Q3 2022 Douyu International Holdings Ltd Earnings Call
Good morning, and good evening ladies.
Ladies and gentlemen, thank you and welcome to the.
<unk> International Holdings Limited third quarter 2022 earnings conference call.
At this time, all participants are in listen only mode.
We will begin 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. Lynn linked call IR Director. Please go ahead ma'am.
Thank you Hello, everyone welcome trucks still quite a 2022 earnings call joining us today are Mr. Shao, Lee Chen Chairman and Chief Executive Officer, Mr. Naming Sioux Chief Strategy Officer, and Mr Hotel, Vice President of Finance.
It's worthwhile to third quarter 2020 to financial results on our IR website at IR thought, though your dot 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 ladies thank some degrees out performance.
Patients implied by this forward looking statements.
All forward looking statements 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. Shao G HN.
During the third quarter, we continue to you know wage game content and optimize our operational model with both of them. We can all kind of user base and attracting new users by developing high quality content well all P. Myers in each game segments rate of return by enhancing existing body.
Added services and launching new ones.
We achieved our second consecutive quarter off profitability adjusted basis, as we stabilized our revenue improving revenue quality, well augmenting our cost controls and optimizing expenses this quarter I'm, a huge number 57 1 million and total.
Revenue were RMB, one 8 billion, our quarterly paying user accounts with five 6 million and adjusted net profit reached RMB $25 7 million.
This quarter, our mobile average mobile I may use well 57, 1 million a decline of 7.7% year over year, but eight 2.5% increase quarter over quarter, our steady growth E. M. A use for two consecutive quarters dummy steroid that negative impact.
I'll start with selective copyright procurement strategy has been absorbed.
Looking back on the third quarter the changes in our May use what's driven by two factors first the execution of our selective call crap acumen strategy not to eight year over year traffic loss from users, who primarily with esports tournaments our platform.
This led to a decline in May you beginning in the fourth quarter of this year.
However, we were able to stabilize traffic by increasing our investment in self produced content and a combination of high quality tournament related content and streaming content. Our platform has helped us retain existing users and attracting new ones.
For instance, the launch in September of our top Streamer tournament in the league of Legends Skinny settlement was a showcase event for our users.
And dummy straight at the potential of investing in self produced content.
Second we continue to innovate our membership services emphasizing their value as an avenue for exploring monetization opportunities outside of what Youll gifting.
Together with a series of promotional activities. This initiative, partially offset the negative impact of the mail decline caused by our shift in content procurement policies.
We have been upgrading our platform wide membership service and this past quarter introduced a game specific memberships that's about.
By integrating game features and gamers needs into our liable so as package our membership services attract new traffic and motivated inactive users to revisit our path for them.
Turning to our accounting update.
In the third quarter, so as for the argument of why to off content offering, including integrated live streaming radio graphic content and community discussions with bought together popular Gamer game developers and distributors to organize costume tournaments and shows based on the unique features.
Individual games.
Discounting offered opportunities for enhanced interaction between users and streamers.
And we see this and other initiatives as part of our long term growth strategy to create a comprehensive game centric content ecosystem.
We endeavor to create a library and healthy gaming community flowered users they call system, providing high quality content and innovative product offerings.
Based on the huge user base of games and esports as well as their worst counting me with foreigner enriched our content offerings and produced almost 90 esports tournaments this quarter.
Joining upon our experience in organizing professional not Herman we integrated features typical off poor humans into our amato offerings, leveraging our post al competition matching them and inviting official commentators two hostages events with.
We provided our users with a genuine German experience featuring games, including honour of Kings and Cisco.
As engagement off goes intervening in the gaming community increases. We also produced a series of tournaments exclusive to female users there.
This tournament features of games C. S go close fire and in Iraq, a blade point.
And combined it with our student recruitment and training system provided I'm, a female users with increased exposure and opportunity.
Overall this tournament's both expanded our user base and increase engagement levels in their respective game segments.
We also put in the effort to add entertainment value travel professional competitive gaming content, making it more accessible to a wider audience.
For instance, we held for them and in the L. O L gaming segment in partnership with top streamers.
Being asked team anchored this top streamers in lighting professional E sports players and other skilled gamers to team up and compete in live streaming sessions, which garnered widespread acclaim and attention.
This type of content featuring pro gamers in entertainment oriented team play.
I have just come in if he'd rather than any engagement any scanning segment, attracting new users and re engaging in active users.
Let's now turn to a copyrighted content join our years of rich experience in life Dreaming official tournaments, we launched diversified promotional activities across a variety of content formats.
These formats include live streaming videos and graphics related to official game and turn them into IP content.
At the same time, we export new models for cooperating waves game developers. So after we had tournament's user stickiness and the user engagement.
For instance, during the K P. Al Summer tournament, we collaborated with honour of Kings game developers to provide membership services exclusively for K P out for them and we always leveraging the partial game data sharing partnership we established in the previous quarter.
Incorporating the game feature of K P. L. This survey was well received and contributed to new user growth.
In addition to this innovation, we continue to improve all Eiffel copyrighted content, thanks to our initiatives to manage operating costs, such as by utilizing named hematopoietic resources and conducting joint operations.
Now turning to monetization.
Our total paying user count in the third quarter was $5 6 million with average quarterly artful of RMB 319.
As we maintain our efforts to promote a rationale consumption weight dynamically emulsifiers and fine tune our platforms keeping functions and operations Inc.
Including canceling low hour I promotional activity for new paying users.
As a result of this changes our paying user accounts declined.
However, or revenue remained stable on a quarterly basis Dummies trading is a high stakes in each of our coping users with more rational and sustained both spending behaviors.
More importantly, starting in the second quarter, we made structural adjustments to improve our revenue quality.
We have the quantity of virtual gifting revenue and made progress in improving our now virtual gifting revenue.
First we have been updating our platform wide membership services since its major upgrade at the beginning of this year.
During the quarter, we upgraded our member privilege system, where members entitled to extra benefit upon the completion of certain activities on the platform and.
And a tangy enjoys their membership and you work through a display in streamers like streaming channels.
The survey flooding enhances the interactive experience between streamers and platform members.
We have seen encouraging improvements.
Membership fee renewal rate with.
With the high new there's thickness of our loyal fans demonstrating the value added by the service.
At the same time with Warner explore the potential of new monetization models and achieved meaningful progress in the development of collaborations with game developers.
The quarter, we began launching our innovative game specific membership service.
Users, who purchase games specific memberships our platform received basis points and then they can earn extra points by completing assigned tasks on our platform.
It was a skank change accumulate points for in game items, all rewards provided by our platform in select live streaming channels.
This promotional activities, which are based on games unique features for few gamers demand well enhance and user stickiness to our platform, reflecting the value of Dow he as a game centric ecosystem password.
Going forward, we will continue to further explore the needs of users based on different game features and closely collaborate with game developers to discover and expand commercialization models and opportunities.
In terms of product innovation and development, we continued to improve our users really experience enforced or a game century community.
During the quarter, we collaborated with Tencent cloud to create a way our stadium, where users can watch esports tournaments.
I'm, turning the way our stadium through our platform tournament live streaming channel users can enjoy well why two of interactive features including wearing games in regular and we all know the ability to care for and support the participating teams in special.
In fact gifting.
We implemented this feature during the livestream of C. S go E P L and use it showed great enthusiasm in participating.
We will continue to refine and upgrade our virtual game really experience further enhancing our users' life streaming experience and creating new and unique forms of engagement within our user community.
Overall, we continue to execute our sustainable development strategy by investing in self produced content and further integrating our operations. We're also remained our deep collaborations with game developers and our commitment to build a healthy and engaging games since.
Trade ecosystem supported by interactive content offering.
The combination of this effort will ensure the stable development of our traditional business at the same time, we remain committed to improving our financial performance by actively exploring new monetization models to improve our revenue structure well maintaining the stability of our current <unk>.
Revenue stream.
We will continue to improve our own operating efficiency through cost controls and expense optimization.
Realizing our platform's potential for long term sustainable growth.
With that I will now turn the call over to our Vice President of Finance, Mr. Hao Tao to go through the details of our financial performance in the quarter.
Thank you Linda and Hello, everyone.
In the third quarter, we maintained a stable financial performance of our core live streaming business.
Continuing to execute.
The cost and expense controls.
A result, we generated an adjusted net profit for the second consecutive quarter.
On top of this we haven't been investing in new forms of premium content and exploring new monetization channels.
We believe that our healthy financial status will enable us to write out the hunting market environment with more flexibility in our operations.
Let's now look at our financial performance in more detail.
Total net revenues in the third quarter of 802 decreased by 23 point to 4% year over year to RMB, one 8 billion.
Live streaming revenues were RMB 171 billion a decrease of 22, 9% from RMB 2.21 billion in the same period of 2021.
The decrease was due to the continued implementation of prudent operating strategies, such as adjustments certain interactive features and related efforts great.
Great art houses into healthy long time at the bottom end of our platform.
As we seek a more balanced revenue structure with focus on maintaining a.
Ill call paying user base and do.
So we intentionally cancel some perfect promotional campaigns for new paying users starting this quarter.
This provided a low all right.
As a result of debt decreased number of paying users.
The App was.
<unk> was RMB 390.
Three 9% increase from RMB 307 in the same period last year.
Advertising and other revenues were RMB 93, 3 million compared with RMB 167, 5 million in the same period over 2021.
The year over year decrease was primarily attributable to the continued exploration of new commercialization models.
Which used a portion of advertising traffic that could otherwise have been directly monetized.
Whereas the soft demand for brand advertising and the weak macro economy.
The decrease was partially offset by the increase in other revenues contributed by specific membership services.
Cost of revenues in the third quarter of 202 was RMB, one 5 billion a decrease of five 2% comparatively RMB 2.07 theaters in the same period of 2021.
Revenue sharing fees and content costs decreased 28, 3% to RMB 1.32 billion from RMB 1.84 billion in the same period of time they tend to work.
Which was driven by two factors.
First the.
The decrease in revenue sharing fees outpaced the decrease in live streaming revenues as a result of lower revenue sharing ratio.
This demonstrated our ongoing improvements to efficiency as we continue to execute our prudent operating strategies.
Copyright cost decreased significantly as a result of our selective copyright procurement strategy, whereby we seize acquiree overpriced copyrighted content for E sports tournaments.
Bandwidth costs in the third quarter of two decreased by 17.4% to RMB 135 million from RMB 163, 4 million in the same period of 2021.
The decrease was mainly due to higher bandwidth efficiency.
<unk> through dynamic bandwidth allocation.
Meanwhile, the year over year reduction in pig bandwidth usage also contributed to the decrease in bandwidth costs.
Gross profit in the third quarter of partners and it too was RMB $251 2 million compared with RMB 278.5 minutes in the same period of 291.
Gross margin for the quarter expanded to 14% from 11, 9% in the third quarter of two one.
I'm really due to two factors. The first was the significant decrease in the copyright costs as a percentage of revenues as we ceased acquiring overpriced copyrighted content for E sports tournaments.
The second was lower revenue share ratio, which benefited from the improvement in revenue quantity.
Our sustainable operating strategy.
Sales and marketing expenses in the second quarter of kind of alluded to were RMB 162 1 million.
And if can decrease.
25, 9% from RMB $218 9 million in the same period of two one.
This was mainly.
Attributable to the decreases in both marketing expenses for user acquisition and branding expenses.
Research and development expenses in the third quarter of two.
Two were RMB $84 4 million representing a.
One 5%.
The decrease from RMB, 100, and a kind of $3 2 million in the same period of 291.
This decrease was primarily due to a decrease in personnel related expenses.
General and administrative expenses in the second quarter of 200 to RMB 52, 3 million dropping by 30.
5% from RMB 86, 5 million in the same period of time.
On the.
The decrease was primarily due to decreased share based compensation expenses.
The vast majority of shares and I'll show you some new plans were.
Were fully vested.
As decreased professional service fees.
Adjusted operating loss in the quarter of 102, which adds back share based compensation expenses was RMB eight 4 million compared with adjusted loss from operations of RMB 91 million in the same period.
Yes.
Net loss in the third quarter of unintended too was RMB six 6 million compared with RMB 143, 5 million in the same period of 2021.
The improved gross margin and expense controls combined have led to three consecutive quarters of narrowing losses.
Adjusted net income in the third quarter of 102, which excludes share based compensation expenses shelf loss the equity method investments and impairment loss of investments was RMB 95, 7 million comparatively adjusted net loss.
<unk> of RMB $72 7 million in the same period of two one.
For the third quarter of pun intended to be.
Basic and diluted net loss per ads as well RMB point.
0.01, and RMB 0.01, respectively.
While adjusted basic and diluted net income, but it is what RMB quite.
Nine and RMB.
<unk> nine respectively.
As of September 30th pundits I need two the company had cash and cash equivalents.
Strictly cash.
Short term and long term bank deposits of RMB 6.87 billion compared with RMB 6.64 billion as of December so depressed public countrywide.
Going forward, we will.
We have continued to focus on optimizing costs and improving revenue quality.
Ought to deliver sustainable profitability.
We will continue to improve or.
Enhance monetization capabilities to support the long term development of our platform.
This concludes our prepared remarks for today operator.
We are now ready to take questions.
Okay.
We will now begin the question and answer session.
I'll ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And our first question will come from Louise <unk> of Bank of America. Please go ahead.
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Oh, no it's exactly how we maybe some business that Jeff mentioned and to change our content plans. This year, what's yoghurt market improvement. So can you share with us your card and the strategic food cards and all of our business plan for the next year or second delay Oh no. Okay. So we have about your own Killeen cumin.
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But how would they hit upon it.
Since updating our strategy two years ago, we have consistently ask here towards the development of a game centric comprehensive common system.
As we have communicated in the past earnings calls. This includes building an integrated content system refining our operations and innovating services.
Populating a healthy positive game focus the content ecosystem.
In the light of current economic capacities, we have adjusted our short term operational focus.
Internet companies has been operating year ever changing and highly complex external environment since last year as such we have adopted a more sustainable operating strategy pretty active they ceased acquiring overpriced copyrighted content and optimize our cost structure.
To ensure operational and financial stability for our business.
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I will turn the corner to ensure that people should count on it.
Turning.
And you're right.
Oh, so far this adjustment has delivered positive results, we grew our mobile and they use for two consecutive quarters also continued investment in self produced content and innovative services without relying on traffic from overpriced premium tournaments with <unk>.
<unk> managed to achieve positive adjusted net income for two consecutive quarters by streamlining our operations improving revenue quality and implementing stringent cost controls.
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You said your official decision.
We also refined our internal management practices, we adjusted our allocation of resources by the enemy for re evaluating and altering our operating strategies based on the ROI of each game.
Pete the peace cable segment for example, our decision now to purchase the copyright of the Peacekeeper elite leagues screen tournament earlier. This year was based on the reality no all I performance of this segment.
As we as we refine our operations and deepen our cooperation with game developers all are improved and we concluded that the timing was right to purchase the copyright of the Peacekeeper Elite League Soccer tournament.
Allow us to regain the traffic from the tournament content, while maintaining our operational prudent.
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Due to the general partner.
Well, we have a deep understanding of the gaming industry years of operating experience and the leading streamer resources leveraging these advantages we will continue to develop and strengthen our collaboration with game developers and invest in more in game centric self produced content all pointing out.
TBD.
As well as community building at the same time, we will remain our advantages in high quality content and game operation and the stabilized platform traffic by promoting a healthy and positive game ecosystem going forward, we will continue to explore new business models gradually.
The improved revenue quality and boosted operating efficiency through effective cost controls and expense optimization by doing so we will realize our platform potential for long term and sustainable growth.
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Women.
Sure.
And then you have been more fashion, yes.
Okay.
As we have communicated before though it is a game centric platform, which are tax under returns users by providing high quality games century content.
When we introduced our select few contract procurement strategy, we expected to lose some users.
The lack of some overpriced copyrighted tournaments means that users, who primarily use our platform towards official tournaments would have less incentive to engage.
Recognizing this we implemented several strategies to smell nice traffic and to maintain Oh meus fostering the creation of high quality self produced content and innovating our operational strategy.
This included increasing our investment in self produced content and the deepening our collaborations and operations with game developers.
We expanded our content offerings based on the analysis of tumors and of users' demands in order to meet the diverse content consumption needs of our users.
In terms of all patients with further emphasized our collaboration with game developers and deliver our users the cans of content and services they wish to see and pay for we achieved this by conducting joint operations with developers sharing game data in compliance with laws and regulations.
And designing innovative strategies for commercialization.
As a result, our user count has grown steadily for two consecutive quarters.
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Sure.
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Why not wait.
Sure.
Let's take a closer look at the typical gaming segments.
In the L. O L segment, we lost some users who when they watched official term into our platform as we did not purchase the copyright of L. P. L. However, the traffic of non copyrighted content has remained stable and user interactions improved sequentially. This was.
Driven by the quality of our premium self produced content as well as innovative operations.
Certain gaming segment, we introduced new game specific membership services based on each game features and our users needs. This.
This matter is not only attracting new users, but also drove the recovery of.
Those segments traffic and greatly improved user engagement.
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So that's.
That's what you do them jumped the gun.
This adventure.
Let me read them.
These are important reduction had we done this.
All following three quarters of operational adjustments, we have build a healthy and interactive community I'm, a password and have stabilized our user base. Thanks to our premium stream of resources and self produced content.
Going forward, we will continue to enhance the engagement of our core users attract more users and cultivate our gaming centric ecosystem.
Nevertheless, we cannot ignore the impact of large scale hormats on traffic in the fourth quarter, we will try our best to keep our old traffic stable without the copyright Allstate L O L World Championship.
Operator next question please.
The next question comes from Thomas Chong of Jefferies. Please go ahead.
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Chung Peabody Young Union shoe, which you wont see until now.
A couple of quick diagnosing the youngest union found in that you can do you walk them back up on something you saw that excuse me.
Thanks management for taking my questions just now management talks about content in them.
Operations are pooled show in maintaining our traffic, which is a very key reasons for the step therapy in terms of the topic.
I just want to get some more color from the management perspective.
In terms of the poll glass and all parents in content.
<unk> operations sorry, thank you.
Yeah.
Thank you Barbara.
How do you intend to is we tend to visit a promise we must continent.
Our and our collaboration with empty bedroom.
Its graduates basketball better quality, better yogurt or feedback.
High quality continue to attract more users more streamers are drawn to our platform.
Their garage contend lodestone.
High quality content, there is a call of our obligations and that we continue to that great Aberdeen intends to meet the evolving in market leaders and to create a healthy didn't compete Tom through high quality content.
Operational refinement.
On top of having not thinking as to how many pharma all the content that we have aggregate videos and community focused content to tighten supply and a reach of our market data.
This is Tom.
We have also product trends.
And we find that the operation of our business.
In gaming content to stabilize our core user base.
And at the same time we.
And then it extended our game channel recovered in module shipped by Marlin of long tail, numerous and expand our overall user base.
We continue to improve the quality of our self produced content and the Q U E professional what's on the minds of protests in Hong Kong.
Oh God.
Based on our teams and our combined teams.
We successfully launched the signature itself program with very professional.
We worked with parts and monitor that by each game event.
And we'll now be able to buy hard core gamers.
Meanwhile, we continued our airports probuphine a match for condiments our content.
The auction initiatives this quarter were concentrated on the continent, our interaction between three months and yogurt.
Based on precise contains a recommendation we provider yogurt this continuously renovate the Goodyear easy.
Interest and use them more effectively.
To continue the journey.
These include a Europe out of Europe .
Okay.
In Continental Europe .
Based on the strong performance of our pulp screen more fundamental E. L. L gaming segment.
We subsequently Portland female contingent on our kids segment in October and also with dealing with a group of patients from our numerous.
In terms of operation, we continue to deepen our collaborations with game developers this collaboration.
Boulder Rama simple game launch promotions and basic operation into US co strengthening we are we work with Ginsberg tobaccos throughout the entire game publishing title.
We did.
That was by design content and climbing.
And we have now begun to explore commercializing your opportunity in mobile.
Paul is that we need.
Colorado is a big part of it.
And on asking to Sheila parcel getting better income blithely ignore that regulation.
Providing a better viewing experience for our users.
What a cruise with them.
Our in depth.
Aberration frankly.
Leveraging that film, we launched a membership service and other in Q2.
Indeed.
And as soon as an hour.
Besides the on Albert Chan sentiment, we also launched the <unk>.
Games domestically membership in others it will be from both game when expansion and user model.
Mark.
By providing value added services to other than gaming content with product in concert music.
Two our platform.
Going forward, we are dedicated to creating a more interactive gaming ecosystem on top of our existing contingency plan. Our goal is to provide users with a bad experience on our platform in regards to gaming content gaming.
And gaming demand.
Thank you.
Next question.
The next question comes from Rafael Chen of <unk>. Please go ahead.
Oh sure sure blood centers, or you want where they want to draw supply gold circle there for sure.
But you'd also talk about Yahoo, Schwab mutual Jana Jordan shops, no votes in Guangzhou, China, Shaanxi and she shops.
Oh sure Yeah, No full thing challenge that we're allowed to do that for the youngest we'll just watch it.
I will translate myself. Thanks for taking my question. My question is regarding the quarterly paying users. We noticed that this quarter experienced a quarter over quarter decline could management share more color on the underlying reserves.
And can management comment on the paying user trends going forward and main contributors. Thank you.
Okay.
As a way of briefly explained.
Remarks, Patricia and paying user count was due to our decision to cancer, although <unk> promotional activities for new paying users.
This decision was consistent with our operating strategy of lowering costs and increasing operating efficiency.
Based on analysis.
Oh hi.
Motion of activities for a new users past recipes.
One of promotional activities that don't have full up ongoing streamer and the user interactions.
Less effective at converting new paying users into record of paying users.
As such we are starting to better manage our paying user groups they ought to improve revenue quality.
We have gradually reduced pour all high promotional activities and started to focus on improving.
Overall quality of paying users.
We are developing and improving.
Revenue stream all revenue streams in two ways.
First.
We are focused on maintaining core paying users to stabilize our core business. For example, streamers fan has always been a high corky paying user base.
In addition to utilizing our effectively commercialized platform wide membership and game specific bamboo shapes.
We also launched the now monetize defense tongue feature.
This is a space where fans record gross pass along the screamers active.
Activity is in the feature we're designed to be complete to be completed over a long period of regular participation.
Promoting frequent fans streamers interactions and gradually contemplating paying habits among clients.
Second we are focused on developing new business model other than the traditional business model.
We upgraded our platform wide a membership service to provide added services based on streamers characteristics and games unique features to.
The surface is developing well and has already improved our revenue mix.
We also work to identify further opportunities for monetization and launched game space civic memberships across several gaming segments.
Looking ahead.
We will continue to leverage our competitive advantage of our in depth Gabe.
In depth gaming centric ecosystem to explore the potential of a new and innovative business models. Thank you very much.
Yes.
The next question comes from Richard <unk> of HSBC. Please go ahead.
Oh anytime fitness in England for what a Q1, a chipotle C D.
Do you tell your child got heads out Oh, yeah, yeah, well just in pink.
You'll see it again with the same time IL woman.
Yeah would you.
Hold that thought that.
Thank you management for taking my questions.
Could you elaborate more on the platform why it's war games, Betsy think membership surfaces, what they saw a progress on that and can you talk about.
Monetization potential in the future.
Thank you.
Yes.
Let me answer your jetstream.
And the annual membership service model.
Other components of our nine keeping Montana due to model. We are actively tendering this membership to suit deeper into yogurt.
Examples include our implementing change of a platform wide membership and again metric data and membership services in line with our refined the operating expenses, we plan to launch customized memberships study based on their needs.
Principally.
That's no small black mamba membership is an important tool to maintain interaction between our Cmos and models.
With a monthly subscription members have more opportunity to indirectly a screamer games and game personal accident to Union Proband inhibitor somebody's this increases increased engagement between members and Sweden.
It leads to an increase in virtual gifting.
We can't really tell you the direction bedroom and upgrade to the member prevailing interest income this quarter.
Leading to a significant increase in renewal.
And in the high single advanced Beacon to our platform.
As a way to experiment with new recipes for monetization. We also launched game collective membership liaison with Netscape natural.
In game items.
<unk>.
We are currently rolling out the discoveries amount hall screamers in certain games.
And this has achieved a good result through what hallmark promoting so far.
Three months will come up with the discoveries kindred greeting poorer.
And in beer.
Traffic increased by 50% to Pittsburgh.
A significant number of game game plan, what protected who participated in the new membership.
This strategy allows us to both protect and new users and the galvanize our active yoga promoting what's wrong.
<unk> content that you could see some in the gaming segment.
Going forward we.
We will continue to explore coming from language opportunities based on game day.
And not more than that at the membership.
More gaming thing.
Barton, scoring Denmark ETF demand, we can provide our users with a retreat gameplay experience to supplement the content consumption on our platform.
And at the same time this new initiative to Bill also offer more diversified their new channels to our three months and further.
Most of our boneless gaming content ecosystem.
Please next question.
The next question comes from Catherine Tang of Morgan Stanley . Please go ahead.
Okay said, Washington, Vishal Q, Oh gosh. His answer was that some people are going through that volume.
And on behalf of Dalian issue on it yet.
Okay, John I'm sure you've thought about lumping them all your distribution I will translate myself.
Its management for taking my question could you help actually almost a bit more about the drivers behind J P. Morgan fluctuations in colder. This year also how should we think about the future as utilization. Thank you.
Okay.
Thank you for the question.
A slight quarter over quarter increase in cost of revenues was mainly due to three factors first we managed to stabilize revenue sharing ratio sequentially.
Our adoption of a long term study the vitamin strategy for virtual gifting business.
We also reduced those revenue streams with law, all while improving our revenue quality.
We expect that our overall revenue sharing ratio will remain at the current healthy level with only slight fluctuation between quarters.
If we further adjust and fine tune our revenue generation generating operations.
Second.
Our content costs increased sequentially during the quarter. This was mainly due to increases in copyright of self produced content costs.
Which were partially offset by a reduction in stream of payroll.
In terms of copyright costs, we purchased copyright of Peacekeeper a P M resort.
Regarding a slight increase in copyright costs compared to the previous quarter.
Our self produced content, Frank we continue to explore.
Very different content formats.
During the quarter, we launched content updates for new versions of games and promoted a platform new initiatives.
Leading to a sequential increase in content costs.
We have also been continuously optimizing our streamer with sources of overseas business, leading to a quarter over quarter decrease in stream of payroll.
Looking forward, we will prudently evaluate our procurement decisions for large scale tournaments and optimize our stream of our payroll structure.
At the same time, we were contingent continue to increase our investment in high quality self produced content.
In summary, we expect of course margin for 2802 to improve slightly on a year.
Year over year basis. Thank you.
Yeah.
Yes.
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 team. Thank you for joining our call. We look forward to speaking with everyone next quarter.
Thank you that concludes the call today. Thank you everyone for attending and you may now disconnect.
Okay.
[music].