HUYA Inc.

Good day and good evening, and thank you for standing by. Welcome to Huya's fourth quarter and fiscal year 2025 earnings webinar. I'm Han Yu Liu from the Huya Investor Relations. At this time, all participants are in lesson only mode. Please be advised that today's webinar is being recorded. The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.huya.com. A replay of the call will be available on the IR website soon. Participants of management on today's call will be Mr. Vincent Jun Hongfang, 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 under 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 applicable law. Please also note that Huya's earnings press release and this conference call include discussion of unaudited gap financial information as well as unaudited non-gap financial measures. Huya's press release contains a reconciliation of the unaudited non-gap measures to the unaudited most directly comparable gap measures. With that, I'm pleased to turn the call over to our co-CEO, Mr. Huang. Please go ahead.

Okay, hello everyone, and thank you for joining our earnings call today. I'm proud to say 2025 was a record year for us. In the fourth quarter, total net revenues grew by 16% to RMB 1.74 billion, the highest in the last 10 quarters, while our live streaming business remains stable. Revenues from game-related services, advertising, and other businesses grew 59% year-over-year, demonstrating our successful transformation to the gaming space. On a four-year basis, total net revenues returned to growth and reached RMB 6.5 billion, up 7% year-over-year. In the fourth quarter, we recorded and won off accounting provision, excluding this provision sbc and amortization items we would have seen three consecutive quarters of positive growing operating profit and a full year operating profit a robust content ecosystem and a stable user base under been our performance in q4 we asked total maus were approximately 160 million we are also pleased to see our platform's influence continue to grow in february we welcome the return of ugi one of the most legendary names in esports his return further validate the strength of huya esports content ecosystem and our ability to attract and support top tier streamers The influence of our streamer ecosystem continue to expand with more top streamers returning to Huya and many of our streamers gaining recognition across our platforms, including WeChat channels, Douyin and beyond. We are no longer just a game live streaming platform, but have evolved into a content-driven integrated game services provider with broad cross-profile platform reach and a key strategic partner to game developers. Since our strategic transformation into games-related services in 2023, we have expanded and deepened our footprint across the industry's value chain. We have expanded beyond live streaming into a broader range of game-related services, including game distribution in game item sales and game advertising, further transforming Huya into a more integrated game-related services provider. Our entry into game publishing with the success of Couscous Duck Mobile marks another important milestone in this transformation. Unlike traditional publishing model that rely primarily on user acquisition, We leverage the strengths of our content ecosystem and take a content-driven approach to publishing. Google Stack Mobile launched in January delivered outstanding results, attracting over 5 million new users within the first 24 hours and surpassing 10 million within six days, and has ranked number one on the iOS 3 game chart for most of the time since its launch. The game quickly became a market sensation and a clear validation of our strategy. Since pre-registration stage, we have been working closely with top streamers across multiple platforms and produced two seasons of live streaming variety shows. Guska Night, with few strong social media buzz and anticipation prior to launch. We saw very strong user generated content trending on social media as the game generated hundreds of millions of impressions and sparked over 100 social media trending moments on social platforms such as Douyin and Red Note. This content driven marketing approach resulted in a much higher ROI that far exceed traditional traffic acquisition channels. This underscore our effectiveness in content-driven marketing for new game launches and maintaining traction over time. We are pleased to see that two months after its launch, Goose Goose Stack Mobile continues to stay at the top of the chart and continue to outperform our expectation in terms of user retention. Most of our players for this game are college students and young working professionals with a higher proportion of iOS and female users. Looking ahead, we are excited to continue enhancing our social feature and building a stronger and more vibrant community. Monetization remains relatively limited for now as we focus on growing engagement, but with major game content update schedule for later this year, we expect more monetization to increase afterwards. The successful debut of Goose Goose Duck Mobile demonstrate the potential of our publishing strategy and give us great confidence in our next growth driver fueled by our live streaming content ecosystem. We are excited by our strong publishing pipeline with multiple new titles coming later this year. At the same time, supported by the strength of Huya's ecosystem, our other game-related businesses, including in-game item sales and advertising, continue to deliver solid performance. For in-game item sales, revenue continues to grow year over year, increasing by more than 200%, driven by new titles such as Peacekeeper Elite and Crossfire Mobile. As the business further scales, we continue to expand and deepen our collaboration with game developers. In January, we became the first platform to secure inclusive pre-sale rights for the MVP scheme in Honor of Kings, which is rare for the industry. We also partnered with Arena Breakout to launch a customized bundle exclusively for overseas players. which also delivers strong sales performance. Looking ahead, we will continue to expand customized rights offerings, joint marketing and localized partnerships across more top tier titles to further enhance user satisfaction. On the advertising side, Huya's content-driven marketing capabilities are also gaining broader recognition from leading game developers, including Tension and NetEase. In the fourth quarter, we hosted NetEase Fantasy Westward Journey Mobile, Wushuang Cup, in collaboration with 32 top streamers. This helped the game to further expand its brand awareness to younger audiences through live streaming. In our esports ecosystem, we deliver solid results across both licensed and self-produced events in Q4. During the quarter, we offered users close to 100 licensed tournaments as well as around 40 self-produced tournaments and variety shows. One key highlight came in December when we hosted the Demacia Cup for the first time, one of the core professional tournaments in the league operation ecosystem. This also marked the first time that the official league operation organizer had granted hosting rights to a third-party live streaming platform. It reflects strong recognition of Huya's event planning, operational and content production, capabilities and marks our evolution from an inclusive live streaming partner to a full service tournament organizer. Building on our summer success, we hosted the Delta Force Diamond Champions Autumn Season. The event set new bars for the game in terms of both scale and viewership in Delta Force Esports circuit. On the product side, we see great opportunities in the AI wave today. We have made meaningful progress in AI-powered live streaming with this growing number of production featuring permanently on viewership charts. We have integrated AI host into our eSports programs who are equipped with realistic human-like avatars and capable of professional level commentary and interaction. This visual host engaged with viewer comment in real time, fostering strong audience resonance. This has been particularly well received among users of leading game categories such as League of Legends and CSGO, driving longer viewing time and deeper community engagement. We are thrilled to continue exploring the latest technologies and integrating them directly into our game tools and products, creating richer and more engaging experience for our players that were not possible before. For example, In March, our Delta Force map tool will introduce a real-time navigation feature powered by our context-aware multimodal AI capabilities, enabling smoother gameplay and more intuitive interactions. Beyond this, we are actively exploring ways to embed these technologies across additional titles, including Golden Spatula, and Goose Goose Duck Mobile. On the overseas front, we remain focused on improving the product experiences and strengthening our content ecosystem, which supported steady growth in both advertising and in-game item sales. We will continue to incubate new products in a flexible manner and involve our monetization strategies. We believe this will further strengthen our capabilities and momentum for scaling our overseas publishing business as well as other monetization opportunities. Overall, marked a pivotal year for Huya. defined by solid strategic execution and impactful milestones. From an operational perspective, we return to growth and further enhance our profit profile. Looking ahead, we will further scale our footprint across the entire gaming value chain. With our growth momentum on the robust and sustained upward trajectory, we are poised to embark on an ambitious new chapter of sustainable high-quality development for Huya. With that, I will now turn the call over to our co-acting CEO and CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello everyone. I'll start with our first quarter results, followed by our full year financial highlights and an update on our shareholder returns. In the first quarter, we delivered accelerated top-line growth driven by robust expansion in our game-related services and advertising businesses. However, Our operating results were impacted by a one-time RMB 66 million provision, which led to a non-GAAP operating loss of RMB 36 million for the quarter. Excluding the impact of this one-time item, we continue to see improvement in our core operating performance and the overall earning profile. Let's move on to more details of our Q4 financial results. Total net revenues were RMB 1.74 billion for Q4, up 16% from the same period last year. Live streaming revenues were RMB 1.15 billion for Q4, up 2% from the same period last year, primarily due to higher average spending per paying user for live streaming services. The number of domestic paying users remained stable at 4.4 million for Q4. This figure excludes users who made in-game purchases through our game distribution business but didn't compute payments through our platform or related services, as well as overseas paying users. Game-related services, advertising, and other revenues were RMB 593 million for Q4, up 59% from the same period last year. The increase was primarily due to higher revenue from game-related services and advertising, which were mainly attributable to our deeper cooperation with game companies in China and overseas. Cost of revenues. increased by 30% year-over-year to RMB 1.49 billion for Q4, primarily due to increased revenue sharing fees and accounting costs, as well as increased costs related to game items. With this, revenue sharing fees and accounting costs rose by 10% year-over-year to RMB 1.28 billion, reflecting growth in our top line. Gross profit was RMB 245 million for Q4, up 44% from the same period last year. Gross margin was 40.1% for Q4, improving from 11.4% from the same period last year. Excluding share-based compensation expenses, live-gap gross profit was RMB 248 million. and the line gap gross margin was 40.3% for Q4. Research and development expenses were RMB 123 million for Q4, largely flat year-over-year. Sales and marketing expenses increased by 24% year-over-year to RMB 78 million for Q4, primarily due to increased marketing and promotional efforts including pre-launch preparations for good stock mobile. General and administrative expenses increased by 55% year-over-year to RMB 126 million for Q4, primarily due to RMB 66 million provision related to receivables arising from 2021 arrangement with broadcaster. which was deemed to have a heightened risk of non-recoverability. Other income was RMB 18 million for Q4, compared with RMB 4 million for the same period last year, primarily due to increased government subsidies. Operating loss narrowed to RMB 65 million for Q4, compared with a loss of RMB compared with the loss of RMB 93 million for the same period last year. Excluding share-based compensation expenses and the optimization of intangible assets for business acquisition, the gap operating loss narrowed to RMB 36 million for Q4, compared with the loss of RMB 69 million in the same period last year. Interest income was RMB32 million for Q4, down from RMB75 million for the same period last year, primarily due to a lower time deposit balance following the payment of special cash dividends. Impairment loss of investments was RMB81 million for Q4, compared with RMB151 million for the same period last year. primarily due to the recognition of the amendment charge on the currency investments attributable to the weak financial performance of certain USTs. That loss attributable to Huya Inc. narrowed to RMB 180 million for Q4, compared with the loss of RMB 172 million for the same period last year. Excluding share-based compensation expenses, impairment loss of investment, and the optimization of competitive asset for business acquisitions, net of income taxes, land loss attributable to Huya Inc. was RMB 8 million for Q4, compared with the net income attributable to Huya Inc. of RMB 1 million for the same period last year. primarily due to the provision item and the lower interest income as explained earlier. Diluted land loss per ADS was approximately RB 0.51 for Q4. Long-term diluted land loss per ADS was RB 4 cents for Q4. As of December 31, 2025, the company has Cash and cash equivalents, short-term deposit and long-term deposit of RMB 3.82 billion, largely flat compared to September 30, 2025. Moving on to our full-year 2025 results, total net revenues were RMB 6.5 billion for 2025, increasing by 7% from the prior year. Live streaming revenues were R&B 4.59 billion for 2025, compared with R&B 4.75 billion for the prior year. Game related services, advertising and other revenues were R&B 1.91 billion for 2025, compared with R&B 1.33 billion for the prior year. Non-GAAP gross profit was R&B 800 and 84 million for 2024-05, up 7% from the prior year. Long-gap gross margin remained flat at 30.6% for 2025. Long-gap net income attributable to Huya Inc. was RMB 99 million for 2025, compared with RMB 269 million for the prior year. And the long-gap net margin was 1.5% for 2025 compared with 4.4% for the prior year. To reiterate, the decline was largely due to the provision we discussed at the lower interest income, rather than any change in our core business performance. Like gap diluted land income per ADS was RMB 0.43 for 2025, compared with RMB 1.15 for the prior year. Net cash used in operating activities was RMB 176 million for 2025, compared with net cash provided by operating activities of RMB 94 million for the prior year, primarily due to decreased interest income and increased amount due from related parties. For additional details on our full-year 2025 financial results, I encourage listeners to refer to our early press release issued earlier today. Finally, let me provide an update on our shareholder returns. To implement our 2025-2027 dividend plan adopted in March, 2025, we are pleased to declare a 2026 special cash dividend of US dollar 0.135 per auditor share or US dollar 0.135 per ADS for a total amount of approximately US dollar 31 million. In addition, under our Under our up to US dollar 100 billion share repatriation program, we had repatriated 22.9 billion Huya shares with a record consideration of US dollar 75.5 billion as of the end of December 2025. 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 five to ask a question, then press six to unmute yourself. If you are accessing the phone from the Tencent meeting for 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. Hi, Rebecca. Your line is open. Please go ahead.

Hi. Hi. That's great. Thank you for accepting my question. My question is about the supply chain and the cut-off of investment. It seems to be the main reason for the fluctuation of profit. Could you please share the specific structure of these projects and the reasons behind them? I would also like to know if similar processes will appear in the future. I will translate for myself. Thanks management for taking my question. We see a profit fluctuation mainly driven by provisioning and investment impairments. Can management share the composition and underlying reasons for this outcome? And how should we think of the future trend and operation on OP and that profit? Thank you.

Thank you, Rebecca. Let me explain. There are two main factors in this fiscal year. One is related to the contract arrangement of a streamer in 2021. We raised RMB 66 million in this fiscal year. This is also one of the main factors in this fiscal year. This caused GAAP's operation to lose about RMB 36 million. The second factor is that we confirmed The 8,100 million investment cut is mainly related to the weak performance of the investment companies. This also affects our net profit. In general, both of these are non-currency accounting processing done after consideration and consideration. It does not represent the change in the core net profit trend of the company. It is more like a one-time effect. The company still complies with the requirements of the accounting standard and conducts regular evaluation of long-term investment. According to the management's judgment, there are no other large-scale assets that need to be improved.

Thank you for the question. The fluctuation in our profit this quarter was mainly driven by two items. First, we recorded a 66 million RMB one-off provision related to a receivable arising from 2021 arrangement with the broadcaster. This was recorded in GNA. and contributed materially to our non-GAAP operating loss of RMB 36 million for the fourth quarter. And secondly, we recorded the impairment loss of investments of 81 million RMB related to companies that were previously invested in this as underperforming. This contributed to our net loss. Overall, these two items are non-cash accounting adjustments based on management's highly prudent and critical evaluation. So from our perspective, these are more like one-off impacts that do not reflect our cooperating trends. So going forward, we'll continue to review to perform regular impairment review in accordance to accounting standards. But right as of now, based on management's current judgment, we don't see any additional impairment required at the moment. Thank you.

Thank you. Our next question comes from Wei Meng from CICC. Hello, Wei Meng, please go ahead.

Thank you, Director. I have two questions about EYASHA. The first one is, can you share with us the current status of the game's DAU storage, ARP water flow, and the KPI that we are promoting for the game this year? The second question is, how does the company plan to extend the life cycle of the game? So let me translate myself. Thanks for taking my question. My question is about GoSchoolStock. First of all, could you maybe share some color on the current matrix like DAU retention, our pool and revenue, etc. And also what's the KPIs for 2026? And secondly, how does the management think about extending the game lifecycle from here? Great. Thank you.

Thank you for your question. Let me briefly report on the core data of EYASA and some of our future plans. First of all, from the performance of the core data, we can see that the daily DAU of the game has always remained at a relatively high level, and we can see that its performance is still very stable. In addition, we can also pay attention to the fact that from the launch of the game to now, about two months, we can see that we are still at a level like this in the front row of the free download board of the entire iOS. Then our overall long-term flow is also beyond our expectations. In the future, with the arrival of the forget-me-not period, and the continued evolution of our operation at the product end, we also expect that our DAU will still have room for further improvement. On the other hand, in terms of commercialization, we have maintained a relatively restrained strategy at this stage. The content of the commercialization release is relatively limited at present. Therefore, we see that the daily up or up-poo is still at a relatively low level. However, at some points of activity, up-poo will also grow significantly. Later, as our entire party OK. OK. Our main strategy is to focus on three points. First, as we mentioned earlier, we will continue to keep a tight schedule of content. Secondly, we will look for new evidence. Including the small game version of WeChat. It is expected that it will be online by the end of this year. We are also looking forward to improving our entire active users, which will lead to a very significant growth. Thank you for the question. Let me briefly walk you through the current performance and our future plans for Goose Goose Duck.

The game's DAU has consistently stood high and steady since its launch, with user retention also exceeding our expectations. As mentioned earlier, we are very proud that two months after its launch, the game is still at the very top of the iOS 3 download charts. We expect to see another DAU jump in the summer as we prepare a number of game events and content updates for that season. On monetization, we have been quite conservative with only very limited monetization content introduced at this stage. as we focus on growing the user base. As a result, our baseline daily ARPU is still at a relatively low level. Having said that, whenever we push out a new event or a new update, we do see significant ARPU growth. This reiterates our belief that our users respond well to these content updates, and we will roll out more party game modes and home systems later this year, which we hope will be meaningful in driving daily ARPU. In terms of longer term potential and lifecycle extension, we are focused on three things. First, keeping a rapid pace of content updates. Second, gaining actual user growth across multiple platforms. We expect to launch WeChat mini game version later this year, which could further expand our overall active user base. Third, building our UGC ecosystem. We are currently working on the UGC editor. and we will keep upgrading these functions to give our users the enriched UGC experience within the game. Thank you.

Thank you. And our next questions come from Richie Sun from HSBC. Hello, Richie. Please go ahead.

Thank you for your time. Thank you, Vincent, Raymond, Margaret, and Hanyu. I'd like to ask about the core progress the company has made in the AI industry, especially in terms of AI live streaming, AI game tools, and internal software sales. Thank you, Benjamin, for taking my questions. I want to ask about AI. So what has been the progress in terms of the AI, especially in AI live streaming, AI game tools, and internal organizational improvement in terms of efficiency? And what are the tangible results over there? Thank you.

OK, thank you for your question, Rishi. I will answer this question. Indeed, in terms of the whole environment, AI is a problem that every company needs to think about. In the AI strategy, we can't just focus on the existing business. We also need to explore new channels in these two directions. In terms of our independent business, we mentioned earlier that the performance of the AI live broadcast room, including the performance of our AI tools, is still very bright. Currently, our AI live broadcast room has contributed about 10% of our company's overall DAU. And the head AI live broadcast room is 40% higher than the average live broadcast room of the same type, which is about 80% higher than the highest of the most prominent live broadcast rooms. This year, we will also continue to introduce the content capability of the live broadcast room driven by pure AI, and improve the efficiency of our entire operation to further improve the overall flow of our platform. On the other hand, in terms of AI game tool service, we have also made a relatively positive progress. Last quarter, we also launched a map tool for triangle axis operations. to provide players with a more immersive 3D running environment to help them get familiar with the game faster and explore the game better. We also put this tool overseas, and it was very popular. The game officials also paid attention to it, and in the official community, they also recommended the game tool to us. Therefore, I think for AI technology, In March of this year, we will also launch a real-time AI-driven version to be put into the entire game tool to supplement the entire process of users playing the game, to further improve the ability of our entire customers, including the activity of our users. On the other hand, in terms of the new track, we are also deploying AI hardware and AI interactive products. For example, if we combine the EASA IP, we will soon launch an AI smart hardware. At the same time, we all know that OpenCrawl is very popular. We are also exploring how to combine OpenCrawl, the multi-agent capability, and the digital technology of tiger teeth, and integrate them into the game scene to enhance the interactive experience and support more customized games. In the future, we will also plan to expand these AI-driven functions and tools into more games, such as the Battle of Jinchan, as well as the popular IP game of EYASA.

Thank you for the question. AI is something every company should think about. For us, it's about two things. One is empowering our existing business, and two, exploring new opportunities. So for our existing business, both AI-powered live streaming channels and AI game tools continue to deliver very strong momentum. These AI-powered channels now contribute nearly 10% of our overall DAU, and the performance continues to stand out across the platform. On average, they outperform their real-life peers by 40% across key metrics such as viewing time, retention, and attributed DAU. And that number goes up to 80% for the very best AI live streaming channels. This year, we'll continue to enhance content capabilities and operating efficiency of fully AI-powered live streaming channels and further increase their traffic contribution. AI game tools are also very promising. Last quarter, we launched Delta Force Mac tool, which provided very rich, immersive 3D environment for players to quickly get familiar and better navigate the game. So we also launched this tool to overseas markets, and it was very well received by international users. It drew great attention from Games' official team, and it was recommended on many of the official community channels. So as we continue to iterate our AI capabilities, we are working on applying AI-powered real-time navigation into this map tool this month, where they expand user reach and engagement. Additionally, we are developing AI hardware and AI interactive products, including AI-enabled smart hardware based on Google Stock IP. At the same time, we're exploring different ways to integrate new technologies such as open-core multi-agent systems, virtual live streamers into party game scenarios to enhance interactivity and support more customized gameplay experiences for Google Stock. Going forward, we also plan to create more AI-driven companion tools for other popular titles, such as Battle of Golden Spatula. Thank you.

Thank you. We will take our next question from Nelson Chong from Citibank. Nelson, please go ahead.

Vincent, Raymond, Margaret, Han Yu, good evening. Thank you for accepting my question. Can you please share with us the strategy for the future of Huya's game release, the latest pipeline, and the online release schedule? And the future game release, do we have a prospect for growth, and an overview of the company's overall revenue contribution scale? So let me translate myself. Thanks management for taking my question. Can management share your future strategy of your game publishing business, the latest publishing pipeline and the release schedule? Can management share your view on the growth expectation for the game distribution business and overall contribution to the group revenue as a whole? Thank you.

OK, thank you, Nelson, for your question. Let me answer this question. As I said before, EYASA has given us a stronger confidence and a proof in the release of the game. Regarding the release of the game, we will also firmly promote the strategy of internal marketing as a driving force. Currently, our industry is also changing rapidly towards the direction of internal marketing. This is also perfectly in line with the advantages of our entire ecosystem. It is the best window for us to enter. We are not simply relying on the purchase volume, but we are relying on building a complete public network in the short video, live broadcast, and community. In cooperation, we insist on being unique as the core, so that we can accurately verify the efficiency of our entire transformation, and develop a repeatable long-term distribution method. In terms of product storage and operation, we have also provided strong support for the promotion of multiple products. Based on these circumstances, we expect that there will be multiple small games and mobile games released this year. In terms of products, we will also focus on high-quality games with strong content properties, and have the potential for e-sports and entertainment. to maximize the advantage of our entire platform to achieve long-term operations. From a strategic point of view, as our company continues to promote our diversification of our business and break through the boundaries of traditional live broadcast business, game launch will also drive the growth of our entire key engine. Although we still need to wait for the product to be released after the specific income contribution, we can have a clearer prediction. But we also believe that from a long-term perspective, the publishing business will inevitably become an important component of our company's revenue in the future.

On game publishing, we remain firmly committed to a content-driven strategy. The industry is rapidly shifting towards content-driven publishing, which fits very well with Huya's strength in live streaming, short-form media content, and community engagement. Rather than relying mainly on traditional user acquisition, we're building a more integrated publishing model driven by content. Having publishing rights help us to better measure user conversion efficiency and build a scalable publishing capability. From a pipeline perspective, we have a number of mini games and mobile games in the pipeline for the year. Most of them either have very strong content appeal or clear esports and entertainment potential. This is where Huya's strength in live streaming and esports content can be fully leveraged. We see game publishing as the most important driver of our growth as we continue to diversify beyond our traditional live streaming business. While we might have better visibility into revenue contribution after the games are launched, we do have a very strong conviction that our publishing business will be an important part of our revenue mix over time.

Thank you. Our next question comes from Yiwen Zhang from China Renaissance. Hi, Yiwen. Please go ahead.

So thanks for taking my question. The question is on margin. We note despite some negative impact from probation and impairment in Q4, there was no point in improvement on our gross profit margin during the quarter. So what is the management view on future gross profit margin trend and the room for improvement? Thank you.

Thank you, Yiwen. In 2025, the company's annual profit margin is 13.4%, which is 0.1% higher than Xiaofu's. In terms of the quarter performance, the fourth quarter profit margin in 2025 increased by 2.7%. is mainly driven by two aspects. First, the advertising revenue of the fourth quarter has been increased, and the advertising business margin is relatively high. Second, the props business continues to grow rapidly and has also made a positive contribution to the overall margin. Looking forward, although the margin of our live broadcast business faces certain pressure, the positive impact of the increase in the margin of high margin business is clearly visible. This has been reflected in our performance in the fourth quarter. For the fall year 2025, our gross margin was 13.4%, up 0.1 percentage points year-over-year.

In Q4 2025, gross margin, however, improved by 2.7% percentage points year-over-year, mainly driven by two factors, First, advertising accounted for a high percentage of total revenue and carries a relatively high gross margin. Second, our in-game item business maintained a very strong growth and also contributed positively to the margin improvement. Looking ahead, while gross margin of our live streaming business might be facing a bit of pressure, the benefits from our higher margin businesses are becoming much more visible as reflected in our fourth quarter performance. As game publishing and in-game item sales business continue to grow, and as operating leverage gradually improve, we expect to see continued gross margin improvement.

Thank you. We will take our last question today from Maggie Yeh from CLSA. Maggie, please go ahead.

Good evening, thank you for the question. My question is about the game industry. In addition to income growth, I would like to ask if there is any practical progress in terms of profitability, channel structure, and exclusive rights. How does the management view the sustainability of these businesses in the next few seasons and their room for profit improvement? Thanks for taking my question. And my question is related to game virtual item sales. So beyond the top line growth this quarter, could management share any material progress regarding these segments, margin profile, channel mix, and any exclusive partnership initiatives? And furthermore, how should we think about the sustainability of this growth and the potential for future margin expansion over the coming quarters? Thank you.

Thank you for your question, Maggie. I will answer the last question. In this quarter, we can see that the performance of the whole prop business is still very healthy. Overall, the increase in both size and profit quality has been achieved. From the data, in the fourth quarter of 2025, the revenue of our prop sales will continue to maintain a growth rate of more than 200%. At the same time, with the release of the effect of the scale of our prop business, we have further optimized the structure of our entire cost and brought about a significant improvement in the quality of our entire profit. The highlights of the business are mainly reflected in three aspects. The first is the breakthrough of our exclusive rights. This is the first time we have taken the skin of Wang Zhaoyun, the FNVP of the Prince of Glory, and we can enjoy the exclusive rights of super-price pre-sale. In the first hour of the campaign, we also received nearly 10 million yuan. We can also help promote the growth of new items and paid users. It also fully testifies the ability of our entire commercialization transformation. In fact, we are optimizing the entire channel structure. It is expected that in the future, the market share of Huya Station will also be further improved. We will also put more of this transaction into our own free environment. The third one is the cooperation expansion of our key products. At present, we are also gradually Thank you for the question.

Overall, our in-game item business delivered a very solid quarter with a very strong growth and improved profitability. In the fourth quarter of 2025, revenue from in-game item sales continued to grow by over 200% year over year. As the business scaled, we also further optimized our cost structure, which translated into meaningful improvement in earnings quality. So there were three key highlights during the quarter. First, we achieved a meaningful milestone in exclusive rights partnership. For the first time, we secured exclusive pre-sale rights for Wang Zhaoyun's FMVP scheme in All of Kings. The launch generated close to 10 million RMB in gross billings within the first hour. and drove very strong growth in new paying users, demonstrating our monetization capability. Second, we continue to improve our channel mix. We expect more transactions to be completed in our proprietary in-game item more over time, which will further improve monetization efficiency. Third, we continue to work with some of the largest game companies in China, working on their key titles, including those from Tanzanese. We hope to further expand our portfolio of games. and continue to grow our presence in the industry. Thank you.

Thank you once again for joining us today. If you have further questions, please feel free to contact Huya Investor Relations through the contact information provided on our website or P&T Financial Communications. This concludes today's call, and we're looking forward to speaking to you again next quarter. Thank you.