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Operator
Good morning and good evening. Thank you and welcome to WU International Holdings Limited's first quarter 2024 earnings conference call. At this time, all participants are in the listen-only mode. We will be hosting a question and answer session after the management's prepared remarks. I will now turn the call over to the first speaker today, Ms. Lingling Kong, IR Director at WU. Please go ahead, ma'am.
Lingling Kong
Thank you. Hello, everyone. Welcome to our fourth quarter 2024 earnings call. Joining us today are Mr. Mingming Su, Chief Strategy Officer, Mr. Hao Cao, Vice President of Finance, and Ms. Siming Yan, Vice President from Interim Management Committee. You can refer to our fourth quarter 2024 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 current 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 these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statement, risk factors, and details of the company's filing 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 Update, and the call will be handed over to our Vice President of Finance, Mr. Hao Cao, for financial discussion. Presented with another period of challenging market conditions, in the fourth quarter, we focused on leveraging our company's key strengths and improving our revenue structure by strengthening our cooperation with game developers. At the same time, we boistered our streamlined operations by optimizing our organizational structure and user strategy. As always, we remain committed to fostering a healthy, vibrant, game-centric content ecosystem. Throughout the period, we diligently enhanced compliance standards and practices across the platform, meeting our co-users' needs by providing them with more premium content, enrich the gaming services, and improve user experiences. With that overview, I'd like to review some details of our business operations during the quarter. In the first quarter of 2024, our mobile MAUs were $45.3 million, a decrease of 9.7% year-over-year. This was in line with our operating strategies and expectations for the year. The MAU decline was primarily due to competition from short video platforms. However, a deep dive into user viewing behavior and payment patterns revealed that user attrition was predominantly from low engagement users with relatively short viewing hours. These users exhibit minimal platform loyalty and frequently switch platforms. Their payment habits are sub-bar, so the MAU decline did not significantly affect our platform's overall monetization efficiency. Moreover, our gaming commercialization ventures continued to join fresh users, and re-engaged previous users. This partially offset the decline in mobile MAUs and led to a higher payment conversion rate of targeted gaming traffic joined in by our attractive gaming services. This quarter, we broadcasted nearly 30 large-scale official tournaments, including the Spring Tournaments of LPL, KPL, and CFPL, and the CSGO Copenhagen Major, among others. Through refined gaming event content operations and deeper cooperation with game developers on traffic and commercialization, we have increased the appeal of official gaming event content and boosted the ROI of the copyrighted content. For example, In the Crossfire Gaming segment, our advantages include top-tier gaming streamers, partnerships with high-ranking CF teams, and years of premium content accumulation, which have attracted a sizable user network. These assets empower us to carry out ongoing collaborative initiatives and explore projects with game developers. For instance, this year, we began promoting in-game props through livestreamed events on official gaming channels and our livestreamers' corresponding commentary sessions. Leveraging the game prop resources shared by game developers and targeting the preferences of our platform gaming users, this initiative effectively elevated user engagement across the gaming ecosystem. gaming event content and game props fulfilled gamers' needs, enhancing user experience, while new prop acquisition boosted gaming activity, improving gaming engagement. As the central hub for content operations, innovative operational strategies like this neutral stream of development while increasing user engagement and stickiness, strategically leveraging our strengths to cultivate a mutually beneficial gaming ecosystem. Regarding self-produced content, we produced over 40 esports tournaments during the quarter. To maximize the benefits of this event, we have been exploring reciprocal content sharing collaborations with our partners, a first for Douyu. These agreements allow us and our partners to tap into each other's high-quality streamer assets under fair and equitable terms. In the fourth quarter of 2024, we launched an array of cross-platform collaborative initiatives covering various game segments like League of Legends, Honor of Kings, Peacekeeper Elite, Teamfight Tactics, etc. In addition, we actively broadened our portfolio of collaborative tournaments. During the quarter, we teamed up with Taobao to curate the appealing content in the Valorant segment, hosting Valorant challenges exclusively streamed on Taobao and Douyu. Another highlight was our signature self-produced event, Valorant Cup, which has been staged for three consecutive series. It's a good example. We recruited teams from streamers across different platforms and directly invited the top two teams to the Valorant National Championship. These collaborative content initiatives and related promotional campaigns were designed and executed by effectively leveraging the strength of our deep streamer resources and the large Valorant user base. In terms of streamer management, we integrated our streamers' strengths with those of our platform to enhance synergy and create upside. First off, based on our streamers' standout characteristics and their fans' preferences, we crafted engaging content initiatives highlighting top tier streamers' distinctive personal brands and IP. This included co-streamed live commentary for official gaming events, eSports fun challenges sponsored by streamers, and much more. Additionally, we recreated and promoted content highlighting our streamers' unique appeal outside of Douyu's ecosystem. By sharing and managing content on streamers' personal social media accounts, we helped them gain more exposure while attracting more users to Douyu to watch their captivating content. In terms of streamer-based commercialization, we ramped up our game promotions as more new games were launched, gradually expanding our reach from top-tier streamers to niche streamers within specific verticals. According to data analysis, Our conversion rates from game promotions outperformed market averages. This creates additional income for streamers beyond base compensation and live streaming virtual gifting while further optimizing the company's revenue structure. Let's turn to our monetization. Our total number of paying users in the fourth quarter was 3.4 million with a quarterly uproar of RMB 238. The year-over-year decrease in paying users was primarily caused by challenging macroeconomic conditions and a seasonal reduction in operational activities. Given subdued consumer sentiment during the quarter, we offered some modestly priced revenue-generating products to maintain our users' spending habits. As a result, our quarterly output declined year over year. Through the exploration of commercial diversification pathways over the past year, we have pinpointed two effective strategies centered on GameCorp itself in collaboration with game developers. The first strategy taps into DOE's dedicated community of hardcore gamers and their interests. We serve as a commercial channel for game developers' sales, promoting their game props through streamers, content creation, and operational activities. Viewers can easily navigate into game developers' offerings and make purchases with a single click on the valuable links during live stream sessions on our platform. This partnership model serves as the cornerstone of our joint commercialization with game developers. By promoting game props, we empower the game developers to diversify their revenue streams while also driving increased traffic to our platform and optimizing our traffic monetization efficiency. Our second strategy ties gaming memberships to our game props. Users who purchase gaming memberships in our platform's gaming segments receive loyalty points and can earn additional points by completing platform-based tasks. These points can be redeemed for game props and exclusive platform benefits during selected live streaming sessions. Compared with the first strategy, This model's product design is more closely aligned with our streamer's characteristics and users' needs, fostering deeper and more enduring collaborations with game developers. Moreover, both of these mainstream collaboration models cater to gamers' preferences and bolster user engagement on Douyu. underscoring those values as a pivotal game-centric community ecosystem. We have currently established collaborations with game developers in over 10 games. Moving forward, we aim to broaden our collaboration with more game developers, diversifying and advancing GamePop commercialization avenues tailored to different game genres. Moving on to technology R&D. We upgraded Douyu's in-app content categorization in late March, adding a tournament category within the content recommendation sub-column. This addition effectively consolidates gaming event content from top gaming segments, including annual esports events calendars, gaming schedules, match replays, player ratings, and more. We designed the upgrade based on user behavior analysis, spotlighting top-tier gaming events' specialized content to bring more convenience to avid gamers while increasing averaging viewing hours across the platform. In summary, the business adjustments we made in the fourth quarter in response to involving market dynamics are showing encouraging results. While we continue to foster a healthy and dynamic community of users and streamers within our gaming-centric ecosystem, we will also sharpen our focus on capitalizing on the platform's core strengths and further refining our resource allocation to optimize our revenue structure. Through ongoing innovation and iterations of products, features, and operating models, we will propel 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.
Hao Cao
Thank you, Lingling. Hello, everyone. While we continue to face challenges from both macroeconomic trends and evolving industry dynamics, we are focused on executing our long-term sustainable growth strategy. During the period, we continue to diversify and strengthen our revenue mix. Revenues from our innovative businesses continue to grow on sequential quarter basis while we further streamline our operations and maintain our overall solid financial position. Now, let's look at our financial performance for the first quarter in more detail. Our total net revenues decreased by 29.9% year-over-year in the first quarter to RMB 1.04 billion. Live streaming revenues were RMB 0.8 billion, down 41.5% from RMB 1.37 billion in the same period of 2023. Livestreaming revenues were primarily impacted by soft macroeconomic conditions and our planned reduction in revenue generating promotions during the seasonally low first quarter. These factors notably affected some new and price-sensitive paying user spending, leading to a year-over-year decrease in total paying users. To address the soft consumer sentiment, we strategically maintained lower-priced revenue product offerings to support stable spending habits among our existing paying users. While our approach was effective in this regard, It also impacted our quarterly up, which declined by 24.2% to RMB 238 from RMB 314 in the same period last year. Conversely, advertising and other revenues increased significantly in the first quarter by 109.3% to RMB 238.8 million. up from RMB 114.1 million in the same period of 2023. The year-over-year increase was primarily driven by an increase in other revenues generated through other innovative businesses, such as our voice-based social networking service. Cost of revenues in the first quarter of 2024 decreased by 28.8%, to RMB $0.93 billion, compared with RMB $1.31 billion in the same period of 2023. This cost reduction was largely based on a 37.7% decrease in our revenue sharing fees and accounting costs to RMB $0.68 billion from RMB $1.08 billion in the same period of 2023. Revenue share fees reduction were largely in line with decreased live streaming revenues, while the decrease in content costs primarily came from improved cost measurement in streamer payments and our self-produced content. Bandwidth costs in the first quarter of 2024 decreased by 33.7% to RMB 82.5 million from RMB 124.5 million in the same period of 2023, which was primarily due to a year-over-year decrease in peak bandwidth usage. Cross-profit in the first quarter of 2024 was RMB 109 million, compared with RMB 176.5 million in the same period of 2023. The decline in gross profit was primarily attributable to decreased live streaming revenues and increased costs related to our other innovative businesses. Gross margin in the first quarter of 2024 was 10.5%, compared with 11.9% in the same period of 2023. In line with our strategic streamlining initiatives, Staff related expenses were reduced across the board in operating expenses accordingly. Sales and marketing expenses declined by 16.6% in the first quarter of 2024 to RMB 75.6 million from RMB 90.7 million in the same period of 2023. Research and development expenses were reduced by 25% to RMB 54.2 million from RMB 72.3 million in the same period of 2023. General and administrative expenses came down by 28.4% in the first quarter of 2024 to RMB 42.8 million from RMB 59.8 million in the same period of 2023. Loss from operations was RMB 166.9 million in the first quarter of 2024 due to RMB 111.7 million of the voluntary return compared with RMB 27.3 million in the same period of 2023. Net loss for the first quarter of 2024 was RMB 88 million compared with net income of RMB 14.5 million in the same period of 2023. Adjusted net loss, which excludes shelf loss in equity method investments and impairment loss of investments, was RMB 85.7 million in the first quarter of 2024, compared with adjusted net income of RMB 25.8 million in the same period of 2023 For the first quarter of 2024 basic and diluted net loss per ADS were both RMB 2.77 while adjusted basic and diluted net loss per ADS were both RMB 2.69 As of March 31, 2024 The company had cash and cash equivalents, restricted cash, restricted cash in other non-current assets, and short-term and long-term bank deposits of RMB 6.76 billion, compared with RMB 6.86 billion as of December 31, 2023. At the end of last year, we announced our 2024 share repurchase program for up to US dollar 20 million. As of March 31st, 2024, we had repurchased an aggregate of US dollar 2.7 million in ADS under this program. We plan to expedite our repurchase activity in the second quarter of 2024. Moving forward, our consistent strategic approach is designed to support the sustainable growth of our platform. We are committed to building on a strong foundation by prioritizing diversified revenue streams, prudently managing costs and expenses, and focusing on long-term growth. We will do all of this while staying proactive and swiftly responding to evolving market dynamics. by ensuring our strong fundamentals and maintaining a stable financial profile against the macro headwinds. We believe we are well positioned to overcome the short-term challenges and foster the long-term healthy development of our platform. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchtone 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. For benefit of all participants on today's call, if you wish to ask your question to the management in Chinese, please immediately repeat your question in English. Our first question is from the line of Li Zhang from Bank of America Securities. Please go ahead.
Li Zhang
Thanks management for taking my questions. My first question is regarding the net loss in the first quarter. Can management share any update on the three-year margin outlook and second one is on the use of cash? Thank you. Thank you for the question.
Hao Cao
As we noted amidst challenging macroeconomic dynamics, our primary focus remains on long-term sustainable growth by strategically adjusting our business operations. We stabilized our traditional businesses and refined our streamlined operations while further exploring diversified revenue streams. In 2024, navigating heightened market competition and persistent macroeconomic headwinds, we have taken a more agile operational approach, driving growth momentum in our innovative ventures. At the same time, we have continued to adopt a disciplined approach to controlling costs. Looking ahead, due to macroeconomic and operating uncertainties, as well as revenue pressures from ongoing adjustments, to the live streaming business. We expect to experience some leverage on the profit level due to the downsizing of our revenue base. Despite these challenges, we will closely monitor market dynamics and our business trajectory, flexibly fine-tuning our strategies accordingly to ensure the company's solid advancements. Regarding financial planning, Our financial standing remains exceptionally strong. As of the end of first quarter, we had cash and cash equivalents, restricted cash, and short-term and long-term bank deposits of RMB 6.76 billion. We strictly follow positive ROI standards and are prudent when allocating funds to new business ventures, fostering continuous innovation and business improvement. In the meantime, we prioritize our shareholders' long-term interests, consistently repurchasing shares to bolster market confidence. In short, we will consistently implement prudent financial strategies, optimize fund allocation, and further enhance our platform's diversified commercialization capabilities, elevating operating efficiency, and providing robust support for the company's long-term growth. Thank you.
Lingling Kong
Operator, next question, please.
Operator
Thank you. The next question is from the line of Thomas Chong from Jefferies. Please go ahead.
Thomas Chong
Good evening. Thank you, Manager Chen, for introducing my question. My question is about MAU. Manager Chen, can you share why Q1 has changed and what are our future expectations? Thanks, management, for taking my question. My question is about our MAU. Can management comment about the software in Q1, and how should we think about the outlook? Thank you.
Chen
As we noted in our prepared remarks, the MAU decline in the first quarter was primarily due to competition from short video platforms. Their expanded live streaming gaming content offerings and aggressive periodic promotional campaigns impacted our MAU in the short term as some users' attention shifted. We took a deep dive into user behavior that revealed our MAU losses were predominantly from low engagement users with relatively short viewing hours. These types of users frequently switch platforms and exhibit inconsistent payment habits. So, despite the drop in MAU, we believe it had minimal impact on our platforms overall monetization efficiency. Amidst intense market competition, We responded proactively, harnessing our platform's strength and implementing multiple initiatives. We wrapped up cross-platform content collaboration and sharing, offering exceptional, premium content to meet our users' diverse needs. We also Depends our collaborations with game developers and promoted game proper sales. Catering to the needs and interests of hardcore gamers. This fostered user engagement and satisfaction with Douyu, thereby fortifying and expanding our user base. Overall, MAU declined. Our platform's core user behavior metrics remained relatively stable. While this in mind, in 2024, we are enhancing our core user operations to elevate user monetization efficiency. Our platform thrives on our core users They are the backbone of our community, driving the platform's growth with their active engagement and high loyalty. Their consistent payment patterns are instrumental in driving our monetization. Notably, during previous GameProc marketing campaigns, we noticed significant demand among gamers for gaming services and a higher payment conversion rate with our more attractive gaming services. Thereby, we will offer products and services that align more closely with the needs of our core users in order to increase user commercialization efficiency. We anticipated potential downward pressure on mobile MAUs in 2024. Over the years, with our consistently agile operational approach, we have swiftly adapted to industry trends and evolving user needs. We secured operational stability and efficiently adjusted and aligned our operation strategies to our core competitive strengths. Through the continuous rollout of new products and models, and further advancement and scaling of these offerings, we are actively pursuing opportunities for Douyu's second growth engine. Thank you.
Lingling Kong
Thank you, operator. Next question, please.
Operator
Thank you. Our next question is from the line of Richie Sun from HSBC. Please go ahead.
spk03
Thank you, management, for taking my question. I have one regarding the cross-collaboration with other platforms. the management share the progress made in terms of the content collaboration and the effectiveness seen so far and the expectation going forward. Thank you.
spk08
Hi, Richard. So, as we noted last quarter, cross-platform content sharing has become the prevailing trend With the rapid evolution in content creation and distribution, there has been a parallel surge in user demand for more diverse and high-quality content. During the quarter, we focused extensively on content innovation and cross-platform collaborations, maximizing content utilization and distribution under fair and equitable terms. Through resource polling and collaborations, we strategically worked with multiple platforms to tap into each other's high quality streamers assets. In the first quarter, we rolled out on a series of jointly produced events across signature gaming segments of live streaming platforms. Instead of live streaming platforms competing for resources, these content collaboration models has proven highly effective in increasingly border-based traffic and user engagement across all of the participating platforms. Additionally, by harnessing cross-platform visibility, streamers reached border audiences and expanded their influence, increasing their commercial value. Our cross-platform cooperation also extended to more comprehensive platforms, like through our deepened partnership with Taobao. In late 2023, we co-launched the gaming shopping bonanza with Taobao, selling and promoting game props and gaming merchandise. During the quarter, we co-created appalling content with Taobao in the Valorant segment, hosting Valorant challenges that were exclusively streamed on Taobao and Douyu, expanding the reach of our gaming content distribution. Right now, our cross-platform content collaborations are being piloted on a relatively small scale. Based on user feedback and data analysis, we will continue to refine and optimize our collaborative models. We believe that through these content collaborations, platforms can learn from one another and leverage each other's experiences, raising the bar for content standards and cultivating the healthy advancement of the gaming live streaming industry. Thank you.
Operator
Thank you.
Lingling Kong
Thank you. I'll play your next question, please.
Operator
Yes, thank you. The next question is from the line of Rafael Chen from BOCI Research. Please go ahead.
Rafael Chen
Thank you for answering my question. My question is about the model of business cooperation. Thanks management for taking my question. I want to follow up on our cooperation with game developers. Could management share the current revenue contribution for our cooperation with game developers and games already included in this model? Lastly, could we have any thoughts on future play? Thank you.
Hao Cao
Commercialization collaborations with game developers are a natural extension of Douyu's content offerings. Gamers account for most of our core user base, so there is a built-in appetite for both game prompts and new game releases, which perfectly matches our platform's gaming content offerings. Our collaborations with game developers mainly follow two approaches. The first centers on game prompt sales, primarily through collaborative promotional channels and gaming memberships. As we explained in our prepared remarks, revenue-wise, the collaborative promotional channels currently make minor contributions to our revenue. However, the GMV facilitated through our promotional channels was meaningful. The revenue generated from game memberships, which is included in other revenues, has substantially boosted year-over-year growth in other revenues since the second half of 2022. Over the past two years, we have explored promoting game prompt sales in several gaming segments, yielding valuable insights. We have currently established collaborations with game developers in over 10 games. The second approach involves updating our game promotion model. We are pivoting away from streamer-sponsored product placements and gradually transitioning to performance-based cost-per-sell promotions. The CPS model covers new games across diverse genres. allowing streamers the flexibility to select which new game get promoted based on their expertise and audience preferences. Most of our users are gamers, leading to higher than market average gaming promotion conversion rates. With the release of more new games, as we expand our collaborative channels, such as our co-promotion with QQ mini games, we will consistently amplify the scale of our game promotions, progressively extending the CPS model from top tier streamers to niche streamers within specific verticals. Additionally, as we actively advance collaborations with game developers, our other smaller innovative businesses are also demonstrating promising growth momentum and making notable revenue contributions. Overall, we expect advertising and other revenues to grow year-for-year in 2024, with their overall revenue share exceeding 20%. Thank you.
Operator
Thank you. That's all the time we have for questions. I would now turn the call back over to the management for closing remarks.
Lingling Kong
Thank you. On behalf of the interim management committee, thank you all for joining our call tonight. We look forward to speaking with everyone next quarter.
Operator
Thank you. Thank you for joining our call. We look forward to speaking with everyone next quarter.
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