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Edited Transcript of DOYU.OQ earnings conference call or presentation 27-Nov-19 1:00pm GMT

Q3 2019 Douyu International Holdings Ltd Earnings Call

Nov 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Douyu International Holdings Ltd earnings conference call or presentation Wednesday, November 27, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hao Cao

DouYu International Holdings Limited - VP & Director

* Mao Mao

DouYu International Holdings Limited - IR Director

* Shaojie Chen

DouYu International Holdings Limited - Founder, CEO & Director

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Conference Call Participants

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* Chun Man Poon

Morgan Stanley, Research Division - Equity Analyst

* Hillman Chan

Citigroup Inc, Research Division - Research Analyst

* Lei Zhang

BofA Merrill Lynch, Research Division - Associate

* Qi Chen

JP Morgan Chase & Co, Research Division - Research Analyst

* Thomas Chong

Jefferies LLC, Research Division - Equity Analyst

* Zhangxiang Liu

China Renaissance Securities (US) Inc., Research Division - VP

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Presentation

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Operator [1]

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Good morning, and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited Third Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note, the conference call is being recorded.

I will now turn the call over to the first speaker today, Ms. Mao Mao, IR Senior Director of DouYu. Please go ahead, ma'am.

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Mao Mao, DouYu International Holdings Limited - IR Director [2]

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Thank you. Hello, everyone. Welcome to our third quarter 2019 earnings call. Joining us today are Mr. Shaojie Chen, Chairman and Chief Executive Officer; Mr. Mingming Su, Chief Strategy Officer; and Mr. Hao Cao, Vice President of Finance.

You can refer to our third quarter of 2019 financial results on our IR website at ir.douyu.com. You can also check a replay of this call when it becomes available in a few hours on our IR website.

Before we start, please note that this call may contain forward-looking statements made pursuant to the safe harbor provisions for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward-looking statements.

All forward-looking statements are expressly qualified in their entirety by the cautionary statement, 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.

Now I will read the prepared remarks on behalf of Mr. Chen.

Overall, we sustained solid growth momentum in both our financial and operating results in the third quarter of 2019. During this quarter, our total revenues increased by 81.3% year-over-year to RMB 1.86 billion, while gross profit increased by 450.5% year-over-year to RMB 316.8 million, implying a gross margin of 17%.

Likewise, adjusted net income grew to RMB 72.2 million, representing an adjusted net margin of 3.9%.

At the same time, our user base continues to expand with quarterly total MAUs increasing by 14.7% year-over-year to 163.6 million, among which mobile MAUs increased by 26.1% to 52.1 million. In addition, quarterly paying users increased by 66% year-over-year to 7 million.

The robust growth in mobile MAUs was attributable to 3 key factors: First, several awards championship tournaments, including The International 2019 caused user traffic to flourish in both Dota 2 and other related segments during the quarter. The high-profile event also successfully reengaged a significant portion of previously inactive users. Second, the overlap of the summer holiday period during the quarter was conducive to a higher viewing frequency on mobile devices. Third, several new phone model launches during the quarter significantly enhanced our users' viewing experiences on mobile devices. In addition, our PC MAUs ramped up to 111.5 million, maintaining a steady growth rate of 10% year-over-year.

The launch of games with megahit potential, including World of Warcraft classic and Teamfight Tactics, also expanded users' number of viewing choices on both mobile and PC platforms, which further boosted both mobile and PC viewership in turn.

Beyond user growth, we maintained high level of user engagement and stickiness, while keeping our average daily viewing time steady in the quarter. Looking forward, with more and more gamers and eSports players being converted into viewers of game live streaming and the coming launches of highly anticipated game titles, we are confident in our ability to sustain a long-term MAU growth. During the quarter, we continued to cultivate the vibrancy of our game-centric live streaming content ecosystem, while expanding our content coverage across all segments of the platform. Notably, our game live streaming segment accounted for more than 80% of total viewership in the quarter. Meanwhile, nongaming content [has actually] supplemented our game live streaming content, bolstering our appeal to a broader array of viewing preferences and accelerating our penetration into various user segments.

On the eSports front, we continue to explore both upstream and downstream segments of the eSports value chain. During the quarter, we self-organized and live streamed over 50 tournaments as well as broadcasted over 70 large-scale eSports events such as CS:GO Major Championship and The International 2019. These events are quite in fashion with the eSports community and helped us to attract a tremendous amount of game users. In addition to broadcasting eSports events, we also signed several exclusive streaming partnerships with highly potential eSports team, thus continuing to lay a solid foundation for the cultivation of top-tier game streamers and the distribution of premium game-centric live streaming content. Going forward, we will continue to explore different areas of the eSports value chain for investment and further enhance our premium content to attract more eSports users onto our platform.

In line with our curation of premium eSports content, we also continue to sign our DouYu track system of exclusive contracts and talent agency models to maximize the effectiveness of our streamer management network.

For example, through increased collaboration with talent agencies, we were able to improve the operating and monetization efficiencies of mid-tier and long-tail streamers. By leveraging our close ties to this group of top streamers, we were able to develop premium content, amplify viewership and increase user stickiness.

We also continue to devote a substantial amount of resources to the discovery and conservation of mid-tier streamers. Through our work with this deep pool of promising talent, we were able to diversify our live streaming content ecosystem, generate a constant stream of quality content and accelerate the monetization potential of this streamer category.

Going forward, we will continue to deepen our cooperation with leading game developers and distributors such as Tencent. Such collaboration will enable us to enrich our gaming-centric content offerings, seize the first-mover advantage for megahit game launches and facilitate a constant flow of premium eSports content.

Furthermore, we will also optimize our operating capabilities in each segment, while refining our internal streamer management system, both of which will further boost our user conversion and accelerate our market penetration.

In addition to content diversification, we also ramped up our monetization capabilities in the third quarter of 2019. Notably, our quarterly paying users increased by 66% year-over-year to 7 million, implying a paying ratio of 4.3% compared to 3.0% in the prior year period.

Meanwhile, the ARPPU increased by 10.4% year-over-year to RMB 237 million in the third quarter.

For our game live streaming segment, we continued to promote our fans system and small amount gifting through a series of innovative products and interactive features to enhance user streamer interaction and stimulate user venues to pay.

For example, in August, we launched the super fans club as an extension of our existing fans system. The super fans club was both effective and well received by users, increasing users' engagement with the platform and paying ratio within the game live streaming segment.

In our non-gaming segment, we continue to refine our premium membership system and increase our monetization efficiency by deepening our collaboration with talent agencies in the quarter. Going forward, we will continue to develop new ways of enhancing user streamer interaction and accelerating users' consumption habits.

As we move into the fourth quarter, we are increasing the frequency of major online user events from a quarterly to a weekly basis. The combination of such weekly events like the super fans club with several annual major events like the [user] ceremony enabled us to track user data and paying habits, cultivate user engagement and adjust our operational strategies based on user behavior analysis in real time, thus significantly reducing systematic risks.

Underlying all of our operational success is our ability to develop and implement technology on the frontier of progress. For example, during the quarter, as we continue to supercharge our AI and Big Data analytical capabilities, we pass along significant advantage to both streamers and talent agencies empowering both parties with more comprehensive data-driven insights and boosted operating efficiency. Leveraging our strength in data analytics and modeling, we were able to target users within every phase of the game live streaming life cycle, provide users with personalized recommendation and sharpen the effectiveness of our precision marketing.

Notably, the 5G network technologies are accelerating the development of the game live streaming business, optimizing user experience and enabling the creation of innovative business models, such as cloud gaming. In light of these industry trends, we foresee immense growth potential within the game live streaming industry and are proactively laying the groundwork for a coming transformation. Going forward, we will continue to build out and refine our technology infrastructure to capitalize on these promising market opportunities.

As we expand overseas, we are actively exploring the monetization potential of select countries, such as Vienna, where we have already secured a foothold in the market. Additionally, in Japan, we have also launched products and continue to maintain a healthy pace of progress.

In summary, we are pleased that we made progress in the third quarter, augmenting our user base, forging our content ecosystem and investigating innovative methods of monetization.

Going into the fourth quarter, we will continue to scale up our user base, stimulate deeper user interaction, curate more premium content and implement additional products and features to meet a broader array of user demand. At the same time, we will remain steadfast in our dedication to improving our financial results and generating long-term shareholder value.

With that, I will now turn the call to our Vice President of Finance, Mr. Hao Cao, to go through the details of our financial performance in the third quarter.

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Hao Cao, DouYu International Holdings Limited - VP & Director [3]

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Thank you, Mao Mao. Hello, everyone. During the third quarter, we increased our total net revenues by 81.3% year-over-year to RMB 1.86 billion and achieved solid growth in both our live streaming revenues and advertising and other revenues.

Our gross margin expanded to 17% from 5.6% in the prior year period. We also improved our adjusted net income to a gain of RMB 72.2 million from a loss of RMB 214.2 million in the third quarter of 2018.

Now please allow me to provide you with some more details regarding our key financial metrics. Our total net revenues grew by 81.3% to RMB 1.86 billion, including RMB 1.66 billion in live streaming revenues and RMB 0.2 billion in advertising and other revenues.

Live streaming revenues increased 83.0% year-over-year on the RMB 1.66 billion, as the monetization strategies proved to be efficient in enhancing user streamer interactions and stimulating users' readiness to pay. We also collaborated more closely with talent agencies to increase our monetization efficiency for mid-tier and long-tail sales. Advertising and other revenues also reported robust growth as our brand awareness broadened and promotional demand from advertisers increased significantly.

Notably, the increase in revenue from this segment mainly came from integrated advertisements as we worked carefully to maintain our superior user experience.

Cost of revenues increased by 59.4% to RMB 1.54 billion. More specifically, revenue sharing fees and content costs increased by 66% to RMB 1.31 billion. This increase was primarily driven by 2 factors: first, increased revenue sharing fees, which were in line with increases in total revenues; and second, increased investments in eSports-related content rights and eSports themes, expansion of self-organized tournaments and in-house content production.

The rise in content costs is in line with our belief that premier content is one of the key drivers for organic user acquisition, existing user retention and user engagement level improvement. These increases were partially balanced out by the declining trajectory of signing bonuses used to secure top streamers with exclusively signed contracts despite a greater number of top streamers existing on platform during the third quarter of 2019.

Bandwidth costs increased by 6.1% to RMB 150.8 million, primarily due to higher traffic and user engagement on platform, which was partly offset by our lower unit purchase price and improved utilization efficiency in bandwidth during the quarter.

Gross profit increased by 450.5% to RMB 316.8 million and gross margin expanded to 17% from 5.6% in the prior year period, mainly due to better operating leverage as a result of the company's continuous improvements in bandwidth monetization, bandwidth utilization efficiency and economies of scale.

Now let's turning to our operating expenses. Sales and marketing expenses increased by 18.6% to RMB 173.2 million in the third quarter of 2019. This change was mainly due to share-based compensation expenses recognized immediately following the company's IPO as well as an increase in promotional and marketing expenses incurred to promote eSports-related content while further strengthening both our leadership in eSports market and brand awareness.

R&D expenses increased by 47.2% to RMB 119.9 million, primarily driven by share-based compensation expenses and in-house research and development efforts for various business segments.

G&A expenses increased by 326.3% to RMB 232.9 million, which was also mainly due to share-based compensation expenses. Share-based compensation expenses allocated in operating expenses accounted to RMB 228.2 million in the third quarter of 2019 as compared to RMB 4.4 million in the third quarter of 2018 and RMB 27.4 million in the second quarter of 2019. This sharp increase due to -- during this quarter was due to the successful completion of our IPO in July this year, which was a significant noncash charge.

Other operating income net was RMB 11.8 million in the third quarter of 2019 compared with RMB 16.4 million in the prior year period. Adjusted operating income, which excluded share-based compensation expenses, ramp up to RMB 30.8 million compared to an adjusted operating loss of RMB 203.7 million in the prior year period.

Adjusted net income, which excluded share-based compensation expenses, share of loss or income in equity method investments and impairment loss of investment, improved to a gain of RMB 72.2 million from a loss of RMB 214.2 million in the prior year period. Such an increase was mainly due to our enhanced monetization capabilities and improved operational efficiencies.

Basic and diluted net loss per ADS were both RMB 0.59. Adjusted basic and diluted net income per ADS were both RMB 0.26 for the third quarter of 2019.

Looking ahead, we expect our total net revenues for the fourth quarter of 2019 to be in the range of RMB 1,960 million to RMB 2,030 million. This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.

This concludes our prepared remarks for today. Operator, we are now ready to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Hillman Chan of Citigroup.

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Hillman Chan, Citigroup Inc, Research Division - Research Analyst [2]

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(foreign language) Could management share more on your view on how the game live streaming industry has been evolving since third quarter? And how we are thinking about the competition from Kuaishou and the other self-video platforms as well as the competitive landscape in the future, please? And my second question is on Tencent. Given the investments in the 3 platforms, Kuaishou, DouYu and Huya, are we seeing any preferential treatment in terms of the resources allocation from them? And then if Tencent were to exercise the rights in coming year to consolidate Huya, how should we think about the chance of merging between Huya and DouYu, please?

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [3]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [4]

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[Interpreted] I will translate for Mr. Chen. The industry competition landscape so far has not changed materially since the first quarter of this year. To date, we believe that Kuaishou's entrance into game live streaming market has not posed any direct compete to our business. Instead, Kuaishou's presence has brought in a massive user traffic to the game live streaming industry, which we believe has both promoted the industry and also raised the growth ceiling. So such an injection of users has benefited development of the entire industry as a growing number of nongame live streaming users are becoming the game live streaming users. So it should also be noted that as a content platform, DouYu has the most premium game live streaming content, meaning that a higher industry ceiling will also significantly benefit DouYu's growth.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [5]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [6]

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[Interpreted] In terms of the user demographics, we believe that our users are different from Kuaishou or other short-form video platforms because as one of the leading platforms in the game live streaming industry today, we are generating most of our user traffic from high-quality eSports games and the majority are coming from heavy game players. So this group is of high quality, consisting of users who are highly attractive to our platform. And in addition, from user experience perspective, the short-form videos only present the highlights of an eSports tournament, while for us and other game live streaming platforms, we are providing users with complete viewing experience for the tournament. So these are quite different 2 types of viewing choices. So we believe that although Kuaishou and other short video platforms might take up a small portion of user time, given the various differences just mentioned between Kuaishou and us, we don't regard Kuaishou as a direct compete.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [7]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [8]

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[Interpreted] In general, we believe that the live streaming industry is large enough to accommodate multiple companies and its current penetration is still low. So we can work together to enlarge the size of the market.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [9]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [10]

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[Interpreted] And regarding your second question on the resource allocation by Tencent between the 3 invested companies, we, as the leading platform in the gaming live streaming space, have continuously cultivated each link of the industry's value chain and assisted our strategic partner and shareholder, Tencent, in the distribution and promotion of its games, and we also worked to attract game users on to our platform. So for Tencent, the primary goal of working with a live streaming platform is to promote new games and extend the life cycle of old games. According to third-party QuestMobile's data, DouYu has clearly established a leading advantage in terms of user traffic. So we believe that our platform is more competitive than others in terms of cooperating with Tencent.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [11]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [12]

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[Interpreted] And lastly, we believe that by leveraging our large group of users, especially those high-quality hardcore players that are highly attracted and attached to our platform, we can collaborate with Tencent very closely for a win-win partnership. But ultimately, whether we will see a consolidation to take place is up to Tencent's intention.

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Operator [13]

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The next question comes from Alex Poon of Morgan Stanley.

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Chun Man Poon, Morgan Stanley, Research Division - Equity Analyst [14]

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(foreign language) I'll translate my question. My first question is since late August, you have removed certain lucky draw features. And can you let us know the reason why you took it off and also the revenue impact in Q3? And also since you have restated these features, how is the revenue run rate at present? Is it better than before you removed these features already? And from here onwards, how does the regulatory landscape look like for these features?

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [15]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [16]

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[Interpreted] Okay. Regarding the reason of the temporary removal of our quiz features since August, we have always prioritized the long-term and sustainable growth of DouYu. So in order to contribute to a positive Internet environment, our management team made decision to carry out an assessment of certain interactive features in mid-August 2019 prior to China's anniversary celebration. And as a result of our internal assessment, we adjusted certain functions of the interactive product featuring.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [17]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [18]

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[Interpreted] Regarding the revenue impact, our interactive features, including quiz, were designed to enhance the interaction between the streamers and users. So consequently, the removal of certain features has somehow affected users' engagement activity with streamers for a certain period of time in third quarter. And we -- after revision and improvement, we initially reacted (sic) [activated] part of the features in late third quarter, and we activated the rest in the fourth quarter. So after resuming the access to our interactive features, the users engagement for these interactive features are gradually recovering, and we have also factored in all of these into our fourth quarter guidance for 2019.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [19]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [20]

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[Interpreted] Regarding future risk adjustment, we will pay close attention to development laws and regulations issued by the local authorities, while maintaining active communication with government departments. Thank you.

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Operator [21]

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The next question comes from Daniel Chen of JPMorgan.

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Qi Chen, JP Morgan Chase & Co, Research Division - Research Analyst [22]

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(foreign language) I will translate myself. My question is related to the MAU. So in the third quarter, we actually see that the year-over-year growth and sequential growth of the MAU actually decelerated from the second quarter. So what's -- how should we look at the whole game live streaming industry's MAU growth in the fourth quarter and in 2020? Are we seeing the deceleration to continue? And will DouYu's strategic focus change from user expansion to the profitability improvement?

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [23]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [24]

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[Interpreted] We believe that the recent slowdown of the MAU growth in the game live streaming industry was mainly due to lack of megahit games, such as King of Glory in 2016 and PUBG in 2017. So it highly depends on content offering, especially new content. So with the reopening of the game licensing with more approvals as well as the continued investment and development of new games by game developers, such as Tencent, we are quite optimistic about user growth for the fourth quarter of 2019 and the full year of 2020.

So we also believe that the game live streaming industry has a very high-growth ceiling and is large enough to accommodate all players. And currently, the industry penetration rate is still low, which implies an abundant amount of future growth opportunities in the market.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [25]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [26]

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[Interpreted] And on the other hand, as we further enhance our leading position in the industry, we increasingly enjoy the advantage of our industry leadership. And according to third-party data from QuestMobile, as of the end of September, we have significantly outperformed other game live streaming platforms in the industry in terms of MAU. And in the future, the user growth will continue to be our strategic focus by further strengthening our cooperation with game developers and distributors, such as Tencent, we will create high-quality eSports content, host large-scale eSports events and diversified content in our ecosystem to gain further user traction and increase our user stickiness. Thank you.

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Operator [27]

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The next question comes from Lei Zhang of Bank of America Merrill Lynch.

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Lei Zhang, BofA Merrill Lynch, Research Division - Associate [28]

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(foreign language) My first questions is about the top hosts. We noticed that some top hosts are out of the platform after the contracts fared. So wondering how should we look at the concentration risk of the top hosts? And any king host whose contracts may fare in the coming quarters that you can share with us? Secondly, on the content costs set, any color on the breakdown, especially the signing bonus related to the top streamer, any change of the signing bonus part in the third quarter? And how should we look at the trend in the coming years?

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [29]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [30]

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[Interpreted] So some individual top streamers ask for a significantly high amount of signing bonus as one-off conditions for their contract renewal, which we believe was a legacy of approaching streamers of our other platforms through high signing bonuses. And after we comprehensively evaluate the respective ROIs for these streamers, including their revenue viewership contribution as well as the related cost, including their signing bonus, we decided not to renew contracts with some of these streamers, given that they are not meeting our internal ROI targets. Well, for others, we are still in negotiation stage.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [31]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [32]

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[Interpreted] So the historical data shows that terminating contracts with these streamers actually had very minimal impact on our revenue and user traffic. In addition, we are having a 3- to 5-year contract with most of our top streamers. So only very few top streamers out of the top 100 will have their contract to expire within 1 year, while they are still not renewing yet with us.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [33]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [34]

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[Interpreted] Regarding the breakdown of content costs, to start with, the streamer signing bonus was affected by the industry-wide adoption of the streamers' behavioral guidance -- guidelines by Tencent since the beginning of this year and continued to decline on a sequential basis within the range, which was in line with management's long-term expectation. So we expect this trend to continue going forward. And regarding the content rights -- broadcasting rights, so with the release of the new games and the continued promotion of old games, we expect the frequency of the eSports tournament to increase in the future. And furthermore, the competition for acquiring these broadcasting rights has yet to pick up. So as a result, we believe that broadcasting rights and other content-related costs, including the self-organized tournaments fees, are expected to rise in the future.

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Operator [35]

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The next question comes from Alex Liu of China Renaissance.

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Zhangxiang Liu, China Renaissance Securities (US) Inc., Research Division - VP [36]

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(foreign language) I'll translate myself. How should we think about the sequential decline of bandwidth costs in the third quarter considering the high seasonality in third quarter and the fact that our competitor is actually having a higher bandwidth cost? And should we consider or regard bandwidth cost gap between DouYu and Huya as any kind of a representation of the traffic difference between these 2 platforms?

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [37]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [38]

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[Interpreted] Regarding the sequential decreases of bandwidth costs in the third quarter, let me give you some data points for reference. So the bandwidth usage at peak period in October this year increased by 70% as compared to January. However, due to our deployment of proprietary P2P and CDN technologies as well as active bandwidth usage management, the chargeable bandwidth usage during the same period only increased by 18%. And regarding the reason of why we are having a sequential decrease in bandwidth costs, it's mainly due to 3 reasons: Number one, we are increasing our bargaining power in negotiation with the bandwidth service providers, which leads to unit price decreases. So during the second quarter and third quarter this year, we saw unit price decrease twice; and secondly, the improved bandwidth usage efficiency as we actively manage our bandwidth usage during peak periods, such as tournaments as well as consolidate some bandwidth consumption from unpopular long-tail curate; and lastly, we reduced IT outsourcing expenses by developing the proprietary CDN and P2P technologies.

So lastly, the reason why we have lower bandwidth costs than our competitors that, although we don't really understand what our competitor is doing, for us, we have more sophisticated proprietary technologies, CDN and P2P. And we are also deploying these technologies on a very large scale. And secondly, we are very accurate and efficient in terms of managing the bandwidth usage efficiently, which ultimately results in a significant cost savings. And lastly, based on our precise bandwidth usage forecast, we actively manage bandwidth usage throughout the platform and make full use of the resources by the multiple suppliers that are working with us in order to minimize the average bandwidth unit cost.

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Operator [39]

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And the final question today or this evening will come from Thomas Chong of Jefferies.

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Thomas Chong, Jefferies LLC, Research Division - Equity Analyst [40]

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(foreign language) My question is about, first, the revenue sharing ratio with our broadcasters. Is there any trend that we are seeing that may increase in the future? And my second question is about the content strategies, in particular, about the game and the nongame content costs as well as the revenue growth in the future? And my final question is about the competition in overseas markets as well as thoughts on game distribution other than advertising?

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [41]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [42]

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[Interpreted] Okay. I'll just say for the first question first. Regarding the revenue sharing ratio between the platform and streamers, we have been fairly stable to keep it at a 50-50 split in the past few quarters, and we don't foresee a significant change going forward. And regarding second question on our investment on content, we believe that most of our content investment are focused on games category, while -- where we include both broadcasting rights with procurement and also eSports team sponsorship, and for nongaming sector including talent show and other segments, we are mainly sharing the revenue with our streamers rather than compensating in other way.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [43]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [44]

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[Interpreted] Regarding the future growth expectations for content cost, we believe that the signing bonus for the streamers will be on a sequential decline trend for the next few years until we reach a reasonable level. While for content rights and broadcasting rights, we believe that we will expect certain level of increase in the future.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [45]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [46]

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[Interpreted] So regarding your last question on overseas investment, we believe that the current user growth of normalized -- our overseas platform in areas like Indonesia, Vietnam, India, Taiwan and Latin America and other regions are on track. And however, the game live streaming market in these countries are still at a very early stage of development. And users in these locations have not yet formed a mature paying habit, so we are still currently focusing on user base growth and exploring some monetization opportunities. In the third quarter, we also invested in the Japanese market and utilized our Japanese partner's local resources and our product for the Japanese market called Mildom has already launched in the third quarter this year.

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Shaojie Chen, DouYu International Holdings Limited - Founder, CEO & Director [47]

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(foreign language)

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Mao Mao, DouYu International Holdings Limited - IR Director [48]

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[Interpreted] We have been experimenting on different business models that combine gaming and live streaming. For example, in past, we invented the bullet chats, and also we had some trials in the mini game apps, et cetera. So we are also proactively laying the groundwork for cloud gaming, and we are also working on new categories of advertising. For some of these attempts, we are still in the early stage, and we will update investors on our progress in the products and the metrics at the appropriate time. And at current stage, we are not considering distributing anything.

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Operator [49]

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Does that conclude your response to the question?

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Mao Mao, DouYu International Holdings Limited - IR Director [50]

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Yes, Steve.

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Operator [51]

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This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

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Mao Mao, DouYu International Holdings Limited - IR Director [52]

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Thank you for joining our call today. We look forward to speaking with everyone next quarter. If you have any questions, please contact the IR team of DouYu. Thank you.

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Operator [53]

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