3 Positive Takeaway From Huya’s Latest Result

Last week, HUYA Inc – ADR (NYSE: HUYA), also known as the Twitch of China, reported its first-quarter result for the year ending 2020.

Here are three positive things that investors should take away from this earning’s release.

#1 The key financial information

Overall, Huya reported some solid numbers in its latest quarterly result.

Net revenue for the quarter increased by 47.8% to RMB2.4 billion, up from RMB1.6 billion for the same period last year. This increase was due to higher income from live-streaming and advertising. Net income improved as well and was up by 169.8% to RMB171.2 million in the quarter. Higher gross margin and lower operating expenses propelled net income to grow at a much faster pace than revenue.

Looking forward, Huya expects revenue for the second quarter to be in the range of RMB 2, 600 million to RMB 2, 630 million, representing year-over-year growth of between 29.3% and 30.8%.

#2 Operational metrics

Huya’s solid financial performance was the result of a stronger operational performance.

For starters, average monthly active users (MAUs) of Huya Live (Huya’s live-streaming platform) reached 151.3 million in the first quarter of 2020, marking an increase of 22.2% from 123.8 million in the first quarter of 2019. Out of this number, average mobile MAUs accounted for 74.7 million, an improvement of 38.6% from 53.9 million in the same period last year.

Beyond that, the total number of paying users of Huya Live grew 13.0%, increasing from 5.4 million last year to 6.1 million this quarter. On average, the users spend more on Huya’s platform this quarter, increasing spending by 29.7% from RMB287.5 per user to RMB 372.9 per user.

A combination of higher MAUs, an increase in the total number of paying users, as well as stronger average spending per user, drove the strong revenue growth that we have mentioned above.

#3 A strong balance sheet

Another important highlight from Huya first-quarter 2020 results is the company’s strong balance sheet.

As of March 31st, 2020, Huya had RMB 10.3 billion in cash and cash equivalents, short-term deposits, and short-term investments – that marks an increase of RMB 6.3 billion last year —  and zero debt.

With its strong balance sheet, Huya is well-positioned to weather any short term challenges amid the COVID-19 economic downturn. Moreover, it can use its strong cash hoard to sustain its near-term growth by investing in user growth and content acquisition.

Foolish conclusion

In sum, this was a solid quarter for Huya with strong performance across the board and a positive outlook for the next quarter.