On the morning of June 6th, Beijing time, Huya (NYSE: HUYA) today released its financial report for the first quarter of fiscal year 2018 as of March 31st. According to the report, the total net revenue of Huya in the first quarter was 843.6 million yuan (about US$ 134.5 million), an increase of 111.5% compared with the same period last year of 399.9 million yuan; net profit was 31.4 million yuan (about 5 million yuan). The US dollar), compared with a net loss of 41.7 million yuan in the same period last year. This is the first financial report released by Huya since the IPO (Preliminary IPO) went public.
After the financial report was released, the company’s management held a conference call to interpret the key points of the financial report and answer the analyst’s questions.
Credit Suisse Analyst Thomas Cheung: The first question is what is the strategy of the company in 2018? Second, how much is the company's market share? Third, what is the proportion of games and entertainment in company revenue?
Executives: The company will continue to invest in e-Games Tournament and e-sports content. The top e-Games Tournament brought a lot of video views to the company earlier this year. The trend we see is that game developers, operators, and e-sports platforms continue to increase their investment in capital and resources, including increasing their efforts in the production of e-sports content and hosting online competitions online and offline. The improvement of quality is certainly beyond doubt. I believe that China’s e-sports industry will surely become more mature in the near future.
The market competition of e-sports industry has existed a few years ago. At that time, the video live broadcasting industry is in the ascendant. We expect that the resources of the industry, including anchors and spectators, will be more concentrated, which means that the barriers to entry into the industry are getting higher and higher.
The company was unable to provide accurate game and entertainment revenue, but the game content generated more than half of the revenue generated.
Goldman Sachs Analyst Wendy Chan: The first question is that company advertising and other business revenue increased by 212.4% year-on-year in the first quarter. Can you tell us about the growth in advertising and other business revenues, such as self-developed games? What is the future growth trend? The second question is how much is Tencent's contribution to the game revenue of the company? Will there be traffic cooperation in the future?
Executives: Self-developed games are just one of our past attempts, not the focus of the future. The current volume is still very small, only 10 million in one quarter.
Revenue growth of the company's advertising business exceeded our expectations and it is expected that the annual growth rate will exceed expectations. Advertising business will also become another important driving force for the growth of the company's performance.
In the first quarter, we are still negotiating specific details of cooperation with Tencent, and cooperation will begin in the second quarter and the third quarter.
We explored a series of cooperation with Tencent. The company completed capital cooperation with Tencent in March. Therefore, the details of the cooperation have not yet been negotiated. We will cooperate with Tencent in terms of gaming and e-sports content, and Tencent will also help companies to improve their business liquidity capabilities, such as advertising and content distribution capabilities.
Goldman Sachs Analyst Piyushi Mubayi: Can you comment on the new trend in the development of the game industry. Will the new game impact traditional games? The company expects strong growth in the second quarter. What are the reasons? What is the trend of monthly active users and paid users? What is the changing trend of the amount paid per paying user? How does the company forecast the growth performance of the third quarter and the fourth quarter?
Executives: New games have been introduced throughout the industry, but compared to the "League of Legends" and "Jade for survival," the amount may not be that large in a short period of time. Huya has always been committed to building a good content ecosystem. When a new game is launched, we will ensure that there are enough anchors to start broadcasting, affecting the most users, and continuing to lead the industry.
The growth in the second quarter was driven by a combination of factors, such as the increase in user base, the growth in paying users, and the revenue growth contributed by each user.
UBS Analyst Jerry Liu: The company’s second-quarter revenue forecast has a better acceleration compared to the first quarter, due to the popularity of games such as “The Jedi”. Or is the company doing better than before? Or is there any other game contribution?
Executives: The second quarter growth is due to the increase in the company’s ability to realise commercial real-time business. In addition, as I said earlier, it is also due to a combination of factors.
Jerry Liu: The overall competition in the video industry is even fiercer. For instance, the increase in investment in video platforms and the increase in video broadcast on social media broadcast platforms will affect the company's development? Do other game-playing platforms seek to establish a trade union system will cause pressure on the company's competition?
Executives: The rapid growth of vibrato occurred at the end of last year and early this year, and the number of tiger teeth users is also growing rapidly. Therefore, from this dimension, we are two business forms that do not have much impact on each other. In addition, some of the short video users are pan-gaming users, while users on the tiger's teeth are core game users, so overall, it is because the proportion of our game users leads to the stickiness of our users than the short video platform users. It's much bigger. Thirdly, our competitors are also learning about us as a trade union ecology. In fact, YY was built in 2011, and it took Tiger took four years to slowly build this ecology, so we welcome competitors to realize that the trade union ecology is right. The value of the live broadcast industry, on the other hand, is a relatively long time for the construction of this ecology, so we are not particularly worried.
The number of anchors in the first quarter of Tiger teeth is still the largest among all platforms, with the number of monthly active players reaching 660,000.
Analyst: The game content of Huya is quite different from that of competitors. So where does the company focus on expanding general entertainment content? Will it be related to the current game content? How to attract existing users? In addition, what are the strategies, methods, and plans for the company's international business expansion?
Executives: We launched the overseas game live broadcast last month and it is still in its early stages. So the current digital significance is not very great, but we still see great potential in the live game market in Southeast Asia. In addition, from the company's point of view, we have been exploring non-game live broadcasts. In the existing Tiger tooth platform, we already have comics, two-dimensional elements, and live music. Next, we will pick one or two key points and vigorously Try.
Deutsche Bank analyst Eileen Deng: Is there any specific plan for the company to play rewards and realise the live game in the next quarter?
Executives: In the coming quarters, we will still focus on providing rich e-sports content and services. This service is characterized by certainty in terms of revenue contribution. In the future, we will add more social elements to e-sports to enable e-sports content. More exciting, improve liquidity and revenue growth.
Eileen Deng: What new liquidation model will emerge in cooperation between the company and Tencent? Does Tencent's new game have an impact on the company's game-playing business?
Executives: The game content broadcast by the company is the most widely covered in the industry. Therefore, regardless of any new games released by developers and operators, users can see the relevant game video content on our platform. The company will seize all industry opportunities. .
We will cooperate with Tencent in a number of different directions. We have obtained a number of exclusive e-sports resources from Tencent, such as the LCK Tour. These are the advantages of having a Tencent investment company.
Citi analyst Herman Chan: Tencent has also invested in tiger teeth and betta. What impact will this have on the competitive landscape of the industry? In addition, the company's future profitability can be maintained at what level? How to improve? Finally, does the company have any marketing opportunities in terms of increasing the number of users?
Executives: As far as the overall trend is concerned, the entire industry is doing integration, and the share of the head broadcast platform is increasing. The competition for live game is not only current competition, but also includes some overseas competitions and some non-gaming level competitions. Next, Huya will conduct in-depth discussions with Tencent and other game companies on live games. The trend is still very good progress. The competition in the game live broadcasting industry is not just digging game anchors. More importantly, we must build a content ecology. We believe that digging game anchors and building a content ecology are two capabilities. The investment and deposition of Huya's content ecology will help the company in the future. Go further in the competition.
The company’s growing revenue will help improve profitability, but margins will inevitably fluctuate in the coming days due to the company’s investment in content and technology. In terms of marketing strategy, we hope to attract users through high-quality content, and Huya's investment in marketing will not be as large as other Chinese Internet companies.