HUYA Inc. (HUYA) Q1 2019 Earnings Report, Transcript and Summary

Hello, ladies and gentlemen. Thank you for standing by, and welcome to the first quarter 2019 earnings conference call for HUYA Inc. [Operator Instructions]. Today's conference call is being recorded. I'll now turn the call over to Ms. Hanyu Liu, company Investor Relations. Please go ahead.

Hello, everyone, and welcome to the first quarter 2019 earnings conference call of HUYA Inc. 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 Huya, ir.huya.com. A replay of the call will be available on IR website in a few hours. Participants on today's call will be Mr. Rongjie Dong, Chief Executive Officer of Huya; and Mr. Henry Sha, Chief Financial Officer. 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 uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that Huya'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. I will now turn the call over to our CEO, Mr. Rongjie Dong. Please go ahead.

Hello, everyone. Thank you for joining us for today's call. I would like to talk about two primary topics. One is a review of our business and operations during the first quarter. The other is Huya's new initiatives and underlining strategic thinking as we look ahead. In terms of key quarterly highlights, Huya's revenues for the first quarter grew 93% year-over-year as we continued delivering game and e-sports content to a highly engaged community of game enthusiasts while also making progress in the nongame genres, thereby participating -- participation grew faster evidenced by our total monthly average user base growth of 33% year-over-year, reaching 123.8 million in quarter one. In particular, the accelerated growth of our MAUs during the past two quarters has exceeded our expectations. Looking at the composition and the strategy behind our MAU numbers, we maintained our focus on mobile and solidified our advantages in technology as well as product diversification for the sake of both user and broadcaster experience. Our mobile strategy paid off with promising results as mobile MAUs for the first quarter continued its strong momentum to 54 million users, up 30% year-over-year and up 6.3% quarter-over-quarter. Mobile achieved higher sequential growth than that of the PC end, contributing more than 80% of live streaming revenues, justifying our resource allocation and technology focus in this area. Additionally, we experienced higher MAU conversion rates to paying users at 5.4 million, up 57% year-over-year and up 11% quarter-over-quarter mainly thanks to our mobile-end strength. E-sports remains a strategy -- strategic concentration as we further integrate ourselves across the ecosystem's value chain. We are making further positive strides in deepening relationships with key stakeholders as we build up our vibrant e-sports community, engaging with more industry players. Talking about deepening industry relationships vertically, in the first quarter, we broadcasted over 80 e-sports tournaments with viewership of approximately 380 million covering all major events such as LPL, LCK, KPL, HoK Champion Cup Winter Season and WESG Grand Final as compared with broadcasting 60 tournaments and generating 260 million viewership in the year ago period. It's also worth noting that our exclusively broadcasted LCK series alone hit viewership of 89 million in the quarter. In the spirit of mapping out the horizontal relationship within the e-sports matrix, we have recently signed Team WE and TOP and look forward to more teams who are producing exclusive and professional gaming content for Huya. We are also quite committed to self-organized tournament services by hosting over 20 events in quarter 1. These self-organized tournaments generated viewership of over 63 million, among which Huya Destiny PUBG Solo Series and the Fifth Honor of Kings Guild Tournament each generated viewership of more than 10 million. Through our dedicating to generating a broader range of diversified content, Huya has successively evolved its ecosystem to create more original and quality content targeted at our expanded cohort from hardcore gamers to the entire gaming population. In the past 12 months, Huya's platform has expanded its content suppliers into a mix of user generated content or UGC, professionally generated content or PGC and the professional user generated content or PUGC from the original composition of major UGC and limited e-sports PGC. Meanwhile, we are leveraging our talent agency mechanism especially the platinum talent agencies to produce high-quality PUGC efficiently. Platinum talent agencies are recognized as capable of managing large pools of broadcasters and contributing to constant streaming hours upon thorough and ongoing assessment of their quality by us. The number of platinum agencies increased from approximately 1,000 in 2017 to over 1,500 by the end of 2018. As a marketplace for content producers, we strategically provide platinum talent agencies with additional resources to promote and develop their broadcasters while we also set some incentive measures for top earning platinum talent agencies. Platinum talent agencies are playing a key role in producing both gaming and the nongaming content since we have seeing that outcome from our efforts with providing them with more foreseeable diversification guidelines based on our data mining and operation experiences. For example, as are sharing some overlapping cohorts with gaming content, both outdoor activities and animation themed streaming have also been successful categories thanks to Huya's talent agency partners. The percentage of MAUs viewing live streaming of outdoor content and anime content increased to 14% and 10% in quarter 4 2018 from 10% and 7%, respectively, in the year ago period. As talent agencies are taking a significant role in developing outdoor and anime PUGC, our quality of content has been greatly improved at minimal overhead costs to us. At the same time, we produced a series of original PGC shows on our path to content diversification. For instance, by collaborating with PUBG Mobile, we launched the Team up with My Idol in January, a crossover live show inviting idol celebrities to stream with popular game broadcasters. International expansion continues to be our key competitive differentiated -- differentiator as we remain optimistic and selective in emerging markets across Southeast Asia and Latin America, where we have established first-mover advantage. Establishing a baseline foundation through NIMO TV, our wholly owned business unit targeting the overseas market, we will launch further marketing and promotion efforts to grow user base. To illustrate, we are hosting local tournaments on regional popular games such as Free Fire in Brazil to attract streamers and users alike. Leveraging off our expertise in the game live streaming space and localization strategy, we are confident in our globalization process and long-term returns on our overseas investment. Facing the uncertainties that lied ahead under such macroeconomic conditions, our overseas strategy will diversify the sources of both user base and revenue streams, thus bolster our confidence to generate steady long-term growth. On the technology initiatives front, with the advantages in content and operation, we will remain focused on investing in technology to develop revolutionary products and best-in-class user experience. As an example, we have now deployed AI facilitated technology called Smart Editing, which generates clips of highlights right after a game ends and automatically distributes to various channels so that users can have immediate access to the gaming highlights. Another recent tech update is that we signed a MOU with China Telecom in April for 5G solution cooperation and successfully completed live streaming outdoor activity in 4K high-definition through the 5G network for the first time among China -- Chinese live streaming peers. Looking ahead, we see great potential for higher definition and latency-free solutions as 5G technology is put into commercial deployment, bringing fluent gameplay and content consumption experiences. With all that being said, as we drive our leadership position further with these initiatives in technology, overseas market and content diversification, I believe Huya will establish significant presence in some of these new territories within next 2 to 3 years. While the game live streaming industry has been consolidating since Huya went public last year, we are also seeing an increasing amount of capital inflow into this arena, and the competition remains among top companies. To lay the foundation of these new initiatives and provide funding for long-term sustainable growth, we successfully completed a follow-on offering recently. In summary, we are excited to get the year off to a strong start as we successfully execute our business strategy. We are confident in leveraging our well-established leadership position in game live streaming to unlock value for all stakeholders. With that, I will now turn the call over to our CFO, Henry, to share the financial details.

Thank you, Mr. Dong. Thanks, everyone, for joining us on our first quarter 2019 earnings call. It's my pleasure to walk you through our financial results in this quarter and the revenue guidance for the next one. We are pleased to kick off a strong start to the year delivering revenues that beat both our guidance and The Street consensus. Just to break down the revenues and the drivers behind our growth: We continued live streaming revenue growth with strong user monetization as paying user growth reached 57.4% year-over-year, surpassing MAU growth of 33.3%. On the other hand, revenue of advertising and others also saw a expedited sequential growth as a result of upgraded advertising product and strong branding efforts. Having achieved solid growth margin improvement to 17% on a non-GAAP basis in the first quarter of 2019 from 15.6% the year ago period and 16.1% sequentially, non-GAAP operating margin improved to 5.9% in the first quarter 2019 from 5.5% in the sequential period. As an apple-to-apple comparison, in the first quarter last year, we haven't yet established our overseas platform, while this quarter, we had and needed to bear the cost and expenses associated with our overseas expansion. Under such circumstance, I'm glad that we kept our margin expansion trend well in place despite the overseas investments. Looking ahead, Huya will continue to leverage our strengths, ramping content acquisition efforts, further penetrating the e-sports value chain while executing our globalization strategy. We will also maintain our sales and marketing efforts in order to enhance brand awareness. Investment in globalization will be directly further into Southeast Asia and Latin American markets as they are fertile planting grounds for nurturing a game live streaming community. With our March launch in Mexico, we officially entered the Spanish language market, and we believe global expansion is differentiating Huya from its competitors. In this regard, we are targeting further investments in Huya's overseas expansion within next 2 to 3 years. Monetization is expected to be more visible in the overseas market in the second half of 2019. Now let me briefly go over the financial results for the first quarter. Total net revenues for the first quarter of 2019 increased by 93.4% to RMB1,631.5 million from RMB843.6 million in the same period of 2018. Live streaming revenues increased by 95.8% to RMB1,552.5 million in the first quarter of 2019 from RMB792.8 million in the same period of 2018 primarily due to the increase in both the number of paying users on our platform and average spending per paying user. The increase in the number of paying users was primarily driven by our mobile strategy, diversification of content offerings and continued efforts in converting active users into paying users. Advertising and other revenues increased by 55.5% to RMB79 million in the first quarter of 2019 from RMB50.8 million in the same period of 2018. As we continue efforts to diversify revenue streams, revenue contributed by advertising and others experienced a 25% quarter-over-quarter growth for Q1, demonstrating an accelerated sequential development. The growth was mostly driven by increased demand from gaming advertisers, product placement by our broadcasters along with greater pricing power with higher recognition from advertisers. Since the beginning of 2019, we have provided more advertising services for our broadcasters to help increase the advertisement orders of commercial activities and product placement. Cost of revenues increased by 90.6% to RMB1,358.1 million in the first quarter of 2019 from RMB712.5 million in the same period of 2018 primarily attributable to the increase in revenue sharing fees and content costs as well as bandwidth costs. Revenue sharing fees and content costs increased by 116.7% to RMB1,113.1 million in the first quarter of 2019 from RMB513.6 million in the same period of 2018 primarily due to the increase in virtual item revenue sharing, which was in line with the company's live streaming revenue growth and continued spending in e-sports content and content creators in both domestic and overseas markets. Bandwidth costs increased by 8.3% to RMB169 million in the first quarter of 2019 from RMB156.1 million in the same period of 2018 primarily due to an increase in bandwidth usage as a result of the increased user base on Huya's platform and enhanced live streaming video quality improvement, partially offset by improved efficiency in bandwidth utilization through continued deployment new technologies in content distribution. Gross profit increased by 108.6% to RMB273.4 million in the first quarter of 2019 from RMB131 million in the same period of 2018. By excluding share-based compensation expenses, non-GAAP gross margin increased to 17% in the first quarter of 2019 from 15.6% in the same period of 2018 and from 16.1% in the fourth quarter of 2018 primarily due to technology innovation on bandwidth utilization, our enhanced monetization efforts and the continued leverage of economies of scale. Research and development expenses increased by 75% to RMB90 million for the first quarter of 2019 from RMB51.5 million for the first quarter of 2018 mainly attributable to an increased head count of R&D personnel and share-based compensation expenses related to the share awards granted in 2018. For example, more R&D resources were need -- will need to be spent on overseas product and in collaboration with Tencent in developing new functions. Sales and marketing expenses increased by 201.3% to RMB78.2 million for the first quarter of 2019 from RMB25.9 million in the first quarter of 2018 mainly attributable to the increase of marketing and promotion expenses as a result of cooperation with various marketing channels in both domestic and overseas markets as well as enhanced efforts in promoting Huya's brand awareness and e-sports content and the increase in head count of sales and marketing personnel. General and administrative expenses increased by 139.8% to RMB85.8 million for the first quarter of 2019 from RMB35.8 million for the first quarter of 2018 mainly due to the increase in share-based compensation expenses related to share awards granted in 2018 as well as the increase in head count of management personnel. Operating income was RMB28.2 million for the first quarter of 2019, increased by 0.2% from RMB28.2 million in the same period of 2018. Non-GAAP operating income, which excludes share-based compensation expenses, increased by 82.9% to RMB96 million for the first quarter of 2019 from RMB52.5 million in the same period of 2018. Non-GAAP operating margin was 5.9% in the first quarter of 2019 compared with 5.5% in the fourth quarter of 2018 and 5.9% in the first quarter of 2018. Income tax expenses was RMB19 million for the first quarter of 2019 compared with the income tax benefits of RMB4.5 million in the same period of 2018. Since the first quarter of this year, we have started recording corporate income tax while we are applying for tax privilege from relevant local government agencies. If we exclude the impact from income tax, the non-GAAP profit margin before tax would be 9.2% in Q1 2019, improved by over 117 -- 170 basis points year-over-year and by over 20 basis points quarter-over-quarter. Net income attributable to HUYA Inc. was RMB63.5 million for the first quarter of 2019, increased by 102.1% from RMB31.4 million in the same period of 2018. GAAP net margin was 3.9% in the first quarter of 2019 compared to 3.7% in the same period of 2018. Non-GAAP net income attributable to HUYA Inc. in the first quarter of 2019, which excludes share-based compensation expenses, increased by 94.1% to RMB131.3 million from RMB67.6 million in the same period of 2018. Non-GAAP net margin was 8.0% in the first quarter of 2019, remained flat from the same period last year. Diluted net income per ADS was RMB0.29 for the first quarter of 2019 compared with diluted net loss per ADS of RMB4.96 for the same period of 2018. Each ADS represents 1 Class A ordinary share. Non-GAAP diluted net income per ADS was RMB0.59 for the first quarter of 2019 compared with RMB0.35 for the same period of 2018. Now turning to our balance sheet and cash flows. As of March 31, 2019, the company had a cash, cash equivalents, short-term deposits and short-term investments of RMB6,329 million. Net cash provided by operating activities was RMB501.7 million for the first quarter of 2019 compared with RMB182.4 million in the same period of 2018. We received approximately USD 314 million net proceeds from our follow-on public offering in April. By the end of April, we have more than USD 1.2 billion cash balance, which can fuel us in long-term growth and help us face with uncertainties in the near term. For the second quarter of 2019, Huya currently expects total net revenues to be in the range of RMB1,730 million to RMB1,790 million, representing a year-over-year growth of between 66.6% and 72.4%. This forecast reflects our current and preliminary views on market and operational conditions, which are subject to change. We have been the leader in China's game live streaming industry. With our determination to succeed and execution track record, we will enhance our leadership in the domestic market and establish first-mover advantage in other emerging markets. Staying ahead of competition, we will keep on investing to support our new initiatives across a spectrum of opportunities, especially in the content acquisition segment to achieve sustainable growth. We believe in the longer term and aspire to realize margin expansion progressively to justify our current investment as stepping stones. This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.

[Operator Instructions]. Our first question in queue is from Hillman Chan from Citigroup.

I have two major questions. First one on the competitive landscape. So how does management differentiate ourselves versus our competitor for the traffic growth strategy, new game launches and operations and also aggressiveness in stream approaching? And also how do we see Tencent's relationship with our two platforms? And my second question is on overseas expansion. Noticed that we've enjoyed fast user growth in the overseas market. Could management help us compare the user behavior of overseas live stream viewer such as visit retention rate, paying ratio ARPU versus Chinese viewers in terms of similarities and differences? And how should we think about the P&L and maybe potential NIMO TV?

Thanks for your question. The translation, you might have noticed that there is a recent consolidation in the game live streaming industry. And in terms of the competition landscape right now, we do feel that fine management operations and commercial monetization are the crucial factors that manage for game live streaming competition in the near term. And the poaching issues of the broadcasters, as you just mentioned, for now, it's actually a existing issues and -- but we do see that bringing substantial operation performance by poaching broadcasters will be the path. In the long run, the performance of game live streaming business will not be focused on simply poaching broadcasters from platform to platform. As I said earlier, the focus -- the strategic focus right now will be fine management and operations and to increase and diversify our revenue stream and also the commercialization, monetization of the game live streaming industries. These are in the near term. In the longer run, as you also have been noticed, keeping its current ways of business model for game live streaming platform in China, but in exploring more revenues sources of this business, we do see that we need to in close contact with the upstream content players and the game developers to seek for more revenue streams so that we can put the business model of game live streaming more game related instead of just taking as a business model. And of course, we will penetrate deeper into the stream-related content and to explore more business monetization method. That's for the long term. Horizontally speaking, given that globalization has becoming quite common in the game live streaming industry and also the gaming industry, we have already established our business units in the overseas earlier last year. And at this closing of first quarter '18 earnings conference call, our -- total MAU of our overseas business unit, NIMO TV, has already surpassed the 10 million and it's due on the rapid growth as of now. And we're quite confident that globalization will also be one of -- will also become one of our competitive advantage going forward. So I hope this answers the question regarding landscape in the near term, long term and horizontally.

Thanks, Dong Rong. And Hillman, I will comment on the Dong Rong's, CEO's answers to you. So because of the businesses haven't contributed significantly to our total business, our whole business platform, so we cannot disclose the financials. But as we disclosed in the last quarter earnings call that we will be -- have a stronger visibility on the monetization of overseas business in the second half this year. Thank you. These are the answers to your questions.

Our next question is from Wendy Chen from Goldman Sachs.

So I have two questions. First on our advertising and other business. Follow on CEO's remarks, how do we see this business line going forward especially if we deepen our cooperation with the investee like -- with investor like Tencent. And secondly, on our paying ratio contribution, can the management shed some color on the contribution from the mobile side as well as PC side? And how is the new user we have been acquired for the past few quarters behaving, the paying behavior?

Thanks, Wendy. I will help answer the question for you. So about your first question about our advertisement business, so we have been seeing progress in the product placement business cooperation with our broadcasters and talent agencies in this quarter. So our advertisement business revenue also achieved sequential growth quarter-over-quarter since Q4 to Q1 this year. So we have been seeing the opportunity from different gamer -- gaming companies, not only from the Tencent-related gaming companies and gaming studios as well as from the non-Tencent system gaming companies as well. So given the -- as you can see, more and more gaming title have been approved and get the license in beginning of -- since beginning of this year, so we stay also optimistic on the growth of -- on further growth of the advertising business for us. I think 50% -- more than 50% of the advertising revenue was contributed by the gaming companies in the first quarter, and the number of the advertisers also get increased in comparison with the same shared one year ago. About your second questions about the paying users, more than like 70% of the paying users in this quarter was contributed or paid through their mobile devices especially on the mobile phone. And the payment behavior of our -- the new users coming to our platform. As you can see, our user -- we still achieved a more than like 6% of the sequential growth in terms of the total MAU and also faster in the mobile side. The new users come to -- and their payment behavior looks good. The retention rate also -- I mean the paying user's retention rate also looks good. The paying users increased to like 5.4 million in this quarter from below like 5 million in 4Q last year. So I think that -- the payment behavior is ramping up sequentially. That's the answer to your question.

Our next telephone question is from Ashley Xu from CLSA.

I got two questions. Why is that could we share more operating metrics on user stickiness, for example, user time spent on the platform? And second is what's the revenue contribution from gaming content. And what would be the trend for second quarter?

So I will help to answer your questions. For the user time spent for this quarter on the mobile side is around approximately 100 minutes per user per day. This number also gets increased from like 99 minutes since the last quarter and 97 minutes in Q1 2018. So the user engagement from this user time spent perspective, we believe the user behavior and the user engagement performed well in this quarter. And now more than 70% -- 7-0% of our paying user, they are paying for our gaming-related and e-sports-related content on the platform. So these numbers keep like stable in the past, and also, we stay optimistic. This number also looks healthy, the trend, looking forward. Thank you.

[Operator Instructions]. Our next question is from Lei Zhang from Bank of America Merrill Lynch.

Two questions here. First question about your user growth, which has remained strong in the first quarter and how do you see the user growth in the domestic market and how do you see the user TAM for the game broadcasting market in the longer term. And my second question about the content cost. What is your key component for content costs? And how do you see the churn in the following quarter? Do you see the content cost to come down gaming industry consolidation? Or any change in the fixed portion variable components for your proposed?

I'll translate what Mr. Dong has just said. In terms of the user growth, there are actually several dimensions to talk about this topic. Firstly, as an industry still undergoing a massive consolidation, we're still exploring new opportunities for market share gains. And secondly, as with the recent regulatory changes, regulator authorities are actually putting multiple measures regarding the game title approvals, and we've seen new games coming through into the industry. And whether it's a gaming industry or the game live streaming industry, it's actually coming back to the right and healthier track. And thirdly, as e-sports has been increasingly becoming more and more popular domestically and abroad, we believe that the past audience base will be shifting from the hardcore gamers to the overall gaming population, so that's for the third point. And last but not least, we're still seeing a lot of new forms of gaming content come to the market, and we're exploring a more diversified categories for the game live -- for the live streaming for these new kinds of games. So we believe and we are confident that the user growth trend will continue at least in the near to midterm. And regarding your question on content cost, actually, the cost for broadcasting e-sports performance is actually only annual basis. And that kind of content already been spent in the first half this year, and we don't really see much of increase of that in the second half. And as you mentioned and to add regarding the broadcaster poaching issue, we believe that even though the market is consolidating and we also see that Tencent is releasing new measures to prevent from poaching broadcasters between platforms. But we have to see that. It's probably going to last for a while for us to fight for the popular broadcasters, I will say, in 1 or 2 quarters because, as we can see, once a contract between broadcasters and platform has expired, there is still fierce competition among platforms to sign on that broadcaster. So we believe the trend isn't going to end immediately right after Tencent-related measures to prevent such issue. It's going to at least last for a little bit while.

And this is Henry. I will also have to supplement some answers to your questions based on Dong Rong's answers. First, about your total addressable market, looking at the game live broadcast industry, we are looking at, I think, now still that the gaming of the penetration rate improvements. So from this regard, we believe that there is still like 250 to 300 people, I think they are hardcore gamers, will be there, the potential or maybe the existing users of the game live broadcasting services in China. That's in domestic. And in the overseas, including the U.S. market, we believe that will be between the -- 150 to 200 gamers will be the game live broadcasting viewers and audience. So that's the answer to your question about the total addressable market. And the second, the driver for the MAU growth, we believe that the mobile is still our key focus in going long run. So we stay very optimistic on the -- because the mobile users value -- I mean their engagement with the platform is more intense in comparison with that from PC. And another about your question about the revenue sharing fee percentage, we believe that, that percentage will -- looks like -- looking back maybe the four quarters ago -- I mean in 2018 and now in first quarter 2019, this number still keep that relatively stable. And to compensate the questions from -- the answers from Mr. Dong, we are going up -- we are -- within the next while two quarters, we're going up to -- we're going to sign up more broadcasters because we are working on the content diversification, and more content creators will need to work on this to help us maybe in the like the animation, outdoor sports, et cetera, et cetera. So that's why we need to increase our investment in this side. And that's the answer -- and also to improve the content quality. So that's the -- all the answers to your questions.

Our next question now is from Daniel Chen from JPMorgan.

I would translate myself. So I have two relatively long-term questions. So the first one is on the 5G. We just signed with the MAU -- MOU with China Telecom on the 5G development. So I want to ask management on how's management view on the 5G's influence on the game live broadcasting industry. The second one is on the cloud gaming. So the new technology seems to be a very exciting trend for the game live broadcasting industry because right now you can directly play that game with the host. So what's management view on the long-term influence on the China's game live broadcasting industry?

Thank you for your question. Regarding your first one with the 5G, I can say that 5G technology actually very much beneficial to the game live streaming industry in several respects. Firstly, live streaming platform in this nature has a huge demand for the 5G technology especially given that the platform we do have a lot of interactions between the viewers and broadcasters. But for those kinds of entertainment platform like a short video and video streaming platform, whether you see such content on 3G, 4G, or 5G, it actually doesn't make a difference. And secondly, 5G is actually creating a new possibility to the whole Internet to the whole future because whether what we see on the Internet to 5G is actually virtual, but what we see in the reality is quite different from that. But going forward with this 5G technology, virtual will combined perfectly with the reality, and you don't really tell much of a difference in between. So that kind of new improvement making virtual more real life -- more reality like that will make the live streaming platform to step out of the entertainment industry to realize more business opportunities in addition to just can stream within the entertainment industry, so more broader possibilities lie ahead of those game live streaming companies like us. And thirdly, as you may see that there are many applications of 5G technology including artificial reality and virtualization, we think if we combine virtualization and reality together, we can -- if we combine virtualization and reality together, we can actually see new possibilities to solve the -- all issues that lie in front of the game live streaming industry. And these are essentially for Huya itself. We do see with this newly adopted technology, we can have more possibilities to sign on due to explore possibilities with the virtual broadcasters. And these are actually on of our future investments focused virtual broadcasters. So that's for your questions in 5G. And for your second question in cloud compute -- in cloud gaming, firstly...

No problem. So Daniel, I will help to translate Dong Rong's answer to your question about cloud gaming. So cloud gaming still has some like technology obstacles especially for the utilization of the bandwidth usage. We believe this technology problem can be solved, so the cloud gaming product managed solutions will be applied to -- will be deployed to more gaming companies and streaming platforms. So we believe that if the technology problem can be solved and the cost problem can be solved, so these will be very optimistically for the future growth. So that's the answers to your questions.

As there are no further questions now, I'd like to turn the call back to the company for any closing remarks. Please go ahead.

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 or the TPG group's Investor Relations. Thank you very much.

Thank you.

This concludes this conference call. You may now disconnect your line. Thank you very much.