Hanyu Liu:

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 Hanyu Liu from the Huya Investor Relations. [Operator Instructions] Please be advised that today's webinar is being recorded. The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir. huya.com. A replay of the call will be available on the IR website soon. Participants of management on today's call will be Mr. Vincent Junhong Huang, our Acting Co-CEO and Senior Vice President; Mr. Raymond Peng Lei, our Acting Co-CEO and CFO; and Ms. Marguerite Xie, 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 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 20-F 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 discussion 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 our Co-CEO, Mr. Huang. Please go ahead. Junhong Huang: 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 remained 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 full 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 a one-off accounting provision, excluding lease provision, SBC and amortization items, we would have seen 3 consecutive quarters of positive growing operating profit and the full year operating profit. A robust content ecosystem and a stable user base underpin our performance. In Q4, Huya's total MAUs were approximately 160 million. We are also pleased to see our platform's influence continue to grow. In February, we welcomed the return of UGI, one of the most legendary names in Esports. This return further validates the strength of Huya's Esports content ecosystem and our ability to attract and support top-tier streamers. The influence of our streamer ecosystem continued 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-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 Goose Goose Duck Mobile marks another important milestone in this transformation. Unlike traditional publishing model that rely primarily on user acquisition, we leveraged the strength of our content ecosystem and take a content-driven approach to publishing. Goose Goose Duck Mobile launched in January delivered outstanding results, attracting over 5 million new users within the first 24 hours and surpassing 10 million within 6 days and has ranked #1 on the iOS free game chart for the most of the time since its launch. The game quickly become a market sensation and a clear validation of our strategy. Since preregistration stage, we have been working closely with top streamers across multiple platforms and produced 2 seasons of a live streaming variety show. [indiscernible] with full 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 2 months after this launch, Goose Goose Duck 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 updates scheduled for later this year, we expect monetization to increase afterwards. The successful debut of Goose Goose Duck Mobile demonstrates 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 continued 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 exclusive presale 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 delivered 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 Tencent and NetEase. In the fourth quarter, we hosted NetEase's Fantasy Westward Journey Mobile, [Foreign Language] Cup in collaboration with 32 top streamers. This helped the game to further expand its brand awareness to younger audience through live streaming. In our e-sports ecosystem, we delivered 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 tournament in the League of Legends ecosystem. This also marked the first time that the official League of Legends 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 exclusive 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 item in terms of both scale and viewership in Delta Force e-sports 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 a growing number of production featuring permanently on viewership charts. We have integrated AI host into our e-sports 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 CS:GO, 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 game play 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 evolve 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 returned to growth and further enhanced our profit profile. Looking ahead, we will further scale our footprint across the entire gaming value chain. With our growth momentum on a 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. Lei Peng: Thank you, Vincent, and hello, everyone. I'll start with our fourth quarter results, followed by our full year financial highlights and an update on our shareholder returns. In the fourth 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 onetime RMB 66 million provision, which led to a non-GAAP operating loss of RMB 36 million for the quarter. Excluding the impact of this onetime item, we continue to see improvement in our core operating performance and the overall earnings 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 complete 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 deepened 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 content costs as well as increased costs related to in-game items. Within this, revenue sharing fees and content 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 14.1% for Q4, improving from 11.4% from the same period last year. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 248 million and non-GAAP gross margin was 14.3% 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 Goose Goose Duck mobile. General and administrative expenses decreased by 55% year-over-year to RMB 126 million for Q4, primarily due to RMB 66 million provision related to a receivable arising from 2021 arrangement with a broadcaster, which was deemed to have 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 93 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, non-GAAP operating loss narrowed to RMB 36 million for Q4 compared with a loss of RMB 69 million in the same period last year. Interest income was RMB 32 million for Q4, down from RMB 75 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 RMB 81 million for Q4 compared with RMB 151 million for the same period last year, primarily due to the recognition of impairment charge on the company's investments attributable to the weak financial performance of certain investees. Net loss attributable to HUYA Inc. narrowed to RMB 118 million for Q4 compared with loss of RMB 172 million for the same period last year. Excluding share-based compensation expenses, impairment loss of investment and amortization of intangible assets from business acquisitions, net of income taxes. Non-GAAP net loss attributable to HUYA Inc. was RMB 8 million for Q4 compared with non-GAAP net income attributable to HUYA Inc. of RMB 1 million for the same period last year, primarily due to the provision item and lower interest income as explained earlier. Diluted net loss per ADS were approximately RMB 0.51 for Q4. Non-GAAP diluted net loss per ADS was RMB 0.04 for Q4. As of December 31, 2025, the company has cash and cash equivalents, short-term deposits and long-term deposits 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, decreased by 7% from the prior year. Live streaming revenues were RMB 4.59 billion for 2025 compared with RMB 4.75 billion for the prior year. Game-related services, advertising and other revenues were RMB 1.91 billion for 2025 compared with RMB 1.33 billion for the prior year. Non-GAAP gross profit was RMB 884 million for 2025, up 7% from the prior year. Non-GAAP gross margin remained flat at 13.6% for 2025. Non-GAAP net income attributable to HUYA Inc. was RMB 99 million for 2025 compared with RMB 269 million for the prior year, and the non-GAAP 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 and the lower interest income rather than any change in our core business performance. Non-GAAP diluted net 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 amounts due from related parties. For additional details on our full year 2025 financial results, I encourage listeners to refer to our earnings press release issued earlier today. Finally, let me provide an update on our shareholder returns. To implement our 2025 to 2027 dividend plan adopted in March 2025, we are pleased to declare a 2026 special cash dividend of USD 0.135 per ordinary share or USD 0.135 per ADS for a total amount of approximately USD 31 million. In addition, under our up to USD 100 million share repurchase program, we have repurchased 22.9 million Huya shares with an aggregate consideration of USD 75.5 million as of the end of December 2025. With that, I'd like to open the call for your questions. Hanyu Liu: [Operator Instructions] Today's first question comes from Rebecca Xu from Morgan Stanley. Rebecca Xu: [Foreign Language] I will translate myself. We see profit fluctuations mainly driven by provisioning and investment impairments. Could management share the composition and underlying reasons for this item? And how should we think of the future trend on OP and net profit? Lei Peng: [Interpreted] Thank you for the question. The fluctuate in our profit this quarter was mainly driven by 2 items. First, we recorded a RMB 66 million one-off provision related to a receivable arising from 2021 arrangement with broadcaster. This was recorded in G&A and contributed materially to our non-GAAP operating loss of RMB 36 million for the fourth quarter. And secondly, we recorded impairment loss of investments of RMB 81 million related to companies that were previously investees as underperforming. This contributed to our net loss. So overall, these 2 items are noncash 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 core operating trends. So going forward, we'll continue to review -- to perform regular impairment review in accordance to the accounting standards. But right as of now, based on management's current judgment, we don't see any additional impairment required at the moment. Hanyu Liu: Our next question comes from Wei Meng from CICC. Meng Wei: [Foreign Language] Let me translate myself. My question is about Goose Goose Duck. First of all, could you maybe share some color on the current metrics like DAU retention, ARPU and revenue, et cetera. And also what's the KPIs for 2026? And secondly, how does the management think about extending the game life cycle from here? Junhong Huang: [Interpreted] 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 2 months after this launch, the game is still at the very top of the iOS 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 life cycle extension, we are focused on 3 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 an enriched UGC experience within the game. Hanyu Liu: And our next questions come from Ritchie Sun from HSBC. Ritchie Sun: [Foreign Language] 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? What are the tangible results over there? Junhong Huang: [Interpreted] Thank you for the question. So AI is something every company should think about. For us, it's about 2 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 outperformed 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 Map Tool, which provides a very rich, immersive 3D environment for players to quickly get familiar and better navigate the game. So we also launched this tool to the overseas market, and it was very well received by international users. It draw great attention from games official team and 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, further expand user reach and engagement. Additionally, we are developing AI hardware and AI interactive products, including AI-enabled smart hardware based on Goose Goose Duck IP. At the same time, we're exploring different ways to integrate new technologies such as open call, multi-agent systems, virtual live streamers into party game scenarios to enhance interactivity and support more customized gameplay experiences for Goose Goose Duck. Going forward, we also plan to create more AI-driven companion tools for other popular titles such as Battle of Golden Spatula. Hanyu Liu: We will take our next question from Nelson Cheung from Citibank. Fuk Lung Cheung: [Foreign Language] So let translate myself. Can management share your future strategy on your game publishing business, 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? Junhong Huang: [Interpreted] The in-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 video 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 e-sports and entertainment potential. This is where Huya's strength in live streaming and e-sports 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. Hanyu Liu: Our next question comes from Yiwen Zhang from China Renaisance. Yiwen Zhang: [Foreign Language] So translating my question. The question is on margin. We note despite some net impact from provision impairment in Q4, there was not improvement on our gross profit margin during the quarter. So what is the management's view on future gross profit margin trend and the room for improvement? Lei Peng: [Interpreted] Full 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 2 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 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 do -- we expect to see continued gross margin improvement. Hanyu Liu: We will take our last question today from Maggie Ye from CLSA. Yifan Ye: [Foreign Language] My question is related to game virtual item sales. So beyond the top line growth this quarter, could management share any material progress regarding this segment's 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? Lei Peng: [Interpreted] Thank you for the question. So 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 then translated into meaningful improvement in earnings quality. So there were 2 -- there were 3 key highlights during the quarter. First, we achieved a meaningful milestone in exclusive rights partnership. For the first time, we secured exclusive presale rights for Wang Zhaojun's FMVP skin in Honor of Kings. The launch generated close to RMB 10 million 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, who are working on their key titles, including those from Tencent and NetEase. We hope to further expand our portfolio of games and make -- and continue to grow our presence in the industry. Thank you. Hanyu Liu: Thank you once again for joining us today. If you have further questions, please feel free to contact the Huya Investor Relations through the contact information provided on our website or Piacente Financial Communications. This concludes today's call, and we're looking forward to speaking to you again next quarter. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]