Spotify Rival Tencent Music Clocks Q3 Revenue Decline, But Online Music Paying Users Grow 21%

Tencent Music Entertainment Group TME reported a third-quarter revenue decline of 10.8% year-over-year to $900 million, beating the consensus of $875.6 million. 

China's leading online music and audio entertainment platform's adjusted EPADS of $0.12 was in line with the consensus.

Key Metrics: The Q3 Monthly active users (MAUs) for online music declined by 4.2% Y/Y to 594 million. Mobile MAUs for social entertainment decreased by 16.8% Y/Y to 129 million.

Monthly ARPPU for online music grew by 17% Y/Y to RMB10.3, Monthly ARPPU for social entertainment declined 51.4% Y/Y to RMB86.2, and Online music paying users increased by 20.8% Y/Y to 103 million. 

Online music service revenues grew by 32.7% Y/Y to $624 million, while the revenues from music subscriptions were $438 million, an increase of 42% Y/Y.

Revenues from social entertainment services and others decreased by 48.8% Y/Y to $276 million.

The gross margin of the Spotify Technology S.A. SPOT rival increased by 310 bps to 35.7%, primarily due to the strong growth of revenues from music subscriptions and advertising services and the ramp-up production of original content.

The operating profit increased by 13% Y/Y to $195 million.

Net cash provided by operating activities was $198 million. The combined balance of the company's cash, cash equivalents, term deposits, and short-term investments amounted to $4.24 billion.

The Q4 consensus revenue and EPS are $876.6 million and $0.13.

Price Action: TME shares are trading higher by 1.35% at $7.53 premarket on the last check Tuesday.