Q2 2022 Douyu International Holdings Ltd Earnings Call
Good morning, and good evening, ladies and gentlemen, thank you and welcome to the Dow You International Holdings Limited second quarter 2022 earnings conference call.
At this time all participants are in listen only mode, but will be hosting a question and answer session. After management's prepared remarks. Please note. Today's event is being recorded I will now turn the call over to the first speaker today Ms. Li Lincoln I aren't director I tell you. Please go ahead ma'am.
Thank you Hello, everyone welcome to our second quarter 2022 earnings call. Joining us today are Mr. Shao, Jade Cheng Chairman and Chief Executive Officer, Mr. Mainly to Chief strategy Officer and meet their hotel last question talk about lunch.
You can refer to our second quarter 2022 for natural without our IR website at IR <unk> Com you can also check a replay of this call waste 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 probation for the parties to Q T D indication with form act of 1995.
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 some debates output.
Formats, all expectations implied by these forward looking statements.
All forward looking statements expressed they quantified 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 be wise, Oh update any forward looking statements for select in rental circumstances. After the date of this conference call.
I will now speak on behalf of our chairman and CEO , Mr. Shao Uhm.
In the second quarter, we continued to explore new growth drivers, while increasing our investment in self produced content.
In addition, we tightened our cost controls and improved revenue quality by structural adjustment all pharma revenue streams with that.
<unk> appropriate care routes for the quarter.
This quarter.
Mobile M. A U was $55 7 million.
Total net revenues were RMB, one 8 billion in quarterly paying user accounts with six 6 million Viper.
By prudently adjusting our pulp rifle cumin strategy and destiny implementing cost controls, we increased our gross margin to six 9%.
Meanwhile, we made solid progress improving operating efficiencies and our adjusted net income reached RMB 23 five.
5 million.
I'm pleased to share with you that we have achieved our go ultimate kidney stable mobile and they use from the fourth quarter I'll see you through the second quarter.
In the quarter average mobile I mean, with $55 7 million a decline of eight 2% year over year, but an increase of one 1% quarter over quarter. We believe that there are two factors at work.
As we execute our selective corporate procurement strategy.
We have ceased acquiring overpriced content rights for esports tournament, starting in the fourth quarter, which.
Which led to a year over year decline. He may you called for by traffic loss from users, who primarily wheeled tour them into our platform.
Though the logging Gorman CEO theres negatively effective may.
May you base it only had a very limited impact on our revenue.
The second quarter of the year is the traditional peak season for official tournaments with.
With the high number of users live streaming platforms will include women compared with the fourth quarter.
Therefore, it is very difficult to stabilized quarter over quarter traffic is the absence of certain official Portland our platform.
However, thanks to our high quality standards set the mandate and the refined content such as cell pretty retirement, we retained all users and attracting new users during the quarter.
As a result of a mobile I may use achieved a sequential increase.
Indicating that the net impact of our selective corporate human strategy, how can they realized and absorbed by our business.
Second we collaborated with game developers to launch promotional activities to attract new platform users.
Offsetting a portion of the D crazy and they use that resulted from our no longer purchasing certain copyright content.
For example, we launched a promotion our live streaming channel what is the game developer of Peacekeeper, where users can purchase the most popular in game items with the unlimited time period.
This promotion successfully attracted a significant number of gamers to participate.
Which contributed to the growth of new users and the galvanizing 10 of them in active users.
Turning to our content update.
During the second quarter, we maintained the effective execution of our strategy of building our game centric comprehensive content platform.
While further investing and innovating in self produced content.
Based on users' differentiate a porphyrin fish and game features we collaborated with well I don't know if Jamie game developers and distributors to customize high quality IP content shows.
Enriching our content ecosystem by integrating life, Jamie leading graphics and interactive communities.
In the second quarter, we continued to enhance the diversified content system for our self produced tournaments and increase investment in self produced content with a focus on refining content and operations based on game category.
We produced close to 95 E sports tournaments in the quarters to meet that differentiate he needs of our users.
This performance can be divided into two categories.
The wage is professional swimmer experiment for hardcore gamers. The second category is amato tournament's four competition between our loyal users among college students and casual competition for like Emmy core gamers.
Leveraging our years of experience in operating esports tournaments, our self produced professional performance received about spread acclaim from both game developers and hardcore gamers.
Our quarter, our self produced or Joe you faith honour of Kings Matsuo tournament with once again selected by the games developer.
It's official collaboration partners.
For the first time users, we're able to participate in this tournament through and you know this innovative combination of online and offline format Inc.
Increasing user engagement and creating a honour of kings tournament at still east and intellectual property that can be enjoyed by our user category.
With the popularization and deeper penetration of esports, we have created and developed more unique and differentiated assortments that are open to all comers.
In order to cater to diverse user demand, we organized a variety of different city in England.
Excluding colleagues selective child to discover top gamers L O L team sense competition and the five wafer <unk> festival for honour of Kings.
They seemed lens, attracting both new and Iraq will they use it by inviting well known gas to attend and by using nowhere masses of competition and unique ways for players to team up.
Do you in terms of promotional and hot Pink theory, we stimulated a second round of activities question between different path forms and the communities by promoting walnuts warm up campaigns and tournament's postmatch highlight.
By doing so with further enhance user engagement and created our exciting and absorbing environment our platform.
Regarding our previously purchased the copyrights, we continue to collaborate closely with game developers and integrated official tournament with our lives Jamie we do graphics operating activities and community Cushing to increase user engagement and attract new users.
Using K P. S. Print tournament I think example, we self produce several show derived from term in IP content.
In addition, the K P. L E sports team we sign.
Taking all Hon E star when the spring season Championship.
Going forward, we will continue to execute our selective copyright procurement strategy and make purchases of cost effective content, we will analyze and evaluate the all iPhone eight Portland based on metrics such as traffic compute contribution revenue contribution and cost.
In addition to term and content, we continue to equate entertaining gaming Pelican.
We developed and released China's sports my streaming gaming knowledge quick show gaming expert.
More than 120000 users participated into online quake contact which attracted over 8 million likely always.
Furthermore, as we increased our investment in high quality gaming content and the development of our diverse content ecosystem. We continued to refine our operations and a successful their grades all I for our games segment by improving revenue quality and in planning content cost controls.
We successfully enhanced our platforms or operating efficiency, while still delivering innovative premium content and maintaining our advantage in game centric operation.
No opinion to monetization of a total paying user count in the second quarter was $6 6 million, what's that average quarterly a pool of RMB 276.
In the context and tuned of promoting rationale consumption in live streaming we proactively adjusted and refined our platforms keeping function and operation.
We have been making ongoing changes to maintain compliance with the latest regulation guidelines.
As a result of these modifications our paying user accounts and op, who declined year over year basis, but remained stable on a quarter over quarter basis.
At the Mitel effect this adjustment and optimization actually increased the quality of our virtual gifting revenue and improve the sustainability by encouraging healthier paying habits among users.
For example by utilizing customized promotional campaigns based on the performance of different user groups. We continued to stabilize our coal use is willing to spend and he has the casual and mid core gamers engagement to cultivate their paying habit.
By adopting more sustainable operating strategies, we have been able to maintain a stable paying user base and sustain our how strange for all options.
Meanwhile, we continue to explore and develop our membership services as demonstrated by a healthy sequential growth in the second quarter since they upgraded Diamond science membership system in the previous quarter.
I have a membership service is an important interact to choose to change the interaction between our streamers and their fans.
As such we continue to release additional value added features including.
Including swimmers in multi com and demonstrates our talk that are exclusive to them and fans and our related games unique features and streamers.
<unk> characteristics.
This has further enhanced the stickiness offense and increase the willingness of users to subscribe to membership services.
Going forward, we will continue to explore new and diversified monetization channels.
In terms of technological innovation and development, we have been strengthening our in depth cooperation with game developers.
Last quarter, we cooperated with daughter Chiefs game developer to ship partial gaming data and then employ this data to do to develop a number of practical functions.
This quarter, we extended our cooperation scheme. So net so that now we also share partial gaming data with a developer of honor of Kings.
We launched customize the features.
That allow users to active latest play a game of humans and rankings are a path for them with users consent.
By connecting their gaming accounts with the.
So you can.
Use this game achievements such as gaming batteries can be paid when they participate in bullet chats should.
Having gaming inflammation in this way improves user experience by fostering.
For the connection between gamers in squamous Yeah. Why is he of different scenarios. In addition, or a collection of gaming data and platform user behavior may be possible for us to leverage machine learning technology to provide more accurate content recommendations.
For game users with different characteristics.
Oh, all based on the stable performance of our traditional life streaming business, we increased our investment in self produced content and optimize our operation the innovations to better target and customize our content based on user preferences and game features.
Furthermore, we deepened our cooperation with game developers so as to further augment our content offerings of integrated live streaming media.
Our fixed and interactive communities will continuing to develop a robust and healthy game centric ecosystem.
In regards to financial performance, we hence our monetization capabilities exported new monetization models and improved overall operating efficiency by implementing effective cost controls and expense optimization.
Through the consistent all I hansman of each game sentiment, we are realizing our platform's potential for long term and sustainable growth.
With that I will now turn the call over to our best high spend that will finance the hotel to go through the details of our financial performance.
Performance in the quarter.
Thank you Linda and Hello, everyone.
Last quarter, we saw.
David.
Our top priority was to reach non-GAAP breakeven by improving operating efficiency.
I'm delighted to see that our performance exceeded our expectations.
During the second quarter gross margin further expanded to 16, 9%.
We recorded adjusted net income of RMB 10 to three proof points meet them.
This demonstrates the effectiveness of all of us.
Fusion operating efficiency improvement through refined.
Huntsman and effective cost and expense controls.
Total net revenues in the second quarter of 292 decreased by 21, 6% for year to RMB 183 billion.
Live streaming revenues were RMB 177 billion a decrease of 18, 8% from RMB two 1 billion in the same period of 2021.
The decrease was due to the continued implementation of prudent operating strategies.
Such as adjustments to certain interactive features and related operational efforts.
For a long term healthy development of our pencil, we have made operational adjustments and feature updates you on our bumps.
And has been highly responsive to the newly announced guidelines in order to fully comply with regulatory requirements.
As a result of Jason Hi.
Adjustments.
Gibson interactions.
Partially in pounds.
<unk> cost year over year decreases in both the number of paying users on quarterly up.
However, the number of paying users and quarterly up remain stable at current levels as we continue to stabilize the paying habits of our core users and cultivate the paying goodness of mid to long tail paying users.
Quarterly up was RMB 276.
Eight 7% decrease from RMB 300, I'm sorry in the same period last year.
Two 4% increase on a sequential basis.
Advertising and other revenues were RMB $64 9 million.
Out of these RMB $158 7 million in the same period of 2021.
The year over year decrease was primarily attributable to the continued exploration of new commercialization motives by using a portion of advertising traffic that could have been directly monetize.
I'll ask the soft demand for advertisements coupled with the Kuwait with service in China.
Cost of revenues in the second quarter of pun intended to was RMB 1.52 billion.
The increase up 24, 9% compared with RMB, two point or 3 billion in the same period of 2021.
Revenue sharing fees and content costs decreased 27.2% to RMB 131 billion from RMB 181 billion in the same period of 2021.
Which was driven by several factors.
The decrease in revenue sharing fees okay.
The decrease in live streaming revenues.
Leading to a lower revenue sharing ratio.
This demonstrates the effective execution, all prudent operating strategies with a focus on efficiency improvements.
Second the cost of broadcasting right <expletive>.
<unk> significantly as we ceased.
Overpriced content content for E sports tournaments, and selected copyright procurement strategy.
Sure.
The content cost also recorded a year over year decline as we continue to optimize in house content production efficiency.
Bandwidth cost in the second quarter of 2022 decreased 11, 2% to RMB $143 7 million from RMB 106 to one 8 million in the same period of 2021.
The decrease was mainly due to a year over year reduction in peak bandwidth usage and the absence of purchased esports tournament copyright.
Given that.
And the lease costs are generally billed based on peak bandwidth usage.
Meanwhile, the lower per unit bandwidth costs, which benefited from improved procurement efficiency with our major suppliers.
So contributed to a decrease in bandwidth costs.
Gross profit in the second quarter of.
<unk> was RMB 309 million compared with RMB 306 plants, what made them in the same period of 2021.
Margin in the second quarter of 'twenty two.
Two expanded to 16, 9% from 13, 1% in the same period.
<unk>.
A sequential improvement of 330 basis points from the first quarter.
This margin improvement was primarily due to the significant decrease in the call.
Cost of <unk> as a percentage of revenues as we ceased acquiring overpriced content rights for esports tournaments.
The lower revenue sharing ratio reached Betty <unk>.
<unk>, a revenue quality and our sustainable operating strategy.
Sales and marketing expenses in the second quarter of 2022 were RMB 100.
67 5 million.
<unk> made it a significant decrease of 43.2% from RMB 295 million in the same period of time to send you one.
This was mainly attributable to the decreases in both marketing expenses.
Acquisition and personnel related.
Research and development expenses in the second quarter of 2022 were RMB 101.9 million representing <unk>.
17, 2% decrease from RMB 100.
23 million in the same period of 251.
The decrease was primarily due to the reduction in personnel related expenses.
General and administrative expenses in the second quarter of times and it too will RMB $97 million.
Crazy by 11, 7% from RMB 102, 6 million in the same period of 2021.
The decrease was primarily due to the decreased professional service fees.
Adjusted operating income in the second quarter of kind of in it too.
We expect share based compensation expenses was RMB, one 3 billion comparatively adjusted loss from operations of <unk>.
RMB $165 1 million in the same period of 2021.
Net loss in the second quarter of 292 was RMB $38 8 million compared with RMB $181 7 million in the same period of 2021.
They expanded gross margin and decreased expenses combined to deliver two consecutive quarters of narrowing losses.
Adjusted net income in the second quarter of 2022, which excludes share based compensation expenses schaffel loss in equity method investments.
Impairment loss of investments was RMB 23, 5 million compared with adjusted net loss of RMB $145 1 million in the same period of 2021.
For the second quarter of 2022 basic and diluted net loss per ads.
U S well RMB.
One and RMB, one respectively, while adjusted basic and diluted net income per ads.
Were RMB, one and RMB one respectively.
As of June <unk> hundred 92, the company had cash and cash equivalents.
Restricted cash short term and long term bank deposits of RMB, 6680, 5 million compared with RMB 6000 643 million.
At December 31st 2021.
Going forward, we will focus on delivering sustainable profitability through our continued operational efforts on cost controls and improvement of revenue quality.
Along with the ongoing improvement of our overall ice.
We will continue enhancing our monetization capabilities to support the long term development of our platform.
This concludes our prepared remarks for today.
Later, we are now ready to take questions.
Thank you we will now be green.
<unk> and answer session to ask a question you May Press Star then one on your Touchtone phone you are using a speakerphone. Please pick up your handset before pressing the keys.
Anytime your question has been addressed.
Like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our RASK.
The first question comes from Li Zhang with Bank of America.
Oh hi.
Uh huh.
Wow.
Aren't you wanted to do was hot dogs in Shandong and Guangdong.
It's hard though to your fortune, great or you go through and quantify at all what Ben said Montana.
So what's in backlog.
Now I'll tell you that you'll see Oh, it's all kind of example, Jan he go back Joe.
I was hoping you can quantify or when I got a bunch of attached to them.
She says that but I mean, that's that's what's adopt all you'll really see okay.
I think that would be fine with that.
So that's my medical and taking my question I'll ask two questions your airports.
Any updates on their life's journey regulation. So he may end up can you share with us it impacts our business that can delay.
Car and preparation E sports tournaments, and Oh any change allo field trips out in the license esports content. Thank you.
Okay.
Not only are the outlets.
Right.
Seven megawatts.
Nike or regulations on virtual gifting, including project Childminder rectitude summer because they've heard.
And the marketing Guy that I believe is that the appropriate thing to guide users to submit that.
Congratulated by.
They may June 13th paper.
In the context of a trend although in promoting your aggression on consumption.
And I was giving you that you're in.
David.
We implemented a series of metals.
Thank you.
Keep you name a single transaction on Washington, and the pulp.
We kept in check.
Hmm formation for each type of transaction.
In June .
We continued to update our platform according to the latest guidance.
<unk>.
Update included adjusting our ranking system in regard to true multi dimensional.
Maybe a few PK fine jewelry, he could our drug D rewards bulky came out.
These adjustments to our operation have lead to an improvement in the quality of our revenue.
Barry we bought remains positive.
Positive unhealthy all refused serenity I looked your bathroom and get folks that have shifted to the formal generating total revenue growth to come.
<unk> high quality revenue growth by recognizing the spending habits of our core yoga.
G mall need and the long tail.
Are there.
The lower payout in Q.
We have been carrying out these director adjustments.
All we're trying to feed can be one.
Therefore, we do not anticipate significant incremental negative impact on our.
Our revenues based upon the operating performing.
Ladies have a better update in.
In June .
Thank you.
Thank you. The next question comes from Alex <unk> with Morgan Stanley .
Hi, excuse me hi, operator, we are still answering the second question.
Okay got it.
Intervention strategies to kind of let me answer your question you know, what I'm, saying that you're going through probate Robyn.
Some questions.
Sure sure sure.
Your boss should equal to insurance with them.
Needless to say I'm not too.
Sure.
Michelle.
Currently our esport tournaments broadcasting rights cover a variety of popular games, such as an up King qualifier.
<unk> et cetera.
For this purchase tournament's content with further diversifying our content offerings by integrating last training with video graphics and intact interactive communities to meet our users differentiated knee jerk.
Okay.
Sounds good.
In particular, John as pressure pension the Taco plate for example, with our Hearts.
That's again influence how you what's your sense of Australia.
So my first question.
So you got to the country would hope make us thanks for your questions.
And under Cushing, Joshua Sudan shouldn't you mentioned that you're gonna Thiago.
Sure Jonathan.
Moshe.
As you kind of answer.
Oh sure until you get halfway he's not gonna go. Thank you mentioned that you named who once again I'm doing a bunch of that was supposed to play ball on search on sort of the July time with Xiaomi phones.
Jonathan.
The gaming content industry in China has developed into a healthy growth stage and we anticipate that the pricing of esports copyright will gradually go back into a reasonable range in the near future.
Therefore, when they will carry out a carryout excuse me excuse me our selective kebab common strategy our beats for those copyrights purchases will be based on a true evaluation of the monetization capability and the traffic contribution driven by each esports tournaments broadcasting right.
At the same time, we will deepen our cooperation with game developers.
<unk> of panels resources and joint operations to control content costs.
Under this strategy we are in active negotiations regarding more copyright partnership with game developers.
Got it.
Sure.
Julie.
Oh, sorry.
California.
Okay.
Shifting Havant, England on a question that's really hard to go.
Secondly on assurance Allen's article attitude.
When people say.
So you should not lose that pension.
Okay.
Do you want to use.
Lisa Hook why Didnt, you mention yet John .
Following jugal each entity like Kubota I'm sure as you called out how are you going to cook on controlling markdowns in Nichols.
Sure Jonathan.
Oh boy.
Okay.
The Lucius.
I bought into it.
Yeah.
As we mentioned earlier esport tournaments with her team is only one part of our comprehensive gaming content as we are seeing more and more women options. We believe differentiated content and refine operations are the key to our platform stable and healthy growth.
Despite the absence of some important esports tournaments.
Average mobile meus achieved quarter over quarter, well proving that our selective co pack procurement strategy is.
It's a step in the right direction.
Leveraging our deep understanding of the gaming industry use of experience operating experience and a leading E E.
He loves to any resources, we will continue to expand depaolo cooperation with game developers.
At the same time, well before they invest.
In game centric self produced content.
Well, maintaining our advantages in high quality content and game operations to stabilize traffic on our platform.
Operator, we're ready for next question.
Okay.
Thank you.
Our next question comes from Alex <unk> with Morgan Stanley . Please go ahead.
Right.
One townhouses in connection with the two automobile once you see Cisco when you've got a whole bunch of needle J J J from yet.
Well when going through chunk yellow featured payrolls.
One is on coverage.
That all gets a <expletive> probably accrue them into luxury bulk giants, who didn't need all that she's now since you just said you get your geography, when she wants at Liza.
Well, then conduct by Hudson T core lineup.
So that's.
See what they care about.
The woman.
We have sold tens of millions you're going to see here.
Thanks management for taking my question. My first question is really get too.
Oh self produced content.
Can management share the view, how we produce our self developed content in house, how do we ensure the quality of these content.
My second question is related to a gain license approval since the approval has to be prudent in April .
That's been helping our traffic growth and revenue growth.
Thank you.
Sure Ghansham.
In Pennsylvania.
You will see my question is on the network.
And then along a shovel.
Triple nickel mines, we would've Suzhou, Ohio, you guys do for what Michelle said.
Sure Nicole.
Coming out of them, how do you think.
You Shouldnt see pockets events, when we opened the docket arthropod spokeswoman Susan.
In terms of utilization.
Permian.
Total transaction Shanghai Guangzhou.
Thank you.
Okay.
Good.
Sure.
I Should've mentioned I've tried to articulate today, Tabak, Kentucky, Tennessee installment lending.
Oh God I didn't do a hook.
Now, let me turn the tubular.
Okay.
I apologize.
What I think you should eat them essentially the Oklahoma serum gasoline horsewoman.
And are you.
Just wanted to be.
Considering the home to ban on one another.
Our thoughts and constitutional into European shoots him in that report.
Then Jonathan see in Oklahoma.
All right.
To answer the door until you're ready to ship.
So of course, all the time that your balance sheet tobacco cigarette comp in Hampshire.
Some changes on Colorado autonomy in Colorado.
So regarding the self produced content as a human centered platform with diverse content the key to attracting and retaining users are satisfying their needs and creating engaging community environment for them.
Because users are the most important component of our platform, we are motivated to make content and products upgrades from their perspective.
In terms of gaming content different user groups look for different kinds of gaming content.
Hardcore gamers focus more on the competitive aspect of gangs.
And prefer streamers, who are professional and highly skilled casual gamers on the other hand, we'll have a better experience with Dreamworks can create enjoyable atmosphere do you like draining.
So therefore, we designed different form of content to cater to different user preferences for how core Gamer way produce tournament with brokers and present and streamers.
And in gaming techniques to provide our professional SKU oriented where we experience.
A part of hardcore gamers are college students, who are also our core users of our platform.
In the second quarter, we held stock hub of King tournament in collaboration with eight round oncologists and coached by several famous streaming it was highly popular and much discussed among college students.
To the end of the second quarter, we have cumulatively cost is nearly 700 esport tournaments involving more than 700 colleges, giving those brands strong appeal and influence among college students.
Yeah.
[noise] Ghansham with regards to training et cetera.
For me at Wilmington Congratulatory.
Co promotion.
Oh Wow.
Uh huh.
Okay.
Since the announcement intraocular pressure from la.
Sure.
Hum.
I don't know if that sounds right.
I have attended.
Hi, initials, Oakland Mahalo vacuum consensual woman.
Our job trying to get a sense of digital hubs.
Hello.
Professor trends you called why don't you answer that attitude with your ballot.
I would say a woman judgment, Takashi Ito and Super Bowl.
So it changes the Hong Kong branch, bringing our customers really seem that anyone from the Washington, definitely John Travolta and working hard on.
One of them.
While organizing entertainment based Herman with focus on enhancing user engagement and interaction during the quarter. We produced the top L O L fast Harland, which.
<unk>, which was designed for fans of league of legends poorly we recruited more than 450 cents, representing 16 professional L. P. L teen.
<unk> gave them the stage to honor their favorite team by fighting for weeks really in department at the first large scale central element in the industry were invited professional L. P. L commentators and professional players to commentate undetermined, adding depth and are starting to soften to choose WEX here.
In addition, we also hosted a five week five festival for honour of Kings and embodies stand up comedy popular streamers and fans to team up playing the game well all while they last June .
This casual event natural it became a huge party involved streamers uses platforms and game developers.
So that's why I'm kind of specialties.
On a comparable oncology both April now shipping to them for sure.
No.
Now in general.
That's a lot in New York.
Thanks have a good example.
Sure.
I was wondering now that you're shipping to switch.
So what you got in that kind of specialties and usually that means you should you want to call them quote unquote in job.
Linda.
Oh, we have now fully integrated our Kodak streaming content within our diverse.
Terminal content system, coupled with meetings graphics and community discussion. This comprehensive conference system supports various promotions.
Median different platform and at different stages. During this England and achieved solid without we have observed growth in viewing traffic longer we're in hours and more interaction using fully chat doing our self for the retirement when compared to the typical levels in this game.
Segment.
Let me answer your second question about the new Kim abroad.
We are we were pretty certain.
Okay.
Sure.
Or is it seems that after the gaming market is very keen to work with diversification.
Sophistication vitanza cannula.
<unk> recently approved would kick.
In the long run we can do with it.
Your bedroom and that will be beneficial for the gaming Gotcha, all gaming container platform.
Yeah.
Hey, good high quality games.
Turning to demo our primary source of untrained yoga.
As mobile game.
Are you comfortable with it.
<unk>.
Starting to ease them resume promotional campaign in good luck to you get relief, we adopt our book Ramos generating advertising revenue to deeper.
Collaboration with game developers.
Providing support through our product I'm trying to kind of be talking that we have with the backlog increasing Dr. Kim cooler.
Cool.
And you go download unfortunately.
While increasing our <unk>.
Compare to that.
Right.
For example, <unk>.
Jim.
In the second quarter, our esports Amanda on the life of that <unk> achieved in Calgary Dougherty <unk> co.
Comparable number of game play.
Execution and activation. Thank you operator, please next question.
Thank you. Our next question comes from Thomas Chong with Jefferies.
But somehow changzhou, what if you will well Mindy crunchy. That's you should go to Utah woman shouldn't give up on trend.
I'd go with it because I'm not so sure.
Hmm.
Humanity, which I'll, let you do see J J.
Good luck or you die cortisol you.
Well I mean the gondola.
Thanks management for taking my question.
So I'll just talk about.
Companywide continental to administer strategies.
The negative impact and the U a.
He is a graduate Epo. So just wanted to get some more color about the books that we have fun.
To achieve this outcome. Thank you.
So that ones that had interest into those transactions.
And I'm trying to tell you that the country.
All a function of the function of type of Jehovah garden on such a bunch of them to tell me that he's done.
So your question actually prevent drop off.
Certainly for me Auntie Anne's, what I'll handle that.
I wasn't sure if there's anything on the whole room from an interest you damn they all centered around tonnage, but you will see that it goes into the.
Producers.
In China.
Two questions.
Sometimes somebody in <unk>, Ohio.
Have you tried to do it.
You may access with somebody who can blow from Toyota.
So you ought to do it again.
You sure you don't want them.
Okay.
Uh huh.
Sure.
Okay.
When we made that they are when we made the decision to execute our selective copaxone and strategy. We expected that we would lose some users who are primarily.
Official tournaments, our platform and the absence of some overpriced.
Tournaments, we went forward with the move as part of our strategy to stabilize traffic such as increasing our investment in self produced content.
Well, we kept a close track on the performance of the games sacraments that lacked official assortments in order to swiftly adjust our content offerings and operations. Thanks to this counter measures our platforms mobile meu's performed better than we had anticipated, especially in the <unk>.
Quarter doing wage more federal tournament will help and we see a quarter over quarter increase in mobile I may use as opposed to the expected decline.
Okay.
You can assume inhibition.
The home Center channel, which is on the ocean about.
<unk> connect launch.
Hello, everyone.
Hello, everybody.
Talk to you in due course issues as you go from kind of couponing.
Sure.
So there isn't going to help our cash neutral.
She is valuable to them.
Do you as you know.
But whenever you go one layer up with them.
Well, Josh we talked on a single source.
Okay.
That you want in a month in June to July you sit in in Atlanta.
Sure.
So to the needle on that Chicago, North Virginia document.
And Joe Millionaire.
Touch on physical attributes into Belgium doubled them, but actually that's you name it.
One kind of Chicago.
You said your goal I guess.
It wasn't too long ago controller.
Due to the two parts.
Needless to say looking at Stephens.
Steven.
You know as you see them.
Other than central bank trends slowed occupancy remains challenging project.
Moreover, user behavior has been consistent with our expectations most of the decline we experienced as a result of our new corporate procurement strategy, what users who came to our platform then they watch official retirement, our platform's men source of traffic.
On the other hand, our long term continuous stable users who came to watch streamers content.
This large quantity of high quality users are characterized by their high retention rates longer willing hours and its thickness to high quality live streaming content.
Leveraging our stable similar structure, we worked with gamers of different characteristics to launch creative content and the diversified our promotional activities based on sleep in collaboration with game developers.
In the L. O L segment, we launched a series of promotional and Amato Herman so as to maintain the number of viewing hours and interaction with our self produced content at a stable level.
In the peacekeepers segment, we cooperated with game developers to launch limited promotions for in game items.
Your life doing this not only attracting new users, but to substantially increase the number of willing hours and impaction of self produced content.
Since we have successfully stabilized our core user base and being able to attract new users to combine operations of utilizing premiums Zimmer resources and self produced content. We believe the negative impact from the absence of certain tournaments copyrights has fully absorbed.
Operator next question please.
Thank you. Thank you. The next question comes from <unk>, Zhang with China Renaissance.
Alright.
California.
Just wanted to know or to build out a lunch. So can you go through some of the prepared remarks here.
Sure.
Sonya prototypes.
A couple of resorts generally shop use with them they'll figured yeah, we're looking to target.
Are you able to essentially go to China.
I'll tell you I'm gonna tissue can you tell me about it. So we cannot talk about are you sure you don't get the government issued a T shirt.
That's really cool.
He is with the law.
All in total should I say goodbye to have somebody of chips.
The old man you got milk her tenure, but what you don't get to choose the third.
That's what it came out of country.
All countries plus the recording demonetization.
Their remarks in their training.
Probably a multi client amortization.
Wisconsin.
Or is the multi dose for example, what our latest progress Oh I met a bunch of opinions.
Or are the monetization why exporting.
Understanding what goes where.
When those households already implemented this quarter could you discuss the drivers behind that.
How much was actually report with a content of course sitting in a wholesale way.
At a whole year it was probably about 10. Thank you.
Yeah.
As to the first question about new business model, we have been exploring new models of commercialization with the goal of both increasing virtual gifting revenue and exploring other revenue streams beyond virtual gifting.
Here are some examples.
And the last quarter, we upgraded our permanent friends membership system.
<unk> is designed to increase virtual gifting revenue, but the housing engagement between.
Users and streamers.
Membership subscription users gain access to additional value added services and gain more opportunities to interact with streamers.
On the gaming scenarios.
Streamers provide exclusive in game device surfaces and rewards for diamond fence users.
This quarter, we improved our system by providing more customized features.
Users based on streamers characteristics.
Which further enhance user's loyalty and improve memberships paying ratio.
Members of our membership subscription grew healthily quarter over quarter with steady improvement of renewal rates.
Going forward, we will have built integrated membership system that offers platform privilege indeed.
Interactivity with streamers and game benefits single package.
In addition to the surveys that we offered on our platform.
We also strengthened our collaboration with game developers to provide more.
Added benefits for Diamond fan users.
In terms of advertising models, we continued to refine the formation smart distribution system as a supplement to traditional direct response advertising and display advertising.
Current go of this system is to improve the conversion rate from game leadership game downloads.
Our smart distribution system platform enables game developers to release promotional costs.
Allowing streamers to choose their preferred method for promoting games.
This live streamers enjoy greater flexibility, while fulfilling their task based promotional obligations. So far the system is progressing well and has proven to be effective in promoting version updates and galvanizing the return of activity.
Users to mature game titles.
About the second question on margin and cost structure.
The decrease in cost of revenues is mainly attributable to a 27.2% he ever year decrease in revenue sharing fees and content costs.
The year over year decrease in revenue sharing fees is mainly the result of decreased live streaming revenue and <unk>.
Also some a small decline in overall revenue sharing ratio.
Since the beginning of this year, we have been implementing more sustainable and steady operating strategies.
Which are meant to guide live streaming users to spend rationally.
We foreclosed on improving operational efficiency to improve our revenue quality.
Reducing dose of <unk>.
Operations with a poor revenue generation.
As a result revenue sharing ratios.
<unk> declined for two consecutive quarters.
We expect that our overall revenue sharing ratio will remain at a cutter and current healthy level with.
With only slight fluctuations between quarters as.
We refer to adjust our revenue generating operations.
The decrease in content costs, mainly resulted from lower copyright fees optimization of stream of payroll and a reduction in self produced content cost.
The reduction in corporate wide cost was mainly the result of us seizing our acquisition of certain large scale tournament content rights such as LPL.
In terms of stream of payroll, we have been continuously optimizing our streamer resources for some segments.
Leading to a year over year decrease in the second quarter.
On the self produced content front, we have utilized a variety of measures to reduce our costs such as resource integration and John operations.
We continue to focus on the improvement of Conan quality rather than quantity.
As a result, we were able to launch more self produced tournament's while lowering production costs on a year over year basis.
Looking forward, we will prudently evaluate our procurement decisions for large scale tournaments optimize our streamer payroll structure and increased our investment in self produced tournaments, and PTC content, but which we control the related production costs we.
Expect a certain degree of decrease.
<unk> cost this year.
Although we expect our gross margin will improve at a modest pace for the year 2022.
Thank you operator, we're ready for next question.
Thank you. The next question comes from Brian Gong with Citigroup.
Okay.
Oh Boy Oh Boy approach is essential if you will.
Okay, you want to take them.
You bet.
Oh coming from local things.
Yeah, Yeah, yeah yeah.
D G will mentioned.
So you don't go to the attrition.
I will translate myself.
For taking my question.
<unk> recorded a decent decline or apex commencement share though.
Growers dependent days ended the trending into the second half of this year in the future. Thank you.
In the second quarter, both of our operating expenses decreased on a year over year basis, among which sales and marketing expenses showed a significant decrease as compared to the heightened promotional expenses for new products and features in the same period last year.
At present, we are performing continuous and cost efficient data analyses to select the appropriate promotional channels to increase marketing efficiency, we expect our promotional costs to remain at current level for the foreseeable future.
Besides the above mentioned marketing expenses, a major component of operating expenses is payroll.
This quarter, we adjusted and optimize our staff structure. According to evaluations for each division overall, we achieved a certain level of cost savings and payroll expenses year over year.
For the remainder of the year, we will further optimize payroll expenses and operating expenses, while ensuring a stable business operations, allowing us to gradually realized a narrowed its net loss.
Thank you.
Thank you that's all the time, we have for questions.
Now I'll turn the call back over to management for closing remarks.
Yeah.
On behalf of the management. Thank you for joining our call. We look forward to speaking with everyone next quarter.
Thank you that does conclude our call today.
Thank you everyone for attending you may now disconnect your lines.
Okay.
[music].
Okay.
[music].
Okay.
Yeah.
Okay.
Okay.
[music].