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spk02: Hello, ladies and gentlemen. Thank you for standing by for the first quarter 2023 earnings conference call for Huya Ying. At this time, all participants are in the listen-only mode. Today's conference call is being recorded. I'll now turn the call over to Ms. Han Yu Liu, Company Investor Relations. Please go ahead.
spk04: Hello, everyone, and welcome to Huya's first quarter 2023 earnings conference call. The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.guya.com. A replay of the call will be available on the IR website in a few hours. Participants on today's call will be Mr. Rongjia Dong, Chief Executive Officer of Guya, and Ms. Ashley Wu, Vice President of Finance. Management will begin with prepared remarks, and the call will conclude with a Q&A session. Before we continue, please note that today's discussion will contain forward-looking statements made on the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that WHOIA's earnings press release and its conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. WHO-YAS press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited, most directly comparable GAAP measures. I will now turn the call over to our VP of Finance, Ashley Wu, who will read today's prepared remarks on behalf of Mr. Do.
spk00: Please go ahead. Hello, everyone. Thank you for joining our conference call today. I'm pleased to deliver the following brief remarks on behalf of Mr. Do. In the first quarter of 2023, in the soft micro environment and seasonal headwinds, we achieved steady development, maintaining a stable user scale year over year, and delivering total net revenue of RMB $1.95 billion and non-GAAP net income of RMB $85.5 billion. During the quarter, we continue to make improvements in our content offerings, products, and technologies in preparation for a more favorable market environment ahead. On the user side, Huya Life Mobile MAUs reach 82.1 million in the first quarter, up slightly compared with the same period last year. The first quarter is typically a low season for live streaming activities due to the Chinese New Year holidays. Furthermore, given China's reopening early in the first quarter this year, users and broadcasters dedicated more time to offline entertainment activities. With this in mind, we continue to spend prudently on promotional and marketing channels, drifting a 37% year-over-year decline in sales and marketing expenses in the first quarter. We believe our appearing esports and entertainment program offerings as well as our continued efforts to enhance our products with interactive features, help us sustain user engagement during the period. We have been closely monitoring changes in the dynamic market environment and striving to quickly and flexibly refine our content and operational strategies to better meet our users' needs. Next, Let me share with you some updates on our recent product and technology development. In March, we held Ho Ya Boon Night, our annual gala event and our first large-scale offline event after more than a year. Ho Ya Boon Night recognizes and rewards our broadcasters, talent agencies, and various business partners and feature great performances by renowned singers and our most popular streamers. This year, we also introduced a virtual stage for the Gallup Live Broadcast for the first time, representing an upgrade from the virtual esports venue we launched last year. With this virtual stage, online viewers felt as if they were on site in an immersive live atmosphere. We also added creative interaction features to make this viewing experience even more fun and exciting. For example, viewers assessing the virtual scene were able to join live performers' fan camps, showing their support through their avatar captions and decorations, and vote for their favorite team Virtual viewers also have access to our virtual gravity tools which allow them to draw pictures and gravity design and simultaneously display them on the scene of the live stage for the on-site audience to enjoy. Encouragingly, the number of total online interactions and the popularity index of this event on our platform, broke the records of peer-read gallows. We believe features like this help to promote the integration of online and offline performances and better enable co-creation and interaction with users. Building on the success of this flagship event, we plan to bring these features to our broadcasters and users in more scenarios in the future. Recently, the interactive game category on our platform has been gaining more traction, as interactive games allow viewers to directly engage with broadcasters and influence game outcomes in real time, creating a highly interactive and engaging experience. In response to the trend, we have introduced several interactive games through our Huya MiniTools open platform. Enable broadcasters to select and apply those tools during their streaming session. Currently, our most popular interactive games are Battle of Laws and Crushes. Battle of Laws features streamers' fan relationships build wild user participation in competition through gifting and bullet checks. Wild Crushes offers real-time interaction between broadcasters and viewers from two camps. Although still at an early development stage, our interactive game category is gradually cultivating its core user audience. We will continue to release upgrades to our existing tools and welcome additional good quality interactive games to our platforms in an effort to bring more monetization opportunities to our broad pastures. We are also focusing on further building gamification elements and integrating interactive content into live streaming sections for more dynamic viewing and interaction effects, thereby increasing viewer engagement. As more game titles have received approval in China in recent months, we also plan to diversify our operational activities and deepen our cooperation with game companies to seize the opportunities brought by new game launches. For example, Through our gift draw feature, broadcasters and viewers can get free exclusive game tools and other free gifts provided by game studios for use in new games, such as Andromed Metro Slug and Honkai Star Rail. We are also organizing platform-based competitions for new games, inviting popular broadcasters to participate. leveraging our strong ability to monitor new games and our proven success in game promotion. We are confident we can identify and offer attractive new game content and enhance new games' popularity, thus further solidifying our leading position in game live streaming markets and increasing our presence in the game value chain. While we're still facing some external uncertainties in the near term, we remain positive about the overall market recovery process. Our efforts across content enrichment, product advancement, and exploration of commercial opportunities, as well as our constant improvements in operational efficiency, are setting the stage for our long-term development Also, as Tencent recently increased its holding of Korea's shares, we look forward to deeper collaboration with Tencent Group and enjoy the synergies we can create together. We will continue to seek growth opportunities as the business environment rebounds with an eye to creating sustainable value for our users, broadcasters, and all other stakeholders. This concludes Mr. Dong's remarks. Now, I will continue with some updates on our content enrichment and diversification initiatives. During the first quarter of 2023, we broadcasted around 55 third-party professional esports tournaments attracting a viewership of over 400 million. While we experienced a gradual uptick in the number of professional tournaments starting from the beginning of this year, the overall quantity of tournaments in the first quarter was lower than that of Q1 last year, primarily due to our stricter content procurement policies and sub-scheduling disruptions immediately following China's reopening. Our most popular events during the quarter included LPL Spring, KPL Spring, and CFPL, as well as our exclusive broadcast of LCK Spring and CSGO Tournament EPL Season 17, and IEM We also broadcasted around 15 self-organized esports tournaments and entertainment PGC shows in the first quarter, generating total viewership of approximately 77 million. Two standouts this quarter were Huya Choshen Cup for Peacekeeper Elite and Jueying Cup for crossfire mobile. Our partnership with CFM enabled our viewers to claim a variety of Huya custom game tools while watching Jueying Cup matches, showcasing our cross-promotional capabilities. Also, as we strive to enrich our content genre, we launched Huya Babylon Cup local tool capturing the attention of sports fans across our platform. As always, we will dramatically adjust our offering of self-produced tournaments and programs according to users' interest as we seek to complement the licensed professional content supplied on our platform. In addition, During our annual gala period in March, we hosted an e-sports event, Hu Yabung Fight, inviting popular streamers, celebrities, and etc. players to join competitions among the game titles, including League of Legends, Honor of Kings, and Identity V. Held in Macau, this large e-sports event not only engaged a wide audience, both online and on-site, it also helped promote e-sports culture exchange among youth groups in the Guangdong, Hong Kong, Macau, Greater Bay Area. Next, let me provide some color on our operational optimization efforts. In the first quarter, our Content Licensing Corps decreased significantly year-over-year and quarter-over-quarter, primarily due to the pricing term adjustments following the amended licensing agreement for LOL metrics in January, as well as our reduced procurement and production of licensed and self-organized content. We also continue to realize savings on broadcast child-related costs, and bandwidth usage through detailed ROI analysis and efficient use of technical resources. As a result, we achieved a nice rebound in our growth margin, nearly reaching the first quarter of 2022 level, despite lower total revenues this quarter. We also solidified our efficiency gain reducing our total operating expenses in the first quarter by 26% year over year and 7% compared with the previous quarter. Therefore, we narrowed our operating loss and achieved a positive net profit this quarter. I also would like to point out that while we expect overall tournament content costs to decline this year compared to 2022. Tournament content costs will still weigh more heavily in the second half of the year due to the seasonality of event schedules. This may create some ongoing fluctuations in our profit levels. Next, moving on to our Q1 financial details. Our total net revenues were RMB 1.95 billion for Q1, a decline from RMB 2.46 billion for the same period last year. Livestreaming revenues were RMB 1.86 billion for Q1, compared with RMB 2.16 billion for the same period last year. The decrease was primarily due to a decreased number of paying users on Huya Life, as the micro and regulatory environment continue to adversely affect paying users' sentiment. Advertising and other revenues were IMB 89 million for Q1, IMB 313 million for the same period last year. This was primarily due to a significant decrease in content sub-licensing revenues, as well as soft demand for advertising services resulting from the challenging micro environment. As we mentioned previously, following our amended licensing agreement for LOL Matches in January, we no longer own the sub-licensing rights for LPL metrics during the 2023 to 2025 period, while the sublicensing of those LPL metrics was the primary contributor to our content sublicensing revenues in 2022. Cost of revenues decreased by 21% year over year to RMB 1.69 billion for Q1, primarily due to decreased revenue sharing fees and content costs, as well as bandwidth costs. Revenue sharing fees and content costs decreased by 18% year-over-year to RMB 1.49 billion for Q1, primarily due to the decrease in revenue sharing fees associated with the decline in live streaming revenues and lower costs related to the esports content as well as content creators. Bandwidth costs decreased by 44% year-over-year to RMB 94 million for Q1. This was primarily due to improved bandwidth cost management and continued technology enhancement efforts. as well as less bandwidth usage as a result of strategic adjustments in our overseas business to remain focused on key markets. Gross profit was RMB $256 million for Q1, primarily due to lower revenues. Gross margin was 13.2% for Q1. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 265 million and non-GAAP gross margin was 13.6% for Q1. Research and development expenses decreased by 22% year-over-year to RMB 152 million for Q1. primarily due to decreased personnel-related expenses and share-based compensation expenses. Sales and marketing expenses decreased by 37% year-over-year to RMB 91 million for Q1, primarily due to decreased marketing and promotion fees, as well as personnel-related expenses. General and administrative expenses decreased by 16% year over year to RMB $68 million for Q1, primarily due to decreased personnel related expenses and share-based compensation expenses. Other income was RMB $4 million for Q1. compared with RMB 28 million for the same period of 2022, primarily due to lower tax refunds and government subsidies. As a result, operating loss was RMB 51 million for Tier 1, compared with RMB 60 million for the same period of 2022, interest and short-term investment income were RMB 96 million for Q1, compared with RMB 59 million for the same period of 2022, primarily due to increased interest rates. Net income attributable to Huya Inc. was RMB 45 million for Q1, compared with a net loss attributable to Huya of RMB 3 million for the same period of 2022. Non-GAAP net income attributable to Huya Inc. with RMB 86 million for Q1 compared with RMB 47 million for the same period of 2022. Non-GAAP net income margin was 4.4% for Q1. Denoted net income per ADS was RMB 0.18 for Q1. Non-GAAP denoted net income per ADS was RMB 0.35 for Q1. As of March 31, 2023, the company had cash and cash equivalents short-term deposits, short-term investments, and long-term deposits of RMB 10.3 billion, compared with RMB 10.7 billion as of December 31, 2022. With that, I would now like to open the call to your questions.
spk02: Thank you. We will now begin the question and answer session. To ask the questions on the phone, please press star 11 and wait for a name to be announced. If you would like to cancel requests, please press star 11. For the benefits of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English. One moment for the first question. First question comes from the line of Richie Sun from HSBC. Please go ahead.
spk08: Thank you, management, for taking my questions. I'll translate myself. So after reopening and we've seen more offline entertainment activities coming back, so how does it impact online platforms like streaming platforms like Huya in terms of the user behavior as well as the consumption? Thank you.
spk09: From a general technical point of view, the Spring Festival is usually the beginning of live broadcast activities. The frequency of live broadcasts will be reduced compared to other times, and there will be fewer corresponding events. Therefore, the watching of live broadcasts during this period will also be affected. Moreover, the Spring Festival this year is relatively early, and the live broadcasts from the end of last year to the beginning of this year are infected. These factors add up, so for the live broadcast of the live broadcast, has a greater impact than in the past. With the optimization of prevention and control measures, we have noticed that some users and anchors have improved their online entertainment activities. In the short term, it has affected the broadcast of anchors and the viewing of users, especially the viewing frequency and market of some long-term users. It has affected the consumption of users on the platform to a certain extent.
spk07: In the first quarter of this year, the behavior of users and streamers on our platform was mainly affected by the following aspects. Generally speaking, the Chinese New Year period used to be the off season for live broadcast activities, and the frequency of the streamers are usually reduced with less corresponding as well as less corresponding events. So the viewing was affected. In addition, The Chinese New Year this year was earlier than previous years, coupled with huge infection numbers of streamers. Therefore, it affected the behaviors of users and streamers. With the optimization of prevention and control measures across the country, we noticed that some users and streamers shifted to offline entertainment activities in a compensatory manner, which affected the live streamers as well as the users viewing in the short term. especially the viewing frequency and duration of the long-tail users. That's affected the users' consumption on the platform to a certain extent.
spk09: We believe that these impacts should be temporary. Overall, we expect the user's viewing to be a gradual recovery, becoming a more stable trend. But because of the Q number, there are also some small long-term prices. These price periods increase travel with the incoming users and other We believe that these impacts are relatively temporary. And also on the whole, we expect that our user ceiling will gradually recover and become more stable. In the second quarter of this year, there are some short vacations
spk07: And these vacations had increased the travelings and other entertainment activities taking place to our users and causing some fluctuations to the viewing times on our platforms. So in the future, we'll continue to monitor the users' and streamers' behaviors and to provide appropriate content and operational activities for them.
spk09: and work to increase user participation. Therefore, in terms of promotion and channels, we continue to maintain the same level of user size and stable development under the situation of savings. For example, in March, we upgraded the virtual e-sports hall that was launched last year, bringing a more interactive virtual stage for Huya's New Year's Eve. The online general interaction system of this activity has also broken through
spk07: Despite these external influences, we continue to fine-tune our content and product in order to strive to increase the user participation so that we'll be able to maintain a steady growth of our user scale in the first quarter on a year-over-year basis, maintain a prudent spending on promotion in channels, For example, we have upgraded the virtual esports venue launched last year in March, bringing a more interactive virtual stage to the annual Grand Gala of Huya. The total number of online interactions of this activity also exceeded the record of previous parties. This function is also conducive to better integration of online and offline content. in the context of an increased offline activities. We also plan to further expand these applications of the technologies and offer this function to more live broadcasting scenarios. The video content and community functions provided on our platforms are also conducive to users' consumption of content during the non-live broadcast period during the speaker of the streamer.
spk04: Thank you. Let's have the next question, please.
spk02: Thank you for the questions. One moment for the next question. Next up, we have a live from Yiwen Zhang from China Renaissance. Please go ahead.
spk10: Good evening, Mr. Guan. I have a very quick question. How should we look at the trend of income this year? This includes a live broadcast and a non-live broadcast. Can you tell us about it? So thanks for taking my question. So my question is regarding this year's revenue trend. Can you discuss it in detail, including both live streaming and non-live streaming revenue? Thank you.
spk00: Okay, let me answer this question. We also talked about it at the phone conference last quarter. This year's live streaming income is still low. mainly due to the red-light factors and the same impact of the previous year's live broadcast policy on revenue. The first quarter's live broadcast income is still the same as the decline, but after our efforts in operation, the decline ratio has been significantly reduced in the previous quarter. As mentioned earlier, we have noticed that the increase in users' online entertainment activities in recent years may also bring some changes to the live broadcast revenue line in the short term.
spk07: We communicated this in the last quarter's earnings call. The live broadcast revenue in the first half of this year is still relatively weaker on a year-on-year basis, mainly because of the macroeconomic factors and the year-on-year impact of last year's live broadcast policy on the revenue. Although the live broadcast revenue in the first quarter is still declined, through our operational efforts, the decline was narrowing down than the previous quarter. And as I mentioned earlier, we noticed that the recent increase in offline entertainment activities may also have some short-term influences over the revenue of live streaming activities. So we will continue to observe and monitor its impact.
spk00: We are still optimistic about the recovery of the overall economic environment and more online games in the future. We also hope to consolidate Huya's position in the game live broadcast market and seize the opportunity of new games to promote new live broadcasts such as live interaction games to improve our live broadcasts overseas and help live broadcast revenue to gradually recover in the following stages.
spk07: We are still really optimistic about the recovery of the overall economic environment and also we remain positive about the future launch of more game titles. We also hope that by consolidating our position in the live game market and by seizing the opportunity of new games, we'll be able to promote new forms of live broadcasting such as live interactive games and also improve our monetization capability in overseas from live broadcasting, so that we'll be able to gradually recover the revenue in the subsequent quarters.
spk00: 广告和其他收入方面, 签署LOL算是版权协议的修订, 带来版权收入大幅下降的影响。 第一季度广告收入由于季节性和宏观因素也相对较低。 However, we expect that advertising revenue will benefit from the recovery of the market environment and the increase in the demand for game advertising by new users. As a result, these revenue opportunities may be gradually restored. In addition, we aim to optimize video content and game communities to build a foundation for subsequent advertising and game-related transformation, and continue to explore the possibility of new income growth.
spk07: In terms of advertising and other revenue, if we exclude the impact of the significant decline in copyright revenue caused by the revision of the amendment of LOL copyright agreements, advertising revenue in the first quarter was also relatively low due to seasonal and macroeconomic environment. However, we expect that advertising business will benefit from the recovery of the market environment and increase the demand for game advertising brought by the new launch of games, so its revenue will have an opportunity to gradually recover. At the same time, we'll continue to optimize the video content and game community so as to lay the good foundation for future and subsequent increases of advertisement and monetization on new games and continue to explore new revenue growth possibilities.
spk04: Thank you. Next question, please.
spk02: Thank you. One moment for the next question. Next question comes from the line of Lei Chang from Bank of America. Please go ahead.
spk06: Hi, 管理層晚上好,謝謝接受我的提問。 我的問題第一個就是想看一下我們今年有更多的新遊戲上線, 不知道對我們整體直播業務有沒有什麼好的影響, 再就是可以跟我們更新一下最近跟騰訊的整體合作的情況嗎? 謝謝,我自己翻譯一下。 Thanks, management, for taking my question. My first question is mainly regarding the impact from new game supply to our live streaming business this year. Secondly, can you give us some updates on the cooperation with Tencent? Thank you.
spk09: As a gaming streaming platform, Guya is closely linked to the gaming industry. From the perspective of gaming players, the gaming streaming platform satisfies players We believe that more new games will bring us
spk07: As a live platform for games, Who We Are is closely related to the game industry. So from the perspective of the game players, the platform can provide opportunity for the players to understand and discover new games and consume the relevant content after playing the game And for the game companies, we are able to help them promote and expand their influence for existing game users to retain and to help the old users to return. With the normalization of game title approval, new game titles will become available in the market. And we believe that this will help us to bring more opportunities for user expansion and promotion cooperation opportunities with the game companies.
spk09: Due to the new game, the content of the live broadcast has been increased. At the same time, if these new games and its live broadcast content are welcomed, it will also be beneficial to the users on the platform. We will also use diversified operating content, including live broadcast and viewing rewards, and hold platform competitions, etc. to attract users and improve viewing levels. Because the new games will bring increased supply of live content, and if this content and new games become popular,
spk07: it would be very conducive to increase the users and to promote their activities on our platforms. We would also like to attract users and improve their viewing levels through diversified activities, including providing launch and viewing incentives, holding platform events, and we can also strengthen our cooperation with the GAN companies, such as joint launch of interactive play methods, and platform-specific game props so that we can help the users increase their participation and to strengthen our role in the game industry.
spk09: In general, games that tend to be competitive, such as mobile and FPS, will have a better live viewing experience because it will help to gather new users. But for other types of games, especially games with stronger user attraction. We will also adjust the platform resources according to the data streamed and viewed, to better meet the needs of users. But compared to the impact on users, we expect that the new games will be slower in terms of revenue. The streamer needs to have a process of accumulation. It needs to convert the accumulated users into paid users. At the same time, it also needs to cooperate
spk07: Compared with competitive games such as MOBA or FPS, well, these probably would have better live viewing experiences for the users and would be very conducive to accumulating new users. But for other types of games, especially those that are really attractive to users, we would also allocate our resources according to the launch and viewing data to better meet the demands of our users. And the impact of new game titles would have an impact on our revenue as well, even though a little bit slower, because it takes some time for the live broadcasters to accumulate their core users and transform them into paying users. And of course, with which provide some opportunities for them to cooperate and interact with one another through our operational activities on the platform.
spk09: and platform accounts. While we bring better live streaming experience to our users, we also enhance the game's replayability. Under the background of more new games, we will also promote new games and their live content from product operation, community, and many other aspects, such as the recently released Awakening of the Apes and the nuclear warhead.
spk07: As for our cooperation with Tencent, we have always been very close with Tencent on the business level, especially in games and events. And through Huya featured live interactive function in a number of Tencent-owned games, we have deepened links between game accounts and platform accounts. we help to enhance the activity of the game while bringing users to better live viewing experiences. And with more games coming online, we could also promote the popularity of those new games and their relevant live content. And for example, recently there's Undone and Metal Slug, as well as Valorant that will soon be launched We are actively cooperating with Tencent on these scams.
spk09: In terms of eSports events, we have established a strategic cooperation relationship with a number of Tencent game events.
spk07: Together with our industry-leading live broadcast technologies and activities, we are able to touch and reach a wider range of users. And also, at the same time, we held a number of officially licensed events and tournaments so as to enrich our self-organized event content. And we are also exploring new ways of cooperation by utilizing our technologies in audio and video streamers and game content, and et cetera, so as to have deeper cooperation and generate better synergy with Tencent.
spk04: Thank you. Next question, please.
spk02: One moment for the next question. Next question will come from the line of Jasmine Wang from Credit Suisse. Please proceed.
spk05: Thanks management for taking my question. After effective cost control in 1Q, how should we think about cost saving in terms of COGS and OPACs for the rest of the year? And what is the profitability trend this year? Thank you.
spk00: Okay, let me answer these two questions. In terms of the cost of broadcasting, due to the overall competitive environment of the market compared to before, there has not been much change. Therefore, in the first quarter, we maintained a similar share ratio as in the previous quarter. Currently, we have also made more product plans for the broadcasts. This will help us to make appropriate adjustments to the performance and needs of different categories. In terms of broadcast signing, we continue to carry out a more rigorous analysis and control of the cost of signing. Therefore, the broadcast signing cost of the first quarter has been reduced. Currently, we expect that the following market trend is still relatively stable. We will also continue to pay attention to the movements of competitors and make flexible adjustments to the broadcast incentive policy.
spk07: In terms of streamer costs, the overall market competition environment has not changed much from the previous period, and so we maintained a similar sharing ratio in the first quarter. At present, we had also made some fine-tuning of the sharing policies. This enables us to provide different levels of sharings according to the performance and demand in different categories. In terms of the signing fees, we continue to conduct a more strict analysis and control of the cost of the signing fees, so the cost in the first quarter was reduced. And at present, we expect that the future market trend will remain relatively stable and we'll continue to pay attention to the trend of our competitors and make flexible adjustments to the streamer incentive policy.
spk00: In terms of competition market and knowledge content cost, we also obtained an effective discount in the first quarter. On the one hand, due to the stricter selection of competition purchases and production, the number has been reduced. At the same time, some of our competition prices, especially LPL, through the revision of the copyright agreement, also have a better condition. It is expected that this year's competition market and knowledge content cost will be significantly reduced compared to 2022. In terms of the cost of copyright events and self-organized content, we had also achieved very effective savings in the first quarter.
spk07: On one hand, the number of events was reduced due to more strict screening of event procurement and production. At the same time, the prices of some of our events, especially the LPL, enjoyed better terms through the amendment of the copyright agreement. So we're expecting that the cost of events and self-organized content in the whole year will be significantly lower than that in the year of 2022. And of course, the cost of events will be affected by the scheduling of the events. So there will be more large-scale events and activities in the second quarter and in the second half of the year compared with first quarter. So this will probably bring some fluctuations to the total cost of our copyright events and content. 总体来说,我们一季度的成本优化取得了比较好的进展。
spk00: Although the income has decreased, the QE interest rate has increased significantly and reached the same level as last year. From this year's whole year, we believe that the interest rate will increase compared to 2022.
spk07: Overall speaking, we made very good progress in cost optimization in the first quarter. Even though with a decrease in the revenue, our gross profit margin in the first quarter had significantly improved from quarter-over-quarter basis and reached a level similar to the same period last year. And from the perspective of the whole year, we believe that the gross margin will improve compared with 2022.
spk00: In terms of operating costs, our Q1 total operating costs were reduced by 26% in the same ratio and reduced by 7% in the same ratio. Since the second quarter of last year, we have been strengthening the cost-effective measures, and the double-digit decrease in the same ratio for four consecutive quarters, and we have achieved the same reduction in the three costs. We plan to support the current results obtained in efficiency improvement, and look forward to
spk07: And in terms of the operating costs, our Q1 total operating expenses decreased by 26% year over year and 7% quarter over quarter. And since we strengthened our cost-cutting and efficiency improvement measures in the second quarter of last year, our Q1 total operating expenses has decreased by double digits for four consecutive quarters. And we are hoping to further consolidate the achievements that we had got so far in efficiency improvement and to look forward to have an even better optimization of operating costs for the whole year.
spk00: We made a net profit in the first quarter of this year, and even though the profit rate probably would be subject to subsequent fluctuations due to seasonality in later quarters,
spk07: we will aim to further narrow the losses and improve the profitability capability from the perspective of the whole year.
spk04: Okay, thank you. Let's have the next question, please.
spk02: Certainly. One moment for the next question. Next up, we have the live from Thomas Chong from Jefferies. Please proceed.
spk01: Thank you for answering my question. Then my question is about how we should view the current live monitoring environment and its impact.
spk03: So I transfer myself. Thanks, management, for taking my question. My question, how should we think of the current evacuation environment on the live streaming in the same time? Thanks.
spk00: According to our current understanding, the overall live monitoring environment has not changed much in the previous few seasons. The requirements for the content of the platform, the broadcast, the behavior of users, and the protection of minors have always been relatively strict. Our industry continues to be under the supervision of supervision. I believe the purpose of doing this is to better regulate the industry, promote the quality and sustainable development of the industry. In the current environment, Huya will continue to strengthen the supervision of the content on the platform and maintain effective review mechanisms.
spk07: As far as we understand, the overall live broadcast regulatory environment has not changed much compared with previous quarters. And the requirement for the content, for the behavior of streamers and users, and the protection of minors have always been relatively stringent from the government. So our industry continues to come under regulatory attention. I believe that the purpose of doing so is to better regulate the industry and to promote healthy and sustainable development as a whole. So under current environment climate, Huya will continue to strengthen our supervision and maintain an effective monitoring mechanism for the content on our platform. and to guide the streamers and the guilds to strengthen their compliance awareness and improve our platform's compliance capability through technical advancement and operation.
spk00: After the release of the live policy in May last year, we adjusted the products and operations in time according to the policy guidelines. There were some fluctuations in the subsequent live income. As you know that in May last year there was a new set of
spk07: streaming-related policies from the government, and we made adjustments accordingly on our products and operations on time in order to make sure that we meet the policy requirements and therefore caused some fluctuations in the live broadcast revenue in subsequent quarters. So we expect that the impact of such policy changes in our revenue will gradually be reduced after the second quarter of this year. And at the same time, we will keep a close eye on the policy changes by communicating regularly with our authorities and pay close attention to relevant requirements and better adapt our product and operations to make sure that we can meet the policy requirements.
spk04: Okay, thank you.
spk02: further questions. If there's no further questions, now I'd like to turn the call back over to the company for closing remarks.
spk04: Thank you once again for joining us today. If you have further questions, please feel free to contact HUYA's Investor Relations through the contact information provided on our website or the PS&T Group Investor Relations. Thank you.
spk02: This concludes this conference call. You may now disconnect your line. Thank you.
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