Good morning and good evening, ladies and gentlemen. Thank you and welcome to DouYu International Holdings Limited Fourth Quarter and Full Year 2021 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 would now like to turn the call over to your first speaker today, Ms. Lingling Kong, IR Director at DouYu. Please go ahead ma'am.

Thank you, operator and hello, everyone. Welcome to our fourth quarter and full year 2021 earnings call. Joining us today are Mr. Shaojie Chen, Chairman and Chief Executive Officer; Mr. Mingming Su, Chief Strategy Officer; and Mr. Hao Cao, Vice President of Finance. You can refer to our financial results on our IR website at ir.douyu.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 Securities 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 performance – without 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 statements, risk factors and 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 Chairman and CEO Mr. Shaojie Chen.

In the fourth quarter we made further headway on our efforts to explore new growth drivers for user traffic and revenue generation as we maintain the stable development of our core businesses. Total net revenues were RMB 2.33 billion and average paying user count reached 7.3 million in the fourth quarter. Mobile MAU for the fourth quarter increased by 7.2% year-over-year to 62.4 million. The MAU growth was mainly driven by three factors. First, during the traditional eSports tournament season, we produced and acquired a range of high-quality content to capitalize on elevated in series and surrounding tournament events. We also rolled out a series of promotional events in cooperation with game developers to drive MAU growth. Second, the mobile version release of the blockbuster game LoL: Wild Rift helped drive additional traffic to our platform, leveraging our industry-leading LoL Streamers, extensive operational experience and comprehensive content library, we were able to successfully develop and launch a range of exclusive content and promotional campaigns in collaboration with the game developers. By connecting our platform, streamers, developers and distributors, we were able to develop a comprehensive content ecosystem to secure leading traffic inflows for LoL: Wild Rift. Finally, we leveraged the advantages of our integrated content platform to further drive MAU growth through our production and promotion of high-quality short videos. Turning to our content update. During the quarter, we continued to refine our content offerings for both eSports and non-eSports categories, as the continued development of our integrated content ecosystem, combining live streaming, videos, graphics and interactive communities, we also refined customized operation for each game to highlight its unique features. Even as we continue to offer traditional live streaming content services, we also experimented with innovative content format and operating methodologies to further improve our game-centric content system. Meanwhile,…

Thank you Lingling. Hello everyone. Total net revenues in the fourth quarter of 2021 increased by 2.6% to RMB 2.33 billion. Live streaming revenues were RMB 2.21 billion, an increase of 6.7% from RMB 2.07 billion in the same period of 2020. While the size of our core paying users largely remained stable, our effective operational strategies helped to improve our monetization efficiency, resulting in an 11.7% increase up to RMB 305 in the fourth quarter from RMB 273 in the same period last year. Advertising and other revenues were RMB 118.5 million compared with RMB 198.5 million in the same period of 2020. The year-over-year decrease was primarily attributable to the continued exploration of new commercialization models by using a portion of advertised traffic that could have been directly monetized. Simultaneously, we were also partially impacted by soft demand for advertising cost by a challenging macro environment and regulations related to the gaming industry. Cost of revenues in the fourth quarter of 2021 was RMB 2.08 billion, remaining relatively flat compared with RMB 2.09 billion in the same period of 2020. Revenue sharing fees and the content costs were RMB 1.85 billion, unchanged from RMB 1.85 billion in the same period of 2020. More specifically, there was an increase in revenue sharing fees, which is in accordance with increased live streaming revenues. Such increase was offset by the decrease in the cost of broadcasting rights. Other common costs remained stable on a year-over-year basis, as we continue to optimize in-house production efficiency. Bandwidth costs in the fourth quarter of 2021 decreased by 1.6% to RMB 167.9 million from RMB 170.7 million in the same period of 2020. This decrease was mainly due to lower per unit bandwidth costs, which benefited from our improved procurement efficiency with major suppliers. Gross…

Thank you. And we will now begin the question-and-answer session. And our first question today will come from Lei Zhang from Bank of America Securities. Please go ahead.

Thanks management for taking my questions. Two questions here. First, can you share with us some updates on the regulatory change recently and the impact to our business. Secondly, I noted that we have adjusted our content investments in eSports licensing content and can you share with us the logic behind this? Thank you.

Let me answer your first question. There have been continued advance in regulatory guidelines for the live streaming industry, internal industry results to probably implement measures and refine operations to comply with regulatory requirements. No new rules were introduced additionally. We have made internal operational adjustments, future updates, adopted a more prudent operational strategy and implemented strict internal review to improve the platform’s community building and to promote the long-term development of our platform. For example, for unlicensed games, we have been gradually redirecting traffic and streamers to license their games of similar genres since the third quarter of 2021 to ensure proper traffic allocation between different game segments, maintain streamer income levels and their willingness to stream. The initial impact of these adjustments was reflected in our first quarter performance. We will also pay close attention to any regulatory changes and adjust our operational strategies in a timely manner. Thank you.

Okay. I will translate Mr. Chen's answers. So as we previously mentioned in the prepared remarks we have conducted extensive analysis and calculations in the context of the increasing tournament content license fees. We concluded that the traffic -- the growth in game traffic or revenue generated by this large tournament has been outpaced significantly by the growth in corporate costs. Our analysis of user behavior data found that a majority of our users primarily watch games live streamed by individual streamers. So within comparison the proportion of users who mainly watch the tournament is relatively low. Meanwhile, the return rate of inactive users through tournaments content has been declining. So in addition historical data always shows that large-scale eSports tournaments do not drive revenue growth. They can even have a negative impact on our platform's revenue. This is due to the different user experience delivered by these two content segments. While watching tournaments is a complete immersive experience virtual gifting revenue is generated by interactions between users and streamers. During the tournament users are immersed in watching the game and therefore tend to spend less time interacting with streamers which negatively impacts their willingness to pay. So based on this we have adopted a selective corporate procurement strategy. We conduct comprehensive evaluation on the deliverable value of each tournament both in terms of traffic and monetization to determine our corporate copyright B price. We will continue ongoing dialogue with copyright owners regarding copyright prices and explore more rational and long-term models for corporation. For those purchased content license, we aim to improve the return on investment through innovative operational methods. So we would like to emphasize that our selective purchase of permanent copyright does not mean that we will reduce our investment in content. Based on our in-depth understanding of the gaming industry years of operational experience, we will deepen our cooperation with game developers and increase our investment in original content operations and community building in order to keep our competitive advantage in the premium content and game operations. Thank you. Operator, next please.

And thank you. Our next question today will come from Yiwen Zhang of China Renaissance. Please go ahead.

Thanks everyone for taking my question. So, three questions. So, just wondering you mentioned some adjustments how license corporate procurement, which actually generates a lot of discussion. So, what's your part will be in live streaming competition as if now. And secondly, recently there was some streamers who are considered to be final participation and the minimal paying for back taxes on the amenities. So, just wondering if this has any impact on our new sharing policy. And then lastly, we know that we have a game content-centric strategy, so what's the implication from our marketing strategy and also expand it? Thank you.

As I mentioned earlier, we adjust our corporate procurement strategy because we believe, the value delivered to us by corporate is not in line with the increase in costs. Another factor behind this strategic adjustment is the evolving environment of the live streaming industry. As previously mentioned, the growth rate of new user acquisitions through game live streaming is decreasing, take large-scale eSports tournament as an example. They delivered a substantial amount of new traffic in early stages of game live streaming, especially high-quality users in the eSports segment. With the development of gaming live streaming, high-quality users have become regular users of live streaming platforms. So these users have certain preferences, for the platform's regular streaming content, so that their viewing hours and stickiness to the platform are relatively stable. Therefore, it is very difficult to drive additional traffic growth by only broadcasting eSports tournament. However, we have seen that the continued expansion of short video platforms have attracted more diverse user groups to consume gaming content, while enlarging the potential user base for the entire gaming content industry. So that is to say, our industry has already transitioned from a competition in gaming live streaming to gaming content. At the same time, our user acquisition strategy has also transitioned from a stage of capturing hard-core gamers to stabilizing our hard-core gamer base, while attracting new cash flow and meet core gamers. Our platform primarily consists of hard-core gamers, whose live streaming service penetration rate is high. They have high expectations for the quality of our content and our streamers. This uses our core users and exhibit high-level of stickiness. When contracted streamers cannot frequently switch between different platforms, the overall competitive environment is relatively stable. This user group is, very stable and provide steady traffic through our platform. The live streaming penetration rate for casual and mid-core users is relatively low, as we have more diversified needs for game genres and game content. We believe that short video graphics and other comprehensive game content and community-centric features can attract casual and mid-core gamers. This is the reason why we expand our content offerings and build our communities. So, as various options -- using options for users consistently grow, we believe that differentiated content, refine operations, and improve profitability as a key to stable and healthy growth for the platform. Therefore, starting last year, we have been implementing platform strategy upgrades to continuously refine our live streaming video and graphic content. So as to we can enlarge our user base to more casual and mid-core gamers. Thank you.

Regarding the second question about the taxation, first of all, we have strictly and continuously adhered to our relevant laws and regulations regarding taxation. As a result, investigations into tax irregularities of individual streamers did not negatively impact our platform. For streamers, who are directly contracted with us, we withhold their income taxes to ensure the tax obligations are fulfilled. Separately, there are a large number of streamers who signed their contracts with third-parties, as the obligation to pay income taxes lies with these third-parties. We strongly advise those partners to comply with the taxation loss. At present, our streamer engagement models have not changed. As I just mentioned because we consistently uphold these strict tax compliance requirements, investigations into tax irregularities of individual streamers have not negatively impacted our platform. Therefore, we will not adjust our revenue sharing fee structure. As a result of the recent investigations into tax evasion. About the last question on the sales and marketing strategy. As I mentioned previously, our high-quality traffic generation has been slowed down by pure gaming live streaming. Competition within the industry has switched from gaming live streaming to gaming content. Our user acquisition strategy has also changed from hard-core gamers to stabilizing hard-core gamers while attracting new casual and mid-core gamers. Hard-core gamers are our core user group. For a long time this user group has preferred specific game genres and live streaming with higher stickiness to our platform. Based on our long-term operating experience and accumulated user behavior data, we will maintain stable streamer resources to ensure continued supply of high-quality content. We will also produce more exclusive self-produced content and launch additional marketing campaigns to increase user activity and build a healthy game-centric community. Casual and mid-core gamers user groups that we are increasingly impacting. This group is relatively large and has more diverse needs in terms of gaming content and categories. By targeting this user group, we enhanced our cooperation with game developers to attract new users through our innovative operations and traffic acquisitions. Meanwhile, we leveraged our high-quality content to produce short videos to promote our platform and acquire users while improving users' stickiness utilizing our active community. Both approaches delivered encouraging results demonstrating our platform's competitive advantages in our rich content library and a vibrant game-centric community. Thank you.

Our next question today will come from Thomas Chong of Jefferies.

Thanks management for taking my questions. My first question is about the gaming approval. Does the slowdown in gaming approval affect our operations? And my second question is about our share repurchase plan. Can management comments are forced and the progress that we should anticipate in coming quarters? Thank you.

Let me answer your first question. We have not seen any significant impact on our existing users from the slowdown of approvals for new games as our businesses based on the conversion of gamers into viewing hours of game-centric content. There are a large number of players of many high-quality games who are our existing or potential users following successful conversion of gamers into viewers of our game-centric content operational metrics such as user stickiness, time spend per user, and user engagement have remained very stable. The primary impact from the slowdown in approval for new games has been new user growth which is reflected in our recent momentum. The approval of new games is not on hold rather the slowdown has been caused by stricter standards for approval of new games, which we believe will be advantageous for the gaming industry in the long run. As for game-centric content platforms, such as DouYu, we will also benefit from these stricter standards since high-quality games and their users, are the most important resources for our content generation and user growth. And recently, the quality of the games launched on our platform has been very high. Through the integration of live streaming video content, graphic content, community discussion and our customized operations for each game segment, we have been able to successfully promote these premium games and attract new users. This has further demonstrated the effectiveness of our operational strategy of cultivating diversified game-centric content community. Cao Mr., answer the second question.

Okay. About the second question, by the end of August we had announced share repurchased program for a total amount of US$100 million. As of December 31, 2021, we had repurchased an aggregate of US$16.7 million worth of ADS, due to the impact of certain SEC rules and restrictions, a large portion of the repurchase funds has been set aside for further repurchase but has not been settled yet. Thank you.

Our next question today will come from Alex Poon of Morgan Stanley. Please go ahead.

I have two questions. My first question is related to our -- the performance of our -- after our strategic change, is there any performance data that we can share? And second is -- my second question is related to -- for new games launch. What is our operating policy for new games launch? And is there any data that you can share with us at this stage? Thank you very much.

So, during the past year, we have upgraded our content product offerings centered around our game centric content platform. On the content side, we expanded our content to including video and community segments, well-integrating live streaming video and graphic content communities and other content forms. We have also cooperated with game developers to carry out multifaceted promotions and content offerings to meet the diversified needs of our users. On the product side, we made multiple upgrades to our mobile interface. On one hand, we highlighted our video content graphic content and community functions. On the other hand, we refined our customized operations to highlight each game's features. We were able to increase community in the activity and user engagement through our customized content layout and promotional activities for different game segments. For our marketing leading traditional eSports, we continue to foster our close relationship with game developers to jointly host tournaments and the launch of self-held promotional activities. Furthermore, we are refining our content offerings and operations to improve retention rate, user activity and user stickiness. Building on our advantages in the traditional eSports games, we expanded our gaming courage into NiNe Esports games. NiNe Esports games additions mainly came from newly released games, to which we have applied our upgraded content system and game segment-based operating strategy. We have achieved promising results and devised operating mechanisms that is both effective and efficient. We have achieved encouraging results for new games launched in 2021 and including NARAKA: BLADEPOINT, LOL mobile, and the recently launched Tower of Fantasy by successfully executing our upgraded operating strategy. As a content platform, the evolution of our content ecosystem and changing user perceptions of our platform of both cumulative processes. We are confident that we will continue to implement our operating strategy; the viewing time for nontraditional gaming content will increase as a proportion of overall viewing time. Our platform content will become more diversified and will cover more user groups. Thank you.

Let me answer your second question. Following a year of implementing our game-centric operations, we have produced a major system with established procedures for new game segments and their respective operating strategies. For our new game, we attracted top streamers to stream and promote the game during the launch date. We also recruit and cultivate a large number of new streamers to ensure continued supply. In terms of videos and graphics, we collaborate with game developers and streamers to produce content such as multiple PGC videos and graphic centric guides to activity promote games. Through this means, we increase user viewing time and enhance user engagement. For our gaming communities, we invite influencers such as K.O.L to create hot topics and both the interaction between streamers, game developers and users. At the initial status of our games launch, we established an integrated gaming segment. This combines live streaming promotional events and gaming strategy discussions, to provide a comprehensive game content to our users. For newly released games, gamers they already have many questions. We summarize and analyze this questions and assign solution and content creation task to streamers. By doing this, we gradually from our game-centric helpful and friendly discussion-based environment. Take Tower of Fantasy, as an example. Each day, over 50% of its players on our platform not only view live streams they also participate in our gaming activities and game-related discussions. During our games growth stage, we collaborate intensely with the games developers. Take LoL Mobile as an example, we encourage users to complete certain tasks for offering virtual rewards, such as in-game items. Both user growth and viewing time increase impressively. Meanwhile, we produced a variety of game-centric PGC content, such as chat-based talk show that was tailor-made for NARAKA: BLADEPOINT to effectively enhance user engagement and…

Thank you. That’s all.

Our next question today will come from Ritchie Sun of HSBC. Please go ahead.

So I noticed that the self-set marketing expenses grow much faster than the top line growth. Can management comment on why is that? And how do we assess the effectiveness of traffic acquisition? And how will this does the market can expand trend in the next few quarters? Thank you.

Okay. Sales and marketing expenses mainly consisted of staffing costs, China promotion costs, expenses for online and off-line events and sponsorship fees for eSports teams. The year-over-year growth was mainly due to increased promotions for our new product features and increased costs from utilizing additional promotional channels for user acquisition along with the upgrade of our content offerings. As previously mentioned in our discussion, regarding our platform strategy, we need to expand our promotional efforts to increase our coverage and influence attract more casual and mid-core games. We will carefully select appropriate marketing channels based on continued data analytics to increase our marketing efficiency on a dynamic evaluation basis. We will continue to increase spending on the channels, delivering high-quality users and cut back or stop spending on those channels, whose acquisition efficiency or user quality does not meet our standards. Thank you.

Great. Thank You. Okay. And ladies and gentlemen, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to management for any closing remarks.

Thank you for joining our call. We look forward to speaking with every one of you next quarter. Bye.

Ladies and gentlemen, the conference has now concluded and we thank you for attending today's presentation and you may now disconnect your lines.