HUYA Inc.
Q4 2020 Earnings Call Transcript

Published: 23 Mar 2021

[Operator:]

Hello, ladies and gentlemen, thank you for standing by for the Fourth Quarter and Full Year 2020 Earnings Conference Call for HUYA Inc. . I'd now like to turn the call over to Ms. Dana Cheng, Company Investor Relations. Please go ahead.

[Dana Cheng:]

Hello, everyone, and welcome to Huya's 2020 Fourth Quarter and Full Year Earnings Conference Call. 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 in a few hours. Participants on today's call will be

[Catherine Liu:]

Thank you, everyone, for participating in our conference call today. I am pleased to deliver today's opening remarks on behalf of Mr. Dong. We are very pleased to report another quarter of solid performance across our businesses, allowing us to finish 2020 on a strong note. Total net revenues for the fourth quarter of 2020 increased by 21% year-over-year to close to RMB3 billion, while full year revenues crossed the RMB10 billion mark for the first time. We believe our enhanced monetization capability sets a solid foundation for us to reinvest into the business and strengthen our future. Robust user growth and higher user engagement also continued to underline our ability to execute well. Mobile MAUs of Huya Live reached 79.5 million in the fourth quarter, a year-over-year growth of 29% and a net addition of 5 million compared to Q3, further reinforcing our leadership position on the mobile end. Strong mobile growth was driven by the continued buildup of our quality content library, especially with e-sports tournaments and entertainment programs, product improvements as well as marketing activities. Meanwhile, our Huya Live app's next month retention rate remained at over 70% in the fourth quarter. Driven by mobile growth, average MAUs of Huya Live in the fourth quarter increased by 19% year-over-year to 178.5 million. Paying users for Huya Live increased by 18% year-over-year to 6 million in the fourth quarter. Notably, around 80% of our paying users paid via mobile devices and mobile users contributed to more than 85% of our live streaming revenue this quarter. These results further endorse our mobile strategy focus as we continue to allocate resources to grow our mobile user base.

[Operator:]

. Your first question comes from Thomas Chong from Jefferies.

[Thomas Chong:]

My question is about our 2021 outlook. Can management comment about how we should think about the revenue and the user growth trend for this year? On the other hand, can management also comment about our strategies for the gaming and the long game segments?

[Rongjie Dong:]

Regarding your first question, Mr. Dong has answered the strategic focus. So for the year 2021, on the business side, we actually have some several strategic focus. Firstly, on the live streaming business, we will try to see the opportunity that provided by the new potential blowback to games that is the potential way to launch earlier this year so that we can strengthen our competitive advantage. Meanwhile, we will strategically focus on the e-sports tournaments licensing line and the self-produced e-sports tournament just so that viewers can enjoy a better e-sports tournament content on our platform. And meanwhile, we will also put some efforts on the self-produced PGC shows to provide users with a diverse and enriched content library. In addition to the live streaming business, next, I will talk about our ambitions for the video business. As we have previously communicated, video business is actually a long shop business that potentially requires a relatively longer time for us to get users manage to monetize. And actually, through the endeavor that we have put out in the past few quarters, we actually have already seen some promising results on the video business as the viewership of the video business is actually on a year-over-year growth of 40% right now. And the routine part for the video business is to do the on-demand viewing experience provided for those users. Going forward, we would like to maintain our advantage for the on-demand business. Meanwhile, we'll try to integrate better the live streaming business together with the video business. And we actually have already tried some of them and it's actually making good effects. And next, I will talk about the other business sectors that we will put the strategic focus on, which is game community. On the game community side, we plan to integrate the game-related information and the game-related knowhow, knowledge to integrate all that kind of services on our platform, so that viewers -- users can have one-stop shopping experiences. All in all, gaming side, those are actually similar to what we used to do in the past. We will continue our strategic focus on the common genres such as outdoor, traditional sports and ACG and try to strengthen the quality content on those genres and acquire new users from the market. And having said enough about the domestic market, next I will share some color on the overseas market. For the NIMO TV, this year, what we will focus on is not only to strengthen our leading position in the existing countries but also try to construct a comprehensive ecosystem. Meanwhile, we will actually focus on the breakeven point for each of the countries that we operate in and try to downsize the business in those countries who are -- which are loss making. So with that being said, we will just strengthen our leading position in Southeastern Asian countries and some Middle East countries. So these are our leader's outlook for NIMO TV. And Catherine will take the other questions, of course.

[Catherine Liu:]

Thank you, Thomas. I think with Mr. Dong's remarks on our growth strategies in 2021, we believe the users and the revenues will continue to increase this year. In terms of game versus non-game strategies, obviously, our focus is still on game content, as Mr. Dong just mentioned, but of course, non-game content is also an important part for our monetization. So we will continue to invest in game content to help us to grow more users and we will also invest in the non-game content for us to improve monetization. But of course, for some of the non-game content categories, if we see them grow to a certain large scale, we will also try to invest more in those content categories and potentially cultivate for new users in the future from those content categories. Hope this answers your questions.

[Operator:]

Next question comes from Lei Zhang of Bank from America Merrill Lynch.

[Lei Zhang:]

Two questions here. First is, can you give us some outlook on the competitive landscape in 2021, especially in game-streaming space? Second is, since you mentioned your investments in e-sports weekly related content, so can you give us more color on your content investment plan in 2021?

[Rongjie Dong:]

All right. As a translation, regarding your competitive landscape question, especially with those new entrants in those video platforms, we would like to say that for those video platforms like Bilibili and Kuaishou, what we have been doing for the live streaming business is to converting their existing VTubers and video users to the live streaming broadcasters and live streaming users, respectively. But the last benefit dropped by the conversion period has already come to an end, I would say. Going forward for games, I would say we will have to enter into the period, try to calculate a better and quality pool of the broadcasters and construct the DouYu acquisition for the live streaming business. And we believe we are at an industrial leading position compared with those video platforms, especially on the quality content and the quality broadcasters, especially, our monetization capabilities. Those are areas we are superior to all those video platforms, I would say. So basically, we think the competitive landscape for the live streaming business hasn't really changed much. And Catherine will take your other questions.

[Catherine Liu:]

Thank you, Lei. In terms of the content investments, this year, we will still focus on game content, such as, obviously, one important factor is the e-sports tournament. We are pretty much going to have comprehensive and pretty much all -- most of the important e-sports tournament. And we will also increase the self-made content to help grow our users further. In terms of video, this year, we do plan to add additional investments into game video for future user growth. And we believe that if we could have a successful video business, this will not only pave the way for future user growth but it can also be a monetization opportunity in the future. Hope this answers your question.

[Operator:]

Our next question comes from Alex Liu from China Renaissance.

[Alex Liu:]

In the prepared remarks, the management introduced that there is a sizable group of users that come from Tencent property right now, and this is not really in our reported MAU. Could the management share some color on how to further grow this group of users? And how should we think about the monetization road map and the monetization potential for these group of users?

[Rongjie Dong:]

All right. As a translation, I will provide some updates about the ongoing collaboration that we have with Tencent. By the year-end of 2020, we have actually connected via live streaming content across almost 20 games of Tencent and also Tencent products. That includes League of Legends Pro League teams, Cross Fire and products include WeGame, WeChat game live streaming mini program, mobile QQ gaming center. And earlier this year, during the spring festival, we actually collaborated with leading platform of Tencent and we have collaborated with them during the spring festival. Currently, the traffic brought by those external Tencent wins is not contained in the quarterly reported MAUs of ours. In the first quarter, the external Tencent wins contributed to around 20 million MAUs, which is still relatively lower compared with Q3, as Q3 is the school holidays -- school summer holidays. And in terms of the collaboration on the gaming side with Tencent, we actually have just signed a 5-year licensing agreement with PG Sports in terms of the broadcasting rights of League of Legends Professional League, LPL for short. Specifically stated in the agreement, we actually have discussed with the PG Sports in terms of exploring more opportunities to better monetize e-sports tournaments. As in the old days, e-sports tournaments is actually serving as a major traffic engine for a lot of users, but it's contributed little to monetization, which is why we're trying to work with PG Sports, the e-sports tournament arm of Tencent, to take more opportunities on the e-sports monetization side. And in terms of better engaged users, we are trying to work with Tencent to integrate to bridge through users Tencent i.e., with their Huya account to provide better cross-functional or cross-platform experience for them just so that we can provide personalized recommendations on precise targeting at those users so that their user experience can be improved.

[Operator:]

Our next question comes from Tian Hou from T.H. Capital.

[Tian Hou:]

Okay. So two questions. One is, I feel like somehow, whatever brought us the major users and the user growth for the games from Tencent and -- is that possible for us to bring in the games from other vendors domestically and internationally to further grow our user base and paying user base? That's number one. Number two, as over the last many years, Huya grew pretty rapidly, still like already past its peak and however, the game broadcasting industry relatively still young. In which area Huya is going to invest for the further higher growth in 2021?

[Rongjie Dong:]

All right. As a translation, in terms of your first question regarding whether there is the future for us to broadcast specifically on Tencent, we're actually -- it's not, because currently Tencent games are the back to performing games in the market, especially in the domestic regions. So it is more of a result of the current industry situation rather than the purpose of our activities in the market. And speaking of the investments for this year, I will start with the overseas market. As we always do, we hope the overseas market one day can achieve the breakeven point. And we think it's quite promising because the revenue growth of the overseas market is actually on a surge right now. And for the domestic market, like I said earlier, we would like to strengthen or build up our current genres, specifically on the video business. You can consider it as a defensive or more of an aggressive move for us to try to make the video business prosperous. And we aim to grab some certain market share for the video business in the industry. And in addition to the video business, whether it's core gaming or other new initiatives, we actually had a wide spend in terms of the effort moving. So yes, seems like platform issue.

[Operator:]

Your next question comes from Vincent Yu from Needham & Company.

[Vincent Yu:]

My first question is about the 2021 game releases by Tencent. There are several flagship models will be scheduled to release by Tencent in 2021. Which game launches in 2021 does company think will have the biggest impact on Huya? And second question is on the regulatory guidelines. Can management share some comments on the potential impact on our business with regards to the regulatory guidelines issued back in November 2020?

[Rongjie Dong:]

All right. For your first question regarding the new games, actually there are several games that we consider as a potential blockbuster games for the year. The first one is app mobile. The second one is legal license mobile. And probably really for them to be potentially launched in Q3 of this year. So it's probably the other way. But consider us as the industry leading platform, especially quite excelled at promoting new games, so we are the record picking one platform to promote and operate new games and attract viewers to the platform and also to the games. So we have confidence that the launch of new games. With the launch of those new games, we can continue our industry-leading position. And even though it's being launched a little late, but we actually starting the preparation period as early as last year in terms of recruiting new broadcasters and construct the designating game-related acquisitions. So we are -- we will look forward to the launching of those new games this year. That's for your first question.

[Catherine Liu:]

Thank you, Vincent. And for your question for the government regulatory changes, as you have been probably reading news and since, I think, the beginning of 2020, there have been a lot of the government attention on the industry, and Huya has been closely monitoring and following the regulatory guidelines. And currently, we are still waiting for the details of the potential new guidelines to come out. And we will definitely follow the government's new guidelines and rules when it comes out. And so for the moment, we believe that the government's guidelines would be better regulate the industry and potentially for the long-term healthy growth of the industry. So we believe that even if there might be some short-term changes to follow the rules, the long-term impact should really be minimal. But of course, we will wait for the details of the new guidelines and update investors at that time. Hope this answers your questions.

[Operator:]

Thank you all for your questions. I'd now like to turn the call back to the company for closing remarks.

[Dana Cheng:]

Thank you all for joining our conference call today. If you have further questions, feel free to contact [e-mail], and we look forward to speaking with you in the next quarter. Thank you.

[Operator:]

This concludes this conference call. You may now disconnect your line. Thank you.