HUYA Inc.

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. Junpeng Huang, 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 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 of applicable law. Please also note that WHOIA's earnings press release and this conference call include discussions of unaudited gap financial information as well as un-audited, non-gap financial measures. Guya's press release contains a reconciliation of the un-audited, non-gap measures to the un-audited, most directly comparable gap 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. 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 52.1% year-over-year increase in game-related services advertising and other revenue to RMB 370 million. This segment accounted for 24.6% of total net revenues, up from 16.2% 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 esports 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's worth noting that revenues from game distribution and in-game item sales primarily recognized on net basis after revenue sharing with game companies. As such, the total transaction value of our game-related services, mainly comprised of the 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 quota with 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 Wuya's 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 receipts through the Huya channel, with each growing more than 50% compared to the fourth quarter of last year. Several games we distributed from new partners also performed well, as we continued 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 Oh, sorry. Okay. Yeah, so benefiting our broadcaster ecosystem was again, 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 a popular esports player from Honor of Kings beyond the bars generated by the skin's initial release live streaming section. These players continue engagement within the community that use us to purchase the skin through this channel, making it the second largest scale channel for this skin on our platform, with the number of purchasers 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 We Are 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 brand challenge feature and enhance 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 trends, 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 hold 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 tournament in the first quarter. We broadcast a proxy monthly 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, Veterans VCT Bangkok Masters, and Peacekeeper A-List EPL. This diverse line of caters to the viewing needs of a wide range of esports in Suji East. Our internal data indicates that we as 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 Huya League of Legends Legend Cup Season 3 commenced at the end of March and is still underway. Building on the success of the previous two editions, we upgraded this event with the establishment of dual competition jumps 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 LOL Tournament, a key cooperation that underscores we are a professional influence in esports. During the first quarter Lantern Festival, we launched our pig and chicken catcher streaming challenges, developed in collaboration with a well-known television network. Through offline activities integrated with online interaction and a brand of themes across agricultural products, folks, transitions, shopping, and entertainment. This entertainment program attracted viewership comparable to some top tier esports content. In addition, we introduced Competing to the end, Singles Season, an e-sport 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 kick 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 Valorant 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 leverage end-to-end AI solution to transform the viewing experience and introduce Huya, Hu Xiao, Ai, a pioneering or scenario AI agent for esports viewing as a smart viewing companion for our users. Wu Xiaoyi acts as a strategy microscope in the pre-match team formatting phase, analyzing team's champion pool capability with data driven insights, which transforms team captain's decision making from experience experience-based to visual strategy simulation-based. During the in-match ban and peak phase, Wu Xiaoyi becomes a tactical prophet, generating real-time counter-strategy heat maps that offer viewers a deep dive into professional players' tactical decisions. In poster match analysis and engagement, Hu Xiaoyi acts as a professional esports coach, rapidly producing highlights 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, grace esports dynamics, 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 chats were generated during the Lesion Cup Season 3, with approximately 17% of them related to interactive discussions initiated by Wu Xiaoyan. 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 Huya 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 deliver values to our users and stakeholders alike. With that, I will now turn the call over to our Acting Co-CEO and CFO Raymond Lei. He will share more more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello everyone. I'll start with an overview of our financial performance. In the first quarter of this year, our total net revenues stabilized year-over-year after previous declines, driven by the year-over-year growth in gaming-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 year 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 esports tournaments, but increased incentives for broadcasters to participate in live streaming and provide gaming-related services during the live streaming industries off-season around Chinese New Year, resulting in a gross margin of 12.5% 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 non-GAAP 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 the industrial environment. Game-related services, advertising, and other revenues were R&B 370 million for Q1, compared with R&B 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 deepened cooperation with Tencent and other game companies. partially offset by decreased bandwidth or advertising revenues. 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 bandwidth 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 customer-related costs, partially offset by lower costs related to licensed esports content and in-house produced content. Gross profit was RMB 188 million for Q1, compared with RMB 221 million for the same period last year. Gross margin was 12.5% for Q1 compared with 14.7% 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-GAAP gross profit was RMB 192 million, and non-GAAP gross margin was 12.7% for Q1. Research and development expenses decreased by 4% year-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% year-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% year-over-year to RMB 61 million for Q1, primarily due to higher share-based compensation expenses. Harder 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 amortization of intangible assets from business acquisition. Non-GAAP operating loss was RMB 36 million for Q1, compared with a loss of RMB 16 million for the same period last year. Non-GAAP operating margin was negative 2.4% 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 of income taxes, non-GAAP net income attributable to Huya Inc. was RMB 24 million for Q1, compared with RMB 92 million for the same period last year. Non-GAAP net margin was 1.6% for Q1. Diluted net loss per ADS was approximately 0 RMB for Q1. Non-GAAP diluted net income per ADS was RMB 10 cents for Q1. As of March 31, 2025, the company had cash and cash equivalents, 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 USD 100 million share repurchase program, we had repurchased 21 million OUYA shares with a total aggregate consideration of USD 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 repurchase. With that, I'd like to open the call to your questions.