DouYu International Holdings Limited

Good morning and good evening, ladies and gentlemen. Thank you and welcome to DOEU International Holdings Limited's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode. We will be hosting a question and answer session after management's prepared remarks. I will now turn the call over to the first speaker today, Ms. Lingling Kong, IR Director at DOEU. Please go ahead, ma'am.

Thank you. Hello, everyone. Welcome to our fourth quarter and full year 2023 earnings call. Joining us today are Mr. Mingming Su, Chief Strategy Officer, Mr. Hao Cao, Vice President of Finance, and Mrs. Siming Ren, Vice President from the Interim Management Committee. You can refer to our fourth quarter and full year 2023 financial results on our IR website at ir.w.com. You can also check a replay of this call when it becomes available in a few hours on our IR website. Before we start, please note that this call may contain forward-looking statements made pursuant to the safe harbor provision for the Private Security Litigation Reform Act of 1995. These forward-looking statements are based on management expectations and observations that involve known and unknown risks. uncertainties and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectations implied by this forward-looking statement. All forward-looking statements are expressly qualified in their entirety by the cautionary statement, risk factors, and the details of the company's filings with the SEC The company undertakes no duty to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call. I will now speak on behalf of our Interim Management Committee on Business Updates, and the call will be handed to our Vice President of Finance, Mr. Hao Cao, for financial discussion. the year 2023 continued to be filled with challenges. Amid this backdrop, we remained firmly committed to executing our long-term goal strategy of fostering a vibrant, diverse, game-centric content ecosystem while prioritizing content across our platform. We deepened our cooperation with game developers to enhance commercialization while adjusting our revenue and marketing strategies to be more ROI-driven. At the same time, we continuously optimized costs and expenses. At the adjusted net level, we successfully transformed losses into gains, achieving an adjusted net profit of RMB 154 million for the full year of 2023. In addition, we continued to place a significant emphasis on compliance management and regulatory improvements across the platform. These efforts are dedicated to continue to nurture our platform's ecosystem with enhanced compliance, healthy growth, and sustainability. Navigating the complex and evolving macroeconomic dynamics and operating landscape, we proactively tackled short-term platform challenges in the fourth quarter. We further enhanced our compliance efforts to ensure a steady stream of premium content output and effectively maintained the overall stability of our business operations. In the fourth quarter of 2023, our mobile MAUs were 51.7 million and our quarter paying users were 3.7 million. With 2024 underway, we are zeroing in on harnessing our three core strengths, deep rooted streamer resources, a rich content ecosystem, and close cooperation with game developers. In doing so, we can ensure operating stability and advance healthy development across our platform. First, we are building on our deep rooted streamer resources by intensifying our cooperation with game developers on content and operation fronts. There, we are continuously producing premium content and upgrading content operations, cementing and elevating domain value as a vibrant game-centric content ecosystem. Additionally, we will heighten our efforts to diversify our revenue streams. We will accomplish this by collaborating with more game developers on commercial endeavors and by bringing promotions and Game Corp sales to even more gaming segments through diverse business partnership models. At the outside of the year, we also streamlined our organizational structure, transforming our pivotal content ecosystem business unit into three core divisions, encompassing streamers, content and events, and game developers. With the formation of this primary unit, we believe we can further improve our operating efficiency by integrating and utilizing our key resources. Moreover, leveraging our ongoing efforts to enhance compliance standards and execution across the platform, we will further refine our revenue structure to improve the quality of our revenue streams and continuously optimizing cost and expenses. This initiative provides us with better agility to navigate the evolving market dynamics and challenges, fortifying our company's foundation for long-term development. With that overview, I'd like to review some details of our business operations during the quarter. In the fourth quarter, Of 2023, our mobile MAUs were 51.7 million, showing stability on a sequential quarter basis and a decrease of 9.9% year-over-year as we fine-tuned our user acquisition strategy. As you may recall, beginning in early 2023, we began emphasizing user quality and cutting back on low ROI marketing spending. which greatly reduced customer acquisition expenses. On a year-over-year basis, this led to a lack of user acquisition from promotional channels and a decline in MAUs. Quarter-over-quarter, on the other hand, MAU performance exceeded our expectations, given the high base in the third quarter's summer peak season. Our effective content-driven growth strategy continued to attract and retain high-quality users, supporting MAU stability quarter over quarter. Specifically, we were able to attract new users and boost user retention through the continued development of our platform's diversified commercial initiatives. Promotions of game version updates and new game teams and operational activities featuring high-quality streamers. Second, we rolled out an array of exclusive features and content offerings during official gaming events broadcasts, which elevated user engagement. This quarter, we broadcasted over 30 large-scale official esports tournaments, including the S13 League of Legends World Championship, Dota 2 TI12 International Championship, King Pro League Challenger Cup and Championship, Course 5 Stars 2023 China Regionals and World Championships, as well as the exclusive Water Run Championships Tour 2023. In terms of tournament content operations, in addition to our derivative commentary and review programs, we upgraded real-time interactive features to further boost user engagement. For example, During the League of Legends World Championship, we introduced a professional data scoreboard in our live streaming sessions, allowing hardcore gamers to quickly access the strengths of players and teams. Moreover, we have intensified our investment in interactive features. Alongside the MVP fall list, a best and worst player voting feature initiated during the LPL summer split we added a player rating section, enabling users to rate and comment on players after each game, fulfilling users' desire for frequent interactions. In addition, during the official gaming event's co-streamed live commentary, the player rating feature garnered highly positive feedback from streamers. enabling streamers to rate players, enhance user immersion and enjoyment during the viewing experience, fostering lively discussions and heightened engagement. Moreover, we have proactively expanded our presence in new official esports tournaments. For instance, with Valorant, a new game known for its competitive appeal and captivating gameplay, thanks to our attentive operations during the game's initial launch and our hardcore user base. In addition to regular tournaments like Valorant CN Evolution Series, we secured the exclusive live streaming rights to TAE and Valorant Global Invitational, featuring top-tier stream teams and enriched user experience with a wide array of premium esports content. Upon comprehensive evaluation of our esports content offerings across the platform, we promptly adjusted the balance between copyrighted tournaments and self-produced content, achieving synergistic integration of our premium content offerings while effectively balancing overall content costs. Throughout the fourth quarter, we produced over 60 gaming events, including the KPL Academy tournament 2023 aligned with KPL official events, the S10 Teamfight Tactics Grace tournament highlighting female streamers, and the EBITS BP tournament of Jinxing Impact Continuous Series, alongside other high-caliber self-produced events. Beyond bridging content gaps during official event off-seasons, our self-produced events serve as pivotal platforms for talent discovery, streamer cultivation, and enhancing user engagement and interaction. In terms of premium content promotions, we reinforced this synergy between platforms' online content and offline initiatives. During the quarter, we organized offline activities at 13 Offline Watching for the League of Legends World Championship and Peaceful Adventure for the Peacekeeper segment. Leveraging the momentum of high traffic events of League of Legends in 2023, we curated an area of offline game watching and gathering featuring top tier gaming streamers and entertainment streamers. This innovative model integrated pre-game variety show live streaming, offline esports fight challenges, and immersive offline game viewing. presenting gamers with a fully immersive all-inclusive esports content journey. Furthermore, it capitalized the convergence of gaming and prime entertainment fan select. We also capitalized on in-person engagement for the Peacekeeper gaming segment to enhance promotions. By introducing new redemption in-game items for gaming members, streamers completing offline tasks gained the ability to unlock limited offerings on in-game items. Through those targeted content offerings and interactive user experience, we advanced the promotion of our game-specific membership service. Let's turn to our monetization. Our total number of paying users in the fourth quarter was 3.7 million, with a quarterly approval of RMB 278. The decrease in the number of paying users stems from our strategic shift at the start of 2023 to deliberately reduce revenue-generating activities and low-margin sales promotions. Instead, we began focusing on enhancing the operating efficiency of revenue streams while fostering a healthy and sustainable game-centric community ecosystem. This transition resulted in a year-over-year decline on our paying user base. Furthermore, with the macro-level consumer sentiment gradually waning in the latter half of 2023, we strategically scaled back on platform-wide promotion activities in the fourth quarter. This adjustment also impacted the scale of paying users for the period. While we continue to maintain our co-paying user base, given the current consumer sentiment, we offered some modestly priced revenue-generating products to accommodate the spending habits of mid- and long-tail users. Therefore, our quarterly output marginally declined year-over-year and quarter-over-quarter. Over the past few years, we have been exploring ways to diversify our revenue streams Thanks to our innovative commercialization initiatives, the contribution from other revenues in 2023 significantly increased year-over-year. In 2024, revenue diversification remains one of our focuses, and we will prioritize collaborative commercialization ventures with game developers. Most W users are hardcore gamers with great appetite for game ports. Second, previous sales campaigns for game ports not only diversified our revenue streams, but also boosted traffic on our platform. This suggests strong user interest and engagement in these activities, highlighting the robust alignment between user demands and sales for in-game items. Given these insights, we intend to deepen our partnerships with more game developers, determining and promoting various approaches to commercialization for game ports tailored to diverse game genres. Moving on to our technology R&D, we introduced a major version update to the Douyu app in November in 2023. The update strengthened interactive functionalities between streamers and users within our game-centric content ecosystem, further enhancing overall engagement. We introduced a new tab called the Buzz on the main interface, providing users with real-time updates on streamers they follow, such as live streaming status and access links, as well as non-live streaming updates on streamers and Yuba posts. This feature allows users to engage with streamers and leave comments even outside of live streaming sessions. Additionally, it fosters interaction among users who follow the same streamer within that streamer's Yuba community. Furthermore, we have continued to strengthen our compliance self-assessment procedures and further standardize compliance management across the platform. This ongoing effort includes enhancing compliance standards on various fronts, such as products, operations, and content moderation. We have been implementing strict compliance efforts. In particular, starting this year, we have intensified efforts to combat behaviors violating our platform's rules and policies. This remedial measure showed very good results with regular public announcements on our website. In the meantime, we will continue to comprehensively implement project risk provision and control mechanisms while establishing product tracing procedures. Additionally, we have enhanced our interactive anti-addiction systems, prioritized the distributed compliance resolution, conducted regular reviews of bridge risks across the platform, and ratified irregular behaviors, reinforcing risk awareness among all relevant staff. In summary, throughout 2023, we fine-tuned our operating strategies to align with the evolving market dynamics and effectively maintain the overall stability of our business operations while improving profitability. We believe that by sharpening our focus and capitalizing on the platform's core competitive edge, we can effectively foster a vibrant, healthy, diverse, game-centric content ecosystem while continuing to uphold regulatory compliance. We remain unwavering in our commitment to the company's long-term sustainable growth. With that, I will now turn the call over to our Vice President of Finance, Mr. Hao Cao, to go through the details of our financial performance in the quarter.

Thank you, Lingling. Hello, everyone. Looking back on 2023, despite ongoing macro headwinds, we diversified our revenue streams with advertising and other revenues contributing 13.2% of our total revenue. Meanwhile, we successfully executed our cost-effective strategy, adjusting our live streaming business to prioritize healthy margins and prudently managing our costs and expenses to enhance our earnings. For the fall year of 2023, we achieved an adjusted net income of RMB 154 million. Let's now look at our financial performance for the fourth quarter in more detail. Total net revenues in the first quarter of 2023 decreased by 22.9% year-over-year to RMB 1.3 billion. live streaming revenues were RMB 1.02 billion, a decrease of 36.1% from RMB 1.6 billion in the same period of 2022. The decrease was primarily due to soft macroeconomic conditions and our deliberate reduction in revenue generating promotions during the quarter. These factors affected the spending wellness of some new and price-sensitive paying users. Additionally, our strategic decrease in marketing spending led to a smaller user base, resulting in a year-over-year decrease in total paying users. In response to the soft consumer sentiment, we continue to offer lower-priced revenue products to maintain the spending habits of our mid- to long-tail paying users. leading to a decrease in quarterly up. Our quarterly up was RMB 278, down 4.9% from RMB 293 in the same period last year. Advertising and other revenues were RMB 275.2 million, a significant increase of 226.5% from RMB 84.3 million in the same period of 2022. The year-over-year increase was primarily driven by other revenues generated through our new innovative businesses, such as a game-specific membership service and a voice-based social networking service. Cost of revenues in the fourth quarter of 2023 was RMB 1.17 billion. a decrease of 21.8% compared with RMB 1.5 billion in the same period of 2022. Revenue share fees and accounting costs decreased by 30.3% to RMB 0.89 billion from RMB 1.27 billion in the same period of 2022. The decrease was primarily driven by two factors. The decrease in revenue sharing fees, which was largely in line with decreased live streaming revenues. Second, the decrease in content costs, which was primarily attributable to improved cost management in our self-produced content and streamer payments. However, this decrease was partially offset by higher copyright costs related to the LOL World Championship Tournament. Bandwidth costs in the fourth quarter of 2023 decreased by 27.4% to RMB 105.5 million from RMB 138.4 million in the same period of 2022. The decline was primarily due to a year-over-year decrease in peak bandwidth usage. Cross-profit in the fourth quarter of 2023 was RMB 126.2 million, compared with RMB 186.1 million in the same period of 2022. The decline in gross profit was primarily attributable to decreased live streaming revenues. Gross margin in the fourth quarter of 2023 was 9.7%, compared with 11.1% in the same period of 2022. the decrease in gross margin was mainly attributable to the increase in other costs and copyright costs as a percentage of revenues, which was partially offset by the decreased percentage of revenues attributed to revenue sharing fees. Sales and marketing expenses in the fourth quarter of 2023 were RMB 84 million, a significant decrease of 32.2% from RMB $123.9 million in the same period of 2022. This was mainly attributable to a decrease in marketing expenses for user acquisition, as well as a decline in staff-related expenses. Research and development expenses in the fourth quarter of 2023 were RMB $59.1 million representing a 26.7% decrease from RMB 80.6 million in the same period of 2022. This decrease was primarily due to a decrease in staff related expenses. General and administrative expenses in the first quarter of 2023 were RMB 80 million, an increase of 45% from RMB 55.2 million in the same period of 2022. The increase was due to higher salary expenses associated with management position adjustments, increased expenses related to our organizational streamlining initiatives, as well as an increase in the provisions for assets. Loss from operations was RMB 120.4 million in the first quarter of 2023, compared with RMB 56 million in the same period of 2022. Adjusted operating loss, which asked back impairment loss of goodwill and intangible assets, was RMB 86.4 million in the first quarter of 2023. compared with RMB 56 million in the same period of 2022 Net loss in the fourth quarter of 2023 was RMB 62.2 million compared with net income of RMB 41.8 million in the same period of 2022 Adjusted net loss which excludes share-based compensation expenses The share of income or loss in equity method investments, gain on disposal of investment, impairment loss of investments, and impairment loss of goodwill and intangible assets was RMB 5 million in the fourth quarter of 2023, compared with RMB 4.3 million in the same period of 2022. For the fourth quarter of 2023, basic and diluted net loss per ADS were both RMB 0.19, while adjusted basic and diluted net loss per ADS were both RMB 0.02. As of December 31, 2023, the company had cash and cash equivalents, restricted cash in other non-current assets, and short-term and long-term bank deposits of RMB 6.86 billion, compared with RMB 6.81 billion as of December 31, 2022. Moving forward, we are committed to enhancing revenue diversification, optimizing operating efficiencies, and prudently managing costs and expenses. By remaining agile, In our responses to market dynamics and diligently executing a core growth strategy, we are confident we can overcome the short-term challenges and foster the long-term healthy development of our platform while also delivering value to our shareholders. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Brian Gong with Citigroup. Please go ahead.

I will translate myself. Thanks management for taking my question. With more games now can be live broadcasted on Douyin's platform, how should we see the stability of our streamers and how should we see the future trend? Thank you.

Thank you for your question. So overall, our streamers remain relatively stable. We have exclusive cooperation agreements with our platform's top tier streamers, securing stability throughout relevant contract terms For core streamers whose agreements are about to expire, with prevailing market condition in mind, we actively engage in renewal discussion with them in advance. We comprehensively assess contract cost and operating efficiencies and selectively negotiate and renew contracts. Over the years, Douyu's game-centric content ecosystem has fostered a wild array of influential streamers. What I need to highlight here is for some of those have emerged Breakup streamers began their live streaming journey as gaming streamers on Douyu. Their achievement underscored Douyu's prowess in nurturing and supporting streamers. Building upon our years of experience in gaming content operations, we have developed a sophisticated and effective mechanism for identifying and cultivating gaming streamers. Firstly, our platform offers streamers a multitude of content production options based on our commitment to content innovation and diversity. Secondly, our data analysis tools empower streamers with better insights into user needs and market dynamics, enabling them to fine-tune their live streaming strategies, enhance quality, and boost efficiency. Unlike short video platforms, we provide our streamers not merely algorithm-based data insights, but also with customized resources and content support based on each streamer's unique characteristics. This approach grants streamers ample time for development while empowering them to grow. We are intensifying our focus on refined operations, on customizing our services and support to streamers across different tiers. To build on the existing influence of top-tier streamers, we continue to reinforce their brand presence and impact by enhancing streamer IP through high-quality content and strategic operations, channeling and driving traffic both within and beyond our platform. With mid-tier streamers, we mainly focus on increasing their visibility by inviting them to participate in our self-produced events and programs. Additionally, some of our original esports player streamers have gained significant recognition and user acclaim through our co-streamed live commentary programs during the broadcast of official tournaments. With our platform support, many have rapidly acceded to the top tier. For mid- to long-tail streamers, our priority is to provide them with solid fundamentals that support their continued presence and space for growth. Over the past year, we have initiated incentive programs in various gaming segments, encouraging up-and-coming streamers to go live and actively engage with the audience so that they can secure relatively stable incomes. Joining all insights from the outgoing data analyzers, we also enable meet-to-long-tail streamers with more timely and customized content support. Apart from refined content operations, we will also offer more commercialization avenues for streamers through deeper cooperation with game developers. These will include game promotion and game itself. Among other revenue-generating opportunities across various game genres, our endeavors will increase streamer income, sentimenting and elevating DOE's value as a vibrant, game-centric content ecosystem Top-tier streamers represent invaluable assets within the industry. As the live streaming sector matures, there is always competition over streamers' resources within legal compliance. Through DOE's decade-long journey, we have continuously navigated this competitive landscape for high-quality streamers. Like I said, our advantages, such as exclusive contracts and streamer neutering programs, are the cornerstone of our ongoing success within the competitive streaming market. Thank you. Next question, please.

Excuse me. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. The next question comes from the line of Lei Zhang with Bank of America, Mary Lynch. Please go ahead.

Thank you management for taking my question. My question is about 2024. Can you give us more color on your strategy and the business plan in 2024? Thank you.

Thank you for your question. As we mentioned in our prepared remarks, our 2024 plans and focus will revolve around the three core strengths, streamer, content, and cooperation with game developers. Let me walk you through these plans one by one. In terms of streamer resources, our approach includes three key initiatives. Firstly, we will concentrate on our core streamer resources by enhancing streamer IP and fortifying IP operations. By managing and promoting streamer accounts both across and beyond our platform, we aim to foster streamer appeal and drive increased traffic within our platform. Secondly, we will prioritize fostering gaming streamers and recruiting more esports professional players. Thirdly, we will diversify our streamers' monetization avenues through cooperation with game developers. In terms of our content ecosystem, our goal is to elevate content ROI while upholding premium quality. We strive to balance overall content costs by optimizing the number of official export tournaments and self-produced gaming events. Additionally, we are delving into direct commercialization prospects for gaming event content, such as resources sharing and game purpose sales to improve the ROI of our gaming content. Our advancements in both stream and content are closely tied to our cooperation with game developers. We have now centralized our resources and planning efforts, shifting away from our past approach where each business unit independently provides the collaborative proposals. By fully understanding our users' content and gaming needs, we can pursue more in-depth collaborations with game developers. Additionally, We are tailoring game promotions, operations, and commercialization strategies for game developers based on each game's specific development stage. To facilitate more effective execution of our plans and amplify the scenery of our core strengths, we began an organizational restructuring at the outset of 2024, particularly within business units related to our content ecosystem. We used to structure our content ecosystem business units around individual gaming projects with teams under each business unit, managing stream operations, events and activities, and game developer cooperation. Our restructuring has enabled us to shift away from game-based operations and consolidated fragmented resources associated with gaming segments. Our internal communication channels are now more streamlined allowing us to amplify our platform's collective strength. In short, our goal this year are to enhance compliance while improving content quality and user experience. We are committed to diversifying revenue streams and continuously optimizing costs and expenses. In doing so, we can stabilize and propose long-term healthy platform growth amidst continually evolving market dynamics. Thank you.

Excuse me, Mishank, are you done with your question?

Yes, next question, please.

The next question comes from the line of Rafael Chen with BOCI Research. Please go ahead.

Thank you, management, for taking my question. I'm just wondering how does management team evaluate the impact of some top tier games such as Honor of Kings and League of Legends being branded to stream on Douyin platform? Thank you.

Thank you, Raphael. So the user base of China's Internet and gaming sector is near situation. In response, starting last year, Internet platforms started pivoting away from traditional traffic acquisition methods. Instead, they have been prioritizing core business operations and competitive strengths, improving operating efficiencies and foster cross-platform collaborations. So cross-platform content sharing is emerging as a strategic trend. We have actively embraced the trend of open content. We have focused on our core strengths to fortify business fundamentals, also diversified our business scope and models. Being mindful of competition risks while seizing diverse opportunities, we have been actively innovating our content offerings and fostering cross-platform collaborations. In addition to producing differentiated and appalling content integrating our streamers' unique characteristics, we also explored cooperation avenues with other platforms to expand our content ecosystem, launching joint promotions and collaborative initiatives powered by the premium content features on our platform. For example, we have been progressively piloting partnerships with other platforms, based on each party's top tier exclusive streamer resources. We've been working on create complimentary content synergies, offering eSport live streaming users more premium content and more convenient viewing options. Additionally, in the second half of 2023, we started piloting content promotions on WeChat channels with selected streamers. These enable streamers to cynic their live streaming content on WeChat channels to improve their content's visibility. Given the vast user base of short video platforms, we might encounter certain challenges in the short term, particularly potential downward pressure in MAUs this year. We have proactively addressed these risks by leveraging our strengths. As part of our primitive measures, we deepen our operation around the gaming needs of our core users, including consistently rolling out high quality content and operational activities, and updating product features to fulfill diverse user needs. According to our data analysis so far, despite MAU declines, our platform's core user behavior matrix remain relatively stable, Moreover, leveraging insight from our prior commercial collaborations, marketing campaigns centered around game props, including limited time cells during live streaming sessions and regular game membership services that not only contribute to revenue diversification, but also further new user acquisition while deepening existing user engagement. Moving forward, we will continuously explore more operational models to solidify our core user base and to pursue opportunities to propel growth across our platform. Thank you.

Operator, next question, please. The next question comes from the line of Derek Say with Morgan Stanley. Please go ahead.

Thank you management. We noticed that the company has made significant progress in the non-live streaming revenue in 2023. And you just mentioned earlier that diversifying revenue is one of the key focus for 2024. Could you please share more details about the plans and goals for the upcoming year? Thanks.

Thank you, Derek. In 2023, advertising and other revenues surged by 135% year-over-year, with its revenue contribution increasing from 4.4% in 2022 to 13.2%. This remarkable growth was driven by revenues from our new revenue-generating models. Capitalizing on strengths in gaming content operations since 2022, we have been exploring diverse avenues for commercialization beyond the traditional virtual gifting model. The robust growth of gaming membership business and certain smaller innovative initiatives such as our voice-based social networking service, both contributed to other revenues in 2023. In 2024, we plan to dive deeper into commercialization directly related to games. Given that the majority of our platform's core users are gamers, there's a clear demand for game prompts and new games, which closely align with our platform's gaming content. Firstly, we will bolster and broaden the scope of gaming membership business, aiming to expand this service to more game genres. We plan to unveil new revenue generating products and marketing strategies tailored to distinctive characteristics and player needs. Secondly, we will ramp up our focus on performance-based game promotions. We intend to pivot away from Streamers sponsor product placements and gradually transition to performance-based promotions such as cost per sale model. Streamers will have the flexibility to select new games for promotion based on their expertise and audience preferences. The CPS model has been operational for some time now, yielding promising results with conversion rates surpassing market average Furthermore, our other smaller innovative businesses have shown promising momentum and are now making revenue contributions. While these ventures currently operate on a multi-scale, we will keep you informed of their progress and expand. Overall, we anticipate advertising and other revenues will grow year-over-year in 2024, with their overall revenue share exceeding 20%. Given the impact of macroeconomic factors and internal operational adjustments on traditional live streaming business, we expect live streaming revenue to experience downward pressure in 2024. As the overall revenue share from live streaming remains significant, the rapid growth of innovative businesses may have a comparatively limited effect on the company's overall revenue scale. Despite potential short-term growth pressure, as we fine-tune our core business, the company's financial remains solid and we continue to pursue breakthroughs in our innovative businesses. For example, in October 2023, we joined hands with Taobao and game developers to launch the game Shopping Bonanza on Douyu's official live streaming channels. on the Taobao platform, as well as live streaming sessions on Douyu's platform, selling game prompts and gaming merchandise from popular mobile games like Genshin Impact, League of Legends, Battlefield 2, and Crossfire. Gamers showed considerable demand for those offerings. The result of this campaign proved that streamers have a substantial influence on gaming commercialization unveiling vast potential opportunities. Moving forward, we will delve deeper into additional revenue-generating avenues within the gaming content value chain. Thank you. Next question, please.

The next question comes from the line of Thomas Chong with Jefferies. Please go ahead.

Thank you for accepting my question. I have two questions here. The first question is, I see that the management cost of this quarter is rising significantly. Can you introduce the reason for this? And how do you assess the trend and profit level of our 2024 operating cost? And my second question is about stock repurchase. The company announced a stock repurchase plan at the end of the year. Can you share the strategy of stock repurchase and whether you are preparing to expand the scale of stock repurchase? I'll try to transform myself. So I have two questions. My first question is, so we saw the year-over-year and the quarter-over-quarter increase of Virginia expenses. So could we share the reason behind and how the management see the trend of operating expenses and the profitability in 2024? And my second question is about Share Backpack program. So we announced the Share Repurchase program, and could we share our strategy on Share Backpack? And do we consider increased amount of Backpack? Thanks.

Thank you. I will answer the first question. There are two reasons for the year-over-year and sequential increase in operating expenses in the fourth quarter. First, at the onset of 2024, we announced an organizational restructuring that will allow us to better respond to market dynamics and continually optimize the company's operating efficiency. As part of our staff were aligned to managerial functions, A portion of their salaries was allocated to administrative expenses in the fourth quarter, resulting in an increase in employee salaries and administrative expenses. We also incurred some one-time personnel costs as part of our ongoing workforce optimization efforts. These were part of our preliminary organizational structure adjustments. and we anticipate further workforce adjustments in the first quarter of 2024. Second, we made provisions for bad debts of doubtful account receivables. The combination of these one-time expenses caused part of the increase in operating expenses for the fourth quarter. And a goal of long-term sustainable growth throughout 2023. We adjusted our revenue and marketing strategies while continuing to make ROI-driven decisions and consistently optimizing our cost structure. These coordinated efforts resulted in a 28.7% year-over-year decrease in operating expenses for the fall year of 2023. Importantly, we successfully transformed losses into gains at the adjusted net profit level heading into 2024. Our focus remains on enhancing our diversified commercialization capabilities across the platform while maintaining stringent control of our operating expenses. We are dedicated to upholding the company's financial stability in order to navigate complex and evolving macroeconomic dynamics.

Let me answer your second question and buyback. We have been overcoming challenges arising from a blend of macroeconomic conditions and operational aspects. The Company's Board of Directors and Interim Management Committee are fully committed to addressing these challenges head on. As part of our strategic initiatives, we announced a shared repurchase program on December 28, 2023. on which we plan to repurchase up to 20 million US dollars of the company's ordinary shares through ADS repurchases. This initiative highlights our confidence in the value of the company as well as our commitment to enhancing shareholder returns. We are currently in the initial phase of implementing our share repurchase program. future adjustments to the program may be made based on the company's strategic priorities and ongoing reviews of market conditions. Beyond returns, the foundation of enhancing shareholder value lies in the company's fundamental business operations. We have proven our business model is a and strongly believing in the company's long-term growth potential. Management's primary focus remains on executing our business strategies, identifying opportunities amidst challenges, and propelling the company toward long-term sustainable growth. Throughout this journey, we will continue to show up our fundamentals providing regular updates on our business operations and the shared repurchase program. Thank you. Operator, please.

Thank you. That's all the time we have for questions. I will now turn the call back over to management for closing remarks.

On behalf of our Interim Management Committee, we thank you for joining our call. We look forward to speaking with everyone next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.