HUYA Inc.

posted online. You can also view the earnings press release by visiting the IR website at .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. Jun Penghuang, our Acting Co-CEO and Senior Vice President, and Ms. 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 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 these and other risks and uncertainties is included in the company's prospectus and other public filings as felt 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 applicable law. Please also note that Huya's 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 Co-CEO and SVP, Mr. Huang. Please go ahead.

Okay. Hello, everyone. Thank you for joining our Unincompetence today. In the first quarter of 2025, Huya's total net revenues stabilized year over year and grew quarter over quarter to RMB 1.51 billion. This was supported by our steady execution of our strategic business transformation, which drove a .1% year over year increase in game-related services, advertising, and other revenue to RMB 370 million. This segment accounted for .6% of total net revenues, up from .2% in the same period last year. We were also pleased to deliver a net profit this quarter. Meanwhile, we continue to strengthen our live streaming content ecosystem, deepen collaborations with game companies and content platforms, and explore the integration of AI capabilities in our e-sports experiences, laying a solid foundation for future development. Now, let me share the details of our recent business progress, starting with our business transformation. As I just mentioned, our game-related services, advertising, and other revenues reached RMB 370 billion this quarter. It is worth noting that revenues from game distribution and in-game item sales are primarily recognized on a net basis after revenue sharing with game companies. As such, the total transaction value of our game-related services mainly comprises of gross receipts generated through our game distribution channel and the GMV for our in-game item sales is actually much higher than our reported revenue. Let's begin with a closer look at our domestic game-related services and advertising businesses. In terms of game distribution, we proactively deepen our engagement with existing games despite a quarter which few major new game launches. By working with game studios, refining operational strategy, and unlocking the consumption potential of high commercial value user groups that have naturally congregated within our game live streaming ecosystem, we achieve a solid and more balanced game distribution performance. Total gross receipts generated through UYAS game distribution channel in the first quarter more than doubled year over year and increased sequentially. In particular, thanks to various game events during the spring festival, several titles including QQ Speed Mobile, Peacekeeper Elite, Delta Force, and League of Legends Mobile recorded significant increase in gross receipt through the Huya channel with each growing more than 50 percent compared to the fourth quarter of last year. Several games we distributed from new partners also performed well as we continue to collaborate with additional game companies. These results underscore our extensive capabilities in operations and game promotions. As we continue to expand our role as game distribution and promotion channel, we plan to deepen our exploration of distribution service such as the inclusive distribution model to advance our progress. For in-game item sales, we are consistently expanding our in-game item SKU offerings while enhancing our platform sales channel and purchasing experience leading to a record GMV for in-game item sales in the first quarter as in-game item sales scale up 75 events including popular competitions such as League of Legends, LPL, and so benefiting our broadcaster ecosystem with game broadcaster generating more income from in-game item sales in addition to live channels and the more section our community section has emerged as an access point for in-game item sales. In early April, we successfully showed an inclusive game skin for popular e-sport players from Unknown of Kings beyond the buzz generated by the skin's initial release live streaming section. These players continued engagement within the community led users to purchase the skin through this channel making it the second largest scale channel for this skin on our platform with the number of purchaser more than 60% higher than other similar inclusive skin activities. As users who are active in our community section tend to be more hardcore gamers, we believe that there is great potential within this section to expand our customer base for in-game item purchase and improve repeat purchase rate. On the advertising side, lower brand advertising revenue due to fewer tournaments and promotions as well as the high base contributed by some large scale new games in the first quarter of last year caused our advertising revenue to decline year over year and quarter over quarter. On the other hand, at the end of last year, we upgraded the presentation format for live channels on the VR live apps creating more efficient performance based advertising scenario to strengthen our advertising business. While maintaining a strong focus on our domestic market, we have begun to actively explore and enhance our game related commercialization capabilities in overseas markets, particularly through our global mobile application service platform to better leverage the commercial value of our content and user traffic. In addition to our existing app promotion and live streaming service, we are developing diverse business models targeting overseas market including game distribution, in-game item sales, regional inclusive distribution and game advertising services. We are strengthening our partnership with Chinese game companies that are expanding overseas as well as local firms. As of the first quarter, we have partnered with multiple game companies to distribute or sell in-game items for approximately 50 games including PUBG Mobile, Honor of Kings, Arena Breakout, Delta Force and Devil May Cry. We have also launched operational activities tailored to each game's characteristic and key events, such as friend challenge feature and enhanced localized game promotion by collaborating with local broadcasters on our overseas game live streaming platform. These initiatives are demonstrating promising growth with our overseas game related services delivering a multi-fold sequential revenue growth in the first quarter. Given current development and market change, we are confident that they will continue to help expand our overseas user base and scale up our business. We believe overseas game related commercialization initiative holds significant potential, making them a key growth engine for our company going forward. Next, our professional content enrichment efforts. We continue to solidify our leading position in licensed esports tournaments in the first quarter. We broadcast approximately 75 events including popular competitions such as League of Legends, LPL, First Stand Tournament, Honor of Kings KPL, Crossfire CFPL, Counter-Strike 2 EPL Season 21, Valorant's VCT Bangkok Masters and Peacekeeper A-List EPEL. These diverse line-up caters to viewing needs of a wide range of esports in Suji East. Our internal data indicates the FUYA's market share in esports broadcasting continue to improve this quarter, reinforcing our position at the top game live streaming platform for watching esports tournaments. We are also consistently innovating diverse in-house produced content and broadcast approximately 25 self-organized esports tournaments and entertainment PGC shows this quarter. Our highly anticipated FUYA League of Legends Legend Cup Season 3 commenced at the end of March and is still underway. Building on the sets of the previous two editions, we upgraded this event with the establishment of dual competition rounds in China and South Korea, enhancing the competitive pace and match excitement. The Legend Cup Season 3 has also partnered with the comprehensive international esports event serving as the Asia Championship League's LOL2 tournament, a key corporation that underscores we as professional influence in esports. During the first quarter lantern festival, we launched our pig and chicken caters streaming challenge, developed in collaboration with a no-no television network. Through offline activities integrated with online interaction and a brand of scenes across agricultural products, folks, traditions, shopping and entertainment. This entertainment program attracted viewership comparable to some top-tier esports content. In addition, we introduced a competitive truly end singer season and esports music crossover program featuring professional singers and popular broadcasters, which received positive audience feedback and expanded our content reach. As we entered the second quarter, we kicked off our self-organized Dota 2 tournament, the Immortal Cup in early May. This event featuring top retired professional Dota 2 players has already attracted great attention. We will also introduce several large-scale events produced in-house in the coming months, including an offline esports music festival and a top-tier variant tournament. Turning to product upgrades, under our AI plus live streaming strategy, we are exploring the integration of AI capabilities in our esports experience. At the Legend Cup Season 3, we leveraged -to-end AI solutions to transform the viewing experience and introduce Hu Xiaoyi, a pioneering or scenario AI agent for esports viewing as a smart viewing companion for our users. Hu Xiaoyi acts as a strategy microscope in the pre-match team formatting phase, analyzing teams champion pool capability with data driven insights, which transforms team captains' decision-making from experience-based to visual strategy, simulation-based. During the in-match, fan, and pick phase, Hu Xiaoyi becomes a tactical profit generating real-time counter-strategy heat maps that offer viewers a deep dive into professional players' tactical decisions. In post-match analysis and engagement, Hu Xiaoyi acts as a professional esports coach, rapidly producing high-light reels and injecting humor into post-match analysis with meme-filled MVP reviews in elevating the entertainment value of esports content. Hu Xiaoyi can understand the game, raise esports dynamic, and provide live commentary throughout tournaments, engaging users with a viewing companion that is both tactical and entertaining. Our statistics show that as of early May, over 300,000 bullet chat were generated during the CUP Season 3, with approximately 17% of them related to interactive discussions initiated by Hu Xiaoyi. This demonstrates a substantial leap in the viewing experience, with fans actively engaging with the content in a more immersive and interactive way. We are encouraged by these initial results and will continue to advance our AI-driven initiatives under our AI Plus Live Streaming Strategy. By applying AI models throughout the entire cycle of live streaming content production, distribution, and consumption, we aim to create long-term value for Hu Xiaoyi in live streaming, esports, and other areas. In summary, we believe that our positive progress across various business segments in the first quarter has laid a solid foundation for our development throughout the year. We will continue to enhance and expand our game content and service platform and explore new commercial opportunities moving towards a more diversified and sustainable business model that delivers value to our users and stakeholders alike. With that, I will now turn the call over to our Acting Co-CEO and CFO Raymond Lay. He will share more details on our results. Raymond, please go ahead.

Thank you Vincent and hello everyone. Our start is an overview of our financial performance. In the first quarter of this year, our total net revenues stabilized -over-year after previous declines, driven by the -over-year growth in game-related services, advertising, and other businesses. Notably, live streaming revenues saw a slight sequential increase this quarter, contributing to a marginal sequential improvement in our total net revenues. The number of paying users in the first quarter remained flat -over-year, standing at 4.4 million, excluding those who made in-game purchases through our game distribution business but didn't pay via our platform or related services. On the cost side, we continued to optimize content costs, particularly those related to e-sports tournaments, but increased incentives for broadcasters to participate in live streaming and provide game-related services during the live streaming industries off-season around Chinese New Year, resulting in a gross margin of .5% for the quarter. Furthermore, despite a substantial decrease in interest income compared with the previous periods, primarily due to our dividend payments, we still achieved a positive net income for the quarter, with a non-gap income of RMB 24 million. Let's move on to more details of our Q1 financial results. Our total net revenues were RMB 1.51 billion for Q1 compared with RMB 1.5 billion for the same period last year. Live streaming revenues were RMB 1.14 billion for Q1 compared with RMB 1.26 billion for the same period last year, primarily due to the continued impact of the macroeconomic and industry environment. Game-related services, advertising and other revenues were RMB 370 million for Q1 compared with RMB 244 million for the same period last year. The increase was primarily due to higher revenues from game-related services, which were mainly attributable to our deep co-operation with Tencent and other game companies, partially offset by decreased spend or advertising revenues. The cost of revenues increased by 3% to RMB 1.32 billion for Q1, primarily due to increased revenue sharing fees and accounting costs, partially offset by decreased benefits and server custody fees. Revenue sharing fees and accounting costs, a key component of cost of revenues, increased by 4% to RMB 1.17 billion for Q1, primarily due to increased broad customers related costs, partially offset by lower costs related to licensed e-sport content and in-house produced content. The gross profit was RMB 188 million for Q1 compared with RMB 221 million for the same period last year. Gross margin was .5% for Q1 compared with .7% for the same period last year, primarily attributable to increased revenue sharing fees and accounting costs as a percentage of total net revenues. Excluding share-based compensation expenses, non-gap gross profit was RMB 192 million and the non-gap gross margin was .7% for Q1. Research and development expenses decreased by 4% -over-year to RMB 130 million for Q1, primarily due to decreased personal related expenses and share-based compensation expenses. Sales and marketing expenses decreased by 20% -over-year to RMB 61 million for Q1, primarily due to decreased marketing and promotion fees as well as personal related expenses. General and administrative expenses increased by 2% -over-year to RMB 61 million for Q1, primarily due to higher share-based compensation expenses. Hard income was RMB 4 million for Q1 compared with RMB 12 million for the same period last year, primarily due to lower government subsidies. As a result, operating loss was RMB 60 million for Q1 compared with a loss of RMB 39 million for the same period last year. Excluding share-based compensation expenses and the amortization of intangible assets from business acquisition, non-gap operating loss was RMB 36 million for Q1 compared with a loss of RMB 16 million for the same period last year. Non-gap operating margin was negative .4% for Q1. Interest income was RMB 65 million for Q1 compared with RMB 117 million for the same period last year. Primarily due to a lower time deposit balance which was primarily attributable to the special cash dividend paid in May and October 2024. Net income attributable to Huya Inc was RMB 1 million for Q1 compared with RMB 71 million for the same period last year. Excluding share-based compensation expenses and the amortization of intangible assets from business acquisition, net income taxes, non-gap net income attributable to Huya Inc was RMB 24 million for Q1 compared with RMB 92 million for the same period last year. Non-gap net margin was .6% for Q1. Diluting net loss per 8 years was approximately 0 RMB for Q1. Non-gap diluted net income per 8 years was RMB 10 cent for Q1. As of March 31, 2025, the company had cash in the cash equivalence, short-term deposit and long-term deposit of RMB 6.25 billion compared with RMB 6.73 billion as of December 31, 2024. Finally, let me provide an update on our shareholder returns. Through our Up to US Dollar 100 million share repatriation program, we had repatriated 21 million Huya shares with a total aggregate consideration of US Dollar 69.8 million as of the end of March 2025. Looking ahead, we will remain committed to reinforce our business and operational foundations and returning value to our shareholders through dividends and share repatriation. Mr. 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 the question, then press 6 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 the 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.

Let me translate myself into English. Thanks, management, for taking my questions and congratulations for Huya with a solid quarter in first quarter and with a solid -on-year growth for game-related revenues in first quarter. I'm wondering if management could elaborate more on the business outlook and the prospect for this segment. Thank you.

In the first quarter, Huya's game-related services, advertising and other revenues reached 370 million, representing a -over-year increase of 52.1%. This growth was primarily driven by the increase in game-related services revenues, partially offset by a -over-year decline in brand advertising revenues. The decrease in brand advertising revenues was primarily due to fewer tournaments and promotional activities during Q1 this year, as well as the high base effect from major new game launches in the same period from last year. It is worth noting that since our game distribution and in-game item sales revenue is primarily recognized on a net basis after revenue sharing with game companies, the total transaction value of our game-related services is significantly higher than our reported revenue.

In the first quarter, Huya's game distribution and in-game item sales revenue was primarily due to fewer tournaments and promotional activities during Q1 this year, as well as the high base effect from major new game launches in the same period from last year. The total transaction value of our game-related services was significantly higher than our expected revenue from last year. This is due to fewer tournaments and promotional activities in the same period from last year.

Specifically, in terms of domestic game distribution, despite limited major new game launches in the market this year, we proactively deepened our engagement with existing games. Through cooperation with game studios and refined operational strategies, we continued to unlock the consumption potential of high commercial value user groups that have naturally congregated within our game live streaming ecosystem, forming a more stable and balanced foundation for our game distribution business. In the first quarter, the total gross revenue generated through Huya's game distribution channel more than doubled year over year and increased quarter over quarter. In particular, thanks to various game events during the Spring Festival, several titles including QQ Speed Mobile, Peacekeeper Elite, Delta Force, and League of Legends Mobile recorded significant increases in gross revenue through the Huya channel, with each growing more than 50% compared to the fourth quarter of last year. Additionally, games from new partners that we collaborated with also performed well. These results underscore our extensive capabilities in operations and game promotions. As we continue to solidify our position as a game distribution and marketing channel, we plan to enhance our exploration of game agency publishing, including exclusive distribution models to further expand our business. We also look forward to capturing opportunities as more new games launch in the market.

We have successfully sold a exclusive skin of a famous e-sports player, not only through the skin live broadcast, but also through the long-term effective operation of this player in the Huya community. This has also attracted many users to purchase through this channel, which has become the second largest channel for skin sales on our Huya platform. The number of people purchasing the items exceeds those of the receive activity mentioned above 60% in a previous event. We are confident that a kein cable ricotta group with high return choices willreturn resist!!!

For in-game item sales, we are consistently expanding our in-game item SKU offerings, while enhancing our platform's self-channels and also purchasing experiences, leading to a record high in GNV for in-game item sales in the first quarter. As in-game item sales scale up, they are also benefiting our streamer's ecosystem, with more game broadcasters generating better commercial income from in-game item sales. In addition to live channels and the mall session, our community section has emerged as an effective access point for in-game item sales. In early April, we successfully sold an exclusive game skin for renowned Honor of Kings e-sport player. Beyond the buzz generated by the skin's initial relief session, the player continued its effective engagement within the community. It has also attracted many users to purchase through this channel, making it the second largest sales channel for the skin in our platform. With the number of purchases more than 60 percent higher than the previous similar exclusive skin activities. As users who are active in our community section, tend to be more hardcore gamers, we believe that there is great potential to expand our customer base for in-game item purchases and improve repeating purchase rates.

We are also working on the development of international mobile app service platforms and other overseas businesses. We are also actively exploring and improving our commercialization capabilities in game related overseas, to better discover the value of the platform content and user traffic. In addition to the already existing in-game advertising service, we are also working with China's overseas game manufacturers and local game manufacturers. We are also working with the game's characteristics and its activity nodes to launch special operations. In addition, we are working with local streamers from overseas to enhance the effect of local game promotion.

While maintaining a strong focus on our domestic market, we have begun to actively explore and enhance our game-related commercialization capabilities in overseas markets, particularly through our global mobile application services platform, to better leverage the commercial value of our content and user traffic. In addition to our existing app promotion and live streaming services in overseas markets, we are developing diverse business models including game distribution, in-game item sales, regional exclusive distribution, and game advertising services. We are strengthening our partnerships with Chinese game companies that are expanding overseas as well as local firms. At the same time, we've launched operational activities tailored to each game's characteristics and key events. Furthermore, we are enhancing localized game promotion by collaborating with local broadcasters on our overseas game live streaming platform.

Our sales have increased several times since the first quarter compared to the fourth quarter. Based on the current business track and market prospects, we are confident that by expanding the coverage of overseas users and the scale of our business, commercialized overseas games are expected to become one of the key growth engines.

Thank you. game-related services delivering multi-fold revenue growth in the first quarter? Given current business trajectory and market outlook, we are confident that by expanding our overseas user coverage and business scale, our overseas game-related commercialization business has the potential to become one of the company's important growth engines.

Thank you. And our next question comes from Richie Soon from HSBC. Hi Richie, please go ahead.

Bank management for taking my questions. I have two questions. First of all, can management comment on the outlook for the revenue? Second of all, given the geopolitical tensions and there have been some risks around the listing, can management comment on how do we plan to address this risk? Thank

you. Thank you Richie. I will answer these two questions. The first question is about the future revenue trend. The overall revenue of the first quarter is slightly increased. The total revenue of the first quarter is 15.1 billion. The growth of game-related commercialization and other businesses has achieved the same growth rate. This also reflects the steady development and company's performance.

Thank you for your questions. With regard to the first question, in the first quarter, Hoya's total net revenue increased slightly from $1.5 billion to approximately $1.51 billion. Thanks to the -over-year growth in game-related services, advertising and other businesses, our total net revenue has stabilized -over-year after previous declines. This also reflects the steady progress of our strategic business transformation and the company's execution capabilities.

According to the current situation, we expect the total revenue to be basically at the bottom. On the one hand, with the economic and industrial environment the same-day impact of the border is constantly weakening. And we continue to optimize live operation and strengthen user interaction functions. Live income is expected to be stable. On the other hand, we expect game-related services, advertising and other income will also achieve a faster growth this year. Based on the growth of overseas game commercialization in the future, we expect to be another growth engine. So, based on the current business situation, we expect that this year's total revenue will increase.

Based on what we are currently seeing, we expect that our total revenue has essentially bottomed out. On one hand, as the marginal -over-year impact from economic and industry conditions weakens, and as we continue to optimize our live streaming operations and enhance our user interaction features, live streaming revenues are expected to stabilize. On the other hand, we anticipate that game-related services, advertising and other business revenues will achieve relatively fast -over-year growth this year, particularly on the foundation of continued growth in domestic game-related services and advertising business. The enhancement of overseas game commercialization is also expected to become another future growth engine. Therefore, based on the current business situation, we expect that our total revenue to achieve growth this year.

As reported by the media recently, the US government has not yet issued new formal legislation against the forced withdrawal of Chinese stocks. We will continue to monitor this. At the same time, the company is also actively discussing the corresponding solution to reduce the risk of potential stocks, including the opportunities for other capital markets. As we have always said, we

will continue to monitor the requirements of the US government. The company continuously monitors US listing regulations and regulatory requirements, and is committed to fulfilling the responsibilities and obligations of the public company. Facing a constantly changing international situation and global economic trends, we closely monitor potential impacts that changes in the external environment may have on capital markets. To the company's knowledge regarding the forced day listing risks for US listed China- based companies recently reported by the media, the US government has not yet issued new formal regulations. We will continue to monitor this situation. Meanwhile, the company is also prudently assessing potential risks and actively exploring corresponding situation, including evaluating opportunities in other capital markets. As we have always emphasized, Huya consistently values and is committed to protecting investors' interests. If there is any material information, the company will make timely announcement in strict accordance with relevant requirements and fulfill its disclosure obligations.

Now we will take next question from Yan Yan Xiao from CICC. Yan Yan, please go ahead.

Thank you, Guan Yu Chen, for answering my question. My question is how do you see the company's future profit trend? I will translate myself. Thanks, management, for taking my question. My question is how should we estimate the company's future profit trend? Thank you.

Thank you, Chloe. I will answer this question. This quarter, the company continues to optimize the cost of the competition. The company has increased the cost of the competition, but in order to stimulate the opening of the live streaming during the Spring Festival, the platform has increased the incentive measures for the live streaming. In addition, the high profit rate of the brand's advertising income has been significantly weakened and the impact of high technology last year has been slightly decreased. Therefore, the profit rate of this quarter has been slightly decreased compared to last year's. However, compared to last year's fourth quarter, the return has increased by 12.5%. Although the profit has been greatly reduced due to the high interest rate, we still achieved a positive profit. The profit rate of this quarter has been 24 million.

This quarter, we continue to optimize costs related to e-sports content, but increased incentives for broadcasters to encourage the streaming and participation in providing game-related services during the Spring Festival's quiet season. Additionally, we have higher margin brand advertising revenue declined both -over-year and -over-quarter due to seasonal weakness and the high base effect from last year. As a result, our gross margin this quarter decreased slightly compared to the same period last year, but increased -over-quarter to 12.5%. Despite significantly lower interest income due to dividend payments, we still achieved a positive net income for the quarter with non-GAAP net income reaching 24 million. Regarding future profit trends, considering that our shareholder return measures will result in reduced cash surplus on our balance sheet, coupled with factors such as declining market interest rates. This year's interest rate income is particularly in the second half of the year will be significantly lower than the same period in 2024. Therefore, this year's bottom-line performance will rely more on the improvements in the company's operational results.

We also expect that the future balance sheet cost will improve. The profit will be affected by the overall income scale and structure. Overall, we expect that this year's non-GAAP profit will be improved.

We expect that the future balance sheet cost will be improved. Overall, we expect that the future balance sheet The company's non-GAAP operating results will show notable improvement this year.

Thank you. That's all for our Q&A session today. Thank you, Wes, again, for joining us today. If you have further questions, please feel free to contact FUYA Investor Relations through the contact information provided on our website or Piacente Financial Communications. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.