HUYA And DOYU 2020 Q3 Earnings Summary

DOYU 2020 Q3 earnings

DOYU missed its mid-point revenue guidance by roughly $10M, thus only generated $373.3M in revenue (an increase of 43% YoY). This is not very reassuring when keeping in mind that the company already revised its guidance in October. GAAP EPS was $0.04, hence beating estimates slightly.

At first glance, the Q3 earnings of DOYU are disappointing. However, the number of MAU increased to 194M MAU from 165M MAU in Q2 of 2020, representing a QoQ increase of 18%. According to the management, this increase was achieved by leveraging the reach of Tencent (TCEHY). A further factor to the rise in users was eSports tournaments, like the World Championship of League of Legends. These factors also led to an increase in paying users to 7.9M.

Tidbits of DOYUs conference call

  • Continues to hold more eSports events
  • Focus on cloud-gaming
  • Increasing investments in the Japanese market
  • Further improving operating efficiency over the long-run
  • No guidance for Q4 of 2020
  • Ecommerce business as a supplement for streaming business

HUYA 2020 Q3 earnings

HUYAs Q3 earnings numbers looked a bit different. By reaching revenue of $414.6M, the firm managed to increase revenue by 30% YoY. According to management, growth declined slightly because of China's shortened holiday season due to Covid. However, GAAP EPS of $0.15 was in line with analyst's expectations.

MAU increased from 168.5M MAU in Q2 to 172.9M MAU. Hence, being 21.1M smaller than DOYUs userbase. While DOYU could strongly grow its base due to TCEHY, HUYA already had intense cooperation before the recently announced merger. A further negative is that the number of paying users declined quarter over quarter. In Q2, HUYA had 6.2M paying users. This figure fell to 6M in Q3. It will be essential to observe if this trend continues.

Tidbits of HUYAs conference call

  • Penguin & DOYU synergies will lead to a larger user base
  • Exploring further monetization options
  • Efficiency increase in operating expenses through the merger
  • No guidance for Q4 of 2020

Overall I am not satisfied with the earnings of both firms. However, as I described in my previous article, HUYA and DOYU are priced very reasonably. Hence, I am still bullish on HUYA and DOYU.

In the following updated graphics on key financials:

Figure 1: Operating expenses divided by revenue

(Click on image to enlarge)

Source: created by the author

Sales and marketing expenses mostly drive the slight increase of operating expenses over revenue. This is a good sign because it suggests that both firms continue to invest in growing their userbase. It has to be seen if this increase will also lead to more robust revenue growth.

Figure 2: Combined margin development of HUYA & DOYU

(Click on image to enlarge)

 

Source: created by the author

The combined margins of both firms decreased. It was mostly driven by higher sales and marketing expenses and higher than usual share-based compensation of DOYU. Hence, DOYUs margins worsened. On the opposite, HUYAs margins slightly improved.

Figure 3: Combined Quarterly Figures of HUYA & DOYU

(Click on image to enlarge)

Source: created by the author

 

Disclosure: I am long DOYU.

This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a ...

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William K. 2 years ago Member's comment

The fact that profits were not as much as hoped for, but still quite impressive, does not seem so terrible from where i stand. Still quite a bit of PROFIT, keep that in mind. If there were a loss then there would be something to cry about.

An interesting and informative post.

Robert Templin 2 years ago Author's comment

Yes, I partly agree. However, $DOYUs operating margin was only 1% in Q3. That is pretty weak in comparison with past results. Moreover, I think it is also just a bad look to revise guidance and then miss it. I also want to show that not everything is rosy for $DOYU and $HUYA. And that it is essential to keep an eye on specific numbers and their development. Maybe my recap came off a bit too negative. However, as I also mentioned in this article, the company is still highly undervalued, and I think it is a good buy.

Thank you very much for your feedback. I am glad you liked the article and very thankful that you keep reading my content.

Terrence Howard 2 years ago Member's comment

Good analysis. Definitely undervalued.