HUYA Inc.

and thank you for standing by. Welcome to HUYA's third quarter 2024 earnings webinar. I'm Han Yu Liu from the HUYA's Investor Relations. At this time, all participants are in listen-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 soon. Participants of management on today's call will be Mr. Junhong Huang, our Acting Co-CEO and Senior Vice President, and Mr. Raymond Peng Lei, our Acting Co-CEO and CFO. 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 on the applicable law. Please also note that WHOIA's earnings press release and this conference call includes discussions on audited gap 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 co-CEO and SVP, Mr. Huang. Please go ahead.

Okay. Hello, everyone. Thank you for joining our earning conference today. We were pleased to make significant strides in developing our game-related services business during the third quarter. Game-related service advertising and other revenues reached a new record high, contributing 26.7% of our total net revenues. To drive this progress, we continue to enhance content and upgrade product features on our platform. to improve users' experience while exploring new partnerships and business opportunities to expand our user reach and unlock our growth potential. Moreover, despite the ongoing challenges in the macroeconomic and industry environment, we maintain a relatively stable year over year operating performance and achieve a non-GAAP net income of RMB 78 million. Now, let's take a detailed look at our recent operational and strategic achievements. First, our users. Engagement across our high-quality user base remained stable during the third quarter, with mobile MAUs improving slightly sequentially to 84 million. While we maintain our disciplined approach to marketing and promotion spending, we also enrich our content and service offerings as well as product features to reinforce our users' engagement. Furthermore, we continue to strengthen our cooperation with various content platforms joining hands with these partners to conduct cross-platform streaming and co-produce premium professional content. We also selectively distributed our comparing game live streaming and video content to product lines within Tencent's ecosystem and other content channels. Thanks to these initiatives, We estimate that Huya's content reached a total of over 140 million users in September, taking into account other platforms' users as well as our own mobile users. We believe our productive platform collaborations will continue to broaden our reach. among gamer users, empowering us to explore more commercialization opportunities around game-related services and live streaming. Moving on to game-related services, our game distribution in game item sales and game advertising business continue to grow robustly. Revenues from game-related services, advertising, and others reach RMB 410.2 million for the third quarter of 2024, up to by 209.3% year over year and 32.9% quarter over quarter. For game distribution, we worked closely with game studios on new game release, version updates, and related operational activities, and incentivized our broadcasters to participate in game distribution. These efforts effectively promoted our growth this summer, with total gross receipts generated through Huya's game distribution channel in the third quarter, rising to more than 20 times that of the year ago period. The quarter's top titles included Honor of Kings, Demigods, and Semi-Devil Mobile, DF Mobile, QQ Speed Mobile, and Peacekeeper Elite. We are confident of further developing our game distribution service as We expand our reach in the vast game market by offering distribution for wider range of titles, including both mobile and PC games, and collaborating with additional game studios. What's more, we plan to implement targeted initiatives for broadcasters to enable them to provide more tailored user services and drive users' interest in exploring and engaging with the games distributed via our platform. We have also strengthened our collaborations with major game titles in game item sales, broadening the scope of our coverage in this area. In particular, we were promoting inclusive or customized in-game items for our platform and broadcasters and holding sales events for initial release of new in-game items. For instance, during the third quarter, we held a crossfire workshop offering for your inclusive weapon skins, as well as an inclusive initial release of co-branded outfit skins featuring a well-known broadcaster on our platform. Sold on that broadcaster's channel, Both initiatives garnered great interest from our users. Notably, the total value of the co-branded outfit skins sold on the broadcaster's channel during this initial release activity exceeded RMB 50 million, validating the growth potential of our in-game item sales business. In terms of game advertising, we responded to the summer's increasing game marketing demand with comparing new game launch promotions and anniversary events for the existing games. In the third quarter, we collaborated with a number of game companies promoting popular game such as Arena Breakout, World of Warcraft, and Neruka Mobile. Going forward, we will continue to diversify our advertiser base and enhance our game promotion and marketing capabilities so we are streamer-created content and in-house produce events. Moving on to our professional content enrichment efforts on our platform, including licensed and in-house content. In the third quarter, We broadcasted over 90 licensed esports tournaments. The LPL, PPL, Valorant Champions, and Esports World Cup were among the most watched events during the quarter. In addition to the tournament of more proven esports game titles, which continued to attract user attention, Valorant tournaments have become increasingly popular since the game's launch in China last year. This year's Valorant Champions increased its viewership by approximately 160% compared to the previous edition, further boosting the popularity of the game's content on our platform. We also broadcasted the recently concluded LOL World 2024, one of the year's most important esports events. We prepare comprehensively for LOL World and we are pleased to see our hard work drive positive outcomes. We optimized our tournament broadcast audio and video technology for the event, providing a variety of HDR video quality options to suit users' various devices and network environments, which brought our users' industry-leading image quality effects and viewing experiences We also introduced a competition data analysis system for this event that instantly captured each data point and converted the data into a visual presentation, allowing viewers to see real-time changes in teams and players with win rates while they watch the competition. Also, in addition to our official streams, popular broadcasters and professional players on our platform created secondary live commentary for the event, providing our users with more diverse and entertaining tournament viewing experience unique to Huya. Based on our initial statistics, we maintained our leading market share of this event's viewership and further increase our market share year over year, significantly ahead of other live streaming platforms. In terms of in-house content, we broadcasted over 20 self-organized esports tournaments. and entertainment PGC shows in the third quarter. For example, we successfully hosted the HOK Streamer League in collaboration with two other major live streaming platforms to rave reviews across platforms. We also continue our Village Games series for community participation and hosted the Zhou San Village Games for Honor of Kings. Additionally, We collaborated with well-known TV program to produce Dreamer Rush Forward, a reality show featuring our game and entertainment broadcasters, which attracted strong user interest. For Competing to the End, our interactive game play variety show that integrates game promotion, and entertainment content. We covered more hot and new games in this quarter, such as HOK's new mod, Black Mii's Wukong Naruto Mobile. Given that our in-house content generally delivers good ROI performance. We are strengthening our investment in this area to create more influential and commercially valuable event IPs. As our range of in-house content expands and becomes more diverse, we will also focus on scheduling these programs to seamlessly integrate with our licensed events to better complement and enrich our professional content library. For example, following the conclusion of LOL Worlds 2024, we commence season two of our LOL Legend Cup, building on the success of its inaugural season in May. Finally, we continue to explore innovative features to engage users and enhance interaction while differentiating Huya's live streaming experiences. including product cooperation with leading game titles. For example, in the third quarter, Huya became the first platform in the industry to integrate Honor of Kings bullet chatting game play mode in live broadcast, adding both native features and platform-exclusive modifications developed by Huya using Honor of Kings tools. In this mode, viewers can activate special skill cards that impact the live game by sending bullet chats or visual gifs to the channel, creating unique gameplay situations that drive more interesting live streaming content. Given these features, promised we will continue to leverage Huya's expertise in creating engaging game live streaming content to bring entertaining, inclusive features to our streamers and users. Looking ahead, we will remain focused on fostering our in-house content initiatives We are especially excited about Season 2 of our self-produced Legend Cup and look forward to amplifying this series' success and influence. We will also deepen collaboration with content creators and industry partners to extend our content reach beyond the Huya platform and explore broader cooperation with more game developers and publishers to expand our presence in the game market. We are confident these efforts will unleash new commercialization opportunities, propelling our long-term business development. With that, I will now turn the call over to our Acting Co-CEO and CFO Raymond Lei, who has been with us for a few months. He will share more details on our results. Renmin, please go ahead.

Thank you, Vincent, and hello everyone. I'm delighted to be part of Huya's management team and to speak with you for the first time. I'll start with an overview of our financial performance. Our total net revenues were Renminbi 1.54 billion in the third quarter of 2024. The soft macro and industrial environment, which impacted users' willingness to pay for live streaming, continued to weigh on our live streaming revenues. Meanwhile, we proactively adjusted our business structure to support our strategic transformation and maintained prudent operations. Game-related services, advertising, and other businesses showed strong momentum and made a more meaningful contribution to our top line, increasing by 209.3% year-over-year and 32.9% quarter-over-quarter, primarily due to increased revenue from game distribution and advertising services and in-game item sales. We are pleased to see more users paying for our game-related services driving growth of 9.5% year-over-year in paying users to reach 4.6 million in the third quarter. Also, our continuous efforts to improve operational efficiency paid off, with total operating expenses decreasing by 20.9% year-over-year. I'd also like to review our recent progress in optimizing our content. We continue to refine our street procurement strategy for licensed content, striving for better commercial terms. As we disclosed in September, we entered into a second supplemental license agreement for a series of League of Legends matches that decreased the license fee, which we believe will help us further reduce our overall esports license costs this year and in 2025. Let's move on to more details of our Q3 financial results. Our total net revenues will remain be 1.54 billion for Q3, of which live streaming revenues will remain be 1.13 billion, and the game-related services, advertising, and other revenues will remain be 410 million, compared with total net revenue of RMB 1.66 billion for the same period last year. Cost of revenues decreased by 6% year-over-year to RMB 1.33 billion for Q3, primarily due to decreased revenue sharing fees and accounting costs, as well as benefits and salary custody fees Revenue sharing fees and content costs decreased by 5% year-over-year to RMB 1.17 billion for Q3, primarily due to decreased live streaming revenue sharing fees associated with the decline in live streaming revenues, as well as lower costs related to licensed esports content. Partially offset by increased game-related services, advertising, and other revenue sharing fees, Bandwidth and server custody fees decreased by 26% year-over-year to RMB 61 million for Q3, primarily due to continued technology and management enhancement efforts, as well as favorable pricing terms. Gross profit was RMB 204 million for Q3, compared with RMB 243 million for the same period last year. Gross margin was 13.2% for Q3, compared with 14.6% for the same period last year. The change was primarily attributable to increased revenue sharing fees and accounting costs as a percentage of total net revenues. which rose mainly because the decrease in live streaming revenues outpaced the decrease in content costs. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 207 million, and the non-GAAP gross margin was 13.5% for Q3. Research and development expenses decreased by 12% year-over-year to RMB 126 million for Q3, primarily due to decreased personal related expenses and share based compensation expenses. Sales and marketing expenses decreased by 30% year-over-year to RMB 73 million for Q3, primarily due to decreased marketing and promotion fees as well as personal related expenses. General and administrative expenses decreased by 25% year-over-year to RMB 50 million for Q3, primarily due to decreased professional service fees and personal related expenses. Other income was RMB 13 million for Q3 compared with RMB 40 million for the same period last year, primarily due to realized damages received in the third quarter of 2023 from a favorable outcome in a broadcaster-related lawsuit and lower government subsidies. As a result, operating loss was stable at RMB 32 million for Q3 compared with the same period last year. Excluding share-based compensation expenses and the application of intangible assets from business acquisition, non-GAAP operating loss was人民비 13 million for Q3 compared with人民비 15 million for the same period last year. Long gap operating margin was negative 0.9% for Q3. Interest income was RMB 97 million for Q3, compared with RMB 128 million for the same period last year, which was primarily attributable to the special cash dividends paid in May and October 2024. Net income attributable to Huya Inc. was RMB 24 million for Q3 compared with RMB 11 million for the same period last year. Excluding share-based compensation expenses, impairment loss of investments and amortization of intangible assets from business acquisitions, net of income taxes, non-government net profit attributable to Huya Inc. was RMB 78 million for Q3 compared with RMB 107 million for the same period last year. Non-GAAP net margin was 5.1% for Q3. Diluted net income per ADS was RMB 0.1 for Q3. Non-GAAP diluted net income per ADS was RMB 0.34 for Q3. As of September 30, 2024, the company had cash and cash equivalents, short-term deposits, short-term investments, and long-term deposits of RMB 8.1 billion, compared with RMB 8.2 billion as of June 30, 2024. Finally, an update on our shareholder returns. As of the end of September 2024, We had repurchased US dollar 61.1 million of Huya shares through our share repurchase program. The two special cash dividends we paid this year also returned an aggregate value of approximately US dollar 400 million to our shareholders. We remain committed to consolidating our financial and operating performance and creating more value for shareholders. With that, I'd like to open the call to your questions.

Thank you, Raymond. And hello, everyone. If you are dialing in by phone, please press 5 to ask a question, then press 6 to unmute yourself. If you are accessing the call from Tencent Meeting or both 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 Nelson Chong from Citibank. Nelson, your line is open. Please go ahead.

Hello, thank you, Mr. Huang, Mr. Lei, and Mr. Han. This is my question. My question is about our game-related service business. I would like to ask about our current game-related business and our progress in the last three seasons. How is the development going? Can you share some of the new developments in the fourth quarter? In 2025, how do you see the development plan for our business? And in 2025, how do we maintain the advantage of Huya's game-related business on this platform? So let me translate the question myself. So thanks, management, for taking my question. My question is related to the game-related services. Wondering if management can share the latest update on the game-related services in third quarter and any new updates in fourth quarter right now. And how do we perceive the upcoming development plans for this business into 2025? And what would be the comparative advantage of Huya? Thank you.

Thank you, Nelson, for your question. I will answer this question. First of all, we can see that in the third quarter, our game-related services and businesses continued to grow rapidly. Game-related services, advertisements, and other business income reached 4.1 billion. The same growth was 209.3 billion. In the third quarter, our game-related business contributed continue to achieve rapid growth.

With revenues from game-related services, advertising, and others reaching R&B 410 million, an increase of 209.3%, year-over-year and 32.9% quarter-over-quarter. This accounted for a record high percentage of our total revenue at 26.7%.

In terms of game distribution, we and game manufacturers have been working closely with the game distribution service in terms of new game updates and related operating activities. Currently, distribution of revenue is the largest part of our game service revenue. Here, I would like to point out that the revenue of our game distribution is mainly determined by the division of revenue with game manufacturers. That is, based on the amount, the actual flow of business and the amount of growth is actually greater. In the third quarter, the total flow of oil from Huya's distribution channels exceeded 20 times that of last year. Next, we plan to continue to provide distribution services for more games, including mobile games, online games, new games, as well as games that have already been released, and deepen the cooperation with more game manufacturers. In addition, we also plan to develop more targeted operating activities for streamers, to promote streamers to provide more customized user services to increase the player's interest and participation in exploring games on the Huya platform.

With regard to game distribution, we closely collaborated with game developers on new game launches, version updates, and related operational activities, incentivizing broadcasters to participate in game distribution services. Currently, the distribution revenue is the largest portion of our game-related services revenue. It is worth noting that distribution revenue is recognized on a net basis after the revenue sharing with the game developers. Therefore, the actual business volume and growth amount are significantly larger. In the third quarter, the total gross receipts from games distributed through Huya's distribution channel increased to over 20 times that of the same period last year. And going forward, we plan to continue providing distribution services for more games, including mobile and PC games, new and existing titles, and deepen our collaboration with additional game developers. Furthermore, we plan targeted initiatives for broadcasters to encourage them to provide more customized user services, enhancing users' interest in exploring and engaging with the games distributed through our platform.

We have also strengthened our cooperation with the main game in the sales of props, especially the promotion of platform and streamer-specific and customized game props, and the promotion of game props in the form of first-hand activities. In the third quarter, we launched a game skin exclusive to Huya. We also launched a game skin exclusive to a well-known anchor on our platform, and sold it in his live broadcast room. Both of these activities have caused a hot reaction from users. In particular, in this first launch event, the total value of the game skin purchased by our users in this live broadcast room is more than 50 million yuan. This also confirms the development potential of Huya in the props sales business. In terms of game advertising, we also launched a new game online promotion event and the annual event of existing games

We have also strengthened our cooperation with major games and in-game item sales, particularly by launching exclusive and customized in-game items for our platform and broadcasters, as well as promoting initial release events for these items. For instance, in the third quarter, we held a crossfire event offering Huya exclusive game skins. We also had an exclusive initial release of co-branded game skins featuring a well-known broadcaster. Sold in that broadcaster's stream, both initiatives garnered enthusiastic response from our users. especially during the initial release event where the total value of co-branded skins sold existed 50 million yuan and validating the growth potential of our in-game item sales business. And in terms of game advertising, we responded to the increased marketing demand during the summer with promotional activities for new game launches and anniversary events for existing games, enhancing our game promotion and marketing capabilities through streamer-created and in-house produced content, while continuing to expand our advertiser base.

Generally speaking, we think that Buya continues to develop game related businesses with the following advantages. First of all, we have high quality game users on the Buya platform. We participated in the distribution of multiple games in the Huya channel, and the total cost of the game, which is APU, is higher than the entire game platform. This also proves that Huya platform's game users have a higher potential for commercial value. Secondly, our anchors played a very active role in promoting the development of game-related services. These anchors understand the needs of users for games, And the streamer can also participate in the whole income division. This also helps to achieve multi-party supply. Third, we have established long-term cooperation with various game manufacturers. This has also laid the foundation for more in-depth cooperation, such as further expansion of the game distribution and sale of props. In addition, we are currently strengthening cooperation and coordination with multiple content platforms, and selectively distributed the game live broadcast and video content on Huya to multiple products and other content platforms in Tencent's ecosystem. According to our estimate, in September this year, the total number of users in Huya's content ecosystem exceeded 1.4 billion, including Huya's mobile users and the number of users on other platforms. And we expect this scale to continue to grow. As we cover wider game users through effective platform cooperation, we can also explore more related commercial opportunities.

Of all, we believe Fuya has several key advantages in the continued development of game-related services. First, we have a high-quality gaming user base on our platform, where the average revenue per user for several games we distribute is higher than the overall gaming market. indicating the commercial value potential for Huya's gaming users. Second, our broadcasters play an active role in promoting game-related services, understanding users' gaming needs, and participating in revenue sharing, which helps achieve mutual benefits. And third, Huya has established long-term partnerships with various game developers through our live stream business, laying down a good foundation for deeper collaboration on game distribution and in-game item sales. Additionally, we are strengthening our collaboration with multiple content platforms and selectively distributing Huya's game live streams and video content across Tencent ecosystem and other content platforms. We estimated that as of September this year, GUYA's content ecosystem reached over 140 million users, including our own mobile users and those from other platforms. And we expect the scale to continue to grow. As we effectively collaborate to cover a broader game audience, we can explore more commercialization opportunities.

Finally, I would like to mention that because of the game-related service business, especially the game distribution income and the game itself revenue, the connection is relatively close. As we gradually expand our business to a larger scale, the entire income may also be to a certain extent affected by the seasonality of the entire game industry. For example, the summer of Han is the season of the game industry. There may be some changes between the seasons. According to the public statistics, in 2023, the sales of the domestic game market will exceed 300 billion yuan. Overall, Huyao's participation in the entire game market is still very large. We will continue to explore and cooperate with more game manufacturers in various forms to achieve the development of our entire business.

Finally, I want to mention that since the revenue from game-related services, especially from distribution, is closely linked to gaming revenue itself, as we gradually expand this business, its income may be somewhat affected by the seasonal nature of the gaming industry. For example, peak seasons occur during holidays and fluctuations can vary between quarters. According to public statistics, the domestic gaming market sales revenue exceeded RMB 300 billion in 2023, and overall the market space for Huya is still enormous. We will continue to explore diverse forms of cooperation with more game developers to achieve business growth.

Okay, thank you. And our next question comes from Thomas Chong from Jefferies.

Hi, Thomas, please go ahead.

Okay. Okay, let's continue. In the third quarter, our live streaming revenue has been affected by the current global economic and industry environment. The desire to reward the users is still weaker. At the same time, in the process of the company's strategic transformation, we are actively adjusting the structure of the entire business and maintaining a more cautious operation strategy. At the same time, we can also see that the revenue related to game advertising is growing rapidly. In terms of user behavior, the core user participation in the live broadcast business is still very stable.

In the third quarter, our live streaming revenue continued to be influenced by the current macroeconomic and industry environment, with users' willingness to spend on tipping remained weak. Meanwhile, during our strategic transformation, we proactively adjusted our business structure and maintained a prudent operational strategy. However, we have also observed rapid growth in revenues related to game advertising. From user behavior, we see that the engagement of our core users in live streaming remained relatively stable.

Due to the impact of the external environment, we expect that in the short term, there will still be a short-term pressure. We believe that with the improvement of the external environment in the future, the business will still have a certain flexibility. On the other hand, we will also pay close attention to the market situation in order to make adjustments to the business operation activities in time. At the same time, we will continue to pay attention to the investment of live broadcast content to optimize the broadcast and user ecology. We will also continue to improve technology and products to create a difference-making tiger-tooth live broadcast experience. We hope to maintain and improve the activity of users and prepare for a more diversified commercialized form in the future. Due to external factors, we currently expect live streaming revenue to face short-term pressure.

However, we believe that the external economic environment improve will happen in the future. and the business will still have some room for flexibility. On one hand, we will closely monitor market conditions to adjust our operational activities accordingly. On the other hand, we will continue to invest in live streaming content, optimize the broadcaster and user ecosystem, and constantly improve the technology and products to create a differentiated Huya live streaming experience. We hope to maintain and enhance user engagement to prepare for a more diversified commercialization forms in the future. In the long run, we expect that with the expansion of game related services, advertising and other revenue sales, the overall business will achieve relatively stable development.

Thank you. Now we will take the next question. It's from Lei Zhang from Bank of America. Hi Lei, please go ahead.

Thank you for taking my question. Can you give us more color on the driver of Q3's margin change? And how should we look at our margin trend going forward? Thank you.

Thank you for your question. In the third quarter, Huya's profit margin is 13.2%. Compared to the second quarter and the same period last year, it has dropped slightly. In this quarter, we continue to optimize the company's content cost. The cost of broadcasting contracts is also reduced. And in terms of sales copyright, we continue to improve the strict copyright content purchase strategy and strive for better commercial conditions. The cost of copyright content is reduced. However, the cost of content saving this quarter is not enough to offset the impact of the drop in live income. Sorry.

In the third quarter, our gross profit margin was 13.2%, slightly down from the second quarter and the same period of last year. This quarter, we continue to optimize our content costs, reducing broadcaster signing costs year over year. And we further improved our strict licensed content procurement strategy to secure better commercial terms, which saved on licensed content costs. However, the cost savings this quarter was still insufficient to offset the impact of the declining of live streaming revenue. In terms of operating expenses, through continued efforts to enhance operational efficiency, particularly in better controlling our sales expenses, our total operating expenses decreased by 20.9% year over year. Therefore, overall operational performance remained relatively stable, with a non-GAAP net profit of 78 million yuan.

We will continue to adjust the cost structure, to increase broadcast costs and revenue. In the professional content list, in September this year, we signed the second supplementary agreement for the broadcast authorization of a series of League of Legends tournaments, and reduced the relevant authorization costs. I believe this will help to further optimize the cost of this year and the overall copyright eSports tournament in 2025. But from the season point of view, due to the large S14 tournament mainly taking place in the fourth quarter, the cost of the tournament copyright is expected to be higher than the third quarter. On the other hand, we plan to strengthen our investment in the self-reliance content of the investment return content, and create more influential and commercial value SaaS IPs. For example, based on the success of the first Hero Alliance Legendary Cup, we will hold the second season of the Legendary Cup this month.

Regarding the future profit trends, we believe the following factors will be significant. On one hand, we need to consider changes in overall revenue scale, including the seasonal fluctuations in different businesses. On the other hand, we'll continue to adjust our cost structure to enhance the collaboration between broadcaster costs and revenue. On a professional content side, in September this year, we signed a second supplemental licensing agreement for a series of legal legend matches, which reduced related licensing fees. We believe that this will help further optimize overall licensed esports events costs in this year and in 2025. However, quarter to quarter, since the major S14 event will mainly take place in the fourth quarter, the event licensing costs in the fourth quarter are expected to be higher than the third quarter. For self-produced content with good investment returns, we plan to strengthen investment in this area to create more influential and commercially valuable event IPs, such as holding the second season of the League of Legends Cup in this month, building on the success we have in its inauguration season.

Despite this, we expect the interest rate of the fourth quarter to rise significantly compared to the low interest rate of the same period last year. Therefore, it is expected that the performance of Q4 and Q6 will also show a relatively obvious growth.

Nevertheless, we expect that the gross profit margin in the fourth quarter will show a relatively noticeable improvement compared to the low base from the same period last year. Therefore, we anticipate that the non-GAAP results for Q4 and this entire year will also show a relatively noticeable year-over-year growth.

Thank you. Now we will take our last question today. from Cheng Hao Lee, from CICC. Cheng Hao, please go ahead.

Thank you, Manager Chen, for accepting my question. I have a very simple question, which is about the strategy and shareholder return of the company. Could you please update it for us? Okay, I will translate for myself. Hi, management. Thanks for taking my question and congratulations on another solid quarter. My question is about our shareholder return strategy. Could management help update our capital allocation strategy and the shareholder return plan in the future? Thank you.

Thank you, Cheng Hao. By the end of September this year, Wuya holds a total of 8.1 billion RMB, which is about $1.1.5 billion. Compared to the end of June, the capital is relatively stable, and some of it has been affected by the change in the dollar exchange rate. In October, we sent out $2.5 billion of special cash stocks. Currently, the company still has cash and deposits worth about $9 billion, of which about half

As of the end of September, Huya held approximately RMB 8.1 billion yuan about US dollars 1.15 billion in cash and cash equivalents, which remained stable compared to the end of June, partially influenced by the fluctuations in the US dollar exchange rate. In October, we paid a special cash dividend of US$215 million. Currently, the company still has approximately US$900 million in cash and cash deposits, with about half of it held overseas, and the company has no debt.

现今使用的总体策略与我们在上次财报会议上提到的类似。 Currently, we have enough cash for daily operations and business development to provide funds. At the same time as consolidating the basic financial aspects, the company will continue to leave out part of the funds used in the current business development and as reserve funds in uncertain circumstances in the external environment. We will also maintain an open attitude to the appropriate opportunities and investment projects related to the industrial chain to grasp the development opportunities in the industry.

The overall strategy for cash usage is similar to what we mentioned in the last earnings call. We have sufficient cash to fund our daily operations and business development. While consolidating our financial fundamentals, the company will continue to allocate some funds for potential business development and asset reserve under uncertain external conditions. We will also remain open to suitable opportunities and investment projects related to the industry chain, so as to seize industry development opportunities.

At the same time, we will continue to pay attention to the return of shareholders. In terms of financing, this year we have received a total return of about $400 million from our shareholders through the Special Cash Fund. In the future, we also have an intention to share the profits and cash gains with the shareholders. The subsequent stock-sharing plans, including the amount and time, will also depend on the company board's further review and approval. In terms of repurchase, according to our $100 million repurchase plan, by the end of September, we have repurchased 61.1 million US dollars of Huya stocks. In the future, we will comprehensively consider the market situation and the liquidity of stocks and other multi-faceted factors to design and execute strategies.

At the same time, we will continue to place importance on shareholder returns. In terms of dividends, this year we have returned approximately 400 million US dollars to our shareholders through special cash dividends. In the future, we intend to share the company's profits and surplus cash with our shareholders. Future dividend plans, including the amounts and timing, will depend on further review and approval by the company's board of directors. Regarding share repurchases, based on our up to US$100 million repurchase plan, as of the end of September, we had repurchased US$61.1 million worth of Huya's shares. In the future, we will comprehensively consider market conditions and stock liquidity when formulating our execution strategies.

Thank you, Lizette. 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, OPS&A Financial Communications. This concludes today's call. And we look forward to speaking with you again next quarter. Thank you.