HUYA Inc.

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. Vincent Junhong Huang, our Acting Co-CEO and Senior Vice President, Mr. Raymond Peng Lei, our Acting Co-CEO and CFO, and Ms. Margaret Shi, Head of Capital Markets. 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 latest annual report on Form 20F 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 include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. WHOIA's press release contains a reconciliation of the unaudited long gap measures to the unaudited 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. I'm pleased to report a short-lived third quarter. Total net revenues reached approximately RMB 1.7 billion. the highest level yet in the past nine quarters, with year-over-year growth accelerating to around 10%. Non-GAAP operating profit was approximately RMB 6.3 million, representing a meaningful improvement over the same period last year. This encouraging performance was mainly driven by strong growth in game-related services advertising and other revenues, while our live streaming revenues remain stable. Revenues from game relative service, advertising and others have now surpassed the 30% of total net revenues of the first time this quarter. Our platform ecosystem and user base remain resilient in the third quarter, with total MAUS stable at around 162 million. The influence of our streamer ecosystem continues to expand as more top streamers are returning to Huya, and many of our streamers are also gaining recognition across other platforms, including WeChat channels, Douyin, and beyond. Across all major competitive titles, including Honor of Kings, League of Legends, Delta Force, and Peacekeeper Elite, our top tier streamers consistently rank among the leading creators in their respective categories. In addition to our own products and app, we estimate through our top creators, we are able to reach over 100 million users across other platforms, expanding our audience, influence and monetization opportunities across the wider gaming and streaming landscape. This impact is reflected in our third quarter performance, where our game-related service, advertising, and other segments grew 30% year-over-year, reaching 532 million RMB in revenue. We think these segments in game item sales have become a significant growth driver as we deepen our collaboration with game developers, expand our SKU offerings, and leverage the increasing synergy between our live streaming and gaming ecosystems, in-game item sales revenue grew by more than 200% year over year in the third quarter. Partnerships with flagship titles in both China and abroad, including Peacekeeper Elite, League of Legends, Arena Breakout, and PUBG Mobile delivered short-lived results. Looking ahead, we are confident that in-game item sales will maintain robust growth momentum as we continue to broaden partnerships and enhance operations. In terms of game publishing, we are thrilled to announce the upcoming launch of our first title, Goose Goose Dark Mobile, a social deduction game centered on teamwork and strategic gameplay. The game has gone through its second round of testing throughout October, with pre-registration quickly surpassing $10 million during that period, leveraging our powerful streamer influence and stronger content-driven marketing capabilities. In October, we created a live streaming variety show, which brought together top streamers for a group gaming session. The show attracted strong players' engagement and brought market attention. We view GoodSchoolStock Mobile as a key step in our strategy to diversify into game publishing, an important milestone that will not only validate our publishing capabilities, but also position us for sustainable growth in this space. As we continue to step up for our efforts in key areas, including in-game item sales, game publishing, advertising, we believe this segment will remain a sustainable driver of our revenue growth. Let's move on to live streaming, where revenues increased by about 3% year over year, making our first quarter of positive year over year growth since the third quarter of 2021. Our content mix has become more balanced and vibrant, which that the outdoor live streaming category delivering solid gains in both viewing hours and monetization this quarter. At the same time, we continue to enhance both our mobile and PC platform to ensure users enjoy a truly best-in-class live streaming and esports experience Our latest update introduced a new short-form video hub, an interactive 3D game map tool of Delta Force, and other cool features. The short-form video hub enables users to conveniently discover short clips from livestreams directly within the Huya Live app, enhancing our content ecosystem. and driving a notable increase in short video daily active users and time spent. Meanwhile, the Delta Force Map tool provide rich immersive 3D environments for Delta Force players to quickly get familiar and better navigate the game, attracting more hardcore players to our platform. E-Sport live streaming remains a crucial part of our content offerings. We streamed nearly 100 licensed tournaments and hosted around 40 self-produced events in the third quarter of 2025. During the recently-congratulated League of Legends World Champions, one of the most watched licensed esports events in China, we remain the top livestreaming platform in terms of average concurrent users. Building on our fan base, we hosted the 2025 League of Legends Asian Asia Invitational, the first ever LOL international professional tournament produced by a live streaming platform. This event was an important milestone for us, attracting massive viewership outside of China and significantly enhancing our international brand recognition. We are also excited to announce that we will be hosting the Demacia Cup, for League of Legends later this year. Again, we are privileged to be the first live streaming platform ever to be hosting this flagship official event for this game. Additionally, we have a shown lineup of other highly anticipated esports tournament that we will be hosting, including the Delta Force Diamond Champions Autumn Season, following the success we had in the summer. on the international expansion front. Our user base continue to grow steadily during the quarter through our overseas platforms. We are deepening our presence in key geographic market by focusing on user experience and the content ecosystem to enhance engagement and retention. We have also built closer partnership with popular game partners, and diversified monetization strategy, driving sustainable growth and improving profitability. To sum up, we made solid progress expanding our content ecosystem, unlocked new monetization opportunities, and advanced our emerging business models in a disciplined and sustainable manner. Looking ahead, we will remain focused on long-term development, deepening collaboration with partners, improving monetization efficiency and product experience, strengthening our content and technology capabilities, and steadily expanding internationally to deliver sustainable, highly quality growth. With that, I will now turn the call over to our Acting Co-CEO and CFO Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello everyone. I will start with an overview of our financial performance. Our total net revenues for the third quarter reached approximately RMB 1.69 billion, increasing 10% year-over-year. Of this, Live streaming revenues has resumed growth at 3% year-over-year to RMB 1.16 billion. And game-related services, advertising, and other revenues grew around 30% year-over-year to RMB 532 million, accounting for 31.5% of total net revenues. We also achieved a non-gap operating income of RMB 6.3 million. another quarter of solid improvement since we first broke even at operating level last quarter. Furthermore, we still achieved a positive net income for the quarter with non-GAAP net income of RMB 36 million, despite a substantial decrease in interest income compared with previous periods, primarily due to a special dividends pay down Let's move on to more details of our Q3 financial results. Live streaming revenues were under $1.16 billion for Q3, up 3% from the same period last year, primarily due to the improvement of average spending per paying user for live streaming services. The number of the domestic paying users remained stable at 4.4 million in the third quarter. This figure excludes users who made in-game purchases through our game distribution business but didn't pay via our platform or related services, as well as overseas paying users. Game-related services. Advertising and ad revenues were RMB 532 million for Q3, up 30% from the same period last year. The increase was primarily due to higher revenues from gaming-related services and advertising, which were mainly attributable to our deepened cooperation with game companies in China and abroad. Cost of revenues increased by 10% to RMB 1.46 billion for Q3, primarily due to increased revenue sharing fees and accounting costs, as well as cost of in-game items. Within this, revenue sharing fees and accounting costs rose by 8% year-over-year to RMB 1.26 billion, reflecting growth in our top line. Gross profit was RMB 227 million for Q3, up 11% from the same period last year. Gross margin was 13.4% for Q3, also an improvement from 13.2% from the same period last year. Executing share-based compensation expenses, Non-GAAP growth profit was RMB 228 million, and the non-GAAP growth margin was 30.5% for Q3. Research and development expenses decreased by 3% year-over-year to RMB 122 million for Q3, primarily due to decreased staff costs as a result of enhanced inefficiency. Sales and marketing expenses decreased by 4% year-over-year to RMB 70 million for Q3, primarily due to decreased general promotion fees. General and administrative expenses increased by 15% year-over-year to RMB 58 million for Q3, primarily due to increased professional service fees and staff costs. Other income was RMB 9 million for Q3 compared with RMB 13 million for the same period last year, primarily due to lower government subsidies. As a result, operating loss narrowed significantly to RMB 14 million for Q3 compared with a loss of RMB 32 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisitions, non-GAAP operating income reached RMB 6 million for Q3, a meaningful improvement from non-GAAP operating loss of RMB 13 million in the same period last year. Interest income was RMB 35 million for Q3, reduced from RMB 97 million for the same period last year, primarily due to a lower time deposit balance as a result of the special cash dividend space. Net income attributable to Huya Inc. was RMB 10 million for Q3 compared with RMB 24 million for the same period last year. Executed share-based compensation expenses Gain arising from disposal of an equity investment. Net of income taxes. Impairment loss of investments and amortization of intangible assets from business acquisitions. Net of income taxes. Net income attributable to Huya Inc. was RMB 36 million for Q3 compared with RMB 78 million for the same period last year. The decrease was mainly due to the lower interest income as an expanded area. Diluted net income per ADS was approximately RMB 4 cents for Q3. Non-GAAP diluted net income per ADS was RMB 60 cents for Q3. As of September 30, 2025, the company had cash and cash equivalents short-term deposit and long-term deposits of RMB 3.83 billion, compared with RMB 3.77 billion as of June 30, 2025. With that, I'd like to open the call to your questions.

Thanks, 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 the 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 Rebecca Xu from Morgan Stanley.

Your line is open. Please go ahead.

好的,谢谢管理层给我这个机会。 我的问题是关于道具售卖业务的,我想请管理层跟我们详细分解一下这个业务本个季度的表现,以及是否可以展望一下道具售卖业务未来的一个发展的方向。 Thank you, management. My question is regarding the in-game item sales business. Could you please share some color on the updates from the past quarter, as well as the future outlook for this segment? Thank you very much.

OK, thank you, Rebecca. I will answer this question. First of all, we rely on the deep deployment of our live-streaming ecosystem and the cooperation with game manufacturers. We are working with Prince of Glory, Peace Elite, Heroes Alliance, and Dark Zone 2 and PUBG Mobile, and other key game cooperatives to continue the deepening of the game. The props category is also getting more and more active. In this quarter, we can see that the profit of props sales has increased by more than 200%. and effectively improve the users' attraction and choice of consumption within our platform.

Hi, Rebecca. Let me translate for you. This quarter, in-game item sales continue to scale rapidly, supported by our strong live streaming ecosystem and deeper partnerships with flagship titles, including Honor of Kings, Peacekeeper Elite, League of Legends, Arena Breakout, and PUBG Mobile. With broader SKU offerings and more engaging in-game events, In-game item sales revenue grew over 200% year-over-year in the third quarter, giving our users a much wider and more compelling selection on our platform.

展望未来,我们也将从三个方向来持续的去推进。 第一个是加深我们跟现有游戏道具品类的建设,来提升我们内容的丰富度和吸引力。 Secondly, we are also expanding the coverage of the cooperative game, strengthening the flexibility of the platform's prop ecosystem and the resilience of growth. Thirdly, we are also improving the basic practice of prop sales, including continuing to support our entire commercial experience to strengthen the efficiency of user mindset and transformation.

Looking ahead, our focus is threefold. Number one is to further enrich item categories in existing titles. And secondly, it's expanding to additional game partnerships to diversify our portfolio. And third one is to improve our storefront and merchandising systems, enhancing overall purchase experience, making it easier for our users to discover and buy our items.

随着我们合作的维度不断的拓展和运营玩法的持续升级, 我们也有信心推动我们道具的业务, 在未来保持健康而且快速的增长的趋势。

As collaboration expands and our operating model continues to mature, we expect in-game guidance cells to deliver sustainable, healthy, and high-quality growth. Thank you.

Thank you. And our next questions come from Maggie Yeh from CLSA.

Hello, Maggie. Please go ahead. Please unmute yourself. Maggie, you're still muted.

Okay, it's fine now. You should be connected.

Hey, good evening.

Can you hear me now? Yes. Thanks for taking my question. This is regarding companies overall revenue growth. Firstly, live stream revenue has resumed positive year-over-year growth this quarter. So could you share your views on the segment growth going forward? And secondly, for the non-livestream business, which now accounting for over 30% of total revenue, what is your expectation on this segment future growth going forward? And what will be the primary growth driver?

Thank you. Thank you, Maggie.

I will answer this question. This quarter's income improvement comes mainly from two aspects. First, the live broadcast business basic platform remains stable. The core users are connected and the payment hospital is stable. The live broadcast income has increased by about 3%. Since the third quarter of 2021, the growth rate has changed several times. Second, game related services, advertisements and other income have reached 5.3 billion yuan, which has increased by about 30%. with an increase of 31.5% in revenue. In particular, the performance of prop sales has been outstanding, and it has become a new important growth engine for the company. In the context of a relatively stable industry environment, we expect that the Q4 live broadcast revenue in 2025 will continue to maintain a more stable trend. At the same time, game-related services, advertisements, and other businesses are expected to continue to maintain a rapid growth, and we look forward to further increasing Q3 in 2025. mainly benefits from the high growth and continuation of the props and sales business, and the continuous deepening of key game and business cooperation, as well as the seasonal growth of advertising business. Looking forward to the year 2026, we will focus more on the improvement of income growth and business quality. It is expected that the overall income growth of the company in 2026 will be further accelerated in 2025. So we saw promising performance from both our live streaming business and our game-related services.

Live streaming revenue has returned to growth for the first time since Q3 2021. Our game-related services, advertising, and other revenues, on the other hand, grew 30% year-over-year. to 530 million RMB, now accounting for over 31.5% of the total net revenues. The growth was driven in large part by very strong in-game item sales this quarter. So we expect live streaming revenues to remain stable into the fourth quarter, while non-live streaming businesses should continue growing at a very strong pace, potentially accelerating further due to in-game item sales expansion and other deeper game collaborations. Looking ahead to 2026, we expect overall revenue growth to accelerate versus 2025. Live streaming should remain stable while game-related services, advertising, and others continue to drive the majority of our growth. Thank you.

Okay, thank you. And our next question comes from Richie Sun from HSBC. Richie, your line is open.

Vincent, Raymond, Margaret, good evening. Thank you for giving me the opportunity to ask a question. I want to ask about the new game we will release, the strategy and outlook for the release of the game, and the strategy and outlook for the release of the game for the entire company. Will there be any updates? Thank you, management, for taking my questions. So I would like to ask about the publishing of Goose Goose Ducks and overall the game publishing business. So what is our strategy as well as our look going forward?

Thank you. In general, Huya has a good foundation for the development and release of games. On the one hand, Huya has formed a long-term accumulation on content ecology, anchorage ecology, and competitive ecology. From the third quarter, the overall MAU of our platform is stable at a level of about 1.62 billion. On the other hand, we are also firmly promoting our multi-platform ecological strategy. We estimate that the size of the users that can be reached outside the war has currently exceeded 100 million. This accumulation of the energy of the flow for many years is providing abundant growth power for props, sales, distribution, and other businesses.

So maybe I'll start by giving you an overview of our publishing strategy. Over the years, we have built a very robust content-creating esports ecosystem with roughly 162 million MAUs on the platform in the third quarter. On top of that, in addition to our own apps and products, we estimate through our top creators outside of our platforms, we are able to reach another 100 million plus users across other platforms. And this gives us a natural advantage in game publishing.

In this context, EYASA mobile game is the first key practice of our systemization and release capability. We also conducted the second round of testing during October. During this period, the number of appointments quickly broke 10 million. It is expected that we will soon be online. In order to match the up-to-date rhythm, we also launched our own variety of variety and private cards. With the participation of a number of leading anchors, we significantly increased the popularity of our content and the activity of the community. This is not only the first systematic verification of Huya's gaming business, but also a solid foundation for our subsequent construction of a more three-dimensional distribution business.

The mobile version of Goose Goose Duck is our very first full-fledged publishing effort. The game has gone through a second round of testing throughout October, with pre-registrations quickly surpassing 10 million during that period. We expect the game to be ready for launch pretty soon. Now for this game specifically, we created a dedicated live streaming variety show, Oskar's Year, which brought together top streamers for a group gaming session, helping boost social buzz and community engagement. This project serves as an important milestone in validating our publishing playbook and execution, laying the foundation for the titles to come.

展望未来,我们也将继续围绕内容驱动发行的这样的策略,依托主播的这种内容创作,短视频传播和赛事主场的优势, 重点挖掘适合直播传播和高互动性的游戏品类, 为全网的玩家带来更多优质游戏的内容。

Going forward, we'll continue to follow a content-driven publishing strategy. We'll rely on our stream-up network, short-form media reach, and esports presence to focus on titles that work well in live streaming and interactive settings. This allows us to bring more high-quality games to players and drive sustainable growth in this business.

Thank you. We will take next question from Nelson Chong from Citi. Tom Nelson, please go ahead.

Hello, Mr. Huang, Mr. Lei, Margaret, Han Yu, hello. My question is about this triangle action. Because I saw this game is one of the most popular games in China this year. We also see that the company has quite a lot of cooperation with us. So I would like to ask the company to share more about the relevant steps in this game. Thanks, management, for taking my question. With the solid momentum of Delta Force launched this year, we also observed a lot of collaboration between who we are and this title. May we have a management to elaborate more on the ongoing partnership? Thank you.

Okay. I will answer this question. Thank you for your question. First of all, the layout of the Three Gorges Action is mainly around product ecosystem construction and the creation of a competitive system in two directions. First, in terms of product ecosystem, we have also launched the Three Gorges Action running tool in the latest version to help players become more familiar with tactical gameplay and game rhythm. This feature is currently attracting more and more hardcore players to use it in depth on the platform.

Our focus on Delta Force is about building a vibrant community engagement and a sophisticated esports tournament ecosystem for that game. As part of community engagement effort, we launched Delta Force map tool recently, which provides rich immersive 3D environments for players to quickly get familiar and better navigate the game, attracting more hardcore players to our platform. Over time, it will serve as a new entry point for value-added services, helping us to build a more complete ecosystem around that game.

第二,我们在赛事生态方面, 七月我们成功主办了首届的三角洲行动, 电竞赛事,DDC钻石冠军赛, 以验证了平台在这个品类赛事组织和内容运营上的能力。 Right.

So on the esports side, we hosted the first CDC Diamond Championship in July for Delta Force, which was a great success. Building on that, we'll be hosting the second season in the coming months, gradually building a consistent, structured esports presence around that game.

Thank you. So now we will take our last question from Meng Wei from CICC. Hello, Chloe. Please go ahead.

So let me translate myself. My question is on the new business. Can you break down their financial impact in our profitability? And how should we think about the trend for our profit of this going forward? Thank you.

Thank you, Weimeng. Let me answer this question. This quarter, the company's interest rate has remained stable overall. Currently, game-related business is still in the process of ongoing promotion. The investment structure is gradually optimizing. As the game-related service business gradually expands, income-scale efficiency shows and is gradually improving, we expect that the overall interest rate will show a gradually improving trend. In this quarter, our net profit has increased by 23 million yuan, which is 11% of the total growth, which reflects the 10-digit profit contribution brought by business growth.

Our gross margin remains stable this quarter. As we further scale and expand our game-related services and optimisation of our cost structures, we expect to see gradual margin improvement over time. This quarter, our gross profit actually grew over 23 million RMB, which is 11% year-over-year, which led to further improvement at operating level.

Okay, thank you. 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 of PS&T Financial Communications. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.