Good day and good evening and thank you for standing by. Welcome to HUYA's Fourth Quarter and Fiscal Year 2023 Earnings Webinar. I am Hanyu Liu from HUYA's Investor Relations. At this time, all participants are in listen-only mode. Please be advised that today's webinar is being recorded.

The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.huya.com. A replay of the call will be available on the IR website in a few hours. Participants of management on today's call will be Mr.

Junhong Huang, HUYA's Acting Co-CEO and Senior Vice President; and Ms. Ashley Wu, Acting Co-CEO and Vice President of Finance. 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 on the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today.

Further information regarding these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the US Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required on the 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.

With that, I'm pleased to turn the call over to our Acting Co-CEO and SVP, Mr. Huang. Please go ahead..

Hello, everyone. Thank you for joining our earning conference. Today, I'd like to share an overview of our recent performance and business development and technology offerings and overseeing initiatives as well as our corporate social responsibility efforts. 2023 marked a year of transformation for HUYA.

We launched a strategic plan to transition our commercialization focus toward game-related services and expand our presence in the game industry. I'm pleased to report that we have made great strides in this area, while also strengthening our core capabilities to maintain our leadership and competitive learners in the game live streaming industry.

Against the backdrop of challenging macro and industry environment and this proactive business adjustment, we experienced revenue decline this year. However, we achieved a turnaround on the margin side, posting a non-GAAP net income of RMB119 million for the full year, as we continue to optimize cost and improve operational efficiency.

We also kept our user community engaged through our extensive content and service offerings, with HUYA Live's average mobile MAUs holding steady year-over-year at 84.1 million for full year 2023. Next, a brief update on our strategic transformation.

Our main goal for 2023 was to build the business infrastructure required to support our new game-related service and to establish cooperation with related game studios.

We have largely completed this work, including upgrading the game center module, developing and integrating the in-game item mall function and optimizing account binding with related games.

We have also begun cooperating with various major game titles to provide distribution and promotion service as well as in-game virtual item sale service on our platform. Other revenues from game-related service was modest in 2023 as we were in preparatory phase.

We saw encouraging sign of growth in the fourth quarter and expect that trend to strengthen in 2024. We are confident that game-related service will continue to scale as we add newly launched and existing titles and ramp-up public participation from our broadcasters.

Revenues from our advertising and other segment increased 41% quarter-over-quarter and 29% year-over-year in the fourth quarter, primarily driven by game-related service contribution.

Our recent efforts in the promotion and distribution of an early awaited new game, DreamStar, clearly demonstrate our game-related service capabilities as well as less business vast potential.

We conducted a comprehensive promotional campaign loaded with innovative feature resulting in industry leading levels in terms of promotional performance and the number of reservations and downloads through our channel during the game's launch period.

Specifically, we invited popular broadcasters on our platform to stream their gameplay and rewarded live stream viewers with video DreamStar gift packs through our unique interactive gift drop feature.

We also created a DreamStar preorder and download area in our game center and provided broadcasters with commission generating reservation links to place on their channels, incentivizing their participation while boosting user preorders.

Meanwhile, users who downloaded the game through our platform received inclusive in-game props and other gifts provided by both DreamStar and HUYA.

In addition, we held cross platform entertainment competition incentivized the creation of gameplay delivered videos and organized activities for broadcasters to design inclusive game maps, all of which effectively expanded this new game's reach on our platform.

As a live streaming platform, primarily serving the game vertical, HUYA provide a more professional, more feature rich game streaming experience than non-dedicated platforms. We are committed to further differentiating our superior game live streaming platform and continue to drive progress through tech innovation.

For instance, we currently leveraging deep game data and our proprietary large language model chain own data from our platform streaming contents, and 270 million bullet chats to enhance the traditional live streaming viewing mode with real time analysis and interaction based on game content and events.

This immersive upgrade makes game live streaming content more professional and entertaining, boosting engagement across the board. For example, in our content, current owner of King Live Streams, Our AI tech can help streamer dynamically generate customized commentary based on real-time information, such as game battle status and web unused.

In addition, viewers can use our AI intelligent editing function to instantly capture and replay broadcasters best moves, increasing user sense of participation.

Turning now to our overseas expansion, we view our overseas initiatives as strategically important, providing revenue diversification while supporting our overall growth as we capitalize on opportunities arising from the overseas activities of Chinese game companies.

In December 2023, we acquired a 100% equity interest in a global mobile application service provider, in line with our strategic transformation. This acquisition is intended to enhance our game promotion and distribution capabilities in international markets.

It will also create synergies with our overseas game live streaming platforms, NimoTV, empowering better utilization of localized results and improving efficiency.

Lastly, as a part of our corporate social responsibility efforts, we continue to expand our portfolio of content with positive social impact through our live streaming plus model, connecting online interactions and offline activities.

In 2023, more than 4,600 broadcasters contributed a total of over 50 sovereign streaming hours of positive social impact content to our platform, covering areas such as cybersecurity education, minor protection, and rural revitalization to complement our game and entertainment programming.

We leverage our innovative technology and brand awareness to increase this content's influence, enhancing our platform's healthy atmosphere. Going forward, HUYA will remain committed to upholding its corporate social responsibility and contributing to the healthy development of the live streaming industry.

Looking ahead to 2024, we faced a rapidly changing market conditions and that present both challenges and opportunities. We will continue to solidify our core live streaming business and actively promote the development of game-related service to expand our business and revenue streams.

As we steadily implement our strategic transformation plan, we remain confident in our future business prospects. With that, I will now turn the call to over to our Acting Co-CEO and VP of Finance, Ashley Wu to share more details on our results. Ashley, please go ahead..

Thank you, Vincent, and hello, everyone. I'll provide some updates on our operating metrics and financials. Overall, we maintained a stable user base in the fourth quarter.

We continue to incur engage users in rich game and e-sports content during the period, particularly some major e-sports tournaments, while upgrading interactive features to enhance the viewing experience.

HUYA Live mobile MAUs for the fourth quarter of 2023 was 85.5 million, but compared with the same period last year, and slightly lower compared with the summer season's higher base.

On the other hand, as we developed more innovative game-related services, more users started to pay for these new services in the fourth quarter, driving a slight sequential increase in HUYA Live's paying users for the fourth quarter to 400 million despite a decrease in live streaming products and services paying users.

Turning to our professional content enrichment. On the licensed content front, we broadcasted over 70 third-party professional e-sports tournaments in the fourth quarter of 2023, with a total viewership of over 360 million.

As we have become more selective in licensing tournaments, we will continue to improve the ROI and content utilization efficiency of these events by enhancing event experience and related operational activities.

A variety of year-end events, including the LOL Worlds, the Honor of Kings International Championship, and China [indiscernible] Cup, the CrossFire CFS Grand Finals, and the PUBG Mobile Global Championship attracted user attention.

The VALORANT China Evolutional series also gained traction on our platform as VALORANT Esports events continue to develop. Notably, our coverage of this year's LoL Worlds 2023, one of the most influential e-sports events in the world, demonstrated our vast content enhancement capabilities.

We once again maintain our leading market share of these events viewership with several of its key viewing metrics on our platform, improving compared to the previous edition.

HUYA has broadcasted this event for sixth consecutive year, gradually increasing our users' awareness of the brand and cultivating a strong habit of watching it on HUYA's platform among the professional e-sport audience.

To provide best-in-class broadcast quality, this year, we continue to focus on upgrading users' viewing and interactive experiences, introducing enhanced features such as 120 FPS high frame rate video quality, an AI camera for taking live scene photos, and our game watching assistant.

In addition, we boosted user attention and engagement through a combination of online and offline operational activities and our self-produced commentary programs such as HuSha S13.

In terms of self-produced content, we broadcasted nearly 30 self-organized e-sports tournaments and Entertainment PGC shows in the fourth quarter, with a total viewership of approximately 120 million. Among these events, League of Legends, HUYA platform qualifier for Demacia Cup, and Peacekeeper Elite MSC Challenge Match were quite popular.

For our in-house developed IPs, we will focus on producing their feature content and expanding its reach through cross platform and cross category collaborations. In December, we hosted the first event in our Village Game series, the Lianghe village game, for Honor of Kings in Lianghe County, Yunnan province.

The village game series represents our first foray into building a rural e-sports tournament brand. With county government support, this event attracted massive attention among local communities, bringing together people of all ages and more than 300 teams to compete.

Our event integrated e-sports with traditional culture activities, successfully expanding the influence of e-sports content among local audience, while also promoting the local culture.

Honor of Kings, named this Lianghe village game, is best authorized e-sports tournament in 2023, a powerful testament to our tournament and brand building capabilities. Let's move on to our Q4 financial details.

First, I would like to point out that because our December acquisition of the mobile application service provider is a business combination under common control. We have consolidated the financials of the acquired business on a retrospective basis from the first quarter of 2022.

Therefore, on this call and in the earnings release, we have included its results in our fourth quarter and full year 2023 figures and retrospectively adjusted the financials from the comparable period of 2022 to reflect the changes. Our total net revenues were RMB1.53 billion for Q4 compared with RMB2.12 billion for the same period last year.

Live streaming revenues were RMB1.34 billion for Q4 compared with RMB1.98 billion for the same period last year, primarily due to the soft micro and industry environment and our proactive business adjustments to support our strategic transformation and prudent operations.

Advertising and other revenues were RMB186 million for Q4 compared with RMB144 million for the same period last year, primarily due to increased revenues from game advertising and distribution services.

Cost of revenues decreased by 37% year-over-year to RMB1.51 billion for Q4 primarily due to decreased revenue sharing fees and content cost as well as bandwidth cost.

Revenue sharing fees and content cost decreased by 39% year-over-year to RMB1.32 billion for Q4 primarily due to the decrease in revenue sharing fees associated with the decline in live streaming revenues as well as lower cost related to e-sport content and content creators.

I'd also like to point out that our content spending for Q4, while meaningfully lower year-over-year as a result of our cost optimization efforts was still higher than in Q3. This was primarily due to the cost related to some large events, particularly the content cost booked for LoL Worlds 2023.

Bandwidth cost decreased by 19% year-over-year to RMB82 million for Q4. This was primarily due to improved bandwidth cost management, favorable pricing terms, and continued technology enhancement efforts. Gross profit was RMB15 million and gross margin was 1% for Q4.

Excluding share based compensation expenses, non-GAAP gross profit was RMB15 million and non-GAAP gross margin was 1% for Q4. Research and development expenses decreased by 6% year-over-year to RMB137 million for Q4, primarily due to decreased share based compensation expenses.

Sales and marketing expenses decreased by 11% year-over-year to RMB113 million for Q4, primarily due to decreased personnel related expenses.

General and administrative expenses increased by 18% year-over-year to RMB100 million for Q4, primarily due to provisions and increased professional service fees, partially offset by decreased share based compensation expenses.

Other income was RMB13 million for Q4 compared with RMB44 million for the same period last year, primarily due to lower indirect tax response and government subsidies. As a result, operating loss was RMB322 million for Q4 compared with RMB581 million for the same period last year.

Interest and short-term investments income was RMB129 million for Q4 compared with RMB102 million for the same period last year, primarily due to increased interest rates and improved management of deposit products. Net loss attributable to HUYA Inc. was RMB275 million for Q4 compared with RMB563 million for the same period last year.

Excluding the share based compensation expenses, impairment loss of goodwill and investments, and amortization of intangible assets from business acquisitions, net of income taxes, non-GAAP net loss attributable to HUYA Inc. was RMB190 million for Q4 compared with RMB439 million for the same period last year. Non-GAAP net loss margin was 12.4% for Q4.

Diluted net loss per ADS was RMB1.14 for Q4. Non-GAAP diluted net loss per ADS was RMB0.79 for Q4. As of December 31st 2023, the company had cash and cash equivalents, short-term deposits, and long-term deposits of RMB9.9 billion compared with RMB10.7 billion as of September 30 2023. Moving on to our full year 2023 results.

Total net revenues were approximately RMB7 billion for 2023 compared with RMB9.26 billion for the prior period. Live streaming revenues were RMB6.45 billion for 2023 compared with RMB8.2 billion for the prior period. Advertising and other revenues were RMB544 million for 2023 compared with RMB1.07 billion for the prior year.

Nevertheless, we achieved a meaningful year-over-year profitability improvement across the board. Non-GAAP gross profit was RMB831 million and non-GAAP gross margin was 11.9% for 2023. Non-GAAP net income attributable to HUYA Inc. was RMB119 million and non-GAAP net margin was 1.7% for 2023. Non-GAAP diluted net income per ADS was RMB0.48 for 2023.

For additional details on our full year 2023 financial results, I encourage listeners to refer to our earnings press release issued earlier today. Finally, let me provide an update on our capital allocation. Under our up to US$100 million share repurchase program that began in August 2023.

We have repurchased 9.2 million ADS with a total aggregated consideration of US$28.8 million as of the end of 2023. In addition, I'm pleased to announce the declaration of a special cash dividend totaling approximately US$150 million for our shareholders.

We will remain committed to enhancing shareholder returns and creating long-term shareholder value. With that, I would now like to open the call to your questions..

Thanks, Ashley, and hello, everyone. [Operator Instructions] Today's first question comes from Lei Zhang from Bank of America Securities. Lei, your line is open. Please go ahead..

[Foreign Language] Thanks management for taking my question. Congrats on a long-term special dividend. And my question is mainly about 2024 outlook in terms of user and revenue. And can you give us more color on the impact from your new business? Thank you..

[Foreign Language] Vincent taking the question first. On the user front, HUYA Live mobile MAUs in Q4 and for the full year 2023 were generally flat compared to prior periods. On one hand, we lowered our marketing and channel promotion spending and we're more selective with our e-sports content offering.

The first half of 2023 was also negatively impacted to some extent by the increase in offline activities from our users.

On the other hand, we continue to enhance our operational capabilities around e-sports events and improve the efficiency of utilizing quality content, while also upgrading interactive features to improve viewing experience and user engagement levels. As a result, we were able to maintain an overall stable user case.

[Foreign Language] For 2024, we'll continue to solidify HUYA's core user base, better operate our existing users, and also reach more high quality gamers. At the same time, we will aim to attract more paying users through enriched game related services.

For example, user payments for in-game virtual items in Q4 drove an increase in total paying users compared to Q3, indicating some initial success in this area..

[Foreign Language] Answer from Ashley. In terms of live streaming revenues, we saw a net decline in Q4 due to the full quarter impact from business adjustment driven by strategic transition and shifts in internal resources allocation as well as from the continued weak industry environment.

For the year 2024, live streaming revenues will experience some seasonal fluctuations in Q2 -- Q1 due to the low traditional low season. Currently, we are seeing live streaming revenue trends starting to stabilize and we hope that they can gradually recover to a steady state in the subsequent quarters.

[Foreign Language] On the advertising and other revenues, despite the game-related services business still being at an early stage, we achieved significant growth of 41% quarter-over-quarter and 29% year-over-year in Q4, particularly driven by game advertising and distribution revenues.

In the coming year, as we offer more distribution, promotion, and virtual item sales services to more games, coupled with more broadcasters joining our platform. We're confident that advertising and other revenues can achieve faster growth..

Thank you. And our next question comes from Yiwen Zhang from China Renaissance. Yiwen, please go ahead..

[Foreign Language] So thanks for taking my question. A question regarding our content strategy in 2024. So under current market dynamics, how will the company plan to maintain competitive edge? Thank you..

[Foreign Language] Our overall content strategy remains relatively stable currently. We will continue to optimize and dynamically adjust it given the rapid changing market environment and competitive landscape.

Broadcaster content is an important component to our offerings and will continue building an ecosystem of influential broadcasters working with game publishers to enhance broadcasters' commercialization opportunities and capabilities and strengthening our platform's appeal to the broadcasters.

At the same time, we are actively exploring the application of AIGC, and the AI powered tools we provide can help lower the entry barriers for broadcasting while improving the content production efficiency and quality.

[Foreign Language] For professional content, HUYA has a comprehensive portfolio of licensed e-sports events and a mature system of self-produced tournaments, enabling us to bring more high quality e-sport content to users.

Especially with an increased focus on ROI for the events in 2024, we'll continue to cover major mainstream e-sports tournaments, including LPL, KPL, PEL, and others. We will also strengthen our professional event operations capabilities while emphasizing on the creation of derivative content.

User experience during large sports events broadcast is crucial. And not only does HUYA possess industry leading audio video technologies, but we are also continuously iterating and upgrading them.

For example, for the League of Legends S13 tournaments, we introduced an industry leading 120 FPS high frame rate video quality feature for the live stream.

[Foreign Language] HUYA's self-produced tournaments are also important part of our professional content offerings, and we'll continue solidifying our own IP metrics and enhancing the influence of our own tournaments and events to create distinctive, proprietary content.

It is worth mentioning that we combine e-sports with rural culture and, with government support, promote e-sports for all through HUYA's self-produced rural e-sports events. The Lianghe Village Game events held in December last year was the first stop of our Village Game series, garnering attention and enthusiastic participation from local residents.

This tournament was also awarded the Honor of Kings Best Authorized Esports Tournament in 2023 by the game officially, attesting to the high quality and professionalism of HUYA's tournaments.

[Foreign Language] As a live streaming platform primarily serving the game at the gaming vertical, HUYA gathered high quality game users and cultivated a strong brand awareness through our community by providing a more professional, more feature rich game streaming experiences than non-dedicated platforms.

We are committed to further differentiating our superior game live streaming platform and continue to drive progress through tech innovation.

For instance, we are currently leveraging deep game data and our proprietary large language model, LLM, trained on data from our platform streaming content and bullet chats to enhance the traditional live streaming viewing mode with real time analysis and interaction based on game content events.

This immersive upgrade makes game streaming content more professional and more entertaining. [Foreign Language] In addition to the above, strengthening collaborations with various platforms and products is an important strategy for us in 2024.

In an overall more open environment, these collaborations will bring more development opportunities and enhance HUYA's competitiveness.

This includes not only deepening interconnectivity and cooperations with Tencent's PCG products, such as QQ and Tencent Video, as well as close collaborations with the IEG business units, but also content and operational partnerships with other live streaming and video platforms.

For example, in February this year, we hosted a New Year Esports All Star event that was co-streamed across three other major live streaming platforms with good reception.

In the long run, this will not only help our content reach a wider user base and bring more enriched offerings to existing users, but will also contribute to enhancing HUYA's scale and influence..

Thank you. And our next question comes from Ritchie Sun from HSBC. Ritchie, please go ahead..

[Foreign Language] Thank you, management, for taking my question. I would like to understand more on the cost control plan in this year. What's management expectation on cost, operating expense, and margin this year? Thank you..

[Foreign Language] We continued our cost optimization and efficiency enhancement efforts in 2023 to better manage our costs and expenses and improve operational efficiency. The loss in Q4 2023 was mainly due to the seasonal impact of content costs, as some larger and more costly tournaments, like S13, took place in Q4.

However, driven by declines in events and broadcaster costs as well as bandwidth costs compared to the same period in 2022, we saw a significant improvement in gross margin profits for Q4, with overall losses also narrowing year-over-year.

For the full year, despite our revenue decline, revenue share and content costs decreased by 29% year-over-year, bandwidth costs decreased by 33%, and gross margin improved from 7.1% in 2022 to 11.7% in '23. Meanwhile, we achieved cost savings across all three operating expenses items i.e.

sales R&D and G&A with total OpEx down by 13.1% year-over-year. As a result, HUYA's operating cost loss narrowed in 2023, where we achieved non-GAAP net profitability of approximately RMB120 million.

[Foreign Language] In 2024, in terms of costs, we'll continue to strive for further optimization of event costs and relatively fixed signing costs for our broadcasters through a strict ROI analysis and optimized content investment strategies.

As the game-related service business is still in its early stage, its gross profit margin is gradually stabilizing, but it will still be slightly higher than the live streaming segment.

With the greater growth of the game-related services business, which has a higher gross profit margin, and the increase in its proportion of total revenue, we expect the overall gross profit margin to increase compared to 2023.

In terms of operations, we will also continue to maintain prudent spending, especially in the sales expenses and labor costs. Based on our current plans, we are confident in achieving profitability in 2024 with profit indicators improving compared to 2023..

Thank you. Now we will take our last question today from Thomas Chong from Jefferies. Thomas, please go ahead..

[Foreign Language] Thanks management for taking my question. My question is about our capital situation and the strategy of cash usage. Thanks..

[Foreign Language] As of the end of 2023, HUYA held nearly US$1.4 billion in cash, cash equivalents and deposits. The change in the amount compared to the end of September last year was mainly due to the business mergers and acquisitions and stock repurchase expenditures at the end of the year.

In terms of distribution, majority of our cash, cash equivalents, and deposits are held in our offshore accounts in US dollars. [Foreign Language] As we mentioned earlier, we expect the profitability level in 2024 to have further room for improvement compared to the year before.

And we also expect to achieve positive operating cash flow for the full year. Therefore, we'll continue to have sufficient cash reserves to well support the development of our business.

At the same time, we will continue to carefully consider potential investment opportunities upstream and downstream of HUYA's ecosystem to enhance the company's competitiveness.

With a healthy balance sheet and cash reserves, the company's Board of Directors and management hope to use cash more efficiently, enhancing investor returns and convey long-term development confidence.

[Foreign Language] In the US$100 million repurchase plan we announced last August, as of the end of December, we have repurchased US$28.8 million worth of HUYA stock, and we have continued to actively repurchase in the first quarter of this year.

Today, we are also pleased to announce our first ever dividend payout of US$0.66 per ADS or per ordinary share, constituting a special cash dividend totaling at US$150 million for our long time supportive shareholders. In the future, we will continue to explore ways to improve the efficiency of capital utilization and return to our shareholders..

Thank you. 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 Piacente Financial Communications..

This concludes today's call and we look forward to speaking to you again next quarter. Thank you. Bye, bye..