Welcome to HUYA's First Quarter 2025 Earnings Webinar. I'm Hanyu Liu from the 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 soon. Participants of management on today's call will be Mr. Junhong Huang, our Acting Co-CEO and the Senior Vice President; and then Mr. Raymond Peng Lei, our Acting Co-CEO and CFO. Management will begin with the 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 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 as except as required under applicable law. Please also note that HUYA's earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. HUYA's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. With that, I'm pleased to turn the call over to our Co-CEO and SVP, Mr. Huang. Please go ahead.

Okay, hello everyone. Thank you for joining our earning conference today. In the first quarter of 2025 we have total net revenues stabilized year-over-year and grew quarter-over-quarter to RMB 1.51 billion. This was supported by our steady execution of our strategic business transformation which drove 52.1% year-over-year increase in game-relative services, advertising and other revenue to RMB 370 million. This segment accounted for 24.6% of total net revenues up from 16.2% in the same period last year. We were also pleased to deliver a net profit this quarter. Meanwhile, we continued to strengthen our live streaming content ecosystem, deepen collaborations with game companies and content platforms, and explore the integration of AI capabilities in our e-sports experiences, playing a solid foundation for future development. Now, let me share the details of our recent business progress, starting with our business transformation. As I just mentioned, our game-relative services, advertising, and other revenues reached RMB 370 billion this quarter. It is worth noting that revenues from game distribution and in-game item sales are primarily recognized on net basis after revenue sharing with game companies. As such, the total transaction value of our game-related services mainly comprised of the gross list generated through our game distribution channel and the GMV for our in-game item sales. It is actually much higher than our reported revenue. Let's begin with a closer look at our domestic game-related services and advertising businesses. In terms of game distribution, we proactively deepen our engagement with existing games, despite a quarter with few major new game launches. By working with game studios, refining operational strategy, and unlocking the consumption potential of high commercial value user groups that have naturally congregated with seeing our game live streaming ecosystem. We achieved a solid and more balanced game distribution performance. Total gross proceeds…

Thank you, Vincent and hello, everyone. I will start with an overview of our financial performance. In the first quarter of this year, our total net revenues stabilized year-over-year after previous declines driven by the year-over-year growth in gaming-related services, advertising, and other businesses. Notably, live streaming revenues saw a slight sequential increase this quarter, contributing to a marginal sequential improvement in our total net revenues. The number of paying users in the first quarter remained flat year-over-year, standing at 4.4 million, excluding those who made in-game purchases through our game distribution business, but didn't pay via our platform or related services. On the cost side, we continue to optimize content costs, particularly those related e-sport tournaments, but increased incentives for broad customers to participate in live streaming and provide gaming-related services during the live streaming industries of season around Chinese New Year resulting in a gross margin of 12.5% for the quarter. Furthermore, despite the substantial decrease in interest income compared with the previous periods, primarily due to our dividend payments, we still achieve the positive net income for the quarter, with non-GAAP income of RMB 24 million. Let's move on to more details of our Q1 financial results. Our total net revenues were RMB 1.51 billion for Q1 compared with RMB 1.5 billion for the same period last year. Live streaming revenues were RMB 1.14 billion for Q1 compared with RMB 1.26 billion for the same period last year, primarily due to the continued impact of the macroeconomic and the industry environment. Gamer-related services, advertising and other revenues were RMB 370 million for Q1 compared with RMB 244 million for the same period last year. The increase was primarily due to higher revenues from gamer-related services, which were mainly attributable to our depend cooperation with Tencent and other…

Thank you, Raymond, and hello everyone. [Operator Instructions]. Today's first question comes from Nelson Cheung from Citibank. Nelson, your line is open. Please go ahead.

Let me translate myself into English. Thanks management for taking my questions and congratulations for HUYA with a solid quarter in first quarter and with a solid year-on-year growth for game-related revenues in first quarter. Wondering if management could elaborate more on the business outlook and prospects for this time? Thank you.

In the first quarter, HUYA's game-related services, advertising, and other revenues reached 370 million, representing a year-over-year increase of 52.1%. This growth was primarily driven by the increase in game-related services revenues, partially offset by a year-over-year decline in brand advertising revenues. The decrease in brand advertising revenues was primarily due to fewer tournaments and promotional activities during Q1 this year, as well as the high base effect from major new game launches in the same period from last year. It is worth noting that since our game distribution and in-game item sales revenue is primarily recognized on a net basis after revenue sharing with game companies. The total transaction value of our game-related services is significantly higher than our reported revenue. Specifically, in terms of domestic game distribution, despite limited major newer game launches in the market this year, we proactively deepened our engagement with existing games. Through cooperation with game studios and refined operational strategies, we continued to unlock the consumption potential of high commercial value user groups that have naturally congregated within our game live streaming ecosystem, forming a more stable and balanced foundation for our game distribution business. In the first quarter, the total gross revenue generated through HUYA's game distribution channel more than doubled year-over-year and increased quarter-over-quarter. In particular, thanks to various game events during the Spring Festival, several titles including QQ Speed Mobile, Peacekeeper Elite, Delta Force, and League of Legends Mobile recorded significant increases in gross revenue through the HUYA channel, with each growing more than 50% compared to the fourth quarter of last year. Additionally, games from new partners that we collaborated with also performed well. These results underscore our extensive capabilities in operations and game promotions. As we continue to solidify our position as a game distribution and marketing channel,…

Thank you. Our next question comes from Ritchie Sun from HSBC. Hi, Richie. Please go ahead.

Thank you, management for taking my questions. I have two questions. First of all, can management comment on the outlook, second quarter outlook and full-year outlook for the revenue? Second of all, given the geopolitical tensions and there have been some risks around -- can management comment on how do we plan to address this risk?

Thank you for your questions. With regard to the first question, in the first quarter, HUYA's total net revenue increased slightly quarter-over-quarter to approximately 1.51 billion. Thanks to the year-over-year growth in game-related services, advertising and other businesses, our total net revenue has stabilized year-over-year after previous declines. This also reflects the steady progress of our strategic business transformation and the company's execution capabilities. Based on what we are currently seeing, we expect that our total revenue has essentially bottomed out. On one hand, as the marginal year-over-year impact from economic and industry conditions weakens, and as we continue to optimize our live-streaming operations and enhance our user interaction features, live-streaming revenues are expected to stabilize. On the other hand, we anticipate that game-related services, advertising, and other business revenues will achieve relatively fast year-over-year growth this year. Particularly on the foundation of continued growth in domestic game-related services and advertising business, the enhancement of overseas game commercialization is also expected to become another future growth engine. Therefore, based on the current business situation, we expect HUYA's total revenue to achieve the growth this year. The company continuously monitors U.S. listing regulations and regulatory requirements, and is committed to fulfilling the responsibilities and obligations of the public company. Facing a constantly changing international situation and global economic trends, we closely monitor potential impacts that changes in the external environment may have on capital markets. To the company's knowledge regarding the first data listing risks for U.S.-listed China-based companies, recently reported by the media, the U.S. government has not yet issued new formal regulations. We will continue to monitor this situation. Meanwhile, the company is also prudently assessing potential risks and actively exploring corresponding situations, including evaluating opportunities in other capital markets. As we have always emphasized, HUYA consistently values and is committed to protecting investors' interests. If there is any material information, the company will make timely announcements in strict accordance with relevant requirements and fulfill its disclosure obligations.

Thank you. Now we will take the next question from Yanyan Xiao from CICC. Hi Yanyan, please go ahead.

I will translate myself. Thanks management for taking my question. My question is how should we estimate the company's future profit trend? Thank you.

This quarter, we continue to optimize costs related to €-sports content, but increased incentives for broadcasters to encourage the streaming and participation in providing game-related services during the Spring Festival's quiet season. Additionally, we have higher margin brand advertising revenue decline both year-over-year and quarter-over-quarter due to seasonal weakness and the high base effect from last year. As a result, our gross margin this quarter decreased slightly compared to the same period last year, but increased quarter-over-quarter to 12.5%. Despite significantly lower interest income due to dividend payments, we still achieved a positive net income for the quarter with non-GAAP net income reaching 24 million. Regarding future profit trends, considering that our shareholder return measures will result in reduced cash surplus on our balance sheet coupled with factors such as declining market interest rates, this year's interest rate income, especially in the second half of the year, will be significantly lower than the same period in 2024. Therefore, this year's bottom line performance will rely more on the improvements in the company's operational results. Specifically, on the cost and expenses side, we will moderately increase investment in self-produced content, which will also benefit the commercialization of development of game-related services, advertising, and other business. At the same time, we expect further improvements in copyright content costs in the future. Profit performance will also be affected to some extent by changes in overall revenue scales and structure. Overall, we expect that the company's non-GAAP operating results will show notable improvement this year.

Thank you. That's all for our Q&A session today. Thank you once again for joining us today. If you have further questions, please feel free to contact HUYA Investor Relations through the contact information provided on our website or PS&T Financial Communications. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.