DouYu International Holdings Limited (Nasdaq: DOYU), a game-centric live-streaming platform, reported a significant drop in its third-quarter earnings, reflecting challenges in the live-streaming industry and a shifting focus toward revenue diversification.
DouYu announced that its total net revenues for the third quarter ended September 30, 2024, decreased by 21.8% year-over-year to ¥1.06 billion RMB ($146.3 million USD), down from ¥1.36 billion ($187.7 million) in the same period last year. The company’s net income plunged to ¥3.4 million ($0.5 million), a sharp decline from ¥76.4 million ($1.05 million) a year earlier.
Decline in Livestreaming Revenues
The downturn was attributed mainly to a 34.7% decrease in livestreaming revenues, which fell to ¥752.1 million ($103.8 million). The company cited a prolonged soft macroeconomic environment that led to a decline in both the number of paying users and the average revenue per paying user. Average mobile monthly active users (MAUs) dropped to 42.1 million from 51.7 million in the same quarter last year.
Revenue Diversification Efforts
Despite the setbacks, DouYu is making strides in diversifying its revenue streams. Revenues from innovative business, advertising, and other segments surged by 49.4% to ¥311 million ($42.9 million), accounting for 29.3% of total revenues—up from 15.3% a year ago. This growth was primarily driven by new ventures such as voice-based social networking services and game membership services.
“In the face of a dynamic external environment, we’ve adapted our operational strategies to focus on creating a vibrant, diverse, game-centric content ecosystem,” said the interim management committee of DouYu. “Our goal is to improve operational efficiency by strengthening our core advantages, enhancing commercialization capabilities, and optimizing operations to maximize ROI.”
Operational Efficiency and Cost Reduction
Hao Cao, Vice President of DouYu, acknowledged the impact of declining livestreaming revenues on the company’s profitability due to a relatively fixed cost base. “We are keenly aware of the short-term pressures on our profitability,” he said. “In response, we are taking proactive steps to maintain financial resilience. This includes accelerating revenue diversification and identifying cost optimization measures.”
Operating expenses saw a decline across the board:
- Sales and Marketing Expenses: Down by 11.9% to ¥79.3 million ($10.9 million), mainly attributable to decreased staff-related expenses.
- Research and Development Expenses: Decreased by 42% to ¥43.2 million ($5.96 million), primarily due to a reduction in staff-related costs.
- General and Administrative Expenses: Fell by 18.7% to ¥41.5 million ($5.73 million), reflecting the company’s efforts to streamline operations.
However, gross profit took a hit, dropping to ¥60.8 million ($8.4 million) from ¥192.4 million ($26.6 million) in the same quarter last year. Gross margin narrowed to 5.7% from 14.2%, primarily due to the decrease in livestreaming revenues outpacing the decline in the cost of revenues.
Cash Position and Share Repurchase Program
The company’s cash and cash equivalents, including restricted cash and bank deposits, stood at ¥4.38 billion ($604.5 million) as of September 30, 2024, down from ¥6.86 billion ($946.7 million) at the end of 2023. The decrease was mainly due to a special cash dividend distribution of $300 million and a $20 million allocation to a share repurchase program. Under this program, DouYu had repurchased $20 million worth of its American Depositary Shares (ADS) by the end of the quarter.