Good morning and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited, Second Quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. We will be hosting a question-and-answer session after management's prepared remarks. I will now turn the call over to the first speaker today, Mr. Mingming Su, Chief Strategy Officer at DouYu. Please go ahead sir.

Thank you. Hello, everyone. Welcome to our Second Quarter, 2021 earnings call. This is a Mingming Su DouYu 's Chief Strategy officer. Joining us today is Mr. Shaojie Chen Chairman and Chief Executive Officer. And Mr. Hao Cao to halt hall widespread it is are finding. You can refer to our Second Quarter 2021 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 Haboro 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. Our forward-looking statements are expressly qualified in their entirety by the cautionary statement, risk factors, and details of the Company's filing with the SEC. The Company undertakes no duty to revise or update any forward-looking statements for selected events of after the date of this conference call. I will now speak on behalf of our Chairman and CEO, Ms. Shaojie Chen. During the Second Quarter of 2021, our overall performance remained stable as continued to upgrade our business system. Total net revenues for the quarter reached RMB 2.34 billion, while quarterly average paying user count reached 7.2 million. During the Second Quarter, our average mobile MAU increased by 3.9% year-over-year to 60.7 million. MAU growth was mainly driven by two factors. Firstly, we've attracted new eSports users and galvanised the return of older users through eSports tournament World Cup. Which included major events such as our, LTL spring grand of final 2021. AOL made the season invitational and KPL Spring grand final 2021. Second, we've refined our exchange by enhancing our collaboration of 8 games, including AOL and While exploring partnerships with additional game developers to introduce small, mid, and the long tail games, and to strengthen operations for new games. So Naraka: Bladepoint, major fleet game launched in the quarter. We collaborated with a skin developer to develop and launch various promotional content and events starting in the taking stage. This effort have gradually attracted high-quality players to our platform. Now, turning to our content updates. During the Quarter, we continued to expand our content ecosystem, both upstream and downstream to cover the entire eSports industry value chain. We also wrapped up our efforts to construct a breaking game content library focusing on various game genre's. By broadcasting and the self producing eSports tournaments and events in various formats, we continued to develop more high-quality eSports content. At the same time, we also continue to actively sponsor and invest in top eSports team. During the quarter, we further cut over eSports tournament and self-produced more than 80 high-quality eSports events. Among them, we leveraged the LOL pre-season challenger match to actively calculate new high-quality streamers, and organize the match between streamers and the team to engage the content on our platform during the off-season for Premier eSports events. In addition, the IPO summer 2021 tournament, which is the high distance level LOL professional tournament in China kicked off in June. We predict that the tournament through our platform in consort with other related sales productivity programs, all complete live streaming coverage of the event from start to finish. For our PLS1 tournament, the high distance level professional season for peace keeper. We rolled out CRS of promotional events such as live watch parties for tournament match anchored by popular live streamers to further improve user engagement. Meanwhile, we continued to fuel the development of our content library by introducing additional game developers to make our content library more comprehensive and cover additional game genre's. Further, we utilized eSports tournament to further engage coverage for our blockbuster games. During the Quarter, we hosted over 20 tournaments for games of various genre's, including Honor of Kings and Peace Keeper. Secondly, we utilized the IP of popular streamers to create more high-quality PGC content and meet the diverse content demand of users. Finally, we further encounter user engagement based on the their increased and high-end and gameplaying by delivering content related to real-time and advice from streamers and high ranking professionals on matching in-game inscription, and equipment selection. We also implemented systematic marketing programs for new made and the long-tail game. This compound our multi-step process which include that they recommend the delivery of promotional content at the event based on individual game live cycles. We began cooperating with game developers prior to the launch of beta testing for new games to foster anticipation and excitement among targeted consumers. We utilize the influence of our top streamers to increase grand events for these new games. Meanwhile, by recruiting new streamers for games , we are able to quickly fill the gap in-game content after the event of a sure launch. Furthermore, we actively cooperated with game developers to launch a series of events to foster development of engaging video content. Through the product costs of this content, more potential players are attracted to bearing game's product cost. Additionally, our platform generates game related hot-topic, introduces customized programs and the content to promote the game and allow the player to have interaction with KOL, enabling us to attract us new users and improve user . Now, tuning to monetization. In the Second Quarter, our quarterly paying users were 7.2 million with an ARPPU of RMB303. The slight year-over-year decrease in ARPPU was primarily due to abnormally high user activity and ARPPU during the Second Quarter of 2020 released to stay at home others from the pandemic. During the Quarter, user behavior normalized to pre-pandemic levels. Through our operating strategy and execution, we continue to focus on improvements in user engagement and paying user consumption. Going forward, we will work to further modify our products than modify our paid user scenarios, and enhance our overall paid user experience to achieve healthy ARPPU growth rate. Finally, we remain committed to refining our operations across different segments, which should have to further growth to recommend efficiency. We are also making good progress on the R&D front. During the quarter, we launched the AV1 decoding technology, becoming the in China to support AV1 decoding in live streaming. Compared with our previous decoding technology, AV1 has lower bandwidth cost and has eliminated lag while maintaining the same video quality. In terms of our product function innovation, our platform upgrades evolve around the evolution in our game content. Starting from live streaming, we have expanded into producer video and graphic content. With our popular and new games, segments as a primary objective. We have forged an integrated and game segment that combines live streaming, video, visual graphics Interactive communities and in game gifts. We have also adapted our platforms search functions to support these multiple forms of content. By providing support for sessions and exiting historical live streams, videos, and zero-bracket content on our platform, we can now better satisfy users Search query for game content. We also continued to fortify our foothold overseas. During the quarter, we continued to increase our investment in overseas market. In particular, I would like to highlight our achievements in Japan. According to the latest APP earnings statistics, is one of the mainstream of video games and live streaming APP in Japan and maintains an industry-leading user base in the country. In terms of , we will continue to strengthen the monetization capabilities of , in order to further solidify, its market position in Japan. And also expect us to achieve best exhibit our skills in Japan. In summary, during the Second Quarter of 2021, we elaborated our platform advantages to achieve success on numerous forms. We expanded our emission collaboration with the Mao game developers. We also provided the gamers and viewers with comprehensive content to operate combining live streaming videos, video graphics, and interactive community. Looking ahead, we plan to continue executing our products, streaming and contentious render date to further augment our monetization capabilities and improve our overall financial performance. 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 second quarter.

Thank you, Mingming. Hello, everyone. Total net revenues in the Second Quarter of 2021 were RMB 2.34 billion. Live streaming revenues were RMB 2.18 billion compared with RMB 2.32 billion in the same period of 2020. Advertising and other revenues were RMB 158.7 million compared with RMB 188.3 million in the same period of 2020.

The year-over-year decrease in live-streaming revenues was mostly due to the abnormally high user activity and up in the prior-year period caused by the stay at home orders during the pandemic. In the Second Quarter of this year as the pandemic was gradually brought under control in China u ser behavior had largely normalized, reverting to pre-pandemic levels. This decline was partially offset by our efforts to improve the spending by our core paying users.

The year-over-year decline in advertising and other revenues was mainly due to the fact that game advertisers increased their marketing budgets of the Second Quarter of last year due to debt pandemic and the related stay at home measures. As a result, overall advertising revenue in the Second Quarter of last year reached a relatively high level during the Quarter as the pandemic was continuously brought under control in China. And the number of hit games featured on platforms was reduced. Our game related advertising revenue decreased quarterly.

Cost of revenues in the second quarter of 2021 increased by a 2.3% to RMB 2.03 billion from RMB 1.99 billion in the same period of 2020. More specifically, revenue sharing fees and content costs increased by 3% to RMB 1.81 billion from RMB 1.75 billion in the same period of 2020. This increase was mainly due to increase investment in overseas streamers as we continue to expand overseas market. Higher licensee costs due to more investment in its first tournament, broadcasting rights, and additional investment in proprietary content production. Bandwidth costs in the second quarter of 2021 decrease by 3.9% to RMB 161.8 million from RMB 168.4 million in the same period of 2020. This decrease was mainly due to the successful execution of our ongoing in-house technology upgrades, which led to higher bandwidth efficiency and a lower bandwidth usage cost during the period. Gross profit in the second quarter of 2021 was RMB 306.5 million compared with RMB 522.9 million in the same period of 2020. Gross margin in the second quarter of 2021 was 13.1% compared with 20.8% in the same period of 2020. This decrease was primarily due to the decrease in revenues resulting in the increase in revenue sharing fees and content costs as a percentage of total net revenues. Sales and marketing expenses in the second quarter of 2021 were RMB 295 million compared with RMB 142.1 million in the same period of 2020. This increase was mainly attributable to the increased cost from utilizing additional promotional channels for user acquisition, and the continued spending on both official and self-produced live eSport tournaments and corresponding sponsorship fees as the pandemic was gradually brought under control In China. Research and development expenses in the Second Quarter of 2021 were RMB 123 million, which represented an increase of 29.6% from RMB 9.9 million in the same period of 2020.

This increase was primarily due to additional investments in technical personnel as we continued our overhead expansion and technology infrastructure upgrade to in-house user experience. General and other mid-total expenses in the second quarter of 2021 were RMB 102.6 million compared with RMB 79.5 million in the same period of 2020, primarily due to the increase in professional service fees during the quarter.

Adjusted operating loss in the second quarter of 2021, which FX share-based compensation expenses was RMB 165.1 million compared with an adjusted operating income of RMB 272.7 million in the same period of 2020. Net loss in the second quarter of 2021 was RMB 181.7 million compared with Net Income of RMB 319.3 million in the same period of 2020. Adjusted Net loss in the second quarter of 2021, which excludes share-based compensation expenses, shared of income inequity method investments, and impairment loss of investments was RMB 145.1 million compared with an adjusted Net Income of RMB 322.9 million in the same period of 2020. For the second quarter of 2021, basic and diluted net loss per ADS were RMB 0.45 and RMB 0.45 respectively.

While adjusted basic and diluted net loss per ADS were RMB 0.35 and RMB 0.35 respectively. Going forward, we've continued exploring new methods of improving our monetization capability and efficiency. Additionally, as we continue to grow, we will focus on further utilizing our operating leverage to view the sustainable environment of our platform. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

We will now begin the question and answer session . And the first question comes from Lei Zhang with Bank of America Merrill Lynch. Please go ahead.

Q –Interpreter: Thanks management for taking my question. 2 questions here. First is, can you give us some more color on a new game that's had good performance in second quarter. And if we look at into the second half, any new games that we can expect. Secondly, I want to hear your opinion on traditional use of those games, what is the trend of those games in terms of time spend? Are you there that's if they share it? So how do we look at the trend of the past traditional game in the future? Thank you.

Okay. Let me answer this two questions. According to our platform data, new games such as Lara Croft, and CHG have performed well since the second quarter of this year. From June to July, we are with the overall live streaming and user engagement for Lara Croft, Slide point increased by more than 200%. We have continued to generate a PGC video and built our contender ecosystem for this new game. Such efforts have played an important role in promoting these games and elevating our platforms . expected the launch schedule for games in the Second Half of this year, we expect that new catalysts for the gaming market will include LL mobile, Pokemon Unite, and Justice Online. Prior to the launch of new games, we plan to cooperate with game developers to bolster anticipation and excitement among targeted consumers and to deliver sufficient and rich game-related content for gamers and users on our platform. And second question. the majority of our top 10 platform games are from traditional baseball game channels, such as the mobile and the FPS, which are characterized by long live type of and high entertainment . According to our platform data, our top 10 game channels have a remainder largely similar in the other several quarters. The data also suggests that the data user, time spender, non-top 10 games over their approximate 2 quarters has gradually increased compared to the same period a year ago. We believe the primary reason behind this trend, was the strategic upgrade of our platform. In the process of pure P2P platform of our game-related live streaming content to gamers and user. However, starting from this year, we have a focused more on non games. We have tried to create a separate segment for each new game on our platform. We are also distinctive efforts to develop more comprehensive plans, and quantitate content for game promotion through live streaming, video and graphic content as well as our user community. Such as in terms of live streaming, we can leverage our top streamers to foster anticipation and excitement among targeted consumers prior to the launch of new games. By working with game developers, we can create multiple PGC videos and increase our number of promotional channels. For user communicates we can invite the KOLs to have real-time interaction with our users. Thus generating more related hot topics and engaging content as we continue to execute this product strategy we expect that the time spent by users on non eSports game segments will increase and our platform content will become a more diversified in the long run. Thank you.

The next question comes from Lee Wen Zhang with China Renaissance. Please go ahead.

Q –Interpreter: Thanks for taking my question. The first question regarding the self-produced tournament. In the prepared remarks, you mentioned there were over 80 self-produced tournaments and we also note that this year there was an upward trend in the pricing and the license tournaments. self-produced content investment in order to tackle the increasing licensing cost trend. And similarly new game preparation, you mentioned a few in the previous question for example the league of legends mobile. How is our latest progress on the streamer recruitment and in what way will we build up the top cohort streamers in the new game -- for the new game preparation. Thank you.

And that will be translated. So basically this year we have witnessed an increase in licensing costs for our eSports tournaments broadcasting rights across the industry. However, we've had the licensing cost for the broadcasting right of major eSports tournament to remain relatively stable over the next couple of years. And our expectation is based on our observation of current market conditions and the fact that the eSports industry has reached a pretty mature stage of development. And in addition, self-produced tournament content has been a pretty important part of our content strategy as well. And self-produced tournaments such as Golden Brand tournament and the DNS, all-stars. They both have a pretty produced outstanding result on our platform. And especially that DouYu Golden Brand Tournament, which has been held for around 11 seasons already, and now it has become one of the most important brands off DouYu as well. And going forward, we will definitely continue to bolster the organization of our own E4 events. And focus more on the generation of PGC content for non-E4 games. And we are pretty confident that we will be able to leverage our enormous amounts of quality streamers and video creator of these works to ask you the strategy.

Thank you.

Next question, please.

The next question comes from Alex Fung (ph) with Morgan Stanley. Please go ahead. Q –Interpreter: .

I had two questions. First question is regarding the revenue share and content costs trend in Second Quarter, including the different components, including the sign-up bonus, revenue share, and content procurement costs, et cetera. And how should we forecast this segment cost in future given we have a little bit of revenue decline. My second question is related to the PC MAU number. This time we have not disclosed the PC MAU number. What is the recent behind this? And if we remove the duplicated users, how much -- how many PC users do we actually have? Thank you very much.

About the first question on revenue sharing costs. We will maintain our 50 to 50 revenues lead sharing policy for our platform and streamers. But that's for our platform and tenant additives. During promotional periods, we also offer certain incentives to streamers, and . Therefore, while the overall revenue share and ratio may fluctuate slightly quarter-over-quarter, it will also remained stable in general. The increase in content cost in the Second Quarter of 2021 was primarily associated with higher revenue cost and increased investment in self-produced programs. The increase in licensing costs was due to more investment in eSports tournament broadcasting across industry, starting from this year. As tournament necessities becomes higher, we expect licensing costs in the second half of this year to increase slightly from the first half of this year. While our self-produced programs as we invest more in programs to produce PGC content to support the upgrade of the content and functions of our new businesses. We expect the associated costs to continue increasing at a moderated pace throughout second half of this year.

Let me answer your first question. First, our PC MAU have remained relatively stable within the range of 119 to 130 million. Since our IPO in July of 2019, the quarterly function were mainly driven by such figures as our periodic collaborations with PC game developers. In addition, the revenue contribution from live streaming on our PC portal has stabilized over the past several quarters. In the long run, we expect our mobile portal to be the primary driver for and generating revenue. As a result, they have decided to disclosing our PC MAU s starting from this quarter. With the user growth fall, non-eSports blockbuster game viewed relatively under-penetrated. We believe there's plenty of opportunities in the mobile market. In the future, we will depend our collaboration with non - eSports game developers to better calculate user spending habits and create more welcoming content ecosystem for our users. Thank you.

The next question comes from Daniel Chen with JP Morgan. Please, go ahead.

I will translate myself. My first question is on the revenue side. We actually see that the Second Quarter revenue has declined on year-over-year basis. Could management provide some more color on the rationale behind? And what's the paying user and the ARPPU trend for the Second Half of this year for live-streaming. Secondly, is on cash. Currently I see as of Second Quarter of this year, we still have over $1 billion of net cash, how are we going to use this cash in the future? Thank you.

The year-over-year decrease in revenues was mostly due to abnormally high user activities and up in the prior-year period caused by the say at home orders during the pandemic. In the Second Half of this year, to further stimulate our paying users willingness and reach their assumptions scenarios we will continue to focus on monetization activities and . Through our continuous focus on improving the engagement and consumption of our existing paying users, we hope to further innovate our As to the cash on hand, we are focused on effectively using a strong balance of cash going forward. We will prioritize the sufficient distribution allocation of cash to operational initiatives that drive the steady the development of our Game related revenues. These initiatives include exploring strategic content upgrades more actively. Developing new business elements and continuing to invest in new growth drivers. For example, at end of last year, we rolled out a strategic plan to further erase the content on our platform. We also increased investments in non-esport game segments to attract new users. Finally, we escalated our R&D spending to further explore new monetization models, which was in line with our aim to make games a major monetization channel for game-centric people. On the other hand, we will take more initiative in the exploration of suitable investment and acquisition opportunities. The game-related segment, as well as downstream and upstream, the eSports value chain. Through these investments and acquisitions, we will expand the depth of our exposure to a wider range of industry segments and generated more casino use within our existing businesses. Thank you.

Thanks.

The next question comes from Thomas Chung with Jefferies. Please go ahead.

Q –Interpreter: Thanks management for taking my question, I have a question relating to the homes of, the M & A with , when should we expect the cancellation of the deal to our operations and can management comment about our business strategy as an independent platform? And the second question, is related to the competitive landscape. How should we think about the competition, is it going to be more intense after the merger is canceled? Thank you.

Thank you for your question. So with the rapid development of the domestic internet industry over the past few years, so the authority have gradually improved the industry policy and regulation as well. So we believe that the anti-trust regulations are in line with the government's goal of promoting positive and a fair competition amounting internet industry specifically, and thus to encourage a level of playing file across the industry. Therefore, so we fully respect this regulatory decision, actively cooperated with the regulatory requirements and operate in complying with the law. So you have been an independently operated and managed company since its inception. As a result, so we don't expect a decision, well, to produce our proposed merger with who we are by SAMR, which stands for the State Administration for Markets Regulations of the People's Republic of China, to have a material impact on our operational and financial performance. as an independently operated and managed company, we will make continuous efforts to maintain our steady growth momentum and also expand our content ecosystem, both on upstream and downstream to cover each lane of E4 industry value chain. In addition to bolstering our industry leadership in the traditional E4 live-streaming industry, we will continue to fortify our operations in non-esport segments to accelerate our growth and cultivate a game-centric content ecosystem on our platform. The second question, the game live-streaming industry competitive landscape has not changed since the Second Quarter of 2021. Since a streamers were barred from moving between platforms, competition in the industry has remained pretty healthy. On top of this, our premium top and mid-tier also the lone style streamer resource have helped us to create a strong competitive advantage in terms of both constant and number of premium streamers. Therefore, enabling us to continuously maintain our industry leadership. We have increased our focus on leveraging our unique competitive advantage to create more game-centric content and also built E4 for content community to attract new users. In addition to our continuous efforts in actively cooperating with the transitional eSports game developers. We have left no stone unturned in expanding our collaboration with other games developers. In our non - eSport segments, we have not only covered entire industry value chain but also reinforced our leading positions at game-centric and community basing platform in China. This achievement is primarily attributable to our execution of operations initiatives based on the unique features of non - eSports games, such as user performances for graphic tags, and video content. Our initiative include encouraging live streaming, video, and community function integration. So strengthening our operations for full life circle gains. Enhancing platform interactions between user and content creator, and also creating a high-quality proprietary content. Thank you for your question.

Thank you.

The next question comes from Richie Zhang (ph) with HSBC. Please go ahead.

. . I'll translate myself. Thank you for taking my questions, the first one is, the sales and marketing expense was growing favorably in Second Quarter. Why is that? And what are the major traffic acquisition channels for us? And how will the traffic acquisition course trend in the future? Second question is on, can you share our expansion progress in the Japanese market in more detail? And when will the monetization kick in? Thank you.

Marketing expenses include steps . China promotion costs, eSports teams, sponsorship fees, and expenses for online and offline activities. In the Second Quarter of 2021, the increase in sales and marketing expenses was primarily due to our promotional activities for new product functions and increased marketing budget to attract new users. Which was in line with the development of our new business. Our primary promotional channels for user acquisition are through those advertising agencies associated with it creates. We also leveraged other News Feed cash flows and content libraries as additional user acquisition channels. And we have high positive about development of the eSports industry to normal run. And we will continue to increase our investments in eSports-related activities and e-sports teams sponsorships going forward. Meanwhile we will upgrade our product features to improve efficiency of our traffic conversion. We intend to continue enhancing our channel promotions. Therefore, in the future, we expect our sales and marketing expenses to remain at a relatively high level.

Let me answer your second question. During the Second Quarter of 2021, we continued to invest and explore in the Japanese market.