DouYu International Holdings Limited Reports Second Quarter 2020 Unaudited Financial Results

Author: DouYu International Holdings Limited / 2023-07-23 22:03 / Source: DouYu International Holdings Limited

DouYu International Holdings Limited Reports Second Quarter 2020 Unaudited Financial Results

WUHAN,China,Aug. 10,2020 -- DouYu International Holdings Limited ("DouYu" or the "Company") (Nasdaq: DOYU),a leading game-centric live streaming platform in China and a pioneer in the eSports value chain,today announced its unaudited financial results for the second quarter and six months ended June 30,2020

Second Quarter 2020 Financial and Operational Highlights

Total net revenues in the second quarter of 2020 increased by 33.9% to RMB2,508.2 million (US$354.4 million) from RMB1,872.7 million in the same period of 2019.

Gross profit in the second quarter of 2020 increased by 73.7% to RMB522.9 million (US$73.9 million) from RMB301.1 million in the same period of 2019,implying a gross margin of 20.8% in the second quarter of 2020,compared with 16.1% in the same period of 2019.

Net income in the second quarter of 2020 was RMB319.3 million (US$45.1 million),compared with RMB23.2 million in the same period of 2019,implying a net margin of 12.7%,compared with 1.2% in the same period of 2019.

Adjusted net income in the second quarter of 2020 was RMB322.9 million (US$45.6 million),compared with RMB52.6 million in the same period of 2019,implying an adjusted net margin of 12.9% in the second quarter of 2020,compared with 2.8% in the same period of 2019.

Average MAUs in the second quarter of 2020 were 165.3 million,compared with 162.8 million in the same period of 2019.

Average mobile MAUs in the second quarter of 2020 increased by 15.4% to 58.4 million from 50.6 million in the same period of 2019.

Quarterly average paying user count in the second quarter of 2020 increased by 13.4% to 7.6 million from 6.7 million in the same period of 2019.

Mr. Shaojie Chen,Chief Executive Officer of DouYu,commented,"We are pleased to announce that DouYu continued to deliver solid financial and operational results in the second quarter of 2020. In this quarter,we continued to demonstrate our ability to maintain our steady growth as our revenues once again outperformed the high-end range of our guidance,increasing by 33.9% year over year to RMB2.51 billion in the quarter. In addition,our adjusted net income in the quarter grew at a rapid pace,increasing by 513.7% year over year to RMB322.9 million. Going forward,by upgrading our high-quality content offerings on a continual basis,we remain confident in our ability to sustain our growth trajectory as well as further enhance our position as an industry-leading eSports-centric community with diversified live-streaming content."

Mr. Hao Cao,Vice President of DouYu,"We continued to deliver solid financial results in the second quarter of 2020 as we increased investment in those initiatives with growth potential and higher operating efficiency. This investment strategy enabled us to sustain the growth trajectory of our revenues,bolster our ROI,and steadily improve the profitability of our platform. Looking ahead,we plan to continue exploring our platform's monetization capabilities while also enhancing our operating efficiency to generate sustainable shareholder value over the long term."

Second Quarter 2020 Financial Results

Total net revenuesin the second quarter of 2020 increased by 33.9% to RMB2,872.7 million in the same period of 2019,primarily driven by the increase in live streaming and advertising revenues.

Live streaming revenuesin the second quarter of 2020 increased by 35.8% to RMB2,319.9 million (US$327.8 million) from RMB1,708.3 million in the same period of 2019. This increase was primarily due to the Company's optimization of its platform's interactive features and continuous refinement of its event models,both of which helped to further cultivate users' paying habits.

Advertising and other revenuesin the second quarter of 2020 increased by 14.5% to RMB188.3 million (US$26.6 million) from RMB164.4 million in the same period of 2019,primarily attributable to the Company's improving brand awareness and the corresponding increase in demand for advertising products related to streamer promotion.

Cost of revenuesin the second quarter of 2020 increased by 26.3% to RMB1,985.3 million (US$280.5 million) from RMB1,571.7 million in the same period of 2019,primarily due to the increase in revenue sharing fees and content costs.

Revenue sharing fees and content costsin the second quarter of 2020 increased by 32.3% to RMB1,754.9 million (US$248.0 million) from RMB1,326.6 million in the same period of 2019. This increase was primarily explained by: 1) increases in revenue sharing fees,which were largely in line with the increases in total net revenues,2) increases in content costs attributable to the Company's investments in eSports-related content and market expansion initiatives in Japan,and 3) increased investment in tournament-related videos and in-house content production.

Bandwidth costsin the second quarter of 2020 increased by 9.8% to RMB168.4 million (US$23.8 million) from RMB153.3 million in the same period of 2019. This increase was primarily due to increases in the growth of mobile users and total user engagement as well as the Company's ongoing efforts to improve the viewing experience of users.

Gross profitin the second quarter of 2020 increased by 73.7% to RMB522.9 million (US$73.9 million) from RMB301.1 million in the same period of 2019. Gross margin in the second quarter of 2020 expanded to 20.8% from 16.1% in the same period of 2019.

Sales and marketing expensesin the second quarter of 2020decreased by 15.3% to RMB142.1 million (US$20.1 million) from RMB167.8 million in the same period of 2019,primarily attributable tothe postponement of large-scale offline events as a result of the COVID-19 pandemic and related safety concerns.

Research and development expensesin the second quarter of 2020 increased by 12.5% toRMB94.9 million (US$13.4 million) from RMB84.4 million in the same period of 2019,mainly due to the increased investment in technological innovations as well as higher share-based compensation to related employees.

General and administrative expensesin the second quarter of 2020 increased by 8.4% to RMB79.5 million (US$11.2 million) from RMB73.3 million in the same period of 2019,mainly due to higher professional service fees related to the compliance requirements of being a publicly-listed company on the NASDAQ.

Other operating income,net in the second quarter of 2020wasRMB32.5 million (US$4.6 million),compared with RMB14.5 million in the same period of 2019.

Incomefrom operationsin the second quarter of 2020 was RMB238.9 million (US$33.8 million),compared with an operating loss of RMB10.0 million in the same period of 2019.

Adjusted operating income[1] in the second quarter of 2020,which adds back share-based compensation expenses,was RMB272.7 million (US$38.5 million),compared with RMB17.4 million in the same period of 2019.

Income tax expenses in the second quarter of 2020 and 2019 were nil due to the Company's cumulative net losses and the resulting tax loss carryforward.

Net incomein the second quarter of 2020 was RMB319.3 million (US$45.1 million),compared with RMB23.2 million in the same period of 2019.

Adjusted net incomein the second quarter of 2020,which excludes share-based compensation expenses,share of income in equity method investments,gainon disposal of investment or subsidiaries,and impairment loss of investments,was RMB322.9 million (US$45.6 million),implying an adjusted net margin of 12.9% for the second quarter of 2020.

Basic and diluted net income per ADS[2]in the second quarter of 2020 were RMB1.06 (US$0.15) and RMB1.02 (US$0.14) respectively. Adjusted basic and diluted net income per ADS in the second quarter of 2020 were RMB1.07 (US$0.15) and RMB1.07 (US$0.15) respectively.

Business Outlook

The Company expects its total net revenues to be in the range of RMB2,640 million to RMB2,680 million in the third quarter of 2020,representing year-over-year growth between 42.1% and 44.2%. This forecast reflects the Company's current and preliminary views on the market and operational conditions,which are subject to change.

Conference Call Information

The Company will hold a conference call on Monday,August 10,2020,at 8:00am Eastern Time (or 8:00pm Beijing Time on the same day) to discuss the financial results. Listenersmay access the call by dialing the following numbers:

International:

1-412-317-6061

United States Toll Free:

1-888-317-6003

Mainland China Toll Free:

4001-206115

Hong Kong Toll Free:

800-963976

Singapore Toll Free:

800-120-5863

Conference ID:

5488573

The replay will be accessible through August 17,by dialing the following numbers:

International:

1-412-317-0088

United States Toll Free:

1-877-344-7529

Conference ID:

10146942

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.douyu.com/.

[1] "Adjusted operating income" is defined as operating income adding back share-based compensation expenses. For more information,refer to "Use of Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Results" at the end of this press release.

[2] Every ten ADSs represent one ordinary share.

About DouYu International Holdings Limited

Headquartered in Wuhan,DouYu International Holdings Limited (Nasdaq: DOYU) is a leading game-centric live streaming platform in China and a pioneer in the eSports value chain. DouYu operates its platform on both PC and mobile apps,through which users can enjoy immersive and interactive games and entertainment live streaming. DouYu's platform brings together a deep pool of top live streamers. By providing a sustainable streamer development system built on advanced technology infrastructure and capabilities,DouYu helps ensure a consistent supply of quality content. Through collaborations with a variety of participants across the eSports value chain,the Company has gained coveted access to a wide variety of premium eSports content,which further attracts viewers and enhances user experience. For more information,please see http://ir.douyu.com/.

Use of Non-GAAP Financial Measures

Adjusted operating income (loss) is calculated as operating income (loss) adjusted for share-based compensation expenses. Adjusted net income is calculated as net loss adjusted for share-based compensation expenses,share of income (loss) in equity method investments and impairment loss on investments. Adjusted net income attributable to DouYu is calculated as net income attributable to DouYu adjusted for share-based compensation expenses,share of income (loss) in equity method investments and impairment loss of investments. Adjusted basic and diluted net income per ordinary share is non-GAAP net income attributable to ordinary shareholders divided by weighted average number of ordinary shares used in the calculation of non-GAAP basic and diluted net income per ordinary share. The Company adjusted the non-cash impact of (i) share-based compensation expenses,(ii) share of income (loss) in equity method investments and (iii) impairment loss of investments to understand and evaluate the Company's core operating performance. The non-GAAP financial measures are presented to enhance investors' overall understanding of the Company's financial performance and should not be considered a substitute for,or superior to,the financial information prepared and presented in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of the historical non-GAAP financial measures to its most directly comparable GAAP financial measures. As non-GAAP financial measures have material limitations as analytical metrics and may not be calculated in the same manner by all companies,they may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations,you should not consider non-GAAP financial measures as a substitute for,such metrics in accordance with U.S. GAAP.

For more information on these non-GAAP financial measures,please see the table captioned "Reconciliations of Non-GAAP Results" near the end of this release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to U.S. dollars are made at a rate of RMB7.0768 to US$1.00,the noon buying rate in effect on June 26,in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB amounts could have been,or could be,converted,realized or settled in U.S. dollars at that rate on June 26,or at any other rate.

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts,including statements about the Company's beliefs and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties,and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases,forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Further information regarding these and other risks,uncertainties or factors is included in the Company's filings with the Securities Exchange Commission. The announced results of the fourth quarter and full year 2019 are preliminary and subject to audit adjustments. All information provided in this press release is as of the date of this press release,and the Company does not undertake any duty to update such information,except as required under applicable law.

Investor Relations Contact

Mao Mao

DouYu International Holdings Limited

Email: ir@douyu.tv

Phone: +1 (646) 224-6934

Xinran Rao

ICR,Inc.

Email: DouYu.IR@icrinc.com

Phone: +1 (646) 224-6934

Media Relations Contact

Iris Ding

DouYu International Holdings Limited

Email: pr_douyu@douyu.tv

Phone: +1 (646) 308-1475

Edmond Lococo

ICR,Inc.

Email: DouYu.PR@icrinc.com

Phone: +1 (646) 308-1475

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands,except share,ADS,per share and per ADS data)

As of December 31

As of June 30

2019

2020

RMB

US$(1)

ASSETS

Current assets

Cash and cash equivalents

8,091,990

8,178,190

1,155,634

Restricted cash

42,903

10,703

1,512

Accounts receivable,net(2)

188,100

160,610

22,695

Prepayments(2)

50,304

98,524

13,922

Amounts due from related parties

24,044

40,533

5,728

Other current assets

204,310

178,744

25,258

Total current assets

8,601,651

8,667,304

1,224,749

Property and equipment,net

38,909

35,236

4,979

Intangible assets,net

198,057

188,538

26,642

Investments(2)

225,534

481,671

68,063

Goodwill

30,973

14,032

1,983

Right-of-use assets,net(3)

85,516

12,084

Other non-current assets

8,547

17,171

2,426

Total non-current assets

502,020

822,164

116,177

TOTAL ASSETS

9,103,671

9,489,468

1,340,926

LIABILITIES,CONVERTIBLE REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY

(DEFICIT)

LIABILITIES

Current liabilities

Accounts Payable

890,039

1,078,540

152,405

Advances from customers

17,135

13,275

1,876

Deferred revenue

195,983

182,658

25,811

Accrued expenses and other current liabilities

392,347

297,498

42,038

Amounts due to related parties

298,733

263,966

37,300

Lease liabilities due within one year(3)

44,485

6,286

Total current liabilities

1,794,237

1,880,422

265,716

Lease liabilities(3)

38,276

5,409

Deferred revenue

46,070

40,074

5,663

Total non-current liabilities

46,070

78,350

11,072

TOTAL LIABILITIES

1,840,307

1,958,772

276,788

(1)Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted,all

translations from RMB to U.S. dollars are made at a rate of RMB7.0942 to US$1.00,the noon buying rate in effect on Mar 27,in the H.10

statistical release of the Federal Reserve Board.

(2) The Group adopted Accounting Standards Update ("ASU") 2016-13,"Financial Instruments—Credit Losses (Topic 326): Measurement of Credit

Losses on Financial Instruments" on January 1,2020 with modified retrospective method,which do not have a significant impact on the consolidated

financial statements.

(3)The Group adopted Accounting Standards Update ("ASU") 2016-02,"Leases (Topic 842)" and its amendments on January 1,2020 with modified

retrospective method. The major impact of the standard is that assets and liabilities amounting to RMB97.7 million and RMB87.5 million,

respectively,are recognized beginning January 1,2020 for leased offices with terms of more than 12 months.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(All amounts in thousands,per share and per ADS data)

As of December 31

As of June 30

2019

2020

RMB

US$(1)

Shareholders' equity

Ordinary shares

Treasury shares

(168,567)

(695,098)

(98,222)

Additional paid-in capital

10,324,278

10,433,755

1,474,361

Accumulated deficit

(3,348,718)

(2,752,222)

(388,908)

Accumulated other comprehensive income

434,894

491,674

69,476

Total DouYu Shareholders' equity

7,241,909

7,478,131

1,056,710

Non-controlling interests

21,455

52,565

7,428

Total Shareholders' Equity

7,263,364

7,530,696

1,064,138

TOTAL LIABILITIES,CONVERTIBLE

REDEEMABLE PREFERRED SHARES

AND SHAREHOLDERS' EQUITY

9,926

(1) Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted,

all translations from RMB to U.S. dollars are made at a rate of RMB7.0942 to US$1.00,in the H.10

statistical release of the Federal Reserve Board.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(All amounts in thousands,per share and per ADS data)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2019

2020

2019

2020

RMB

US$(1)

RMB

US$(1)

Net Revenues

1,872,729

2,278,035

2,508,152

354,419

3,361,853

4,786,187

676,321

Cost of revenues

(1,571,679)

(1,792,181)

(1,985,270)

(280,532)

(2,857,674)

(3,777,451)

(533,780)

Gross profit

301,050

485,854

522,882

73,887

504,179

1,008,736

142,541

Operating expenses(2)

Sales and marketing expenses

(167,759)

(107,357)

(142,058)

(20,074)

(291,328)

(249,414)

(35,244)

General and administrative expenses

(73,344)

(84,580)

(79,470)

(11,230)

(136,802)

(164,050)

(23,181)

Research and development expenses

(84,404)

(92,888)

(94,920)

(13,413)

(163,825)

(187,808)

(26,539)

Other operating income,net

14,497

16,578

32,454

4,586

29,382

49,032

6,929

Total operating expenses

(311,010)

(268,246)

(283,994)

(40,131)

(562,573)

(552,240)

(78,035)

Income (Loss) from operations

(9,960)

217,608

238,888

33,756

(58,394)

456,496

64,506

Other expenses,net

(3,766)

(10,018)

(8,382)

(1,184)

(3,879)

(18,400)

(2,600)

Foreign exchange gains

32,045

Interest Income,net

35,166

45,044

50,106

7,080

69,118

95,150

13,445

Income before income taxes

21,440

252,634

280,612

39,652

38,890

533,246

75,351

Income tax expenses

Share of income (loss) in equity method

investments

1,716

1,892

15,132

2,138

2,418

17,024

2,406

Gain (loss) on disposal of investment or

subsidiaries

23,526

3,324

23,324

Net income

23,156

254,526

319,270

45,114

41,308

573,796

81,081

Less: Net loss attributable to non-

controlling interest

(880)

(5,924)

(16,775)

(2,370)

(1,484)

(22,699)

(3,208)

Net income attributable to DouYu

24,036

260,450

336,045

47,484

42,792

596,495

84,289

Net income per ordinary share

Basic

0.86

8.18

10.56

1.49

1.53

18.73

2.65

Diluted

0.82

7.90

10.23

1.44

1.46

18.12

2.56

Net income per ADS(3)

Basic

0.82

1.06

0.15

1.87

0.26

Diluted

0.79

1.02

0.14

1.81

0.26

Weighted average number of ordinary shares used in calculating net income per ordinary share

Basic

8,063,790

31,848,831

31,828,405

31,405

8,838,618

31,618

Diluted

29,351,365

32,976,034

32,864,145

32,145

29,343,741

32,920,090

32,090

Weighted average number of ADS used in calculating net income per ADS(2)

Basic

318,488,308

318,284,051

318,051

318,386,179

318,179

Diluted

329,760,341

328,641,453

328,453

329,200,897

329,897

(1)Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to U.S. dollars are made at

a rate of RMB7.0942 to US$1.00,in the H.10 statistical release of the Federal Reserve Board.

(2) Share-based compensation expenses was allocated in cost of revenues and operating expenses as follows:

Three Months Ended

Six Months Ended

June 30,

2019

2020

2019

2020

RMB

US$(1)

RMB

US$(1)

Research and development expenses

5,563

5,575

788

11,137

1,574

Sales and marketing expenses

1,174

1,148

162

2,322

328

General and administrative expenses

27,383

35,114

27,130

3,834

45,213

62,244

8,796

(3) Every ten ADSs representone ordinary share.

RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands,per share and per ADS data)

Three Months Ended

Six Months Ended

June 30,

2019

2020

2019

2020

RMB

US$(1)

RMB

US$(1)

Income (Loss) from operations

(9,506

Add:

Share-based compensation expenses

27,383

41,850

33,784

45,213

75,703

10,698

Adjusted Operating income (loss)

17,423

259,458

272,741

38,540

(13,181)

532,199

75,204

Net income

23,081

Add:

Share-based compensation expenses

27,698

Share of income (loss) in equity method investments

(1,716)

(1,892)

(15,132)

(2,138)

(2,418)

(17,024)

(2,406)

Gain (loss) on disposal of investment or subsidiaries

(23,526)

(3,324)

(23,324)

Impairment loss of investment

3,790

2,446

8,400

1,187

3,790

10,846

1,533

Adjusted net income

52,613

296,931

322,865

45,623

87,893

619,795

87,582

Net income attributable to DouYu

24,289

Add:

Share-based compensation expenses

27,533

Adjusted net income attributable to DouYu

53,493

302,855

339,640

47,993

89,377

642,494

90,790

Adjusted net income per ordinary

share

Basic

4.51

9.51

10.67

1.51

7.31

20.18

2.85

Diluted

1.91

9.51

10.67

1.51

3.20

20.18

2.85

Adjusted net income per ADS(2)

Basic

0.95

1.07

0.15

2.02

0.29

Diluted

0.95

1.07

0.15

2.02

0.29

Weighted average number of ordinary shares used in calculating adjusted net income per ordinary share

Basic

8,618

Diluted

27,969,895

31,405

27,947,586

31,618

Weighted average number of ADS used in calculating net income per ADS(2)

Basic

318,179

Diluted

318,179

(1)Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted,in the H.10 statistical release of the Federal Reserve Board.

(2)Every ten ADSs representone ordinary share.