Earnings Call Transcript - TME Q3 2023

Millicent Tu, Head of IR

Good evening, good morning. Welcome to Tencent Music Entertainment Group’s Third Quarter 2023 Earnings Webinar. I am Millicent Tu, Head of IR at the company. TME announced its quarterly financial results today before the U.S. market opened. The earnings release is now available on our IR website and via Newswire services. Today, you will hear from Mr. Kar Shun Pang, our Executive Chairman, who will start the call with an overview of our company’s strategies and business updates. Next, Mr. Ross Liang, our CEO, will share additional thoughts on our platform strategies and developments. Finally, Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to Safe Harbor statements in our earnings release, which apply to today’s call as we will make forward-looking statements. Please note that the company will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in the company’s earnings release and filings with the SEC. Please be advised that today’s webinar is being recorded. With that, I am very pleased to turn over the call to Kar Shun, Executive Chairman of the company. Kar Shun?

Kar Shun Pang, Executive Chairman

Thank you, Millicent. Hello, everyone and thank you for joining our call today. We are pleased to report another quarter of strong growth in our online music services despite the headwinds in the social entertainment business while adjusting certain industry-wide live streaming interactive features presented some challenges for the quarter. It ultimately placed us on an even stronger footing for our long-term sustainable development. As a case in point, our evolving businesses have become more resilient, illustrated by group-wide margin expansion and strong cash flows for the quarter. What’s particularly worth mentioning is our online music subscriptions. This business has registered accelerated year-over-year revenue growth. Growth momentum carried into the third quarter with expansion in both our subscriber base and ARPPU. Our paying user base grew further to 103 million, a strong testament to the broad appeal and high value of our music products and services. Our impressive content offerings, compelling subscriber privileges, and interactive product features, together with strong execution, enabled us to attract new subscribers while retaining existing ones. We are also pleased to see that monthly ARPPU expanded to RMB10.3, thanks to disciplined promotions, effective member acquisitions, and our high subscriber retention rate. These achievements will result from the solid execution of our dual engine content and platform strategy. It further unlocks the value of music and paves the way for our long-term success. I’d like to share a few highlights. First, we cultivate deeper mutually beneficial partnerships with record labels and artists. Our insights across content and users, as well as our holistic approach to growing the industry, supported our strengthened co-operations with music partners. For instance, we strengthened our collaboration with TFBoys on the 30-day head start release of their 10-year anniversary single, 'See You Tomorrow,' as well as the sale of their themed album, '10 Years.' To amplify user engagement and strengthen their bond with the artists, we launched several online song guessing contests and music-based interactive features for this single. We expanded our partnership with YG Entertainment into ticketing, where we opened a dedicated channel for users to purchase BLACKPINK’s concert tickets, further expanding subscriber purchases. In addition, we formed a new partnership with Cube Entertainment, bringing in a prominent line of brands and groups such as B2B, Pentagon, (G)I-dle, and others. This collaboration not only enriched our music catalog but also granted us the privileges of a 30-day head start period on new song releases. Each of these examples strengthens our relationship cycle and creates a win-win situation. Our evolved relationships with artists fortify our music ecosystem, bringing more enjoyable privileges to our users while also creating prosperity for all stakeholders along the industry value chain. Second, leveraging TME’s integrated resources and expertise, we expanded our industry influence by assisting artists at different stages with their career growth. With respect to top-tier artists in August, we hosted an online/offline concept for Jay Chou celebrating the 9-year anniversary of his debut, highlighted by sales of sought-after tickets and social media buzz of nearly 2 billion event views in just 3 weeks. This event generated great excitement and acclaim among users. As for our strategic partnership artists, this quarter we assisted TIA RAY with her appearance at the mid-autumn festival gardens organized by CCTV and Hulan Satellite TV, successfully increasing her influence nationwide. Among our emerging musicians, we helped our Indian musicians perform and showcase their talent on a reality show. Through music exposure and social media, we helped them attract more users to explore their original sounds on our platform. In the third quarter this year, we also had over 20 up-and-coming musicians performing at the Line Music Festival. Many rising musicians from our Tencent Musician program showcased their talents at the Coca-Cola sponsored 2023 Summer Limited Refreshing Music Festival. Such activities with high-quality brands also encourage us to further explore sponsorship advertising opportunities. Third, we enhanced our technology capabilities in content creation, promotion, and distribution. Some of this content also recorded initial success overseas. In the third quarter, we introduced an AI-powered music production tool, featuring fast and convenient generation of a user’s AI voice to produce musical works. Kugou Music’s vocal producer also upgraded its functions to allow AI-generated music content in multiple languages. Through a brief training session, it can effectively and efficiently produce songs in Mandarin, Cantonese, English, Korean, and Japanese. Both tools substantially boosted creators’ creativity. TME’s music promotion and distribution applications, such as the TME Music Cloud and Kugou’s ToMoreMusic platform, make big advancements in helping record labels, creators, and musicians efficiently promote their musical work. Our deep industry insights enhance data and enable us to successfully promote Chinese songs overseas. For example, we helped a specific artist chart on various popular music lists in Singapore during the quarter. Moving on to our continued efforts on ESG. In the third quarter, we joined hands with Tencent’s SSV and launched our 2023 Music Tech X program inviting high school students to explore our technology-inspired music journey. Working side by side with the students, we commissioned a theme song, 'The Most Beautiful Song in the World,' to campaign and support hearing among senior citizens. In addition, we organized a special music education project, 'Music Garden Space,' to help children from ethnic minorities and remote areas appreciate the beauty and power of music. These initiatives demonstrate the value and positive influence we can bring to a wide range of communities. In summary, our holistic and strategic approach is strengthening and expanding our capabilities, making our platform and ecosystem increasingly robust. We continue to grow our music subscriptions and strengthen our partnerships with labels and artists, enriching our content and perpetuating our virtual cycle. We are also fostering new talent and leveraging our advanced technology to support our efficient growth. This powerful combination and evolution will drive our company’s sustainable development in the long run and support the broader industry advancement. Now, I would like to turn the call over to Ross for more insights on our platform development. Ross, please go ahead.

Ross Liang, CEO

Thank you, Kar Shun. Hello, everyone. Music is the heart and soul of TME. I would like to begin by commenting that third quarter results highlighted the efficiency gains across our platforms. Specifically, our ecosystems are strong platforms, scale, and AI important technology have enabled us to transition into an increasingly robust music house. From the operational level, one key highlight is our effort to expand the application of AI technologies across our products and services based on our upgraded music IRM. This quarter, we integrated our IRM integration platform, allowing third-party models to be better integrated and adapted to the music vertical. With the support of AI, we enhanced music discovery and consumption efficiency, creating a more engaging user experience. First, better content connection and discovery. This quarter, we continued to upgrade our recommendation model platform and enhanced personalized recommendations on each of our music apps. As a result, we reached a new record in the share of streams from recommendations as well as an increase in the number of songs added to users’ personal libraries. We also significantly lowered the barriers to music discovery. For example, QQ Music introduced its Quick Listen mode, which allows users to listen to a song’s chorus and then quickly look at the full song. Another example is Kugou Music’s revamped version featuring faster discovery of multiple songs, song covers, as well as AI-run versions played by different instruments. Second, we facilitated better music consumption through more user cases and entertainment scenarios. In the in-car use test, we extended our mobile offerings, such as our seamless user interface, premium song quality, and a tailored playlist to enhance in-cabin music consumption. To increase our coverage, we recently signed additional car models including Mercedes-Benz and more BYD models. Partnering with hardware manufacturers, we led the industry by leveraging Qualcomm’s latest AI computer capabilities to enhance users’ music listening experience with richer details and sensations. In terms of broadening entertainment content consumption, we customized our music services, including content production, promotion, and data analysis across the areas of film and television, gaming, and animation. Through tailored music works, we create unique touch points for original IPs, unlocking their value. For example, we produced the original soundtracks for the blockbuster 'No More Bets' and several mobile games, including 'Peacekeeper Elite,' 'Crossfire,' and 'Dungeon and the Fighter,' all of which have received widespread acclaim. Third, for our immersive user connections, we have created a thriving community where music lovers can bind together, making their experience on our platform more enjoyable and long-lasting. For example, QQ Music launched over 30 interactive song-guessing contests featuring artists such as Jay Chou, BLACKPINK, and the Teens in Times. These events quickly went viral across social media platforms and our in-app community and Funko groups, amplifying TME’s influence. To sum up, these three dimensions of connections inspire us to further unlock music’s value. AI-powered technology is supporting us to provide a better user experience and making the platform increasingly efficient. Our online music business has become a diversifying and crucial growth pillar. Social entertainment services remain adaptive as part of our holistic music offerings. For 2024 and the years ahead, we will stay laser-focused on providing enlightening user experiences while driving operational efficiencies across the platform. With that, I will turn the call over to Shirley, our CFO, for a deep dive into our financials.

Shirley Hu, CFO

Thank you, Ross. Hello, everyone. Next, I will discuss our results from a financial perspective. In the third quarter of 2023, revenues from online music increased by 33% to RMB4.6 billion on a year-over-year basis, driven by strong growth in our music subscription and advertising business. Our total revenues were RMB6.6 billion, down by 11% year-over-year due to a decline in revenues from social entertainment services and other services. Music subscription revenues in Q3 reached RMB3.2 billion, up by 42% year-over-year and by 10% sequentially, driven by further expansion of both the online music paying user base and the monthly ARPPU. The number of new online paying users grew to 103 million, up by 21% year-over-year, representing net adds of 3.6 million users sequentially. Monthly ARPPU was RMB10.3, up 17% year-over-year and 6% sequentially, marking its sixth consecutive quarter of growth and another record high amount. This was the result of our more appealing member privileges and active product features, attractive music content, and the promotion and member acquisition strategies as well as a high subscriber retention rate. Additionally, revenues from advertising achieved strong growth on a year-over-year basis, as our diversified product portfolio and innovative ad formats, including ad-supported models and sponsorship advertising, are highly attractive to advertisers. Our campus music contests, QQ Music 2023 Young Music Contest, and the Coca-Cola sponsored 2023 music festivals were outstanding examples of how our portfolio of music IPs attracted various branded advertisers. Social entertainment services and other revenues were RMB2 billion, down by 49% year-over-year. The decrease was mainly caused by our adjustments to certain live streaming interactive functions and more stringent company procedures as we implemented several enhancements and risk control measures. This aligns with our expectations around live streaming revenues discussed previously. We believe these measures will be beneficial to our users, which will help pave the way for the long-term sustainable development of our business. Gross margin in Q3 was 35.7%, up 3.1 percentage points year-over-year, primarily attributed to several factors. First, our subscription revenues had strong growth this quarter. Specifically, expansions in the paying user base and improvements in monthly ARPPU positively impacted our gross margin. Second, our advertising revenues also grew robustly, benefiting our gross margin. Third, as we gradually ramp up our own content, it has positively impacted our margin. Shifting to win-win relationships with labels and artists and increasing subscription ARPPU over the past several years have improved our margin model and mitigated the outside impact from the decline in live streaming revenues. Now moving on to operating expenses. Total operating expenses for Q3 were RMB1.3 billion or 19.3% as a percentage of total revenue, down by 0.2% from 19.5% of total revenues in the same period last year. Selling and marketing expenses were RMB219 million, down by 11% year-over-year. As we closely monitor the ROI of each promotion channel and improve the effectiveness of promotions, general and administrative expenses were RMB1 billion, down by 2% year-over-year. This decrease was primarily due to employee-related expenses resulting from improved headcount efficiency and expenses incurred in the same period in 2022. Our effective tax rate for Q3 was 12.2%. For Q3, our net profit and net profit attributable to equity holders were RMB1.3 billion and RMB1.2 billion, respectively. Non-IFRS net profit attributable to equity holders was RMB1.1 billion. Diluted earnings per ADS were RMB0.74, up 12% on a year-over-year basis. Non-IFRS diluted earnings per ADS was RMB0.89, up 3% on a year-over-year basis. As of September 30, 2023, our combined balances of cash, cash equivalents, and term deposits were RMB31 billion, as compared with RMB30.5 billion as of June 30, 2023. This combined balance was also affected by the change in the exchange rate from RMB to USD. In March 2023, we announced a share repurchase program of $500 million. As of September 30, 2023, we had repurchased 13.8 million ADS from the open market for a total consideration of approximately $103 million. In conclusion, our music subscription business has demonstrated a strong growth trajectory, marked by quarterly growth in both ARPPU and the number of paying users, and we expect this trend to continue with a keen focus on our management and improving efficiencies in operating costs and promotional channels. We expect to continue driving our overall profitability while investing in new products and services, high-quality content, and new technologies through organic development and to solidify the foundation for our long-term growth. This concludes our prepared remarks. We are ready to open the call for questions.

Operator, Operator

Thank you, Shirley. The first question comes from Alicia Yap from Citigroup. Alicia, please go ahead.

Alicia Yap, Analyst

Hi, thank you. Good evening, management. And thanks for taking my questions. Congratulations on the solid result. I’m going to ask the questions in reverse. I am going to translate myself. So I wonder if management could share your preliminary view on your expectations for online music revenue growth in 2024 and how you expect the business and the competitive environment to evolve in the next three years? In addition, I’m wondering if management could share how you think the macro environment might affect growth prospects next year and also over the next three years? Thank you.

Kar Shun Pang, Executive Chairman

Thank you for your question, Alicia. I think 2023 is a critical year for us. We have been transitioning and expanding our music ecosystem, making our business mix much more resilient. This is actually factored in a number of aspects. First, we responded quickly to the challenges facing the live streaming industry, taking proactive actions to adjust our social entertainment business and make it more sustainable. Secondly, we continue to drive the prosperity of our music ecosystem while diversifying our revenue streams. And thirdly, our core business, like online music subscriptions and advertising, recorded robust growth amid an evolving macro environment. You can see this in our second and third quarter financial results. For 2024, I think that assuming we have a stable external environment, we see the opportunity to drive our overall top line growth and margin expansion compared to 2023. Especially, we will continue to drive solid growth of our online music business with subscription revenue driven by subscription growth and also ARPPU expansion. Outside of subscription revenue, we expect revenues from advertising and new initiatives such as artist merchandise to continue to grow healthily. For social entertainment services, we will continue to execute our current operational strategy with the backdrop of macro factors and competition. Before 2024, our primary target is to stabilize the business and better serve our core users. As part of our holistic music ecosystem, we expect our social entertainment business to continue generating healthy cash flow for us. For 2024 earnings, we aim to build on our strong results so far in 2023 and continue to drive both gross and net margin expansion. For the three-year outlook, I think TME’s core businesses, especially our online music services, still have lots of room to grow over the next three years. We are excited to see growth opportunities in existing areas, including subscription, ARPPU advertising, and more potential from long-form audio as well. In addition to the online music services, we have been extending our rich and expanding capabilities along the entire music value chain. We have successfully developed new monetization models to increase our target addressable market with diversifying revenue streams. These include live performances like concerts and music festivals, artist merchandise, and more. With all these initiatives still in the early stages, we believe we have built a strong foundation to tap into more areas for long-term growth. In a nutshell, we are glad that our core businesses like online music services show great resilience amid the current macro environment. We are confident that our content and platform dual-engine strategy will continue to capture more opportunities for our healthy growth in the future.

Operator, Operator

Thank you. The next question comes from the line of Alex Poon from Morgan Stanley. Alex, please.

Alex Poon, Analyst

Congratulations to management for very strong quarterly results, especially in the subscription business. My question is related to our ARPPU growth. In the third quarter, we have achieved a record high absolute number and also year-over-year and sequential growth. Going forward, because our blended ARPPU is still even lower than our Double 11 promotion price and many users are paying the auto renewal price of RMB15, how should we think about the trajectory? How much visibility do we have for continuing this very strong ARPPU growth in the next two to three years? Additionally, there is also a macro issue, a deflationary environment, and competition with NetEase, which is still charging a lower price than us?

Shirley Hu, CFO

Thank you very much. Thanks for the question. Regarding the ARPPU, we have maintained our revenue growth for six consecutive quarters. For this quarter, it’s already RMB10.3. We have also continued to downsize our promotional events and made the membership benefits more attractive. We also adjusted our price policies. At the same time, you can say that we made some concessions regarding the discounted rate for the consecutive subscription business, but we are also proactively adopting effective operational strategies. Therefore, we will be able to retain our users. The results in Q3 this year show a very good performance. We are still very confident regarding our future subscription business revenue growth. You are also asking about the Q4 performance, and we are optimistic and confident that we’re going to grow the number. In the same part of your question, you asked about the outlook for the next three to five years. You mentioned that our fee is around RMB50, and we’re going to keep an eye on the industry competition and our own operational strategies, factoring in elements like inflation to further optimize our performance.

Operator, Operator

Okay. The next question comes from the line of Zhang Lei from Bank of America Merrill Lynch. Zhang?

Zhang Lei, Analyst

Hi. Thank you, management, for taking my question. I noticed that our gross margin has been quite stable in past quarters and reached a record high since 2019. Can you share with us the trend of music and social entertainment business in terms of gross margin? How should we look at the margin trend going forward?

Shirley Hu, CFO

Gross margin is 35.7% in Q3, increased by 4.1% year-over-year due to the following factors. First, music subscription revenues had a significant growth with expansion in paying user base and improvement in monthly ARPPU, both had positive impacts on our gross margin. Second, the robust growth of advertising revenues also favorably impacted gross margin. Third, we gradually ramped up our self-owned content, which benefits our gross margins. Fourth, we optimized the content cost model, increasing our requirements for content costs. Our online music revenue growth ratio was faster than the net ratio of content costs. Fifth, the license cost of long-form audio decreased on a year-over-year basis. After the adjustment to our live streaming business, the proportion of revenues from rising membership and advertising in social entertainment revenues increased, which positively impacted our gross margin. Additionally, the optimized technology and operation strategy related to brand–short capability improved the utilization of our service and equipment. Our gross margin has improved for six consecutive quarters. Looking forward to Q4, we expect subscription and advertisement revenues will continue to strongly grow. On the cost side, we expect our in-house made content will positively impact gross margin continuously, and we will continue to increase our operational efficiency while monitoring our costs. Despite a decrease in live streaming revenue expected in Q4, we anticipate our gross margin will continue to increase sequentially and, in the next year, we expect our gross margin will increase, but the degree of increase will be less than this year.

Operator, Operator

Okay. The next question comes from the line of Lincoln Kong from Goldman Sachs. Lincoln, please.

Lincoln Kong, Analyst

Thank you, management, for taking my question. My question is about the online music business and the subscription business. First of all, can you provide more details on how this business is performing in the third quarter including advertising, supply chain, digital outcomes, etc.? We’re particularly interested in the enterprise investment trend into the fourth quarter as we just passed a single-day shopping event. How do we see enterprise ramping up for this year or for the fourth quarter? And when we think about 2024, which areas do you think still have growth potential?

Shirley Hu, CFO

Thank you very much. Thanks for your question. In Q4 of this year, we believe we’re going to maintain good growth for the subscription business as long as what we’ve seen performed in Q3. Regarding the advertising business, since Q4 includes the Double 11 shopping festival, we do believe the Q4 performance will outperform Q3. For the outlook of 2024, we believe our subscriber base will continue to grow, but maybe the growth rate will slow down compared with 2023. Regarding the subscription business model in 2024, we plan to intensify our efforts in mobile solutions, in-car applications, and IoT applications. We’re also going to step up efforts in the Super VIP business, providing additional functions like enhancing the music experience. Additionally, we will continue rolling out family and couple membership options to grow our app user base. For advertising revenue in next year, we aim to maintain a positive outlook, keeping our revenue growth targets similar to those of 2023. For growth next year, in addition to what we've mentioned regarding the ad-supported model, we will also enhance efforts regarding commercial promotions during major events and concerts, leveraging these opportunities to deepen the bond between our commercialization and offline events, which will also be a great growth driver for our advertising business next year.

Operator, Operator

The next question comes from Thomas Chong from Jefferies. Thomas, please.

Thomas Chong, Analyst

Hi, good evening. Thanks, management, for taking my questions. My question is relating to AI and LLM. Given that we have been seeing AI as so important in content creation and in supporting our musicians while also driving user engagement, I wanted to get some color on our three-year strategies in LLM and AI. What level of spending should we expect over the next couple of years?

Ross Liang, CEO

Thank you very much. Thanks for the question. Regarding AI-related topics, we believe AI is going to be a very strong and robust driving force for the next few years. Due to our relationship with Tencent Group and their baseline models, we are not going to dig deeper into research because Tencent Group has already released its system. We plan to leverage the programs produced by Tencent Group to continue deepening our business with their models. Our business is more application-driven. Therefore, what we are going to do in the near future is leverage the existing LLM to support our solutions with great integration. We believe we will be able to seamlessly switch to leading language models in the industry, including advancements on our end. As you probably noticed, in Q3 of this year, we have already launched our music model connection platform 2.0. We are fully committed to accelerating model use, especially making the model integral to our production system to help us optimize costs and boost our work efficiency. In the next three years, we will continue to leverage existing LLM to expand its application. For example, we already have the 'listening together' product that is based on the updated LLM. In other words, it allows users to listen to the same music while chatting with each other. The application of these models has significantly improved Q&A and chat efficiencies. At the same time, compared with fundamental LLM, we aim to improve our AIGC capacity. We are also researching and adopting leading engines in the industry, with some preliminary results already achieved in video, graphics, and audio, and we’ve seen some commercial results in our live streaming performances. Lastly, we believe AIGC plays a vital role in music creation and enhancing user experience, providing users with more personalized, diversified, yet immersive music experiences. In the near future, we will continue to invest and explore innovation in this area, collaborating with our technical partners and music creators.

Operator, Operator

Thank you. The next question comes from Alex Yao from JPMorgan. Alex, please.

Alex Yao, Analyst

Hi guys. Can you hear me okay?

Operator, Operator

Yes, we can hear you now. Yes.

Alex Yao, Analyst

Yes. Okay. Thank you, management, for taking my question and congrats on a good quarter. I have a question on sales and marketing. You have been rationalizing sales and marketing spending very successfully in the past few quarters. Now that the revenue mix has significantly shifted towards music and on the back of potentially more online/offline integration and involvement in offline music activities, how should we think about the sales and marketing strategy going forward? For next year, are we still going to see flat or even slightly lower sales and marketing expenses compared to this year, or should we expect that as you focus increasingly more on music with more potential offline activities, sales and marketing will gradually ramp up in the next few quarters? Thank you.

Shirley Hu, CFO

Thank you very much. Thanks for your question. Yes, indeed, for the first few quarters, our sales expenses have been well managed because we have always adopted a return on cost (ROC) model to manage our expenses. Regarding the future, we believe we will improve our profitability regarding the music business, and we are still going to invest in the music channel business. However, as we adopt the ROC model, we will be able to confidently translate our investment into returns. As noted, we continue to strive for better self-produced and co-created content, and we are also going to launch more offline events or activities. Therefore, we will need more promotional activities to support this. However, we adopted a ROI management methodology so our investment will be highly efficient and effective. As for Q4 of 2023, as is typical for Q4, which is usually packed with marketing and promotional events, I expect our sales and marketing expenses in Q4 to remain in line with last year. Regarding 2024, from an absolute value perspective, there might be some growth in sales and marketing expenses but compared with revenue growth, I believe our investment will continue to be truly efficient.

Operator, Operator

Thank you. The next question comes from Zhang Xueqing from CICC. Xueqing, please.

Zhang Xueqing, Analyst

Follow-up on the questions about IoT, as also mentioned before, you will expand IoT membership in the future. I would like to ask about the scale of IoT and the MAUs. How many are paying users? What is our plan to convert them into paying users in the future? How should we think about the long-term monetization potential? Thank you.

Ross Liang, CEO

Thank you very much. Thanks for the question. Regarding the IoT business, our strategy is to ensure healthy growth for both the loudspeaker and TV business while also stepping up our efforts to expand the user base for in-car services. As you probably noticed for the loudspeaker and TV business, future growth potential might be limited. We are focused on diving deeper into the existing user base to ensure monetization and growth within our current customers. For the in-car service, we place great importance on the growing new energy vehicle industry and we also see increasingly rapid growth in intelligent vehicles in China. Our strategy for in-car applications involves maintaining good relationships with auto OEMs, including domestic ones and even Tesla, to ensure our content is well integrated into their driving experiences. Our goal is to ensure high-quality sound effects to enhance the user experience while they are in their vehicles. We have noticed that over the past two years from an absolute value perspective, the in-car service has better performance than mobile and service. However, we are also working to expand the user base for the in-car service. When we grow our customer base to a significant number, we will leverage more commercial activities and strategies to convert them into paying users.

Operator, Operator

Due to time constraints, we will take the last question from Wei Xiong from UBS. Wei Xiong, please.

Wei Xiong, Analyst

Thank you, management, for taking my question, and congratulations on a good quarter. My question is around shareholder returns, it's good to see the execution of the buyback program in the past quarter. Looking ahead, how should we think about the pace of buybacks? What factors do we consider in determining the timing and pace of buyback execution? Also, what are the ways we are considering to drive better shareholder returns? Thank you.

Shirley Hu, CFO

Thank you very much. In Q1 of this year, we announced a $500 million share repurchase program for repurchasing Class A ordinary shares. As of September 30, 2023, we made cash repurchases of approximately 50.8 million ADS in the open market for a total consideration of nearly $103 million. We will continue to keep an eye on the market, especially the latest market trends, and capture opportunities to create more value for our shareholders. By monitoring the market, we will also consider further repurchase programs if the timing and opportunity arise.

Operator, Operator

Okay. With that, I will turn the call over to Kar Shun for closing remarks.

Kar Shun Pang, Executive Chairman

Thank you everyone for joining us today. If you have any further questions, please feel free to contact TME’s IR team. And this concludes today’s call, and we look forward to speaking with you again next quarter. Thank you so much and goodbye.

Shirley Hu, CFO

Thank you.

Ross Liang, CEO

Thank you.