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HUYA Inc. Reports Second Quarter 2020 Unaudited Financial Results

GUANGZHOU, China, Aug. 11, 2020 /PRNewswire/ -- HUYA Inc. ("Huya" or the "Company") (NYSE: HUYA), a leading game live streaming platform in China, today announced its unaudited financial results for the second quarter ended June 30, 2020. Second Quarter 2020 Highlights Total net revenues for the second quarter of 2020 increased by 34.2% to RMB2,697.2 million (US$381.8 million), from RMB2,010.5 million for the same period of 2019. Net income attributable to HUYA Inc. was RMB226.8 million (US$32.1 million) for the second quarter of 2020, representing an increase of 86.2% from RMB121.8 million for the same period of 2019. Non-GAAP net income attributable to HUYA Inc.[1] was RMB351.0 million (US$49.7 million) for the second quarter of 2020, representing an increase of 106.0% from RMB170.4 million for the same period of 2019. Average mobile MAUs[2] of Huya Live in the second quarter of 2020 reached 75.6 million, representing an increase of 35.2% from 55.9 million in the second quarter of 2019. Average MAUs[3] of Huya Live in the second quarter of 2020 reached 168.5 million, representing an increase of 17.1% from 143.9 million in the second quarter of 2019. Total number of paying users[4] of Huya Live in the second quarter of 2020 reached 6.2 million, representing an increase of 26.5% from 4.9 million in the second quarter of 2019. [1] "Non-GAAP net income attributable to HUYA Inc." is defined as net income attributable to HUYA Inc. before share-based compensation expenses, gain on fair value change of investments, and income tax effects on non-GAAP adjustments. For more information, refer to "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and Non-GAAP Results" at the end of this press release. [2] Refers to average monthly active users on our mobile apps. Average mobile MAUs for any period is calculated by dividing (i) the sum of active users on our mobile apps for each month during such relevant period, by (ii) the number of months during such relevant period. [3] Refers to average monthly active users on our platform. Average MAUs for any period is calculated by dividing (i) the sum of active users on our platform for each month during such relevant period, by (ii) the number of months during such relevant period. [4] Refers to the sum of user accounts that purchased various products and services on our platform at least once during such relevant period. "I'm glad to deliver a strong second quarter. Revenues for the period exceeded our expectations, further illustrating our growth potential," said Mr. Rongjie Dong, Chief Executive Officer of Huya. "Average mobile MAUs and MAUs in the second quarter reached 75.6 million and 168.5 million, respectively, demonstrating our commitment to expanding our user communities. With a healthy track record in both monetization and user growth, we expect to continue to broaden our user community as we strengthen our market leadership in the game live streaming industry." Mr. Dong added, "Since Tencent became our largest shareholder, our cooperation has deepened in many aspects. For example, Huya's live streaming content is now available in an increasing number of Tencent's games and products, tapping into an expanded pool of viewers. We are in the process of building one-click streaming services within some of Tencent's games to attract more broadcasters. We are also rolling out the cooperation in various dimensions relating to e-sports tournaments. Additionally, we continued to diversify and enrich our product offerings in the second quarter. Harnessing the strengthened collaboration with Tencent and our product deployment strategy, we look forward to further user growth, engagement and monetization in 2020 and beyond." Ms. Catherine Liu, Chief Financial Officer of Huya, commented, "Our gross profit in the second quarter of 2020 grew by 71.3% year-over-year, reflecting our fast business growth and improved profitability. We also continued to enhance operating efficiencies. Our operating margin increased to 7.5% in the second quarter of 2020, compared to 3.4% in the second quarter of 2019, while our non-GAAP operating margin increased to 12.1%, compared to 5.8% in the second quarter of 2019. Our solid financial position supports our ability to make key investments in our future growth and deliver long-term shareholder value." Second Quarter 2020 Financial Results Total net revenues for the second quarter of 2020 increased by 34.2% to RMB2,697.2 million (US$381.8 million), from RMB2,010.5 million for the same period of 2019. Live streaming revenues increased by 33.5% to RMB2,565.1 million (US$363.1 million) for the second quarter of 2020, from RMB1,921.5 million for the same period of 2019, primarily due to the increase in the number of paying users and the average spending per paying user on Huya Live. The increase in the number of paying users was primarily driven by the Company's user growth. The increase in the average spending per paying user was primarily driven by the enrichment and enhancement of content, products and services. Advertising and other revenues increased by 48.6% to RMB132.2 million (US$18.7 million) for the second quarter of 2020, from RMB89.0 million for the same period of 2019, primarily driven by the increasing and diversifying advertiser base, mainly attributable to strengthened recognition of Huya's brand name in China's online advertising market. Cost of revenues increased by 26.7% to RMB2,122.2 million (US$300.4 million) for the second quarter of 2020 from RMB1,674.8 million for the same period of 2019, primarily attributable to the increase in revenue sharing fees and content costs, bandwidth costs and personnel-related costs. Revenue sharing fees and content costs increased by 24.1% to RMB1,682.9 million (US$238.2 million) for the second quarter of 2020 from RMB1,355.6 million for the same period of 2019, primarily due to the increase in revenue sharing fees in relation to higher live streaming revenues, and increased spending in content creators, e-sports and self-produced content. The year-over-year increase was partially offset by benefits from economies of scale. Bandwidth costs increased by 35.3% to RMB264.8 million (US$37.5 million) for the second quarter of 2020 from RMB195.7 million for the same period of 2019, primarily due to an increase in bandwidth usage as a result of the Company's larger user base and enhanced live streaming video quality, partially offset by improved efficiency in bandwidth utilization through continued technology enhancement efforts. Gross profit increased by 71.3% to RMB575.0 million (US$81.4 million) for the second quarter of 2020 from RMB335.7 million for the same period of 2019. Gross margin increased to 21.3% for the second quarter of 2020 from 16.7% for the same period of 2019. Research and development expenses increased by 70.6% to RMB179.9 million (US$25.5 million) for the second quarter of 2020 from RMB105.4 million for the same period of 2019, mainly attributable to increased personnel-related expenses. Sales and marketing expenses decreased by 4.2% to RMB114.5 million (US$16.2 million) for the second quarter of 2020 from RMB119.6 million for the same period of 2019. The decrease was primarily attributable to lower spending in marketing activities due to the impact of COVID-19, and partially offset by the increased personnel-related expenses. General and administrative expenses increased by 61.5% to RMB120.0 million (US$17.0 million) for the second quarter of 2020 from RMB74.3 million for the same period of 2019, mainly due to the accelerated share-based compensation expenses recognized in April 2020 in the event of a change of control. Operating income increased by 197.6% to RMB201.4 million (US$28.5 million) for the second quarter of 2020 from RMB67.7 million for the same period of 2019. Operating margin increased to 7.5% for the second quarter of 2020 from 3.4% for the same period of 2019. Non-GAAP operating income, which excludes share-based compensation expenses, increased by 180.0% to RMB325.6 million (US$46.1 million) for the second quarter of 2020 from RMB116.3 million for the same period of 2019. Non-GAAP operating margin increased to 12.1% for the second quarter of 2020 from 5.8% for the same period of 2019. Income tax expenses increased by 137.1% to RMB51.3 million (US$7.3 million) for the second quarter of 2020 from RMB21.6 million for the same period of 2019. Net income attributable to HUYA Inc. for the second quarter of 2020 increased by 86.2% to RMB226.8 million (US$32.1 million), from RMB121.8 million for the same period of 2019. Non-GAAP net income attributable to HUYA Inc. for the second quarter of 2020, which excludes share-based compensation expenses, increased by 106.0% to RMB351.0 million (US$49.7 million), from RMB170.4 million for the same period of 2019. Diluted net income per American depositary share ("ADS") was RMB0.96 (US$0.14) for the second quarter of 2020, compared with RMB0.52 for the same period of 2019. Each ADS represents one Class A ordinary share of the Company. Non-GAAP diluted net income per ADS was RMB1.49 (US$0.21) for the second quarter of 2020, compared with RMB0.73 for the same period of 2019. Balance Sheets and Cash Flow As of June 30, 2020, the Company had cash and cash equivalents, short-term deposits and short-term investments of RMB10,745.1 million (US$1,520.9 million), compared with RMB10,316.7 million as of March 31, 2020. The increase was primarily due to net cash provided by operating activities of RMB512.2 million (US$72.5 million) for the second quarter of 2020. Recent Updates In April 2020, the Company recognized RMB57.7 million (US$8.17 million) of share-based compensation expenses in its cost of revenues and operating expenses from the accelerated vesting schedule of Huya's pre-IPO options in the event of a change of control, pursuant to the Company's 2017 Share Incentive Plan and option agreements. Conference Call The Company's management will host an earnings conference call at 7:00 a.m. U.S. Eastern Time on August 11, 2020 (7:00 p.m. Beijing/Hong Kong time on August 11, 2020). For participants who wish to join the call, please complete online registration using the link provided below at least 20 minutes prior to the scheduled call start time. Upon registration, participants will receive the conference call access information, including dial-in numbers, Direct Event passcode, a unique registrant ID and an e-mail with detailed instructions to join the conference call. Participant Online Registration: http://apac.directeventreg.com/registration/event/4287969 Once complete the registration, please dial-in at least 10 minutes before the scheduled start time of the earnings call and enter the Direct Event passcode and registrant ID as instructed to connect to the call. Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.huya.com. A replay of the conference call will be accessible approximately two hours after the conclusion of the live call until August 18, 2020, by dialing the following telephone numbers: United States: +1-646-254-3697 International: +61-2-8199-0299 Hong Kong, China: +852-3051-2780 Replay Access Code: 4287969 About HUYA Inc. HUYA Inc. is a leading game live streaming platform in China with a large and active game live streaming community. The Company cooperates with e-sports event organizers, as well as major game developers and publishers, and has developed e-sports live streaming as one of the most popular content genres on its platform. The Company has created an engaged, interactive and immersive community for game enthusiasts of China's young generation. Building on its success in game live streaming, Huya has also extended its content to other entertainment content genres. Huya's open platform also functions as a marketplace for broadcasters and talent agencies to congregate and closely collaborate with the Company. Use of Non-GAAP Financial Measures The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), except that the consolidated statement of changes in shareholders' equity, consolidated statements of cash flows, and the detailed notes have not been presented. Huya uses non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributable to HUYA Inc., non-GAAP net income attributable to ordinary shareholders, and non-GAAP basic and diluted net income per ADS, which are non-GAAP financial measures. Non-GAAP gross profit is gross profit excluding share-based compensation expenses allocated in cost of revenues. Non-GAAP operating income is operating income excluding share-based compensation expenses. Non-GAAP net income attributable to HUYA Inc. is net income attributable to HUYA Inc. excluding share-based compensation expenses, gain on fair value change of investments, and income tax effects on non-GAAP adjustments. Non-GAAP net income attributable to ordinary shareholders is net income attributable to ordinary shareholders excluding share-based compensation expenses, gain on fair value change of investments, and income tax effects on non-GAAP adjustments. Non-GAAP basic and diluted net income per ADS is non-GAAP net income attributable to ordinary shareholders divided by weighted average number of ordinary shares used in the calculation of non-GAAP basic and diluted net income per ADS. The Company believes that separate analysis and exclusion of the non-cash impact of (i) share-based compensation expenses, (ii) gain on fair value change of investments, and (iii) income tax effects on non-GAAP adjustments add clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the non-cash effect of (i) share-based compensation expenses, which have been and will continue to be significant recurring expenses in its business, and (ii) gain on fair value change of investments and (iii) income tax effects on non-GAAP adjustments, which both may recur when there is observable price change in the future. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "HUYA Inc. Reconciliations of GAAP and Non-GAAP Results" near the end of this release. Exchange Rate Information This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.0651 to US$1.00, the rate in effect as of June 30, 2020 as certified for customs purposes by the Federal Reserve Bank of New York. Safe Harbor Statement This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Huya's strategic and operational plans, contain forward-looking statements. Huya may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Huya's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Huya's goals and strategies; Huya's future business development, results of operations and financial condition; the expected growth of the game live streaming market; the expectation regarding the rate at which to gain active users, especially paying users; Huya's ability to monetize the user base; fluctuations in general economic and business conditions in China; the impact of the COVID-19 to Huya's business operations and the economy in China and elsewhere generally; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Huya's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Huya does not undertake any obligation to update any forward-looking statement, except as required under applicable law. For investor and media inquiries, please contact: In China:HUYA Inc.Investor RelationsTel: +86-20-2290-7829E-mail: ir@huya.com The Piacente Group, Inc.Jenny CaiTel: +86-10-6508-0677E-mail: huya@tpg-ir.com In the United States:The Piacente Group, Inc. Brandi PiacenteTel: +1-212-481-2050E-mail: huya@tpg-ir.com HUYA INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share, ADS, per share data and per ADS data) As of December 31, As of June 30, 2019 2020 2020 RMB RMB US$ Assets Current assets Cash and cash equivalents 1,113,193 2,062,524 291,931 Restricted cash 1,392 6,175 874 Short-term deposits 6,743,445 6,284,593 889,526 Short-term investments 2,219,531 2,398,004 339,415 Accounts receivable, net 61,708 63,486 8,986 Amounts due from related parties 51,936 52,415 7,419 Prepayments and other current assets 400,615 408,489 57,818 Total current assets 10,591,820 11,275,686 1,595,969 Non-current assets Deferred tax assets 45,816 99,182 14,038 Investments 379,424 430,551 60,941 Property and equipment, net 96,686 118,489 16,771 Intangible assets, net 45,085 66,078 9,353 Right-of-use assets, net 102,824 90,919 12,869 Prepayments and other non-current assets 104,895 96,751 13,694 Total non-current assets 774,730 901,970 127,666 Total assets 11,366,550 12,177,656 1,723,635 Liabilities and shareholders' equity Current liabilities Accounts payable 3,725 34,714 4,913 Advances from customers and deferred revenue 845,966 560,789 79,375 Income taxes payable 26,051 83,223 11,779 Accrued liabilities and other current liabilities 1,460,025 1,542,921 218,386 Amounts due to related parties 79,032 238,495 33,757 Lease liabilities due within one year 31,878 31,961 4,524 Total current liabilities 2,446,677 2,492,103 352,734 Non-current liabilities Lease liabilities 70,110 58,837 8,328 Deferred tax liabilities - 540 76 Deferred revenue 164,913 196,990 27,882 Total non-current liabilities 235,023 256,367 36,286 Total liabilities 2,681,700 2,748,470 389,020 HUYA INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (All amounts in thousands, except share, ADS, per share data and per ADS data) As of December 31, As of June 30, 2019 2020 2020 RMB RMB US$ Shareholders' equity Class A ordinary shares (US$0.0001 par value; 750,000,000 shares authorized as of December 31, 2019 and June 30, 2020, respectively; 67,101,314 and 70,054,088 shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively) 44 46 7 Class B ordinary shares (US$0.0001 par value; 200,000,000 shares authorized as of December 31, 2019 and June 30, 2020, respectively; 152,357,321 and 152,357,321 shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively) 100 100 14 Additional paid-in capital 10,081,946 10,327,892 1,461,818 Statutory reserves 64,679 64,679 9,155 Accumulated deficit* (1,986,054) (1,591,137) (225,211) Accumulated other comprehensive income 524,135 627,606 88,832 Total shareholders' equity 8,684,850 9,429,186 1,334,615 Total liabilities and shareholders' equity 11,366,550 12,177,656 1,723,635 * On January 1, 2020, the Company adopted ASC326, "Financial Instruments-Credit Losses" using modified-retrospective transitionapproach. Following the adoption of this guidance, a cumulative-effect adjustment accumulated deficit, amounting to RMB3.1 million, was recognized as of January 1, 2020. HUYA INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except share, ADS, per share data and per ADS data) Three Months Ended Six Months Ended June 30,2019 March 31,2020 June 30,2020 June 30,2020 June 30,2019 June 30,2020 June 30,2020 RMB RMB RMB US$ RMB RMB US$ Net revenues Live streaming 1,921,485 2,274,490 2,565,057 363,060 3,473,967 4,839,547 684,993 Advertising and others 88,976 137,458 132,187 18,710 167,972 269,645 38,166 Total net revenues 2,010,461 2,411,948 2,697,244 381,770 3,641,939 5,109,192

DouYu Announces Receipt of Preliminary Non-Binding Proposal from Tencent for Strategic Combination of DouYu and Huya

WUHAN, China, Aug. 10, 2020 /PRNewswire/ -- DouYu International Holdings Limited ("DouYu" or the "Company") (Nasdaq: DOYU), a leading game-centric live streaming platform in China and a pioneer in the eSports value chain, today announced that its Board of Directors (the "Board") has received a preliminary non-binding proposal letter, dated August 10, 2020, from Tencent Holdings Limited, proposing that DouYu and HUYA Inc. ("Huya") (NYSE: HUYA) enter into a stock-for-stock merger, as a result of which Huya or its subsidiary would acquire each outstanding ordinary share of DouYu (including ordinary shares represented by American depositary shares) (the "Proposed Transaction"). Pursuant to the Proposed Transaction, shareholders of DouYu will receive a to be agreed number of newly issued Class A ordinary shares of Huya for their respective DouYu shares. A copy of the proposal letter is attached hereto as Exhibit A. The Board plans to review and evaluate the Proposed Transaction. The Board cautions the Company's shareholders and others considering trading the Company's securities that the Board has just received the proposal letter and has not had an opportunity to carefully review and evaluate the Proposed Transaction or make any decision with respect to the Company's response to the Proposed Transaction. There can be no assurance that any definitive offer will be made, that any definitive agreement will be executed relating to the Proposed Transaction or that this or any other transaction will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to this or any other transaction, except as required under applicable law. About DouYu International Holdings Limited Headquartered in Wuhan, China, DouYu International Holdings Limited (Nasdaq: DOYU) is a leading game-centric live streaming platform in China and a pioneer in the eSports value chain. DouYu operates its platform on both PC and mobile apps, through which users can enjoy immersive and interactive games and entertainment live streaming. DouYu's platform brings together a deep pool of top live streamers. By providing a sustainable streamer development system built on advanced technology infrastructure and capabilities, DouYu helps ensure a consistent supply of quality content. Through collaborations with a variety of participants across the eSports value chain, the Company has gained coveted access to a wide variety of premium eSports content, which further attracts viewers and enhances user experience. For more information, please see http://ir.douyu.com/. Safe Harbor Statement This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the Securities Exchange Commission. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law. Investor Relations Contact Mao MaoDouYu International Holdings LimitedEmail: ir@douyu.tv Phone: +1 (646) 224-6934 Xinran RaoICR, Inc.Email: DouYu.IR@icrinc.com Phone: +1 (646) 224-6934 Media Relations Contact Iris DingDouYu International Holdings LimitedEmail: pr_douyu@douyu.tv Phone: +1 (646) 308-1475 Edmond LococoICR, Inc.Email: DouYu.PR@icrinc.com Phone: +1 (646) 308-1475 Exhibit A August 10, 2020 The Board of Directors Huya, Inc.Building A3, E-Park, 280 Hanxi Road Panyu District, Guangzhou 511446 The People's Republic of China The Board of DirectorsDouYu International Holdings Limited20/F, Building A, New Development International Center, No. 473 Guansha Avenue Hongshan District, Wuhan, Hubei ProvinceThe People's Republic of China Dear Directors: Tencent Holdings Limited, through its affiliates (collectively, "Tencent" or "we"), owns approximately 36.9% of the total issued and outstanding share capital of Huya, Inc. ("Huya"), representing 50.9% of Huya's total voting power.[1] We are also the largest shareholder of DouYu International Holdings Limited ("DouYu"), holding approximately 38.0% of the total issued and outstanding share capital and voting power of DouYu.[2] We are writing today to propose that you consider a strategic combination of Huya and DouYu, which we believe represents a compelling value creation opportunity for both companies. We propose that Huya and DouYu enter into a stock-for-stock merger to be effected pursuant to applicable laws, as a result of which Huya (or a subsidiary of Huya) would acquire each outstanding ordinary share of DouYu (including ordinary shares represented by American depository shares, the "DouYu Shares") in exchange for a to be agreed number of newly issued Class A ordinary shares of Huya (such shares, the "Huya Class A Ordinary Shares," including Class A ordinary shares of Huya represented by American depository shares, and such transaction, the "Transaction"). As of the date of this letter, Tencent has entered into a share transfer agreement with JOYY Inc. ("JOYY") and a separate share transfer agreement with Mr. Rongjie Dong, the chief executive officer of Huya ("Mr. Dong"), pursuant to which Tencent will purchase from JOYY 30,000,000 Class B ordinary shares of Huya and from Mr. Dong 1,000,000 Class B ordinary shares of Huya. Subject to the satisfaction of customary closing conditions, the transfers under these agreements will be consummated on or before September 9, 2020, upon which Tencent's shareholding in Huya will be increased to 51.0% of Huya's total issued and outstanding share capital and voting power will be increased to 70.4% of Huya's total voting power.[3] As a shareholder of each of Huya and DouYu, Tencent would support the Transaction and would be willing to participate in the Transaction in such manner and on such terms and conditions as to be further discussed and mutually agreed among Tencent, the independent members of the Board of Directors of Huya (the "Huya Board") and the independent members of the Board of Directors of DouYu (the "DouYu Board", and together with the Huya Board, the "Boards"). We set out below for your consideration the principal terms and conditions upon which Tencent is prepared to support and participate in the Transaction. 1. Exchange Ratio. The exchange ratio at which all issued and outstanding DouYu Shares at the time of the Transaction (including those owned by Tencent) would be converted into Huya Class A Ordinary Shares would be mutually agreed among Tencent, the independent members of the Huya Board and the independent members of the DouYu Board. 2. Financing. Given the all-stock nature of the Transaction, the consummation of the Transaction would not be subject to any financing contingency. 3. Due Diligence. We are prepared to move expeditiously to complete the Transaction as soon as practicable. We have engaged Goldman Sachs (Asia) L.L.C. as our financial advisor. We believe that, with the full cooperation of Huya and DouYu, the parties to the Transaction can complete customary commercial, legal, financial and accounting due diligence in a timely manner and in parallel with discussions on the definitive agreements. We would like to ask the Boards to accommodate such due diligence process and approve the provision of confidential information relating to Huya and DouYu and their respective businesses subject to the execution of a customary confidentiality agreement. 4. Definitive Documentation. We are prepared to promptly facilitate and participate in the negotiations and discussions of the definitive agreements providing for the Transaction (the "Definitive Agreements"). We expect that such Definitive Agreements will contain representations, warranties, covenants and conditions which are typical, customary and appropriate for transactions of this type. 5. Process. We believe that the Transaction will provide superior value to Huya's and DouYu's shareholders. In considering this proposal, you should be aware that we are interested only in supporting and participating in the Transaction and we do not intend to sell our stakes in Huya and DouYu to any third party. 6. Confidentiality. We trust you will agree with us that it is in our mutual interests to ensure that we proceed in a confidential manner, unless otherwise required by law, until we have executed Definitive Agreements or terminated our discussions. 7. No Binding Commitment. This letter does not constitute a binding offer, agreement or an agreement to make a binding offer. This letter is our preliminary indication of interest and does not contain all matters upon which agreement must be reached in order to consummate the Transaction, nor does it create any binding rights or obligations in favor of any person. A binding commitment will result only from the execution of Definitive Agreements, and then will be on the terms and conditions provided in such documentation. 8. Next Steps. We will be filing this letter publicly with the SEC as part of an amendment to our Beneficial Ownership Statement on Schedule 13D with respect to Huya that we are required to make under applicable United States federal securities laws and regulations. In closing, we would like to express our commitment to working together to bring the Transaction to a successful and timely conclusion. Should you have any questions regarding this proposal, please do not hesitate to contact us. We look forward to hearing from you. Sincerely, TENCENT HOLDINGS LIMITED By: /s/ Martin Lau Name: Martin Lau Title: President [1], [2], [3] Share ownership and voting power information provided herein is calculated based on publicly available information. Related Links :https://www.douyu.com/

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