Key Takeaways:
(Bloomberg) -- Chinese game streaming platform Huya Inc. reported first-quarter net revenues of RMB 1.51 billion, a figure that stabilized year-over-year, supported by a 52.1% surge in its game-related services division.
"This was supported by our steady execution of our strategic business transformation which drove 52.1% year-over-year increase in game-relative services, advertising and other revenue to RMB 370 million," Chairman and CEO Junhong Huang said in a statement.
The growth in game-related services to RMB 370 million helped offset a decline in the company's core live streaming revenue, which fell to RMB 1.14 billion from RMB 1.26 billion in the same period last year. Non-GAAP net income was RMB 24 million, a sharp decrease from RMB 92 million a year ago, with gross margin contracting to 12.5% from 14.7%. The number of paying users on the platform remained flat year-over-year at 4.4 million.
Huya’s stock rose 0.31% in pre-market trading. Management expects total revenue to achieve growth this year, but cautioned that future profitability will depend more on operational improvements as interest income is expected to be "significantly lower."
Huya’s transition toward a more diversified revenue model continues to show results, with game-related services now accounting for 24.6% of total revenue, up from 16.2% a year prior. The company achieved a record for in-game item sales GMV and saw multi-fold sequential revenue growth from its overseas game services. This progress came despite a decline in advertising revenue, which management attributed to fewer tournaments and a high comparison base from last year.
The company has been actively managing its cost structure, trimming expenses for e-sports tournaments while increasing incentives for broadcasters. Cost of revenue rose 3% to RMB 1.32 billion, driven by a 4% increase in revenue sharing and content costs. At the same time, the company continued to return value to shareholders, repurchasing 21 million shares for a total of USD $69.8 million under its current buyback program.
Looking ahead, the company is focused on integrating AI into its products, with its Hu Xiaoyi AI agent driving 17% of bullet chat interactions during a recent e-sports event. Management also noted it is monitoring regulatory risks related to its U.S. listing but stated that the U.S. government has not yet issued new formal regulations.
The company's bottom-line performance for the rest of the year will rely more on operational execution as its cash balance of RMB 6.25 billion is expected to generate less interest income. Investors will be watching for continued growth in the high-margin game services segment to offset pressures in the live streaming business.
This article is for informational purposes only and does not constitute investment advice.
