DouYu International Holdings Limited Q1 FY2024 earnings call

• Focused on leveraging company strengths and improving revenue structure by strengthening cooperation with game developers, optimizing organizational structure and user strategy.
• Mobile MAUs were 45.3 million in Q1 2024, a 9.7% year-over-year decrease, but loss was mainly from low-engagement users with minimal impact on monetization efficiency. Gaming commercialization continued to bring in fresh and reengaged users, improving payment conversion rate of targeted gaming traffic.
• Broadcasted nearly 30 large-scale official tournaments, increased appeal of gaming event content and ROI of copyrighted content. For example, in CrossFire segment, advantages like top streamers and partnerships attracted a large user network, and promoted in-game prompts through live streamed events.
• Produced over 40 eSports tournaments, explored reciprocal content sharing collaborations with partners. Launched cross-platform collaborative initiatives covering various game segments and teamed up with Taobao to curate content. Signature self-produced event like Valorant Cup was a highlight.
• Integrated streamers' strengths with platform to enhance synergy. Crafted engaging content initiatives highlighting top streamers' personal brands, recreated and promoted content outside DouYu's ecosystem, and ramped up game promotions with better conversion rates than market averages, optimizing revenue structure.

In the first quarter of 2024, DouYu's total net revenues decreased by 29.9% year-over-year to RMB1.04 billion. Livestreaming revenues were RMB0.8 billion, down 41.5% from the same period in 2023. Advertising and other revenues increased significantly by 109.3% to RMB238.8 million. Cost of revenues decreased by 28.8% to RMB0.93 billion. Gross profit was RMB109.0 million, with a gross margin of 10.5% compared to 11.9% in the same period of 2023. Staff-related expenses were reduced across operating expenses, with sales and marketing expenses down 16.6%, research and development expenses down 25%, and general and administrative expenses down 28.4%. Net loss for the quarter was RMB88 million.

• Due to macroeconomic and operating uncertainties, and revenue pressures from live streaming business adjustments, expected some deleverage on profit level due to downsizing of revenue base. However, will closely monitor market dynamics and flexibly fine-tune strategies.
• Financial standing is strong with cash and cash equivalents, restricted cash, and short-term and long-term bank assets of RMB6.76 billion as of March 31, 2024. Strictly follow positive ROI standards in allocating funds to new business ventures, and prioritize shareholders' long-term interests by repurchasing shares.

• Challenging macroeconomic conditions which affected paying users and ARPU.
• Intense market competition, especially from short-video platforms, impacting MAU in the short term.
• Uncertainties in macroeconomic and operating environment causing potential deleverage on profit level due to revenue base downsizing.

Q: Regarding the net loss in the first quarter, can management share any update on the three-year margin outlook? And the second one is on the use of cash?

A: As noted amidst challenging macroeconomic dynamics, focus is on long-term sustainable growth by adjusting business operations. Stabilized traditional businesses, refined streamlined operations, and explored diversified revenue streams. In 2024, navigating competition and macro headwinds, adopted agile approach. Due to macro and operating uncertainties, revenue pressures from live streaming business adjustments, expect deleverage on profit level. Financial standing strong with RMB6.76 billion in cash and related assets. Strictly follow positive ROI standards in allocating funds to new ventures, and prioritize shareholders' interests by repurchasing shares.

Q: About the MAU softness in Q1 and how should we think about the outlook?

A: MAU decline in Q1 was mainly due to competition from short-video platforms. MAU losses were predominantly from low-engagement users with short viewing hours, minimal impact on monetization efficiency. Responded proactively with cross-platform content collaboration, enhanced collaborations with game developers, and offered premium content. Anticipated potential downward pressure on mobile MAUs in 2024, but will adapt operations agilely and focus on core users to drive monetization efficiency.

Q: About the progress made in terms of the content collaboration and the effectiveness seen so far and the expectation going forward?

A: Cross-platform content sharing is a trend with user demand for diverse content. Focused on content innovation and cross-platform collaborations in Q1, working with multiple platforms to tap into high-quality streamer assets. These models increased border-based traffic and user engagement. Deepened partnership with Taobao, co-launched gaming shopping bonanza and co-created content in Valorant segment. Cross-platform collaborations are piloted on a small scale, will refine models based on feedback and data analysis, and believe they can raise content standards and promote healthy development of gaming live streaming industry.

Q: About the current revenue contribution from our cooperation with game developers and games already included in this model, and thoughts on the future plan?

A: Commercialization collaborations with game developers are an extension of content offerings. Collaborations mainly focus on game prompt sales through collaborative promotional channels and gaming memberships. Revenue from collaborative promotional channels is minor currently, but GMV is meaningful. Revenue from game memberships has boosted other revenues since 2022. Have collaborations with over 10 games. Pivoting to performance-based cost per-sell promotions for new games, expanding from top tier streamers to niche streamers. Expect advertising and other revenues to grow year-over-year in 2024 with revenue share exceeding 20%.