After the close last night, HUYA (HUYA 29.88, +0.16, +0.54%), a recent
China-based IPO, reported 1Q18 results, which was its first quarterly report
since going public on May 11. While there aren't any analyst estimates
available yet, what immediately stands out about the report is the company's
very impressive top-line growth, registering at +112%.
However, even with the surge in revenue, through early trade, the stock struggled to gain significant altitude. On that note, HUYA has soared by nearly 150% since its IPO, so some traders are likely taking a "sell-the-news" approach today to lock in substantial gains.
HUYA was spun-off from YY Inc. (YY) and is the largest game live streaming platform in China. It cooperates with e-sports event organizers, major game developers, and publishers. E-sports live streaming is the most popular content genre on its platform, but it has also branched into other entertainment genres, such as talent shows, anime, and outdoor activities, its platform functioning as a marketplace for broadcasters and talent agencies. Monetization opportunities for broadcasters and talent agencies are linked to their performance, which motivates them to supply high-quality content to HUYA's platform.
The company believes its role as an efficient and
transparent marketplace has fueled its continuous growth. HUYA has the largest
and most active game live streaming community in terms of both average MAUs and
average daily time spent on mobile app per mobile active user.
Beyond the real-time nature of live streaming, which involves each broadcaster improvising during each live streaming session, HUYA's community interactions generate another form of content, which in turn becomes part of the overall entertainment and social experience offered on the platform.
Turning back to its Q1 results, the 112% surge in revenue was driven by 25% growth in average mobile MAUs to 41.5 mln year/year from 33.2 mln and a 19% jump in overall MAUs to 92.9 mln from 78.0 mln. Additionally, the total number of paying users increased by 35% to 3.4 mln.
HUYA's gross margin also showed significant improvement, coming in at 15.5% versus 4.0% in the year ago period. The company credits its monetization efforts as well as leverage from economies of scale for the spike in gross margin. The combination of the impressive top-line growth and ramp-up in gross margin pushed HUYA into profitability. Specifically, it generated operating income of RMB35.8 mln compared to RMB(42.2) mln in 1Q17 and Non-GAAP net income of RMB67.6 mln versus a loss of RMB(34.7) mln.
Lastly, and impressively, HUYA isn't expecting any slowdown in growth for 2Q18, forecasting revenue of RMB970-RMB1.0 bln, representing growth of 110-117%.