monetization via skins and
avatars; grossing in 1H18
over USD 200 million
play mode and plan to ranked #2 in China’s
release new items in dancing iOS Top Grossing Chart
motions since late July launch

PUBG MOBILE PUBG titles Saint Seiya

• 14 million DAU in over
100 markets*
• Monetization via seasonal
pass and skins; grossing in
July over USD 20 million
pursing approval for ranked #4 in China’s
monetization iOS Top Grossing Chart
since early Aug launch

* Excluding Japan, Korea, Taiwan

15
PC Client Games
• 2Q18: RMB12.9 billion revenue, down 5% YoY and down 8% QoQ

• Core users stay loyal to key titles

➢ DnF: launched 10th anniversary in-game marketing activities in June and released popular
items during Labour Day holidays. Paying users and ARPU grew YoY

➢ LoL: highly popular mid-season invitational (MSI) event held in Paris; DAU increased QoQ,
benefitting from Chinese team winning

• Introduce overseas console blockbusters to Chinese PC game players

➢ Fortnite: open-beta testing scheduled for mid-August; 10 million pre-registrations in China

➢ Rocket League: innovative gameplay with over 45 million registered users worldwide

Fortnite Rocket League

16
Online Advertising
+39% +32%
YoY QoQ

14.1 14.1

10.1 4.7 10.7 4.7

+16% +43%
3.3
4.1

+55% 9.4 +27% 9.4

6.0 7.4

2Q17 2Q18 1Q18 2Q18

Media Social and Others (in billions, RMB)

Media Social and Others

• Video ad revenue grew YoY, mainly due to sponsorship • Revenue increased YoY mainly due to
advertising revenue generated from popular programs, ➢ Weixin: 2nd feed ad per user day in Moments and
e.g. Produce 101 and Legend of Fuyao. new Mini Programs ads

• News ad revenue declined single-digit percentage YoY, ➢ Mobile Ad Network: robust growth in impressions
against high base in 2Q17; sequentially, inventories and demand from advertisers
increased after completion of ad system revamp ➢ QQ KanDian: increased ad impressions from news
feed traffic growth
• Media ad revenue increased sequentially due to
• Revenue increased sequentially due to positive
positive seasonality
seasonal demand and more ad inventories

17
• Overview
• Strategic Highlights
• Business Review
• Financials
• Q&A
Income Statement
in million RMB 2Q2018 2Q2017 YoY 1Q2018 QoQ

Revenues 73,675 56,606 +30% 73,528 -

COPS (39,229) (28,300) +39% (36,486) +8%
Gross profit 34,446 28,306 +22% 37,042 -7%
Interest income 1,072 959 +12% 1,065 +1%
Other gains, net 2,506 5,125 -51% 7,585 -67%
Operating expenses (16,217) (11,830) +37% (15,000) +8%
Operating profit 21,807 22,560 -3% 30,692 -29%
Finance costs, net (1,151) (834) +38% (654) +76%

Share of profit/ (loss) of associates & JV 1,526 498 N.A. (319) N.A.
Income tax expense (3,602) (3,970) -9% (5,746) -37%
Net profit 18,580 18,254 +2% 23,973 -22%
Net profit to shareholders 17,867 18,231 -2% 23,290 -23%
Diluted EPS in RMB 1.868 1.914 -2% 2.435 -23%
Non-GAAP:

Net profit to shareholders 19,716 16,391 +20% 18,313 +8%

Diluted EPS in RMB 2.062 1.721 +20% 1.915 +8%

19
Non-GAAP Adjustments

Net (gains)/
Amortisation
in million RMB GAAP losses from Impairment Non-GAAP YoY QoQ
SBC of intangible
2Q2018 investee provision** 2Q2018 change change
assets
companies*

Operating profit 21,807 1,798 (4,010) 99 2,564 22,258 +11% -12%

Net profit 18,580 2,562 (4,033) 813 2,577 20,499 +24% +7%

Net profit to shareholders 17,867 2,478 (3,986) 779 2,578 19,716 +20% +8%

Operating margin 29.6% 30.2% -5.2 ppt -4.2 ppt

Net margin 25.2% 27.8% -1.3 ppt +1.8 ppt

* Including (gains) /losses on deemed disposals, disposals of investee companies and businesses, and fair value changes arising from investments

** Impairment provision for associates, joint ventures, AFS and intangible assets arising from acquisitions

20
Segment Gross Margin
VAS (%)

65.3 66.2 64.2 65.6 66.7 65.2

63.7 63.2 63.3 59.0
60.9 60.6 59.9 59.3

Online Advertising (%)

51.9 51.3
48.9 46.6
43.7 45.3
39.0 36.3 37.8 37.2 37.4
34.8 36.3
31.2

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

Others (%)
25.4 24.9
21.9 22.4 20.3 22.8
18.1 20.4

10.6
7.0

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

21
Operating Expenses

6.4 6.4
S&M 5.6
(in billion RMB)
3.7
+74% +14%
YoY QoQ

2Q17 2Q18 1Q18 2Q18

R&D 5.7 5.7

5.0
(in billion RMB) 4.2

+35% +14%
YoY QoQ

2Q17 2Q18 1Q18 2Q18

G&A excl. R&D 4.1 4.4

(in billion RMB) 3.9 4.1

-7%
+5%
YoY QoQ

2Q17 2Q18 1Q18 2Q18

22
Margin Ratios

60.0 61.6
58.6 58.4 58.1 57.3
54.0 53.9 51.3 50.0 48.6 47.4 50.4
46.8

GAAP Gross Margin (%)

42.0 44.0 39.5 42.1 41.2

37.9 37.2 34.1 37.4 35.4 33.1 32.9 34.4 30.2

Non-GAAP Operating Margin (%)

32.6 34.5
31.8 31.7 32.2
29.6 29.5 28.3 29.0 29.1 27.7 27.8
26.3 26.0

Non-GAAP Net Margin (%)

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

23
CAPEX, Free Cash Flow
in million RMB 2Q2018 2Q2017 YoY 1Q2018 QoQ

Operating CAPEX 6,590 2,327 +183% 3,877 +70%

Non-operating CAPEX 495 683 -28% 2,441 -80%

Total CAPEX 7,085 3,010 +135% 6,318 +12%

Operating Cash Flow 21,578 20,468 +5% 19,825 +9%

Less: CAPEX Paid 6,204 2,957 +110% 6,825 -9%

Free Cash Flow 15,374 17,511 -12% 13,000 +18%

Total Cash 134,176 137,859 -3% 142,526 -6%

Less: Total Debt 169,477 116,592 +45% 157,059 +8%

Net Cash / (Net Debt) (35,301) 21,267 N.A. (14,533) N.A.

Fair market value of our listed investee companies

was approximately RMB 239.7 billion* (USD 36.2 billion) as at June 30, 2018

* Excluding subsidiaries
24
• Overview
• Strategic Highlights
• Business Review
• Financials
• Q&A
Tencent Holdings Ltd.

2018 Second Quarter &

Interim Results Presentation

Thank you!
https://www.tencent.com/ir

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