PR Newswire | Aug 10, 2020 03:00AM EDT

Financial Results

08/10 02:00 CDT

DouYu International Holdings Limited Reports Second Quarter 2020 Unaudited Financial Results WUHAN, China, Aug. 10, 2020

WUHAN, China, Aug. 10, 2020 /PRNewswire/ -- 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, commented, "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 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, primarily driven by the increase in live streaming and advertising revenues.

Live streaming revenues in 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 revenues in 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 revenues in 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 costs in 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 costs in 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 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. Gross margin in the second quarter of 2020 expanded to 20.8% from 16.1% in the same period of 2019.

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

Research and development expenses in the second quarter of 2020 increased by 12.5% to RMB94.9 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 expenses in 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, netin the second quarter of 2020 was RMB32.5 million (US$4.6 million), compared with RMB14.5 million in the same period of 2019.

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

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.

Adjusted net income in the second quarter of 2020, which excludes share-based compensation expenses, share of income in equity method investments, gain on disposal of investment or subsidiaries, and impairment loss of investments, 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% 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 8:00 am Eastern Time (or 8:00 pm Beijing Time on the same day) to discuss the financial results. Listeners may 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, 2020, 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 backshare-based compensation expenses. For more information, refer to "Use ofNon-GAAP Financial Measures" and "Reconciliations of Non-GAAP Results" at theend of this press release.

^[2] Every ten ADSs represent one ordinary share.

About DouYu International Holdings Limited

Headquartered in Wuhan, China, 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, or superior to, 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, 2020, 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, 2020, 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 MaoDouYu International Holdings LimitedEmail: ir@douyu.tvPhone: +1 (646) 224-6934

Xinran RaoICR, Inc.Email: DouYu.IR@icrinc.comPhone: +1 (646) 224-6934

Media Relations Contact

Iris DingDouYu International Holdings LimitedEmail: pr_douyu@douyu.tvPhone: +1 (646) 308-1475

Edmond LococoICR, Inc.Email: DouYu.PR@icrinc.comPhone: +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 2020

RMB 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 392,347 297,498 42,038liabilities

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 rateare solely for the convenience of the reader. Unless otherwise noted, alltranslations from RMB to U.S. dollars are made at a rate of RMB7.0942 toUS$1.00, the noon buying rate in effect on Mar 27, 2020, in the H.10statistical release of the Federal Reserve Board.

^(2) The Group adopted Accounting Standards Update ("ASU") 2016-13, "FinancialInstruments-Credit Losses (Topic 326): Measurement of CreditLosses on Financial Instruments" on January 1, 2020 with modified retrospectivemethod, which do not have a significant impact on the consolidatedfinancial statements.

^(3) The Group adopted Accounting Standards Update ("ASU") 2016-02, "Leases(Topic 842)" and its amendments on January 1, 2020 with modifiedretrospective method. The major impact of the standard is that assets andliabilities amounting to RMB97.7 million and RMB87.5 million,respectively, are recognized beginning January 1, 2020 for leased offices withterms of more than 12 months.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

As of December 31 As of June 30

2019 2020 2020

RMB RMB US$^(1)

Shareholders' equity

Ordinary shares 22 22 3

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 9,103,671 9,489,468 1,340,926

^(1) Translations of certain RMB amounts into U.S. dollars at a specified rateare 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 toUS$1.00, the noon buying rate in effect on Mar 27, 2020, in the H.10statistical release of the Federal Reserve Board.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30, June 30, June 30,

2019 2020 2020 2020 2019 2020 2020

RMB RMB RMB US$^(1) RMB RMB US$^(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 1,716 1,892 15,132 2,138 2,418 17,024 2,406 investments

Gain (loss) on disposal of investment or - - 23,526 3,324 - 23,526 3,324 subsidiaries

Net income 23,156 254,526 319,270 45,114 41,308 573,796 81,081

Less: Net loss attributable to non- (880) (5,924) (16,775) (2,370) (1,484) (22,699) (3,208) controlling interest

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 perordinary share

Basic 8,063,790 31,848,831 31,828,405 31,828,405 8,063,790 31,838,618 31,838,618

Diluted 29,351,365 32,976,034 32,864,145 32,864,145 29,343,741 32,920,090 32,920,090

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

Basic - 318,488,308 318,284,051 318,284,051 - 318,386,179 318,386,179

Diluted - 329,760,341 328,641,453 328,641,453 - 329,200,897 329,200,897

^(1) Translations of certain RMB amounts into U.S. dollars at a specified rateare solely for the convenience of the reader. Unless otherwise noted, alltranslations from RMB to U.S. dollars are made ata rate of RMB7.0942 to US$1.00, the noon buying rate in effect on Mar 27, 2020,in the H.10 statistical release of the Federal Reserve Board.

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

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30, June 30, June 30,

2019 2020 2020 2020 2019 2020 2020

RMB RMB RMB US$^(1) RMB RMB US$^(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 represent one ordinary share.

RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

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

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30, June 30, June 30,

2019 2020 2020 2020 2019 2020 2020

RMB RMB RMB US$^(1) RMB RMB US$^(1)

Income (Loss) from operations (9,960) 217,608 238,888 33,756 (58,394) 456,496 64,506

Add:

Share-based compensation expenses 27,383 41,850 33,853 4,784 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 23,156 254,526 319,270 45,114 41,308 573,796 81,081

Add:

Share-based compensation expenses 27,383 41,850 33,853 4,784 45,213 75,703 10,698

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) - (23,526) (3,324)

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 24,036 260,450 336,045 47,484 42,792 596,495 84,289

Add:

Share-based compensation expenses 27,383 41,850 33,853 4,784 45,213 75,703 10,698

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) - (23,526) (3,324)

Impairment loss of investment 3,790 2,446 8,400 1,187 3,790 10,846 1,533

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 netincome per ordinary share

Basic 8,063,790 31,848,831 31,828,405 31,828,405 8,063,790 31,838,618 31,838,618

Diluted 27,969,895 31,848,831 31,828,405 31,828,405 27,947,586 31,838,618 31,838,618

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

Basic - 318,488,308 318,284,051 318,284,051 - 318,386,179 318,386,179

Diluted - 318,488,308 318,284,051 318,284,051 - 318,386,179 318,386,179

^(1) Translations of certain RMB amounts into U.S. dollars at a specified rateare solely for the convenience of the reader. Unless otherwise noted, alltranslations from RMB to U.S. dollars are made ata rate of RMB7.0942 to US$1.00, the noon buying rate in effect on Mar 27, 2020,in the H.10 statistical release of the Federal Reserve Board.

^(2) Every ten ADSs represent one ordinary share.

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SOURCE DouYu International Holdings Limited