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.
Junhong Huang — Senior Vice President and Acting Co-Chief Executive Officer
OK. Hello, everyone. Thank you for joining our earnings conference today. Despite 2024’s external challenges, we delivered a solid year by seeding opportunities arising from our strategic transformation and new game launches.
Notably, revenues from the game-related services, advertising, and other segment increased by 145.4% year over year to RMB 1.33 billion for the full year. This segment accounted for 21.9% of our total net revenues for the year as a substantial rise from 7.8% in the previous year. We recorded total net revenues of RMB 6.08 billion for the full year with improving profitability. Non-GAAP net income reached RMB 269 billion, up by 125.6% year over year, with net cash provided by operating activities turning positive at RMB 94 million.
These advancements are thanks largely to our strategic commercialization model update as well as our enhanced live-streaming content ecology and technology and product upgrades. Now, let me share the details of our recent business progress. First, we made encouraging strides in our business transformation for the fourth quarter. Revenues from game-related services, advertising, and others increased by 99.4% year over year to RMB 372 million despite a sequential revenue decline from the third-quarter peak due to the game industry’s seasonality.
This sector’s overall performance remained solid. Regarding game distribution, we continue to increase operational excellence for both new and existing titles and are pleased to see the HUYA platform emerging as one of the primary distribution channels for several games. Following the recent launch of Delta Force, we actively encourage our broadcasters’ participation in the title’s live streaming and game promotion. This led to rapid growth in gross receipts for the game generated through the HUYA distribution channel while also boosting its live-streaming content performance.
In addition, we plan to collaborate with more game developers and publishers on distribution and joint operations, and we conducted some meaningful trials with third-party game studios in the fourth quarter. We look forward to these initiatives contributing to the future development of our game distribution business. For in-game item sales, we deepened our focus on diversifying in-game item categories and improving traffic efficiency of online channels. We also upgraded the More section on our app, integrating popular game skins, tools, and user incentive activities.
In January, we launched our first League of Legends themed game item shop, accompanied by a special Spring Festival promotion featuring HUYA exclusive benefits. Excitingly, our efforts drove a record high in our monthly total in-game item sales GMV for January. On the advertising front, it’s worth noting that our in-house LOL Legend Cup Season 2 doubled its sponsorship revenue compared to its inaugural event, leveraging Legend Cup’s increased influence and IP value. The event attracted a wider range of well-known sponsors from the beverage, automotive, and local service sectors.
Furthermore, we began leveraging our international business presence to explore diverse revenue streams in overseas markets in 2024 by providing game distribution, in-game item sales, and game marketing services. These initiatives have already achieved promoting early results. Moving on live-streaming content ecology. We continue to strengthen our content ecology through collaborations with various content platforms during the quarter.
This has brought our broadcasters’ quality content and services to broader game audience, expanding our market presence and setting the stage for the future commercialization initiatives. In December 2024, HUYA’s content reached a record-high number of viewers, which we estimated to be more than double the number of our mobile active users. On our professional content enrichment efforts, our comprehensive coverage strengthened users’ inclination to watch esports on HUYA platform, enhancing our market share of several major events. Our licensed tournaments covered approximately 40 game titles in 2024.
In the fourth quarter alone, we broadcast over 100 licensed esports tournaments, featuring major events such as League of Legends World 2024 and Demacia Cup Honor of Kings KPL Grand Finals and Counter Strike 2’s Shanghai Major and BLAST Premier World Final, solidifying our content advantage. We also broadcast over 35 self-organized esports tournaments and entertainment PGC shows during the fourth quarter. Among these events, LOL’s Legend Cup S2, HOK’s Super Platform Cup, and VALORANT’s WALL-E Cup were quite popular. In addition, we hosted Xianwang Cup and HUYA Jiangsu Village games for HOK and CrossFire competitions in the fourth quarter, attracting widespread participation from local communities.
Furthermore, this year, we continue to develop our self-organized tournaments to complement the licensed tournaments on our platform and provide our users with a steady stream of fresh content. In doing so, we reduce the gap between our major licensed tournaments and in-house-produced content for both League of Legends and Honor of Kings significantly from over one a month in 2023 to no longer than two weeks in 2024. We also enhanced the influence of our in-house-produced content by engaging more popular broadcasters and fostering greater interactions in our game community. We currently lead the industry in the number of top-tier in-house-produced esports events and audience scale.
According to our internal statistics and estimates, we have captured over half of the market share for the industry’s top-tier in-house-produced esports events in 2024. In particular, our flagship, Legend Cup S2, has set a new standard for premier self-organized tournaments across various platforms. Building on the success of its inaugural season, we boosted the event’s viewing and entertainment value this year with upgraded team formation rules, match scheduling and gameplay design, as well as international players’ participation. Increase in the event’s relative content and sponsorship revenue clearly reflect Legend Cup’s rising IP value.
We are also delighted to see that the viewership metrics of the Legend Cup series on our platform nearly equal or even surpass those of some top-tier licensed esports events. In 2025, we intend to replicate our successful self-organized tournament model to encompass a wider array of popular esports titles on our platform. Alongside the upcoming Legend Cup Season 3, which will begin at the end of March, we will also launch premier HUYA-branded tournaments for Dota 2 and VALORANT, creating more high-quality IPs. We invite everyone to stay tuned for this exciting event.
Turning now to our technology and product upgrades, which drove business improvement throughout the year. To further enhance HUYA’s esports community vibe, we launched a series of product features on our app around tournaments to increase viewers’ engagement and facilitate access to professional esports analysis. During the Demacia Cup, we introduced customizable theme, live channel skins, and bullet chat effects as well as pre-match analysis and real-time data based on event statistics. Additionally, we developed features that allow viewers to access in-team chats during matches and flexibly switch between the first-person perspective of different players, which will gradually be integrated with our content release to provide exclusive content for team fans.
We also launched a HUYA rating section on our platform, providing users with a professional forum for esports rating and reviews of esports players, tournaments, broadcasters, and more. This section has quickly gained recognition and active participation from users. For instance, by the end of the event in early March, this year’s LPL Split 1 has received 6.8 million total of user ratings, representing an increase of approximately 80% compared to the cumulative rating of last year’s LPL Summer Split and more than double that of the event on another well-known rating platform during the same period. This not only reflects high user engagement with HUYA ratings but also demonstrates its significant impact on our promoting interaction with the esport community.
Furthermore, we are actively embracing cutting-edge technologies such as AI. In February, we became the first game live-streaming platform to fully deploy the DeepSeek R1 model as we deployed an AI assistant feature to help users efficiently search for game strategies and live channels of interest. We will further advance our AI plus live streaming strategy by applying AI large models to improve broadcasters’ content creation efficiency through smart interaction upgrades, full process automation, and data-driven operational support. This will also foster AI-powered digital IP innovation and facilitate the design of more distinctive visual streamers and delivering a novel experience for both users and content creators.
By leveraging AI technologies throughout the entire cycle of live-streaming content production, distribution, and consumption, we expect to energize the live-streaming creators’ ecosystem with intelligent tools, propelling the human-driven live-streaming industry toward a technology-driven future. We believe these innovative AI-driven endeavors will create more immersive, interactive experience for users and generate long-term value for HUYA in live streaming, esports, and more areas. Building on the meaningful achievements we have made so far, we will continue to progress our strategic transformation. Although challenges and uncertainties exist, we remain committed to building a more comprehensive game content and services platform, exploring new technologies, and deepening their applications to holistically improve our content creators and user experience.
Moving into 2025, we will continue to respond pragmatically to changes in the market environment and capitalize on market opportunities, driving our long-term sustainable business development. With that I will now turn the call over to our acting co-CEO and CFO, Raymond Lei. He will share more detail on our results. Raymond, please go ahead.
Raymond Peng Lei — Chief Financial Officer
Thank you, and hello, everyone. I’ll start with our fourth-quarter results, followed by our full-year financial highlights and an update on our shareholder returns. Our total net revenues in the fourth quarter of 2024 were approximately RMB 1.5 billion, with game-related services, advertising, and other businesses nearly doubling their revenues year over year, largely offsetting the macroeconomic and the industry environment’s continued impact on live streaming revenues. The number of paying users in the fourth quarter rose year over year to 4.5 million, excluding those who made in-game purchase through our game distribution business but didn’t pay via our platform or related services, demonstrating engagement across our core user base.
Due to the seasonal nature of major esports events scheduling and the related cost allocation, we have faced a gross margin pressure in the fourth quarter in recent years. Nevertheless, in 2024, we further rationalized broadcaster-related and esport content costs, including costs related to LOL Worlds resulting in an increase in our fourth-quarter gross margin to 11.4% from 1% in the same period last year. Moreover, enhanced operational efficiencies resulted in a 23.8% year-over-year reduction in total operating expenses, further contributing to the improvement in our broad profit metrics. We achieved a non-GAAP net income of RMB 1.2 million in the quarter, marking a turnaround from the same period last year.
We recorded non-GAAP net profit in all four quarters of 2024, highlighting significant progress in our business optimization efforts. Let’s move to — let’s move on to more details of our Q4 financial results. Our total net revenues were RMB 1.5 billion for Q4, of which live streaming revenues were RMB 1.12 billion, and the game-related services, advertising, and other revenues were RMB 372 million compared with total net revenues of RMB 1.53 billion for the same period last year. Cost of revenues decreased by 12% year over year to RMB 1.33 billion for Q4 primarily due to decreased revenue-sharing fees and the content costs, as well as bandwidth and the server custody fees.
Revenue-sharing fees and the content costs decreased by 12% year over year to RMB 1.16 billion for Q4 primarily due to decreased live streaming revenue-sharing fees associated with the decline in live streaming revenues, as well as lower costs related to licensed esport content and the in-house-produced content, partially offset by the increased game-related services, advertising, and other revenue-sharing fees. Service and server custody fees decreased by 33% year over year to RMB 55 million for Q4 primarily due to continued technology and management enhancement efforts, as well as favorable pricing terms. Gross profit was RMB 170 million for Q4 compared with RMB 15 million for the same period last year. Gross margin was 11.4% for Q4 compared with 1% for the same period last year, primarily attributable to decreased revenue-sharing fees and the content costs as a percentage of total net revenues.
Excluding share-based compensation expenses, non-GAAP gross profit was RMB 174 million, and the non-GAAP gross margin was 11.6% for Q4. Research and development expenses decreased by 10% year over year to RMB 123 million for Q4 primarily due to decreased personnel-related expenses, partially offset by higher share-based compensation expenses. Sales and marketing expenses decreased by 45% year over year to RMB 63 million for Q4 primarily due to decreased marketing and promotion fees, as well as personnel-related expenses. General and administrative expenses decreased by 19% year over year to RMB 81 million for Q4 primarily due to decreased provision and the office expenses, partially offset by higher share-based compensation expenses.
Other income was RMB 4 million for Q4 compared with RMB 13 million for the same period last year primarily due to lower government subsidies. As a result, operating loss was RMB 93 million for Q4 compared with a loss of RMB 322 million for the same period last year. Excluding share-based compensation expenses and the amortization of intangible assets from business acquisition, non-GAAP operating loss was RMB 69 million for Q4 compared with a loss of RMB 360 million for the same period last year. Non-GAAP operating margin was negative 4.6% for Q4.
Interest income was RMB 75 million for Q4 compared with RMB 129 million for the same period last year primarily due to lower time deposit balance, which was primarily attributable to the special cash dividend paid in May and October 2024. Impairment loss of investments was RMB 151 million for Q4 compared with RMB 8 million for the same period last year as we recognized impairment charges on our investment attributable to the weak financial performance of certain investees. Net loss attributable to HUYA Inc. was RMB 172 million for Q4 compared with a loss of RMB 275 million for the same period last year.
Excluding share-based compensation expenses, impairment loss of investments, and amortization of intangible assets from business acquisitions, net of income taxes, non-GAAP net income attributable to HUYA Inc. was RMB 1 million for Q4 compared with a non-GAAP net loss attributable to HUYA Inc. of RMB 190 million for the same period last year. Non-GAAP net margin was 0.1% for Q4.
Diluted net loss per ADS was RMB 0.75 for Q4. Non-GAAP diluted net income per ADS was RMB 0.01 for Q4. As of December 31, 2024, the company has cash and cash equivalents, short-term deposit, and long-term deposit of RMB 6.73 billion compared with RMB 8.08 billion as of September 30, 2024. Moving on to our full-year 2024 results.
Total net revenues were RMB 6.08 billion for 2024 compared with RMB 6.99 billion for the prior year. Live streaming revenues were RMB 4.75 billion for 2024 compared with RMB 6.45 billion for the prior year. Game-related services, advertising, and other revenues were RMB 1.33 billion for 2024 compared with RMB 544 million for the prior year. Non-GAAP gross profit was RMB 825 million for 2024 compared with RMB 831 million for the prior year.
Non-GAAP gross margin was 30.6% for 2024, up from 11.9% for the prior year. Non-GAAP net income attributable to HUYA Inc. was RMB 269 million for 2024, up from RMB 119 million for the prior year. The non-GAAP net margin was 4.4% for 2024, up from 1.7% for the prior year.
Non-GAAP diluted net income per ADS was RMB 1.15 for 2024, up from RMB 0.48 for the prior year. Net cash provided by operating activities was RMB 94 million for 2024 compared with net cash used in operating activities of RMB 32 million for the prior year. For additional details of our full-year 2024 financial results, I encourage listeners to refer to our earnings press release issued earlier today. Finally, let me provide an update on our shareholder returns.
To enhance our shareholder returns and optimize our capital structure, we are pleased to introduce our 2025 to 2027 dividend plan, which is expected to distribute a total of no less than USD 400 million to our shareholders over the next three years. Specifically, for 2025, we have declared a cash dividend of USD 1.47 per ordinary shares or per ADS, totaling approximately USD 340 million for 2026 and 2027. We expect to distribute no less than USD 30 million in cash dividend annually. In addition, through our up to USD 100 million share repurchase program, we had repurchased 19.1 million HUYA shares with a total aggregate consideration of USD 63.6 million as of the end of December 2024.
HUYA’s board of directors has also authorized the renewal and the continued usage of the unutilized quota under the exceeding share repurchase program until March 31, 2026. With that, I’d like to open the call to your questions.
Hanyu Liu — Investor Relations
Thank you, Raymond, and hello, everyone. [Operator instructions] For the benefit of all participants on today’s call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Today’s first question comes from Thomas Chong from Jefferies. Your line is open.
Please go ahead.
Thomas Chong — Analyst
[Foreign language] So, I transfer myself, and thanks, management, for taking my question. My question is about our shareholder return strategy. So, what factors do we consider when we make shareholder return strategies? Thanks.
Raymond Peng Lei — Chief Financial Officer
[Foreign language] We place great emphasis on enhancing shareholder returns and have thus emphasized — established a 2025 to 2027 dividend plan, which aims to distribute a total of no less than USD 400 million in cash dividends to HUYA’s shareholders over the next three years. Especially for 2025, we have declared a cash dividend of USD 1.47 per ADS, totaling approximately USD 340 million. For 2026 and 2027, we expect to distribute no less than USD 30 million in cash dividends annually. This dividend plan is designed to further reward HUYA shareholders and optimize the company’s capital structure and improve the efficiency of our cash utilization.
[Foreign language] HUYA currently has sufficient internal funds. As of the end of December 2024, the company held cash, cash equivalents, and deposit totaling over USD 900 million with no debt. For the full year of 2024, our non-GAAP net profit increased significantly compared to 2023, reaching RMB 270 million, and we achieved positive operating cash flow for the year. Even without considering future business cash flows, after completing the full dividend payment under this three-year dividend plan, HUYA will still retain approximately USD 500 million in funds, ensuring sufficient financial support for future business development.
Given that HUYA is currently in a special phase of strategic transformation, we will consider, after this dividend plan, studying long-term return mechanism, such as a regular dividend policy based on the company’s operating condition and visibility so as to achieve sustainable development and shared value with our shareholders. [Foreign language] In terms of share repurchases, under the existing share repurchase program of up to USD 100 million, we had repurchased HUYA shares with a total aggregate consideration of USD 63.6 million as of December last year. The repurchase program had been extended until March 31, 2026. We will comprehensively consider various factors, including market conditions, stock liquidity, and overall shareholder returns to prudently advance the repurchase program.
Hanyu Liu — Investor Relations
Thank you. And our next question comes from Nelson Cheung from Citi. Nelson, please go ahead.
Nelson Cheung — Citi — Analyst
[Foreign language] So, let me translate the question in English myself. Thanks, management, for taking my question. My question is related to the other revenue business growth. Under the fast robust growth in 2024, can management share your expectation into the other revenue, especially the game-related services, the business development, and also the growth driver going forward? Thank you.
Junhong Huang — Senior Vice President and Acting Co-Chief Executive Officer
[Foreign language] In the fourth quarter, although our revenues from game-related services, advertising, and others declined sequentially compared to the peak summer season, they still nearly doubled year over year, reaching RMB 372 million, demonstrating a very solid overall performance. Especially in-game distribution, we continue to enhance the operational excellence for both new and existing game titles on HUYA platform, and we have become one of the primary distribution channels for several games. Following the launch of the new game Delta Force, we actively encouraged platform broadcasters to participate in live streaming and related promotional activities, leading to a rapid growth in-game gross receipts through the HUYA distribution channel and fostering a positive life cycle with live-streaming content. At the same time, we are expanding distribution and joint operations with more game developers and conducted meaningful trial collaborations with third-party game studios in the fourth quarter of 2024.
[Foreign language] In terms of in-game item sales, we continue to diversify the categories of in-game items, improving traffic efficiency. And we further optimized the more section on our app, integrating popular items and user incentive activities. In advertising, we actively enhanced the sponsorship capabilities of our self-organized esports tournaments, particularly the IP value of LOL Legend Cup S2, which doubled its sponsorship revenue compared with the first season of the scam and attracted a broader range of well-known sponsors. They’re from beverage, automotive, and local live platform sectors.
[Foreign language] It is worth noting that the performance of our game-related services business is not only constrained by the seasonality of the game industry but also closely related to the participation of the streamers. Therefore, even though the Spring Festival period is typically a peak season for game industry, the decline in streamer live streaming rates during the same period may have a certain impact on our business. Additionally, in 2024, we successfully participated in the distribution and promotion of several major new game launches, and the release schedule and market performance of future game products are expected to influence the growth of company’s related business revenue. [Foreign language] Looking back over the past year, HUYA has made a significant progress in its commercialization transformation with non-live streaming business revenue accounted for over 20% of the total revenue for the full year.
In 2025, we will continue to advance our commercialization transformation, focusing on further increasing the game-related services and advertising revenues. In addition to refining our existing business, we also plan to strengthen the cooperation with various game developers and platforms and explore the exclusive distribution model to bring more possibilities for the sustainable development of our business.
Hanyu Liu — Investor Relations
Thank you. And our next question comes from Ritchie Sun from HSBC. Ritchie, please go ahead.
Ritchie Sun — HSBC — Analyst
[Foreign language] Thank you, management, for taking my questions. We noticed the rise of DeepSeek and also AI in general recently, and how does it impact our product monetization strategy, cost structure, all these aspects? Thank you.
Junhong Huang — Senior Vice President and Acting Co-Chief Executive Officer
[Foreign language] HUYA is a technology-driven entertainment platform, and we are actively integrating and applying various AI large model solutions, leveraging the platform’s technical resources, reach game live-streaming content and data with the aim of creating a long-term value for HUYA in live streaming, esports, and other areas and bring opportunities for future revenue and profit growth. [Foreign language] In February this year, HUYA Live app integrated the DeepSeek R1 large model full version and launched the AI assistant to help the users efficiently search for popular events, topics, and fun live streaming rooms on the platform. Moving forward, this assistant will also support features such as game guides and real-time interaction during live game streaming. [Foreign language] At the same time, we continue to explore the potential of AIGC in enhancing live-streaming content and user services.
Currently, we are developing an AI-powered streamer assistant to help the broadcasters more effectively to help them plan live streaming scripts, achieve data-driven operational support, and respond to viewer interaction needs in real time and also create a more interactive user experience. On the other hand, leveraging the reasoning and multimodal capabilities of AI large models and through deep integration with the unique commentary styles of our platform’s streamers, we will build a series of more stylized AI-powered virtual streamers in the construction of live-streaming event content and provide the users with more differentiated gaming experiences in areas such as event commentary, event replace, and band peak phase match analysis. According to current early testing data, the application of the streamer assistant has significantly increased the activity of live-streaming viewers and the gift revenue from the viewer interactions. Additionally, we have made progress in the creation of virtual streamer style and real-time reasoning output of large models, and we will continue to optimize on these areas.
[Foreign language] In summary, looking into the future, HUYA will deepen the implementation of AI plus live streaming strategy and empower our broadcasters with AI large models to upgrade their efficiency to create new AI IP models and more stylized virtual streamers, bringing a completely new experience to users and content creators. HUYA will leverage AI large models throughout the content production, distribution, and consumption loop using intelligent tools to activate the live streaming creator ecosystem and propel the live streaming industry from a human-driven to a technology-driven future.
Hanyu Liu — Investor Relations
Thank you. Now, we will take our last question today from Yiwen Zhang from China Renaissance. Yiwen, please go ahead.
Yiwen Zhang — China Renaissance Securities — Analyst
[Foreign language] So, thanks for taking my questions. So, can you discuss our live streaming revenue trend and additional rate? Can you also touch upon our group overall profitability margin trend as well? Thank you.
Junhong Huang — Senior Vice President and Acting Co-Chief Executive Officer
[Foreign language] In the fourth quarter, our live streaming revenue continued to be impacted by the macroeconomic and industry environment with users’ willingness to spend on gifting yet to recover. At the same time, we maintain a cautious operational strategy, resulting in overall live-streaming revenue remaining weak. [Foreign language] Typically, the first quarter of a year is low season for the live-streaming industry. During the Spring festival holiday and its surrounding period, the number of broadcasters going live decreases, and with fewer related activities and events in this quarter, we expect live-streaming revenue in this first quarter of this year to seasonally decline compared to the fourth quarter last year.
And we have noticed that some streamers’ live-streaming activity has gradually recovered after the Spring festival period. [Foreign language] In terms of profitability, on the cost side, the costs increased sequentially in the fourth quarter due to the presence of more large-scale licensed and self-organized esports events. However, compared to the same period last year, content costs have significantly declined due to the effective savings in licensing fees for licensed esports events, including LOL Worlds 2024, as well as a more optimized streamer cost structure. So, as a result, the gross margin in the fourth quarter reached 11.4%, slightly lower than the third quarter but up by 10.4% compared to the fourth quarter of 2023.
And in terms of operating expenses, the company continued to maintain a cautious spending strategy, effectively supporting the year-over-year improvement and overall operating performance in the fourth quarter, with non-GAAP net income turning profitable compared to the same period of last year. [Foreign language] Our future profitability will be influenced by the changes in overall revenue scale, while on the cost and expenses side, in addition to moderately increasing investment in self-produced content, we expect there’s still room for improvement in licensed content costs and streamer cost structures in the future. And we will continue to strictly control operating expenses, notably due to our proactive shareholder return policy leading to a reduction in cash surplus on the book. Coupled with factors such as declining market interest rates, we expect the interest income this year to be significantly lower than in 2024.
Therefore, this year’s bottom-line performance will primarily depend on the improvement in the company’s operating results.
Hanyu Liu — Investor Relations
OK. 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 with you again next quarter. Thank you.
Duration: 0 minutes
Hanyu Liu — Investor Relations
Junhong Huang — Senior Vice President and Acting Co-Chief Executive Officer
Raymond Peng Lei — Chief Financial Officer
Thomas Chong — Analyst
Nelson Cheung — Citi — Analyst
Ritchie Sun — HSBC — Analyst
Yiwen Zhang — China Renaissance Securities — Analyst
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HUYA (HUYA) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool
