Good morning, and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] I would 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 2023 earnings call. Joining us today are Mr. Mingming Su, Chief Strategy Officer; Mr. Hao Cao, Vice President of Finance; and Ms. Simin Ren, Vice President from the Interim Management Committee. You can refer to our fourth quarter and full year 2023 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 involves 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 statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statement, risk factors and the 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 Interim Management Committee on business update and the call will be handed to our Vice President of Finance, Mr. Hao Cao, for financial discussion. The year 2023 continued to be filled with challenges. Amid this backdrop, we remain firmly committed to executing our long-term growth strategy of fostering a vibrant, diverse, game-centric content ecosystem while prioritizing content across our platform. We deepened our cooperation with game developers to enhance commercialization while adjusting our revenue and marketing strategies to be more…

Thank you, Lingling. Hello, everyone. Looking back on 2023, despite ongoing macro headwinds, we diversified our revenue streams with advertising and other revenues contributing 13.2% of our total revenue. Meanwhile, we successfully executed our cost-effective strategy, adjusting our live streaming business to prioritize healthy margins and prudently managing our costs and expenses to enhance our earnings. For the full year of 2023, we achieved an adjusted net income of RMB 154 million. Let's now look at our financial performance for the fourth quarter in more detail. Total net revenues in the fourth quarter of 2023 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 RMB 1.6 billion in the same period of 2022. The decrease was primarily due to soft macroeconomic conditions and our deliberate reduction in revenue-generating promotions during the quarter. These factors affected the spending awareness of some new and price-sensitive paying users. Additionally, our strategic decrease in marketing spending led to a smaller user base, resulting in a year-over-year decrease in total paying users. In response to the soft consumer sentiment, we continued to offer lower-priced revenue products to maintain the spending habits of our mid to long-tail paying users, leading to a decrease in quarterly ARPU. Our quarterly ARPU was RMB 278, down 4.9% from RMB 293 in the same period last year. Advertising and other revenues were RMB 275.2 million, a significant increase of 226.5% from RMB 84.3 million in the same period of 2022. The year-over-year increase was primarily driven by other revenues generated through our new innovative businesses, such as a game-specific membership service and a voice-based social networking service. Cost of revenues in the fourth quarter of 2023 was RMB 1.17 billion, a decrease of 21.8% compared with RMB 1.5 billion…

[Operator Instructions] The first question comes from the line of Brian Gong with Citigroup. Please go ahead.

Foreign Language I'll translate it myself. Thanks for taking my question. With more games now can be live-broadcasted on DouYu's platform, how should we see the stability of our streamers and how should we see the future trend? Thank you

So overall, our streamers remain relatively stable. We have exclusive cooperation agreements with our platform's top-tier streamers, securing stability throughout relevant contract terms. For core streamers whose agreements are about to expire, with the value market condition in mind, we actively engage in renewal discussion with them in advance. We comprehensively assess contract costs and operating efficiencies and selectively negotiate and renew contracts. Over the years, DouYu's game-centric content ecosystem has fostered a wild array of influential streamers. What I need to highlight here is for some of those have emerged as breakup streamers, begun their live-streaming journey as gaming streamers on DouYu. Their achievements underscore DouYu's prowess in nurturing and supporting streamers. Building upon our years of experience in gaming content operations, we have developed a sophisticated and effective mechanism for identifying and cultivating gaming streamers. Firstly, our platform offers streamers a multitude of content production options based on our commitment to content innovation and diversity. Secondly, our data analysis tools empower streamers with better insights into user needs and market dynamics, enabling them to fine-tune their live-streaming strategies, enhance quality, and boost efficiency. And unlike short video platforms, we provide our streamers not merely algorithm-based data insights, but also with customized resources and content support based on each streamer's unique characteristics. This approach grants streamers ample time for development while empowering them to grow. We are intensifying our focus on refined operations, on customizing our services and support to streamers across different tiers. To build on the existing influence of top-tier streamers, we continue to reinforce their brand presence and impact by enhancing streamer IP through high-quality content and strategic operations, channeling and driving traffic both within and beyond our platform. With mid-tier streamers, we mainly focus on increasing their visibility by inviting them to participate in our…

[Operator Instructions] The next question comes from the line of Lei Zhang with Bank of America Merrill Lynch. Please go ahead.

Foreign Language Hi. Thank you management for accepting my question; my question is about 2024's outlook. Can you give us more color on your strategy and the business plan in 2024?

Thank you for your question. As we mentioned in our prepared remarks, our 2024 plans and focus will revolve around the company's three core strengths: streamer, content, and the cooperation with game developers. Let me walk you through these plans one by one. In terms of streamer resources, our approach includes three key initiatives. Firstly, we will concentrate on our core streamer resources by enhancing streamer IP and fortifying IP operations. By managing and promoting streamer accounts both across and beyond our platform, we aim to bolster streamer appeal and drive increased traffic within our platform. Secondly, we will prioritize fostering gaming streamers and recruiting more eSports professional players. Thirdly, we will diversify our streamers' monetization avenues through cooperation with game developers. In terms of our content ecosystem, our goal is to elevate content ROI while upholding premium quality. We strive to balance overall content cost by optimizing the number of official eSports tournaments and self-produced gaming events. Additionally, we are delving into direct commercialization prospects for gaming event content, such as resources sharing and game profit sales to improve the ROI of our gaming content. Our advancements in both streamer and content are closely tied to our cooperation with game developers. We have now centralized our resources and planning efforts, shifting away from our past approach where each business unit independently provides collaborative proposals. By fully understanding our users' content and gaming needs, we can pursue more in-depth collaborations with game developers. Additionally, we are tailoring game promotions, operations and commercialization strategies for game developers based on each game's specific development stage. To facilitate more effective execution of our plans and amplify the scenery of our core strengths , we began an organizational restructuring at the outset of 2024, particularly within business units related to our content ecosystem. We used to structure our content ecosystem business units around individual gaming projects with distinct teams under each business unit managing streamer operations, events and activities, and game developer cooperation. Our restructuring has enabled us to shift away from game-based operations and consolidate fragmented resources associated with gaming segments. Our internal communication channels are now more streamlined, allowing us to amplify our platform's collective strength. In short, our goals this year are to enhance compliance while improving content quality and the user experience. We are committed to diversifying revenue streams and continuously optimizing costs and expenses. In doing so, we can stabilize and promote long-term healthy platform growth amidst the continually evolving market dynamics. Thank you.

Excuse me, Lei Zhang, are you done with your question?

Yes, next question, please?

The next question comes from the line of Raphael Chen with BOCI Research.

Foreign Language I'm just wondering how does the management team evaluate the impact of some top-tier content games, such as Honor of Kings and League of Legends, being branded to stream on DouYu platform? Thank you.

Thank you, Rafael. So the user base of China's Internet and gaming sector is near saturation. In response, starting last year, Internet platforms started pivoting away from traditional traffic acquisition methods. Instead, they have been prioritizing core business operations and competitive strengths, improving operating efficiencies and foster cross-platform collaborations. So cross-platform content sharing is emerging as a strategic trend. We have actively embraced the trend of open content. We have focused on our core strengths to fortify business fundamentals, also diversified our business scope and models. Being mindful of competition risks while seizing diverse opportunities, we have been actively innovating our content offerings and fostering cross-platform collaborations. In addition to producing differentiated and appealing content integrating our streamers' unique characteristics, we also explored cooperation avenues with other platforms to expand our content ecosystem, launching joint promotions and collaborative initiatives powered by the premium content features on our platform. For example, we have been progressively piloting on partnerships with other platforms based on each party's top-tier exclusive streamer resources. We've been working on great complementary content synergies offering eSport live streaming users more premium content and more convenient viewing options. Additionally, in the second half of 2023, we started piloting content promotions on WeChat channels with selected streamers. These enabled streamers to sync their live streaming content on WeChat channels to improve their content visibility. Given the vast user base of short video platforms, we might encounter certain challenges in the short-term, particularly potential downward pressure in MAUs this year. We have proactively addressed these risks by leveraging our strengths. As part of our primitive measures, we deepened our operation around the gaming needs of our core users, including consistently rolling out high-quality content and operational activities and updating product features to fulfill diverse user needs. According to our data analysis so far, despite MAU declines, our platform's core user behavior matrix remained relatively stable. Moreover, leveraging insight from our prior commercial collaborations, marketing campaigns centered around game prompts, including limited time sales during live streaming sessions and regular game membership services that not only contribute to revenue diversification, but also foster new user acquisition while deepening existing user engagement. Moving forward, we will continuously explore more operational models to solidify our core user base and to pursue opportunities to propel growth across our platform. Thank you. Operator, next question, please?

The next question comes from the line of Derek Tse with Morgan Stanley. Please go ahead.

Foreign Language Thank you.We noticed that the company has made significant progress in the non-live streaming revenue in 2023. And you just mentioned earlier that diversifying revenue is one of the key focuses. Could you please share more details about the plans and the goals for the upcoming year?

In 2023, advertising and other revenues surged by 135% year-over-year with its revenue contribution increasing from 4.4% in 2022 to 13.2%. This remarkable growth was driven by revenues from our new revenue-generating models. Capitalizing our strengths in gaming content operations since 2022, we have been exploring diverse avenues for commercialization beyond the traditional virtual gifting model. The robust growth of gaming membership business and certain smaller innovative initiatives, such as our voice-based social networking service, both contributed to other revenues in 2023. In 2024, we plan to dive deeper into commercialization directly related to games. Given that the majority of our platform's core users are gamers, there is a clear demand for game prompts and new games which closely aligns with our platform's gaming content. Firstly, we will bolster and broaden the scope of gaming membership business, aiming to expand this service to more game genres. We plan to unveil new revenue-generating products and marketing strategies tailored to distinctive characteristics and player needs. Secondly, we will ramp up our focus on performance-based game promotions. We intend to pivot away from streamer-sponsored product placements and gradually transition to performance-based promotions, such as cost-per-sale model. Streamers will have the flexibility to select new games for promotion based on their expertise and audience preferences. The CPS model has been operational for some time now, yielding promising results with conversion rates surpassing market averages. Furthermore, our other smaller innovative businesses have shown promising momentum and are now making revenue contributions. While these ventures currently operate on a multi-scale, we will keep you informed of their progress and expand. Overall, we anticipate advertising and other revenues will grow year-over-year in 2024 with their overall revenue share exceeding 20%. Given the impact of macroeconomic factors and internal operational adjustments on traditional live-streaming business, we expect live-streaming revenue to experience downward pressure in 2024 as the overall revenue share from live-streaming remains significant. The rapid growth of our innovative businesses may have a comparatively limited effect on the company's overall revenue scale. Despite potential short-term growth pressure, as we fine-tune our core business, the company's financial remains solid and we continue to pursue breakthroughs in our innovative businesses. For example, in October 2023, we joined hands with Taobao and game developers to launch the game Shopping Bonanza on DouYu's official live-streaming channels on the Taobao platform, as well as live-streaming sessions on DouYu's platform, selling game prompts and gaming merchandise from popular mobile games like Genshin Impact, League of Legends, Dota 2, and CrossFire. Gamers showed considerable demand for those offerings. The result of this campaign proved that streamers have a substantial influence on gaming commercialization, unveiling vast potential opportunities. Moving forward, we will delve deeper into additional revenue-generating avenues within the gaming content value chain. Thank you. Next question, please?

The next question comes from the line of Thomas Chong with Jefferies.

Foreign Language I have two questions. My first question is, so we saw the year-over-year and quarter-over-quarter increase of regional expenses. So could we share the reason behind and how the management see the trend of operating expenses and the profitability in 2024? And my second question is about share buyback program. So we announced the share repurchase program and could we share our strategy on share buyback? And do we consider increasing the amount of buyback?

Thank you. I will answer the first question. There are two reasons for the year-over-year and sequential increase in operating expenses in the fourth quarter. First, at the onset of 2024, we announced organizational restructuring that will allow us to better respond to market dynamics and continually optimize the company's operating efficiency. As part of our staff were aligned to managerial functions, a portion of their salaries was allocated to administrative expenses in the fourth quarter, resulting in an increase in employee salaries and administrative expenses. We also incurred some one-time personnel costs as part of our ongoing workforce optimization efforts. These were part of our preliminary organizational structure adjustments and we anticipate further workforce adjustments in the first quarter of 2024. Second, we made provisions for bad debts of doubtful account receivables. The combination of these one-time expenses caused part of the increase in operating expenses for the fourth quarter and our goal of long-term sustainable growth throughout 2023. We adjusted our revenue and marketing strategies while continuing to make ROI-driven decisions and consistently optimizing our cost structure. These coordinated efforts resulted in a 28.7% year-over-year decrease in operating expenses for the full year of 2023. Importantly, we successfully transformed losses into gains at the adjusted net profit level heading into 2024. Our focus remains on enhancing our diversified commercialization capabilities across the platform while maintaining stringent control of our operating expenses. We are dedicated to upholding the company's financial stability in order to navigate complex and evolving macroeconomic dynamics. Let me answer your second question about buyback. We have been overcoming challenges arising from a blend of macroeconomic conditions and operational aspects. The company's Board of Directors and Interim Management Committee are fully committed to addressing these challenges head-on. As part of our strategic initiatives, we announced a share repurchase program on December 28, 2023, on which we plan to repurchase up to USD 20 million of the company's ordinary shares through ADS purchases. This initiative highlights our confidence in the value of the company as well as our commitment to enhancing shareholder returns. We are currently in the initial phase of implementing our share repurchase program. Future adjustments to the program may be made based on the company's strategic priorities and ongoing reviews of market conditions. Beyond returns, the foundation of enhancing shareholder value lies in the company's fundamental business operations. We have proven our business model is a resilient one and strongly believe in the company's long-term growth potential. Management's primary focus remains on executing our business strategies, identifying opportunities amidst challenges and propelling the company toward long-term sustainable growth. Throughout this journey, we will continue to show up our fundamentals, providing regular updates on our business operations and share repurchase program. Thank you. Operator, please.

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 our Interim Management Committee, we thank you for joining our call. We look forward to speaking with everyone next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.