Good morning and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited's Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] I will now turn the call over to the first speaker today, Ms. Lingling Kong, IR Director at DouYu. Please go ahead, ma'am.

Thank you. Hello, everyone. Welcome to our fourth quarter and full year 2022 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 fourth quarter and full year 2022 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 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 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 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. Throughout 2022, against the backdrop of a complex and volatile macro environment, we remained committed to our long-term growth strategy of fostering a vibrant game-centric content ecosystem. We ended the year with a stable business performance achieved through a mix of operational adaptation and innovation that included optimizing our revenue structure, streamlining our operations, creating new services and enhancing monetization capabilities. In the fourth quarter, we continued to produce premium gaming content, upgrade our content operating model adding…

Thank you, Lingling. Hello, everyone. For the full year 2022, we focused on optimizing cost and developing revenue quality in order to improve financial performance. As we continue to invest in high-quality self-produced content and improve our revenue structure, we enhanced operating efficiency through adjusting our live streaming business, together with effective cost and expense controls. For the full year 2022, our gross margin expanded to 13.9% and adjusted net loss narrowed significantly to RMB7.6 million. Let's now look at our financial performance for the fourth quarter in more detail. Total net revenues in the fourth quarter of 2022 decreased by 27.8% year-over-year to RMB1.68 billion. Live streaming revenues were RMB1.6 billion, a decrease of 27.7% from RMB2.21 billion in the same period of 2021. The decrease was mainly attributable to two factors: our continued implementation of prudent operating strategies and the one-off impact of a decline in streamers' activities following the end of COVID-19 restrictions. As a result, virtual gifting interactions were partially impaired, which caused a year-over-year decrease in quarterly ARP. Our quarterly ARP was RMB293, down 4%, from RMB305 in the same period last year. Advertising and other revenues were RMB84.3 million compared with RMB118.5 million in the same period of 2021. The year-over-year decrease was primarily attributable to the soft demand for brand advertising amid the challenging microeconomic environment. The decline was partially offset by increase in other revenues contributed by game-specific membership services. Cost of revenues in the fourth quarter of 2022 was RMB1.5 billion, a decrease of 28.2% compared with RMB2.08 billion in the same period of 2021. Revenue sharing fees and content costs decreased by 31.2% to RMB1.27 billion from RMB1.85 billion in the same period of 2021. The decline was primarily driven by the following two factors: First, the decrease in revenue…

[Operator Instructions] And our first question today will come from Lei Zhang of Bank of America Securities.

Thanks for management for taking my question. My first question is mainly on your strategy. We noticed that you have invested in eSports contract this year. Can you share with us your strategy for 2023? And how should we deliver -- operating efficiency will have additional in-content cost? Secondly, we noticed that [ex partaking] attraction this year and can you share with us its performance in live streaming? And we also know that there are more new games to be launched this year. Will those games help our user growth and game streaming involvements?

As a leading game live streaming platform in China, we remain committed to our long-term growth strategy of fostering a vibrant game-centric content ecosystem. We continue to establish a diversified gaming platform by streamlining our operations and creating new services, propounding a vibrant game content ecosystem. Facing the ever-changing macro environment in the past two years, we've made some adjustments to pursue long-term sustainable development. Those adjustments include us actively modifying our operating strategy to optimize our revenue structure and controlling business spending through fine-tuned operations. All the measures we've taken have not only stabilized the overall company's business, but also improved our financial performance, and significantly narrowed our adjusted net loss for the full year 2022. Looking ahead to 2023, we will continue to execute prudent operational strategies and focus on the long-term business process. We will reduce our investment in traditional business lines with low ROI and focus on exploring new growth avenues. While pursuing growth in user scale, we will target improving user quality. By delivering high-quality content, upgrading our product structures and strengthening our interactive features, we are able to enrich our platform's ecosystem so that we can enhance our user experience and retention rate. In terms of cost allocation, we conducted a detailed evaluation of the ROI of each of our expenses in allocated company’s resources rationally and dynamically, dedicating limited resources to business lines with greater potential. For example, in terms of our user acquisition strategy when we compare it with content-driven user acquisition, we noticed that channel promotions drove user growth in the short term, but with lower retention rate and conversion rate. As users' needs have becoming -- become more diversified, focusing on channel promotion is no longer a sustainable user acquisition strategy. Therefore, we have adjusted our overall marketing strategy in…

Let me answer your second question about [Eggy Party]. [Eggy Party] is our casual interactive mobile game. The game is easy to operate in highly interactive features. For this game, we prepared experienced streamers in advance and adopted a charity incentive method to encourage more players to engage in the game’s livestream. Meanwhile, leveraging the functionality of our user community, we organized various [indiscernible] teaming up activities within our community channels. We also provided plenty of in-game items as rewards to increase player engagement and interaction. This helps us effectively promote the game’s popularity and improve our user stickiness on our platform from general tune-up. [Eggy Party’s] live streaming volume has ranked at the top of the industry. More than half of the segment's users participated in activities within our community channels during the promotional event. In terms of new games that we eagerly anticipated launch of more blockbuster game. For games content platform such as DouYu, high-quality games and there users are the most important for content generation and user growth. Based on game features, we will continue to create premium gaming content with greater interaction -- interactive and engaging features as well as wide-ranging selection. We can't predict the exact schedule of the launch of these games. But according to our practice, we will cooperate with game developers to promote the new games during the pre-launch stage. We will also select experienced streamers, enrich game content for players to watch and discuss and then provide interactive content, such as game tutorials and tournament events to increase user engagement, evaluate, elevate user experience and enhance user stickiness.

Okay. And our next question today will come from Thomas Chong of Jefferies.

Thanks management for taking my questions. My first question is regarding our strategic direction. Given that the company has made a number of strategic assessments in the past two years, how should we think about the industry trend? Or may I put in this way that, how should I think about the management thoughts regarding the game live broadcasting overall industry environment? And my second question is about the user scale for this year, if there's any qualitative color?

As we mentioned before, the competition we face in our industry has already transitioned from gaming live streaming to gaming content. Gaming content is a much larger market with a broader user base expanding beyond hardcore gamers, watching video game live streaming. This means, users' needs are evolving, which is both an opportunity and challenge for us. Given the large scale of our existing user base and revenue base, the challenge is how to adjust our products and operations to acquire new users and explore new commercialization channels. We insist on achieving success with premium game content. Specifically, we leverage high-quality game content to acquire new users and build a diversified product system to meet users' diverse needs and improve user stickiness. Attracted by wide-ranging content, high-quality users can also generate content through interacting and self-producing, fostering a virtuous cycle on our platform of content production and user development that we have emphasized to build a healthy and sustainable platform. It's what we've done in the past and what we'll continue to do in the future. Furthermore, for a long time, we paid considerable attention to our revenue scale based on live streaming -- based on our live streaming platforms, easing monetization features. However, we think this may harm our platform's ecosystem and healthy development in the long run. Therefore, we have recently reduced our marketing activities that target revenue growth. Instead, based on our virtual gifting revenue mode, we provided diversified products to cater different users' paying habits and demand, while also emphasizing our product’s sustainability. In addition, we are exploring new initiatives, such as a membership business. It took time to make these changes. Therefore, we focus on refining our operations and improving our cost and expenses control. In this way, while making the above adjustments, we still managed to maintain our platform's long-term profitability.

Let me answer your second question about MAU. As we have consistently communicated before, DouYu is a game-centric content platform that attracts and retains users by providing high-quality game-centric content and adopting user acquisition strategies to face different business environments. In 2023, to navigate the volatile macro environment with agility, we prioritized our long-term business profile, reduced our investment in traditional business lines with low ROI. Focusing on our user growth strategy of improving user quality, we strive to strengthen our content operations as well as explore commercialization avenues. Our total revenues are mainly contributed by our content-driven users with [indiscernible] habits. We plan to largely cut our promotional expenses this year, which will directly affect our platform’s MAU in the short term. Nevertheless, since most of these lower MAUs are short-term users on the platform, this strategy won’t affect our content operations or our monetization efficiency. In addition, with the purchase of copyrighted content, we expect to gain some tournament users. By observing traffic on our LoL game segment, we found that the increase in traffic that it brought, couldn't offset the decline in user scale resulting from sustainability, decreased our promotional expenses. We believe that operational adjustments will enable us to increase our resource allocation in order to build a more sustainable content ecosystem. Although the return on this investment takes time, we will ultimately enhance our overall competitiveness and support our platform’s long-term development. Thank you.

Our next question today will come from Yiwen Zhang of China Renaissance.

So I have a couple of questions. First question is regarding our DouYu’s content procurement. So can you assure our plan on how we plan to improve ROI on game content? And then secondly, can you give us an update on the 2022 whole year cash flow? Have we achieved positive operating cash inflow?

Thank you for your questions. As to the first question on copyright procurement, copyrighted tournaments played an important role in stabilizing our platform's traffic and improving our user engagement. In the past year, we adopted a selective copyright procurement strategy due to the overpricing of some copyrighted tournaments. With the price level of copyrighted tournaments gradually returning to a reasonable range, we have increased our investments in purchasing co-copyrights in 2023. Major copyrighted tournaments we have purchased so far include League of Legends; Honor of Kings; Peacekeeper Elite, Crossfire, [indiscernible] and DOTA2. For the tournament copyrights we purchased, we will improve our return on investment through innovative operations. In terms of enhancing user engagement, we will continue to upgrade interactive features on platform to meet users' diversified needs by building on our accumulated experience in live streaming and operating copyrighted tournaments. For example, in LPL, by leveraging our top-tier streamer resources, we selected 12 streamers to do a co-streaming of the tournament events. These streamers included both official tournament commentaries and top-tier streamers with massive fan base in these tournaments and on our platform. This co-streaming initiative achieved good results. The DAU of live streaming channel is on par with that of our official channel. In addition, the number of buddy chats is several times higher than that of our official channel. Furthermore, we featured more user-friendly access to videos and community channels, our live streaming channel, thereby, gaining more exposure for our diverse gaming content and attracted more users to join. In terms commercialization, we continue to integrate our copyrighted tournaments content with more refined operations. For example, we promote our game-specific membership services to tournament viewers. Meanwhile, we will explore more direct monetization opportunities based on copyrighted tournaments content. In addition to discussing the copyright price with copyright owners, we will communicate more proactively with them to explore reasonable long-term cooperation. So on the second question of cash flows. As of December 31, 2022, our overall cash balance, including cash and cash equivalents, restricted cash and deposits amounted to RMB6.81 billion, an increase of RMB170 million compared with RMB 6.64 billion in the same period of 2021. This is mainly due to two factors: First, the increase in our cash balance is primarily a result of reporting currency translation as appreciation of the U.S. dollar increased value of the large amount of U.S. dollar-denominated cash assets we hold, totaling RMB480 million. Second, in terms of cash outflow, we used a total of RMB110 million in cash for the share repurchase. Other total cash outflow was RMB210 million, of which the operating cash outflow was RMB77.8 million. Thank you.

Our next question today will come from Raphael Chen of BOCI.

Thanks for taking my question. My question is regarding the paying user trend. Could management elaborate on how the current operations strategy will impact the paying users going forward? It would be great if management could share more insight on the paying user trend, especially in the year of 2022?

Thank you for your question. As mentioned previously, improving user quality is our key focus this year. In the second half of last year, we canceled some marketing activities for new paying users with low rates of return. That reflects the high quality of our current paying users with consistent paying behaviors for our services. In 2023, we plan to further reduce our marketing expenses and acquisition expenses for paying user acquisition, which will have an impact on paying user base. In 2023, we will continue to improve revenue quality and maintain our core paying users business and also their willingness to pay, shifting the focus of revenue generation to the following two areas: First of all, we will put more emphasis on maintaining core paying users to ensure core business stability. We launched various tiers of paying products based on our users' different abilities to pay in order to sustain and improve their willingness to do so. Meanwhile, we rolled out more companionship-oriented functions and activities for our fans, but only maintaining the day-to-day interactions between streamers and the fans, but also enhancing the fans' willingness to pay. Last year, we upgraded our user benefits and strengthened our interactive functions, substantially improving fan stickiness and steadily increasing members' renewal rates. Second, we will explore more new non-virtual gifting business model based on game characteristics to improve our revenue mix. The game-specific membership service that we launched in the second half of 2022 is progressing smoothly. Despite its relatively small revenue currently, we believe this business can satisfy some gamers' demands for the games themselves. It not only attracts large number of game fans, thereby adding new users to our platform, but also appeals to existing users. So promoting a virtuous cycle in our game content ecosystem. In short, developing our membership business will be a priority for 2023. Specifically, we will continue strengthening our platform-wide membership service, while reinforcing our close cooperation with game developers to delve deep into users' gaming needs and extend our game-specific membership service to multiple segments. Thank you.

Thank you. That's all the time we have for questions. I will now turn the call back over to management for closing remarks.

On behalf of the management, thank you for joining our call. We look forward to speaking with everyone next quarter.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.