Hello, ladies and gentlemen. Thank you for standing by for the Third Quarter 2019 Earnings Conference Calls for HUYA Inc. At this time, all participants are in listen only mode. Today's conference call is being recorded. I'll now turn the call over to Ms. Dana Cheng, Company Investor Relations. Please go ahead..

Hello everyone and welcome to HUYA's third quarter 2019 earnings conference. 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 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 CFO, Mr. Henry Sha. Please go ahead..

Hello, everyone. Thank you for joining us today. Now let me read the CEO remarks on behalf of Mr. Dong.

Our third quarter 2019 result makes another quarter of successful reparation, where we beat our revenue guidance continued to sustain growth in MAUs, made a positive strides across our strategic initiatives in gaming value chain deployment, and the technology upgrades. Now, let me walk you through the metrics, starting from traffic.

Total MAUs in the domestic market reached 146.1 million during the third quarter, representing a robust growth of 47.6% compared with a year ago period. This impressive growth was attributable to the high season of school summer break and e-sports tournaments hosted in the quarter.

In addition, to our further enlarge the mobile game streamer base, for breakdown of our MAUs, mobile MAUs continued its healthy growth to RMB63.8 million, up 29.1% year-over-year, and a 14.1% quarter-over-quarter. Non-mobile MAUs, which includes both PC and web active users, also realized the substantial growth of 65.9% on a year-over-year basis.

In this quarter, we successfully migrated a portion of non-mobile users into Huya mobile app, which led to a faster growth in our mobile MAU.

Also benefiting from our dominant position in China mobile game broadcasting space, we are able to retain the users newly acquired from the WeChat mini program and in-game pop-up functions to be actively engaged with our mobile app during this peak season of e-sports activities.

Our paying user base growth trend has recovered, reaching 5.3 million in this period. Encouragingly, Q3 paying user number is slightly better than our early expectation. At the core of our content ecosystem, e-sports maintained the momentum of accelerated rise in viewer popularity.

During the third quarter, we broadcasted over 110 e-sports tournaments with the viewership of nearly 560 million, including LPL, LCK, KPL, TNI and the PCL, as compared with 510 million viewership in the year ago period, spotlighting our compelling e-sports content.

Recently, in October, we signed a strategic partnership with Riot Games, the developer of League of Legends, to secure the LCK broadcasting exclusivity with Huya in China between year 2020 and year 2022, as well as the corresponding promotion and the business development rights across the various Chinese marketing channels for the next three years.

The exclusive partnership for this major world-class tournament further demonstrates our sterling branding match and the influence in the vast market of China's e-sports industry. Our efforts to promote e-sports events continue to solidify our position as a leader in this space.

For instance, in the recently concluded 2019 season of World Championship for League of Legend as known as World 2019, we have established a comprehensive coverage of this high profile events by offering various viewing angles for viewers, such as the ultra HD live channel and self-produced commentary channel featuring our broadcasters and the former e-sports professionals.

Additionally, we aligned with four out of 16 participating teams of World 2019, including RNG, FPX, GRF and Team Liquid for the exclusive streaming partnerships -- sorry, for participating teams on World 2019, including RNG, FPX, GRF and Team Liquid for their exclusive streaming partnerships in China.

The broadcasting content of those top teams on Huya platform has proven to be an effective driver in terms of user acquisition and time spent in the LL content sector, in addition to broadcasting the mobile game blockbusters that we have already excelled at.

Besides broadcasting the above major world-class tournaments, which generated a significant viewership on our platform, we have also been proactively producing our self-organized tournaments and further complement the viewing experience of game enthusiasts.

During the quarter, we successfully hosted 38 self-organized tournaments with a viewership of over 76 million compared to 20 events with 49 million viewership in the year ago period. Notably, average daily viewership of Huya, PUBG Destiny Cup 2019 was almost doubled compared to a Destiny Cup spring season of last year.

Of special note, our self-organized events cover not only top-tier games like owner of the team or PUBG, but also long-held games to meet the various gamer’s preference. Now let's talk about content diversification efforts. As discussed in previous earnings calls, nearly half of our active users opt for non-gaming content within Huya's platform.

And non-gaming content accounted for around 45% of streaming revenues. This explains why we incorporated the content diversification in our long-term strategy, while paving our way in gaming content and e-sports.

Among the diversified genres that Huya has cultivated in its non-gaming sector, anime and comic contents has been an essential category given its overlapping demographic with gaming content.

In this quarter, anime and comic category continued its 100% year-over-year growth of viewing hours, thanks to our ever-improving anime and comics content and production capability.

Exemplified by our live comic video series called Please Subscribe Me [ph], yet another fan favorite categories, our production efforts of PGC shows continue to optimize viewers all-in-one experience, including Huya's season four [Indiscernible] a long-standing werewolf game show; Huya Golden College [ph], another reality show focusing on campus life; and The Real Singer [ph], a music talent show engaged with multiple Huya broadcasters.

Diversifying our revenue stream has always been a mission of Huya's management team. As mentioned previously, the advertising distribution platform that we launched in August has been receiving positive feedback from our advertisers.

Especially in game and advertising realm, nearly half of game advertisers with Huya have placed advertising orders through the platform. In addition, as part of our preliminary attempt in game publishing business, we published a Remedy's action adventure game called Control in Southeast Asia, Hong Kong and Taiwan regions in this December.

This is a case of exploring more opportunities in the upstream of gaming value chain. Now talking about expanding the company's overseas footprint. In October, we officially established the presence of our Nimo Tv in Argentina, and have further extended our operation in the Spanish-language speaking regions after a launch in Mexico.

Our overseas MAUs reached about 17 million in the third quarter, with our expansion plan well underway to hit the 20 million MAUs target for overseas markets by end of this year.

We aim to continue geographic expansion for Nimo Tv and increased the game title coverage to include more types of games on platform, while exploring overseas monetization opportunities in the meanwhile. Last but not least, we have never stopped the advancement of our technology and the vision to underscore the openness of Huya.

Most recently, in November, we have hold the live chat conference, launching the Huya open platform to engage and empower third-party and application developers in the development of Huya's mini program, including broadcaster software, interactive features and the marketing tools.

We believe our Huya open platform, where we shape the interactions between broadcasters and the users with innovative, fun and dynamic features. In turn, the upgraded interaction while strengthening user stickiness and the monetization capability of broadcasters and talent agencies.

For example, we now have some mini programs of interactive games in the open platform that allow viewers to influence game results through virtual gifting while broadcasters are playing the game. We estimate to invest approximately RMB1 billion worth of resources and capital in supporting our open platform strategy within the next three years.

We will allow third-party developers to leverage Huya's core technologies and the capabilities on image technology, based on its speech recognition, movement detection, and data intelligence. There will also be an app store on the Huya platform, which we believe will yield income for the mini program developers.

In conclusion, our robust third quarter performance across the operating and the financial metrics once again illustrates our strong execution capability and substantial Huya's proven track records of outstanding performance.

Having delivered a six quarters in a row beating management's revenue guidance, I'm confident that Huya will sustain its growth of core business of live streaming, which gives us a solid foundation for us to explore more business opportunities over the long-term. Now, let's move on to the financial results.

We are delighted to deliver another strong momentum in revenue growth in this period to break down revenues and the drivers behind our growth. Live streaming revenue grew by 77.2% year-over-year, demonstrating solid growth trajectory in our core business as underpinned by increasingly enhanced user engagement.

In this quarter, we achieved a sequential growth in both average user spending and paying user base. I'd like to highlight that we were making product upgrade in the previous quarter. We have a carry-on a prudent strategy in monetization since then.

We were pleased to see the paying user number has been reinvigorated in our quarter basis and the product since the beginning of the third quarter.

This increased our confidence in driving long-term sustainable growth with our strategic focus on creating valuable content and enhancing the vibrant gaming community to serve our streamers and the gamers.

On the other hand, advertising and other revenues growth momentum continued with an 81.3% year-over-year increase and a 22.5% quarter-over-quarter increase.

Thanks to an increasing number of advertisers encouraged by our newly launched advertising distribution platform and higher spending from branding advertisers, boosted by Huya's enhanced brand awareness and market position. In the third quarter, 36% of total advertisers have placed the advertisement orders through the new distribution platform.

We believe our advertisement platform can create more value for our clients through further optimization. We achieved a significant margin expansion in the quarter with gross margin being improved to 18.3% on a non-GAAP basis from 15.5% in the year-ago period and 16.9% sequentially.

Thanks to leverage improvements across content costs and the bandwidth utilization. In addition, non-GAAP operating margin increased to 6.5% from 5.8% on a sequential basis, driven by operating leverage and the success of the ROI-oriented marketing expenditure strategy in the overseas markets.

During the third quarter, we granted a new batch of employee share awards under the existing 2017 share incentive plan to the management team and the key employees.

Those newly granted awards impacted the third quarter to a partial extent and we expect that they will have a full quarter impact on SBC expenses in the following quarters, starting from Q4.

Going forward, we are confident that our faster growing user base, high quality content value that we have created and our strength in the competitive position through compelling strategies will remain as our drivers of strong top-line growth and our efforts to efficiently manage costs by leveraging our growth scale, both of which will continue to serve as crucial pillars to generate healthy cash flows.

Now, let me briefly go over the financial results for the third quarter. Total net revenues for the third quarter of 2019 increased by 77.4% to RMB2,265.1 million from RMB1,276.6 million in the same period of 2018.

Live streaming revenue increased by 77.2% to RMB2,156.1 million in the third quarter of 2019 from RMB1,216.5 million in the same period of 2018, primarily due to the increase in both average spending per paying user and a number of paying users on our platform.

The increase in average spending per paying user was primarily driven by the enhancements of content attractiveness, the improvement in user experience and the optimization on product features.

The increase in number of paying users was primarily driven by our mobile strategy, diversification of content offerings and the continued efforts in promotion activities and in converting active users into paying users.

Advertising and other revenues increased by 81.3% to RMB109 million in the third quarter of 2019 from RMB60.1 million in the same period of 2018.

The growth was mostly driven by increased demand from gaming advertisers, and newly launched an advertising distribution platform and a further recognition of Huya's brand name in China's online advertising market.

Cost of revenues increased by 71.7% and to RMB1,858.8 million in the third quarter of 2019 from RMB1,082.9 million in the same period of 2018, primarily attributable to the increase in revenue sharing fees and accounting costs, bandwidth costs as well as the increase in headcount or personnel involved in the operation of company's platforms.

Revenue sharing fees and content costs increased by 78.8% to RMB1,508.9 million in the third quarter of 2019 from RMB844 million in the same period of 2018.

The increase was due to increased virtual item revenue sharing fees in addition to higher live streaming revenue and continued spending in e-sports content and content creators in both domestic and overseas markets, partially offset by benefits from economic upscale.

Bandwidth costs increased by 21% to RMB210.5 million in the third quarter of 2019 from RMB174 million in the same period of 2018, primarily due to the increase in bandwidth usage as a result of the increased user base of Huya platform and enhanced live streaming video quality, partially offset by improved efficiency in bandwidth utilization through continued deployment of new technologies in the content distribution.

Gross profit increased by 109.7% to RMB406.3 million in the third quarter of 2019 from RMB193.7 million in the same period of 2018. As such, by excluding share based compensation expenses, non-GAAP gross margin increased to 18.3% in the third quarter of 2019 from 15.5% in a year ago period and 16.9% sequentially.

The increased non-GAAP gross margin was driven by the leverage in the costs paid to our content creators and improved efficiency in bandwidth usage.

Research and development expenses increased about 80.9% to RMB135 million for the third quarter of 2019 from RMB74.6 million for the third quarter of 2018, mainly attributable to increases in headcount of R&D personnel and a share-based compensation expenses related to this share awards newly granted in the third quarter of 2019.

Sales and marketing expenses increased by 98.2% to RMB122.3 million for the third quarter of 2019 from RMB61.7 million for the third quarter of 2018.

The increase was primarily attributable to the increased marketing expenses associated with promoting our product and a brand name in both domestic and overseas markets, including summer promotion activities for e-sports events and cooperation with various marketing channels.

General and administrative expenses increased about 35.3% to RMB96.3 million for the third quarter of 2019 from RMB71.2 million for the third quarter of 2018, mainly due to increase in headcount and improvement in compensation of our general and administrative personnel. Operating income was RMB63.9% -- sorry.

Operating income was RMB63.9 million for the third quarter of 2019 compared with an operating loss of RMB2.7 million in the same period of 2018. Non-GAAP operating income, which excludes the share-based compensation expenses increased by 139% to RMB147 million for the third quarter of 2018 from RMB61.5 million in the same period of 2018.

Non-GAAP operating margin was 6.5% in the third quarter of 2019 compared with 5.8% in the second quarter of 2019 and 4.8% in the third quarter of 2018. Income tax expenses was RMB27.9 million for the third quarter of 2019 compared with income tax benefits of RMB8.6 million in the same period of 2018. Net income attributable to HUYA Inc.

for the third quarter of 2019 increased by 117.1% to RMB123.2 million from RMB56.8 million in the same period of 2018. GAAP net margin reached 5.4% in the -- for third quarter of 2019 compared with 6.1% in the second quarter of 2019 and 4.4% in the third quarter of 2018. Non-GAAP net income attributable to HUYA Inc.

in the third quarter of 2019, which excludes the share-based compensation expenses increased by 70.5% to RMB206.4 million from RMB121 million in the same period of 2018, mainly driven by the improved gross profit, thanks to the leverage in content costs and improved efficiency in bandwidth usage.

Non-GAAP net margin was 9.1% in the third quarter of 2019 compared with 8.5% in the second quarter of 2019 and 9.5% from the same period last year. Diluted net income per ADS was RMB0.52 for the third quarter of 2019 compared with diluted net income per ADS of RMB0.26 for the same period of 2018. Each ADS represents 1 Class A ordinary ratio.

Non-GAAP diluted net income per ADS was RMB0.87 for the third quarter of 2019 compared with RMB0.55 for the same period of 2018. Now turning to our balance sheet and cash flows, as of September 30, 2019, the company had a cash, cash equivalents, short-term deposits and short-term investments of RMB9,537.2 million.

Net cash provided by operating activities was RMB302.2 million for the third quarter of 2019 compared with RMB237.7 million in the same period of 2018.

Business outlook, for the fourth quarter of 2019, we currently expect the total net revenues to be in the range of RMB2,340 million to RMB2,420 million, representing a year-over-year growth between 55.5% and 60.8%. This forecast reflects our current and preliminary views on the market and operational conditions which are subject to change.

This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead..

[Operator Instructions] Your first question is from Thomas Chong from Jefferies. Your line is open. Please go ahead..

[Foreign Language] Thanks management for taking my questions and congratulations on a strong set of results. I have two questions. My first question is about our content strategies.

Can management comment about our strategy in game and non-game segment? And the long-term potential as well as the time spent and the content mix between game and non-game segment going forward.

And my second question is about the overseas landscape, given we demonstrate quite solid execution in geographical expansion, can management comment about our competitive edge as well as the landscape in overseas market?.

[Foreign Language] Hi, Thomas, as the translation for your question regarding our content strategy in future. In the gaming content, we will keep home our efforts to improve our differentiation so that we're making more market share, and we will keep on investing to the domestic e-sports tournaments and the PTC shows.

And also, another part of the investment will be spent on the overseas in terms of the signing on overseas broadcasters and hire more e-sports tournaments broadcasting right. On the non-gaming side, more efforts will be realized in diversifying our content streams, especially in the categories of outdoor, anime and also music..

To compensate Mr. Dong's answers for the overseas strategy. Actually, we will still adhere to our localization on the mobilization strategy in the overseas market. First, we believe that the mobile game live broadcasting will have a good chance in those emerging markets. And secondly, I think our competitors will be majorly Twitch and YouTube Game.

So another competitive edge that we are trying to use the native speaker and the local broadcaster gamers to serve the local user needs..

Your next question is from Hillman Chan. Your line is open. Please go ahead..

[Foreign Language] Thank you management for taking my questions.

Also the follow up on the overseas expansion, can you shed more color on the improvement including content cost, marketing dollar and MAU strategy going forward and how should we think about monetization therefore for MAU in overseas market versus China and in Kuaishou please? And my second question is on the competition versus Kuaishou.

How are we seeing the competitive landscape defaulting in the past [indiscernible] going forward please. Thank you very much..

[Foreign Language] Hi, Hillman. As for your translation for your question regarding our overseas. For the third quarter of 2019, we have achieved the average MAU of 17 million. And on top of the user acquisition efforts that we have put out so far, we will also improve our endeavor in the monetization side.

And from management's perspective for now, the existing regions that we have established operational presence in the Southeast Asia countries and countries in the South America, we wish to have a period -- in the second half of 2020. And that is the forecast expectation for now. For your question regarding the competition with Kuaishou.

We don't clearly know Kuaishou’s exact plan in the game live streaming, but we have noticed that they have obtained some of the broadcasting rights as the e-sports tournament, and we have signed some of the top broadcasters.

But we also notice that the coverage, no matter is for the amount of the e-sports tournaments were tight or the category is quite limited. So for now, we can see, given our strong capabilities in the PGC and PUGC. We remain confident about Kuaishou’s expansion into the game live streaming..

Yes. Hillman, to clarify. So for the overseas business, we're still in the investment stage. The company does invest in the content production as well as the channel buy from the overseas marketing channels. And for next year, we are trying to achieve the breakeven by excluding those like operation expenses on the GP margin level for the overseas.

But I think for the next several months, we will have a stronger visibility on this point. That's the answer for your questions..

Your next question is from Wendy Chen, your line -- from Goldman Sachs. Line is open, please go ahead..

[Foreign Language] So, thanks management for taking my question and congratulations on the strong beat yet again. So, my question -- two questions here. One is about the mini program we announced. So, just wondering what's the management's outlook on the monetization potential of the Huya mini program.

And whether this potential investments in the developer side could have some pressure on the margin going forward? And the second question is about operating data. I wonder if management can kindly share some update on, for example, time spent of our platform and potentially compare it to our competitor. Thanks..

Hi Wendy, as a translation, yes, you are correct, we held our tech conference a few days ago and we have launched the Huya open platform.

The platform is aimed to connect and engage third-party application developers for them to build up the mini programs and mini programs could engage -- could include broadcaster software and interactive features and marketing tools. And our tools will empower the broadcaster to create more and better content effectively.

For the -- to support the open platform, we will devote RMB1 billion worth of resources and capital as a whole.

And we will also open our core technologies and fundamental capabilities to those third-party application developers that include image technology, face recognition, speech recognition, movement detection to those developers, and all of those will help them to create better features for our broadcaster.

And we will also establish a app store to host our -- display the mini programs on our platform so that when they generate income for those third-party application developers.

And from a macro perspective, we think there are actually thousands of broadcasters that are actually -- there are a massive amount of broadcasters that is actually actively stream with us every day. And we have coming want -- from them demands are actually quite personalized.

We wish by opening up this platform will help those broadcasters, will help those third-party application developers to meet the long-term needs of the broadcasters so that we can create an ecosystem for them to better create content and diversify our content offerings and so that we can also improve the user stickiness and user interactive needs.

And all of that will as a result to help us improve the user monetization. Yes, that's it..

Wendy, I will help to provide some reference points for our user activities and user matrix for the third quarter. So actually I think we have been meeting with a very good quarter because of the popularity of the e-sports activities in the summer holidays.

So we have seen the user time spent per every day per DAU every day is like more than 100 minutes in this quarter, which is largely in line or slightly higher than our original expectation.

And second is our second amount retention rate for those users is more than like 70% which also satisfies our investment in those contents and bring us the return for the content creation and content creators.

Also, we have been seeing happily the paying user numbers has been reaccelerating this quarter to 5.3 million paying user numbers, which is slightly above our original expectation announced in our last earnings call. Just for -- that's the -- was matrix of our reference. Thanks..

Your next question is from Alex Poon from MS. Your line is open. [Foreign Language].

I'll translate my question. My first question is regarding the MAU sequential growth. You mentioned that a portion of the MAU growth -- sequential growth is coming from conversion from non-mobile devices to mobile devices.

If we strip out this portion, how much is the new mobile user growth sequentially Q3 compared to Q2 and also compared to last year, Q3. For my second question, how is management balancing top line growth and margin expansion at the same time. It looks like the OpEx in China, domestic portion is not really growing. It looks a little bit flattish.

Thank you..

Alex, I will come back later..

[Foreign Language] Hi, Alex. The transition, we believe that with the e-sports tournaments and the gaming content are still serving as a major channel for us to generate the new users. Apart from that, we still -- we also see that anime is serving as an effective source for us to partner users as well.

And all of that, together with the open platform that we recently launched, we believe it has enabled us to perform better in terms of content -- in terms of content creation on an iterative business. And as we can see forward, data shows that mobile user maximum retention rates still like at 70%.

And for your question regarding the non-mobile to the mobile, the conversion, we have noticed that. in the second quarter, we did pop-up feature with -- an in-game pop-up feature with some game developers, and we have seen the newly acquired traffic from that has been successfully converted to the mobile traffic..

Okay. Alex, I will be happy to answer your second question. So actually, for the company, I think we are still not to emphasize on the profit growth, but we're still very emphasized and is still focusing on the top line growth as well as the total MAU growth for the next two years. That's the answer for your questions..

Your next question is from Lei Zhang from Bank of America Merrill Lynch. Your line is open..

[Foreign Language] Congrats on the strong quarter. My first question about content costs launching in China going forward, and do you think the quite extensive gain in industry may impact the content cost. Secondly, any color on your game publishing business in coming quarters? Thank you..

Okay. Thanks, Lei. I will help to answer your questions. Your first question about the broadcasters had contracts with us, that number is roughly between the 4,000 to 5,000 broadcasters with us.

And almost everyone with us like those 4,000 to 5,000 with exclusive contracts with us and we pay them like the relatively fixed salaries per month, according to their compliments about their KPIs or their terms with us. I think that's for your first question.

And for the next one, we still believe that since -- because of the competition for the top-tier broadcasters has been mild down since the beginning of this year, we have been seeing some leverage from the cost to be paid out to those broadcasters generate revenues with us.

So that's why as you can see, our GP margin has been slightly improved in this quarter because of the leverage on this side, another side is because of the bandwidth utilization. For your second question about like the impact from the content platform, actually, we're still not very clear about their game live broadcasting strategy at this stage.

And our business frontier team also hasn't -- don't have like a lot of like the information like their movement on the signing those top-tier broadcasters or compete for those top broadcaster with us. We also don't see a sign from this angle. So that's your for the second question.

And for the question about game publishing, actually we have been starting publish one adventure game called Control in the Greater China region, in Hong Kong, South Asia and Taiwan. Yes, we consider it's a great trial internally.

And the publishing of gaming products will also be -- we stay optimistic on this new business and expect that, that will bring in the revenue in the future, but I think that will be for the next year. But for this year, we are trying to running through all the process and established publishing teams. I think we have already achieved our first goal.

And for the next year, we're trying to do more to build up our game publishing pipeline for 2020. That's the answers for your questions..

Your next question is from Daniel Chen from JPMorgan. Your line is open. Please go ahead..

[Foreign language] I will translate myself. My question -- I have two questions. First question is related to our lower-tier cities. As we see quite -- actually, quite a lot of e-sports audience in those regions, so wondering what's our strategy in this front? My second question is related to non-gaming entertainment content.

So wondering what's the revenue contribution for non-gaming content this quarter? And also, are you seeing competition from short video platforms, as they seem quite aggressive in terms of the talent show live broadcasting monetization. For example, offering a very high revenue share in ratio? Thank you..

Daniel, for your first question, so actually we haven’t seen a major difference between the user behavior on our platform. I mean, between the sort of Tier 3, Tier 4 city users and Tier 1, Tier 2 city users. The user demographic and the user behavior, the user attention to what content are our platform, there's no huge difference between each other.

And I think we're still focusing on operation and the content creation of our platform in both gaming and non-gaming, but we do not divide the users into like a Tier 1 and Tier 2 cities, we will have a different operational strategy.

But I believe -- I do believe that looking forward, I think we will try to do something to provide a more customized and content if they have the need -- if they have different demands, we were trying to provide the related content for them to help them to stay with us and to improve the user engagement from different areas -- from users from different areas.

For your second question about the different payments. So as we discussed, as we -- in our prepared remarks, we disclosed that the non-gaming content still contributed more than 45% of the total revenue -- of the total streaming revenue in this quarter. According to your questions.

So we haven't feeling strongly from the competition from the short-form video platforms in China, but we do believe that a shorter video has the advantage in engagement and the user acquisition is a relatively low cost. But streaming is a quite different product from the short video.

And streaming has more like a real-time interaction and higher user retention, higher user engagement with our core users and the core payers. From this angle, we still believe that we do have some advancement at this point. That's our answers for your questions..

Your last question is from Alex Liu from China Renaissance. Your line is open..

[Foreign language] I'll translate myself. So we know Tencent has options to increase the voting powering at HUYA at their discretion basically. And just wondering, how does the management think about the possibility of business cooperation with Tencent regardless of whether the increase to take or not into the next 1 to 3 years? Thank you..

[Foreign Language].

Hi, Alex, as translation, it is well aware that Tencent's established in the gaming market whether it's home or abroad. And we think going forward given that Tencent is a strong gaming content provider, we wish to work with them in several respects including gaming and content stream and e-sports tournaments.

All of that, as a whole, would be the directions for future cooperations. On top of that, we will also be in close contact with Tencent to explore more opportunities to realize -- to seek for a new business model for us to work together in terms of game live streaming. I think that's it..

We don't have any other questions at the moment. Presenters, please continue..

Thank you, again, for joining us today, and we look forward to speaking with you in the next quarter..

Thank you, everyone. Thank you..

Ladies and gentlemen, that does conclude our call for today. Thank you for participating. You may all disconnect..