Q1 2023 DouYu International Holdings Limited Earnings Call

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Speaker 1: Do the.

Speaker 2: Good morning and good evening ladies and gentlemen. Thank you and welcome to Do You? International Holdings Limited first quarter 2023 earnings conference call. At this time all participants are in listen only mode. We'll be hosting a question answer session after management's prepared remarks.

Speaker 2: I will now turn the call over to the first speaker today, Ms. Ling-Ling Kong, IR Director at Doyou. Please go ahead, ma'am.

Speaker 3: Thank you. Hello everyone. Welcome to our fourth quarter 2023 earnings call. Join us today are Mr. Xiao Jiechen, Chairman and Chief Executive Officer, Mr. Mimming Su, Chief Strategy Officer and Mr. Hao Tao, Vice President of Finance.

Speaker 3: You can refer to our fourth quarter 2023 financial results on our IR website at IR.douyu.com. You can also check a replay of this call when it becomes available in a few hours on our IR website.

Speaker 3: Before we start, please note that this Comey-Contain forward-looking statement made pursuing to safe harbor provision for private security litigation reform act of 1995.

Speaker 3: These forward-looking statements are based on management 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.

Speaker 3: or expectations implied by this forward-looking statement.

Speaker 3: All forward-looking statements are expressly qualified in their entirety by the cautionary statement, risk factors, and detail of the company's filing with the FCC. The company undertakes no duty to revise or update any forward-looking statements for select events or circumstances.

Speaker 3: after the date of this conference call.

Speaker 3: I will now speak on behalf of our Chairman and CEO , Mr. Xiao Jiechen.

Speaker 3: In 2023, we plan to continue implementing our core strategy of building a comprehensive game-centric content ecosystem and to prioritize our focus on fostering a vibrant and healthy gaming community.

Speaker 3: In the fourth quarter, we made persistent efforts to produce premium gaming content and highlight our platform's gaming features by refining our operations and optimizing community interactions.

Speaker 3: These initiatives continue to lay a solid foundation for long-term sustainable development.

Speaker 3: With that in mind, we proactively adjusted our revenue generation and marketing strategies with a sharp focus.

Speaker 3: on enhancing our user quality and maintaining stable business performance. In the fourth quarter, our mobile MAUs were 50.2 million, with the total number of paying users at 4.5 million, and our adjusted net profit was RMB 25.8 million.

Speaker 3: for the changes include, first, in the fourth quarter, we shifted our operating strategy to focus on improving user quality, which significantly reduced our marketing expenses for user acquisition. On a year-over-year basis, the lack of user acquisition from promotional channels

Speaker 3: led to a notable decline in MAUs in the fourth quarter. We made this change in strategy because we discovered through data analysis that channel promotions resulted in low user retention and conversion, despite a short-term increase in user numbers. That is to say, as users' needs grow more, they work.

Speaker 3: with game developers, essentially advancing our growth with an account driven approach.

Speaker 3: Second, our membership business, which we launched in collaboration with game developers, contributed to user growth, partially offsetting the year-over-year decrease in MOUs due to the adjustment we made in our marketing strategy.

Speaker 3: By upgrading and promoting our membership business based on game features, we met the gaming needs of more users, gaining traction among both new and existing users.

Speaker 3: Moving to our content ecosystem.

Speaker 3: Throughout our many years of operation, we have emphasized the development of our game-centric interactive content ecosystem.

Speaker 3: Our investments.

Speaker 3: Our content-centered approach allows for continuous improvement in the quality of our content based on game features, well-provided innovative services, and driving enhanced interactions in our community.

Speaker 3: Ultimately, this contributes to a healthy ecosystem with rich content and extensive interactions.

Speaker 3: In parallel with content optimization in the fourth quarter, we introduced new content display formats and interaction options to meet different users' needs across more diversified content consumption scenarios.

Speaker 3: which elevated all our user engagement and stickiness on our platform.

Speaker 3: In the fourth quarter, we continue to improve our diversified, self-produced tournament system and organized almost 90 E-

Speaker 3: This included collaborative events that have been held for several years in a row and are already integrated into the game's professional tournament system, such as the League of Legends Team Fight Tactics Tournament on Dory's platform.

Speaker 3: We also produce tournaments based on our existing IP.

Speaker 3: with participation coming primarily from streamers.

Speaker 3: including the PeaceCaper Elite Mount Haruna Cup and the GONASS Cup for Naraka Blade Point and CSGO, which will be held for female streamers.

Speaker 3: In addition, we organized even more interactive and engaging mass tournaments.

Speaker 3: such as the On of Kings MECO tournament and the PeaceCaper Elite Follower Contest, among others. By providing both professional and ledger events, our multi-layer tournament system not only met gamers' needs for watching diverse competitions, but also for the competition's

Speaker 3: but also encouraged more users to take part in mass tournaments.

Speaker 3: In addition to producing tournaments for existing games, we also built new tournament content that caters to the feature and user base of new games.

Speaker 3: For example, we unveiled the Water Ranch Overseas Tournament to build momentum for this new game segment, along with the opening of the game for domestic preregistration, while offering streamers more opportunities for participation and exposure.

Speaker 3: This offers streamers with a wider growth path and provided a channel to professional esports teams to subsequently select professional player candidates.

Speaker 3: With respect to copyright determents, as copyright pricing gradually retaining to a reasonable range, we purchased some co-tourments copyrighted again this year, including the League of Legends Pro League and LOL World Championship Tourments.

Speaker 3: This purchase is...

Speaker 3: or in consideration of the board influence of co-corporate determines and our rich experience in operating such content.

Speaker 3: In the fourth quarter, we broadcasted over 20 large-scale official events.

Speaker 3: such as the sprint tournaments of LPL, KPL, and PEL, further elevating user engagement and thickness in our game segments through differentiated derivative content and diverse operating activities.

Speaker 3: For example, in LPL, by leveraging our top tier streamer resources, we selected 12 streamers to do a co-streaming of the tournament events, which achieved good results.

Speaker 3: The DAUs on our top streamers' left-wing channel were on par with that of the official, the game's official channel. In addition, the number of bully chats exceeded those from the game's official channel several times.

Speaker 3: In terms of community interaction, our goal is to augment the level of user engagement on our platform by exploring a broad variety of content formats.

Speaker 3: To that end, we consistently upgrade and roll out new Bully chat formats, and as Bully chat has proven to be an important form of live streaming interaction.

Speaker 3: Specifically, we provided different colors, emoji pictures, and in-game roles for users to customize their bully comments.

Speaker 3: further complemented by identity tags that can be used as user names prefixes to diversify the interactive experience.

Speaker 3: Furthermore, we designed different booty chat formats that varied according to users' membership levels and identity settings on our platform, not offering users better interactive experience.

Speaker 3: Between live streaming sessions, our Game Center community became the primary hub for communication between streamers and users and among users themselves.

Speaker 3: As such, we continue to explore different interactive formats within our community channel.

Speaker 3: For example, we observed that organizing team gaming activities through our community channel was an effective way to enhance user activity, addressing our users' gaming needs while highlighting our platform's game-oriented features.

Speaker 3: Moving on to our monetization strategies. Our total number of paying users in the fourth quarter was 4.5 million with a quarterly R-Pool of RMB 314. The reasons for the change in the number of paying users are threefold.

Speaker 3: First, we continue to execute on the strategy we introduced in 2022 of increasing our operating efficiency.

Speaker 3: which included canceling marketing activities for new paying users with low rates of return.

Speaker 3: Second, beginning in the fourth quarter of 2023, we proactively reduced our low-growth margin marketing activities by cutting back on the promotions of certain virtual gifts.

Speaker 3: Third, the decrease in our overall user base was partially a result of reduced marketing spending. To some extent, this adjustment affected our users' willingness to pay, including both new users and price-sensitive users.

Speaker 3: resulting in an overall decline in paying users. Nevertheless, we devoted more operational resources to maintaining our co-paying users. Internal data show that in the fourth quarter, our co-paying users maintain stable spending habits.

Speaker 3: as reflected in our quartered art pool, which rows both year-over-year and quarter-over-quarter.

Speaker 3: Apart from traditional virtual gifting, our membership business also represents a sustainable source of revenue, which is essential for maintaining co-uses.

Speaker 3: Since 2022, we have consistently improved and promoted our platform-wide membership service with upgraded membership features and privileges to reinforce the companionship attributes of our products and amplify interactions between streamers and members. In the fourth quarter, we further optimized our...

Speaker 3: paying user ecosystem through various member privileges and operational activities, facilitating a steady increase in members' renew rates for several consecutive quarters. On top of that, this year we plan to focus on expanding our game-specific membership services. We will design and promote customized game membership services for all users.

Speaker 3: not only strengthened our user sickness, but also promoted our revenue diversification and sustainability, demonstrating the long-term value of dough-use game-centric ecosystem. In terms of our product R&D and functionality innovation,

Speaker 3: as a gaming content platform, we continue to launch new content production tools. In the fourth quarter, we provided more convenient editing and display tools in our PC-based live streaming application for streamers.

Speaker 3: enabling them to quickly add gaming images, their personal images, words, and advertisements as live streaming inputs to improve live streaming quality and efficiency. Thanks to the user-friendly interface of this content aggregation tool,

Speaker 3: more long tail streamers were able to employ them and enjoy and enhance life-dreaming experience.

Speaker 3: which can help to improve their long-term retention rates. In conclusion, we have been committed to executing our core core strategy of fostering a vibrant game central content ecosystem.

Speaker 3: with a focus on maintaining the scale and quality of our co-users. We will strive to build a healthy platform for our co-users.

Speaker 3: by attracting more high quality users to our diverse and growing content and fortifying user interaction and thickness through innovative operations.

Speaker 3: Looking forward, we will continue to explore more commercialization channels and new growth avenues while maintaining our leading position in the domestic game live streaming industry.

Speaker 3: With that, I will now turn the call over to our Vice President of Finance, Mr. Hao Tao, who will go through the details of our financial performance in a quarter.

Speaker 4: Thank you Lingling. Hello everyone. In the first quarter, based on refined strategy to achieve healthy and balanced growth, we focused on the development of healthy margin business and operations.

Speaker 4: Without further adjustments to revenue generating activities and reduced our marketing spendings,

Speaker 4: We generated an adjusted net profit for the quarter amid a short-term impact on revenues.

Speaker 4: Let's now look at our financial performance in more detail.

Speaker 4: Total net revenues in the first quarter of 2023 decreased by 17.4% year-over-year to RMB 1.48 billion.

Speaker 4: Livestreaming revenues were RMB 1.37 billion, a decrease of 20.7% from RMB 1.73 billion in the same period of 2022.

Speaker 4: The decrease was mainly attributable to our continued operational adjustment on live streaming revenue.

Speaker 4: such as significantly reducing low-margin promotional activities on virtual gifts.

Speaker 4: As a result, those adjustments impact willingness to pay of new paying users and price-sensitive paying users.

Speaker 4: together with decreased user base cost by reduced marketing spending.

Speaker 4: resulting in a year-over-year decrease in the number of paying users.

Speaker 4: However, the paying behavior of our core paying users remains relatively stable, leading to a year-over-year increase of 16.5% in quarterly up to RMB 314 in the first quarter, up from RMB.

Speaker 4: 270 in the same period last year.

Speaker 4: Advertising and other revenues were RMB 114.1 million, an increase of 66.6% from RMB 68.4 million in the same period of 2022.

Speaker 4: The year-over-year increase was primarily attributable to the increase in other revenues contributed by game-specific membership services.

Speaker 4: Cost of revenues in the first quarter of 1023 was RMB 1.31 billion.

Speaker 4: a decrease of 15.8% compared with RMB 1.55 billion in the same period of 2022.

Speaker 4: Revenue share fees and content costs decreased by 19.1% to RMB 1.08 billion from RMB 1.34 billion in the same period of 2022.

Speaker 4: The decline was primarily driven by the following two factors.

Speaker 4: First, the decrease in revenue share fees was mainly in accordance with the decrease in live streaming revenues.

Speaker 4: In addition, the lower revenue sharing ratio, which was achieved through our continued operational efficiency improvement,

Speaker 4: led to a further reduction in revenue sharing fees. Second, content costs also decreased largely attributable to better managed self-produced content costs benefited from less operating activities.

Speaker 4: with low margin as well as controlled payments to streamers. The decrease was partially offset by increase in copyright costs as a result of the purchase of LPL tournament copyright.

Speaker 4: BIDO-based costs in the first quarter of 2023 decreased by 18% to RMB 124.5 million from RMB 151.9 million in the same period of 2022.

Speaker 4: The decrease was mainly due to improved efficiency of peak bandwidth usage.

Speaker 4: Though the peak bandwidth usage increased year-over-year due to the growing tournament of viewing demand, we managed to control bandwidth costs through dynamic bandwidth allocation and other optimization measures.

Speaker 4: Also, the peak bandwidth usage increased year-over-year due to the growing tournament viewing demand. We managed to control bandwidth costs through dynamic bandwidth allocation and other optimization measures.

Speaker 4: bandwidth usage increased year-over-year due to the growing tournament of viewing demand. We managed to control bandwidth costs through dynamic bandwidth allocation and other optimization measures.

Speaker 4: First profit in the first quarter of 2023 was RMB 176.5 million, compared with RMB 243.8 million in the same period of 2022.

Speaker 4: The decrease in gross profit was mainly attributable to the decrease in net revenues and the increased other costs.

Speaker 4: Other costs include the cost of game-specific membership service, which

Speaker 4: grew largely in line with the increase in other revenues.

Speaker 4: Gross margin in the first quarter of 2023 was 11.9% compared with 13.6% in the same period of 2022.

Speaker 4: The decrease in gross margin was mainly attributable to the increase in other costs as a percentage of revenues, which was partially offset by the decreasing percentage of revenues attributable to revenue sharing fees and content costs.

Speaker 4: Sales and marketing expenses in the first quarter of 2023 were RMB 90.7 million, a significant decrease of 51.3% from RMB 186.4 million in the same period of 2022.

Speaker 4: This was mainly attributable to a decrease in both marketing expenses for user acquisition and branding expenses. Research and development expenses in the first quarter of 2023 were RMB 72.3 million.

Speaker 4: representing a 37.8% decrease from RMB 116.3 million in the same period of 2022.

This decrease was primarily due to a decrease in personnel-related expenses.

General and administrative expenses in the first quarter of 2023 were RMB$59.8 million, a drop of 33.6% from RMB$90.1 million in the same period of 2022.

The decrease was primarily due to decreased share-based compensation expenses as the vast majority of shares and our share incentive plans were fully vested.

Loss from operations was RMB 27.3 million in the first quarter of 2023.

narrowed significantly from RMB 101.2 million in the same period of 2022.

Net income in the first quarter of 2023 was RMB 14.5 million, compared with net loss of RMB 86.9 million in the same period of 2022. Adjusting net income, which excludes share-based compensation expenses,

the share of loss or income in equity measure investments.

And the empowerment loss of investments was RMB 25.8 million in the first quarter of 2023, compared with adjusting net loss of RMB 52.5 million in the same period of 2022.

For the first quarter of 2023, basic and diluting net income per EDS were both RMB 0.05, while adjusted basic and diluting net income per EDS were both RMB 0.08.

As of March 31, 2023, the company had cash and cash equivalents.

restricted cash and short-term and long-term bank deposits of RMB 6.6 billion, compared with RMB 6.81 billion as of December 31, 2022. Going forward, we will maintain the stable operation of our core business.

and further improve revenue quality while continuing to optimize costs and expenses in order to deliver sustainable profitability.

We will also strive to explore more commercialization channels and enhance their monetization capabilities to support the long-term healthy development of our platform.

This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you. We will now begin the question and answer session.

To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.

For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Li Zhang from Bank of America. Please go ahead.

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So can you help us to understand our co-user group and how we can achieve and expand our co-user group? Secondly, we know that we have so many new games launching this year. So do you think this new game can drive our user and the streaming business? Thank you.

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They are basically game users who have played a key role in building the gaming community on our platform.

They are also the foundation of our business development.

As such, we have kept upgrading our content and product formats based on changes in users' needs. We have also taken various measures to maintain our co-users while acquiring new users through an enhanced platform ecosystem.

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For software, we value content quality and user experience. That's why we have continuously optimized our product features and interface that strengthens our platform's game attributes to enforce our appeal to users.

We have continued to invest in content upgrades, establishing a multi-layered gaming content system covering official tournaments, self-produced tournaments and programs.

Meanwhile, we met users' needs for long-term, fragmented, and interactive content through different content formats such as live streaming, videos, and communities, respectively.

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List with the dend added and you your create converssial reginion. Today you see international shps in other whole seenior coed, another valship, ION. Second, regarding produarct format, we optimize our video and community access based on us habits. We also change the accountant D priority in different gang segments.

according to game characteristics and user preference to facilitate content consumption. Notably, in game segments such as LOL Teamfight Tactics and Jinting Impact, video content such as Game Strategies has a higher viewership compared to traditional game segments.

In the newly launched egg party segment, users can team up through our community channel, leading to stronger user engagement and appeal in this channel than in traditional game segments.

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Third, we strengthen our user operations and services, enhancing our user experience and thickness through personalized recommendations and innovative services. For example, for users with continuous consumption habits who follow our streamers, we recommend platform-wide membership.

ensured our co-users satisfaction and thickness, thereby maintaining user loyalty in the long run. The stability of our co-users is not only the foundation of our gaming community, but also the starting point of our explorations for new growth models.

that can benefit the long-term healthy development of our platform. Let me answer your second question about the new game. As the approval for new game titles resumed at the beginning of this year, casual games have been gaining popularity. The public testing, pre-launch promotions, and official launch of some games have been gaining popularity.

large-scale games have given us more opportunities to attract users through higher quality new game content and innovative platform operations.

TKAG party as an example. As it's a casual game with strong social attributes, we enhanced our community channel operation, encouraging users to team up through our community channel to play games. Thus, we forcing user interactions to attract support with aud eyewitnesses to support the team.

highly engaging tournament content to attract the attention of both streamers and users.

Thanks to our high quality stream pool and self-produced tournaments, users viewing time grew significantly in the variant segment after the opening for domestic preregistration.

On the top of providing streamers and content offerings, which is our common practice for new games, we also offer suitable gaming content and display formats based on game characteristics.

to acquire more new gamer benefits and promote the games in conjunction with our platform's game content.

In this way, new games can attract more new users in the early stages of their launch.

among the games to be launched this year.

We believe HongK, Stereo and Justice Online Mobile will be the focus of our operation.

As Honky stereo is not a great fit for livestream compared with competitive games, we leverage its ACG attributes for content operation, such as inviting popular L.O.L players who are also fans of Jameson.

impact to showcase the new game through live streaming. We also launched a game Q&A challenge in our community channel to inspire user interactions.

Although we cannot accurately predict the schedule for the game's launch, we have already conducted detailed evaluations of the new games. And accordingly, we have made thorough plans for their operations. This is to ensure that...

we can quickly deploy and integrate resources upon the game's launch and provide promotional and operational support

Thus seeing the opportunity to acquire more users during the game's promotional phase. Thank you. Please next question.

The next question comes from Thomas charong, from Jeffrey, Please go ahead. Thank you by already. Were what the ones J and to challge if I one body time or ING that will make you away to you? Came over, miss to you, alth see.

I have a question for myself. Thanks, management, for taking my question. So my question is that, so in recent years, we have made some adjustments on operational strategies. So how should we measure or evaluate the effectiveness of these new strategies? Thanks.

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and the development of the new technology. As we face a consistently evolving industry landscape and more diverse gaming consumption needs, we are prioritizing long-term sustainable development as a leading game-centric content platform in China. While stabilizing and optimizing our traditional business.

features, we've been able to enrich our platform's game-centric community ecosystem and enhance our user experience and retention rate.

I will elaborate on the strategic adjustments we made over the past years and still ongoing, along with discussing the effectiveness of our evaluation metrics. I think we should be looking at the strategic improvements we made over the past years and still ongoing, along with discussing the effectiveness of our evaluation metrics.

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First, I will discuss changes in our user acquisition strategy. At present, the scale of China's gaming market is essentially stable. Given users' involving needs in the current market, the ROI of channel promotion has been declining. As such, we stick to a content-driven approach to growth.

by continuously investing in high quality content and cooperating with game developers to acquire new users. We've also built a diverse product system to meet user different needs and enhance user thickness, gradually forming a positive cycle of content production and user growth. The most straightforward metrics for improvements in our equal...

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and more likely for users to engage in paying behavior.

in order to promote our platform's long-term health development.

Regarding our traditional virtual gifting business, we further reduced low ROI investment during the first quarter, such as various promotions and developed products more suitable for current consumption trends.

While adjusting our virtual gifting revenue mix, we also optimize our cost and expense structures. As a result, with virtual gifting still our major source of revenue, we focus on revenue stability and improvements in both gross margin and adjusted net margin.

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can consistently satisfy gamers' needs with a focus on platform's game attributes. For example, based on our user cohort, we launched our platform membership business with companionship-oriented products and the game membership services for gaming users.

These unique and sustainable products can not only bring new users to our platform, but also improve our revenue structure.

Although the current revenue contribution of membership services is relatively small, we believe it has a great potential and it has demonstrated the flexibility of our new models. On the whole, compared with revenue and expense adjustments, it will take time and patience for our content investments and new model exploration to pay off with improvements in

Next question, please. Next question comes from Richie Sun from HSBC. Please go ahead.

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return of this tournament contribute to the platform. Second of all, can management share our MAU as well as paying user trends for this year? Thank you.

Let me answer your first question about tournaments. We believe the co-copyrighted tournaments are still of great value, and the price levels gradually returned to a reasonable range. We purchased some co-copyrighted tournaments in 2023.

such as the LPL and the LOL World Championship tournaments. While LPL's return brought us some incremental growth in traffic in the LOL segment, it could not offset the decline in user skill resulting from significantly reduced promotional experience.

There have been clear quote-over-quote improvements in average daily viewing hours and the number of celebs reported

In particular, as mentioned in our CEO's remarks, this year we leveraged our top-tier streamers and official tournament commentaries for a co-streaming of the tournament events.

The topics covered in this live streaming session are check the widespread edition and inspired discussion on and of our website.

This demonstrates once again our enduring influence as an established game live streaming platform, even if we stop the live streaming some copyrighted tournaments for a year.

I will answer the second question about the user and paying user training.

Our operating strategy prioritizes long-term sustainable development, that is exploring growth from new businesses while stabilizing and optimizing our traditional businesses. As our traditional businesses account for a large share of our total revenue, our business

activities.

These adjustments affected our platform's user scale and our number of paid users.

which explains the year-over-year and quarter-over-quarter decline in MAUs and paying users in the first quarter.

A significant reduction of China promotional expenses was the main reason for the decline in MAUs.

Our MAU performance in the first quarter was in line with our expectations.

namely, most of the large MAUs were short-term users from the platform. So this strategy won't affect our content operations or our monetization efficiency.

In comparison, our core user base has remained relatively stable. For instance, users with above-average viewing hours have a retention rate that almost doubles the average retention rate.

And paying users next month's retention rate exceeds the average retention rate by over 50%.

We will continue to execute our strategy of reducing China promotional expenses. On that basis, we expect MAUs in 2023 to remain on the same level as in the first quarter, with small quarterly fluctuations.

A decline in paying users is attributable to two factors. One is that our adjustments in revenue-generated activities affected some users' willingness to pay. The other is that the overall decrease in our revenue-generated activities affected some users' willingness to pay.

The decline in paying users is attributable to two factors. One is that our adjustments in revenue-generated activities affected some users' willingness to pay. The other is that the overall decrease in our user scale.

Guided by the operating principle of improving use quality, we will devote more operational and other resources to maintaining a core pain user's thickness and willingness to pay through more interactive products and innovative membership services.

So far, our paying user base has reached a relatively stable range. We believe our operational adjustments will allow us to concentrate our resource on content, which is more sustainable despite a longer payoff cycle. It will take time to complete the process.

before we can see the results of these adjustments. Meanwhile, we have been following the progress and will provide updates in due course. Thank you. Next question.

The next question comes from Raphael Chen from Bank of China International, please go ahead

Thanks management for taking my question. I only have one question regarding the bottom line. Could management share some color on the bottom line or margin outlook in the next few quarters? Thank you. Starting last year as we kept adjusting the live streaming business to drive its healthy growth.

Our overall operational efficiency has improved through fine-tune operations and increasing ROI. We have achieved good results, with our net loss has gradually narrowed.

In the first quarter, by continuing to adjust and reduce our low-margin operations, we achieved net profitability under both non-GAAP and GAAP, echoing our goal of maintaining prudent operations in traditional business in 2023.

Working towards this goal, we remained committed to executing our strategy of fostering a comprehensive game-centric content platform. We increased the investment in quality tournament content, adding the copyrighted LPL tournaments this year.

and continuing to invest in KPL tournaments and other top-notch copyrights. Furthermore, we also actively promoted innovative businesses, such as game-specific membership services.

To address the increased costs of copyrights and innovative business, we adopted a flexible approach to control overall costs through content management and strategic operations. Regarding revenue share fees, as we actively...

fostered a healthy and sustainable live streaming ecosystem and reduced low margin operational activities. The overall revenue sharing ratio remained at current low level. In terms of content costs, we strengthened content management and operations. On the one hand,

we elevated the production efficiency of our self-produced content for ROI improvements. On the other hand, we reduced low margin promotional activities.

As a result, the costs of self-produced content and operational activities have been notably reduced year-over-year. On the whole, we expect the overall cost of revenues in 2023 as a percentage of revenues to remain flat year-over-year.

In terms of operating expenses, we adhere to a content-driven approach to user growth, virtually cutting our channel-related user acquisition expenses. We expect a major reduction in four-year marketing expenses year-over-year.

Meanwhile, we will actively optimize operating expenses and further refine our employee streamlining to improve operational efficiency.

Cost control measures certainly helped us strengthen our traditional live streaming business. Live region on the competitive edge of traffic and gaming content we build from our traditional live streaming business. We put more effort.

are exploring and developing innovative growth avenues, which in turn supported our platform's long-term sustainable profitability and development. Thank you.

Thank you. That's all the time we have for questions. I will now turn the call back over to management for closing remarks. On behalf of the management, thank you for joining our call. We look forward to speaking with everyone of you next quarter.

the time we have for questions. I will now turn the call back over to management for closing remarks. On behalf of the management, thank you for joining our call. We look forward to speaking with everyone of you next quarter.

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