Wednesday May eighteenth$Tencent (00700.HK) $It was announced that revenue and net profit in the first quarter of fiscal 2022 were lower than market expectations, revenue grew zero year-on-year, net profit fell 51% year-on-year, and non-international financial reporting standards (Non-IFRS) adjusted net profit fell 23% year-on-year, the third consecutive quarter of negative growth.

Overall, Tencent's performance is affected by multiple factors such as macro environment, industry supervision and so on. Ma Huateng, chairman and CEO of Tencent, said that Tencent will continue to invest in strategy and continue to invest in strategic growth areas, including enterprise software, video numbers and international market games, focus on key business and persist in innovation in the future. continue to create value for users, partners and society as a whole.

There is room for growth in mobile games. Cash conversion of game products will take time.

In the main business, game revenue grew zero compared with the same period last year, while game revenue in the local market decreased by 1% compared with the same period last year, reflecting the impact of protection measures for minors; overseas game revenue increased by 4% over the same period last year, and in the post-COVID-19 epidemic period, user consumption has dropped from the peak of the epidemic period. After becoming the largest source of revenue for the first time in the fourth quarter of last year, revenue from the financial technology and enterprise services business surpassed that of games for the second consecutive quarter, growing by 10 per cent year-on-year and accounting for more than 30 per cent of total revenue.

In a conference call in the fourth quarter of last year, Tencent predicted that the impact of juvenile protection measures would be fully digested in the second half of this year, and that challenges such as the suspension of game version numbers faced by domestic games would be "temporary." the company has a large number of new games ready to launch when the environment is stable later this year.

In a conference call on Wednesday, Tencent executives did not directly elaborate on the direct impact of the Juvenile Protection Law on gaming business revenue, but said that the current development of the mobile Internet means there is still room for growth in mobile games. The adult gaming market is doing very well in 2021, while shifting to a more profitable gaming business. Tencent games need to focus on areas that can generate more revenue.

Game version number, Tencent executives said that the current version number approval status is good, the future will show more positive signs, regulatory factors will promote the further development of the game industry.

Tencent believes that the re-release of the current game version number means that there will be more games to be listed in the future, which is very optimistic for the industry. At present, larger, relatively mature companies with some game inventory will be able to survive this period of time, but the approval process will take time and will not immediately see the conversion of game products into cash.

Advertising revenue is affected by policy, epidemic situation and other factors.

Online advertising revenue, another major business of Tencent, fell 17% in the first quarter compared with the same period last year. Tencent believes that this reflects the weak demand in industries such as education, Internet services and e-commerce, as well as the impact of changes in the online advertising industry's own regulation.

At the performance call, Tencent executives said that policy trends had an impact on the advertising business, especially in games and educational advertising, followed by the market environment affecting supply and supply, which negatively affected the group's network business. especially the official account advertising demand and so on. The recurrence of the current epidemic has brought a lot of difficulties to people's lives, which are challenging for the advertising business.

Personnel optimization may be carried out, but not because of short-term influencing factors such as the epidemic.

In a conference call held by senior executives of Tencent in the fourth quarter of last year, Liu Chiping, president of Tencent, said in response to the news of "personnel optimization" that Tencent will take the initiative to adjust when the Internet industry is facing structural challenges, in order to maintain healthier growth, the cost of the loss-making business has been optimized. In the future, Tencent will focus on key strategic areas based on the principle of health and sustainability, deploy personnel in businesses of long-term value, and at the same time continue to introduce core scientific and technological talents and outstanding new graduates. It is expected that the company's personnel will continue to grow this year.

In this evaluation of first-quarter revenue performance, Ma Huateng said that Tencent "implemented cost control measures and adjusted some non-core businesses, which will help us to achieve a more optimized cost structure in the future."

On the earnings call, Tencent executives said that the more people, the higher the cost, so structural changes are needed to focus on more profitable businesses. At present, structural changes have taken place in the industry, and the company may optimize its personnel, but temporary factors such as the epidemic will not be the cause of the optimization. Therefore, on the whole, reducing cost and increasing efficiency is a comprehensive consideration.