DouYu International Holdings Limited (NASDAQ:DOYU) Q2 2024 Earnings Call Transcript

DouYu International Holdings Limited (NASDAQ:DOYU) Q2 2024 Earnings Call Transcript September 12, 2024

Operator: Good morning and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a 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 our first speaker today, Ms. Lingling Kong, IR Director at DouYu. Please go ahead, ma’am.

Lingling Kong: Thank you. Hello, everyone. Welcome to our second quarter 2024 earnings call. Joining us today are Mr. Mingming Su, Chief Strategy Officer; Mr. Hao Cao, Vice President of Finance; and Ms. Simin Ren, Vice President, from Interim Management Committee. You can refer to our second quarter 2024 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 provision for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company’s control, which may cause actual results, performance or achievements of the company to be materially 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 update — to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call. I will now speak on behalf of our Interim Management Committee on our business update. The call will then be handed over to our Vice President of Finance, Mr. Hao Cao, for financial discussion. In the second quarter, we undertook several initiatives under our strategy of fostering a healthy, vibrant game-centric content ecosystem. Mainly, we focused on harnessing our robust assets in top-tier streamers and premium content, and deepen our cooperation with game developers to explore more diverse and sustainable partnership models.

At the same time, we worked closely with streamers to drive content innovation and more revenue-generating scenario. As we optimize our revenue structure, we are introducing premium content that is more resonate with user preferences and enriching our gaming service lineup. All of these initiatives serve to consistently elevate user experience and refine our platform’s game-centric content ecosystem. In the second quarter of 2024, our quarterly average mobile MAUs were 44.1 million, a decrease of 12.3% year-over-year. The decline was primarily due to competition from short video platform. Our ongoing data tracking indicated that user attrition was predominantly from low-frequency users with short viewing hours and low stickiness. While this shift places short-term pressure on our overall user base, total user behavior has remained stable in terms of viewing hours and activity levels.

We are joining in fresh users and reengaging in active ones by rolling out game commercialization programs in [waves] (ph), fostering a more vibrant ecosystem across our gaming segments. During the quarter, we broadcasted nearly 30 large-scale official tournaments, including the LPL Spring Split and MSI, alongside the spring tournament of KPL, PEL and [CS:GO BLAST] (ph) among others. Aligned with the strategy we introduced last quarter to refine our gaming event content operation, we ramped up our collaboration with game developers on promotional campaigns centered on game [props] (ph), enhancing user engagement and driving monetization. For example, we launched an area of special initiatives for our game-specific membership services during the PEL official tournament and offered time limited game prop promotions during QQ Speed’s official tournament.

The organic integration of gaming event content with game props has driven higher ROI of copyrighted content. Through game prop monetization, we are also elevating user interaction during livestreaming and in turn advanced our healthy vibrant gaming ecosystem. Regarding our self-produced content, we broadcasted over 50 self-produced eSports tournaments during the quarter. We continued exploring cross-platform content sharing collaboration, leveraging our unique streamer assets to [craft] (ph) high-impact collaborative tournaments across diverse gaming segments, including King Pro League, Dota 2 and VALORANT. If we look at the [PL Center] (ph) Glory Cup as an example, we enriched the KPL professional tournament experience with entertainment elements closely aligned with user preferences.

This included enlisting popular call streamers for live commentary to boost engagement and hosting show matches, featuring professional teams and streamer face-off beyond official gaming events. This enhancement brought our users more captivating and enjoyable content, generating lively discussions. We also launched targeted self-produced events tailored to different gaming audience, including the Douyu Heroes Cup Season 5 for Teamfight Tactics, our signature Peacekeeper Elite [Mount Haruna] (ph) Cup, as well as the Valorant Cup, which we have held for fourth consecutive series. While managing large-scale gaming content, we also focused on refining our content operations within gaming verticals where we have a strong competitive edge. Harnessing our robust streamer network, the dedicated user base we’ve nurtured over the years and our extensive experience in year round operation, we unveiled a wide range of personalized content and initiatives, including self-produced events, PGC programs and in-game commercialization ventures.

In the [billiard] (ph) segment, we leverage the momentum of this game’s return to the domestic market by orchestrating engaging [iron cup] (ph) gaming events. This sparked substantial enthusiasm among streamers and users alike. Our initiatives boosted engagement across the community and enhanced streamer/user discussions, facilitating deeper cohesion community wide. In the Dota 2 segment, we capitalized on streamers’ reach and impact to launch offline PGC variety shows that blended local scenes and culture IP. This innovative approach fully showcased local culture, amplified the program’s appeal and fostered greater user engagement. In the Moonlight Blade segment, we strategically aligned games for promotions with streamer content through targeted marketing campaigns and active streamer participation.

This approach increased the user engagement levels, promoting lively involvement and interaction. As a result, the campaign was a success. This innovative approaches to content operations not only sustained the enduring appeal of classic games, but also cemented engagement and user stickiness across our platform, raising new life into our community ecosystem. Streamers are crucial to our content ecosystem. While enhancing the efficiency of streamer management, we launched various streamer recruitment initiatives. First, we widened our recruitment scope to cover all gaming segments, eased entry [stress hosts] (ph) and added additional streaming rights and benefits. Second, we diversified our recruitment channels by conducting promotional activities on multiple external platforms, reaching a broader audience of game enthusiasts.

Third, we improved streaming incentives by accessing streamer performance across multiple metrics, such as streaming duration and efficiency. We also introduced a tiered incentive system to motivate our streamers and increase streaming consistency. Overall, by increasing the content depth of top-tier streamers and improving the streaming frequency of mid-tier and [long-tail] (ph) streamers, we significantly enriched our content lineup, laying a solid foundation for refining our game-centric content ecosystem. Moving on to monetization. Our total number of paying users in the second quarter was 3.4 million, with a quarterly ARPU of RMB243. The year-over-year decline paying users was caused by prolonged macroeconomic challenges and our strategic decision to scale back promotional activities and initiatives focused on paying user acquisition.

Our long-term data monitoring revealed that this initiative rarely resulted in sustained spending by the users they attracted, instead led to higher promotional costs. The number of total users remained stable quarter-over-quarter as we focused on maintaining our core user spending habits. To address the macroeconomic impact on users’ willingness to spend, in addition to promoting traditional affordably-priced revenue-generating products, we introduced more budget-friendly paid products, tied to platform rewards and game props. This approach encouraged spending among gamers and helped to maintain the overall spending patterns of our paying users. As a result, while quarterly ARPU was down year-over-year, it remained stable quarter-over-quarter.

In the quarter, we continued to deepen our commercialization collaborations with game developers. We recently rolled out DouYu’s game-specific membership program in the League of Legends: Wild Rift. This offering was crafted to meet the characteristic and the needs of DouYu users. Highlighting the appeal of our platform benefits, exclusive game props and game prop discounts, we promoted this initiative through multiple channels across and beyond our platform and attracted the participation of more users. For games already backed by our commercialization collaborations, we have been experimenting with diversified promotional strategies aligned with game updates, new game prop rollouts and seasonal or holiday events to boost the commercialization efficiency.

Moving forward, we aim to broaden our collaboration with more game developers, diversifying and advancing game prop commercialization avenues tailored to different gaming genres. Moreover, we have been expanding our partnership channels for game promotions. Our game center’s integration with popular mini game platforms like QQ enabled us to refine our operations and promotions to better suit user interest, while earning a decent share of in-game purchases and advertising revenue. We are pleased with the impressive growth momentum in user engagement and relevant revenue since the debut of QQ mini games on our platform. In summary, during the second quarter, we have stayed the course. We refined streamer management and optimized content while steadily diversifying our revenue mix.

Our achievements have confirmed that the effectiveness of our strategy is fostering a healthy game-centric content ecosystem. Amidst the changing macro dynamics and industry shift, we will keep our finger on the [indiscernible] and adapt our operational strategy to maximize DouYu’s core competitive edge. We believe that by optimizing resource allocation, deepening collaborations with diverse stakeholders and consistently investing in new ventures with promising growth prospects, we are well-positioned to navigate short-term challenges and steadily advance our business, laying a solid foundation for the company’s long-term sustainable growth. With that, I will now turn the call over to our Vice President of Finance, Mr. Hao Cao, to go through the details of our financial performance in the quarter.

Hao Cao: Thank you, Lingling. Hello, everyone. This quarter, we focused on strengthening new revenue streams and enhancing cost control measures to advance our long-term development strategy, while also increasing shareholder returns. Despite the second quarter’s tough macro environment, our revenue diversification efforts have already begun to yield positive outcomes. Let’s look at our financial performance for the second quarter in more detail. Our total net revenues decreased by 25.9% year-over-year in the second quarter to RMB1.03 billion. Livestreaming revenues were RMB0.79 billion, down 37.2% from RMB1.26 billion in the same period of 2023. Livestreaming revenues were primarily impacted by challenging macroeconomic conditions, which prompted us to reduce promotional activities aimed at acquiring paying users and offer lower-priced revenue products to encourage consistent spending among our existing paying users.

Consequently, we saw a year-over-year reduction in both the total number of paying users and our quarterly ARPU, which declined by 25.5% to RMB243 from RMB326 in the same period last year. Meanwhile, our accelerated exploration of new revenue stream produced encouraging results. Innovative business, advertising and other revenues, formerly known as advertising and other revenues, increased significantly in the second quarter by 80.7% to RMB242 million, up from RMB133.9 million in the same period of 2023. The year-over-year increase was primarily driven by an increase in revenues generated through our innovative businesses such as voice-based social networking service. Cost of revenues in the second quarter of 2024 decreased by 21.2% to RMB0.95 billion, compared with RMB1.2 billion in the same period of 2023.

These cost reductions were largely due to a 18.1% decrease in our revenue-sharing fees and content costs to RMB0.8 billion from RMB0.98 billion in the same period of 2023. Revenue-sharing fees reductions were largely due to decreased livestreaming revenues, which was partially offset by the increase in revenue-sharing fees related to innovative business. Furthermore, the decrease in content costs primarily came from improved cost management in streamer payments and copyrighted content. Bandwidth costs in the second quarter of 2024 decreased by 33% to RMB79.6 million from RMB118.8 million in the same period of 2023, primarily due to year-over-year decrease in peak bandwidth usage. Gross profit in the second quarter of 2024 was RMB84.2 million compared with RMB188.9 million in the same period of 2023.

The decline in gross profit was primarily due to decreased livestreaming revenues outpacing the reduction in cost of revenues. As a result, the disproportionate decrease in revenue led to margin compression. Gross margin in the second quarter of 2024 was 8.2% compared with 13.6% in the same period of 2023. Sales and marketing expenses declined by 11.5% in the second quarter of 2024 to RMB77 million from RMB87 million in the same period of 2023. The decrease was mainly attributable to a decrease in staff-related expenses. Research and development expenses were reduced by 29.4% in the second quarter of 2024 to RMB50.1 million from RMB71 million in the same period of 2023. The decrease was primarily attributable to a decrease in staff-related expenses.

General and administrative expenses increased by 3.4% in the second quarter of 2024 to RMB48.5 million from RMB46.9 million in the same period of 2023. The increase was primarily due to increased expenses related to our employee streamlining initiatives. Loss from operations was RMB119.6 million in the second quarter of 2024 compared with RMB7.5 million in the same period of 2023. Net loss for the second quarter of 2024 was RMB49.2 million compared with net income of RMB6.8 million in the same period of 2023. Adjusted net loss, which excludes share of loss in equity method investments and impairment loss of investments, was RMB45.5 million in the second quarter of 2024 compared with adjusted net income of RMB61.4 million in the same period of 2023.

For the second quarter of 2024, basic and diluted net loss per ADS were both RMB1.58, while adjusted basic and diluted net loss per ADS were both RMB1.46. As of June 30, 2024, the company had cash and cash equivalents, restricted cash, restricted cash in other non-current assets and short-term and long-term bank deposits of RMB6.56 billion compared with RMB6.86 billion as of December 31, 2023. Finally, I would like to update you on our commitment to shareholder returns. At the end of last year, we announced our 2024 share repurchase program for up to US$20 million. As of June 30, 2024, we had repurchased an aggregate of US$11.2 million in ADS under this program. Additionally, we declared a special cash dividend of approximately US$300 million in early July.

Moving forward, we will remain proactive amid macroeconomic headwinds and changing business environment, responding with innovative revenue diversification initiatives and tighter cost and expense controls to overcome short-term pressures on our financial performance. By exploring new commercial pathways and strengthening our fundamentals, we aim to foster the long-term healthy development of our platform and consistently create value for our stakeholders. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Ritchie Sun with HSBC. Please go ahead.

Q&A Session

Ritchie Sun: [Foreign Language] Thank you, management, for taking my questions. How does management view the current macro challenges and changes and the impact on the operations? How would you assess these challenges in terms of the impact on our business fundamentals as well as financials? Thank you.

Mingming Su: Thank you for your question. [At the present] (ph), we face two primary challenges, intense market competition and macroeconomic headwinds. Height in the market competition, particularly the surge of gaming content and services on short video game platforms, has drawn users with short viewing hours and low stickiness away from our platform. This pressured our MAU in the short term, as reflected in the year-over-year and the sequential MAU decline in the second quarter. Nonetheless, our core user base continued to demonstrate the stability. Our long-term data monitoring and analysis revealed that our core users’ key metrics, like viewing hours and activity levels, remained stable, thanks to our year-long strategy to focus on fostering a game-centric content ecosystem.

So, it not only features a variety of gaming content, but has also established a stronghold across diverse verticals, catering to the wider ranging preferences of both mainstream gamers and niche gaming fans. Our particular significance is our loyal user base in the PC and the console game segments, which remains highly engaged, thanks to our focused cultivation efforts. To stay competitive in the market, we will prioritize our core users and maximize our platform’s advantages while also driven ongoing content innovation and operational optimization. On the content front, we will continue to building our distinct and different content metrics. Operationally, we aim to offer a greater variety of gaming services to maintain the virtuous cycle between core user stability and healthy content ecosystem.

We have also been actively advancing cross platform of content sharing collaborations, including [indiscernible] our streamer access for content co-creation, new game promotions, commercial partnerships and game prop marketing campaigns. This content and services offerings not only cater to existing users depending engagement, but also draw in new users through innovative business approach. In terms of our second challenge, macroeconomic headwinds have noticeably affected our traditional livestreaming revenue, primarily due to reduced consumer willingness to spend. Starting last year, we refined our revenue strategy by phasing out revenue-oriented initiatives and the low ROI revenue-generation activities, which lead to the departure of some price-sensitive users.

This year, we further scaled back on initiatives designed to boost the paying user numbers, resulting in a decline in paying users. In response, we rolled out budget-friendly products to support the payment habits of core paying users. As this revenue strategy [has matured] (ph), the number of paying user has stabilized, remaining within a consistent range over the past two quarters. To address the pressures of declining livestreaming revenue, we actively diversified our revenue mix, preemptively enhancing gaming services. Thanks to our platform’s substantial base of average gamers and the high alignment between their needs and our game-related services, we have made significant strides in the commercialization of game profits. We are committed to actively promoting diversified revenue streams to enhance our overall business resilience to economic cycles.

We have responded to macroeconomic dynamics by proactively and [flexibility] (ph) adjusting our operational strategies, consolidating our traditional business and expanding new areas to alleviate revenue pressure. Financially, we have implemented a series of operational measures, including optimizing resources allocation and strengthening cost control, to ensure financial stability. We believe that through the continuous creation and the growth of new content and product models, we can concentrate on the platform’s long-term development and identify opportunities for our secondary growth engine. Thank you. Operator, please, next question.

Operator: The next question comes from Thomas Chong of Jefferies. Please go ahead.

Unidentified Analyst: I’ll translate myself. Thanks, management, for taking my question. So, based on current competition environment, how’s the stability of the streamers on our platform and any large investment on streamer resources in future? Thanks.

Simin Ren: Thank you for your question. So, at present, DouYu’s overall streamer assets remain stable. Competition for top-tier streamers in the livestreaming industry is ongoing. As user demand evolves and the industry develops, we continuously adapt our streamer strategies to address the competition for top-tier streamers. We maintain advantages in exclusive contracts, streamer training and operations. First, given our many years of experience in content operation within the gaming industry, our platform has accumulated a substantial pool of streamers, ensuring stabilities during their contract period. We also enhanced streamer content quality and efficiency through continuously refined operations. For streamers nearing the end of their contracts, we actively assess market conditions, operational strategies and signing costs and operational efficiencies before negotiating and selectively renewing the contracts.

Second, we placed greater emphasis on streamers’ refined operations, especially in niche game segment, DouYu, having grown alongside PC games, boosts deep streamer resources and a strong user base in evergreen game categories. By creating content and marketing activities tailored to the characteristics of these segments, we improved interactions between streamers and users, enhanced our community ecosystem and increased the stickiness of both streamers and users. In terms of streamer compensation, besides base compensation, we provided streamers with some resources and diverse income opportunities. We focused on game promotion and the sales of game props to provide streamers with more growth opportunities and earning potential, and this further solidified the stability of our top-tier streamers’ resources in niche category.

With the arrival of summer season, we also allocate more resources to streamer recruitment. Firstly, we revised our recruitment model, which previously focused on specific game categories. So, now, we no longer restrict streaming categories that’s giving streamers more freedom to choose and experiment with different content. Second, we improved the reward mechanism, providing streamers with guaranteed income and resource support. By enhancing earnings and streaming experience, we aim to increase streamers’ willingness to go live. Third, we established a clear streamer development path. Through a tiered task system, we identified potential streamers and designed growth paths for them using our platform resources. The results for the first series of our updated streamer recruitment initiatives was quite positive, and we will continuously refine our recruitment policies in the next series to attract more gaming enthusiasts.

Additionally, we are continuously upgrading our streaming technologies and support tools to provide streamers with a better user experience. Our streamer big data [analyzer] (ph) system helped streamers accurately understand user needs and market trends, enabling them to optimize their streaming strategies and thus improving their livestreaming qualities and efficiency. We also offered more convenient content production tools that support intelligent editing based on streamer content, producing high-quality videos, images and [bullet charts] (ph). This enhanced streamers’ content production efficiency and made content dissemination more effective. In the content industry, competition for streamer resources is long term and continues. We believe that by leveraging our platform’s core resources and adjusting our operational strategies, we will continue to maintain a leading position of streamers in game livestreaming industry.

Thank you.

Operator: The next question comes from Lei Zhang with Bank of America. Please go ahead.

Lei Zhang: [Foreign Language] Thank you, management, for taking my question. My question is mainly regarding margin. Can you share the driver behind year-on-year decline on second quarter’s gross margin? And how should we look at full year gross margin and the overall margin trend? Thank you.

Hao Cao: Thank you for your question. The second quarter’s year-over-year decline in gross margin was mainly due to the decrease in livestreaming revenue. Although revenue-sharing fees have remained constant with the changes in livestreaming revenue and our revenue-sharing ratio has always stayed within a healthy range, the relatively fixed costs in livestreaming business, such as copyright costs and base compensation for streamers, did not decrease in line with year-over-year decline in livestreaming revenue. Therefore, the decline in livestreaming revenue put pressure on gross margin. While we have implemented a series of measures to optimize content costs and streamers’ payments, the positive impact on overall gross margin has been relatively limited.

In the face of macroeconomic and operating uncertainties, we have undertaken a series of measures to address the challenges posed by the decline in revenue while adjusting the revenue structure for 2024. On the cost side, we aim to alleviate cost pressure, so copyright control costs, increasing the co-creation of self-produced content, enhancing production efficiency and optimizing streamers’ payments. On the expense side, we will continue to refine the company’s organizational structure and optimize marketing strategies to strictly control operational expenses. Additionally, interest income is expected to decrease in the second half of 2024 due to decreased cash balances following dividend distributions, which will also impact our profitability in the second half of the year.

As a result, it will be challenging for us to achieve net level breakeven for 2024. Looking forward, we will continue to refine our revenue structure, enhance operational efficiency and control costs to gradually improve the company’s financial profile. Thank you. Next question please, operator.

Operator: The next question comes from Raphael Chen with BOCI. Please go ahead.

Raphael Chen: [Foreign Language] Thanks, management, for taking my question. Just wondering the estimated cash balance by the end of this year, and any cash usage [pecking order plan to show there] (ph)? Thank you.

Hao Cao: Thank you for your question. As of the end of second quarter, we had cash and cash equivalents, restricted cash and short-term and long-term deposits of RMB6.56 billion. In the second quarter, we repurchased US$8.5 million in ADS, a significant increase compared to the US$2.7 million in ADS we repurchased in the first quarter, reflecting our enhanced share buyback efforts in the second quarter. To-date, aside from normal business operations, large cash expenditures have primarily been used for shareholder returns, including a US$20 million share repurchase plan and a special cash dividend of US$300 million at the end of August. This demonstrates the company’s commitment to shareholder interest and our determination to provide reasonable returns to shareholders while ensuring the company’s long-term development.

Despite the aforementioned large cash expenditures, our overall cash balance remained healthy and is sufficient to support our business operations and development. We will continue to closely monitor market dynamics and business development trends, flexibly adjusting our strategies to ensure the effective use of our funds and related risk control. Meanwhile, we will continue to invest in our communities’ ecosystem and new businesses. These investments not only helped enhance user experience and strengthen our platform’s competitiveness, but are also key to the company’s long-term sustainable development. Through continuous technological innovation and service optimization, we remain committed to fostering a more vibrant and healthy community ecosystem and promoting the rapid growth of our businesses, thereby building the company’s enduring momentum and long-term success.

Thank you. Operator, next question, please.

Operator: The next question comes from Nelson Cheung with Citibank. Please go ahead.

Nelson Cheung: [Foreign Language] Let me translate the question myself. Thanks, management, for taking my question. Wondering if management can share the latest development plan and progress regarding the cooperation with game developers and your expectation on the revenue growth. Thank you.

Simin Ren: Nelson, thank you for your question. So, we implemented a revenue diversification strategy in 2022, including commercial collaborations with game developers based on our gamers demand, recognizing streamers’ substantial influence on gaming commercialization and the vast opportunities in this space. We continue to delve into new revenue-generating avenues within the game content value chain and have established two primary forms of commercial collaborations with game developers. Last quarter, we shared that game membership revenue from sales of game props contribute to our innovative business revenue growth. Within this segment currently covered by our game membership business, we have boosted revenues by enriched game prop categories, enhancing platform benefits and increasing market frequency.

In terms of expanding into new game segments, we launched game membership services in the League of Legends: Wild Rift in mid-July. We promoted these new services in livestreaming sessions by distributing limited edition props and platform benefits based on the current game theme. The real props provided by game developers and promotions both on and off our platform attracted gamers’ attention and interest, contributing additional revenue streams. In terms of the progression — the progress with our game developer cooperation, the convenience of collaborative promotional channels allows us to quickly expand this business model. Although this model currently contributes only a very small proportion of revenue, we see gamers’ strong demand for game props sales and the growth potential for this business.

For example, Moonlight Blade, a game launched in 2016, is one of the first games for which we initiate commercial cooperation on game props. Through various forms of cooperation with game developers, we have updated our product offerings to enable users to place orders directly through the prop mall, optimizing the users’ purchasing experience. And as a result, users’ average prop consumption level through our channel is higher than that of other channels. In the Peacekeeper Elite game segment, which features our deepest cooperation with game developers, we launched our exclusive Peacekeeper Elite boutique store in the first quarter of 2024. This event generated over 3 million user orders within three days during livestreaming sessions. Furthermore, during the recent multiplatform boutique store campaign, DouYu shared the — DouYu’s share of the related GMV lead the industry, highlighting our operational advantages and commercialization efficiency in leveraging segment-specific content.

Prop marketing has also enriched the gaming segment’s content and activities, which further enhancing their exposure and attractiveness. And in the future, we plan to expand our game prop sales to more game segments, customizing exclusive promotion plans based on the characteristic of different games and user needs. These initiatives are designed to drive revenue growth in our innovators business and provide gamer with rich and more diverse game-related services. In addition to the commercial collaborations with game developers, our other innovative businesses are also progressing well and contributing to revenue. We are maintaining our year-over-year growth expectation for innovative businesses, advertising and other revenue, which we expect to account for over 20% of our total net revenue in 2024.

Yes, I think that’s it.

Operator: Thank you. That’s all the time we have for questions today. I will now turn the call back over to management for any closing remarks.

Lingling Kong: Thank you for joining our call. We look forward to speaking with everyone next quarter.

Operator: The conference has now concluded. Thank you for attending. You may now disconnect.