Huya Broadcasting (NYSE:HUYA) Q4 2018 Earnings Conference Call March 4, 2019 8:00 PM ET

Company Participants

Rongjie Dong - Chief Executive Officer
Henry Sha - Chief Financial Officer

Conference Call Participants

Hillman Chan - Citigroup
Thomas Chong - Credit Suisse
Jerry Liu - UBS
Daniel Chen - JPMorgan
Li Zhang - Bank of America
Wendy Chan - Goldman Sachs

Operator

Hello ladies and gentlemen. Thank you for standing by for the Fourth Quarter and Fiscal Year 2018 Earnings Conference Call of Huya Inc. At this time, all participants are in listen-only mode. Today’s conference call is being recorded. And I would now like to turn the call over to Ms. [indiscernible], company investor relations. Please go ahead.

Unidentified Company Representative

Hello everyone and welcome to the fourth quarter and full year 2018 earnings conference call of Huya Inc. The company's financing 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 Mr. Henry Sha, Chief Financial Officer. 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 Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherit risks and uncertainties as such the company's result may be materially different from the views expressed today.

Further information regarding this and under 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 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’s, as well as unaudited non-GAAP financial measures. Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the audited most directly comparable GAAP measures.

I will now turn the call over to our CEO, Mr. Rongjie Dong. Please go ahead.

Rongjie Dong

Hello everyone. Thank you for joining us today. We are pleased to have completed 2018 on a strong note. 2018 was a very important year for Huya. In May, we became the first Chinese game live streaming company listed in the U.S. And throughout the year we continued to increase our market share by seizing the opportunity of industry consolidation and leveraging our first-mover advantage in the capital market.

In the first quarter, we continued delivering solid financial and operational results, including revenue growth of 103% year-over-year that exceeded our expectations. We are also pleased to have exceeded our financial guidance in every quarter since our IPO. As an encouraging milestone, we achieved annual profit for the first time with our non-GAAP net income for year 2018 beyond [RMB 450 million].

Our revenue streams were posted by strong MAU growth reaching 116.6 million users in the quarter, 34.5% increase year-over-year. User growth was driven by our major Esports events broadcasted on Huya’s website and mobile apps. We believe the following factors resulted in MAU growth, which was beyond our own expectation for the period.

Firstly, we made a significant improvement in Huya’s website viewing experience such as reducing the long-time our entering streaming channels, which promoted user growth, our non-mobile front. Secondly, a few notable Esports tournaments broadcasted by Huya attracted massive gamer’s attention in this quarter.

Specifically, when Chinese Esports team named iG won the World Championship in the final of League of Legends World Championship Season 8 in November, [subject to] concurrent user and leadership number on Huya’s platform hit a record high. Lastly, we continued to take efforts in content monitoring enhancing our presence in major app stores.

[The all-in] Chinese national holiday’s in October 2018 are key competitor’s mobile app was [suspended] by IOS app store, and main [indiscernible] downloading channels in China, which also served to strengthen our overall competitive positioning. Our mobile strategy continues to be our strategic for our mobile user experience supported by cutting edge technology and early mover advantages in mobile deployment. Further [indiscernible] our leading competitive edge and differentiates our content in the service offerings in the marketplace.

As such, mobile MAUs grew to over 50 million and we continued to maintain one-month replenishing rate our Huya Mobile app users to be about 70%. We have seen stronger monetization opportunities with mobile users presenting higher conversion rates for both the fourth quarter and full-year mobile users drove more than 80% of our live streaming revenue.

Meanwhile, we are happy to share that Huya continues to be ranked the Number 1 game live streaming platform in China in terms of total MAU, mobile MAU, and average daily time spent on mobile app per mobile active user in the fourth quarter 2018. We are proud of our performance in 2018 and view the year as important step in our growth.

In addition to our successful IPO, we worked through the year to further build our content ecosystem in addition to strengthening our partnership with gaming companies’ broadcasters and talent agency. We also worked diligently to enhance our user into extreme experience. Our content distribution technology and advantage user platform providing smooth viewing experience and [indiscernible] creating our professional generated content will further broaden our content offerings.

Huya’s content was also broadcasted and shared through external links, including WeChat, game live streaming mini-program, [indiscernible] platform and [indiscernible]. While viewership numbers and user behavior data is [indiscernible] are not included in our operating metrics according to our [indiscernible].

Total monthly active users watching via live streaming content from its external link issued over 40 million in December 2018. Our strategic focus on Esports continues to deliver encouraging results as [positively] our Esports growth both in China and globally.

During the fourth quarter, we broadcasted over 110 Esports tournaments with viewership of over 380 million, including LoL, S8, [indiscernible] that brought our 2018 total number of Esports events to approximately 400, which drove over 1.6 billion in total viewership. In the year, going forward, we will increase investment in high quality Esports tournaments by supporting for four major professional leagues like [indiscernible] to name a few.

We will be the exclusive live broadcasting platform for [indiscernible] important Esports events such as LCK, LPL, [indiscernible] grand final during the year. Beside these Esports tournaments organized by gaming companies we also provided Esports tournaments services and hosted approximately 20 events in Q4, which generated viewership of over 58 million in the period. Self-organized Esports tournaments held again one important part of our Esports strategy, which strengthens our competitive position in upstream content and poster. We [indiscernible] Esports tournaments and brand names.

Huya have not only generated [new statics], but also sold to grow and showcased possibly broadcasters on our platform. In January, we announced that we are establishing Esports and we are [indiscernible]. We are also evaluating and [indiscernible] Esports FX with the goal of establishing and efficient and effective operating management.

Going forward in this year, we will continue to place greater emphasis on self-organized events, including the Huya [indiscernible] and Huya mobile gaming [indiscernible], and will derive additional professionally generated content based on the [indiscernible] our Esports tournaments.

Finally, as announced in September of last year, we launched our [indiscernible] team participating in the [indiscernible] 2019 season. We are pleased to share the [indiscernible] gain victory for the first match in February of this year. As the only team composed of all Chinese professionals among ten teams in the whole league this season.

We believe the team will be well-received well with the domestic offense. As we look forward, our primary objectives for 2019 and above and beyond our [tool] strengthen our leadership position in China and [indiscernible] expand into overseas markets.

To strengthen our positioning in China, we will provide more services for our content [ecosystem] and continue investing to enhance our content differentiators. We have been seeing fast growing trends in terms of MAU and user time spent in both outdoor activities and amazing content [indiscernible] since the second half of 2018. We will build a [non-game professionally] generated content meant to improve user [indiscernible] leading to enhance monetization in 2019.

On our gaming contents side, we will improve visibility into the new game pipeline by establishing more partnership with gaming companies going forward. These efforts will get us prepared to push out content, as well as game approval versus [indiscernible]. As we evaluate our growth opportunities, we view our overseas presence as core differentiator in the competitive game live streaming landscape.

Our recent entry in Latin American has assured greater potential with [indiscernible] user growth and is viewed as potentially lucrative opportunity for us. In addition, we saw the total MAU of NIMO TV, our major content platform for overseas expansion surpassed $10 million in December 2018, which was not included in our quarter MAU statistics as reported.

We believe that the overseas user base, our NIMO TV has shown sizable advantages as compared to its past. Our [indiscernible] with capital and operating strengths will drive our success in the overseas market with sustainable return in the long run.

In summary, 2018 was a momentous year for HUYA. In addition to sustaining the lesser growth our domestic business and overseas expansion. We have been encouraging broadcasters on the HUYA platform to create more content advocating social responsibility. During the past year over 600 live streaming events broadcasted on the HUYA platform promoted a healthy and more positive social environment covering topics such as public welfare and cultural heritage to name a few.

We intend to work tirelessly to maintain our position as a leading game live streaming platform in China. While leveraging our technology to capture the tremendous growth opportunities both domestically and around the globe.

With that, I will now turn the call over to our CFO, Henry to share the financial details.

Henry Sha

Thank you, Mr. Dong. Hello everyone. We delivered a strong top line performance with fourth quarter revenue growing by 103% year-over-year to $1.5 million RMB and the 2018 full-year revenue growing by 113% to over $4.6 billion RMB. This was driven by solid growth in both live streaming and our advertising business. As a result of our continuous revenue increase and margin expansion we were able to deliver fourth quarter positive operating and net income on GAAP basis.

We also achieved non-GAAP net profit for the fifth consecutive quarter reaching a record high of 166.9 million RMB, while net margin increased by 160 basis point quarter-over-quarter to 11.1% in the fourth quarter 2018. Live streaming revenue was supported by MAU’s growth and a year-over-year increase in commercial rates of paying users with notable improvement in gaming content and monetization.

The paying user commercial rate rose to 4.2% in the fourth quarter of 2018 from 3.2% in the same period last year, as a result our paying users grew to 4.8 million in the fourth quarter of 2018, up 73% from the prior year period, with the mobile paying users making up about 80% of that total. In the quarter, revenue from gaming related content contributed more than 65% of total live stream revenue.

Our advertising business benefitted from our strategy of proving value added services, enhance the partnership between [indiscernible] and their broadcasters and our efforts and balancing advertisement slot and the user experience. While we experienced robust growth momentum, we have also worked prudently to enhance our operating efficiency and made significant stride in improving growth margin for both the quarter and the year.

That improvement resulted from our continued technology development in order to lower bandwidth consumption and the cost while distributing high quality streaming and video content and the top tier resolution. We also benefitted from our growing scale at content cost were leveraged across the larger user base.

Our fourth quarter non-GAAP gross margin increased by 60 basis points quarter-over-quarter to 16.1%, despite this fact our overseas expansion required a continuous investment in mutual fast growth. As we enter 2019, we expect our fast-growing user base the content value we have created and our strategic focus on business diversification will remain as our drivers of strong revenue growth.

We see tremendous opportunity to expand our user base in both domestic and overseas market and efforts efficiently managed cost, while leveraging our growing scale will continue to generate positive cash flow. We got confident our strong competitive position and compelling strategy of growth will allow us to deliver solid returns to shareholders.

Now, let me briefly go over the financial results for the fourth quarter. Total net revenue for the fourth quarter of 2018 increased by 103.1% to RMB 1,504.9 million from RMB $741 million in the same period of 2017. Live streaming revenues increased by 108.1% to RMB 1,441.8 million in the fourth quarter of 2018 from RMB $692.7 million in the same period of 2017, primarily due to the increase in both the number of paying users in our platform and extending per paying user.

The increase in the number of paying users was primarily driven by our mobile strategy diversification of content offerings and the continued efforts in converting active users into paying users. Advertising and other revenues increased by 30.7% to RMB 63.1 million in the fourth quarter of 2018, from RMB 48.3 million in the same period of 2017. This increase was primarily driven by increased demand from gaming advertisers and further recognition of HUYA’s brand name in China online advertising market.

Cost of revenues increased by 100.1% to RMB 1,266.3 million in the fourth quarter of 2018 from RMB 632.9 million in the same period of 2017, primarily attributable to the increase in revenue sharing fees and content costs, as well as bandwidth costs. Revenue sharing fees and content costs increased by 112.8% to RMB 1,042.1 million in the fourth quarter of 2018 from RMB 489.7 million in the same period of 2017, primarily due to the increase in virtual items revenue sharing, which was in line with the company’s live streaming revenue growth and continued spending in Esports content and content creators in both domestic and overseas markets.

Bandwidth costs increased by 42.1% to RMB 161.6 million in the fourth quarter of 2018 from RMB 113.8 million in same period of 2017, primarily due to an increase in bandwidth usage as a result of increased user base on HUYA’s platform and enhanced live streaming video quality improvements, partially offset by improved efficiency in bandwidth utilization as a result of the deployment of new technologies in content distribution.

Gross profit increased by 120.7% to RMB 238.6 million in the fourth quarter of 2018 from RMB 108.1 million in the same period of 2017. Excluding share-based compensation expenses, non-GAAP gross margin increased to 16.1% in the fourth quarter of 2018 from 14.6% in the same period of 2017 and from 15.5% in the third quarter of 2018, primarily due to our enhanced monetization efforts, technology innovation on bandwidth utilization, and a continued leverage on economies of scale.

Research and development expenses increased by 80.9% to RMB 79.1 million for the fourth quarter of 2018 from RMB 43.7 million for the fourth quarter of 2017, mainly attributable to increased headcount and wage inflation in R&D personnel and share-based compensation expenses related to the share awards newly granted in 2018.

Sales and marketing expenses increased by 102.4% to RMB 59.9 million for the fourth quarter of 2018 from RMB 29.6 million for the fourth quarter of 2017, mainly attributable to the increase of marketing and promotion expenses as a result of enhanced efforts in promoting HUYA’s brand awareness and Esports content, as well as cooperating with various marketing channels in both domestic and overseas markets.

General and administrative expenses increased by 153% to RMB 92.6 million for the fourth quarter of 2018 from RMB 36.6 million for the fourth quarter of 2017, mainly due to the increase in share-based compensation expenses related to the share awards newly granted in the first quarter of 2018, professional fees and salaries and welfare of management personnel.

Operating income was RMB 18.5 million for the fourth quarter of 2018, compared with an operating loss of RMB 1.8 million in the same period of 2017. Non-GAAP operating income, which excludes share-based compensation expenses, increased by 280.9% to RMB 82.5 million for the fourth quarter of 2018 from RMB 21.7 million in the same period of 2017.

Non-GAAP operating margin was 5.5% in the fourth quarter of 2018 compared with 4.8% in the third quarter of 2018 and at 2.9% in the fourth quarter of 2017. Net income attributable to Huya Inc was RMB 99.6 million for the fourth quarter of 2018, a 19-fold increase from RMB 5.0 million in the same period of 2017.

Non-GAAP net income attributable to Huya Inc. in the fourth quarter of 2018, which excludes loss on fair value change of investments and equity investee’s investments and share-based compensation expenses, increased by 486.8% to RMB 166.9 million, from RMB 28.4 million in the same period of 2017.

Non-GAAP net margin was 11.1% in the fourth quarter of 2018 significantly improved by 3.8% in the fourth quarter of 2017. Diluted net income per ADS was RMB 0.45 for the fourth quarter of 2018, compared with diluted net loss per ADS of RMB 0.05 for the same period of 2017. Each ADS represents one Class A ordinary share. Non-GAAP diluted net income per ADS was RMB 0.76 for the fourth quarter of 2018, compared with RMB 0.19 for the same period of 2017.

Let me turn into our balance sheets and cash flows. As of December 31, 2018, the company had cash and cash equivalents, short-term deposits, and short-term investments of RMB 5,993 million. Net cash provided by operating activities was RMB 717.5 million in 2018, compared with RMB 242.4 million 2017. To be mindful of the length of our earnings call for the other full-year 2018 financial results. I will encourage listeners to refer to our earnings press release for further details.

Now, let’s come up to the business outlook. For the first quarter of 2019, we currently expect total net revenues to be in the range of RMB 1,510 million to RMB 1,516 million, representing a year-over-year growth of between 79.0% and 83.7%. This forecast reflects our current and preliminary views on the market and the operational condition, which are subject to change.

This concludes our prepared remarks. We are now open to call to questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you. And we will now begin the question and answer session. [Operator Instruction]

And our first questioner will be Hillman Chan with Citigroup. Please go ahead.

Hillman Chan

[Foreign Language] Thank you management for taking my question and congrats on a solid quarter result. My first question is on [indiscernible] legends, could management share more on your observation of the initial usage function of this title on Huya in China in terms of the user popularity and how does is compared to other titles in terms of over watching fortnight? And could you also share more on our effort in building up quickly the stream and eco-system for this time in China please? And my second question is on competition, could management share more on how we think about the competition versus [indiscernible] in terms of user popularity if creation of new game launches, recruiting of streamers, and also [indiscernible] IPs and how do we think of our differentiated growth comparative strategy going into 2019 please? Thank you very much.

Rongjie Dong

[Foreign Language] Please go ahead.

Unidentified Company Representative

Thanks, I will help translate the answers in to English. So, in terms of, like the title coverage of Huya’s platform, we basically cover over 3,000 game titles, which means we have a broad coverage of [indiscernible] games to attract users that’s number one, firstly. And secondly, Huya is a live streaming platform, we will welcome new popular game titles, but speaking of Apex Legends, it’s too early stage, but we see in the U.S. that Twitch has made a successful marketing experience for the game title and that’s good example to say that the game live streaming platforms provide a really effective channel for games to become a new blockbuster, so that Apex Legends from what we observed in overseas market.

Speaking of Huya, how we want to prepare the game titles, obviously we have been keeping a close attention of new games in the market and make timely investment, we have provided incentives and support time life for the broadcasters and recruitment them for the game title and we also invited popular broadcaster to attend Huya’s self-organized Apex Legends online tournament.

[Foreign Language]

Unidentified Company Representative

Thanks. I will help translate the answer into English. So, in terms of our comparison with [indiscernible] I think overall, we need to consider game live streaming platform as the content provider, content platform. So, ultimately providing high quality content that's on top of all priority and we are able to provide that content in our platform.

Secondly, is that we able to provide the right incentive financial support to the broadcasters, to make sure they can grow together with our platform. Then speaking of those two things we can share that our mobile MAU, make sure we are the largest game live streaming platform in China. And also, we have achieved a good monetization if we look at the game live streaming platforms in China.

And also speaking of the business models, we are not hugely dependent on recruiting the top broadcasters, we think the mid-tier shorter broadcasters are also the core of streams of our platform to provide a variety of content. We have also maintained quite strong relationship with talent agencies as we have been walking with them for a long time. We work together to support and promote the broadcasters.

Lastly, from technology perspective we are also a leading player in the game live streaming platform. We are able to provide high quality streaming qualities for the users at the same time really manage our bandwidth cost to achieve the cost efficiency for Huya platform.

And we looking into the future, I think first of all, we still want to maintain the factors we mentioned above to train, promote the broadcasters, grow the broadcasters with Huya, and also achieve better monetization, and maintain all monetization capabilities going forward. Secondly, looking to 2019 overseas is the focus for us.

We want to keep the overseas expansion and achieve certain scale for 2019, and I think all of the MAUs if we look at the data last year, the same where we have already achieved over 10 million MAUs. Lastly, I think we wanted to create a platform that also has a variety of content besides gaming. So, we want to diversify our content offerings going forward as well. Thank you.

Henry Sha

Hi this is Henry, I will add one more point to compensate to the answers provided by Mr. Dong. So, we ask the user base is more recommended, which is disputed to all the [indiscernible] in China, especially for the [indiscernible] and the IOS users around the 10%. So, we believe that we also have the cost advantage and user base advantage from this perspective. That’s the answers to Hillman.

Operator

And our next questioner today will be Thomas Chong with Credit Suisse. Please go ahead.

Thomas Chong

[Foreign Language] Thanks management for taking my questions. My first question is about our trend, in terms of our MAU forecast in coming quarters in 2019. And my second question is about our thoughts on our KPI, for our overseas expenses’ strategy in the future, thank you.

Rongjie Dong

[Foreign Language]

Unidentified Company Representative

Thanks. Our target to MAU for 2019 is to reach about 140 million to 150 million total MAU. And our overseas user growth will be faster than the domestic user growth.

Operator

And our next questioner today will be Jerry Liu with UBS. Please go ahead.

Unidentified Company Representative

Hi, really, I'm sorry. We’re just not finished the question for Thomas. Management will go ahead.

Henry Sha

Yes, sorry, apologies. This is Henry. So, I will compensate to the answers about Mr. Dong. So, overseas [indiscernible], so our major platform is NIMO TV, as we early briefly introduced in our scripts. Now, the NIMO TV has entered into Indonesia, [indiscernible], Thailand, as well as into the Latin American Market. Because, we believe the user behavior in those regional markets is quite similar to the North American user's behaviors with very great potential and as Mr. Dong mentioned earlier the MAU after NIMO TV in December 2018, the MAU exceeded 10 million. And now it's a 100% owner unit and the Huya, which is operated by the CEO and our VP in charge of the overseas business. Thanks. That's the answer to Thomas. Operator, please go ahead. Thanks.

Operator

And the next questioner will be Jerry Liu with UBS. Please go ahead.

Jerry Liu

[Foreign Language] First just a follow-up on the 140 million to 150 million MAU number for 2019, does that include users outside of China? And then secondarily, my question is on some of the new recent broadcaster policy that Tencent discussed in recent weeks, especially one of the things is on limiting the bidding process between top tier broadcasters between the different platforms. So, I just want to understand how do we think about this? What kind of impact it can have potentially on our content cost in 2019? Thank you.

Rongjie Dong

[Foreign Language]

Unidentified Company Representative

Thanks. I will help to translate. First of all, the MAU target includes overseas market as well. Secondly, on the new rules introduced by Tencent, I think this is the sign to show that the industry is going to be better regulated and become healthy and that’s also something we still really happy to see and we can also contribute to building a healthy and stable game live streaming industry. In speaking of the impact on the sign-up bonus and also the pay to the broadcasters, I think it’s too early to speak firmly on this point. We still want to monitor how the market will play out over the next two quarters to make a meaningful comment on the cost. Thanks.

Henry Sha

Jerry, I will help to add one more point to our CEO’s answers to you. So, from the perspective of the accounting cost and sign-up bonus fees we paid to the broadcasters we believe we do a very excellent execution on the cost management in considering the results of the last year. So, going forward, we believe that we will [indiscernible] same level of the execution and make sure and trying to improve the margin in the new year in the coming year. Thank you.

Jerry Liu

[Foreign Language]

Operator

And our next questioner will be Daniel Chen with JPMorgan. Please go ahead.

Daniel Chen

[Foreign Language] I will translate myself. My question is related to the content cost, so this quarter, content cost as a percentage of revenue has upped by 3% this quarter. So, what’s the reason behind and how should we look at the ratio into 2019? And also, Henry just mentioned in 2019 Huya will have a margin expansion year-over-year basis. So, where should we see the operating leverage to come from? Thank you.

Henry Sha

Thanks, Daniel. I will help answer your questions. For your first question about the Q4, the content cost and revenue shares percentage as a percentage of revenue has a slight increase in comparison with Q3, I believe that was caused by the season of the ceremony, the year-end ceremony and the increase in number of the broadcasters we signed up to the platform and by the year-end regularly we will pay you like one of the bonus to those broadcasters who performed really well including their personal performance compliance everything good with the platform for the whole year, so we will pay them for the bonus fees at year-end. So, I think that’s the major driver behind this.

So, for the forecast of 2019, we believe that for the margin expansion, so we believe that we have the huge advantage on the content distribution technology. As I mentioned earlier last quarter, we have the great progress in the P2P technology to have to lower the bandwidth consumption into the same period of the very high-quality dilution. So, actually this technology has been deployed since September last year in Q3 and in Q4. So, this technology has been deployed to more and more users on our platform. So, with the result of bandwidth utilization has improved gradually. So, we believe that’s one of the drivers of the margin expansion.

Another is the, because we are growing very fast in the user base in terms of MAU, so the content cost, we have the economics of scale of the content cost will have leverage on that. So, we paid one of the content fee and will be shared by all the users on the platform, the growing user base. So, that is how we caught a leverage on that. So, that I believe the major drivers for the next year. Thank you.

Operator

And our next questioner today will be Li Zhang with Bank of America. Please go ahead.

Li Zhang

[Foreign Language] My first question is about your investments in [indiscernible] 2019 and any large tournament we can expect? And my second question is a follow-up on the overseas strategy, notice that we also have some entertainments related overseas, how should we look at the competition in overseas markets and how to drive the scalability in overseas and do you have any target in overseas and also want to know our major investments in overseas markets in content creator talent agency or may be the local team? Thank you.

Rongjie Dong

[Foreign language]

Unidentified Company Representative

Thanks, I’ll help translate with your answers. So firstly, we want to just talk about the overseas expansion strategy at a high level, so as we can already speak on the wider market, lot of game companies also expanding to the overseas market, so it is a natural claim for game [indiscernible] companies to go overseas as well and we have started doing that things in 2018. But then speaking of the overseas market we think there are opportunities for us to explore and not just on game live streaming, but other medium contents, venues, and short-form videos or other entertainment contents. I think we are just generating more opportunities for us to explore in overseas market. And our CFO Henry will supplement more concrete detail.

Henry Sha

Hi, Li, let me add some point to Mr. Dong’s answers for you. First, our spending in the overseas market will be extended into the user acquisition cost. So, we call this the launch program, so we need to acquire new users from the channel [indiscernible] or maybe the Google Play, the channels to do marketing to acquire the new users from the overseas market in the regional market. Second, our status has always become, we use the local player, local broadcaster to twist up the local users by playing the local games.

So, that’s a part of the cost that we need to pay to find the new talents and new broadcast in the regional market because of language problems. So, to your question about the target, we believe that the overseas business for the 2019, I will still prioritize the user growth instead of monetization, but we are looking at the opportunity to monetize our overseas business in the second half of the year. So, the user growth, we are looking at more than 100% growth in terms of MAU. Thanks, that’s the answers to Li’s questions.

Operator

And our next questioner today will be Wendy Chan with Goldman Sachs. Please go ahead.

Wendy Chan

Hi, Dong, hi Henry. [Foreign language] Thanks a lot for taking my questions. So, my question is about the ARPU trend that we are seeing that in the fourth quarter that’s the year-over-year growth after reaching a relatively a slower level, so just wondering how should we proceed ARPU growth in 2019 and also for the newly added PCMU we’ve seen this quarter, which was [indiscernible] robust growth, how is their paying ratio and ARPU trending for this new PC user? Thank you.

Henry Sha

Hello, Hi Wendy, this Henry. Let me answer you first question about the output trend. So, as you can see from Q3 to Q4, our output has shown the trends up more stabilized. So, this was because a lot of the new users become our payers on our platform. So, at their first time to pay their [ticket size] is relatively small. So, I think that’s why as you can see the ARPU is more stable and looking forward for 2019 with the management teams do stay very optimistic on these ARPU growth. So, that’s the answers to your first question. As you can see, our paying users come up from 4.2 million paying users into 4.2 million in Q4 quarter-over-quarter. So, I think that’s a very encouraging number to explain the expansion of the paying user base.

So, to your second question about TC MAU growth, so actually in Q4, we improved a lot about our user experience, the viewing experience as Mr. Dong introduced earlier in his remarks. So, the viewing experience in the website has been hugely improved, especially for the loading time, we shortened the loading time period and as you may know in Q3 and in Q4 there are quite a lot of the top tier, the final [indiscernible] tournaments happen, so this bring a lot of like new users to our platform on the TC end.

We still stay very optimistic to convert them into the mobile end users, but now at this stage, mobile is still our key focus on the strategy, which contributed more than 80% of the total paying users. The paying ratio of the mobile stat is relatively high. So, we were still staying with the mobile strategy. Yes, thank you.

Rongjie Dong

[Foreign Language]

Unidentified Company Representative

I’ll help translate the answers. So, speaking of the PC, the growth of the PC in use for 4Q, we think it’s more as [indiscernible] instead of a trend and we usually look at going forward. The reason is because from our group level is always think the value of the PC, and you wouldn’t be that high because in the limited interactions available for the users and the paying behavior is not as good as the mobile MAUs. Thank you.

Operator

Now, I would like to turn the call back over to the company for any closing remarks.

Unidentified Company Representative

Thank you once again for joining us today. If you have further questions, please feel free to contact the investor relations through the contact information provided on our website or the TPG investor relations. Thank you.

Operator

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