DouYu International Holdings Limited

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's 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 this forward-looking statement. 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 FCC. 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. With that, I will turn the call over to our Co-Chief Executive Officer, Ms. Jin, for business updates. Ms. Jin, please go ahead.

In 2024, amid the dual challenge of a soft microeconomic landscape and intensified market competition, we remained focused on strengthening our game-centric content ecosystem. We adopted more flexible operational strategies, swiftly adjusting how we allocate our resources and diversifying our revenue streams while religiously controlling costs and expenses, achieving incremental progress. First, we were pleased with the early success of our revenue diversification efforts. The promotional ramp-up of our voice-based social networking business and game membership services drove revenues from our innovative business, advertising, and others to reach 28% of our total revenues for the year, marking at 63.6% increase in revenue contribution year over year. This growth partially offset the decline of our live streaming revenues. Second, we continued to drive cost optimization. We proactively cut back on inefficient business and fine-tuned the compensation structure for streamers, reducing our content cost by 19% year over year. Additionally, by streamlining our business flow and aligning our staff structure, we achieved a 17% year-over-year decrease in sales and marketing, research and development, and general and administrative expenses. Third, we considerably bolstered shareholder returns. Drawing on the company's historical cash surplus and future plans, we declared two special cash dividends, totaling $600 million one in July 2024 and a second in January 2025. This distribution highlights our commitment to rewarding shareholders and also reflects our confidence in the company's stable growth potential over the long term. In addition, we continued to enhance our platform's ecosystem governance, strengthening compliance standards and fostering a healthy content and consumption ecosystem to support long-term sustainable development. Before dying into our 2025 growth plans, I'd like to share a brief snapshot of our performance in the fourth quarter. In the fourth quarter of 2024, our mobile MAUs were 44.5 million, increasing 5.9% quarter over quarter and decreasing 13.9% year over year. The year over year decline remains largely a result of the evolving gaming video content industry dynamics. However, the quarter-over-quarter increase exceeded our expectations and shows the benefits of our content-driven growth strategy. Our platform's content innovation and operational activities have consistently drawn in and retained high-quality users with this quarter's sequential MAU growth, lead by three key drivers. First, stronger cross-content partnerships. Second, broadcast of mainstream international official tournaments and related operational activities. And third, more frequent game prop promotions that improve market awareness. Overall, despite short-term pressure on the platform's user base, we have been focusing resources on strengthening our core user base. At the same time, promoting our new business ventures, particularly Game Prop South, has helped us acquire new users. During the quarter, we broadcasted over 50 large-scale official tournaments. During the off-season, We broadcasted nearly 40 self-produced esports tournaments, extending our cross-platform content co-creation partnerships. We rolled out collaborative events across diverse game segments. For example, the Honor of Kings Thunder Glory Cup S2, which we co-produced with multiple content partners, featuring multiple top professional players from different platforms. further strengthen its IP's recognition. In addition, we gradually roll out diverse self-produced tournaments for valourant featuring professional teams and streamer communities, effectively maintaining high activity levels. Moreover, we tailored tournament productions to align with streamer resources, new game launches and their unique gameplay characteristics. A notable example is the Douyu Golden Rush Cup for Zelda action. By implementing cross-platform content sharing, we effectively enhanced the tournament's visibility. Beyond gaming content, we launched an array of entertaining annual events around the year-end holiday season, enriching the platform's content ecosystem and successfully maintaining user engagement. Moving on to monetization. Our total number of paying users in the fourth quarter was 3.3 million. With a quarterly ARPPU of RMB 246, the year-over-year decline in paying users was partly caused by macroeconomic hardwings leading to a continued contraction in the spending willingness of transient users on our platform. More importantly, we proactively adapted our user acquisition strategy, scaling back high-cost initiatives such as cash subsidiaries. While these activities typically attract users in the short term, they fail to drive sustained user spending and drive up our operational costs. The total number of paying users remains stable quarter over quarter, highlighting the incremental progress of our adjusted user operations strategies and successfully stabilizing the spending patterns of our core users. We also launched products under a tiered pricing model for our core users to help promote our membership system with premium benefits and gaming product, increasing their payment frequency For the border user base, we promoted pricing-friendly revenue-generating product combined with the diverse game content and our platform's incentives and benefits. These strategies boosted user engagement and we maintained our overall paying user base. Despite a year-over-year decline, our quarterly AR PPU slightly increased quarter-over-quarter validating the effectiveness of our refined strategies. Furthermore, our innovative business continued to grow in the fourth quarter, gaining initial monuments of end scalability. As we advanced our game prop commercialization initiatives, we consistently refined our strategy, capitalizing on key gaming milestones and exploring additional marketing scenarios For example, we integrated offline content with online sales to further encourage users' willingness to spend. Meanwhile, our voice-based social networking business expanded rapidly, driven by our well-structured product design, effective recruitment mechanism, and high precision user targeting. Overall, in 2024, More intense industry competition and weaker consumer spending leads to a contraction in our total net revenues for the year. These factors placed greater pressure on allocating our fixed cost, resulting in decreased growth margin and increased net loss. In light of this, the company's core strategy for 2025 will center on cost reduction efficiency improvement, and narrowing losses, emphasizing three key areas to improve our structure. First, we will reinforce our revenue resilience by unlocking monetization opportunities within our niche game ecosystem, advancing the commercialization of new business ventures. We will ramp up product innovation and marketing around game props, enhance AI capabilities and user conversion efficiency for our voice-based social networking business, and continue to increase the revenue contribution from our innovative business. These will reduce our dependency on revenues from our live streaming business and improve our ability to weather microeconomic fluctuations. Our second priority is optimizing our cost structure to mitigate the adverse impact of skill inefficiencies. Over the past year, we performed an in-depth ROI analysis of our content and tested multiple approaches to enhance returns. So far, the results have been modest. Moving into 2025, Our focus will be on adjusting fixed cost components, especially content costs, in order to improve growth margin. In terms of Streamr's resource management, since the third quarter of 2024, we have gradually adjusted the Streamr compensation framework, introducing performance-based compensation assessment matrix This has allowed us to achieve a year-over-year reduction in streamer compensation costs. Nevertheless, given our current revenue size, streamer compensation costs still account for a large portion of our total revenues. In 2025, we will continue to optimize our streamer resources through ongoing adjustment, leveraging flexible contracting models, we will actively explore cross-platform content co-creation, unleashing streamers' traffic and commercial potential while significantly reducing streamer compensation costs. In terms of acquiring official tournament copyrights, with more platforms broadcasting official tournaments in 2024, the typical traffic driven to our platform from official tournament content gradually declined. Our historical data suggests that large-scale esports events have not significantly boosted our revenue and, in some cases, might have had an active effect. Although we experiment with direct monetization activities in 2024, such as promoting game props in official tournaments, live streaming channels, these initiatives did not notably improve the ROI for copyrighted content. In 2025, we will focus on acquiring official tournament copyright with higher ROI potential and work with copyright holders to secure more advantages, pricing, optimizing our copyright cost. Additionally, we are ramping up our AI initiatives to drive efficiency. Our intelligent content review system continues to evolve with integrative advancement in large models, improving the accuracy of identifying risk content and shortening processing time. At the same time, our R&D center is applying AI-powered programming productivity tools, which enable content-based, inference-driven code generation, boosting overall R&D efficiency. In February, we completed the technical research and development of open-source models based on DeepSeq. we expect our development efficiency to increase as AI programming tools become more deeply integrated. Operationally, we will continue to focus on our core business, extending our AI capabilities across a broader range of business scenarios, optimizing costs by reducing efficiencies, and further streamlining the workforce. These initiatives are designed to boost productivity, reduce operating expenses, and free up more resources to grow and innovate within our core business. Naturally, these adjustments might help achieve cost optimization goals, but they might also lead to a noticeable decline in our user base and revenue for a period of time. Unfavorable macroeconomic dynamic may extend the timeline for narrowing of a loss. We have developed an array of contingency plans to mitigate these challenges. These include consolidating platform resources for more content collaborations to ease traffic pressure and trimming key cost to ensure margin improvements among others. We believe that these initiatives will narrow our net loss in 2025, securing financial stability through cyclical macro fluctuation while balancing business 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. Hello everyone. In 2024, we continue to navigate challenges posed by macroeconomic headwinds and an evolving industry landscape. In response, our financial focus has been on revenue diversification, cost control, and expense optimization. We made significant strides in diversifying our revenue structure with revenues from our innovative business, advertising, and others increasing by 63.6% year-over-year to RMB 1.2 billion for the fall year of 2024. However, both our gross margin and net margin were negatively impacted by a decrease in overall revenue, coupled with relatively fixed cost components. Looking ahead to 2025, our top financial priority is margin improvement restore our financial resilience. Let's take a closer look at our financial performance for the fourth quarter. Our total net revenues decreased by 12.3% year-over-year in the fourth quarter to RMB 1.14 billion from RMB 1.3 billion in the same period of 2023. The decline was primarily driven by a decrease in live streaming revenues which dropped by 28.4% to RMB 0.73 billion, compared with RMB 1.02 billion in the same period of 2023. The ongoing macroeconomic softness and evolving user spending patterns were the key factors impacting live streaming revenues. To address these challenges, we have continued our revenue strategy of focusing our core paying users, reducing new paying user acquisition promotions, and prioritizing the promotion of more affordable product offerings to encourage consistent spending. As a result, we saw a year-over-year decline in both total number of paying users and our quarterly up, which decreased by 11.5% to RMB 246. from RMB 278 in the same period last year. On a positive note, our revenue diversification efforts are showing momentum. Innovative business, advertising and other revenues increased significantly in the fourth quarter by 47.2% to RMB 405.1 million up from RMB 275.2 million in the same period of 2023. The year-over-year increase was primarily driven by higher revenues from our voice-based social networking service and game membership service. With eight consecutive quarters of growth in our innovative business, the contribution to total revenue from innovative business, advertising, and others reached 35.7% in the fourth quarter marking a significant milestone in our revenue diversification strategy. Cost of revenues in the fourth quarter of 2024 decreased by 8.8% to RMB 1.07 billion compared with RMB 1.17 billion in the same period of 2023. For comparison purposes, we reclassified certain costs related to our innovative business from other costs to revenue sharing fees for the fourth quarter of 2023. After this reclassification, revenue sharing fees and accounting costs in the fourth quarter of 2024 decreased by 9.3% to RMB $896.2 million, compared with RMB 988.6 million in the same period of 2023. The decrease was primarily driven by a reduction in content costs as well as a decrease in revenue sharing fees due to lower live streaming revenues. However, this decrease was partially offset by increased revenue sharing fees related to revenue growth in our innovative business. Bandwidth costs in the fourth quarter of 2024 decreased by 30% to RMB 70.3 million from RMB 100.5 million in the same period of 2023, primarily due to a year-over-year decrease in peak bandwidth usage. Cross-profit in the fourth quarter of 2024 was RMB 69.8 million, compared with RMB 126.2 million in the same period of 2023. The decline in gross profit was primarily driven by a faster decrease in live streaming revenues relative to the cost of revenues, resulting in reduced gross margin efficiency. Gross margin in the fourth quarter of 2024 was 6.1%, compared with 9.7% in the same period of 2023. However, we observed a slight quarter-over-quarter increase in gross margin, primarily due to decreased content costs. The sequential improvement in gross margin not only highlights our ongoing efforts to optimize content costs but also reinforces our strategy for 2025 of continuously fine-tuning our cost structure to enhance gross margin. Sales and marketing expenses declined by 5.5% in the fourth quarter of 2024 to RMB 79.3 million from RMB 84 million in the same period of 2023. The decrease was mainly attributable to a decrease in staff-related expenses. Research and development expenses were reduced by 42.2%. to RMB $34.2 million from RMB $59.1 million in the same period of 2023, again mainly due to a decrease in staff-related expenses. General and administrative expenses decreased by 10.4% in the fourth quarter of 2024 to RMB $71.7 million from RMB in the same period of 2023. The decrease was mainly attributable to reductions in staff-related expenses and provision for receivables, and was partially offset by an expense related to our ongoing employee streamlining initiatives. Our loss from operations was R&B. 183.5 million in the fourth quarter of 2024, compared with RMB 120.4 million in the same period of 2023. Our adjusted loss from operations, which excludes impairment loss of goodwill and intangible assets, was RMB 108.1 million in the fourth quarter of 2024, compared with RMB 86.4 million in the same period of 2023. Our net loss for the fourth quarter of 2024 was RMB 163.7 million, compared with RMB 62.2 million in the same period of 2023. Our adjusted net loss, which excludes shelf loss in equity method investments, Impairment loss of investments, gains from failed value changes in long-term investments, and impairment loss of goodwill and intangible assets was RMB 144.3 million in the fourth quarter of 2024, compared with RMB 5 million in the same period of 2023. For the fourth quarter of 2024, basic and diluted net loss per ADS were both RMB 5.43, while adjusted basic and diluted net loss per ADS were both RMB 4.78. As of December 31st, 2024, we had cash and cash equivalents, restricted cash, restricted cash in other non-current assets, and short-term and long-term bank deposits of RMB 4.47 billion or USD 612.1 million, compared with RMB 6.86 billion as of December 31, 2023. The year-over-year decrease in cash balance was primarily due to the special cash dividend distribution of USD 300 million and the US dollar 20 million share repurchase program, both of which reflect our commitment to returning value to shareholders while maintaining a healthy cash position. Looking ahead, we are focused on improving margins and achieving financial resilience. We will continue to refine our operational efficiency and pursue profitable growth, particularly by lowering our content costs and growing our innovative business. We are confident in our ability to navigate market conditions through the solid execution of our strategies and remain dedicated to creating long-term value for our shareholders. This concludes our prepared remarks for today. Operator, we are now ready to take questions.