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. We were pleased to make significant strides in developing our game-related services business during the third quarter.

Game-related services advertising and other revenues reached a new record high, contributing 26.7% of our total net revenues. To drive this progress, we continue to enhance content and upgrade product features on our platform to improve users' experience while exploring new partnerships and business opportunities to expand our user reach and unlock our growth potential. Moreover, despite the ongoing challenges in the macroeconomic and industry environment, we maintain a relatively stable year-over-year operating performance and achieve a non-GAAP net income of RMB 78 million. Now, let's take a detailed look at our recent operational and strategic achievements.

First, our users, engagement across our high-quality user base remains stable during the third quarter, with mobile MAUs improving slightly sequentially to RMB 84 million. While we maintain our disciplined approach to marketing and promotion spending, we also enrich our content and service offerings as well as product features to reinforce our users' engagement. Furthermore, we continue to strengthen our cooperation with various content platforms, joining hands with these partners to conduct cross-platform streaming and co-produce premium professional content. We also selectively distributed our comparing game live streaming and video content to product lines within Tencent's ecosystem and other content channels.

Thanks to these initiatives, we estimate that Huya's content reached a total of over 140 million users in September, taking into account other platforms' users as well as our own mobile users. We believe our productive platform collaborations will continue to broaden our reach among gamer users, empowering us to explore more commercialization of opportunities around game-related services and live streaming. Moving on to game-related services, our game distribution, in-game item sales, and game advertising business continue to grow robustly. Revenues from game-related services, advertising, and others reached RMB 410.2 million for the third quarter of 2024, up by 209.3% year over year and 32.9% quarter over quarter.

For game distribution, we work closely with game studios on new game releases, version updates, and related operational activities and incentivized our broadcasters to participate in game distribution. These efforts effectively promoted our growth this summer, with total growth generated through Huya's game distribution channel in the third quarter rising to more than 20 times that of the year-ago period. The quarter's top titles included Honor of Kings, Demi-Gods, and Semi-Devil Mobile, DnF Mobile, QQ Speed Mobile, and Peacekeeper Elite. We are confident of further developing our game distribution service as we expand our reach in the vast game market by offering distribution for a wider range of titles, including both mobile and PC games, and collaborating with additional game studios.

Once more, we plan to implement targeted initiatives for broadcasters to enable them to provide more tailored user services and drive users' interest in exploring and engaging with the games distributed via our platform. We have also strengthened our collaborations with major game titles in-game item sales, broadening the scope of our coverage in this area. In particular, we were promoting inclusive or customized in-game items for our platform and broadcasters, and holding sales events for initial release of new in-game items. For instance, during the third quarter, we held a crossfire workshop offering Huya inclusive weapon skins, as well as an inclusive initial release of co-branded outfit skins featuring a well-known broadcaster on our platform.

Sold on that broadcaster's channel, both initiatives garnered great interest from our users. Notably, the total value of the co-branded outfit skins sold on the broadcaster's channel during this initial release activity exceeded RMB 50 million, validating the growth potential of our in-game item sales business. In terms of game advertising, we responded to the summer's increasing game marketing demand with comparing new game launch promotions and anniversary events for the existing games. In the third quarter, we collaborated with a number of game companies promoting popular games such as Arena Breakout, World of Warcraft, and Naruto Mobile.

Going forward, we will continue to diversify our advertiser base and enhance our game promotion and marketing capabilities through Huya's streamer-created content and in-house produced events. Moving on to our professional content enrichment efforts on our platform, including licensed and in-house content. In the third quarter, we broadcasted over 90 licensed Esports tournaments. The LPL, KPL, Valorant Champions, and Esports World Cup were among the most-watched events during the quarter.

In addition to the tournament of more proven Esports game titles, which continue to attract user attention, Valorant tournaments have become increasingly popular since the game's launch in China last year. This year's Valorant champions increased its viewership by approximately 160% compared to the previous edition, further boosting the popularity of the game's content on our platform. We also broadcasted the recently concluded LoL Worlds 2024, one of the year's most important Esports events. We prepared comprehensively for LoL Worlds and were pleased to see our hard work drive positive outcomes.

We optimized our tournament broadcast audio and video technology for the event, providing a variety of HDR video quality options to suit users' various devices and network environments, which brought our users industry-leading image quality effects and viewing experiences. We also introduced a competition data analysis system for this event that instantly captured each data point and converted the data into a visual presentation, allowing viewers to see real-time changes in teams and players with win rates while they watch the competition. Also, in addition to our official streams, popular broadcasters and professional players on our platform created secondary live commentary for the event, providing our users with more diverse and entertaining tournament viewing experience unique to Huya. Based on our initial statistics, we maintained our leading market share of this event's viewership and further increased our market share year over year, significantly ahead of other live-streaming platforms.

In terms of in-house content, we broadcasted over 20 self-organized Esports tournaments and entertainment PGC shows in the third quarter. For example, we successfully hosted the HOK Streamer League in collaboration with two other major live-streaming platforms to rave reviews across platforms. We also continued our Village Games series for community participation and hosted the [Inaudible] Village Games for Honor of Kings. Additionally, we collaborated with well-known TV programs to produce Streamer Rush Forward, a reality show featuring our game and entertainment broadcasters, which attracted strong user interest.

For competing to the end, our interactive gameplay variety show that integrates game promotion and entertainment content, we covered more hot and new games in this quarter, such as HOK's new mode, Wukong Naruto Mobile. Given that our in-house content generally delivers good ROI performance, we are strengthening our investment in this area to create more influential and commercially valuable event IPs. As our range of in-house content expands and becomes more diverse, we will also focus on scheduling these programs to seamlessly integrate with our licensed events to better complement and enrich our professional content library. For example, following the conclusion of LoL World 2024, we commenced Season 2 of our LoL Legends Cup, building on the success of its inaugural season in May.

Finally, we continue to explore innovative features to engage users and enhance interaction while differentiating Huya's live streaming experiences, including product cooperation with leading game titles. For example, in the third quarter, Huya became the first platform in the industry to integrate Honor of Kings bullet chatting gameplay mode in live broadcast, adding both native features and platform-exclusive modifications developed by Huya using Honor of Kings tools. In this mode, viewers can activate special skill cards that impact the live game by sending bullet chats or visual GIFs to the channel, creating unique gameplay situations that drive more interesting live streaming content. Given these features promised, we will continue to leverage Huya's expertise in creating engaging game live-streaming content to bring entertaining, exclusive features to our streamers and users.

Looking ahead, we will remain focused on fostering our in-house content initiatives. We are especially excited about Season 2 of our self-produced Legend Cup and look forward to amplifying this series' success and influence. We will also deepen collaboration with content creators and industry partners to extend our content reach beyond the Huya platform and explore broader cooperation with more game developers and publishers to expand our presence in the game market. We are confident these efforts will unleash new commercialization opportunities, propelling our long-term business development.

With that, I will now turn the call over to our acting co-CEO and CFO Raymond Lei, who has been with us for a few months. He will share more details on our results. Raymond, please go ahead.

Raymond Peng Lei -- Chief Financial Officer

Thank you, Junhong, and hello everyone. I am delighted to be part of Huya's management team and to speak with you for the first time. I'll start with an overview of our financial performance. Our total net revenues were RMB 1.54 billion in the third quarter of 2024.

The soft macro and industrial environment which impacted users' willingness to pay for live streaming continued to weigh on our live streaming revenues. Meanwhile, we proactively adjusted our business structure to support our strategic transformation and maintain prudent operations. Game-related services, advertising, and other businesses showed strong momentum and made a more meaningful contribution to our top line, increasing by 209.3% year over year and 32.9% quarter over quarter, primarily due to increased revenue from game distribution and advertising services and in-game item sales. We are pleased to see more users paying for our game-related services, driving growth of 9.5% year over year in paying users to reach 4.6 million in the third quarter.

Also, our continuous efforts to improve operational efficiency paid off, with total operating expenses decreasing by 20.9% year over year. I'd also like to review our recent progress in optimizing our content. We continue to refine our street procurement strategy for licensed content, striving for better commercial terms. As we disclosed in September, we entered into a second supplemental license agreement for a series of League of Legends matches that decreased the license fee, which we believe will help us further reduce our overall Esports license costs this year and in 2025.

Let's move on to more details of our Q3 financial results. Our total net revenues were RMB 1.54 billion for Q3, of which live streaming revenues were RMB 1.13 billion, and game-related services, advertising and other revenues were RMB 410 million, compared with total net revenue of RMB 1.66 billion for the same period last year. Cost of revenues decreased by 6% year over year to RMB 1.33 billion for Q3 primarily due to decreased revenue sharing fees and the content cost as well as benefits and cyber custody fees. Revenue sharing fees and the content cost decreased by 5% year over year to RMB 1.17 billion for Q3 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 Esports content.

Partially offset by increased game-related services, advertising, and other revenue sharing fees, bandwidth and the server custody fees decreased by 26% year over year to RMB 61 million for Q3 primarily due to continued technology and management enhancement efforts as well as favorable pricing terms. Gross profit was RMB 204 million for Q3, compared with RMB 243 million for the same period last year. Gross margin was 13.2% for Q3, compared with 14.6% for the same period last year. The change was primarily attributable to increased revenue-sharing fees and the content cost as a percentage of total net revenues, which rose mainly because the decrease in live-streaming revenues outpaced the decrease in costs.

Excluding share-based compensation expenses, non-GAAP gross profit was RMB 207 million and the non-GAAP gross margin was 13.5% for Q3. Research and development expenses decreased by 12% year over year to RMB 126 million for Q3 primarily due to decreased personal related expenses and the share-based compensation expenses. Sales and marketing expenses decreased by 30% year over year to RMB 73 million for Q3 primarily due to decreased marketing and promotion fees as well as personal related expenses. General and administrative expenses decreased by 25% year over year to RMB 50 million for Q3 primarily due to decreased professional service fees and the personal related expenses.

Other income was RMB 13 million for Q3, compared with RMB 40 million for the same period last year primarily due to realized damages received in the third quarter of 2023 from a favorable outcome in a broadcaster-related lawsuit and lower government subsidies. As a result, operating loss was stable at RMB 32 million for Q3 compared with the same period last year. Excluding share-based compensation expenses and the application of intangible assets from business acquisition, non-GAAP operating loss was RMB 13 million for Q3, compared with RMB 15 million for the same period last year. Non-GAAP operating margin was negative 0.9% for Q3.

Interest income was RMB 97 million for Q3, compared with RMB 128 million for the same period last year which was primarily attributable to the special cash dividends paid in May and October 2024. Net income attributable to Huya Inc. was RMB 24 million for Q3, compared with RMB 11 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 profit attributable to Huya Inc.

was RMB 78 million for Q3, compared with RMB 107 million for the same period last year. Non-GAAP net margin was 5.1% for Q3. Diluted net income per ADS was RMB 0.1 for Q3. Non-GAAP diluted net income per ADS was RMB 0.34 for Q3.

As of September 30, 2024, the company had cash and cash equivalents, short-term deposits, short-term investments, and long-term deposits of RMB 8.1 billion, compared with RMB 8.2 billion as of June 30th, 2024. Finally, an update on our shareholder returns. As of the end of September 2024, we had repurchased $61.1 million of Huya shares through our share repurchase program. The two special cash dividends we paid this year also retained an aggregate value of approximately $400 million to our shareholders.

We remain committed to consolidating our financial and operating performance and creating more value for shareholders. With that, I'd like to open the call to your questions.

Hanyu Liu -- Investor Relations

Thank you, Raymond. Hello, everyone. [Operator instructions] Today's first question comes from Nelson Cheung from Citibank. Nelson, your line is open.

Please go ahead.

Nelson Cheung -- Citi -- Analyst

[Foreign language] So let me translate the question myself. Thanks, management, for taking my question. My question is related to the game-related services. I'm wondering if management can share the latest updates on the game-related services in third quarter and any new updates in fourth quarter right now.

And how do we perceive the upcoming development plans for this business in 2025, and what would be the comparative advantage of Huya? Thank you.

Junhong Huang -- Senior Vice President and Acting Co-Chief Executive Officer

[Foreign language] In the third quarter, our game-related business continued to achieve rapid growth, with revenues from game-related services, advertising, and others reaching RMB 410 million, an increase of 209.3% year over year and 32.9% quarter over quarter. This accounted for a record-high percentage of our total revenue at 26.7%. With regard to the game distribution, we closely collaborated with game developers on new game launches, version updates, and related operational activities, incentivizing broadcasters to participate in game distribution services. Currently, the distribution revenue is the largest portion of our game-related services revenue.

It is worth noting that distribution revenue is recognized on a net basis after the revenue sharing with the game developers. Therefore, the actual business volume and growth amount are significantly larger. In the third quarter, the total gross receipts from games distributed through Huya's distribution channel increased to over 20 times that of the same period last year. And going forward, we plan to continue providing distribution services for more games, including mobile and PC games, new and existing titles, and deepen our collaboration with additional game developers.

Furthermore, we plan targeted initiatives for broadcasters to encourage them to provide more customized user services, enhancing users' interest in exploring and engaging with the games distributed through our platform. We have also strengthened our cooperation with major games and in-game item sales, particularly by launching exclusive and customized in-game items for our platform and broadcasters, as well as promoting initial release events for these items. For instance, in the third quarter, we held a Crossfire event offering Huya Exclusive game skins. We also had an exclusive initial release of co-branded game skins featuring a well-known broadcaster sold in that broadcaster's stream.

Both initiatives garnered enthusiastic response from our users, especially during the initial release event, where the total value of co-branded skins sold existed RMB 50 million and validating the growth potential of our in-game item sales business. In terms of game advertising, we responded to the increased marketing demand during the summer with promotional activities for new game launches and anniversary events for existing games, enhancing our game promotion and marketing capabilities through streamer-created and in-house-produced content, while continuing to expand our advertiser base. Overall, we believe Huya has several key advantages in the continued development of game-related services. First, we have a high-quality gaming user base on our platform, where the average revenue per user, or ARPU, for several games we distribute is higher than the overall gaming market, indicating the commercial value potential for Huya's gaming users.

Second, our broadcasters play an active role in promoting game-related services, understanding users' gaming needs, and participating in revenue sharing, which helps achieve mutual benefits. And third, Huya has established long-term partnerships with various game developers through our livestream business, laying down a good foundation for deeper collaboration on game distribution and in-game item sales. Additionally, we are strengthening our collaboration with multiple content platforms and selectively distributing Huya's game live streams and video content across Tencent ecosystem and other content platforms. We estimated that as of September this year, Huya's content ecosystem reached over 140 million users, including our own mobile users and those from other platforms, and we expect the scale to continue to grow.

As we effectively collaborate to cover a broader game audience, we can explore more commercialization opportunities. Finally, I want to mention that since the revenue from game-related services, especially from distribution, is closely linked to gaming revenue itself, as we gradually expand this business, its income may be somewhat affected by the seasonal nature of the gaming industry. For example, peak seasons occur during holidays and fluctuations can vary between quarters. According to public statistics, the domestic gaming market sales revenue exceeded RMB 300 billion in 2023, and overall the market space for Huya is still enormous.

We will continue to explore diverse forms of cooperation with more game developers to achieve business growth.

Hanyu Liu -- Investor Relations

OK. Thank you. And our next question comes from Thomas Chong from Jefferies. Hi, Thomas.

Please go ahead.

Thomas Chong -- Analyst

[Foreign language]

Junhong Huang -- Senior Vice President and Acting Co-Chief Executive Officer

[Foreign language] In the third quarter, our live streaming revenue continued to be influenced by the current macroeconomic and industry environment, with users' willingness to spend on tipping remained weak. Meanwhile, during our strategic transformation, we proactively adjusted our business structure and maintained a prudent operational strategy. However, we have also observed rapid growth in revenues related to game advertising. From user behavior, we see that the engagement of our core users in live streaming remained relatively stable.

Due to external factors, we currently expect live streaming revenue to face short-term pressure. However, we believe that the external economic environment will happen in the future and the business will still have some room for flexibility. On one hand, we will closely monitor market conditions to adjust our operational activities accordingly. On the other hand, we will continue to invest in live streaming content, optimize the broadcaster and user ecosystem, and constantly improve the technology and products to create a differentiated Huya live streaming experience.

We hope to maintain and enhance user engagement and prepare for a more diversified commercialization forms in the future. In the long run, we expect that with the expansion of game-related services, advertising and other revenue cells, the overall business will achieve a relatively stable development.

Hanyu Liu -- Investor Relations

Thank you. Now we will take the next question. It's from Lei Zhang from Bank of America. Hi, Lei.

Please go ahead.

Lei Zhang -- Bank of America Merrill Lynch -- Analyst

[Foreign language] Thanks management, for taking my question. Can you give us more color on the driver of Q3's margin change and how should we look at our margin trend going forward? Thank you.

Junhong Huang -- Senior Vice President and Acting Co-Chief Executive Officer

[Foreign language] In the third quarter, our gross profit margin was 13.2%, slightly down from the second quarter and the same period of last year. This quarter, we continue to optimize our content costs, reducing broadcaster signing costs year over year, and we further improved our strict licensed content procurement strategy to secure better commercial terms, which saved on licensed content costs. However, the cost savings this quarter were still insufficient to offset the impact of the declining of live streaming revenue. In terms of operating expenses, through continued efforts to enhance operational efficiency, particularly in better controlling our sales expenses, our total operating expenses decreased by 20.9% year over year.

Therefore, overall operational performance remained relatively stable with a non-GAAP net profit of RMB 78 million. Regarding the future profit trends, we believe the following factors will be significant. On one hand, we need to consider changes in overall revenue scale, including the seasonal fluctuations in different businesses. On the other hand, we will continue to adjust our cost structure to enhance the collaboration between broadcaster costs and revenue.

On the professional content side, in September this year, we signed a second supplemental licensing agreement for a series of League of Legends matches, which reduced related licensing fees. We believe that this will help further optimize overall licensed Esports events costs in this year and in 2025. However, quarter to quarter, since the major S14 event will mainly take place in the fourth quarter, the event licensing costs in the fourth quarter are expected to be higher than the third quarter. For self-produced content with good investment returns, we plan to strengthen investment in this area to create more influential and commercially valuable event IPs, such as holding the second season of the League of Legends Cup in this month, building on the success we had in its inauguration season.

Nevertheless, we expect that the gross profit margin in the fourth quarter will show a relatively noticeable improvement compared to the low base from the same period last year. Therefore, we anticipate that the non-GAAP results for Q4 and this entire year will also show a relatively noticeable year over year growth.

Hanyu Liu -- Investor Relations

Thank you. Now, we will take our last question today from Cheng Hao Lin from CICC. Cheng Hao, please go ahead.

Unknown speaker -- -- Analyst

[Foreign language] OK. I will translate for myself. Hi, management, thanks for taking my question and congratulations on another solid quarter. My question is about our shareholder return strategy.

Could management help update our capital allocation strategy and the shareholder return plan in the future? Thank you.

Junhong Huang -- Senior Vice President and Acting Co-Chief Executive Officer

[Foreign language] As of the end of September, Huya held approximately RMB 8.1 billion, about $1.15 billion in cash and cash equivalents, which remained stable compared to the end of June, partially influenced by the fluctuations in the U.S. dollar exchange rate. In October, we paid a special cash dividend of $215 million. Currently, the company still has approximately $900 million in cash and cash deposits, with about half of it held overseas, and the company has no debt.

The overall strategy for cash usage is similar to what we mentioned in the last earnings call. We have sufficient cash to fund our daily operations and business development. While consolidating our financial fundamentals, the company will continue to allocate some funds for potential business development, and as a reserve under uncertain external conditions. We will also remain open to suitable opportunities and investment projects related to the industry chain, so as to seize industry development opportunities.

At the same time, we will continue to place importance on shareholder returns. In terms of dividends, this year we have returned approximately $400 million to our shareholders through special cash dividends. In the future, we intend to share the company's profits and surplus cash with our shareholders. Future dividend plans, including the amounts and timing, will depend on further review and approval by the company's board of directors.

Regarding share repurchases, based on our up to $100 million repurchase plan, as of the end of September, we had repurchased $61.1 million worth of Huya's shares. In the future, we will comprehensively consider market conditions and stock liquidity when formulating our execution strategies.

Hanyu Liu -- Investor Relations

Thank you. 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 Piacente Financial Communications. [Operator signoff]

Duration: 0 minutes

Call participants:

Hanyu Liu -- Investor Relations

Junhong Huang -- Senior Vice President and Acting Co-Chief Executive Officer

Raymond Peng Lei -- Chief Financial Officer

Nelson Cheung -- Citi -- Analyst

Thomas Chong -- Analyst

Lei Zhang -- Bank of America Merrill Lynch -- Analyst

Unknown speaker -- -- Analyst

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HUYA (HUYA) Q3 2024 Earnings Call Transcript was originally published by The Motley Fool