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HUYA (HUYA)

Participants
Hanyu Liu Investor Relations
Rongjie Dong Chief Executive Officer
Ashley Wu Vice President, Finance
Thomas Chong Jefferies
Yiwen Zhang China Renaissance
Lei Zhang Bank of America
Ritchie Sun HSBC
Call transcript
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Operator

Hello, ladies and gentlemen, thank you for standing by for the First Quarter 2022 Earnings Conference Call for Huya, Inc. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I will now turn the call over to Ms. Hanyu Liu, Company Investor Relations. ahead. go Please

Hanyu Liu

welcome call. and issued first XXXX quarter today Hello, company's to financial conference online. The are were and earnings and everyone, posted Huya's operational earlier results

release Dong, can on will by Ms. ir.huya.com. You Huya, today's replay call IR call on the Chief be of be of the and few website view earnings in A visiting IR a Executive website also Officer the at available the Rongjie will Mr. press hours. Participants

Finance. will a begin of remarks President the call with prepared Vice conclude and Q&A Wu, Ashley Management with will session.

note Before Act we Reform the continue, contain today's please provision Private the US that of under XXXX. statements, Safe of Harbor forward-looking made Litigation will Securities discussion

Forward-looking statements inherent and involve risks, uncertainties.

from Mr. as reconciliation note turn non-GAAP press measures earnings call press release well discussions of Dong. now As the most other such, the Exchange measures. prospectors filed measures. and go Rongjie any any the forward-looking company these information law. US financial also statements, and today. CEO, applicable to of Please a risks and to over as directly does unaudited and update not the in the and regarding GAAP unaudited ahead. that Further, as other unaudited company's release under expressed results will the required information, different with is except Securities the materially as views conference included contains call Huya's uncertainties financial to filings GAAP company's obligation The I public this may Please Commission. assume Huya's include unaudited non-GAAP our be comparable

Rongjie Dong

industry, to our challenges the growth and pressure joining impose near-term standard healthy in for conference call on a delivered million you the market [ph] against continued XXXX. performance with macro Thank Total environment. backdrop financial health and RMBX.XX of we quarter, user today. that the everyone. reached net non-GAAP Despite Hello, income of billion evolving approximately the the line our were revenues expectations and for net RMBXX first quarter first entire in

user First, metrics. let me our on give you some color

user its increasing tournaments by X.X% with Our E-sports The Live, remained cooperation and with studios. was performance content strong Meanwhile, well also first quality, efforts platform in as of this on and base provide through time our our million on as as growth trend the optimize quarter. product users' experience quarter-over-quarter user level in basis. engagement mobile, quarter sustained growth Huya specifically improved we recorded by to user innovations, first fundaments expansion mainly double-digit year-over-year year-over-year our $XX.X diligent quarter, game the spent driven both our in to enhanced and the mails our

user next In Huya month X%. at about retention Live addition, remained stable app, rate

details provide product advancements Now, more our our cooperation I would innovation. about like and in recent studios game with to

time very gift [indiscernible] Duty Kings, first it during broadcaster, complete now our game with as streaming from our and than XX year variety LoL this have a our droppers, platform of and rewards Genshin as players. feature Elite our to late such with and Peacekeeper directly interactive in a certain sending Our Honor studios Rift, Mobile live Excitingly, titles Wild relationships to quarter. during feature on last both of added can as has our users million game By feature studios. such XX of the way over the a super engaged interactive their deepen continue Impact specific as we game they with virtual more users Call to emerged game of tasks, popular this voice combinations connect the type platform, game introduced game once claim period activity, viewing and We viewers task participating for chats. certain of game streaming

the launch platform, players and an with gaming feature more improving bolstering collaboration to In interacting event to to StarCraft to user our exclusive game noted activating titles, return on our joined to effort In that encourages rates. expand membership. user operating another design turn have we metrics addition with than studio games, mobiles, team CrossFire,

period kappa connecting HUYA long-term secured sales which During a month [indiscernible] produced complete game to HUYA users the CFM activity game with the CFM both initiative our exposure play their level. free operators account, privileges gaming them unlock XX allowed promoted championship by HUYA membership, platforms. ID away on community Huya’s game Huya’s This and and tournament-related within increase our tasks to helped the also and gamers CFM

long-term efforts channel, in [ph] available [ph] on live were this on made tournament and also events all our Building endeavors we measures addition, forward. content additional connect cup self-produced In success, live on streaming with will increasing these continuous the in and game were Huya’s ecosystem. CFM events’ going the broadcasted Huya’s ahead area forge this popularity platform with streaming reflecting to Tencent

of beyond are to world innovate live We the looking gaming also streaming interactive features. more

real-time accuracy, we online feature example, an musical game, the users Merging a play musical the collecting rhythm. stage the and activities, between compete debated on broadcast as this extraordinary bringing interactive musical musical artists watching of engage designed performance. audio movement performance our based boundary screen experience, to For and virtuality. our experience [indiscernible] feature new Night other at to immersive the developed the live scored music unique along fingertips truly in-house while This them beat feeling and in users performances were feature broadening to and with fun and beat live to viewing Boom the captivating. reality allowing Users viewers, new make streamed live with on event, created technologies leveraged gala annual game with simple bubbles interactive January our events’ Huya distinctive detection

updates I overseas recent provide business. like in Before initiatives I our on strategic conclude, our would some to

respect Given the rapidly geographic concentrating some our Nimo regions. on both changing have TV's business adjustments future we domestically and to internationally, resources implemented with environment, and refinements strategically operations, key

we growth, our presents are these areas. revenue contract in short-term in just -- overseas expansion as While downsize the user overseas certain in and result could streams

the business of our COVID-XX In ongoing benefit focus of Nevertheless, for We we overseas expect potential move could as regional overall are regulatory we low macroeconomic markets in changes. harnessing our international the resources the create persistent cost. operations this as resurgence more of on we'll in the with headwinds, business to focused directing greater believe challenges at with business ahead. long growth operational summary, and China the term. our We in we impact embrace to to will improve improve confident approach regulatory still some our a further along and the profitable continue the by efficiency, strength fundamentals to strategy, efficiency

government's and technology expertise with by ABL leveraging operational work to streaming continue with guidelines in will our worth We closely [indiscernible] and game live spanning the the complying market.

we that We the also compliant are features retraction not the experiences live users the to of capable users more offer believe our of in world products broadcasting. impact of choices innovating better continually will and and needs and that core

portfolio and technology With remain high-quality growing product and over more advancements business content turn Ashley live our VP broadcasters, stakeholders. details and creating of solid in to financial partners the our user that I operating on call market, leadership will share serving overview, As our base we metrics Financial, to our the committed the Wu and our now will assessment. define, all other our game to more and for streaming the value

Ashley, please go ahead.

Ashley Wu

initiatives. updates expand now diversification Mr. provide you, Dong's on remarks, our I Thank on Mr. will everyone. hello some enrichment To Dong, and content and

We viewership content metrics. than On XX and This year typically broadcasted being E-sport offerings due the tournaments also not events. Spring year, viewership, Pro selective procurement were around were quarter a LCK content previous professional XXXX tournaments to that E-sports FXX period. of Spring Season. the a tournaments performance the the particular, compared the the we LPL doubling KPL record to in of quarter, the Seasons top high-quality high deliberately that, front, total viewership Spring ROI fact in improve first than see is In reached and E-sports we for during strong the E-sports RMBXXX ensure seasonality, the during tournament quarter Spring, third-party first million, despite are quarters exceeding this more quarter. reached more ESL licensed League, to Spring, CFPL first to period more glad

our as through all drivers and continue content Our of traffic user comprehensive users. of to superior our of for E-sports serve experience – a the key

to viewership. total broadcasted PTC XX entertainment we during and E-sport XX content, approximately E-sports shows addition tournaments million self-organized generating licensed the In first quarter,

festival Huya Term the a for tournament CFM New as and Chinese Year feature The which well Huya first Super Cup, Solo holidays, were the also we events in participants Mr. offering which entertaining The League, branded Huya Live our and During categories earlier, Long E-sports Championship mentioned games Dong PC in quarter. like Huya, games, experience. league event, closing different and have streamers content online from users in several popular

been cities major users. our the LPL, lockdowns we lovers We Game Language] in those become And our had events delays on Nevertheless, this our Additionally, of satisfying improving has few quarter, channel production impose viewing strategically comment a game self-produced major season. during analysis show have video which investment the for period. in Room LPL variety pandemic play Furthermore, in to professional production. ratio continuously for broadcasted we game offerings license events events some related achieved enjoy in-house Watch results. for in first experience and we quarter adjusted during HUYA abundant because [Foreign the a

of We've our been integrating newly on peers, by added XX% our in our or video specific and their highlights game retail with helping content quarter-over-quarter number ecosystem a forum the can or with channels. a platform the discussion On Encouragingly, growth. forum platform. tournament users of watch product nearly uploaded dynamic upload end, recorded streaming are share, viewership to tournament in create reduced to grew game on sequential plan, we videos the quarter, and content XX% first discuss

a the our walk Unless reviewing are I basis. me let otherwise specified, QX you will all risk, through year-over-year growth results. on financial be Next,

costs to increased to with lower believe the streaming due Huya billion Bandwidth users were cost primarily QX, users same to per number decreasing to to RMB for increase of the licensing the by by contributed recognize to for by able this compared revenues of the Cost and last last year-over-year. QX, and revenue primarily sharing X.X% net sharing Revenue increased XX.X% compared X.X% content Advertising lower QX, content of sharing RMB RMB X.X primarily sharing nearly fees XXX softness million representing enhancement fees revenues level and billion sentiment. was profit programs. costs. paying sequential spent broadcaster decreased user content year. to incentive user the same X.X% due RMB increase to RMB decline continued billion for in net fees year-over-year increase last The revenue users. by costs sub-licensing and paying to bandwidth primarily QX content was total billion the to compared more were compared revenues. fees in period QX revenues for costs. increase in in to Our for as The due We X.XX revenues year affect mainly by and revenues primarily cost according by X.X% average X.X X.X QX increased QX, spending X.X million for event RMB Huya management period paying licensing addition with efforts. were spending higher XX.X% primarily for driven in technology and margin and million to and other of to the of paying in RMB engagement we the in Gross million a revenues of due and to time improved to XXX flat by driven QX, million, QX. RMB relatively content In schedule. Live, period Gross for on relation XXX same macro Live Live for due revenue was billion e-sports for increased X.XX the XXXX, increase on the to revenues, the X.X year. RMB QX, certain million increased was continue for XXX adversely QX,

and broadcaster-related expenses was for XX.X% to RMBXX QX, share-based for expenses. QX, and gross in QX primarily RMBXX period was to of for decrease marketing to of million, with compensation decrease margin damages XXX QX. XXX Research non-GAAP to expenses, in first the compensation share-based development compensation share-based to outcome to million was attributable primarily decreased the by compared income by X.X% for and for a RMB administrative X.X% realized million non-GAAP expenses General and million QX. Other RMBXX due same the in XXXX decreased by due received lawsuit. RMBXXX the from RMB in Excluding favorable X.X% expenses a million increased profit quarter XXXX, primarily million expenses. gross for Sales

of loss XXXX. with operating result, for operating million RMBXXX compared for QX a of income million was the RMBXX period same As

of with on value net RMBXXX RMBX operating million primarily taxes same Excluding to income to same HUYA QX attributable for of lower income million HUYA the million short-term RMBX.XX share-based for decreased period the was expenses, income X.X% for tax loss QX. income loss compensation same period RMBX which per due compared for QX and Income the and Inc. same fair of was the per net share-based margin gain RMBXX taxable with compensation Interest income. RMBXXX net negative to attributable XXXX. to ADS Inc., non-GAAP XXXX, was net HUYA for excludes of And for RMBXX expenses income for change non-GAAP QX. interest Non-GAAP Net attributable QX. primarily million. for million for operating margin of were net ADS with Inc. for RMBX was compared million for investments, compared million million investment X.X% RMBX.XX Non-GAAP was to net RMBXX period Diluted due period of was million diluted XXXX. RMBXX Non-GAAP rates. compared were loss for of QX. XXXX, was QX expenses QX with

prepayments March due providers. in we billion, the investments like to call cash of and short-term As compared of that, to increase RMB investments open XX, December XXXX, had XX, content billion with XX.XX primarily of and now I cash the deposits RMB questions. would your With equivalents, short-term as to to and XXXX, XX.XX

Operator

Your [Operator question. first Instructions] line your you. from from Thomas Thank question the ask Chong comes Jefferies. of Please

Thomas Chong

about So overseas our my is [Foreign Language] business. question

what behind our impact what will wondering, will the business? reason Thanks. be Just be on the the adjustment, and

Rongjie Dong

in certain directing for on will expect operations focused adjustments rapidly refinements could downsize while key adjustments short-term business benefit our overall of potential regional believe the changing have some internationally, respect our and a Given but expansion with presence improve contractions revenue domestically with at in result to user expenses, longer might to business have international profitable and lower Nimo overseas the we resources growth concentrating resources efficiency as strategically non-recurring by future Language] overseas we some approach TV's in geographic the operations, regions, environment, to [Foreign we that markets and business implemented cost. areas We our overseas in these and growth more greater this term. our

Hanyu Liu

Okay.

Let's have the next question.

Operator

Thank you.

from Your question. from ask China Yiwen next question Zhang comes Renaissance. Please your

Yiwen Zhang

you, thank So, taking for question. Language] my [Foreign management

So, quick I the side. on traffic have a question

So, game [ph]. cities lockdown to expected and license COVID to [indiscernible] in some also April

So side? what are CapEx our to their you. Thank impact

Rongjie Dong

question. Thank you Language] your for [Foreign

is For games the the licensing term, the industry. positive longer gaming development of resumption for of

new the our capacity games. the that game helping we believe Also a of streaming. As Huya player of live be industry, terms downstream best at to this us enrich Huya will operating the in same for content has time,

in gaining for long-term would from when new our stand those it a expansion. be we So, positive traffic more games, and user position advantageous

April, keeping and began the In the being addition, new business I motivating games pulse users. is for of limited eye games of business, the that advertisement much on the is are in whether not now. only be the are not think especially of looking the and impact on pretty the the which in or received our for the whether And streaming an a resumption side, resumption such licensing will will or are suitable positive the we market business, games, at In fact also new live well games platform. business of the released more games on our given the be advertisers are advertisement and short-term, the on people the licensing

this measures for COVID normalizing. but well, traffic As positive somehow for policies because some the streaming, live impact because well stay-at-home impact game some of cities of as in our lockdown that are the terms these there measures, as implemented are or traffic

So XXXX. our beginning versus relatively impact that XXXX, on in positive compared traffic smaller is the with the time of

as terms to for users And regard. from we in the merchants, consuming In demand be for there expect short-term, of this some the will pressures behaviors revenue have in the some impact therefore, COVID. our well of advertisement for as because on the online our revenue, advertisement the

We business. are close keep our that will great on lockdown impact provide very under of our on COVID of And support good a impact the to continue who will eye to guarantee. also we ensure can And measures. provide the and we we protections colleagues could

Hanyu Liu

Okay. That's have it. We question. the can next

Operator

Thank you.

from question. line question next of Your ask your Please Citi. from Brian Gong the comes

Unidentified Analyst

[indiscernible] question. protection Thank taking on assessed from our of policy [Foreign behalf you. have features? those for rollout impact regulation Citi also, new Language] management on and other Katrina ahead? management the my ranking Can [ph] on the PK of on This especially further in May, is the what's for restriction And Brian. Thanks areas asking minor expectation detailed

Unidentified Analyst

[Foreign Language]

Ashley Wu

Thank I'll your take question. you.

Our the Language] better the sure that has as industry very the And keeping keeping so protections been on believe in miners. and that latest regulators better a on released changes a regulations And to under and past behaviors its changes more growth recently, and close to period. the of eye opinions regulators regulate we streaming the way. this, long-term have sustainable guidance. industry of has scrutinizing on terms regulating for in We been are of healthy [Foreign make live

guidance them available. latest sure operating that the For the strictly became miners, protecting regulations more opinions all relevant make details by would and implementing and after these we on abide we earnestly

that in very the mean would, as as soon in We our and a the have to and the to minimize enhance changes evaluating We adjustments and [Foreign users the in Language] At product impact platform. our At our of possible of our from addressable operational the to so may metrics, demand scale adjustments as course, now financial limited to will the on core make terms with good our possible. invest time, try in will changes. changes to think that policies in changes. and technology impact. to operations, so we of we make on might quality core -- are This capacity this of the monetization some and some And do our and have and regulations on time, the our more investments complying same we dynamically the competitiveness product impact as upgrading market. content, such regulation the relevant be in we'll our continue to the operation regulation keep to same addressing continue we

Hanyu Liu

Thank Okay. you.

have the Let’s question, next please.

Operator

you. Thank

from line question ask Bank question. Your Lei comes Zhang from next of America. the Please of your

Lei Zhang

management My terms updates environment? question of with any [Foreign taking cooperation Tencent you. initiatives, and Language] the our my Thanks new change question. regarding mainly in in any for regulatory Thank is

Rongjie Don

question. The your [Foreign Language] cooperation Thank are and between Huya progressing you very for well. Tencent

games close First relationship of keep very a tournaments. we in Tencent synergy with all, and terms of

as in instance, terms activities product as recognized our to feature they cup, on such Users mobile, CFM And game well in expand game -- users stream to become hand, worked enjoy in activities this increases have can it together studio. more membership. benefits in have terms we in results of we Huya the long-term communities. our LOL will in both privileges platform. amongst the and synergetic Games would by And more time, For able have the popular with platform and at self-produced active participate a users joint and cooperation On hope operation and for CFM first the also both active the the in of We our more been exposures games. quarter, and in-game. and one be the same become the to of Huya the very be could live

same share enrich Mobile. LOL live gift special dropping for for the content. we they user Huya applied now, LOL a interactive will our held cup in video Tencent. streaming terms Zhanshen top experience license And on features, at the mobile. time, users e-commerce So the a by instance, have applied been leading be some very right the in to that able of live are self-produced streaming two streaming we for tournament same to market is for or to having had games officially of At time, -- now, have which had that And live

those been nice plan on For over by we to million nice to these with progress Language] applied XXXX, instance, company in games to categories. well dropping, so keeping features apply produced the and a we very technology-driven QX been some And results and more content, more since making some games -- produce having for that far, the features interactive also XX for than active As gift that they've CODM, it users. XX to and interactive content in interactive as Elite very [Foreign more have content. has as got generate

both are of for after Our and positive is of cater content the and game before as metrics users. the the games needs as players for able for to well users, that and the promotion play, retention

in more interactions as of as to more players, active to role continue live bigger do the it some and so by have better well giving will on to play game. our as features of retain to community as industry live and entire users, our streaming a streamers so connections studios users game and having the We

Hanyu Liu

Okay. Thank you.

have Let's the please. next question,

Operator

Thank you.

line Your question. the ask from HSBC. next Ritchie Please from of comes your question Sun

Ritchie Sun

you Language] for [Foreign Thank taking questions. my management

some landscape? how So across about we new should margin adjusted first also competitive the sales think R&D, expenses marketing Thank should you. G&A year? exit and plans and for we this we even so about under And competitors this or allocation profile how budget long-term headcount and secondly, their business, changing strategies all, are of the the as of noted, content their think net

Rongjie Dong

We for a point alleviate we of [Foreign Huya's think will this trend change and positive the by question. strategic your for as you competitor is competition that Language] view, our the noticed us Thank landscape. from

Ashley Wu

content is expenses stringent cost necessary now operating Overall it and efficiencies. right we control optimize to to speaking, in continue to over Huya, invest in [Foreign we is continue and continue users have because Language] where and high-quality a more are recently, Inc., and our our Given product, that sure our will our does we positive the sharing the live terms to [Foreign In lot. a streamers, well market make leading of changed Language] layout competition. fees revenue not position will to in consolidate serve that with to

self-produced capabilities operation think our sharing we for keep monetization current Huya, product of detailed the we [Foreign In products, and analysis will terms to unchanged. that as the content allocate the will is on will more therefore, of ROI we dynamic. and given So have make to different regime our we adjustment and kind more and of effective content, revenue way and market to that Language] resources competitive licensed according

in terms business, Language] and in the we QX, [Foreign also approach to have and At in labor efficient. stringent also to mentioned way, control on strategic tournaments the of expenses more a are to technology some optimization investing of optimize licensed selective a had control our and continue and and making in we'll self-produced overseas operating And [Foreign our in other bandwidth cost. our method to costs more instance, have Language] made the We time, make in content. it which, other marketing we sales and terms same adjustments more For expenses. more would constitute we make as that

that sent would our because quarter, level. short-term, turbulences some of expenses to margin some the quarter, of the and and for there be non-recurring adjustment for might the for costs terms business margin the In

year that XXXX to might down content of year the and continue And look XXXX, so will terms margin slightly trajectory revenue, whole due revenue investment at our expect slightly the XXXX. will be in overall whole However, of good rate And than cost and lower. that as foundation the efficiency, that, a for for believe development. versus we the our a cost for entire will in higher lay effort therefore, affected. operational course, if be gross in long-term But we be as margin percentage we to to XXXX operating the our in you optimizing

Hanyu Liu

That’s it. Okay.

Operator

you. Thank

further no are the questions call there to I'd back like As closing now, over the Company turn remarks. for to

Hanyu Liu

today. again once Thank you for us joining

further Relations. have you. our Investor feel Relations provided you information Investor through Thank free contact If questions, to the or the TPG on contact please Huya's website

Operator

This concludes this conference call.

You disconnect lines. may Thank your now you.