Huya Inc. Earnings Call: Growth Amidst Challenges

Huya Inc ((HUYA)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Huya Inc. revealed a mixed sentiment, highlighting both promising growth areas and notable challenges. The company reported strong growth in game-related services and exciting initiatives in AI and overseas expansion. However, these positive developments were counterbalanced by declines in live streaming and advertising revenues, as well as reduced gross margins and interest income.

Game-Related Services Revenue Growth

The earnings call highlighted a significant increase in game-related services, advertising, and other revenues, which surged by 52.1% year-over-year to RMB 370 million. This segment now accounts for 24.6% of Huya’s total net revenues, up from 16.2% in the same period last year, showcasing a robust growth trajectory.

Increased Game Distribution and In-Game Sales

Huya reported a substantial rise in gross proceeds from game distribution, more than doubling year-over-year. In-game item sales reached a record GMV, driven by expanded SKU offerings and enhanced purchasing experiences, marking a successful strategy in boosting user engagement and revenue.

AI Integration in E-Sports

The introduction of the AI solution ‘Hu Xiaoyi’ for e-sports viewing was a key highlight. This innovation has significantly enhanced user engagement, with over 300,000 bullet chats generated, 17% of which were related to AI interactions, underscoring the potential of AI in transforming user experiences.

Positive Net Income Achieved

Despite facing a challenging economic environment, Huya achieved a positive non-GAAP net income of RMB 24 million for the quarter. This achievement reflects the company’s resilience and effective cost management strategies.

Overseas Market Expansion

Huya’s overseas game-related services demonstrated multi-fold sequential revenue growth. The company is making promising strides in game distribution and advertising services in international markets, indicating a strategic focus on global expansion.

Decline in Live Streaming Revenue

The call revealed a decrease in live streaming revenues, which fell to RMB 1.14 billion from RMB 1.26 billion year-over-year. This decline was attributed to challenging macroeconomic and industry conditions, impacting the company’s core business.

Advertising Revenue Decline

Advertising revenue also saw a downturn, affected by fewer tournaments and promotions, as well as a high base from the previous year. This decline highlights the volatility and competitive nature of the advertising market.

Decreased Gross Margin

Huya reported a decrease in gross margin to 12.5% from 14.7% year-over-year, primarily due to increased revenue-sharing fees and content costs. This reduction in margin underscores the financial pressures the company is navigating.

Lower Interest Income

Interest income dropped significantly from RMB 117 million to RMB 65 million year-over-year, primarily due to dividend payments. This decline reflects a decrease in financial income, impacting overall profitability.

Forward-Looking Guidance

Looking ahead, Huya reported total net revenues of RMB 1.51 billion, indicating year-over-year stabilization and quarter-over-quarter growth. The company is focusing on enhancing its game content, expanding international commercialization, and integrating AI capabilities. Despite a decline in advertising revenues, Huya aims for sustained revenue growth and operational improvements throughout the year, with a strategic emphasis on cost optimization and increased incentives for broadcasters.

In summary, Huya Inc.’s earnings call presented a mixed picture, with strong growth in game-related services and promising AI and international initiatives. However, challenges remain in live streaming and advertising revenues, alongside reduced margins and interest income. The company is strategically focusing on enhancing its offerings and expanding its global footprint to drive future growth.