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spk07: Good day and good evening, and thank you for standing by. Welcome to HUYA's Third Quarter 2023 Earnings Webinar. I am Henry Liu from HUYA's Investor Relations. At this time, all participants are in lesson-only mode. Please be advised that today's webinar is being recorded. 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.huya.com. A replay of the call will be available on the IR website in a few hours. Participants of management on today's call will be Mr. Junhong Huang, Acting Co-CEO and Senior Vice President of HUYA, and Ms. Ashley Wu, Acting Co-CEO and 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 under the safe harbor provisions of the U.S. 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 on the applicable law. Please also know that WHOIA's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited, most directly comparable GAAP measures. With that, I'm pleased to turn the call over to our Acting Co-CEO and SVP, Mr. Junhong Huang. Please go ahead.
spk00: Okay. Hello, everyone. Thank you for joining our earning conference today. The third quarter of 2023 was a transition period for Huya. Amid the soft industry environment and our proactive business adjustment, we achieved total net revenues of RMB 1.65 billion in the third quarter. We also reported positive net profit exceeding our expectations with non-GAAP net income reaching RMB 103 million in the quarter. As we continue to strengthen our user base, we are also beginning to make progress in our strategic transformation. As we discussed last quarter, our transformation targets are shifted in our commercialization focus, building on our deep experience and success of We Ask Game livestreaming business. We plan to provide more game-related services such as game distribution, in-game item sales, and game advertising. This will empower us to better capture our gamer users' commercial value by satisfying more of their game-related needs in addition to their content construction needs. Our main goal this year is to build the business infrastructure required to support these new services while developing terms of cooperation with game studios. Let me share some details of our third quarter efforts. First, to enhance our game distribution capabilities, we recently upgraded the Fuya Live App's existing game center, a one-stop shop where users can pre-order and download new games, obtain Fuya exclusive gift game toolkits, and view latest game information. We enriched the game center's game library and improved the product download function. while also encouraging our streamer to participate in game promotion activities. During the quarter, we participated in the distribution of Demigods and Semi-Devil to mobile and promoted the game on both our game center and broadcaster's channel pages. This early game distribution cooperation outcome was encouraging, with Huya's distribution channel achieving good image Initial results in terms of gross billings generated on the first day of the game's launch. While we continue to optimize our game distribution process and functions, we will also look to partner with more upcoming games for these services. As for the in-game item sales business, we have completed development of our in-game item more function and added it to our app. This more function not only offers users a convenient overview of GamePop products, but also allows us to prompt user check-ins and provide consumer rewards to maintain users' purchase thickness. So far, we have reached a compilation with eight game titles on in-game item sales, including Honor of Kings, Crossfire, Demigods, and Sammy Devils True Mobile. As the first step, a small number of skins and weapons from these games have been made available in the mall and in the yellow shopping cart on selected Broadcasters Live channels. Users can purchase them directly from the yellow shopping cart while watching this Broadcasters Live content. Going forward, we will further refine the entire purchasing experience from buying gamepops on Huya and building users' Huya accounts with their respective game accounts through claiming purchased virtual items within games. At the same time, we are exploring various operational activities around in-game item sales. For example, in September, one of Huya's broadcasters held a live event showcasing the first wearing of a newly designed skin item and described the skin's characteristics and effects in detail during gameplay. The session not only attracted fans' attention, but also gave players a unique opportunity to gain insight into the product before its official launch. Furthermore, in October, we collaborated with a game publisher to introduce a customized skin suit for a popular broadcaster of that game on our platform. The skin shoots limited time exclusive sale on that broadcaster's channel provide growth quite successful with sales exceeding expectations. As activities like this game traction, we will also develop and adopt operational strategy targeting different tiers of broadcasters, thus increasing broadcaster's willingness and ability to participate in game item sales services. On the advertising services side, we have thoroughly analyzed our ad slots and ad types and have begun adjusting our approach accordingly. For brand advertising, which accounts for the majority of our ads, we are deepening our collaboration with advertisers, especially on upcoming game promotions. For example, we worked with Game Studio to organize cross-platform campaigns involving our streamers to increase brand exposure for its new game. Meanwhile, we are increasing our emphasis on performance-based advertising, especially for the currently popular minigames and exploring other users to increase its effectiveness on our platform. Along with these new strategic initiatives, we believe that sustainable development of our platform's content ecosystem remains vital to VUYA's future growth and success. Game-related services will both complement and enhance our live streaming business as we realize the myriad of synergies emerging across content and operations. We are committed to solidifying Huya's core user community and maintaining a healthy broadcast ecology through high quality broadcaster generated content and professional esports content, while also leveraging new technologies such as AI generated content. Let me give you an update on our latest progress on the AI front. We are actively exploring the application of AIGC across the entire broadcaster content production chain to further improve content creation quality and efficiency as well as user engagement. For example, our recently developed AI assistant feature offers intelligent chat, fan interaction, game analysis and mini game widgets function as well as array of content creation tools. Powered by our tens of billions parameter large language model, chain on data from broadcasters streaming content on our platform, as well as natural language processing technologies, AI Assistant can imitate a broadcaster's style and tone while chatting with viewers during live session for an authentic and entertaining user experience. Furthermore, Broadcaster can create customized digital avatar using AI assistance, 2D and 3D digital human technologies and AIGC technologies to satisfy various scanner rails specific requirement. AI assistant is also equipped with image recognition and AI reasoning capabilities for viewing and evaluating game skins, empowering broadcasters to seamlessly provide real-time analysis of gameplay. In addition, our intelligent editing and generation tool help broadcaster quickly generate high-quality video highlights of their live broadcast content and esports tournament, greatly improve the professionalism and production efficiency to deliverative content. In summary, steady execution of Our strategy and transformation plan in this quarter lay a solid foundation for our future development. We are confident that as we strengthen our game live streaming content ecosystem and expand our presence in the game value chain, we will drive more balanced and sustainable business growth in the long term. With that, I will now turn the call over to our Acting Co-CEO and VP of Finance Ashley Wu to share more details on our third quarter results. Ashley, please go ahead.
spk08: Thank you, Vincent, and hello, everyone. I'll continue with some updates on our operating matches and financials. On the user front, although we continue to be affected to some extent by users and broadcasters time spent on offline entertainment activities. Our diversified esports tournaments and entertainment programming during the summer session boosted Hoya's live mobile MAUs to 86 million for the third quarter of 2023, up 3.7% from 82.9 million for the purest quarter and threat year-over-year. Meanwhile, we maintain our strict marketing and channel spending policies to keep our expenses down. In the first quarter, the Huya Live app's next month user retention rate remained above 70%, demonstrating high user stickiness. Let me elaborate on our professional content enrichment. For licensed esports events, we broadcasted about 80 third-party professional esports tournaments in the third quarter of 2023, with total viewership of approximately 480 million. The summer space of LPL, KPL, and LCK were the most watched tournaments of the quarter. The Counter-Strike 2 events EPL Season 18 and IEM column, which are exclusive to Huya in China, were also quite popular among our users. Overall, we will continue to focus on implementing strict procurement processes for licensed esports tournaments and strengthening operational activities to improve the ROIs of the events. For self-produced content, we continue to enhance our own IP metric and increase our IP's market influence. In the third quarter, we broadcasted about 30 self-organized esports tournaments and entertainment PGC shows with a cumulative viewership of more than 110 million. League of Legends Hero Cup Peacekeeper Elite All-Star Cup Summer and Honor of Kings Streamer League were our top performing self-produced events. We also hosted the Wuwei Cup All-Star Invitational for Valorant, raising the profile of this newly launched game on our platform. During the ChinaJoy Gaming Expo in Shanghai, we held a series of on-site competitions, for HOK, LOL, LOL Wild Rift, and Waterlands, involving our fans, professional players, and popular broadcasters, promoting the integration of live content and offline activities. I also want to highlight that Huya broadcasted the Asian Games 2023 held in Hangzhou from late September to early October. This year's event featured the debut of esports competitions as medal programs. Chinese esports teams performed well this year, which boosted public awareness of esports nationwide. The Asian Games esports events also attracted broad attention from our users, with our League of Legends and Honor of Kings events ranking among the top five of all our tournaments this quarter in terms of peak concurrent users. Notably, our Asian Games Esports broadcast showcase our advanced 4K HDR technology and our commitment to superior viewing experiences. We were the only broadcast platform to provide 4K HDR support across multiple devices, including Android and iOS app, website, and PC client, for both live streaming and on-demand video replay, which enable us to bring more delicate detail and richer color to the esports game series for our users. With our real-time super solution image quality technology that supports various devices. We were also able to improve video quality under weak network environments to better meet users' requirements for clarity and smoothness, optimizing their event viewing experience. In addition, we produced commentary programs tailored to the Asian Games esports events to provide new esports viewers with competition-related background information, enhancing their understanding of the events while introducing them to Huya's high-quality, engaging content. Turning now to our financials, our third quarter revenues continue to decline due to the challenging market environment. and our proactive business adjustments in support of our strategic transformation and prudent operations. Nevertheless, our gross margin remained resilient and reached 13.9% in Q3 as we continue to realize savings in content costs, particularly content licensing and broadcaster-related costs as well as bandwidth usage. Our total operating expenses in the third quarter decreased 20.7% year-over-year and 8.7% quarter-over-quarter, reflecting our ongoing operational optimization efforts across the organization. Let's move on to our Q3 financial details. Our total net revenues were RMB 1.65 billion for Q3, compared with RMB 2.38 billion for the same period last year. Livestreaming revenues were RMB 1.53 billion for Q3, compared with RMB 2.02 billion for the same period last year, primarily due to a decrease in the number of quarterly paying users on Huya Life to 4.2 million for Q3 from 5.5 million for the same period of 2022. The decline in the number of quarterly paying users was primarily attributable to the soft micro and industry environment and our proactive business adjustments. as well as the increase in offline entertainment activities, which affected the time spent by non-TEL users on our platform. Advertising and other revenues were RMB 116 million for Q3, compared with RMB 361 million for the same period last year. This was primarily due to a significant decrease in content sublicensing revenues. If we exclude the impact of the reduction in content sublicensing revenues as a result of our amended licensing agreement for LOL metrics in January, the remaining portion of advertising and other revenues recorded single-digit growth year-over-year. Cost of revenues decreased by 30% year-over-year to RMB 1.42 billion for Q3, primarily due to decreased revenue sharing fees and content costs, as well as standard costs. Revenue sharing fees and content costs decreased by 31% year-over-year to RMB 1.23 billion for Q3, primarily due to the decrease in revenue sharing fees associated with the decline in live streaming revenues, as well as lower costs related to esports content and content creators. Bandwidth costs decreased by 28% year-over-year to RMB $83 million for Q3. This was primarily due to improved bandwidth cost management, variable pricing terms, and continued technology enhancement efforts. Gross profit was RMB 228 million and gross margin was 13.9% for Q3. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 231 million. and non-GAAP gross margin was 14% for Q3. Research and development expenses decreased by 17% year over year to RMB 142 million for Q3, primarily due to decreased personnel-related expenses and share-based compensation expenses. Sales and marketing expenses decreased by 24% year-over-year to RMB 95 million for Q3, primarily due to decreased marketing and promotional fees, as well as personnel-related expenses. General and administrative expenses decreased by 23% year-over-year to RMB 60 million for Q3, primarily due to decreased share-based compensation expenses. Other income was RMB 40 million for Q3, compared with RMB 44 million for the same period last year, primarily due to lower indirect tax refunds and government subsidy. As a result, operating loss was RMB $29 million for Q3 compared with operating income of RMB $12 million for the same period last year. Interest and short-term investments income was RMB $128 million for Q3 compared with RMB $72 million for the same period last year, primarily due to increased interest rates and improved management of deposit products. Net income attributable to Huya Inc. was RMB 12 million for Q3, compared with RMB 60 million for the same period last year. Excluding the share-based compensation expenses and impairment loss of investments, non-GAAP net income Attributable to Huya Inc. was RMB 103 million for Q3, compared with 106 million for the same period last year. Non-GAAP net income margin was 6.3% for Q3. Diluted net income per ADS was RMB 0.05 for Q3. Non-GAAP-dinoted net income per ADS was RMB 0.42 for Q3. As of September 30, 2023, the company had cash and cash equivalents, short-term deposits and long-term deposits of RMB 10.6 billion, compared with RMB 10.8 billion as of June Finally, let me provide an update on our share repurchase program. We announced our share repurchase program of up to USD 100 million over a 12-month period in mid-August 2023. Since then, we have repurchased a total of USD 9 million of shares as of the end of Q3. We will continue to execute our share repurchase program, reinforcing our commitment to enhancing shareholder value. With that, I would now like to open the call to your questions.
spk07: Thanks, Ashley, and hello everyone. If you are dialing in by phone, please press 5 to ask a question. then press six to unmute yourself. If you are accessing the call from the Tencent meeting or Vogue meeting applications, please click the raise hand button at the bottom left. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Today's first question comes from Yiwen Zhang from China Renaissance. Yiwen, your line is open, please go ahead.
spk01: So thanks for taking my question. So my question about our strategic transformation It has been three months since we first introduced back in August. Can you guys discuss about the latest update there? Thank you.
spk00: Okay. In addition to being able to meet the needs of game users on our platform in terms of content consumption, we can also further meet their more comprehensive needs in terms of game-related aspects, in order to obtain a higher commercial value for this part of the users. We believe that the main advantage of Huya's development of these businesses lies in the active groups of game users and streamers on the platform. The production of the content of the anchor and their interaction with users can help achieve more game-related services. As for Huya, we have established a close cooperation with game manufacturers in terms of content.
spk05: In August, we announced the key transformation of commercialization and planned to provide more game-related services, including game distribution, game prop sales, and game advertisements. In addition to meeting the needs of the game users on our platform and content consumption, it can also further meet their broader needs in game-related aspects, thus obtaining higher commercial value for these users. We believe that the main advantage of Huya in developing these businesses are the active game users and streamers on the platforms. The content output of the streamers and their interaction with users can help achieve more game-related services and a close cooperation relationship between Huya and game manufacturers in terms of the content.
spk00: According to the plan, our main goal this year is to build the basic facilities needed for new business, including the development of relevant functions and products, and the communication between users' Huya accounts and game accounts. At the same time, we will also work with some game studios and game companies to establish new business cooperation, achieve the three business conditions of cooperation, and facilitate the business process, etc. From the perspective of products and functions, Currently, we have added a new feature that is suitable for game props for sale in Huya Live App, and realized the connection with the function of the small yellow car in the live room. At the same time, for the distribution and transportation of games, we have also upgraded the version of the game center, optimized the download function, and expanded the game library.
spk05: According to our plan, our main goal this year is to build the infrastructure needed for the new business, including the development of relevant functions and products, the connection of users' Huya account and game account. At the same time, we would also establish new business cooperation with some game studios and games, to reach cooperative business terms and to run through business processes. For instance, if we take it from the perspective of products and functions, we have now added the in-game item more function for the sale of game props in Huya's live broadcast app. And we also realized the connection with the yellow shopping cart function in the live broadcasting room. At the same time, we also upgraded the Game Center module for the distribution and optimized the download function and expand the game library that we have.
spk00: In terms of game cooperation, we have already reached a cooperation with Prince of Glory, Crossing the Fire, CF, and the new Tianlong 8 mobile games in terms of selling props, and carried out a small-scale streamer sale. At the same time, we also began to explore related operations related to the sale of game props. For example, we conducted a hand-wearing event for the skin of the Lord of the Rings, which gained the highest level of attention from users on the platform, and began to try out the form of customizing skin and other prop products. We also conducted some preliminary cooperation with a few games, including the new games that will be released in August, such as Xintian Longbao's first game, and the adventure island, Legend of the Wind, and so on. In terms of game ads, we are trying to work with game companies in a more in-depth form. For example, we will organize our anchors to participate in cross-platform brand exposure events. As for small games that are currently more popular, we will also pay more attention to small game ads that focus on the form of effective ads.
spk05: In terms of game cooperation, we have reached cooperation with 8 games including The Honor of King, Crossfire, Demi-Gods and Semi-Devils 2 Mobile in terms of the selling of props and carry out small-scale streamer sales. At the same time, we also begin to explore the cooperation activities related to the sales of gamepods as well. For example, we have a streamer who carry out the first launch of the Honor of Kings skin suits and gain high attention from users on the platform. We also begin to try streamer customized skin suits and other props. We also made some initial cooperation with several games in game distributing, including the new Diamond Gods and Semi-Devils mobile and the MapleStory M, which was launched in August. In terms of game advertising, we have tried to explore some deeper forms of advertising cooperation with game companies, such as organizing our streamers to participate in the cross-platform brand exposure events. And for the currently popular mini games, we also pay more attention to the mini games advertising in a form of performance-based advertising.
spk00: Okay.
spk05: At present, our overall progress is pretty much in line with our expectations. However, due to the limited number of cooperated games right now, the cooperation of these games are still in a small scale. The income and profit contribution of new business will be relatively small this year. But we also hope that after all the preparation work have been completed this year, the business scale of game-related services can be effectively expanded and more income can be obtained from next year.
spk07: Thank you. We will have next question. The next question comes from Richard Sun from HSBC. Please go ahead.
spk03: Mr. Huang, Ashley, and Yu, good evening. Thank you for accepting my question. My question is about the transformation of the company and the adjustment of the management. How big is the impact of these factors on our income? How do we see the trend of income in the next few months or next year? And when will new business grow faster? I will quickly translate myself. Thank you, management, for taking my question. Can management dissect the revenue impact from Huya's own strategic transformation, as well as the operating adjustments to improve the regulatory compliance? And how does management view the revenue trends in the future? And when can we see the new revenue streams to have a better growth profile? Thank you.
spk08: Okay, let me answer Richard's question. We mentioned at the last press conference that in the process of strategic transformation of the company, in order to target new internal resources, we will make some active adjustments to the existing live broadcast business. At the same time, in order to create a healthier platform environment, Huya has also taken the initiative to make some upgrades and optimization adjustments to the content and functions on the platform. These above adjustments mainly led to a decline in our live broadcast revenue in the third quarter. In addition, the overall industry environment and users' desire and ability to consume are still to be restored, which has also affected our income to a certain extent.
spk05: The last quarter meeting, we mentioned that in the process of strategic transformation of our business, in order to optimize the internal resources in a targeted manner, we will make some proactive adjustment to the existing live streaming businesses. At the same time, in order to create a healthier platform environment, Huya has recently taken the initiative to upgrade and optimize the content and functions on the platform. These adjustments caused the decline of our live streaming revenue in the third quarter. In addition, the overall industry environment and the users' willingness and affordability still need time to be fully restored, which has also affected our income level to some extent. However, it is worth pointing out that we are actively optimizing the content cooperation and user experience in the third quarter. The impact of live streaming revenue was slightly smaller than the company's previous expectations. In the fourth quarter, we expect to continue to be affected by the above-mentioned factors, and because it is a complete quarter affected by the business adjustments, the year-on-year decline of live streaming revenue may be greater than that in the third quarter. We hope that after these adjustments, the live streaming revenue will gradually return to a stable trend. 在广告和其他收入方面,
spk08: The third quarter is mainly affected by the decline in copyright revenue. This is due to the higher amount of copyright revenue in the same period last year. Although the revenue of new businesses will be on a smaller scale in the second half of this year, we have achieved growth in the third quarter due to the decline in copyright revenue. When we prepare for the new game related service business better,
spk05: In terms of advertising and other income, the third quarter was mainly affected by the decline in copyright income, which was due to higher amount of copyright income in the same period last year. Although the income of new business will be in a relatively small scale in the second half of this year, however, if we exclude the impact of the decline in copyrighted income, our third quarter advertising and other income level have achieved both an year-over-year and quarter-over-quarter growth. When our preparations for the new game-related services business are completed, we expect that the new business income will increase faster next year, and its proportion to the total income will increase. Our goal is still to strive to achieve a more balanced income structure by 2025, with the proportion of game-related services income accounting for about 30% of the total revenue.
spk07: Thank you. We will take next question. The next question comes from Fiona Pham from Jefferies. Fiona, please go ahead.
spk06: So I will transfer myself. Thanks, management, for taking my questions. I ask a question on behalf of Thomas Chung from Jefferies. My question is, what did Huya or what HUYAO has done for the major events such as Asian Games and S13, and how it impacts on the HUYAO platform traffic. Thanks.
spk00: OK. HUYAO has broadcasted the event in Hangzhou at the end of September and the beginning of October, including the first online competition as an official event of the Asian Games. We pay great attention to the broadcast of the Asian Games. In order to better serve the audience of the Asian Games, We provided 4K HDR ultra-fine image quality support for the Asia-Pacific eSports Championship, and implemented ultra-fine technology through the entire equipment, ensuring the clarity and smoothness of the user's viewing under the weak network environment. From the content, we also made a commentary and comment project about the Asia-Pacific eSports Championship, to help users understand the corresponding game and championship information.
spk05: From the end of September to the beginning of October, Huya platform broadcasted the events of esports in Hangzhou Asian Games, including the, you know, when the esports became the first time as an official event in the Asian Games. We cherish this chance of broadcasting the Asian Games esports events. In order to better serve the audiences of the Asian Games, we have provided 4K HDR support across multiple devices for the Asian Games eSports events and through real-time super resolution image quality technology on the full devices side in order to ensure the clarity and smoothness of users viewing in a weak network environment. In terms of the content, we also made commentaries and comments on the esports events at Asian Games to help the users understand the corresponding events.
spk00: In addition, due to the influence of the Asian Games and the rich content of the sports event, it also helps us to attract some new users. We hope to maintain this part of the users through the quality and diversity provided by the platform. Overall, due to the shorter schedule of the Asian Games, the positive impact of the number of matches in the season will also be diluted.
spk05: The esports events of the Asian Games has received extensive attention from users on our platform, amongst which the peak concurrent users or PCU of League of Legends and Honor of King related to Asian Games events ranked among the top five in the third quarter. In addition, because of the influence of Asian Games and its rich content of esports and events, it has also helped us to attract some new users. We hope to maintain these users through the high quality and diversified content provided on our platform. On the whole, due to the short duration of the Asian Games, the positive impact on quarterly MAU was diluted.
spk00: The World Championship is an important event for Q4. Huya has been broadcasting this event for six consecutive years. It has gradually cultivated the audience's awareness of this event and professional event users' choice to watch this event on Huya platform. We continue to pay attention to users' viewing and interaction experience. In addition to providing the leading broadcasting system in the industry, This time, we also provide customized booking services, as well as various interactive forms such as closed site assistant and MVP voting function to provide users with professional site service. In addition, we combine online and offline operating activities and Huya's own PGC program to better enhance the attention and user sensitivity of sites.
spk05: The League of Legends World Championship is an important event in Q4. Huya has broadcasted this event for six consecutive years, gradually cultivating the audience's awareness of the event brand and also cultivated the habit of watching it on Huya platform from the professional event users. we continue to focus on users' viewing and interactive experiences. In addition to providing industry-leading broadcast quality, this time, we also provide users with professional event services, such as customized reservation services, game watching assistance, and MVP voting functions, and other interactive functions. In addition, Wolf better enhanced the attention and user loyalty of the event by combining online and offline operations and HUYA's own PGC programs.
spk00: 今年的S13比赛还没有完全结束。 我们很高兴中国赛区LPL的一支战队进入了决赛, 也期待他们在决赛的表现。 到目前为止,本次赛事的整体观看数据还是比较不错的。 including key data such as the number of people who watched the event, has been improved by the S12 last year. It also continues to maintain the lead in the share price of our market. After the competition is over, we will further evaluate the impact of this event. Thank you.
spk05: This year's S13 competition has not yet completely ended. We're very glad that one team from LPL made it into the final and we look forward to their great performance in the final. So far, the overall viewing data of this event is quite good, including the number of users and other key metrics, which have increased compared with S12 in the year of 2022. Also, we will continue to maintain the leading market share. We will also further evaluate the impact of this event after the event closes up. Thank you.
spk07: We will take the next question. The next question comes from later on from back of America. Let's go ahead.
spk04: Hi, Thank management for taking my question. My question is mainly regarding margin trend. Specifically, we have some seasonality impact for Q4. Q4 historically. So can you give us more color on the margin trend for Q4? And if any preliminary target for the profits in 2024 will be appreciated. Thank you.
spk08: We also continue to strictly control the expenses of various operating expenses, especially in sales and management expenses. In the third quarter, the total operating expenses decreased by 20.7% compared to 8.7%, achieving net profit above GAAP and non-GAAP.
spk05: In the third quarter, we continued to work hard to control the cost and improve the efficiency. The costs related to streamers and bandwidth were optimized. And therefore, despite the decline in income, the gross profit rate showed some resilience, reaching 13.9%. We also continued to control various operating expenses, especially the sales and administrative expenses. In the third quarter, the total operating expenses declined by 20% year-over-year or 8.7% quarter-over-quarter and achieved a net profit under GAAP and non-GAAP.
spk08: In the fourth quarter, due to the impact of the large-scale competition, 我们的赛事成本将比Q3有明显的增加。 因此,这个季节性的因素将会导致出现季度亏损。 不过,由于今年内容成本的整体优化以及运营费用的持续精简, 我们预计今年第四季度的亏损幅度将小于2022年同期。
spk05: In the fourth quarter, due to the concentrated schedule of large events, especially the League of Legends S13, our event costs will increase significantly compared to the third quarter. Therefore, these seasonal factors will continue to play a role and may lead to a quarterly loss. However, due to the overall optimization of content costs and continuous streamlining of operating expenses over the entire year, it is expected that the loss in the fourth quarter of this year will be less than the same period last year. 从目前的情况来看,因为公司前三个季度的盈利都优于我们之前的预期。
spk08: 我们预计2023年全年的non-gap净利润水平将会实现扭亏为盈并且取得威力。 这也比我们之前预计的全年扭亏时间有所提前。 对于2024年,我们希望随着毛利率高于现有直播业务的游戏相关服务业务的占比增加, 以及在内容成本和预定盈开之上保持持续谨慎并且持续优化,
spk05: From what we can see currently, because the company's profit level in the first three quarters is better than previously expected, we expect that non-GAAP net profit level in 2023 will turn positive with a small profit level, which is also ahead of our previous expectation of a breakeven time for the year. For the year of 2024, we hope that with the increase of the proportion of game-related services businesses, which by the way has a higher gross margin level than the existing live streaming business, and with cautious and continuous optimization of content cost and operating expenses, we can further enhance the profitability level of our company.
spk07: Thank you. Now we will take our last question today. It is from Evan Sue from Morningstar. Evan, please go ahead.
spk02: Hello, Manager Cheng. My question is about stock repurchase. Manager Cheng, can you share your thoughts on stock repurchase? In the third quarter, the company repurchased a stock worth $9 million. In the next few quarters, is it possible to speed up the repurchase? Finally, Manager Cheng, can you share the company's overall plan for cash use? Can you share more of your thinking on shares buyback? Will you accelerate your buyback going into the next few quarters? And lastly, can you share your plan on spending down your strong net cash position? Thank you.
spk08: We announced in mid-August that we will buy back a stock worth $100 million within the next 12 months. We also hope to use cash more effectively. We will continue to carry out this recovery plan at a rhythmical pace and hope to achieve a value-added shareholder.
spk05: In the middle of August, we announced a plan of buying back of up to 100 million US dollars worth of shares in the next 12 months. We also hope to use cash more effectively and show the confidence of the board of directors and management of Huya and the future development. And as of September the 30th, we had bought back shares worth $9 million. We will continue to implement the buyback plan in good place so as to improve shareholders' value. Regarding our usage of cash under the current micro environment and competitive climate, we believe that holding enough cash is conducive to maintaining a competitiveness of Huya. On the one hand, we'll continue to invest in content ecology, technology products, as well as overseas markets. On the other hand, we will remain open to investment or mergers or acquisitions in the upper stream or downstream of our ecosystem. and carefully consider possible potential opportunities. We would also dynamically adjust according to the company's operating conditions and market climate. At the same time, we will also seriously consider various forms of return to our shareholders, including repo or dividends, in order to repay the long-term support of our shareholders and improve the efficiency of our cash. Okay, thank you.
spk07: 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 PS&A Financial Communications. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.
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