Title

Presentation

HUYA Inc. beats earnings expectations. Reported EPS is $0.1, expectations were $-0.01.

Hanyu Liu: Welcome to HUYA’s First Quarter 2025 Earnings Webinar. I’m Hanyu Liu from the HUYA’s Investor Relations. At this time, all participants are in listen-only mode. Please be advised that today’s webinar is being recorded. The company’s financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.HUYA.com. A replay of the call will be available on the IR website soon. Participants of management on today’s call will be Mr. Junhong Huang, our Acting Co-CEO and the Senior Vice President; and then Mr. Raymond Peng Lei, our Acting Co-CEO and CFO. Management will begin with the prepared remarks, and the call will conclude with a Q&A session.

Before we continue, please note that today’s discussion will contain forward-looking statements made on the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company’s results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company’s prospectus and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements as except as required under applicable law. Please also note that HUYA’s earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

HUYA’s press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. With that, I’m pleased to turn the call over to our Co-CEO and SVP, Mr. Huang. Please go ahead.

Junhong Huang: Okay, hello everyone. Thank you for joining our earning conference today. In the first quarter of 2025 we have total net revenues stabilized year-over-year and grew quarter-over-quarter to RMB 1.51 billion. This was supported by our steady execution of our strategic business transformation which drove 52.1% year-over-year increase in game-relative services, advertising and other revenue to RMB 370 million. This segment accounted for 24.6% of total net revenues up from 16.2% in the same period last year. We were also pleased to deliver a net profit this quarter. Meanwhile, we continued to strengthen our live streaming content ecosystem, deepen collaborations with game companies and content platforms, and explore the integration of AI capabilities in our e-sports experiences, playing a solid foundation for future development.

Now, let me share the details of our recent business progress, starting with our business transformation. As I just mentioned, our game-relative services, advertising, and other revenues reached RMB 370 billion this quarter. It is worth noting that revenues from game distribution and in-game item sales are primarily recognized on net basis after revenue sharing with game companies. As such, the total transaction value of our game-related services mainly comprised of the gross list generated through our game distribution channel and the GMV for our in-game item sales. It is actually much higher than our reported revenue. Let’s begin with a closer look at our domestic game-related services and advertising businesses. In terms of game distribution, we proactively deepen our engagement with existing games, despite a quarter with few major new game launches.

By working with game studios, refining operational strategy, and unlocking the consumption potential of high commercial value user groups that have naturally congregated with seeing our game live streaming ecosystem. We achieved a solid and more balanced game distribution performance. Total gross proceeds generated through HUYAs game distribution channel in the first quarter, more than doubled year-over-year, and increased sequentially. In particular, thanks to various game events during the spring festival, several titles including QQ Speed Mobile, Peacekeeper Elite, Delta Force, and League of Legend mobile recorded significant increase in gross proceeds [ph] throughout the HUYA channel, with it growing more than 50% compared to the first quarter of last year.

Several games we distributed from new partners also performed well, as we continue to collaborate with additional game companies. This results underscore our extensive capabilities in operations and game promotions, as we continue to expand our role as game distribution and promotion channel. We plan to deepen our exploration of distribution service, such as the inclusive distribution model to advance our progress. For in-game item sales, we are consistently expanding our in-game item SKU offerings, while enhancing our platform sales channel and purchasing experience, leading to a record GMV for in-game item sales in the first quarter. As in-game item sales scale up, 75 events, including popular competitions, such as League of Legends, LPL, and oh, sorry.

Okay. We are so benefiting our broadcaster ecosystem, with game broadcaster generating more income from in-game item sales, in addition to live channels and the more section, our community section has emerged as an access point for in-game item sales. In early April, we successfully showed an inclusive game skins for popular e-sport player from the Honor of Kings, the young debars generated by the skins initial release live streaming section. This players continues engagement within the community, let users to purchase the skins through this channel, making it the second largest scale channel for this skin on our platform, with the number of purchaser more than 60% higher than other similar inclusive skin activities. As users who are active in our community section tend to be more hardcore gamers.

We believe that there is great potential within this section to expand our customer base for in-game item purchase and improve repeat purchase rate. On the advertising side, lower brand advertising revenue due to fewer tournament and promotions, as well as the high base contributed by some large scale new games in the first quarter of last year, cost our advertising revenue to decline year-over-year and quarter-over-quarter. On the other hand, at the end of last year, we upgraded the presentation format for live channels on the VR live apps, creating more efficient performance-based advertising scenarios to strengthen our advertising business. While maintaining a strong focus on our domestic market, we have begun to actively explore and enhance our game-related commercialization capabilities in overseas markets, particularly through our global mobile application service platform to better leverage the commercial value of our content and user traffic.

In addition to our existing app promotion and live streaming service, we are developing diverse business models targeting overseas market, including game distribution, in-game item sales, regional inclusive distribution, and game advertising services. We are strengthening our partnership with Chinese game companies that are expanding overseas, as well as local firms. As of the first quarter, we have partnered with multiple game companies to distribute or sell in-game items for approximately 50 games, including PUBG Mobile, Honor of Kings, Arena Breakout, Delta Force, and Devil May Cry. We have also launched operational activities tailored to each game’s characteristic and key events, such as Friend Challenge feature and enhanced localized game promotion by collaborating with local broadcasters on our overseas game live streaming platform.

These initiatives are demonstrating promising growth with our overseas game-related services, delivering multi-fold sequential revenue growth in the first quarter. Given current development and market chance we are confident that they will continue to help expand our overseas user base and scale up our business. We believe overseas game-related commercialization initiative holds significant potential, making them a key growth engine for our company going forward. Next, our professional content in regiment efforts. We continue to solidify our leading position in licensed e-sports tournament in the first quarter. We broadcast a proxy monthly 75 events, including popular competitions such as League of Legends, LPL, First-Stand tournament, Honor of Kings, KPL, Plus Fires, CFPL, Counter-Strike, Choose, EPL Season 21, Veterans, VCT Bangkok, Masters, and Peacekeeper, ALIS, EPL.

These diverse line-up caters to the viewing needs of a wide range of e-sports in [indiscernible]. Our internal data indicates that we as market share in e-sports broadcasting continue to improve this quarter, reinforcing our position at the top-game live streaming platform for watching e-sports tournaments. We are also consistently innovating diverse in-house produced content and broadcast proxy monthly 25 self-organized e-sports tournament, and entertainment PGC Show, last quarter. Our highly anticipated HUYA League of Legends, Legend Cup Season 3 commenced at the end of March and is still underway. Building on the success of the previous two editions, we upgraded this event with the establishment of dual-competition genres in China and South Korea, enhancing the competitive pace and match excitement.

The Legend Cup Season 3 has also partnered with the comprehensive international e-sports event, serving as the Asia Championship League’s LOL2 tournament, a key corporation that underscores we as professional influence in €-sports. During the first quarter, Lenten Festival, we launched our pig and chicken [indiscernible], developed in collaboration with well-known television network. So offline activities integrated with online interaction and a blend of scenes across agricultural products, bulk traditions, shopping and entertainment. This entertainment program attracted viewership comparable to some top tier €-sports content. In addition, we introduced competing truly-end singers Ziran, an e-sport music class over-program featuring professional singers and popular broadcasters, which received positive audience feedback and expanded our content reach.

As we entered the second quarter, we kick off our self-organized Dota 2 tournament, the Immortal Cup in early May. This event featuring top-rate entire professional Dota 2 players has already attracted great attention. We will also introduce several large-scale events produced in-house in the coming months, including an offline e-sports music festival and a top-tier veteran tournament. Turning to product upgrades under our AI plus live streaming strategy, we are exploring the integration of AI capabilities in our e-sports experience. At the Legend Cup Season 3, we leveraged end-to-end AI’s solution to transform the viewing experience and introduce Hu Xiaoyi [ph], a pioneering or scenario AI agent for e-sports viewing as a smart viewing companion for our users.

Hu Xiaoyi acts as a strategy my pro-scope in the pre-match team formatting phase, analyzing team’s champion pool capability with data driven in size, which transforms team captains’ decision-making from experience-based to visual strategy, simulation-based during the image, then, and peak phase Hu Xiaoyi becomes a technical profit generating real-time counter-strategy hit maps that over-viewers a deep dive into professional players’ technical decision in post-match analysis and engagement. Hu Xiaoyi acts a professional e-sports coach, rapidly producing highlights, reels, and injecting humor into post-match analysis with meme-built MVP reviewers in elevating the entertainment value of e-sports content. Hu Xiaoyi can understand the game where e-sports dynamic and provide live commentary throughout tournaments, engaging users with a viewing companion that is both tactical and entertaining.

Our statistic shows that, as of early May, over 300,000 bullet chat were generated during the Legend Cup season 3, with approximately 17% of them related to interactive discussions initiated by Hu Xiaoyi. This demonstrate a substantial leap in the viewing experience, with fan actively engaging with the content in the more immersive and interactive way. We are encouraged by this initial results, and we will continue to advance our AI driven initiatives under our AI plus live streaming strategy. By applying AI models throughout the entire cycle of live streaming content production, distribution, and consumption, we aim to create long-term value for we are in live streaming, e-sports and other areas. In summary, we believe that our targeted progress across various business segment in the first quarter has laid a solid foundation for our development throughout the year.

We will continue to enhance and expand our game content and service platform and explore new commercial opportunities moving towards a more diversified and sustainable business model that delivers values to our users and stakeholders alike. With that, I will now turn the call over to our Acting Co-CEO and CFO Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Raymond Peng Lei: Thank you, Vincent and hello, everyone. I will start with an overview of our financial performance. In the first quarter of this year, our total net revenues stabilized year-over-year after previous declines driven by the year-over-year growth in gaming-related services, advertising, and other businesses. Notably, live streaming revenues saw a slight sequential increase this quarter, contributing to a marginal sequential improvement in our total net revenues. The number of paying users in the first quarter remained flat year-over-year, standing at 4.4 million, excluding those who made in-game purchases through our game distribution business, but didn’t pay via our platform or related services. On the cost side, we continue to optimize content costs, particularly those related e-sport tournaments, but increased incentives for broad customers to participate in live streaming and provide gaming-related services during the live streaming industries of season around Chinese New Year resulting in a gross margin of 12.5% for the quarter.

Furthermore, despite the substantial decrease in interest income compared with the previous periods, primarily due to our dividend payments, we still achieve the positive net income for the quarter, with non-GAAP income of RMB 24 million. Let’s move on to more details of our Q1 financial results. Our total net revenues were RMB 1.51 billion for Q1 compared with RMB 1.5 billion for the same period last year. Live streaming revenues were RMB 1.14 billion for Q1 compared with RMB 1.26 billion for the same period last year, primarily due to the continued impact of the macroeconomic and the industry environment. Gamer-related services, advertising and other revenues were RMB 370 million for Q1 compared with RMB 244 million for the same period last year.

The increase was primarily due to higher revenues from gamer-related services, which were mainly attributable to our depend cooperation with Tencent and other game companies, partially offset by a decreased advertising revenues. Costs of revenues increased by 3% to RMB 1.32 billion for Q1 primarily due to increased revenue share fees and content costs. Partially offset by decreased bandwidth and the server-custody fees. Revenue sharing fees and the content costs are a key component of the cost of revenues increased by 4% to RMB 1.17 billion for Q1, primarily due to increased broad-customer-related costs partially offset by lower costs related to licensed e-sport content and the in-house produced content. Gross profit was RMB 188 million for Q1 compared with RMB 221 million for the same period last year.

Gross margin was 12.5% for Q1 compared with 14.7% for the same period last year, primarily attributable to increased revenue share fees and the content costs as a percentage of total net revenues. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 192 million and the non-GAAP gross margin was 12.7% for Q1. Research and development expenses decreased by 4% year-over-year to RMB 130 million for Q1, primarily due to decreased personnel related expenses and share-based compensation expenses. Sales and marketing expenses decreased by 20% year-over-year to RMB 61 million for Q1, primarily due to decreased marketing and promotion fees as well as personnel related expenses. General and administrative expenses increased by 2% year-over-year to RMB 61 million for Q1, primarily due to higher share-based compensation expenses.

Other income was RMB 4 million for Q1 compared with RMB 12 million for the same period last year, primarily due to lower government subsidies. As a result, operating loss was RMB 60 million for Q1 compared with a loss of RMB 39 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, non-GAAP operating loss was RMB 36 million for Q1 compared with a loss of RMB 16 million for the same period last year. Non-GAAP operating margin was negative 2.4% for Q1. Interest income was RMB 65 million for Q1 compared with RMB 117 million for the same period last year, primarily due to a lower time deposit balance which was primarily attributable to the special cash dividend paid in May and October 2024.

Net income attributable to HUYA, Inc. was RMB 1 million for Q1 compared with RMB 71 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, net of income taxes, non-GAAP net income attributable to HUYA, Inc. was RMB 24 million for Q1 compared with RMB 92 million for the same period last year. Non-GAAP net margin was 1.6% for Q1. Diluted net loss per ADS was approximately 0 RMB for Q1. Non-GAAP diluted net income per ADS was RMB 0.10 for Q1. As of March 31, 2025, the company had cash and cash equivalents, short-term deposit and long-term deposit of RMB 6.25 billion compared with RMB 6.73 billion as of December 31, 2024. Finally, let me provide an update on our shareholder returns.

Through our up to U.S. $100 million share repurchase program, we had repurchased 21 million HUYA shares with a total aggregate consideration of U.S. $69.8 million as of the end of March 2025. Looking ahead, we will remain committed to reinforce our business and operational foundations and returning value to our shareholders through dividends and share repurchase. With that, I’d like to open the call to your questions.

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

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

Junhong Huang: In the first quarter, HUYA’s game-related services, advertising, and other revenues reached 370 million, representing a year-over-year increase of 52.1%. This growth was primarily driven by the increase in game-related services revenues, partially offset by a year-over-year decline in brand advertising revenues. The decrease in brand advertising revenues was primarily due to fewer tournaments and promotional activities during Q1 this year, as well as the high base effect from major new game launches in the same period from last year. It is worth noting that since our game distribution and in-game item sales revenue is primarily recognized on a net basis after revenue sharing with game companies. The total transaction value of our game-related services is significantly higher than our reported revenue.

Specifically, in terms of domestic game distribution, despite limited major newer game launches in the market this year, we proactively deepened our engagement with existing games. Through cooperation with game studios and refined operational strategies, we continued to unlock the consumption potential of high commercial value user groups that have naturally congregated within our game live streaming ecosystem, forming a more stable and balanced foundation for our game distribution business. In the first quarter, the total gross revenue generated through HUYA’s game distribution channel more than doubled year-over-year and increased quarter-over-quarter. In particular, thanks to various game events during the Spring Festival, several titles including QQ Speed Mobile, Peacekeeper Elite, Delta Force, and League of Legends Mobile recorded significant increases in gross revenue through the HUYA channel, with each growing more than 50% compared to the fourth quarter of last year.

Additionally, games from new partners that we collaborated with also performed well. These results underscore our extensive capabilities in operations and game promotions. As we continue to solidify our position as a game distribution and marketing channel, we plan to enhance our exploration of game agency publishing, including exclusive distribution models, to further expand our business. We also look forward to capturing opportunities as more new games launch in the market. For in-game item sales, we are consistently expanding our in-game item SKU offerings while enhancing our platform’s sales channels and also purchasing experiences, leading to a record high in GMV for in-game item sales in the first quarter. As in-game item sales scale up, they are also benefiting our streamer’s ecosystem, with more game broadcasters generating better commercial income from in-game item sales.

In addition to live channels and the mall session, our community section has emerged as an effective access point for in-game item sales. In early April, we successfully sold an exclusive game skin for a renowned Honor of Kings e-sports player. Beyond the buzz generated by the skin’s initial release session, the player continued its effective engagement within the community. It has also attracted many users to purchase through this channel, making it the second largest sales channel for the skin in our platform. With the number of purchases more than 60% higher than the previous similar exclusive skin activities. As users who are active in our community section tend to be more hardcore gamers, we believe that there is great potential to expand our customer base for in-game item purchases and improve repeating purchase rates.

While maintaining a strong focus on our domestic market, we have begun to actively explore and enhance our game-related commercialization capabilities in overseas markets, particularly through our global mobile application services platform, to better leverage the commercial value of our content and user traffic. In addition to our existing app promotion and live streaming services in overseas markets, we are developing diverse business models, including game distribution, in-game item sales, regional exclusive distribution, and game advertising services. We are strengthening our partnerships with Chinese game companies that are expanding overseas, as well as local firms. At the same time, we have launched operational activities tailored to each game’s characteristics and key events.

Furthermore, we are enhancing localized game promotion by collaborating with local broadcasters on our overseas game live streaming platform. These emerging initiatives are demonstrating promising growth, with our overseas game-related services delivering multi-fold revenue growth in the first quarter. Given current business trajectory and market outlook, we are confident that by expanding our overseas user coverage and business scale, our overseas game-related commercialization business has the potential to become one of the company’s important growth engines.

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

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

Junhong Huang: Thank you for your questions. With regard to the first question, in the first quarter, HUYA’s total net revenue increased slightly quarter-over-quarter to approximately 1.51 billion. Thanks to the year-over-year growth in game-related services, advertising and other businesses, our total net revenue has stabilized year-over-year after previous declines. This also reflects the steady progress of our strategic business transformation and the company’s execution capabilities. Based on what we are currently seeing, we expect that our total revenue has essentially bottomed out. On one hand, as the marginal year-over-year impact from economic and industry conditions weakens, and as we continue to optimize our live-streaming operations and enhance our user interaction features, live-streaming revenues are expected to stabilize.

On the other hand, we anticipate that game-related services, advertising, and other business revenues will achieve relatively fast year-over-year growth this year. Particularly on the foundation of continued growth in domestic game-related services and advertising business, the enhancement of overseas game commercialization is also expected to become another future growth engine. Therefore, based on the current business situation, we expect HUYA’s total revenue to achieve the growth this year. The company continuously monitors U.S. listing regulations and regulatory requirements, and is committed to fulfilling the responsibilities and obligations of the public company. Facing a constantly changing international situation and global economic trends, we closely monitor potential impacts that changes in the external environment may have on capital markets.

To the company’s knowledge regarding the first data listing risks for U.S.-listed China-based companies, recently reported by the media, the U.S. government has not yet issued new formal regulations. We will continue to monitor this situation. Meanwhile, the company is also prudently assessing potential risks and actively exploring corresponding situations, including evaluating opportunities in other capital markets. As we have always emphasized, HUYA consistently values and is committed to protecting investors’ interests. If there is any material information, the company will make timely announcements in strict accordance with relevant requirements and fulfill its disclosure obligations.

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

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

Junhong Huang: This quarter, we continue to optimize costs related to €-sports content, but increased incentives for broadcasters to encourage the streaming and participation in providing game-related services during the Spring Festival’s quiet season. Additionally, we have higher margin brand advertising revenue decline both year-over-year and quarter-over-quarter due to seasonal weakness and the high base effect from last year. As a result, our gross margin this quarter decreased slightly compared to the same period last year, but increased quarter-over-quarter to 12.5%. Despite significantly lower interest income due to dividend payments, we still achieved a positive net income for the quarter with non-GAAP net income reaching 24 million.

Regarding future profit trends, considering that our shareholder return measures will result in reduced cash surplus on our balance sheet coupled with factors such as declining market interest rates, this year’s interest rate income, especially in the second half of the year, will be significantly lower than the same period in 2024. Therefore, this year’s bottom line performance will rely more on the improvements in the company’s operational results. Specifically, on the cost and expenses side, we will moderately increase investment in self-produced content, which will also benefit the commercialization of development of game-related services, advertising, and other business. At the same time, we expect further improvements in copyright content costs in the future.

Profit performance will also be affected to some extent by changes in overall revenue scales and structure. Overall, we expect that the company’s non-GAAP operating results will show notable improvement this year.

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