HUYA Inc. Price & Performance (HUYA)

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, mister Huang. Please go ahead. Okay.

Hello, everyone. Thank you for joining our earnings conference today. Despite 2024 external changes, challenges, we delivered a solid year by seeding opportunities arising from our strategic transformation and new game launches Notably, revenues from the game related services, advertising, and other other segment increased by 145.4% year over year, to 1.33 mid billion for the full year. This segment accounted for 21.9% of our total net revenues for the year, as a substantial rise from 7.8% in the previous year. When we cut it total net revenues of RMB 6.08 billion for the full year with improving profitability. Non GAAP net income reached RMB $269,000,000 up by 125.6% year over year. With net cash provided by operating activities turning positive at RMB94 million. These advancements are since largely our strategic commercialization model update. As well as our enhanced live streaming content ecology and technology and product upgrades Now let me share the detail of our recent business progress. First, we made encouraging strides in our business transformation For the fourth quarter, revenues from game related services advertising and others increased by 99.4% year over year through RMB372 million. Despite a sequential revenue decline from the third quarter peak due to the game industry's net seasonality.

These sectors overall performance remain solid. Regarding game distribution, we continue to increase operational excellence for both new and existing titles and are pleased to see that we are emerging as one of the primary distribution channels for several games. Following the recent launch of Data Force, we actively encourage our broadcasters participation in the titles live streaming and game promotion. This led to rapid growth in gross receipts for the game generated through the we are distribution channel while also boosting its live streaming contents performance In Edison, we plan to collaborate with more game developers and publishers on distribution and joint operations and we conducted some meaningful trials with third party game studios in the fourth quarter. We look forward to these initiatives contributing to the future development of our game distribution business. For in game item sales, we deepen our focus on diversifying in game item categories. And improving traffic efficiency of online channels. We also upgraded the mall section on our app integrating popular game schemes, tools, user incentive activities In January, we launched our first league of Legend Steam game item shop. Accompanied by a special spring festival promotion featuring HUYA exclusive benefits Excitingly, our efforts drove a record high in our monthly total in game item sales GMV for January.

Only advertising front is was note in that our in house LOL, Legend Cup season two, doubled its sponsorship revenue compared to its inaugural event leveraging Legend Cup's increased influence and IP value. The event attracted a wider range of well known sponsor from, the beverage automotive, and local service sectors. Furthermore, we began leveraging our international business presence to explore diverse revenue streams in overseas market in 2024 by providing game distribution in game item sales and game marketing services. These initiatives have already achieved promoting early results. Moving on live streaming content ecology. We continue to strengthen our content ecology through collaborations with various content platforms during the quarter. This has brought our broadcasters quality content and services to broader game audience expanding our market presence and setting the stage for the future commercialization. Initiative initiatives In December 2024, we asked content reach a record number of viewers, which we estimated to be more than double the number of our mobile active users. On our professional content enrichment efforts our comprehensive coverage extension users inclination to watch eSports on 40 game titles in 2024. In the fourth quarter alone, we broadcast over 100 licensed esport tournaments featuring major events such as League of Legends, was 2024 and the Mafia Cup honor of Kings KPL grand finals. [indiscernible] final, solidifying our content advantage.

We also broadcast over 35 sale organized esports tournament and entertainment PGCE shows during the fourth quarter. Among these events, LOL's Legend Cup s two, HOKs Super Platform Cup, and Valorant's Wally Cup, were quite popular. In addition, we hosted Shangwon Cup and HUYA Jiangsu village games for HOK and cross fire competitions. In the fourth quarter, attracting widespread participation for from local communities. Furthermore, this year we continue to develop our self organized tournaments to complement the licensed tournaments on our platform and our users with steady stream of bread fresh content. In doing so, we reduced the gap between our major licensed and in house produce content. For both League of Legends and Honor of Kings significantly. From over one a month in 2023 to no longer than two weeks in 2024. We also enhanced the influence of our in house produce content by engaging more popular broadcast and fostering greater interactions in our game community. We are currently listed the industry in the number of top tier in house produced esports events and audience scale According to our internal stated [indiscernible] And estimates, HUYA captured over half of the market share for the industry's top tier in house produce eSports events in 2024.

In particular, our flagship Legend Cup s two has set a new standard for premier cell organized tournaments across various platforms. Building on the success of its inaugural season, we put it to the events viewing and entertainment value this year was upgraded team formation rules match schedule during and gameplay design as well as international players participation. Increased in the events [indiscernible] content and sponsorship rev revenue clearly reflect Legend Cup's rising IP value. We are also delighted to see that the viewer shift metrics of the Legend Cup series on our platform nearly equal or even surpassed those of some top tier licensed eSports events. In 2025, we intend to replicate our successful self organized tournament model to encompass a wider array of popular es esports titles on our platform. Alongside the upcoming Legend Cup season three, which will begin at the March. We will also launch premier HUYA branded tournaments for DOTA two and better range, creating more high quality IPs. We invited everyone to stay tuned for this exciting event Turning now to our technology and product upgrades. Which drove broad business improvement throughout the year. To further enhance HUYA's eSports community by we launched a series of product features on our app.

Around tournaments to increase viewers engagement and facilitate access to professional esports analysis. During the the Mafia Cup, we introduced cost [indiscernible] team sim live channel skins and bullet check effects as well as pre match analysis. And real time database [indiscernible] Additionally, we develop features that allow viewers to access in team chess during matches and flex ibly switch between the first person perspective of different prayers which will gradually be integrated with our content release to provide exclusive content for team fans. We also launched a HUYA rating section on our platform. Providing users with a professional forum for eSports rating and reviews of esport players. Tournaments. Broadcasters, and more. This section has quickly gained recognize recognition and active participation from users. For instance, by the end of the event in early March, this year's LPL split one has received 6,800,000 total of user ratings. Representing an increase of approximately 80% compared to the cumulative rating of last year's LPL summer split. And more than double that of the event on another well known rating platform during the same period. This not only reflects high user engagement with HUYA ratings, but also demonstrate its significant impact on our promoting interaction.

With the community. Furthermore, we are actively embracing cutting edge technologies such as AI. In February, we became the first game live streaming platform fully deploy the DIPSPIK r one model. As deployed an AI assistant feature to help users efficient efficiently search for game strategies and live channels of interest. We will further advance our AI plus live streaming strategy by applying AI large models to improve broadcasters' content creation efficiency. Through smart interaction upgrades. Full props process automation and data driven operational support. This will also foster AI powered powered digital IP innovation and facilitate the design of more distinctive visual streamers and delivering a novel experience for both users and content creators. By leveraging AI technologies, throughout the entire cycle of live streaming content production, distribution, and consumption We expect to energize the live streaming creators ecosystem with intelligent tools preparing the human driven driven live streaming industry towards technology driven future.

We believe this innovative AI driven endeavors will create more image shift interactive experience for users and generate long term value for HUYA in live streaming, eSports and more areas. Building on the meaningful achievement we have made so far, We will continue to progress our strategic transformation. Although challenges and uncertainties exist. We remain committed to building a more comprehensive game content and service this platform, exploring new technologies and deepening their applications to holistically [indiscernible] improve our content creators and user experience Moving into 2025, we will continue to respond pragmatically to changes in the market environment and capitalized on market opportunities. Driving our long term sustainable business development With that, I will now turn the call over to our acting Co CEO and CFO, Raymond Le. He will share more detail on our results. Raymond, please go ahead. Thank you, Vincent, and hello everyone. I'll start with our first quarter results.

Followed by our full year financial highlights and an update on our shareholder returns. Our total net revenues in the fourth quarter of twenty twenty four approximately RMB1.5 billion With gaming related services, advertising and other businesses nearly double opening their revenues year over year. Not really offsetting the macro economic and the industry environments that continued impact on live streaming revenues. The number of paying users in the fourth quarter rose over year rose year over year to 4,500,000 excluding those who made in game purchase through our game distribution business, but didn't pay via our platform or related services. Demonstrating engagement across our core user base. Due to the seasonal nature of major eSports events, scheduling and the related cost allocation, we have faced the gross margin pressure in the fourth quarter in recent years Nevertheless, in 2024, we further rationalize broadcaster [indiscernible] including cost related to errors resulting in an increase in our fourth quarter gross margin. To 11.4% from 1% in the same period last year. Moreover, enhanced operational efficiencies resulted in a 23.8% year over year reduction in total operating expenses further contributing to the improvement in our broad profit [indiscernible] We achieved a non GAAP net income of RMB1.2 million in the quarter, marking a turnaround from the same period last year.

We recorded non GAAP net profit in all four quarter of twenty twenty four, highlighting significant progress in our business optimization efforts Let's move to on to more details of our Q4 financial results. Our total net revenues were RMB1.5 billion for Q4 of which live streaming revenues which live streaming were RMB1.5 RMB1.12 billion and the game related services advertising and other revenues were RMB 372 million, compared with total net revenues of RMB1.5 $53,000,000,000 for the same period last year. Cost of revenues decreased by 12% year over year to RMB1.33 billion for Q4, primarily due to decreased revenue sharing fees and the content cost. [indiscernible] custody fees. Revenue sharing fees and the content cost decreased by 12% year over year to RMB 1,160,000,000.00 for Q4 primarily due to decreased live streaming revenue sharing fees associated with the decline in live streaming revenues. As well as lower cost related to licensed esport content and the in house produced content. Partially offset by the by the increased cable related services advertising and the other revenue sharing fees. Benefits and server custody fees decreased by 33% year over year to RMB55 million for Q4. Primarily due to continued technology and management enhancement efforts.

As well as favorable pricing terms. Gross profit was r p 170,000,000,000 for Q4, compared with RMB15 million for the same period last year, Gross margin was 11.4% for q four compared with 1% for the same period last year. Primarily attributable to decreased revenue sharing fees and the content cost as a percentage of total net revenues. Excluding share based compensation expenses, non GAAP gross profit was RMB174 million and the non GAAP gross margin was 11.6% for Q4. Research and development expenses decreased by 10% year over year to RMB 123,000,000 for Q4, primarily due to decreased personnel related expenses partially offset by higher share based compensation expenses. Sales and marketing expenses decreased by 45% year over year to RMB 63,000,000 for Q4, primarily due to decreased marketing and promotion fees as well as personal related expenses. General and administrative expenses decreased by 90% year over year to RMB81 million for Q4 primarily due to decreased provision and the office expenses partially offset by higher share based compensation expenses. Other income was RMB4 million for Q4 compared with million for the same period last year. Primarily due to lower government subsidies. As a result, operating loss was RMB93 million for Q4 compared with a loss of RMB322 million for the same period last year.

Excluding share based compensation expenses, and amortization of intangible assets for business acquisition, non GAAP operating loss was RMB69 million for Q4 compared with a loss of million for the same period last year. Non GAAP operating margin was negative 4.6%. For Q4. Interest income was RMB 75,000,000 for Q4 compared with RMB129 million for the same period last year. Primarily due to lower type deposit balance which was primarily attributable to the special cash dividend paid in May at October 2024. If have a loss of investments was RMB151 million for Q4. Compared with RMB8 million for the same period last year. As we recognize impairment charges our investment attributable to the weak financial performance of certain USTs, Net loss attributable to HUYA was RMB172 million for Q4 compared with a loss of RMB274 5,000,000 for the same period last year. Excluding share based compensation expenses, impairment loss of investment and the arbitration of Shintai's investment from Visa acquisition, Net of income taxes Now get the income attributable to HUYA Inc was RB 1,000,000 for q four. Compared with a non GAAP net loss attributable to HUYA Inc. Of 190,000,000 for the same period last year. The gap lamp battery was 0.1% for q four.

Diluted net loss per ADS was RB 0.75 for q four, Non GAAP diluted net income per ADS was RMB0.01 for Q4. As of 12/31/2024, the company has cash and cash equivalents short term deposit and long term deposit of RMB6.73 billion compared with RMB8.08 billion as of 09/30/2024. Moving on to our full year 2024 results, Total net revenues were RMB6.08 billion for 2024, compared with r b 6 voice like like video for the prior year. Live streaming revenues were RMB 4,750,000,000.00 for 2024 compared with RMB 6,450,000,000.00 for the prior year. Game related services, advertising and other revenues were up to 1,330,000,000.00 for 2024. Compared with RB $544,000,000 for the prior year. Non GAAP gross profit was RB 8 hundred and 25,000,000 for 2024 compared with R and 831 for the prior year. Non GAAP gross margin was 30.6% for 2024. Up from 11.9% for the prior year. Non GAAP net income attributable to HUYA Inc. Was RMB $269,000,000 for 2024, up from r p 101 line 190,000,000 for the prior year. [indiscernible] 4.4% for 2024. Up from 1.7% for the prior year. Non GAAP diluted net income per ADS [indiscernible] point one five for 2024 up from r and b 0.48 for the prior year.

Net cash provided by operating activities was RMB 94,000,000 for 2024 compared with net cash used in operating activities of RMB 32,000,000 for the prior year. For additional details, of our full year 2024 financial results I encourage this interest to refer to our earnings press release issued earlier today. Finally, let me provide an update on our shareholder returns. To enhance our shareholder returns and optimize our capital structure, We are pleased to introduce our 2025 to 2027 dividend plan which is expected to distribute a total of no less than US dollar 400,000,000 to our shareholders over the next three years. Specifically for 2025, we have declared a cash dividend of U. S. Dollar 0.47 per ordinary shares or per ADS. Total approximately US dollar $340,000,000 for 2026 and 2027 we expect to distribute no less than US dollars 30,000,000,000 in cash if the annually.

Addition, through our up to US dollar 100 media share repurchase program, We had repurchased ninety point one million HUYA shares. With a total aggregate consideration of U. S. Dollar US63.6 million as of the December 2024. HUYA's board of directors has also authorized the renewal and the continued usage of the underutilized quota under the existing share repurchase program until 03/31/2026, With that, I'd like to open the call to your questions.

Thank you, Raymond, and hello, everyone. If you are dialing in by phone to express 5 to ask a question. Then press 6 to unmute yourself. If you are accessing the call from Tencent Meeting, or both meeting applications, please click the raise hand button at the bottom left. For the benefits of all participants on today's call, if you wish to ask your question, to management in Chinese, please immediately repeat your question in English. Today's first question comes from Thomas Chong from Jefferies. Your line is open. Please go ahead. So I trust myself, and thanks management for taking my My question is about our shareholder return strategy. So what factors do we consider when we make shareholder return strategies? Thanks. We place great emphasis on enhancing shareholder returns and have thus emphasized established a twenty twenty five to twenty twenty seven dividend plan, which aims to distribute a total of no less than USD 400,000,000 in cash dividends to HUYA's shareholders over the next three years. Especially for 2025, we have declared a cash dividend of US dollar 1.47 per ADS, totaling approximately 340,000,000 US dollars. For 2026 and 2027, we expect to distribute no less than US30 million dollars in cash dividends annually.

This dividend plan is designed to further reward HUYA shareholders and optimize the company's capital structure and improve the efficiency of our cash utilization. HUYA currently has sufficient internal funds. As of the December 2024, the company held cash, cash equivalents, deposit totaling over 900,000,000 US dollars. With no debt. For the full year of 2024, our net, non GAAP net profit increased significantly compared 2023, reaching RMB 270,000,000. And we achieved positive operating cash flow for the year. Even without considering future business cash flows, after completing the full dividend payment under this three year dividend plan, HUYA will still retain approximately 500,000,000 US dollars in funds. Ensuring sufficient financial support for future business development. Given that HUYA is currently in a special phase of strategic transformation, we will consider after this dividend plan studying long term return mechanism such as a regular dividend policy based on the company's operating condition and visibility. So as to achieve sustainable development and shared value with our shareholders. In terms of share repurchases under the existing share repurchase program of up to $100,000,000 we had repurchased HUYA shares with a total aggregate consideration of 63,600,000.0 US dollars as of the December. The repurchase program had been extended until March 2026.

We will comprehensively consider various factors including market conditions, stock liquidity, and overall shareholder returns to prudently advance the repurchase program.

Thank you.

And our next question comes from Nelson Chung from Citi. Nelson, please go ahead.

So let me translate the question in English myself.

Thanks, management, for taking my question. My question is related, to the other revenue, [indiscernible] thousand twenty four. Can management share your expectation into the other revenue, especially the game related services? The business development, and also the growth driver going forward. Thank you.

Okay.

The fourth quarter, although our revenues from game related services advertising and others declined sequentially, compared to the peak summer season. They still nearly doubled year over year reaching an RMB 372,000,000. Demonstrating a very solid overall performance. Especially in game distribution, we continue to enhance the operational excellence for both new and existing game titles on HUYA platform. And we have become one of the primary primary distribution channels for several games. Following the launch of the new game, Delta Force, we actively encouraged platform broadcasters to participate in live streaming and related pro promotional activities, leading to a rapid growth in the game's growth [indiscernible] Through the HUYA distribution channel and fostering a positive life cycle with live streaming content. At the same time, we are expanding distribution and joint operations with more game developers and conducted meaningful trial collaborations with third party game studios in the fourth quarter of twenty twenty four. In terms of in game item sales, we continue to diversify the categories of in game items improving traffic efficiency. And we further optimize the more section on our app integrating popular items and user incentive activities. In advertising, we actively enhanced the capabilities of our self organized esports tournaments, particularly the IP value of LOL Legend Cup s two.

Which doubled its sponsorship revenue compared with the first season of this game and attracted a broader range of well known sponsors They're from beverage, automotive, and local life platform sectors. It is worth no that the performance of our game related services business is not only constrained by the seasonality of the game industry, also closely related to the participation of the streamers. Therefore, even though the spring festival period is typically a peak season for game industry, the decline in the streamer live streaming rates during the same period may have a certain impact on our business. Additionally, in 02/2024, we successfully participated in the distribution and promotion of several major new game launches. And the release schedule and market performance of future GaN products are expected to influence the growth of companies related business revenue. Looking back over the past year, HUYA has made a significant progress in its commercialization transformation with nonlife streaming business revenue accounted for over 20% of the total revenue for the full year. In 2025, we will continue to advance our commercialization transformation, focusing on further increasing the game related services and advertising revenues. In addition to refining our existing business, we also plan to strengthen the cooperation with various GAM and platforms and explore the exclusive distribution model to bring more possibilities for the sustainable development of our business.

Thank you.

And our next questions, come from [indiscernible] HSBC. Please go ahead. Vincent, Raymond, Deep Sea technology was AI [indiscernible] Champing. Monetization cost structure Thank you management for taking my questions.

We noticed the rise of deep sea and also in AI in general. Recently, and how does this impact our products monetization strategy, cost structure, all these aspects? Thank you. [indiscernible] HUYA is a technology driven entertainment platform and we are actively integrating and applying various AI large model solutions. Leveraging the platform's technical resources, reach game live streaming content, and data with the aim of creating a long term value for HUYA in live streaming esports, and other areas. And bring opportunities for future revenue and profit growth. In February, HUYA Life app integrated the DeepSeek r one large model for version and launched the AI assistant to to help the users efficiently search for popular events. Topics, and fun live streaming rooms on the platform. Moving forward, this assistant will also support features such as game guides, and real time interaction during live game streaming. At the same time, we continue to explore the potential of AI in enhancing live streaming content and user services.

Currently, we are developing an AI powered streamer assistant to help the broadcasters more effectively to help them plan live streaming scripts, achieve data driven operational support, and respond to viewer interaction needs in real time and also create a more interactive user experience. On the other hand, leveraging the reasoning and multimodal capabilities of AI large models, and through deep integration with the unique commentary styles of our streamers. We will build a series of more stylized AI powered virtual streamers in the construction of live streaming event content. And provide the users with more differentiated gaming experience in areas such as advanced commentary, event replace, and band pick phase match analysis. According to, current early testing data, the application of the streamer assistant has significantly increased the activity of live streaming viewers and the gift revenue from the viewer interactions. Additionally, we have made progress in the creation of virtual streamer style and real time reasoning output of large models and we will continue to optimize on these areas. In summary, looking into the future, HUYA will deepen the implementation of AI plus live streaming strategy and empower our broadcasters with AI large models to upgrade their efficiency.

To create new AIP. AIIP models and more centralized virtual streamers. Bringing a completely new experience to users content creators. HUYA will leverage AI large models throughout the content production, distribution, and consumption loop using intelligent tools to activate the live streaming creator ecosystem. And propel the live streaming industry from a human driven to a technology driven future.

Thank you.

Now we will take our last question today. From [indiscernible] from China Renaissance. Yiwen, please go ahead.

So thanks for taking my questions. So can you just discuss our live streaming revenue trend and additional additional rate? Can you also touch upon our group overall profitability margin trend as well? Thank you.

The fourth quarter, our live streaming revenue continued be impacted by the macroeconomic and industry environment with users' willingness to spend on gifting yet to recover. At the same time, we maintain a cautious operational strategy resulting in overall live streaming revenue remaining weak. Typically, the first quarter of a year is low season for the live streaming industry. During the spring festival holiday and its surrounding period, the number of broadcasters going live decreases, and with fewer related and events in this quarter, we expect live streaming revenue in this first quarter of this year to seasonally decline compared to the fourth quarter last year. And we have noticed that some streamers live streaming activity has gradually recovered after the spring festival period. In terms of profitability, on the cost side, the costs increased sequentially in the fourth quarter due to the presence of more large scale licensed and self organized esports events. However, compared to the same period last year, content costs have significantly declined due to the effective savings in licensing fees for licensed esports events, including LOL World twenty twenty four, as well as a more optimized streamer cost structure. So as a result, the gross margin in the fourth quarter reached 11.4%.

Slightly lower than the third quarter but up by 10.4% compared to the fourth quarter of twenty twenty three. And in terms of operating expenses, the company continued to maintain a cautious spending strategy effectively supporting the year over year improvement and overall operating performance in the fourth quarter. With a non GAAP net income turning profitable compared to the same period of last year. Our future profitability will be influenced by the changes in overall revenue scale while on the cost and expenses side, in addition to moderately increasing investment in self produced content, we expect there's still a room for improvement in licensed content costs. And streamer cost structures in the future. And we will continue to strictly control operating expenses. Notably due to our proactive shareholder return policy leading to a reduction in cash surplus on the book. Coupled with factors such as declining market interest rates, We expect the interest income this year to be significantly lower than in 2024. Therefore, this year's bottom line performance will primarily depend on the improvement in the company's operating results.

Okay. Thank you. Thank you once again for