Hello, ladies and gentlemen, thank you for standing by for the Fourth Quarter and Fiscal Year 2021 Earnings Conference Call for Huya, Inc. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. Now I’ll turn the call over to Ms. Hanyu Liu, Company Investor Relations. Please go ahead.

Hello, everyone, and welcome to Huya's fourth quarter and fiscal year 2021 earnings conference call. 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 Ms. Ashley Wu, 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 under the safe harbor provision 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 prospectors 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 under applicable law. Please also note that Huya's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our CEO, Mr. Rongjie Dong. Please go ahead.

Hello, everyone. Thank you for joining our conference call today. 2021 was a solid year for Huya as we assumed to fortify our leadership position in China's game live streaming market. Amid macro headwinds related to the subsiding pandemic effects and the evolving regulatory landscape, we finished the fourth quarter with a record high mobile user base and the net revenues of RMB 2.8 billion. For full year 2021, we performed stably overall, generating RMB 11.4 billion total net revenues and RMB 454 million non-GAAP net income. Throughout the year, we expanded our investments in licensed E-sports tournaments, self-produced content and content creators across our platform and continued to advance technology and product development launching innovative impactive features to further enhance user experience and boost user engagement. We also broadened our commitment to corporate social responsibility, fostering deeper bonds with our community, our users and broadcasters, as we promoted positive social values nationwide. First, let's look at our user growth, driven by e-sports events and the new game launches in Q4. Our user base sustained healthy growth momentum and Huya Live’s mobile MAUs reached 85.4 million during the quarter, up by 7% year-over-year. On an annual basis, Huya Live’s mobile MAUs were 88.9 million in 2021 compared with 76 million in 2020. And we remained focused on ramping up content investment and rolling out product innovations. We maintained our Huya Live app next month user retention rate above 70% on average in 2021. Next I would like to provide some updates on our recent efforts to advance technology and product development. Let's begin with our open platform for third-party application developers, which is growing rapidly and gaining popularity with users, broadcasters and developers alike. By the end of December 2021, more than 320 Huya mini tools has been created and…

Thank you, Mr. Dong, and hello everyone. To expand on Mr. Dong's remarks, I will start with updates on our content enrichment and diversification initiatives. Professional E-sports content remain viable on our platform. During the fourth quarter, we broadcasted 125 third-party E-sports tournaments, generating total viwership of approximately 605 million. Notably, the 2021 season of League of Legends World Championship over 2021 achieved record high viewership on our platform and peak concurrent viewers of this event doubled compared with the period addition in 2020. KPL Autumn demonstrated International 2021 and PEL Season 4 are also quite popular among our users. Furthermore we have some exciting news to share about E-sports broadcasting rights. Following our agreement with TC Sports last year through, which we locked down the 2021 to 2024 exclusive broadcasting rights in China for LPL, LTL and LPL AllStar Weekend series, we are securing rights for a greater variety of licensed E-sports tournaments by forming multiyear partnerships with E-sports event organizers. In November, we signed an exclusive Chinese media rights agreement with ESL Gaming for a series of its key events in 2022 and 2023 including ESL Dota 2 and ESL Mobile ecosystem, as well as the ESL Pro Tour for CS:GO and StarCraft II. This collaboration will help us enhance the license coverage for those games tournaments as well as a high-quality international E-sports content to our platform. On the self-produced content front, we broadcasted 64 E-sports tournaments and entertainment PGC shows in the fourth quarter, for which total viewership reached 153 million in the fourth quarter growing over 40% year-over-year: The Huya All Star Cup final season Huya [indiscernible] for Peacekeeper Elite, the Huya for Jing's Cup for Honor of Kings and the [indiscernible] Cup Season 2, [indiscernible] F2 for LoL [indiscernible] our top-performing self-organized events. Going…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Thomas Chong from Jefferies.

[Foreign Language] Thanks management for taking my questions. My question is about the 2022 outlook. Can management share about the overall strategic direction as well as the trend for user and revenue? Thank you.

[Foreign Language] Thank you for that question. This is from Mr. Dong, CEO of the company. We always believe that users are core of our business growth and we will continue to have user-driven growth for our long-term development strategy. For the year 2021, our user increased by 6.4%, with Q4 MAU reached 85.4 million, further cementing our leading position in game live streaming area. In 2022, Huya will continue to increase our market share in game live streaming and cement our leading position. Of course, Huya will continue to explore the diversification of our business and to enhance our monetization ability. [Foreign Language] In order to hit our user growth target, Huya in 2022 will continue to invest effectively on the content and product try to cover the mainstream tournaments and E-sports events and also to enhance our ability to make self-produced tournaments and content and increase the proportion of self-produced content. On top of that, we will continue to acquire streamers to adjust our incentive schemes according to the market dynamic and also keep an eye on overseas live streaming and video businesses. [Foreign Language] On top of that, Huya will continue to improve its technology and product, trying to have virtual streamers to optimize our audio and video technology to improve the users viewing experience and to promote interactive features on live streaming as well as Huya mini programs. Also, we will try to step up our effort in partnering with Tencent and explore new operating models and commercialization models for E-sports as a whole. In terms of operation, we will try to enhance and continue to be compliant in our platform, trying to adapt to regulatory changes and to realize long-term business development.

[Foreign Language] Ms. Ashley Wu, VP of Finance. As to the trend of user growth and revenue outlook for the year 2022, our target is to keep the mobile user number increase for the year by enriching our content in our platforms and also to enhance interactions with our users. It is worth noticing that the user numbers has seasonality changes pretty much depending on the scheduling of the big events as well as holidays and other seasonal issues.

[Foreign Language] In terms of revenue, we noticed that the paying behavior of our users in Q4 2021 somehow was affected by the macro economy, the negative impact. And because this regulatory changes and macro economy impact is still continuing, we expect that for the first half of 2022, our revenue probably will continue to be under some pressure. But generally speaking, the fluctuations in our revenue are mainly due to external forces. Our company will continue to work on and have the right confidence that our business will enjoy a sustainable growth for the long-term. [Foreign Language] Generally speaking, the users are the key to our business development and we'll continue to have content-driven user growth. And we believe that when the market situation turns better, our business will return to upgrowing business growth.

Okay. Next question please. Thank you.

Thank you. Our next question comes from Lei Zhang from Bank of America Merrill Lynch. Please ask your question.

[Foreign Language] Thanks management for taking my question. My question is mainly regarding your content strategy, in particular, on the E-sports tournament set. I consider your competitors adjustment in E-sports tournament recently and then also will share your thought here? Yes. Thank you.

[Foreign Language] Thank you for your question. This is from CEO Mr. Zhang. In order to enhance our competitiveness and continue to provide attractive content for our users, we'll continue to purchase and establish high-quality content, including IP tournaments, self-produced events as well as PGC programs and streaming content. To be more specific in terms of IP tournaments, we'll continue to provide popular tournaments and events. In the mainstream games, for instance, in League of Legends, China, we have the LPL in China as well as the only platform that provides LCK, LEC, LCS as well as PCS. In terms of Honor of King and Peacekeeper Elite, we are also covering the main events and tournaments as well as the professional league in China. In terms of the new games, for instance, LLL Mobile, we had established the live streaming for its professional league WRL, Wild Rift League. And I also mentioned that last year in November, we have established two-year exclusive IP agreement with ESL for Dota2 and CS:GO. And this actually helped us to make up for the shortcomings we had in the past in the portfolio of games and make it a more complete platform that provides professional live streaming content for the games. And to be more specific as of year 2021 Q4, we live-streamed 124 IP games and with a viewership of 605 million in total. [Foreign Language] We will continue to invest effectively on high-quality IP events and while also considering the cost efficiency, while we are purchasing them. Even though some IP events or top events they are quite expensive, but we believe these are very important for us to keep traffic of users and provide better services for our existing users. In terms of self-produced content, the strategy is to increase the…

Next please. Thank you.

Thank you. Our next question comes from Brian Gong from Citi Group. Please ask the question.

Thank you, everyone, for taking my questions. This is Nelson asking on behalf of Brian. I have a question on margin and cost. Can management share your view on content cost and streamer cost outlook in 2022? And how about the margin trend outlook going forward? [Foreign Language]

[Foreign Language] Thank you for that question. Ashley Wu, VP for Finance. In order to increase our attraction to streamers since Q3 last year, while maintaining the split policy stable, we had tried to provide more incentives for our streamers according to the market dynamic. And due to the year-end event in Q4 last year, the split ratio was slightly higher. So that was a seasonal impact. So, based on our overall operation of the platform and monetization ability, I believe that our split policy for the streamers are now quite attractive. And for now we expect that the total split ratio for the year 2022 will be at the same level we had for the year 2021. We'll continue our investment in content and also to carry forward our split policy since the second half of 2021. We believe that the content cost as a percentage to our revenue for the year 2022 would be slightly higher than that in 2021 and therefore the whole year gross margin rate will somehow be affected a little bit. In terms of operating expenses, we'll try to continue to optimize our expenses -- operating efficiency, but due to a slightly lower gross margin level our operating margin will be lower than the year 2021. [Foreign Language] Given the major challenges for the whole industry and macro economy, we believe that it is necessary for us to continue to invest in content, because it would help us to increase competitiveness and increase the market share. Of course, we'll try to be more optimized in terms of operating efficiency, for instance, to be more specific in analyzing the content ROI and to allocate our resources to make more result and efficient. For instance, we would probably also trying to optimize our bandwidth technology, make…

Thank you. Our last question, please.

Thank you. Last question comes from Yiwen Zhang from China Renaissance. Please go ahead.

[Foreign Language] Thank you management for taking my question. So I have a quick question regarding overseas business. Can management share the latest update of overseas business and our target for 2022? Thank you.

[Foreign Language] In Q4, 2021, our overseas business achieved a very nice positive progress with an MAU over 30 million with a new record high. And our revenue also registered in year-on-year 110 percentage growth. The overseas business give us about 4% of the revenue for our company in the year 2021. In the year 2021, we allocate resources to Southeast Asia and those key areas. While optimizing our costs we increased our user base. In terms of Nimo content, while providing popular games and tournaments which are popular in region -- in the regional level, we had also increased pan-entertainment content on our platform to make our ecosystem more complete and it is also favorable for us to monetize on our content. Based on our experience in 2021, we will continue this strategy for our overseas business in 2022, with a goal to further consolidate and increase user base and increase our revenue and also at the same time trying to optimize and reduce loss.

Okay. We finished the answer.

Right. Thank you. So now I'd like to turn the call back to the company for closing remarks. End of Q&A:

Yes. 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 TPG Investor Relations. Thank you.

Thank you. This concludes this conference call. You may now disconnect your lines. Thank you.