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.…

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…

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…

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.