On March 16, EDT, Huya announced its fourth quarter and full year 2019 performance report. The financial report shows that in the fourth quarter, Huya's revenue and net profit maintained rapid growth year-on-year, again exceeding Wall Street expectations, and continuing its good performance record as always. During the quarter, revenue reached RMB 2.468 billion, exceeding management guidance for seven consecutive quarters since the IPO; net profit was 241.9 million, an increase of 44.9% year-on-year, and has achieved profitability for nine consecutive quarters. Affected by the favorable financial report, its after-hours stock price rose 1.8% to $ 14.7.
In fact, at the end of November last year, Huya updated its performance guidance for the fourth quarter of 2019. At that time, its estimated revenue was higher than market expectations. The announcement of this financial report has indeed not disappointed the market. It can be said that Huya handed over a pretty good transcript this time.
It is worth mentioning that on February 11, Huya announced the opening of the online education service "Learn Together" and entered the online education market. At this time, the online education service was launched, and Huya also aimed at the corresponding opportunity. After all, in the special period of the current epidemic, online education has also been promoted to a new outlet. However, in spite of this, Huya still faces many problems, such as high marketing costs, the market intensifying battles, and copyright issues. US Stock Research Institute will combine this latest financial report to analyze Huya's challenges and opportunities.
Annual revenue exceeded 8 billion yuan mark Q4 revenue net profit exceeded expectations
The financial report shows that Huya's revenue in the fourth quarter of 2019 was 2.468 billion yuan, up 64% year-on-year. Net profit was 159.7 million yuan, an increase of 60.3% year-on-year; not in accordance with US GAAP, net profit in the fourth quarter was 241.9 million yuan, an increase of 44.9% year-on-year.
From a business perspective, Huya's revenue is mainly live broadcast revenue. In the fourth quarter, this business contributed 95% of revenue to 2.346 billion yuan, a year-on-year increase of 62.7%. This is mainly due to the increase in the average expenditure per paying user and Huya Live has a large number of paying users. Advertising and other revenues were 121.3 million yuan, a year-on-year increase of 92.1%. This growth is mainly due to the increasing demand of advertisers and more diversified advertisers. Huya launched an advertising distribution platform in the third quarter of 2019 and strengthened the awareness of the Huya brand in the Chinese online advertising market.
From the perspective of the number of users, in the fourth quarter, the average monthly active users of Huya was 150.2 million, an increase of 28.8% compared with 116.6 million in the same period of last year; the average number of mobile monthly active users reached 61.6 million, which was Compared with 50.7 million, an increase of 21.5%; the total number of paying users reached 5.1 million, an increase of 5.9% compared with 4.8 million in the same period last year.
From the cost point of view, the revenue cost in the fourth quarter was 2.0009 billion yuan, an increase of 58% year-on-year, mainly due to the increase in revenue sharing expenses and the increase in content costs, bandwidth costs and personnel-related costs. Among them, revenue sharing expenses were 1.575 billion yuan, an increase of 51.2% year-on-year; bandwidth costs were 225.6 million yuan, an increase of 39.6% year-on-year.
As of December 31, 2019, the total amount of cash, cash equivalents and short-term deposits held by Huya was RMB 10,076.2 million (approximately US $ 1,474,700 million), compared with RMB 5,995 billion as of December 31, 2018.
From the perspective of the whole year, Huya's annual revenue in 2019 exceeded 8 billion to reach 8.374 billion yuan, an increase of 79.6% year-on-year. Among them, live broadcast revenue was 7.9762 billion yuan, a year-on-year increase of 79.5%; advertising and other revenue was 398.3 million yuan, a 80.6% year-on-year increase. Huya predicts that total net revenue for the next quarter will be between 2.36 billion yuan and 2.40 billion yuan, an increase of 44.7% to 47.1% year-on-year.
Taken together, Huya ’s fourth-quarter financial report performed well. Revenue and net profit still maintained a good year-on-year growth, and both exceeded market expectations. The rise in stock prices after the market also saw the confidence of investors. Despite this, Huya still needs to face competition from many platforms, and there are still many challenges.
Multi-faceted challenges behind the intensified market competition
For Huya, being at the head of the game live broadcast platform, it has its own advantages and influence, but as the market competition intensifies, the cost problem has become more prominent. In our view, this will adversely affect Huya's long-term development. After all, nowadays Huya's revenue growth rate is further slowing down.
1. Revenue breakthrough but the challenge of further slowdown in growth remains
The financial report shows that in the fourth quarter, Huya's revenue exceeded US $ 2.4 billion, reaching 2.468 billion yuan, and the overall performance reached a new level, but it is not difficult to find that its revenue growth rate is further slowing down. Huya's revenue in Q1 2019 was 1.631 billion yuan, up 93.4% year-on-year; revenue in the second quarter was 2.01 billion yuan, up 93.6% year-on-year; revenue in the third quarter was 2.265 billion yuan, slowing year-on-year growth to 77.36% In this quarter, the revenue growth rate further slowed to 64%.
In fact, the slowdown in revenue growth is not accidental. Huya's main business is divided into live broadcast business and advertising business, both of which achieved growth rates of 62.7% and 92.1% in the fourth quarter. However, in the current uncertain economic environment and the reduction of Internet platform advertising revenue, Huya's advertising business will still face certain challenges. The live broadcast business will continue to exert further pressure on Huya's revenue growth rate due to the constant efforts of competitors such as Kuaishou, Station B, and Betta.
2. The fiercely soaring marketing costs of the race track may be difficult to control
In the fourth quarter financial report, Huya's marketing expenses were 118.3 million yuan, an increase of 97.6% compared to the 59.9 million yuan in the same period last year. Mainly due to increased marketing expenses related to the promotion of company products and brand names in domestic and overseas markets, as well as increased expenses related to personnel. Last quarter, sales and marketing expenses were 122.3 million yuan, an increase of 98.2% compared with 61.7 million yuan in the same period last year. From the growth of sales and marketing expenses in these two quarters, it has far exceeded Huya ’s business. Revenue growth rate. With the continuous diversion of platforms such as Kuaishou, Station B and Penguin eSports, the marketing costs of Huya will continue to rise.
In recent years, fast money not bad money has frequently added to the golden track of the game live broadcast. In February last year, launched the independent game live streaming app "Electric Meow Live", providing game live streaming, game video, game community, game download and other content; in July, it also announced the "Million Game Creator Support Plan", announcing No less than 500 head game content creators were introduced this year. More importantly, due to the coupling of user groups, content types, and anchor lineups, the threat to Huya by live hand-in-hand live games far exceeds that of other platforms. The quick hands known as "focusing on the underlying ecology" are mostly concentrated in third- and fourth-tier cities and even the vast rural areas. The users of Huya are mainly young people from small towns in the "five rings" urban-rural intersection area, and the two sides have a natural overlap. Obviously, the competition between the two must be a fight.
In addition to the fast-handed forced palace, Betta, which also has Tencent's backing, has performed exceptionally recently. According to the QM "Report" data on March 10, the daily live users of Betta live app on February 19 were 15.0789 million, which was an increase of 25% compared with the number of daily live users during the Spring Festival. Huya ranked second.
It is worth mentioning that B is also ambitious in the field of live game. In December last year, it spent 800 million yuan and reached a three-year exclusive domestic live broadcast agreement with "League of Legends". It was a high price to buy the former Betta first sister Feng Timo, which can reflect that B station has been fully active in game live , Especially station B is more attractive to generation Z. As the official game live streaming platform of Tencent, Penguin e-sports has access to 100 popular games, and has the advantages of Tencent mutual entertainment official resources, which has obvious advantages.
Behind the increased competition in the industry, if Huya continues to maintain its current position, the increase in marketing costs will be inevitable.
3. The high operating costs and copyright issues cannot be ignored
In the fourth quarter financial report, Huya's revenue cost was 2.0009 billion yuan, an increase of 58% year-on-year, mainly due to the increase in revenue sharing expenses and the growth of content costs, bandwidth costs and personnel-related costs. We see that revenue sharing fees and bandwidth costs together account for most of the revenue costs. Although the copyright issue has not been highlighted at present, it cannot be ignored. For platforms that mainly do live game streaming, as the platform scale expands, the demand for game copyrights will rise further in the future. The problems of copyright are mainly two aspects. On the one hand, live content will face fines if it is not copyrighted; on the other hand, even if the copyright is acquired, it will cost a lot of money to buy.
The copyright issue itself cannot be ignored. According to media reports, there have been multiple judgments in judicial practice in China, and the continuous dynamic images generated by the operation of online games are classified as "electric works" in the copyright law for protection. Among them, typical cases include Netease v. YY Live Case. In 2014, Netease Company sued Guangzhou Huaduo Network Technology Co., Ltd., its operating company, for the unauthorized dissemination of the game screen of Fantasy Westward Journey 2 due to YY Live and YY Voice. In November 2017, the court heard that the online game screen is a kind of electric work, and the right owner of the game developer is the "producer" of the game screen as a "like electric work". "Journey to the West" or "Fantasy Westward Journey 2" game screen, and compensate the plaintiff for economic losses of 20 million yuan. Once there is a copyright violation issue, there is almost no other way to solve the problem except to apologize for the loss of money. And the better and better development of game live broadcasting naturally cannot avoid the problem of copyright.
From the industry point of view, the competition for copyright by major platforms is also in full swing. Last year, after the B station won the exclusive broadcast rights of the World Championship for three years with 100 million yuan; Penguin e-sports was successfully photographed at a price of 60 million in January this year. The SPL copyright of the LPL competition, the team of the LPL division has performed well on the world stage in recent years, winning two consecutive S competition championships, which has attracted more and more viewers for Penguin e-sports; Huya Live is won in the bidding The right to file A. Everyone pays more and more attention to the copyright of live games, and naturally spends a lot of money to invest. Then, it will have a certain impact on the profit ratio of enterprises.
Where is the livelihood of Huya in the second half of the live broadcast?
Huya recently launched an online education product and entered the online education market, which seems to send a positive signal to the market. As the live broadcast enters the second half, major platforms have also entered an ecological competition. Huya has also achieved good performance in the diversification of live broadcast content and the exploration of new technologies such as AI. Judging from the financial report for the fourth quarter, Huya's R & D expenditure was 178.3 million yuan (about 25.6 million US dollars), an increase of 125.4% compared with 79.1 million yuan in the same period last year, mainly due to the increase in personnel-related expenditure. Although the growth rate of this data is relatively fast, it also reflects Huya's generosity in research and development costs and the development of new products to expand the market.
1. The epidemic situation brings opportunities for live broadcast platforms. Will this be a new window for Huya?
Affected by the new coronavirus in 2020, all walks of life have been hit to varying degrees. During the epidemic, Huya launched a long-prepared online education service. On the one hand, it helped fight the epidemic and responded to the call for "stopping classes without stopping school." On the other hand, it did indeed open a new window for the future of Huya. There are two main reasons for Huya's new window.
First, relative to the online courses at this stage, and even the entire education market in the future, live broadcast will become a hot spot. First of all, the education industry is an industry with a very low CR4 value. The CR4 value refers to the industry's top four share concentration indicators. According to the previous statistical results of iResearch, the CR4 value of the Chinese K12 offline tutoring industry was less than 5%.
At the same time, the education market itself has a huge space and is closely related to the industry of each family. It is a process of continuous learning and progress, which means that it is a huge cake itself, and it is difficult for a few companies to swallow this big cake. . Furthermore, although online education is an industry that relies on the Internet, it does not have the marginal cost of Internet business. These circumstances have led to the extremely low CR4 value of the online education industry. China ’s online education has not even formed an exclusive leader of a company, let alone a monopoly. As the industry leader New Oriental, Good Future, VIPKID can only be divided into single digits As a percentage of the cake, it can be said that the online education market is from a giant to a microcosm, with a multi-patterned enterprise and a highly dispersed situation. Naturally, there is an opportunity to enter into a professional live broadcast platform.
Of course, we have also seen the conflict between the live broadcast platform and online education. Last month, Tencent News reported that a biology teacher in Wenzhou, Zhejiang, mentioned the formation of "sperm", "egg", etc. on the topic of meiosis, and these words are on the live broadcast platform. This is a sensitive vocabulary, so this teacher ’s live broadcast room was also blocked.
Second, it comes from industry trends. After all, in the future of industrial Internet live broadcasting, including industrial, agricultural production live broadcast, educational live broadcast, telemedicine live broadcast, etc., online education is the closest to users in industrial Internet live broadcast and is a model that has been successfully verified. After the epidemic, with the recovery of production capacity and consumer industries in various industries, more and more live broadcast models that are closely related to life will appear in the lives of the public.
2. The epidemic impacts the online exploration of the global e-sports market or may bring opportunities to Huya
Right now, the new coronavirus is spreading around the world. Under the impact of the epidemic, all walks of life suffered heavy losses, and the offline e-sports faced a shutdown. According to statistics, more than 400 offline e-sports events in Shanghai alone have been affected to varying degrees. It is foreseeable that in the future, offline events and activities around the world will be trapped by the epidemic. However, the offline e-sports events are not sitting still, and they actively explore online using their own characteristics. It is reported that KPL became the first in China to announce the transformation of the competition system into an online e-sports event. LPL first launched the team's online open training event, and then announced that the spring game will be adjusted to online. On March 9th, the LPL Spring Games finally opened online.
Facing the epidemic situation, Huya Huya timely adjusted its operation strategy, further shifted its focus to online, and promoted the live broadcast of large international events in an orderly manner. In terms of major international events, during the holidays, the exclusive LCK game broadcast by Huya became the "perfect alternative" during the LPL extension period. Since it aired on February 5, SKT, KT, KZ, GEN and other celebrity teams took turns fighting. With the perfect league system, operating system and the blessing of Huya professional Chinese commentary, the ratings and attention ushered in At its peak, the focus showdown attracted millions of viewers online at the same time.
In addition, it is understood that Huya has won the important copyrights of the "ESL One 2020 Los Angeles", "Moscow Epicenter Cup" and "ONE Esports Singapore". In addition to broadcasting international events, Huya is also actively preparing for the content of its own events, and will continue to stabilize the flow of e-sports users during this special period. It is reported that Huya's self-run events will also enter an intensive outbreak period in March.
There is no doubt that during the epidemic, the game live streaming industry including Huya Live Streaming and the entire game industry have ushered in a new period of growth opportunities. Of course, it is up to the major platforms to determine whether they can grasp the dividends brought by the epidemic.
3. The imminence of the 5G era may bring more possibilities to Huya's diversified business
From a spatial perspective, according to white paper data, there are currently about 240 million Internet users of game live broadcast users. In 2018, China's game live streaming platform market reached 13.19 billion yuan, and it is expected to reach 25 billion yuan in 2020. From this perspective, Huya's game live streaming business already has huge room for development.
The diversified development of Huya has always been an important part of its strategy. For a long time, Huya has focused on the changes in the needs of young users and promoted the development of the live broadcast industry into a cultural industry with positive social values, a younger, more diverse, healthier and stable culture. According to the data, Huya successfully hosted the annual "Star Festival" on January 11 this year, creating a luxury feast for the live broadcast industry that combines "e-sports, games, music, hot dance, outdoor, technology, and secondary elements".
As early as January 17 of this year, Dong Rongjie, the head of Huya, said at the Huya annual meeting that "Huya will continue to maintain sufficient strategic patience with the new strategic direction, explore the diversification of live broadcast content, and use AI and other new technologies to explore content. Upgrade, continue to promote the innovation of content forms and interactive forms by new technologies such as personalized recommendations and digital people. " As the 5G era approaches, this will bring more new possibilities to Huya.
Judging from the recent institutional ratings, Goldman Sachs, Citigroup, Bank of America Merrill Lynch, HSBC and other agencies have given Huya a "buy" rating. In our opinion, Huya's profitability has been proven, and its premium valuation is currently reasonable. Although, with the intensification of industry competition, there are corresponding risks behind it. However, Huya is also in a leading position in the "vigorous development" market of e-sports today; the online education of the game shows its continuous improvement of the live broadcast ecology, and the future perspectives are worth looking forward to. In the future, the specific market performance, the US Stock Research Institute will continue to pay attention.
Source of this article: American Stock Research Institute, please indicate the copyright
