Good morning and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited's Fourth Quarter Full Year 2024 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I will now turn the call over to the first speaker today, Ms. Lingling Kong, IR Director, DouYu. Please go ahead, ma'am.

Thank you. Hello, everyone. Welcome to our Fourth Quarter and Full Year 2024 Earnings Call. Joining us today are Ms. Simin Ren, Co-Chief Executive Officer; Mr. Mingming Su, Chief Strategy Officer; and Mr. Hao Cao, Vice President of Finance. You can refer to our fourth quarter 2024 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 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. With that, I will turn the call over to our Co-Chief Executive Officer, Ms. Simin Ren, for business update. Ms. Ren, please go ahead.

In 2024, amid the dual challenge of a soft macroeconomic landscape and intensified market competition, we remained focused on strengthening our game-centric content ecosystem. We adopted more flexible operational strategies, swiftly adjusting how we allocate our resources and diversifying our revenue streams while rigorously controlling costs and expenses, achieving incremental progress. First, we were pleased with the early success of our revenue diversification efforts. The promotion ramp-up of our voice-based social networking business and game membership services drove revenues from our innovative business, advertising and others to reach 28% of our total revenues for the year, marking a 63.6% increase in revenue contribution year-over-year. This growth partially offset the decline of our livestreaming revenues. Second, we continued to drive cost optimization. We proactively cut back on inefficient business and fine-tuned the compensation structure for streamers, reducing our content cost by 19% year-over-year. Additionally, by streamlining our business flow and aligning our staff structure, we achieved a 17% year-over-year decrease on -- in sales and marketing, research and development and general and administrative expenses. Third, we considerably bolstered shareholder returns. Drawing on the company's historical cash surplus and future plans, we declared 2 special cash dividends totaling USD 600 million on -- one in July 2024 and a second in January 2025. This distribution highlights our commitment to rewarding shareholders and also reflects our confidence in the company's stable growth potential over the long term. In addition, we continued to enhance our platform's ecosystem governance, strengthening compliance standards and fostering a healthy content and consumption ecosystem to support long-term sustainable development. Before diving into our 2025 growth plan, I'd like to share a brief snapshot of our performance in the fourth quarter. In the fourth quarter of 2024, our mobile MAUs were 44.5 million, increasing 5.9% quarter-over-quarter and decreasing 13.9% year-over-year.…

Thank you, Ms. Ren. Hello, everyone. In 2024, we continued to navigate challenges posed by macroeconomic headwinds and an evolving industry landscape. In response, our financial focus has been on revenue diversification, cost control and expense optimization. We made significant strides in diversifying our revenue structure with revenues from our innovative business, advertising and others increasing by 63.6% year-over-year to RMB 1.2 billion for the full year of 2024. However, both our gross margin and net margins were negatively impacted by an increase in overall revenue, coupled with relatively fixed cost components. Looking ahead to 2025, our top financial priority is margin improvement to restore our financial resilience. Let's take a closer look at our financial performance for the fourth quarter. Our total net revenues decreased by 12.3% year-over-year in the fourth quarter to RMB 1.14 billion from RMB 1.3 billion in the same period of 2023. The decline was primarily driven by a decrease in livestreaming revenues, which dropped by 28.4% to RMB 0.73 billion compared with RMB 1.02 billion in the same period of 2023. The ongoing macroeconomic softness and evolving user spending patterns were the key factors impacting livestreaming revenues. To address these challenges, we have continued our revenue strategy of focusing our core paying users, reducing new paying user acquisition promotions and prioritizing the promotion of more affordable product offerings to encourage consistent spending. As a result, we saw a year-over-year decline in both total number of paying users and our quarterly ARPPU, which decreased by 11.5% to RMB 246 from RMB 278 in the same period last year. On a positive note, our revenue diversification efforts are showing momentum. Innovative business, advertising and other revenues increased significantly in the fourth quarter by 47.2% to RMB 405.1 million up from RMB 275.2 million in the same…

[Operator Instructions] Today's first question comes from Nelson Cheung with Citibank.

[Foreign Language] So let me translate myself in English. I have 2 questions. The first question is regarding the new business growth drivers entering into 2025. Wondering if management can introduce on your audio business? And what is your expectation regarding the audio business and game props business as well? And then my second question is wanted to -- wanted management, wondering if you could share what's your plan on the future use of cash?

Thank you, Nelson. So I'm going to answer your first question. In 2024, revenue from innovative business, advertising and other increased by 36.6% year-over-year and accounted for 28% of our total revenue, which is a significant improvement from last year's 13%. Our voice-based social networking business and game membership program are the 2 key drivers of our revenue diversification strategy. In 2025, we plan to allocate more resources to our innovative business further propelling revenue growth. Let me briefly outline our voice-based social networking business. Our chat room live streaming and other voice-based interaction format bring users and immerse social audio experience. Streamers can interact with users in real-time within their chat rooms while users can engage by sending voice messages and joint voice chat with streamers and other participants. Additionally, users can express their appreciation and support for streamers by purchasing and sending virtual gifts, fostering stronger connections and stickiness between users and streamers and generating revenue for the platform. In terms of commercialization, our voice-based social networking business mainly generates revenue from virtual gift sales with a small portion coming from subscription-based membership services and virtual customization options. In 2022 -- sorry, in 2025, our voice-based social networking business will focus on 3 key areas. First, we will adopt more refined traffic distribution strategies to improve the efficiency of traffic utilization, specifically targeting higher user conversion rates. Second, we will integrate AI capability into the voice-based social networking scenarios to enhance social matching efficiency and overall user experience. Third, we will continue innovating product features and revenue-generating activities to expand user consumption scenarios and increase overall revenue. For our relatively established game prop sales, we will continue to advance the following 3 business models. First, we will partner with game developers on joint large-scale promotional campaigns to increase business visibility and draw in traffic from external channels. Second, we will extend the multi-platform marketing approach led by game developers to more streamers, encouraging them to engage in more commercialization ventures. Third, we will strengthen our game membership program by combining platform benefits and incentives with game props to drive product innovation. At the same time, we will expand the membership program to more gaming segments for continued revenue growth. Overall, in 2025, we expect revenue from innovative business advertising and others to remain a healthy growth trajectory and contribute approximately 35% of our total revenue.

Let me answer the second question regarding cash usage. Following the dividend distribution in February 2025, we had cash and cash equivalents, restricted cash and short-term and long-term deposits of RMB 2.24 billion as of the end of February 2025. In line with our overall business plans for 2025, we aim to substantially reduce our net losses. Given this, we believe the company maintains sufficient cash reserves to manage business fluctuations and support the orderly development of our business initiatives. Thank you.

Our next question comes from Ritchie Sun of HSBC.

[Foreign Language] We have tweaked our strategy for a while, and there have also been 2 large dividend payouts. So how should we interpret the long-term development strategy for the group going forward?

Thank you for your question. I think we outlined much of the background and direction of our operational strategies adjustments in our prepared remarks. To build on this a bit and given the evolving competitive environment and our current revenue scale, it is paramount for us to reevaluate the ROI of our business as a platform deeply engaged in the game-centric diverse content industry. So this strategy is not about a contraction, it's about reallocating our resources from inefficient initiatives to high-value business segments. The strategic steps we are taking will continue to strengthen the platform's core content advantages in niche segments and alleviate the pressure on our margins. Meanwhile, we continue to identify and go after opportunities that will grow our business and revenues. We are also prioritizing shareholder interests with our buyback program and the special cash dividend allocation totaling USD 620 million. Since 2024, we repurchased USD 20 million in share buybacks and we have issued 2 special cash dividends of USD 300 million each. The decision to distribute this special cash dividend was primarily based on the company's cash surplus and future cash utilization plans. We believe that cash dividends are the optimal way to improve the utilization of our surplus cash. Overall, I would summarize our trend as exchanging short-term operational adjustments for stable healthy growth. Further, particularly in 2025, we aim to improve margins by reducing content costs, streamlining our workforce and improving operational profitability. Then we plan to enhance our revenue mix by growing innovative business, building a healthy business ecosystem and striving for operational profitability. In the long term, we remain committed to fostering a vibrant game-centric content ecosystem focusing on differentiated operations for core users and continuously optimizing our diverse content. Thank you.

And our next question today comes from Raphael Chen at BOCI Research.

[Foreign Language] I'm just wondering the user and the financial impact of tournament procurement and the streamer strategic adjustments on our platform.

Thank you, Raphael. Regarding your question on cost restructuring, let me address copyrighted content and stream content separately. First, let's look at copyright content. We have been applying a flexible approach to acquiring copyright since 2022 that aligns with our company's development goals, historical ROI from copyright content and copyright fees. In 2025, our primary goal is cost reduction and loss narrowing based on mobile-focused operations. After thoroughly assessing the contribution of official tournaments to traffic, revenue and associated costs, we identified certain high-cost copyright tournaments that didn't meet our ROI standards. As a result, we decided to forego acquiring some copyright tournaments in 2025, where we couldn't justify making continued investment based on the elevated copyright fees and diminishing returns in incremental traffic growth. Much of our platform's traffic from these games have historically come from tournament users, mostly users on PCs, TVs and other large screens, which are less conducive to promoting and marketing our mobile business. Additionally, the potential for commercializing tournament traffic on a large scale was still limited. Since monetization mainly depends on redirecting tournament traffic to other content on our platform, the process was long and inefficient, leading to lower monetization efficiency. With this in mind, we prioritized more cost-effective tournaments such as Peacekeeper Elite, which boosted strong commercialization [ moment ] and the wildly popular King Pro League, which leads a border audience base. Our official content-driven activities around these 2 events have shown promising results. For example, we successfully promoted game props within the official Peacekeeper Elite live streaming channel, including marketing campaigns led by game developers and DouYu's game-specific membership program. By linking these gaming accounts and completing specific in-game and interactive tasks in the live streaming channels, users are rewarded for redeeming game props. This approach not only boosted traffic…

And our next question today comes from Thomas Chong with Jefferies.

[Foreign Language] My first question is about the G&A expenses. Can management comments about the sequential increase? And my second question is about the 2025 operating profit. Can management share about how we should think about the outlook?

Okay. Thank you for the question. We have been consistently working to optimize our operating expenses as we manage to reduce staff costs by streamlining our workforce. We also took a measured investment approach to marketing our innovative business. Overall, in the fourth quarter, our sales and marketing expenses, G&A expenses as well as R&D expenses all declined year-over-year. The quarter-over-quarter increase in G&A expenses was mainly due to the costs related to workforce optimization aligned with our business adjustments. Looking ahead to 2025, while our business adjustments may exert some pressure on revenue growth, we remain committed to optimizing our cost structure and controlling expenses to improve gross margin, enhance business efficiency and reduce operating expenses. We expect some improvement in our operating losses for 2025 as compared to last year. Thank you.

Thank you. This concludes the question -- that's all the time we have for questions today. I will now turn the call back over to management for closing remarks.

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

Thank you. This concludes today's conference call. You may now disconnect your lines, and have a wonderful day.