DouYu International Holdings Limited Q4 FY2023 earnings call

• The year 2023 saw the company transform adjusted net loss to profit, achieving an adjusted net profit of RMB 154 million for the full year. - Focused on compliance management and regulatory improvements across the platform. - In the fourth quarter of 2023, mobile MAUs were 51.7 million and quarterly paying users were 3.7 million. - In 2024, the company is zeroing in on harnessing three core strengths: deep-rooted streamer resources, a rich content ecosystem, and close cooperation with game developers. - Building on streamer resources by intensifying cooperation with game developers on content and operation, producing premium content and upgrading content operations. - Heightening efforts to diversify revenue streams by collaborating with more game developers and using diverse business partnership models. - Streamlined organizational structure, transforming the content ecosystem business unit into three core divisions. - Introduced a major version update to the DouYu app in November 2023, strengthening interactive functionalities.

In the fourth quarter of 2023, total net revenues 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 the same period in 2022. Advertising and other revenues were RMB 275.2 million, a significant increase of 226.5% from the same period in 2022. Cost of revenues in the fourth quarter decreased by 21.8% to RMB 1.17 billion. Gross profit in the fourth quarter was RMB 126.2 million, down from RMB 186.1 million in the same period of 2022. Sales and marketing expenses decreased by 32.2% to RMB 84 million, research and development expenses decreased by 26.7% to RMB 59.1 million, while general and administrative expenses increased by 45% to RMB 80 million. For the full year of 2023, an adjusted net profit of RMB 154 million was achieved. Live streaming revenues contributed a certain percentage, while advertising and other revenues saw a significant year-over-year increase in contribution from 4.4% in 2022 to 13.2% in 2023.

• 2024 focus on revenue diversification, especially gaming-related commercialization. - Plan to broaden the gaming membership business to more game genres and unveil new revenue-generating products and marketing strategies. - Shift to performance-based game promotions, such as cost-per-sale model. - Anticipate advertising and other revenues will grow year-over-year in 2024 with their overall revenue share exceeding 20%, while live-streaming revenue is expected to face downward pressure. - The rapid growth of innovative businesses may have a comparatively limited effect on overall revenue scale, but the company continues to pursue breakthroughs in these areas.

• Macroeconomic dynamics and evolving operating landscape posing challenges. - Competition for streamer resources within the legal compliance framework. - Potential downward pressure on MAUs due to cross-platform content sharing trends.

Q: How should we see the stability of our streamers and how should we see the future trend?

A: Overall, streamers remain relatively stable with exclusive cooperation agreements. For core streamers with expiring agreements, they actively engage in renewal discussions. DouYu has a mechanism for identifying and cultivating gaming streamers, offering content production options, data analysis tools, and customized resources. It is intensifying refined operations and support for streamers across different tiers.

Q: Can you give more color on your strategy in 2024?

A: 2024 plans focus on streamer resources, content ecosystem, and cooperation with game developers. Concentrate on enhancing streamer IP, fostering gaming streamers, diversifying streamer monetization. Elevate content ROI, balance content costs, and centralize resources for cooperation with game developers. Also, initiated organizational restructuring to improve operating efficiency.

Q: How does the management team evaluate the impact of some top-tier content games being branded to stream on DouYu platform?

A: The user base of China's Internet and gaming sector is near saturation, so platforms are pivoting to core business and cross-platform collaborations. DouYu has embraced open content, explored cooperation avenues with other platforms, and piloted content promotions on WeChat channels. Leverages core user gaming needs, continues to roll out high-quality content and update product features to fulfill user needs.

Q: Could you please share more details about the plans and the goals for the upcoming year regarding non-live streaming revenue?

A: In 2024, plan to dive deeper into commercialization directly related to games. Bolster and broaden the gaming membership business to more game genres, unveil new revenue-generating products and marketing strategies. Ramp up performance-based game promotions, shifting from streamer-sponsored product placements to cost-per-sale model. Other smaller innovative businesses show promising momentum and will be expanded.

Q: Could you share the reason behind the year-over-year and quarter-over-quarter increase of regional expenses and the share buyback strategy?

A: Reasons for expense increase include organizational restructuring with salary reallocation and one-time personnel costs, and bad debt provisions. Regarding share buyback, on December 28, 2023, announced a program to repurchase up to USD 20 million of ordinary shares, showing confidence in the company's value and commitment to enhancing shareholder returns. Future adjustments may be based on strategic priorities and market conditions.