China's Leading Audio Entertainment App Tencent Music's Users Decline In Q4, But Paying Subscribers Surge

Tencent Music Entertainment Group TME reported a fourth-quarter revenue decline of 7.2% year-over-year to $971 million (CNY6.89 billion), beating the consensus of $932 million. 

China’s leading online music and audio entertainment platform’s adjusted EPADS of $0.14 (CNY1.00) was in line with the consensus.

Key Metrics: The Q4 Monthly active users (MAUs) for online music declined by 4.2% Y/Y to 576 million. Mobile MAUs for social entertainment decreased by 28.8% Y/Y to 104 million.

Monthly ARPPU for online music grew by 20.2% Y/Y to CNY10.7, Monthly ARPPU for social entertainment declined by 54.0% Y/Y to CNY78.0, and Online music paying users increased by 20.6% Y/Y to 106.7 million. 

Online music service revenues grew by 41.1% Y/Y to $707 million, while the revenues from music subscriptions were $481 million, an increase of 45.3% Y/Y.

Revenues from social entertainment services and others decreased by 51.6% Y/Y to $264 million.

The gross margin increased by 530 bps to 38.3%, 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 23.5% Y/Y to $241 million.

Operating cash flow was $278 million for the quarter. The combined balance of the company’s cash, cash equivalents, term deposits, and short-term investments amounted to $4.54 billion as of December 31, 2023.

The Q1 consensus revenue and EPS are $896.41 million and $0.13.

The stock gained over 32% last year. Investors can gain exposure to the stock via Vanguard Total International Stock ETF VXUS and Vanguard FTSE Emerging Markets ETF VWO.

Price Action: TME shares are trading higher by 0.67% at $10.45 premarket on the last check Tuesday.

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