#1Tencent 腾讯 2023 Second Quarter Results Presentation Aug 16, 2023#2Cautionary 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 realised 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-IFRS 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-IFRS financial measures may be defined differently from similar terms used by other companies. The Company's management believes that the non-IFRS 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-IFRS measures and reconciliations between our IFRS and non-IFRS 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. All materials contained within this presentation are protected by copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior, express written consent of Tencent. 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 RMB7.2258 for 2Q2023. 2#31. Overview 2. Business Review 3. Financial Review 4. Q&A#4Financial Highlights In billion RMB 2Q2023 2Q2022 YOY 1Q2023 QoQ Total Revenue Value-added Services Social Networks Domestic Games 149.2 134.0 +11% 150.0 -0.5% 74.2 71.7 +4% 79.3 -6% 29.7 29.2 +2% 31.0 -4% 31.8 31.8 +0.1% 35.1 -9% International Games 12.7 10.7 +19% 13.2 -4% Online Advertising 25.0 18.6 +34% 21.0 +19% FinTech and Business Services 48.6 42.2 +15% 48.7 -0.1% Others 1.4 1.5 -10% 1.0 +38% Gross Profit 70.8 57.9 +22% 68.2 +4% Non-IFRS Operating Profit Operating Margin Net Profit Attributable to Equity Holders 50.1 36.7 +37% 48.4 +4% 33.6% 27.4% +6.2ppt 32.3% +1.3ppt 37.5 28.1 +33% 32.5 +15% Domestic Games refers to our games business in the PRC excluding the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan 4#5Key Services Update China • #1 by users and revenue Global • #1 by revenue Premium Content • #1 by paid subscriptions including video, music, literature Digital Content Mobile Browser Utilities • #1 by MAU Mobile Security • #2 by MAU Consumers Weixin & WeChat • #1 mobile community MAU at 1,327m Mobile devices MAU at 571m QQ Games Communications & Social Networks Businesses Mobile Payment #1 by MAU & DAU FinTech laaS . Large scale, high-performance PaaS • Cloud laaS network #2 by revenue SaaS ⚫ #1 standalone cloud conferencing app All rankings above refer to China market, unless otherwise stated. Ranking for PaaS is based on IDC Quarterly Public Cloud Services Tracker report. Company data as of Jun 30, 2023 LO 5#61. Overview 2. Business Review 3. Financial Review 4. Q&A#7Revenue by Segment In billion RMB 150.0 149.2 144.2 145.0 1% 1% 142.4 140.1 1% 138.3 1% 2% 135.3 135.5 134.0 1% 133.7 1% 1% 1% 1% 3% 125.4 1% 32% 32% 114.9 1% 30% 33% 33% 32% 30% 29% 32% 32% 29% 26% 26% 14% 17% 16% 16% 17% 15% 15% 17% 13% 14% 17% 18% 9% 16% 8% 9% 7% 8% 8% 8% 9% 90 9% 8% 10% 7% 8% 23% 24% 25% 25% 23% 24% 24% 22% 21% 21% 26% 22% 19% 23% 23% 21% 22% 21% 21% 20% 22% 21% 21% 20% 21% 20% 2Q20 3Q20 4Q20 1Q21 Social Networks 2Q21 ■Domestic Games 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 ■International Games Online Advertising ■FBS Others 7#8Value-added Services In billion RMB +4% YOY -6% QoQ 79.3 74.2 74.2 71.7 13.2 -4% +19% 12.7 12.7 10.7 35.1 31.8 +0.1% 31.8 -9% 31.8 31.0 29.2 +2% 29.7 -4% 29.7 2Q22 2Q23 Social Networks Social Networks • Revenue was up 2% YoY, driven by increased revenue from mini games and music subscriptions, partially offset by decline of revenue from music- and games-related live streaming services Long-form video subscription revenue decreased 2% YoY. Video subscriptions declined 5% YoY but increased 2% QoQ to 115 million. We are applying Unreal Engine for producing animated series such as The Land of Warriors, to streamline the workflow and enhance production capacity and efficiency • Music subscription revenue increased 37% YoY, as both ARPU and subscriptions grew at double-digit rates YoY. TME optimised operations and enriched offerings in membership privileges and content to enhance users' paying propensity for premium music content Domestic Games • Revenue was stable YoY at RMB31.8 billion, partly due to less commercial content scheduling after a robust 1Q, while revenue from emerging competitive eSports games, Arena Breakout and Fight of the Golden Spatula, increased International Games 1Q23 2Q23 • International Games Domestic Games Revenue grew 19% YoY to RMB12.7 billion, or 12% in constant currency, driven by contributions from VALORANT, NIKKE and Triple Match 3D 8#9Communications & Social Networks Video Accounts - rapid user growth and strengthening ecosystem bode well for expanding monetisation Significant user engagement growth • Total time spent almost doubled YoY in 2Q23, driven by double-digit growth in DAU and much faster growth in per user time spent Strong growth in user interactions, such as likes and comments × Strengthening content ecosystem Expanding monetisation opportunities ● Daily active creators and daily video uploads sustained robust YoY growth in 2Q23 . Enhancing marketing tools that allow creators to boost content exposure, scaling their Video Accounts presence, while contributing to our ad revenue • Ad monetisation expanded significantly; in-feed ads still in its early innings • Cultivating high-margin new revenue stream in commissions; live-streaming eCommerce GMV increased by ~150% YoY in 2Q23 from low base 9#10Communications & Social Networks Mini Games - the largest casual game platform built on Mini Programs S Mini Programs • Over 1.1 billion MAU; time spent per DAU increased double-digit YoY in 2Q23 • Approx. 4 million developers • Over 400 million MAU Mini Games • 300K+ game developers - covering casual games, card games and many other types Over 100 Mini Games each achieved over RMB10 million gross receipts in 2Q23 Compelling value proposition for developers • Reduce entry barriers and launch costs for developers, via social sharing, pre-existing log-in, and instant play infrastructure • Extend reach to non-app users for developers with successful app games, as they can port to Mini Games with minimal development efforts • Benefit from advancement in Mini Games infrastructure, leveraging Tencent's know-how and game technology Strategic value for Tencent • Host the largest casual game community in China with hundreds of millions of MAU • Expand our audience and cultivate new gamers - over 50% of Mini Games MAU do not play Tencent app games; half of MAU are female • Generate game distribution and ad revenues with high margins and platform economics 10#11Domestic Games Several recent games consistently growing into top tier evergreen titles In past two years, we launched 3 games that are sustaining within top 10 mobile games by total time spent¹ Fight of the Golden Spatula: popularity of Set 9 release drove DAU to new milestone of 15 million in June; ranked #4 across all mobile games1 • Arena Breakout: upgraded progression system and new game modes drove DAU to record high in 2Q23; ranked #8 across all mobile games¹; expanded internationally in July Proven evergreen titles demonstrating ongoing vitality Naruto Mobile: gross receipts and average DAU hit all-time highs in 2Q23 after seven years of operation; clear leader in fighting genre despite multiple competitive launches over the years • DnF: DAU increased by double-digit % YoY in June, driven by 15th anniversary content update featuring revisions to art style and improved combat visuals Successfully launched PC blockbusters in China • VALORANT: most successful PC game release in our history by number of active users on launch day; became the most-watched new game on game live streaming platform in China² • Lost Ark: #1 MMOARPG on Steam with a thrilling combat system, captivating storyline, and vast game world exploration; became the most popular MMO game on live streaming platforms in China³ 花金铲铲之战回 100% 55:0 血量高低。 13 无双百战 4 百人对弈 限时玩法 Fight of the Golden Spatula 轮回之眼器 4月28日參上 无畏契约 现已上线 开服庆爽进行中 // 限定福彩上经销 Naruto Mobile 其佩恩,六道「漂泊客」 1. Source: by total time spent in 2Q23, according to QuestMobile 2. Source: out of all games released since 2019, according to Huya 3. Source: Bojianger VALORANT 11#12International Games VALORANT: Sustained expansion PUBG MOBILE: Resumed growth NIKKE: Increased engagement VALORANT Gross receipts and DAU increased YoY, driven by introduction of 1) popular new agent (Gekko) and items; 2) Premier game mode that provides professional tournament experience for competitive players PLATEBAMINOWN'S BATTLEGROUNDS NDBILE Gross receipts and DAU resumed YoY growth in June, benefitting from upgraded Royale Pass, new dinosaur- themed game mode, and brand collaborations with Bearbrick and Ducati User engagement continued to grow due to new characters, newly added storylines with fully voiced scenes, and successful thematic events VALORANT PUBG MOBILE KRAFTON DAY! WILD NIKKE NEW THEMED MODE, DINOGROUND GODDESS OF VICTORY: NIKKE RIDE THE DINO POWER OVER ZONE FORBIDDEN PARADISE HALF-YEAR ANNIVERSARY VERSION UPDATE 12#13Online Advertising In billion RMB 18.6 +34% YOY +19% QoQ 25.0 21.0 25.0 Overall Revenue grew 34% YoY to RMB25.0 billion, against a low-base quarter, and outpacing industry growth. Outperformance was driven by robust demand for Video Accounts ads and ongoing enhancement of machine learning on our advertising platform • Ad spend on our platforms grew at a double-digit year-on-year rate from almost every major advertiser category Weixin Weixin ad revenue increased YoY not only on Video Accounts but also on Moments, Mini Programs and Official Accounts. As we launched new functions to enhance vibrancy of Weixin's commerce ecosystem, we attracted merchants and brands to allocate more ad budget on multiple Weixin properties • Video Accounts ad revenue exceeded RMB3.0 billion in 2Q23 while ad load remained low, underpinned by continuing growth in user time spent and better ad targeting Content Platforms • Music ad revenue grew notably YoY, driven by ad-supported music service and brand sponsorship of offline music events Mobile Ad Network • Revenue ramped up significantly YoY, benefitting from partnership with high commercial value inventory owners; upgraded infrastructure and enhanced efficiency in matching advertisers' demand with traffic supply 2Q22 2Q23 1Q23 2Q23 13#14FinTech and Business Services In billion RMB +15% YOY -0.1% QoQ 48.6 48.7 48.6 42.2 2Q22 2Q23 1Q23 2Q23 FinTech Services • Revenue sustained double-digit YoY growth, mainly benefitting from the recovery of offline and online commercial payment activities • Wealth management users and AUM increased YoY as we provided better investor education and services to meet increased user demand • We have completed self-inspection and corresponding rectification for Tenpay, and upgraded the operational compliance capability of our payment business. We look forward to progressing our business and providing innovative services under the supportive regulatory framework Business Services • Returned to low double digit YoY revenue growth in 2Q23, driven by fees collected on Video Accounts live streaming eCommerce transactions and modest growth of cloud services. Gross margin increased notably YoY due to cost optimisation and new fee-based revenue streams • Launched Tencent Cloud Model-as-a-Service (MaaS) library of models and solutions, which enables enterprises in multiple industries to develop customised large models at higher efficiency and lower cost, leveraging our proprietary vector database and high-performance computing cluster services 14#151. Overview 2. Business Review 3. Financial Review 4. Q&A#16Income Statement In billion RMB 2Q2023 2Q2022 YOY 1Q2023 QoQ Revenue COPS Gross profit Interest income 149.2 134.0 +11% 150.0 -0.5% (78.4) (76.1) +3% (81.8) -4% 70.8 57.9 +22% 68.2 +4% 3.4 1.9 +76% 2.9 +15% Other gains/(losses), net (0.2) 4.4 N/A 0.9 N/A Operating expenses (33.7) (34.1) -1% (31.6) +7% Operating profit 40.3 30.1 +34% 40.4 -0.3% Finance costs, net (3.4) (1.8) +82% (2.6) +24% Share of profit/(loss) of associates & JVs, net 1.2 (4.5) N/A 0.1 +1349% Income tax expense (11.1) (4.6) +144% (11.5) -3% Net profit 27.0 19.2 +41% 26.4 +2% Net profit attributable to equity holders 26.2 18.6 +41% 25.8 +1% Diluted EPS in RMB 2.695 1.915 +41% 2.639 +2% Non-IFRS Operating Profit 50.1 36.7 +37% 48.4 +4% Net profit attributable to equity holders 37.5 28.1 +33% 32.5 +15% Diluted EPS in RMB 3.875 2.896 +34% 3.353 +16% 16#17Non-IFRS Adjustments Net (gains)/ Amortisation In billion RMB IFRS 2Q2023 SBC losses from investee companies1 of intangible assets Impairment provisions/ (reversals)² SSV & Others4 Tax effect СРР3 Non-IFRS 2Q2023 YoY change QoQ change Operating profit 40.3 5.6 (0.2) 0.9 0.1 0.4 3.0 50.1 +37% +4% Net profit 27.0 6.9 (0.3) 2.3 0.2 0.4 3.0 (0.9) 38.6 +33% +15% Net profit attributable to equity holders 26.2 6.7 (0.2) 2.1 0.2 0.4 3.0 (0.9) 37.5 +33% +15% Operating margin 27.0% 33.6% +6.2ppt +1.3ppt Net margin 18.1% 25.9% +4.3ppt +3.6ppt Note: 1. Including net (gains)/losses on deemed disposals/disposals of investee companies, fair value changes arising from investee companies, and other expenses in relation to equity transactions of investee companies. 2. Mainly including impairment provisions/(reversals) for associates, joint ventures, goodwill and other intangible assets arising from acquisitions. 3. Mainly including donations and expenses incurred for the Group's Sustainable Social Value & Common Prosperity Programme initiatives. 4. Primarily non-recurring compliance-related costs (including the fine imposed by the PBOC on Tenpay which was disclosed in our announcement dated 7 July 2023) and expenses incurred for certain litigation settlements of the Group 17#18Gross Margins 47.5 46.3 46.3 45.2 45.4 45.5 44.0 44.1 42.1 43.2 44.2 42.6 40.1 Overall Gross Margin (%) 55.1 53.9 54.0 53.7 52.6 52.9 53.0 51.5 50.4 50.6 51.7 49.8 48.7 Value-added Services (%) 53.3 51.4 50.9 48.9 48.8 45.1 46.4 46.3 44.2 42.7 40.6 41.7 36.7 Online Advertising (%) 38.4 33.3 33.3 33.6 34.5 32.3 32.0 31.6 28.9 27.9 28.5 28.5 27.1 FinTech and Business Services (%) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 18#19Operating Expenses S&M in billion RMB +5% YOY +18% QoQ R&D in billion RMB +7% YOY +5% QoQ G&A (excl. R&D) in billion RMB -16% YOY -0.5% QoQ 8.3 8.3 16.0 16.0 7.9 15.0 15.2 11.2 7.0 9.4 9.4 9.4 2Q22 2Q23 1Q23 2Q23 2Q22 2Q23 1Q23 2Q23 2Q22 2Q23 1Q23 2Q23 Non-IFRS Non-IFRS 2Q23 S&M grew by 5% YoY and 19% QoQ 2Q23 R&D grew by 10% YoY and 7% QoQ Non-IFRS 2Q23 G&A (excl. R&D) declined by 14% YoY or grew by 1% QoQ 19#20Non-IFRS Margin Ratios 32.8 33.6 31.6 32.3 30.4 31.0 28.5 28.7 29.2 27.0 27.4 27.2 23.0 Non-IFRS Operating Margin (%) 27.2 26.6 25.8 25.5 25.4 22.8 25.9 23.8 21.6 22.3 21.1 19.4 17.9 Non-IFRS Net Margin (%) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 20 20#21CAPEX, FCF and Cash Position In billion RMB Operating CAPEX Non-operating CAPEX Total CAPEX 2Q2023 2Q2022 YOY 1Q2023 QoQ 3.0 2.1 +43% 1.0 +191% 1.0 0.9 +6% 3.4 -70% 4.0 3.0 +31% 4.4 -10% Operating Cash Flow 40.7 35.7 +14% 62.3 -35% Less: CAPEX Paid (3.0) (5.6) -47% (4.6) -36% Payments for media content (6.3) (5.8) +7% (4.4) +41% Payments for lease liabilities (1.5) (1.8) -20% (1.5) +0.2% Free Cash Flow 29.9 22.5 +34% 51.8 -42% Total Cash 371.8 315.9 +18% 370.5 +0.3% Less: Total Debt Net Cash/(Debt) (354.1) 17.7 (336.3) +5% (339.0) +4% (20.4) N/A 31.5 -44% Repurchased ~36 million shares with an aggregated cost of RMB11 billion during 2Q23 • Paid cash dividend of RMB21 billion during 2Q23 • As at 30 Jun 2023, the fair value of our shareholdings' in listed investee companies (excluding subsidiaries) was ~RMB435 billion (USD60 billion) and the carrying value of our unlisted investee companies was ~RMB347 billion (USD48 billion) 1. Including those held via special purpose vehicles, on an attributable basis. 21#221. Overview 2. Business Review 3. Financial Review 4. Q&A#23Tencent Holdings Limited 2023 Second Quarter Results Presentation Tencent Thank you! https://www.tencent.com/ir