China's Livestreaming Platform DouYu Reports Profit Ahead of U.S. IPO

The company initially filed​ for an IPO of up to $500 million in April but has since postponed its plan amid trade woes between China and the United States.

Author: Selina Cheng   

China's largest live-streaming platform DouYu International Holdings Ltd. reported a profitable first quarter in an updated prospectus filed Wednesday ahead of an initial public offering previously placed on hold.

The company, a rival of Huya Inc. (NYSE: HUYA), initially filed for an IPO of up to $500 million in April but has since postponed its plan amid trade woes between China and the United States.

In a filing with the U.S. Securities and Exchange Commission today, DouYu provided updated financials. The company said its revenue has more than doubled to $221.9 million in the three months through March from $98 million from the same period last year. Net income reached $2.7 million in contrast to a net loss of $23 million a year ago.

The company reported more than 6.5 million registered streamers as of March 31 this year compared with 4.6 million users last year, indicating an increase of 41 percent. 

Live streaming is DouYu's main monetization channel and generated more than 90 percent of its total net revenue in 2019, which is primarily derived from the sales of a wide array of virtual gifts. At the same time, its massive and highly engaged user base has attracted advertisers from a wide spectrum of industries, which has led to rapid growth in its advertising and game distribution revenue since 2016.

The company has a strategic partnership with Chinese tech giant Tencent Holdings Ltd. (HKEX: 0700), under which the two cooperate on game livestreaming, advertisement and game distribution, among other projects. 

The Wuhan-based company streams a variety of content on its video sharing platform. In addition to gaming, DouYu broadcasts sports, cooking, and other entertainment. The company also hosts virtual game tournaments on a massive scale, drawing hundreds of thousands of arcade fans.

For last year, DouYu reported revenue of $531.5 million, nearly double from 2017. Costs of revenue were $509.5 million while operating expenses were at $146.9 million for the full year. The company had a net loss of $128.4 million, up 44 percent year-over-year. 

As a frontrunner in eSports livestreaming industry, DouYu had the largest eSports viewer base as measured by average total MAUs that viewed eSports livestreaming during the first quarter of 2018 and 2019. Its average total eSports MAUs were approximately 78.3 million and 125.3 million in the first quarter of 2018 and 2019, respectively, according to iResearch. 

DouYu said it intends to use the proceeds from its public offering to expand its content, including growing its e-sports offerings, as well as to invest in research and development to enhance user experience, and for the marketing and promotion of its brand.

Underwriters on DouYu's offering are Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, and Merrill Lynch, Pierce, Fenner & Smith Inc.

DouYu has applied to trade its shares under the symbol "DOYU" on the New York Stock Exchange.

The stock of Huya, Douyu's direct rival in China, closed 4 cents lower Wednesday, at $25.92 per American depositary share.