HUYA Inc (HUYA) 2025 Q2 法說會逐字稿

Good day, and good evening, and thank you for standing by. Welcome to HUYA's second quarter 2025 earnings webinar. I'm Hanyu Liu from the HUYA Investor Relations. (Event Instructions) 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. Vincent Junhong Huang, our Acting Co-CEO and Senior Vice President; and Mr. Raymond Peng Lei, our Acting Co-CEO and CFO; and [Marguerite Xie], Head of Capital Markets. Management will begin with prepared remarks, and the call will conclude with a Q&A session.

Before we continue, please note that today's discussion will contain forward-looking statements made under Safe Harbor provisions of the US 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 latest annual report on Form 20-F and other public filings as filed with the US Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that HUYA's earnings press release and this conference call include discussions 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.

Hello, everyone. Thank you for joining our earnings conference today. It has been exactly two years since I first spoke with you on our August 2023 earnings call. Over this time, HUYA has undergone a lot of transformation uncovering new opportunities, executing on clear strategy, and deepening our strategic alignment with Tencent and the broader gaming industry. Today, I'm pleased to share the progress we have made and the opportunities ahead.

By leveraging our cross-platform strategy, we have achieved an average of 162 million monthly active users across HUYA's platforms and extended our reach even further through the distribution of our content and services on third-party content platforms such as WeChat Channels, Douyin, and Kuaishou.

Over the past year, we have strengthened collaborations with these platforms, enabling cross-platform streaming and co-creating professional content. This not only expand the reach of our high-quality content but also builds the foundation for new monetization opportunities in game distribution, in game item sales, and potentially game publishing.

One of the industry trends we are seeing is the rising importance of content-driven marketing in publishing and long-term operation of game titles. This trend plays directly to HUYA's core strength, our top-tier game live streaming capabilities, a robust and influential e-sports ecosystem and deep expertise in producing high-impact short-form videos optimized for each social platform.

By combining our rich professional production capabilities and community influence, we are able to help game publishers engage players more deeply, extend the life cycle of their titles and drive player spending. As a result, our game-related services advertising and other revenues have grown significantly from RMB122 million in Q2 2023 to RMB414 million this quarter.

This segment now contributes over a quarter of our total net revenues and from a gross billing perspective, accounts for over 40% of HUYA's total transaction value. We see this segment as a key growth engine going forward with substantial room for further expansion as we deepen our partnership with game developers and broaden our service offering.

This quarter, we further increased our portfolio of jointly distributed games in the domestic market to over 300 titles. Tencent's games such as Honor of Kings, Peacekeeper Elite, and League of Legends Mobile all performed strongly. Games from other partners such as Archero 2 and [Xiangong Zhanji] also stood out this quarter. Progressing from our existing joint distribution of games, sales of in-game accessories and cosmetics items are naturally the next step for us.

In the second quarter, gross billings from this category increased by 90% year over year, reflecting strong demand from our high engaged user base. Given our ability to integrate sales seamlessly into live streams, e-sports events, and other content, often featuring influential streamers, we believe this business line has significant potential to scale further and become an increasingly important part of HUYA's revenue mix in the years ahead.

Our community of game streamers remains one of HUYA's most strategic and valuable assets. We nurtured their growth not only within the HUYA's ecosystem, but also across all leading content platforms, enabling them to broaden their reach and deepen audience engagement. Among the top 300 game live streamers nationwide, HUYA continued to command the largest representation in the industry, a testament to our unmatched ability to attract, develop, and retain top-tier talent.

With a user base composed of highly engaged hardcore gamers, HUYA offers the perfect environment for emerging talent to gain visibility and build a loyal following quickly. Combined with the comprehensive professional support we provide, we continue to successfully introduce some of the most sought-after personalities for new release.

For example, one of the hottest games that is trending this summer is Tencent's Delta Force and the biggest live streamer of that game right now in terms of live channel average concurrent users and total short video views is on HUYA. We help him build his fame on HUYA from the ground up.

As we go to destination for e-sports live streaming in China, we continue to invest in e-sports content, driving deeper user engagement and strengthening our market leadership. In the second quarter, we live streamed over 100 licensed e-sports tournament, covering premier domestic leagues such as the League of Legend Pro League, Kings Pro League, and Cross Fire Pro League as well as major international events, including the LoL Mid-Season Invitational and the CS2 Austin major. Currently, we are also bringing global competition to our audience through coverage of Esports World Cup in Saudi Arabia.

Alongside licensed events, we produced over 40 in-house produced tournament, including the LoL Legend Cup Season 3, DOTA2 Immortal Cup and Honor of Kings Saudi Cup Gold Tournament as well as entertainment show like clear the billiard table goals. The Immortal Cup final sold out in just seven minutes, while our HUYA HYPER eSports Carnival branding e-sports music and culture tourism deepened fan loyalty and expanded our audience reach.

In July, in partnership with Tencent, we launched the inaugural Delta Force Diamond Champions Summer Season, featuring 24 leading domestic teams. The event showcased HUYA's production and technology leadership. From 4K ultra-high definition and 120 FPS streaming to multiscreen viewing and in-team voice chat, delivering a truly premium and interactive experience for fans.

Leveraging our content integration strengths, we have begun entering the game publishing arena. In Q2, we piloted a content-led launch strategy for Goddess of Victory: Nikke using live streaming showcases, e-sports promotion, and creator videos. The campaign delivered strong results, and we are actively pursuing additional publishing partnership. Our overseas initiatives are also gaining momentum. We are now reached tens of millions of monthly active users internationally through our mobile application service platform, live streaming and others.

Through these products, we are able to build up our gamer communities and local marketing capabilities and accumulate a sizable user base of hardcore gamers, particularly in genres like FPS and mobile. These efforts will position us to capture opportunities in the growing overseas game-related services market.

Before I pass the call on to Raymond, I would like to update you on our AI strategy. AI is becoming embedded in every aspect of our operations. From AI plus live streaming to AI plus IP and AI plus services using our proprietary gaming data sets, deep user insights, and years of content we have built intelligent gaming analytic models and large language models for specific service needs.

Some initiatives enhance user experience such as our AI agent, Hu Xiao Ai, which delivers real-time engaging commentary during e-sports streams, boosting viewer interaction during events like the LoL Legend Cup Season 3. We are also developing AI-powered virtual live streamer using high fidelity avatar and expression technologies to add new dimensions to our content.

Others create new consumption opportunities, for example, our AI sparring partners for e-sports players provide real-time tactical alerts, response to players' emotions, and offers personal encouragement. This technology also powers the industry's first AI game companion robot, the HUYA AI Superbot launched with Invictus Gaming IG team at ChinaJoy, which generated significant market buzz.

In short, with our dedicated efforts over the past two years have demonstrated to the market that we are more than just a live streaming platform, but a game-related entertainment and service provider capable of adding value to the entire gaming ecosystem. We will continue to deepen our engagement in the gaming industry, strengthen collaborations with industry partners, expand our business boundaries and innovate our service offerings. We will also focus on overseas expansion and AI initiatives, paving the way for HUYA's long-term sustainable growth.

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.

Thank you, Vincent, and hello, everyone. I'll start with an overview of our financial performance. Our total net revenues for the second quarter reached approximately RMB1.57 billion, increasing both year over year and quarter over quarter for two consecutive quarters. Of this, live streaming revenues stabilized with a slight sequential increase to RMB1.15 billion and game-related services, advertising, and other revenues grew to RMB414 million, accounting for 26.4% of total net revenues.

The number of domestic paying users in the second quarter remained flat compared with the first quarter, standing at 4.4 million, excluding those who made in-game purchase through our game distribution business but didn't pay via our platform or related services as well as overseas paying users. Thanks to optimized content cost, particularly those related to e-sports tournaments, we improved our gross margin sequentially to 13.5% for the quarter that -- this discipline also contributed to reaching breakeven non-GAAP operating profit, a significant milestone in our path to improve profitability. We also achieved a non-GAAP net income of RMB48 million, marking our sixth consecutive profitable quarter.

Let's move on to more details of our Q2 financial results. Our total net revenues were RMB1.57 billion for Q2 compared with RMB1.54 billion for the same period last year. Live streaming revenues were RMB1.15 billion for Q2 compared with RMB1.23 billion for the same period last year, primarily due to the continued impact of the macroeconomic and industry environment.

Game-related services, advertising, and other revenues were RMB414 million for Q2 compared with RMB309 million for the same period last year. The increase was primarily due to higher revenue from game-related services and advertising, which were mainly attributable to our deepened cooperation with Tencent and other game companies.

Cost of revenues increased by 2.1% to RMB1.35 billion for Q2, primarily due to increased revenue sharing fees and content costs, partially offset by decreased bandwidth and server custody fees. Revenue sharing fees and content costs, a key component of cost of revenue increased by 2.6% to RMB1.2 billion for Q2, primarily due to increased broadcaster related costs, partially offset by lower costs related to licensed e-sports content.

Gross profit was RMB212 million for Q2 compared with RMB215 million for the same period last year. Gross margin was 13.5% for Q2 compared with 13.9% for the same period of last year, primarily attributable to increased revenue sharing fees and content costs as a percentage of total net revenues. Excluding share-based compensation expenses, non-GAAP gross profit was RMB216 million, and non-GAAP gross margin was 13.8% for Q2.

Research and development expenses decreased by 5% year over year to RMB122 million for Q2, primarily due to decreased personnel-related expenses and share-based compensation expenses. Sales and marketing expenses decreased by 6% year over year to RMB58 million for Q2, primarily due to decreased channel promotion fees. General and administrative expenses remained flat year over year at RMB64 million for Q2.

Other income was RMB8 million for Q2 compared with RMB13 million for the same period last year, primarily due to a notable settlement income from disputes in the second quarter of 2024 and lower government subsidies. As a result, operating loss was RMB24 million for Q2 compared with a loss of RMB26 million for the same period last year.

Excluding share-based compensation expenses and amortization of intangible assets from business acquisitions, non-GAAP operating income reached breakeven for Q2 compared with non-GAAP operating loss of RMB3 million for the same period last year. Interest income was RMB59 million for Q2 compared with RMB103 million for the same period last year, primarily due to a lower time deposit balance, which was primarily attributable to the special cash dividends paid.

Net loss attributable to HUYA Inc., was RMB5 million for Q2 compared with net income attributable to HUYA Inc., of RMB30 million for the same period last year. Excluding share-based compensation expenses, impairment loss of investments and amortization of intangible assets from business acquisition, net of income taxes, non-GAAP net income attributable to HUYA Inc., was RMB48 million for Q2 compared with RMB97 million for the same period last year.

Non-GAAP net margin was 3% for Q2. Diluted net loss per ADS was approximately RMB0.02 for Q2. Non-GAAP diluted net income per ADS was RMB0.21 for Q2. As of June 30, 2025, the company had cash and cash equivalents, short-term deposits, and long-term deposits of RMB3.77 billion compared with RMB6.25 billion as of March 31, 2025.

Finally, let me provide an update on our shareholder returns. Through our up to USD100 million share repurchase program, we had repurchased 22.8 million HUYA shares with a total aggregate consideration of USD75.4 million as of the end of June 2025. Additionally, we distributed a total of about USD340 million in special cash dividends during the second quarter. Going forward, we will continue to focus on performance, advancing our expansion initiatives and deepening our industry alignment to create long-term value for our shareholders.

With that, I'd like to open the call to your questions.

(Event Instructions)

Ritchie Sun, HSBC.

(spoken in foreign language) Thank you, management, for taking my questions. I'd like to ask about the game-related services business. So can you share more on the updates? How does it look like in terms of the development, and how should we think about second half? Thank you.

(interpreted) Ritchie, it's [Marguerite]. Let me translate that for you. We continue to expand and deepen our collaborations with game companies, increasing our portfolio of joint distributed games in the domestic market to over 300 titles. Based on our game streamer ecosystem and the connections they have with our users, it is only natural that we take a step further and extend game services to the sales of in-game accessories and cosmetics through these streamers.

We are at the initial stage of this effort, and we have recorded a 90% year-over-year increase this quarter. As we further expand and diversify our in-game accessories SKUs, perfect its related transaction infrastructures and enhance users' mindset about our value proposition, we believe sales from games accessories is likely to be one of the new growth drivers for us.

On top of that, we have strengthened our collaborations with various platforms and products. This approach has allowed us to expand the influence of our high-quality content and services further to a wider audience. Building on our strong content integration capabilities, we are strategically entering the game publishing arena. In the second quarter, we piloted a comprehensive online content publishing strategy with the launch of Goddess of Victory: Nikke. With prominent live streamers showcasing gameplay, promoting through e-sports events and producing videos in collaboration with content creators, this campaign yielded impressive results. Encouraged by this early success, we are actively pursuing more cooperation opportunities within game sector.

Yiwen Zhang, China Renaissance.

(spoken in foreign language) So thanks for taking my question. So we have noticed the company has hosted the first e-sports event for Delta Force. So can you discuss what is the feedback so far? And how many for at the event to us? Thank you.

(interpreted) In July, in partnership with Tencent, we launched the inaugural Delta Force Diamond Champions Summer Season. Between 24 leading domestic teams, the event showcased HUYA's production and technology leadership from 4K ultra-high definition and 120 frames per second streaming to multiscreen viewing and in-team voice chat delivering a truly premium and interactive experience for fans.

During the finals, viewers tuning into HUYA Live's DDC exclusive stream will also get a chance to win wear in-game items, especially prepared for the event, including some of the highly sought after bundles such as (inaudible), et cetera, making experience much more fun and immersive.

Yanyan Xiao, CICC.

(spoken in foreign language) Thanks, management, for taking my questions. And my question is about overseas business. Can you provide us with a detailed update on the progress of overseas operation?

(interpreted) Overseas initiatives are also gaining momentum. We are now reaching tens of millions of monthly active users internationally through our mobile application service platform, live streaming, and others. Through these products, we are able to build up our gamer communities, our local marketing capabilities and accumulate a sizable user base of hardcore gamers, particularly in genres like FPS and mobile. These efforts well position us to capture opportunities in a growing overseas game-related service market.

As you might have noticed, we changed our definition of MAU this quarter to reflect the progress we've made during this period of transformation, particularly in overseas markets. What we've seen over the past few years and is convinced of is that the potential for international user base is immense in terms of growth and monetization opportunities.

Nelson Cheung, Citibank.

(spoken in foreign language) Thanks, management, for taking my questions, and congrats on the solid progress of business transformation during the quarter. My question is related to the company's future plans on AI development, especially in live streaming experience, e-sports tournaments, Hu Xiao Ai, AI desktop robot launched within this year and future positioning in AI gaming. Thank you.

(interpreted) As mentioned in prepared remarks, leveraging our proprietary gaming data set's deep user insights and use of content, we have built intelligent gaming analytic models and large language models for specific service needs. AI is becoming embedded in every aspect of our operations from AI live streaming to AIP and AI services.

Some initiatives enhance user experience such as our AI agent, Hu Xiao Ai, which delivers real-time engaging commentary during e-sports streams, boosting viewer interactions during those events. Others create new consumption opportunities such as HUYA AI Superbot, which is a great example of that. In collaboration with a well-known e-sports team, IG, we announced these next level robots that not only mirror player's looks and voices, but also offer core experiences like virtual sparring and emotional companionship.

Powered by our proprietary visual recognition technology and this strategy analysis, the robot is close to get the game, get you and get your feelings. Leveraging our knowledge in games and e-sports the robot is your sparring partner and coach. Again, using our proprietary models, our robot reads your mood from your tone and then it responds. It also has a memory graph which helps the robot remembers what our users' favorite heroes are, what their preferred play styles are and what their favorite moves are.

Maggie Ye, CLSA.

(spoken in foreign language) Thanks for taking my question. My question is related to live stream business, which accounted for 74% of total revenue this quarter and seems to have stabilized quarter over quarter. How do you think about the overall trend of live stream business and as well as the total revenue trend for 2025 in addition to margin trend? Thanks a lot.

(interpreted) Our live streaming revenue continued to stabilize with a slight increase to RMB1.15 billion Q over Q. We continue to see overall revenue back on its growth trajectory, driven by our strong growth from gaming related services, advertising, and others. This segment grew 34.1% year over year to RMB414 million this quarter.

Based on what we are seeing right now, we expect live streaming revenues to remain broadly steady as the overall industry and user behavior continues to stabilize. On the other hand, we expect game-related services, advertising, and other revenues to be the main driver for the company as we expand and deepen our partnerships with various game companies. And all in all, we expect our total net revenues to grow in the second half of the year as well as the full year.

In terms of profitability, in Q2, we continue to optimize our content costs, including those related to e-sports events and benefited from higher total net revenues. As a result, our gross margin improved sequentially to 13.5%. Notably, we achieved non-GAAP operating profit breakeven this quarter and recorded a non-GAAP net profit of approximately RMB48 million. This is our sixth consecutive profitable quarter. We will continue to focus on enhancing our operating profitability and expect a meaningful improvement in our non-GAAP operating profit for the full year 2025 compared to 2024 under normal circumstances.

And also, as a reminder, our interest income in the second half of the year is expected to be significantly lower than in the first half, and this is due to a lower cash balance resulting from the sizable shareholder return measures that we implemented since last year as well as the fluctuations in market interest rates. Please take this into consideration when doing your modeling for our net income for the remainder of the year. Thank you very much.

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. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.