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.