HUYA Inc.

Welcome to Huya's second quarter 2026 earnings webinar. I'm Zichen Liu from the Huya Investor Relations. At this time, all participants are in listen-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 Junhong Huang, our acting CEO, Mr. Raymond Peng Lei, our 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and Anxious. 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 under applicable law. Please also note that Gu Ya's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. With that, I'm pleased to turn the call over to Mr. Huang. Please go ahead.

Okay. Hello everyone. I'm Vincent and thank you for joining our earnest call today. Let me begin with a brief overview of our second quarter performance. We deliver another quarter of sustainable growth with total net revenues increasing by 11% year over year to RMB 1.74 billion. Game-related services, advertising, and other revenues maintain strong momentum, growing by 54% year-over-year to RMB 638 million and contributing approximately 37% of total net revenues. Behind this growth is our long-term positioning around the game industry value chain, which is steadily translating into sustainable growth momentum. Over the past three years, we have steadily expanded our presence across the game industry value chain, evolving from game distribution to in-game item sales, advertising, and marketing, and now game publishing. Throughout this journey, we have built differentiated user acquisition capabilities that have been increasingly recognized and validated by both our partners and the market. Let's give us the confidence to extend beyond our capacity as a publishing partner and take on the full game publisher role, which allow us to participate more deeply across the entire game lifecycle. Our publishing model is built around content rather than paid traffic acquisition. Leveraging our strengths in content creation, streamer network, and user communities, we foster high-quality UGC, expand our reach, and generate social bars across platforms, such as Douyin, Red Note, and WeChat channels. This differentiated approach to publishing let us acquire users more efficiently while reducing our reliance on traditional paid traffic channels. GooseGoose.mobile is our first success story published under this framework, maintaining an active user base and a vibrant content ecosystem. Since July, we have stepped up our efforts to improve the in-game voice environment, launching an AI-powered voice moderation system and a tiered matchmaking system under the GooseGoose Alliance program. These measures have laid a solid foundation for a healthy in-game environment and sustained user engagement. On DRY20, we launched a collaboration with the classic IP Journey to the West, together with a new party game play mode that expands player interaction across multiple SIM spaces. The update expanded the experience beyond the game's core social deduction gameplay into a broader range of immersive social experiences, resulting in enthusiastic reception by players. Supported by our ongoing efforts to improve the in-game environment and introduce compelling content updates, Goose Goose Duck Mobile returned to the number one position on the iOS free game chart in the Chinese mainland at the end of July. The performance of Goose Goose Duck Mobile has demonstrated the effectiveness of Guya's content-driven marketing approach while also helping us develop a repeatable publishing playbook and build valuable operational expertise for future titles. Next up in our pipeline are two titles we are publishing exclusively. The Legend of Swarm Man Reunion, the classic martial arts MMORPG, and Xiao Xiao Qi Yu, a 3D match-based casual mobile game. Our transition from co-publishing to exclusive publishing marks another step forward in the evolution of our publishing strategy. Officially licensed from C3G, The Legend of Swordsmen Reunion is the latest entry in the renowned Legend of Swordsmen franchise, building on more than two decades of rich heritage. It was developed by the original core team behind the PC game, Jianxia World, and offers a seamless cross-platform experience featuring synchronized account data and gameplay across mobile app, PC, and mini program platforms. The game has completed its first round of testing and received encouraging user feedback. By combining our content marketing capabilities with the reach of our streamer network. We aim to bring this classic franchise to a broader audience while preserving the authentic gameplay that has made it a fan favorite for generations. Xiaojiao Qiyu is a 3D mesh-based casual mobile game featuring the official licensed , and represent an expansion into the match category for Huya. The title is well aligned with our content-driven publishing model with strong potential to generate user-created content, social engagement, and organic traffic across live streaming and short form video platforms. On the self-developed game front, we We are pleased to see our first self-developed title, Zhe Dao You Huan Shou, received regular approval for publication in dry. As a casual SLG centered on islands and pet collection, the game represents another important step in building an in-house game development capabilities. We are now actively preparing for its upcoming testing and look forward to sharing more updates as development progresses. On the advertising side, we continue to strengthen our content-driven integrated marketing solution for game developers during the quarter while broadening our advertiser base. Hearthstone has emerged as an important new customer this quarter. We partner with leading consumers to deliver a series of tournaments and content collaborations for Hearthstone. Highlighted by Da'an Manor Global Invitational, the first global third-party platform tournament for Hearthstone, Battlegrounds. It debuted in China and generated more than 200 million impressions across online platforms during tournament play, earning strong recognition from the client. On the in-game item sales front, revenues maintain triple-digit year-over-year growth with Peacekeeper Elite, PUBG Mobile, Genshin Impact, and Arena Breakout as key contributors. For Peacekeeper Elite, we continue to invest in the broader game ecosystem. In particular, our coverage and commentary around PEL tournaments generated strong audience interest and engagement, enhanced the appeal of our in-game item offerings, and contributed to continued growth in relative sales. In our live streaming business, the outdoor entertainment content category continues to perform well during the quarter, while our overall streamer ecosystem remains stable. We are also exploring ways to drive greater synergies between game streamers and our entertainment verticals to boost the revenue contribution from top streamers. Since the beginning of the second half of the year, we have also been proactively reviewing the economics of our live streaming partnership aiming to improve the efficiency of our content investment and support a healthier, more sustainable live streaming ecosystem. In terms of tournament content, we offer more than 100 licensed tournaments and approximately 20 self produced tournament on the FUYA platform during the quarter. Our self-produced events continue to grow in scale and build stronger proprietary event brands. For the CF Grand Master Cup, we officially partnered with Crossfire to stage an international invitation featuring eight professional teams and four leading overseas teams The tournament also featured a crossover with the film Kung Fu Hostel, further integrating esports and broader entertainment content. The Dota 2 Immortal Cup Season 2 generated widespread online buzz and more than 2.5 billion impressions across online platforms. In July, we launched both the Dota 4 Streamer Championship and the Peacekeeper Elite Mengnan Superstar Cup. Together, these events expanded our presence across leading shooter titles, strengthened our portfolio of self-produced tournaments, and enhanced Huya's appeal among core gamers. We also helped host a variant national tournament, earning further recognition from game developers for our tournament hosting and products capabilities. On product and AI, We continue to apply AI technologies across our game content ecosystem to improve both our products and overall platform experience. For popular titles such as Delta Force, League of Legends, and Teamfight Tactics, we have launched a range of AI-powered game tools, including map navigation and combat assistance features. These tools have driven solid user engagement and retention. Users of these tools have also shown higher activity levels, longer viewing time, and greater monetization potential on the Huya platform, reinforcing our view that AI-powered game tools will play an increasingly important role in reaching our live streaming ecosystem and creating long-term value. In DRY, we released VAM version 1, our self-developed real-time multi-model digital human model. VAM can rapidly generate AI-powered virtual hosts with natural speech, thinking capabilities, and expressive body movements, enabling highly realistic real-time interaction. We believe VAM has the potential to meaningfully improve the economics of live streaming content. Unlike traditional live streaming, where content supply is inherently constrained by the number and availability of human streamers, VAM enables us to scale content production more efficiently as development expands. Deployment expense will affect operating leverage to increase with our marginal content creation cost declining while content supply become more scalable. Looking back at the quarter, we continue to make steady progress in executing our long-term strategy across publishing, self-development, AI innovation, and game-related services We have further strengthened our capabilities and expanded our role across the game industry value chain. Looking ahead, we remain focused on executing our content driven strategy, deepening our partnership across the gaming ecosystem and investing in the capabilities that will support our next phase of growth. We believe these efforts will further strengthen Wea's competitive position and create a sustainable long-term value for our shareholders. Thank you. With that, I will now turn the call over to our CFO, Raymond. He will share 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 second quarter, We delivered steady top-line growth while continuing to improve our revenue mix and operating performance. With a larger revenue contribution from our higher-margin game-related services, advertising, and other businesses, our growth margin expanded to 14.7%. Operating loss narrowed to RMB 7 million and non-GAAP operating income improved both year-over-year and sequentially to RMB 16 million. Let's move on to more details of our Q2 financial results. Total net revenues were RMB 1.74 billion for Q2, up 11% from the same period last year. Live streaming revenues were RMB 1.1 billion for Q2, compared with RMB 1.15 billion for the same period last year, primarily reflecting the live streaming industry's current environment. Gaming-related services, advertising, and other revenues were RMB 638 million for Q2, up 54% from the same period last year. The increase was primarily driven by higher revenues from in-game item sales and advertising, as well as the contribution from the commercialization of Goods Goods Dark Mobile. Cost of revenues increased by 10% year-over-year to RMB 1.48 billion for Q2, generally in line with the increase in revenues. primarily due to increased revenue sharing fees and the cost of in-game virtual items. Within this, revenue sharing fees and accounting costs rose by 3% year-over-year to RMB 1.21 billion. Gross profit was RMB 255 million worth Q2, up 20% from the same period last year. Gross margin was 14.7% for Q2, improving from 13.5% for the same period last year. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 257 million, and the non-GAAP gross margin was 14.8% for Q2. Research and development expenses decreased by 1% year-over-year to RMB 120 million for Q2. Sales and marketing expenses increased by 58% year-over-year to RMB 91 million for Q2, primarily due to continued marketing and promotional efforts related to GoodSchoolStock Mobile. General and administrative expenses decreased by 8% year-over-year to RMB 58 million for Q2, primarily due to decreased professional service fees. Other income was RMB 7.8 million for Q2, compared with RMB 7.6 million for the same period last year. Operating loss narrowed to RMB 7 million for Q2 compared with the loss of RMB 24 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, land-gap operating income increased to RMB 16 million from RMB 0.4 million in the same period last year. Interest income was RMB 26 million for Q2, down from RMB 59 million for the same period last year, primarily due to a decrease in the average deficit balance as a result of special cash dividends and lower interest rates. Net income attributable to Fuya Inc. was RMB 1.6 million for Q2, compared with the net loss attributable to Huya Inc. of RMB 5.5 million for the same period last year. Excluding share-based compensation expenses and the amortization of intangible assets from business acquisitions, net of income taxes, net income attributable to Huya Inc. was RMB 36 million. for Q2, compared with RMB 48 million for the same period last year. Basic and diluted net income per ADS were each RMB 1 cent for Q2. Non-GAAP basic and diluted net income per ADS was each RMB 16 cents for Q2. As of June 30, 2026, the company had Cash and cash equivalents, short-term deposit and long-term deposit of RMB 3.21 billion compared with RMB 3.46 billion as of March 31, 2026. With that, I'd like to open the call to your question. Thanks, Raymond.