Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion may contain forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under "Item 3. Key Information-Item 3.D. Risk Factors" and elsewhere in this annual report.

For the impact of foreign currency fluctuations on the company, and the extent to which foreign currency net investments are hedged by currency borrowing and other hedging instruments, please refer to "Item 11. Quantitative and Qualitative Disclosures about Market Risk-Foreign exchange risk."

5.A. Operating Results

General Factors Affecting Our Results of Operations

Our business and operating results are affected by general factors affecting China's game-centric livestreaming industry, which include:

●

China's overall economic growth;

●

the usage and penetration rate of mobile Internet and mobile payment;

●

the growth and competitive landscape of China's livestreaming market, especially game-centric livestreaming market;

●

the growth of China's online gaming market; and

●

governmental policies and initiatives affecting China's livestreaming industry, including game livestreaming.

Unfavorable changes in any of these general industry conditions could negatively affect demand for our services and materially and adversely affect our results of operations.

Specific Factors Affecting Our Results of Operations

After achieving substantial scale through our initial investments in user acquisition and experience, we have been proactively managing our growth to accommodate our strategy of building a healthy and sustainable game-centric community ecosystem in a more cost-effective manner. As part of our efforts, we have strategically adjusted our streamer contract model to a combination of exclusive contract model and cross-platform content co-creation model. On the one hand, we enter into exclusive contracts with our top streamers whose performances meet our standards to ensure a consistent supply of quality content. On the other hand, we take an initiative to deploy a cross-platform content co-creation model, where certain of our streamers will collaborate with other platforms to co-develop quality content. In addition, despite being one of the first game-centric livestreaming platforms to make the foray into eSports, we have strategically expanded our content coverage beyond eSports and now mainly covers eSports, music, outdoor activities, and talent shows to adapt to users' evolving needs. We have strategically reduced the purchase of certain eSports tournament copyrights and will continue to selectively stream eSports touraments with a strong focus on mobile gaming and entertainment. However, these strategic adjustments have resulted in, and may continue to result in, a reduction in the size of our active users and our revenue. Even though we expect these strategic changes may continue to have negative impacts to our revenue in the near-term future, we believe by fostering a healthy ecosystem with high operating efficiencies, we are able to manage our growth in a more cost-effevtive manner.

Our ability to maintain our user base and enhance our user engagement

Our ability to effectively maintain our user base will affect the growth of our business and our revenue. We have a large and highly engaged user base, which is core to our revenue growth. As of December 31, 2023 and 2024, we had 493.9 million and 503.3 million registered users, respectively. Our average mobile MAUs decreased from 51.7 million in the fourth quarter of 2023 to 44.5 million in the fourth quarter of 2024, primarily due to competition from short video platforms which have been investing and offering more game-related content and services. In addition, as a result of our strategic adjustments that were recently implemented, we have resulted in, and may continue to result in, a reduction in the size of our active users and our revenue.

Furthermore, we historically focused on the number of active users, which encompasses the number of users who visited our platform through either PC or mobile app at least once in a given period. As a result of the evolving user behaviors observed on game-centric livestreaming platforms with a greater emphasis on mobile devices over PCs, our management is focusing more on mobile apps and mobile users from an operational perspective, and uses the number of active mobile users to track the scale and engagement of our users. Due to the purchase of broadcasting rights of key eSport official tournaments (such as League of Legends) that attracted some of the PC users back to our platform, the PC MAUs increased from 36.7 million for the fourth quarter of 2022 to 42.8 million for the fourth quarter of 2023. Such figure then decreased to 25.7 million for the fourth quarter of 2024, which was mainly attributable to our reduced operating activities in maintaining PC users. The average next month active user retention rate for PC users decreased from 29% in 2022 to 26.3% in 2023 and then slightly decreased to 25.2% in 2024, which was mainly due to our reduced operating activities in maintaining loyal PC users.

Our user base and level of user engagement help us retain popular streamers who produce quality content. The curated content and interactive features of our platform help retain users and encourage user participation, which is related to our livestreaming revenue. Our game livestreaming combined with a broad range of other entertainment contents have been effective in maintaining user traffic and user spending. In addition, the game-centric user base of our platform enable us to establish cooperations with game developers and other participants of the game industry. Our ability to maintain our user base, as well as maintain and enhance user engagement, depends on, among other things, our ability to retain quality streamers, continually produce quality content, maintain our pivotal position in the evolving game industry in China, and continually improve our users' entertainment experience through technological innovation.

Our ability to retain popular streamers and to enhance the quality of our content

Popular streamers are critical to maintaining our user base and enhancing user engagement. The high quality content generated by our streamers increases the vibrancies of our user community and in turn may drive the growth of our revenue across livestreaming, advertisement and game distribution. We adopt a flexible streamer contract mechanism that integrates an exclusive contract model with a cross-platform content creation model. For the streamers who possess large fan bases, generate significant user traffic, and/or exhibit exceptional revenue-generating capabilities in their streaming genres or sections, we typically enter into exclusive contracts with them. As of December 31, 2024, we had entered into exclusive contracts with over 24,600 streamers, which in aggregate contributed to 75.3% of total viewing hours on our platform in 2024 and 66.6% of the live-streaming revenue during that year. We also take an initiative to deploy a cross-platform content co-creation model, where certain of our streamers will collaborate with other platforms to co-develop quality content. We will continue to nurture and promote our streamers through our comprehensive streamer development system. Our ability to retain popular streamers depends on, among other things, our brand awareness, size and engagement of our user base, the support from our platform, and monetization opportunities.

Our ability to capitalize on the game industry

We believe our platform is strategically positioned to benefit from the development of the game industry in China. Our average mobile game MAUs were approximately 19.3 million and 13.5 million in the fourth quarter of 2023 and 2024, respectively. Leveraging our early-mover advantage in eSports in China, we have built a platform that is appealing to game streamers, game developers and publishers of various game types, as a result of our broad user reach, high user engagement, strong brand awareness, and attractive monetization opportunities.

We expect to continue to source and promote more premium game-centric content on our platform. Our ability to secure premium game-centric content allows us to retain users, and also allows us to enhance our user engagement, increase our users' willingness to pay, extend the lifespan of the related games, and strengthen our brand awareness among all participants in the game industry, which drives the growth of our business in the long term.

Our ability to strengthen monetization capabilities

We generate revenue from a diverse range of monetization channels including (i) livestreaming and (ii) innovative business, advertisement and others. Our livestreaming revenue is primarily driven by the number of paying users and ARPPU. Our annual paying user base was 10.1 million in 2023 and 6.1 million in 2024. Our quarterly average paying users were 3.7 million and 3.3 million in the fourth quarter of 2023 and 2024, respectively. Our quarterly ARPPU were RMB278 and RMB246 in the fourth quarter of 2023 and 2024, respectively. We intend to retain popular streamers, provide more quality content, diversify user paying scenarios on our platform, and enhance interaction between streamers and viewers to increase user willingness to pay. We have experienced in the past and may continue to experience a decrease in our paying users due to our cost-effective operating strategies focusing on maintaining core paying users according to market dynamics or a diluted paying user base as compared to total MAUs.We provide effective and targeted advertising solutions. We will continue to innovate our advertising methods, as well as to improve advertisement efficiency. We will monitor market developments and consider deepening our partnerships with game developers and publishers on game distribution.

Under our revenue diversification strategy, we further explore other monetization channels through our innovative business, including voiced-based social networking services and game-related services. The revenue of our voice-based social networking service in 2024 is 813.1 million and the average MAUs is 475.9 thousand in the fourth quarter of 2024. We will continue to invest in various marketing intiatives to attract more users to our innovative business, and develop and offer more revenue-generating products to enhance monetaztion capabilities.

We believe our large and engaged user base and our leading position in China's game-centric livestreaming ecosystem will allow us to continue to enhance our monetization efficiency and diversification.

Our ability to further improve cost efficiency

We have made significant investments in our technology, brand, streamers and team. Our costs consist primarily of revenue sharing fees, content cost, bandwidth costs and other costs. Our expenses primarily consist of sales and marketing expenses, general and administrative expenses and research and development expenses.

Our ability to achieve greater cost efficiency also depends on our ability to efficiently manage and control our costs and expenses. We plan to optimize our costs structure through promoting healthy-margin livestreaming business, managing content costs and bandwidth costs, and streamlining headcounts while supporting the stable development of our business. We expect that our strategies of monetization diversification and optimization of our costs and expenses will enable us to improve operational efficiency in the short to medium run.

Key Components of Results of Operations

​

​	​	​	​	​	​	​	​	​
​		For the Year Ended December 31,
​	​	2022	​	2023	​	2024
​	​	RMB		RMB		RMB		US$
​		(in millions)
Net revenues		7,108.2	​	5,530.4	​	4,270.8	​	585.1
Cost of revenues		(6,118.1)	​	(4,846.4)	​	(3,947.0)	​	(540.7)
Gross profit		990.1	​	684.0	​	323.8	​	44.4
Operating (expenses) income:		​	​	​	​	​	​	​
Sales and marketing expenses(1)		(639.9)	​	(351.7)	​	(311.1)	​	(42.6)
General and administrative expenses(1)		(288.2)	​	(237.8)	​	(204.4)	​	(28.0)
Research and development expenses(1)		(383.1)	​	(276.9)	​	(181.7)	​	(25.0)
Other operating income (expenses), net		122.2	​	32.3	​	(200.2)	​	(27.4)
Impairment of goodwill		-	​	(13.9)	​	-	​	-
Total operating expenses		(1,189.0)	​	(848.0)	​	(897.4)	​	(123.0)
Loss from operations		(198.9)	​	(164.0)	​	(573.6)	​	(78.6)
Other (expenses) income, net		(80.3)	​	(52.9)	​	21.9	​	3.0
Interest income		129.9	​	285.0	​	263.1	​	36.0
Foreign exchange gain, net		-	​	0.1	​	1.2	​	0.2
(Loss) income before income taxes and share of income (loss) in equity method investments		(149.3)	​	68.2	​	(287.4)	​	(39.4)
Income tax expense		(3.5)	​	(1.1)	​	(15.4)	​	(2.1)
Share of income (loss) in equity method investments		62.4	​	(31.6)	​	(4.0)	​	(0.5)
Net (loss) income		(90.4)	​	35.5	​	(306.8)	​	(42.0)
Net Loss attributable to noncontrolling interest		(15.0)	​	-	​	-	​	-
Net (loss) income attributable to ordinary shareholders of the Company		(75.4)	​	35.5	​	(306.8)	​	(42.0)
Net (loss) income	​	(90.4)	​	35.5	​	(306.8)	​	(42.0)
Other comprehensive income (loss), net of tax of nil:		​	​	​	​	​	​	​
Foreign currency translation adjustments		434.6	​	93.3	​	72.1	​	9.9
Comprehensive income (loss)		344.2	​	128.8	​	(234.7)	​	(32.1)

Notes:

(1)	Includes share-based compensation of RMB66.7 million, nil and nil in 2022, 2023 and 2024, respectively.

Revenue

We generate revenue mainly from (i) livestreaming and (ii) innovative business, advertisement and other revenues.

The following table sets forth sources of our revenue in absolute amounts and as percentages of total net revenue for the periods indicated:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended December 31,

​

​

2022

​

2023

​

2024

Net revenues

​

RMB

%

RMB

%

RMB

US$

%

​

(in millions, except for percentages)

Livestreaming

6,797.3

​

95.6

​

4,799.0

​

86.8

​

3,073.9

​

421.1

​

72.0

Innovative business

-

​

-

​

-

​

-

​

1,015.9

​

139.2

​

23.8

Advertisement and others

310.9

​

4.4

​

731.4

​

13.2

​

181.0

​

24.8

​

4.2

Total

7,108.2

​

100.0

​

5,530.4

​

100.0

​

4,270.8

​

585.1

​

100.0

​

Livestreaming

We primarily generate livestreaming revenues through the sales of virtual gifts. See "Item 4. Information of the Company-4.B. Business Overview-Monetization opportunities-Livestreaming."

To navigate market dymanics, we have been proactively managing our livestreaming business to accommodate our strategy of building a healthy and sustainable game-centric community ecosystem in a more cost-effective manner. As part of these efforts, we have been implementing "cost-effective operating strategies", where (a) we have adjusted certain interactive features and operational activities in our livestreaming business with the goal of discouraging excessive user consumption and irrational user consumption patterns on the platform since the beginning of 2022, and (b) we have been focusing on live-streaming activities with high operating efficiencies. Additionally, we have been shifting our attention towards (a) optimizing our streamer structure, and (b) cultivating paying users who exhibit stronger user stickiness and a willingness to pay. In 2024, we continued to execute our cost-effective operating strategy under the prolonged soft macroeconomic environment and competition from short-video platforms focused on maintaining the size of our core paying users by offering more affordable virtual gifts to encourage their consistent spending behavior. As a result, the decreased average revenue per paying user led to a year-over-year decrease in our livestreaming revenue.

Innovative business

We generate revenue from our innovative business through (i) our voice-based social networking services, mainly from the sales of virtual gifts and to a lesser extent, subscription-based membership services and virtual customization options, and (ii) our game-related services, which mainly involves sales of game-specific memberships to users. The revenue generated from our voice-based social networking services was historically classified under other revenues. In the second quarter of 2024, we re-classfied such revenue to the revenue generated from the innovative business in light of its magnitude.

Advertisement and Others

We generate advertisement revenue primarily through offering various forms of advertising services and promotion campaigns to advertisers, including (i) integrated promotion activities during livestreaming, (ii) advertisement display, and (iii) online and offline events-related advertisements. To a lesser extent, we also generate revenue from revenue sharing arrangements with game developers and publishers through game distribution,. See "Item 4. Information of the Company-4.B. Business Overview-Monetization Opportunities-Advertisement and Others."

Cost of Revenues

Our cost of revenues consists of (i) revenue sharing fees and content cost, (ii) bandwidth cost, and (iii) other. The table below sets forth a breakdown of the components of cost of revenues in absolute amounts and as percentages of total cost of revenues for the periods indicated:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended December 31,

​

​

2022

​

2023

​

2024

Cost of Revenues

​

RMB

%

RMB

%

RMB

US$

%

​

(in millions, except for percentages)

Revenue sharing fees and content cost(1)

5,245.9

​

85.7

​

3,878.4

​

80.0

​

3,363.1

​

460.7

​

85.2

Bandwidth cost

569.1

​

9.3

​

449.9

​

9.3

​

304.6

​

41.7

​

7.7

Other

303.1

​

5.0

​

518.1

​

10.7

​

279.3

​

38.3

​

7.1

Total

6,118.1

​

100.0

​

4,846.4

​

100.0

​

3,947.0

​

540.7

​

100.0

Note:

(1)

Include content right costs which are expensed over the streaming periods. The cost related to our voice-based social networking services was historically classified under other cost. In the second quarter of 2024, we re-classfied such cost aligned with the reclassification of revenue, the related costs were also reclassified.

Revenue sharing fees and content cost. Our revenue sharing fees represent our payment to streamers and talent agencies based on a percentage of revenue from sales of virtual items of our livestreaming services and voice-based social networking services, including virtual gifts and other subscription-based privileges. When a viewer sends a virtual gift to a streamer, we pay a certain percentage of the sales of virtual gifts to the streamers or the talent agency of which the streamer is a member. Our content cost mainly covers (i) sign-up bonus to top exclusive streamers, a monthly payment that is determined based on the streamers' performance matrix, (ii) costs we incurred in purchasing content rights, and (iii) our investments in generating self-produced content.

Bandwidth cost. Bandwidth cost is fees that we pay to telecommunication service providers for bandwidth and content delivery-related services.

Others. Other costs include costs related to other innovative business such as game-related services and fees that we pay to third-party payment processing platforms through which our users purchase our virtual currencies, depreciation of servers, cost, related to data center services, costs related to eSports teams which we invested in and other IT infrastructure expenditures.

Operating Expenses

Our operating expenses consist of (i) sales and marketing expenses; (ii) research and development expenses; (iii) general and administrative expenses; (iv) other operating income (expenses), net; and (v) impairment of goodwill.

The following table sets forth the components of our operating expenses in absolute amounts and as percentages of total operating expenses for the periods indicated:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		For the Year Ended December 31,
​	​	2022			​	2023			​	2024
Operating Expenses	​	RMB		%		RMB		%		RMB		US$		%
​		(in millions, except for percentages)
Sales and marketing expenses		639.9	​	53.8	​	351.7	​	41.5	​	311.1	​	42.6	​	34.7
General and administrative expenses		288.2	​	24.2	​	237.8	​	28.0	​	204.4	​	28.0	​	22.8
Research and development expenses		383.1	​	32.2	​	276.9	​	32.7	​	181.7	​	25.0	​	20.2
Other operating income (expenses), net		(122.2)	​	(10.2)	​	(32.3)	​	(3.8)	​	200.2	​	27.4	​	22.3
Impairment of goodwill	​	-	​	-	​	13.9	​	1.6	​	-	​	-	​	-
Total		1,189.0	​	100.0	​	848.0	​	100.0	​	897.4	​	123.0	​	100.0

​

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of (i) advertising and market promotion expenses, (ii) salaries and welfare for sales and marketing personnel and (iii) share-based compensation. We expect our sales and marketing expenses to decrease in absolute amount as we continue to streamline our marketing personnel and prudently invest in our marketing and promotional activities for new users' acquisition of our innovative business.

Research and Development Expenses

Research and development expenses primarily consist of (i) salaries and benefits expenses incurred for research and development personnel, (ii) rental, general expenses and depreciation expenses associated with the research and development activities and (iii) share-based compensation. We expect our research and development expenses to decrease in absolute amount as we continue to streamline our research and development personnel with the integration of AI programming capabilities

General and Administrative Expenses

General and administrative expenses consist primarily of (i) professional service fees, and (ii) share-based compensation, and (iii) salaries and welfare for general and administrative personnel and (iv) allowance for credit loss. We expect our general and administrative expenses to remain stable as percentage of our revenue as we continue to explore our innovative business while improving our operating efficiency.

Other Operating Income (expenses), net

Our other operating income (expenses), net primarily consists of (i) government subsidies, which refers to funds we received from local government, (ii) Contingent litigation income (expenses), and (iii) impairment of streamer's assets.

Other (expenses) income, net

Our other (expenses) income, net primarily consists of the impairment loss from equity method investments, and the disposal loss of cost method investments.

Foreign currency translation adjustments

Foreign currency translation adjustments are reported as cumulative translation adjustments and are shown as a component of other comprehensive income. A cumulative translation adjustment results from the translation of the financial statements of the consolidating entities within the group with functional currency other than the group's reporting currency in Renminbi. The cumulative translation adjustment for the year ended December 31, 2024 was mainly attributable to the amount of cash and cash equivalents held at the Cayman Islands holding company level and the appreciation in Renminbi against U.S. dollar for the year ended December 31, 2024. We expect that the foreign currency translation adjustments will continue to fluctuate in accordance with the fluctuation between Renminbi and U.S. dollars in future periods.

Results of Operations

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Revenue.Our revenue decreased from RMB5,530.4 million in 2023 to RMB4,270.8 million in 2024, mainly attributable to the decreased in our livestreaming revenue as well as advertisement and others revenues, partially offset by an increase in our innovative business.

Livestreaming revenue. Our livestreaming revenue decreased by 35.9% from RMB4,799.0 million in 2023 to RMB3,073.9 million (US$421.1 million) in 2024, which was mainly due to the decrease of our paying users from 10.1 million in 2023 to 6.1 million in 2024 and the decreased ARPPU, as a result of our continued implementation of cost-effectvie operating strategies focusing on maintaining core paying users and offering more friendly-priced revenue products under a weak consumption sentiment.

Innovative business, advertising and other revenues (formerly known as advertising and other revenues). Our Innovative business, advertising and other revenues increased from RMB731.4 million in 2023 to RMB1,196.9 million (US$164.0 million) in 2024, primarily due to the increase in revenues contributed by our innovative business, mainly consisting of voice-based social networking services.

Cost of revenues.Our cost of revenues decreased from RMB4,846.4 million in 2023 to RMB3,947.0 million (US$540.7 million) in 2024, which was mainly attributable to the decrease in our revenue sharing fees and content cost.

Revenue sharing fees and content cost. Our revenue sharing fees and content cost decreased by 13.3% from RMB3,878.4 million in 2023 to RMB3,363.1 million (US$460.7 million) in 2024. The decrease was mainly due to the decrease in revenue sharing fees which was largely in line with the decrease in livestreaming revenues, as well as the decrease in content cost. However, it is offset by the sharing fees associated with voice-based social networking services which experienced significant increase in 2024 and reclassified from other costs to this line from the second quarter of 2024, and there's also a relatively fixed component of sharing fees that would not decreased at the same pace of revenue.

Bandwidth cost. Our bandwidth cost decreased from RMB449.9 million in 2023 to RMB304.6 million (US$ 41.7 million) in 2024, primarily due to a year-over-year reduction in peak bandwidth usage and our effective bandwidth-related cost control measures.

Gross profit and gross profit margin.As a result of the foregoing, we had gross profit of RMB323.8 million (US$44.4 million) in 2024, as compared to the gross profit of RMB684.0 million (US$96.3 million) in 2023. Our gross margin decreased from 12.4% to 7.6% during the same periods.

Total operating expenses.Our total operating expenses increased by 5.8% from RMB848.1 million in 2023 to RMB897.4 million (US$123.0 million) in 2024.

Sales and marketing expenses. Our sales and marketing expenses decreased by 11.5% from RMB351.7 million in 2023 to RMB311.1 million (US$42.6 million) in 2024. Such decrease was primarily attributable to the decrease in reduced payroll-related expenses, partially offset by the increase in marketing expenses for user acqusitions of our innovative business.

Research and development expenses. Our research and development expenses decreased by 34.4% from RMB276.9 million in 2023 to RMB181.7 million (US$25.0 million) in 2024. Such decrease was primarily due to the decreased payroll-related expenses for our R&D personnel.

General and administrative expenses. Our general and administrative expenses decreased by 14.0% from RMB237.8 million in 2023 and RMB204.4 million (US$28.0 million) in 2024, mainly due to the decrease in payroll-related expenses.

Other operating income (expenses), net. Our other operating income (expenses), net, shifted from a income of RMB32.3 million in 2023 to a loss of RMB200.2 million (US$27.4 million) in 2024. Such decrease was mainly attributable to the increased litigation fees and the increased impairment of streamers' assets. The decrease from income to loss in other operating income (expenses), net mainly attributable to the increased impairment of streamers' assets and, a voluntary return of RMB111,720,000 in connection with investigations by relevant government authorities against certain third-party streamers for their historical illegal activities, and the increased impairment of streamers' assets. We voluntarily returned gains associated with certain third-party streamers' historical illegal activities to the relevant government authorities, as we are not entitled to retain such gains under PRC laws. There remain uncertainties regarding potential future developments or regulatory investigations related to these historical activities. As of December 31, 2024, no additional liabilities have been accrued in this regard.
​

Interest income.Interest income consists of interests earned on bank deposits. We recorded RMB285.0 million in 2023 and RMB 263.1 million (US$ 36.0 million) in 2024, respectively. The decrease in interest income was mainly due to the decrease in our cash balance as a result of special cash dividend distribution.

(Loss) income before income tax expenses and share of income (loss) in equity method investments.As a result of the foregoing, we realized a loss before income tax expenses of RMB287.4 million (US$39.4 million) in 2024, compared with a income before income tax expenses of RMB68.2 million in 2023.

Income tax expense.We recorded income tax expenses of RMB1.1 million and RMB15.4 million (US$2.1 million) in 2023 and 2024, respectively. Such increase was primarily due to the increase in net income generated from some of our domestic companies in PRC.

Net (loss) income.We realized a net loss of RMB306.8 million (US$42.0 million) in 2024, compared with a net income of RMB35.5 million (US$5.0 million) in 2023.

Adjusted net income (loss) (non-GAAP).We realized an adjusted net loss of RMB249.2 million (US$34.2 million) in 2024, compared with an adjusted net income of RMB154.0 million (US$21.8 million) in 2023.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

For the detailed description of the comparison of our operating results for the year ended December 31, 2023 to the year ended December 31, 2022, please refer to "Item 5. Operating and Financial Review and Prospects-5.A. Operating Results-Year Ended December 31, 2023 Compared to Year Ended December 31, 2022" of our annual report on Form 20-F filed with the Securities and Exchange Commission on April 29, 2024.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands.

Japan

Our subsidiaries in Japan are subject to an income tax rate calculated according to relevant regulations of Japan's Ministry of Finance. We may be required to withhold a 5% withholding tax from dividends we pay to our shareholders that are non-resident enterprises.

Hong Kong

Our subsidiaries in Hong Kong are subject to Hong Kong profits tax on their activities conducted in Hong Kong at a uniform tax rate of 16.5%. Payments of dividends by our subsidiaries to us are not subject to withholding tax in Hong Kong.

PRC

Generally, our subsidiary and consolidated variable interest entities in China are subject to enterprise income tax on their taxable income in China at a rate of 25%, except where a special preferential rate applies such as a rate of 15% applicable to enterprises qualified as a "High and New Technology Enterprise," subject to various criteria. The enterprise income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards.

In addition, a Software Enterprise is entitled to an income tax exemption for two years beginning with its first year of profitable operation after offsetting tax losses incurred from prior years and a 50% reduction to a rate of 12.5% for the subsequent three years. Enterprises wishing to enjoy the status of a Software Enterprise must perform a self-assessment each year to ensure they meet the criteria for qualification and file required supporting documents with the tax authorities before using the preferential enterprise income tax rates. These enterprises will be subject to the tax authorities' review each year as to whether they are entitled to use the relevant preferential treatments. If at any time during the preferential tax treatment years an enterprise uses the preferential rate but the relevant authorities determine that it fails to meet applicable criteria for qualification, the relevant authorities may revoke the enterprise's Software Enterprise status. Douyu Yule, Wuhan Ouyue and Wuhan Douyu obtained the Software Enterprise status in 2019, but they have not enjoyed the preferential tax treatment with such status in 2024.

In April 2009, the State Administration of Taxation issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC resident enterprises or PRC resident enterprise groups, not those controlled by PRC resident individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation's general position on how the "de facto management body" test should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC resident enterprise or a PRC resident enterprise group will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. Further to the SAT Circular 82, the SAT issued the SAT Bulletin 45, which became effective since September 2011, to provide more guidance on the implementation of the SAT Circular 82. The SAT Bulletin 45 provides for detailed procedures and administration with respect to determination of residence status and administration of post-determination matters. DouYu International Holdings Limited is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body." There can be no assurance that the PRC government will ultimately take a view that is consistent with us.

If the PRC tax authorities determine that DouYu International Holdings Limited is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-PRC resident enterprise shareholders (including the ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC resident individual shareholders (including the ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC resident individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. It is also unclear whether non-PRC resident shareholders of DouYu International Holdings Limited would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that DouYu International Holdings Limited is treated as a PRC resident enterprise.

If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a "resident enterprise" under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-Under the PRC enterprise income tax law, we may be classified as a PRC 'resident enterprise,' which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment."

We are subject to value-added tax, or VAT, at a rate of 6% on the services we provide less any deductible VAT we have already paid or borne. We are also subject to surcharges on VAT payments in accordance with PRC law.

British Virgin Islands

Under the current laws of the British Virgin Islands, our company is not subject to tax on income or capital gains. In addition, upon payments of dividends by our British Virgin Islands subsidiary to its shareholders who are not resident in the British Virgin Islands, no British Virgin Islands withholding tax will be imposed.

Non-GAAP Financial Measure

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to understand and evaluate our core operating performance: adjusted operating income (loss), which is calculated as operating income (loss) adjusted for share-based compensation expenses and impairment of goodwill and intangible assets; adjusted net income (loss), which is calculated as net loss adjusted for shared-based compensation expenses, share of loss (income) in equity method investments, gain on disposal of investment, impairment loss and fair value adjustments on investments and impairment of goodwill and intangible assets; adjusted net income (loss) attributable to DouYu, which is calculated as net income (loss) attributable to DouYu adjusted for share-based compensation expenses, share of loss (income) in equity method investments, gain on disposal of investment, impairment loss and fair value adjustments on investments and impairment of goodwill and intangible assets; and adjusted basic and diluted net income per ordinary shares, which is the non-GAAP net income (loss) attributable to ordinary shareholders divided by the weighted average number of ordinary shares used in the calculation of non-GAAP basic and diluted net income per ordinary share. The non-GAAP financial measures are presented to enhance investors' overall understanding of our 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 the most directly comparable GAAP financial measures. As non-GAAP financial measures have material limitations as an analytical metric 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 prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety and not rely on any single financial measure.

The table below sets forth a reconciliation from the GAAP measures to the non-GAAP measures for the years indicated:

​	​	​	​	​	​	​	​	​
​		For the Year Ended December 31,
​	​	2022	​	2023	​	2024
​	​	RMB		RMB		RMB		US$
​		(in millions)
Loss from operations		(198.9)	​	(164.0)	​	(573.6)	​	(78.6)
Add:		​	​	​	​	​	​	​
Share-based compensation expenses		66.7	​	-	​	-	​	-
Impairment of goodwill and intangible assets(1)		-	​	34.0	​	75.5	​	10.3
Adjusted operating (loss) income		(132.2)	​	(130.0)	​	(498.1)	​	(68.3)
Net (loss) income		(90.4)	​	35.5	​	(306.8)	​	(42.0)
Add:		​	​	​	​	​	​	​
Share-based compensation expenses		66.7	​	-	​	-	​	-
Share of loss (income) in equity method investments		(62.4)	​	31.6	​	4.0	​	0.5
Gain on disposal of investment(2)		-	​	(5.1)	​	-	​	-
Impairment losses and fair value adjuestments on investments(2)		78.5	​	58.0	​	(21.9)	​	(3.0)
Impairment of goodwill and intangible assets		-	​	34.0	​	75.5	​	10.3
Adjusted net (loss) income		(7.6)	​	154.0	​	(249.2)	​	(34.2)
Net (loss) income attributable to DouYu		(75.4)	​	35.5	​	(306.8)	​	(42.0)
Add:		​	​	​	​	​	​	​
Share-based compensation expenses		66.7	​	-	​	-	​	-
Share of (income) loss in equity method investments		(62.4)	​	31.6	​	4.0	​	0.5
Gain on disposal of investment		-	​	(5.1)	​	-	​	-
Impairment losses and fair value adjustments on investments		78.5	​	58.0	​	(21.9)	​	(3.0)
Impairment losses of goodwill and intangible assets		-	​	34.0	​	75.5	​	10.3
Ajusted net (loss) income attributable to DouYu		7.4	​	154.0	​	(249.2)	​	(34.2)
Ajusted net (loss) income per ordinary share		​	​	​	​	​	​	​
Basic		0.23	​	4.82	​	(8.08)	​	(1.11)
Diluted		0.23	​	4.82	​	(8.08)	​	(1.11)
Ajusted net (loss) income per ADS		​	​	​	​	​	​	​
Basic		0.23	​	4.82	​	(8.08)	​	(1.11)
Diluted		0.23	​	4.82	​	(8.08)	​	(1.11)
Weighted average number of ordinary shares used in calculating adjusted net (loss) income per ordinary share		​	​	​	​	​	​	​
Basic		31,971,245	​	31,977,665	​	30,832,271	​	30,832,271
Diluted		31,971,245	​	31,977,665	​	30,832,271	​	30,832,271
Weighted average number of ADS used in calculating adjusted net (loss) income per ADS	​	​	​	​	​	​	​	​
Basic	​	31,971,245	​	31,977,665	​	30,832,271	​	30,832,271
Diluted	​	31,971,245	​	31,977,665	​	30,832,271	​	30,832,271

(1)	Impairment of goodwill and intangible assets was included in line item"impairment of goodwill" for goodwill and "other operating income (expenses), net" for streamer's assets consolidated statements of comprehensive income (loss) in 2023 and 2024, respectively.

(2)	Gain on disposal of investment and impairment losses and fair value adjustments on investments were included in line item"Other (expenses) income, net" of consolidated statements of comprehensive income (loss).

​

5.B. Liquidity and Capital Resources

Liquidity and Capital Resources

Cash flows and working capital

Our principal sources of liquidity have been cash generated from our operations and contributions from our shareholders. As of December 31, 2024, we had RMB1,017.1 million (US$139.3 million) in cash and cash equivalents. Our cash and cash equivalents consist primarily of cash on hand and time deposits placed with banks with maturities of three months or less and money market funds stated at cost plus accrued interest.

We intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities and funds raised from financing activities, including the net proceeds we received from our initial public offering in July 2019. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. We believe that our current cash and cash equivalents, together with our cash generated from operating activities and financing activities will be sufficient to meet our present anticipated working capital requirements and capital expenditures. If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business and prospects may suffer.

As a holding company with no material operations of our own, we conduct our operations primarily through our PRC subsidiaries, variable interest entities and their subsidiaries. We are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries in China through capital contributions or loans, subject to the approval of government authorities and limits on the amount of capital contributions and loans. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit us from using the proceeds of our initial public offering to make additional capital contributions or loans to our PRC subsidiary" and "Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds-14.E. Use of Proceeds." The ability of our subsidiaries in China to make dividends or other cash payments to us is subject to various restrictions under PRC laws and regulations. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-Our PRC subsidiary and PRC variable interest entities are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements" and "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-Under the PRC enterprise income tax law, we may be classified as a PRC 'resident enterprise,' which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment."

The following table presents the summary of our consolidated cash flow data for the years ended December 31, 2022, 2023 and 2024.

​	​	​	​	​	​	​	​	​
​		For the Year Ended December 31,
​	​	2022	​	2023	​	2024
​		RMB		RMB		RMB		US$
​	(in millions)
Net cash used in operating activities		(67.8)	​	(47.7)	​	(238.9)	​	(32.7)
Net cash (used in) provided by investing activities		(608.6)	​	414.2	​	(1,074.5)	​	(147.2)
Net cash used in financing activities		(109.0)	​	-	​	(2,207.0)	​	(302.4)
Effect of foreign exchange rate changes on cash and cash equivalents		366.0	​	94.8	​	48.8	​	6.7
Net (decrease) increase in cash and cash equivalents		(419.4)	​	461.3	​	(3,471.6)	​	(475.6)
Cash, cash equivalents and restricted cash at the beginning of the year		4,467.1	​	4,047.7	​	4,509.0	​	617.7
Cash, cash equivalents and restricted cash at the end of the year		4,047.7	​	4,509.0	​	1,037.4	​	142.1

​

Operating activities

Net cash used in operating activities was RMB238.9 million (US$32.7 million) in 2024. The difference between our net cash used in operating activities and our net income of RMB306.8 million (US$42.0 million) was due to decrease in account payables of RMB44.7 million (US$6.1 million), decrease in amounts due to related parties of RMB28.8 million (US$3.9 million), decrease in accrued expenses and other current liabilities of RMB5.0 million (US$0.7 million) and increase in other non-current assets of RMB15.5 million (US$2.1 million), partially offset by recognition of impairment losses of investments of RMB19.7 million (US$2.7 million) and amortization of intangible assets of RMB56.3 million (US$7.7 million).

Net cash used in operating activities was RMB47.7 million (US$6.7 million) in 2023. The difference between our net cash used in operating activities and our net income of RMB35.5 million (US$5.0 million) was due to decrease in account payables of RMB132.4 million (US$18.7 million), decrease in amounts due to related parties of RMB61.2 million (US$8.6 million), decrease in accrued expenses and other current liabilities of RMB56.2 million (US$7.9 million) and increase in other non-current assets of RMB52.1 million (US$7.3 million), partially offset by recognition of impairment losses of investments of RMB58.0 million (US$8.2 million) and amortization of intangible assets of RMB90.8 million (US$12.8 million).

Net cash used in operating activities was RMB67.8 million in 2022. The difference between our net cash from operating activities and our net loss of RMB90.4 million was due to decrease in accounts receivables of RMB87.2 million, increase in impairment losses of investments of RMB78.5 million, amortization of intangible assets of RMB75.7 million, recognition of share-based compensation of RMB66.7 million, decrease in other current assets of RMB39.4 million, increase in deferred revenue of RMB41.5 million and increase in non-cash operating lease expenses of RMB40.6 million, partially offset by decrease in accounts payable of RMB157.1 million, accrued expenses and other current liabilities of RMB155.5 million, and share of income in equity method investments of RMB62.4 million.

Investing activities

Net cash used in investing activities was RMB1,074.5 million (US$147.2 million) in 2024 primarily due to purchases of short-term bank deposits of RMB2,990.4 million (US$409.7 million), partially offset by proceeds from disposal of short-term bank deposits of RMB1,757.7 million (US$240.8 million).

Net cash provided by investing activities was RMB414.2 million (US$58.3 million) in 2023 primarily due to proceeds from disposal of short-term bank deposits of RMB2,868.6 million (US$404.0 million), partially offset by purchases of short-term bank deposits of RMB1,778.6 million (US$250.5 million).

Net cash used in investing activities was RMB608.6 million in 2022 primarily due to purchases of short-term bank deposits of RMB2,415.3 million and purchases of long-term bank deposits of RMB220.0 million, partially offset by proceeds from disposal of short-term bank deposits of RMB2,104.3 million.

Financing activities

Net cash used in financing activities was RMB2,207.0 million (US$302.4million) in 2024, consisting of repurchase of ordinary shares of RMB105.5 million (US$14.5 million) and payments for dividends of RMB2,101.5 million (US$287.9 million).

Net cash used in financing activities was RMB965.0 (US$135.9) in 2023, consisting of NCI derecognized due to cancellation of one subsidiary of RMB965.0 (US$135.9).

Net cash used in financing activities was RMB109.0 million in 2022, consisting of repurchase of ordinary shares of RMB109.0 million.

Material Cash Requirements

Our material cash requirements as of December 31, 2024 and any subsequent interim period primarily include our capital expenditures and operating lease obligations.

We made capital expenditures of RMB24.2 million, RMB16.3 million and RMB13.1 million (US$1.8 million) in 2022, 2023 and 2024, respectively. In these years, our capital expenditures were mainly used for purchases of intangible assets such as agency contract rights and computer software, and plant and equipment such as servers and computers. We will continue to make capital expenditures to meet the expected growth of our business.

As of December 31, 2024, we also had operating lease liabilities amounting to RMB15.7 million (US$2.1 million), which were unsecured and unguaranteed.

We intend to fund our existing and future material cash requirements with our existing cash balance and other financing alternatives. We will continue to make cash commitments, including capital expenditures to support the short-term and/or long-term growth of our business.

Except as otherwise disclosed in this annual report, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We do not have retained or contingent interests in assets transferred. We have not entered into contractual arrangements that support the credit, liquidity or market risk for transferred assets. We do not have obligations that arise or could arise from variable interests held in an unconsolidated entity, or obligations related to derivative instruments that are both indexed to and classified in our own equity, or not reflected in the statement of financial position.

Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2024.

Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

Holding Company Structure

DouYu International Holdings Limited is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries, variable interest entities and their subsidiaries in China. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries, variable interest entities and their subsidiaries. If our subsidiaries and variable interest entities or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

In addition, our subsidiaries, variable interest entities and their subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise as promulgated by the Ministry of Finance of the PRC, or PRC GAAP. Pursuant to the law applicable to China's foreign investment enterprise, our subsidiaries, variable interest entities and their subsidiaries that are foreign investment enterprise in the PRC have to make appropriation from their after-tax profit, as determined under PRC GAAP, to reserve funds including (i) general reserve fund, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered capital of our subsidiaries, variable interest entities and their subsidiaries. Appropriation to the other two reserve funds are at our subsidiary's discretion.

As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fundraising activities to our PRC subsidiaries only through loans or capital contributions, and to our consolidated affiliated entity only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements. See "Item 3. Key Information-3.D. Risk Factors-Risks Related to Doing Business in China-PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit us from using the proceeds of our initial public offering to make additional capital contributions or loans to our PRC subsidiary." As a result, there is uncertainty with respect to our ability to provide prompt financial support to our PRC subsidiaries when needed. Notwithstanding the foregoing, our PRC subsidiaries may use their own retained earnings (rather than Renminbi converted from foreign currency denominated capital) to provide financial support to our consolidated affiliated entity either through entrustment loans from our PRC subsidiaries or direct loans to such consolidated affiliated entity's nominee shareholders, which would be contributed to the consolidated variable entity as capital injections. Such direct loans to the nominee shareholders would be eliminated in our consolidated financial statements against the consolidated affiliated entity's share capital.

5.C. Research and Development, Patents and Licenses, Etc.

Our advanced technology infrastructure and capabilities allow us to efficiently and effectively provide our services with superior user experience. Our platform incorporates the following features: (i) video and audio quality, (ii) content recommendation, (iii) image recognition, (iv) streamer discovery and evaluation and (v) advanced streaming capabilities. We continue to strengthen our technologies and big data analytic capabilities to enhance user experience and achieve operational efficiencies. See "Item 4. Information on the Company-4.B. Business Overview-Our Technology."

​

5.D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2024 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.

5.E. Critical Accounting Estimates

We prepare our financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.

​

Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions. As conditions resulting from the weakness of macroeconomic continue to evolve, we expect these judgments and estimates may be subject to change, which could materially impact future periods.

The following descriptions of critical accounting estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report. When reviewing our financial statements, you should consider (i) our selection of critical accounting estimates, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Impairment on Investments

We hold equity method investments and investments in equity securities without readily determinable fair values. We elected to measure these equity securities without readily determinable fair values at cost minus impairment, if any, adjusted up or down for observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any adjustment to the carrying amount is recorded in other income (expenses), net. We make qualitative assessment at each reporting period and if the assessment indicates that the fair value of the investment is less than the carrying value, the investment in equity securities will be written down to its fair value, with the difference between the fair value of the investment and its carrying amount recorded as investment loss.

The impairment assessments of equity method investments and equity securities without readily determinable fair values require significant judgments made to identify impairment indicators and to estimate the fair value of these investments in order to determine the amount of impairment. We make significant judgments made to identify impairment indicators and to estimate the fair value of these investments in order to determine the amount of impairment. These judgements include valuation methods by using market approach and key valuation assumptions and estimate used in estimating impairment amounts, which comprised the investees' cash flow forecasts, operating performance of the investees and market conditions.

Changes in these estimates and assumptions could materially affect the fair value of equity method investments and investments in equity securities without readily determinable fair values. The failure to identify impairment indicators could result to material impairment losses in the future. We believe the estimates applied in the estimated fair value of the investments is based on reasonable assumptions, but which are inherently uncertain. As a result, actual results may differ from the assumptions and judgments used to determine fair value of the investments, which could lead to the fair value of the assets is less than its carrying amount.

As a result, the impairment losses of equity securities without readily determinable fair value recognized in other income (loss), RMB78.5 million, RMB58.0 million and RMB19.7 million (US$2.7 million) for the years ended December 31, 2022, 2023 and 2024, respectively. The impairment loss of equity method investments recognized in share of loss(income) in equity method investments, nil, RMB29.1 million and RMB7.1 million (US$1.0 million) for the years ended December 31, 2022, 2023 and 2024, respectively.

Realization of Deferred Tax Assets

Deferred income taxes are provided using assets and liabilities method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized to the extent that these assets are more likely than not to be realized. In making such a determination, the management consider all positive and negative evidence, including future reversals of projected future taxable income and results of recent operation. Deferred tax assets are then reduced by a valuation allowance through a charge to income tax expense when, in the opinion of management, it is more likely than not that a portion of or all of the deferred tax assets will not be realized.

We consider positive and negative evidence to determine whether some portion or all of the deferred tax assets will be more likely than not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of future profitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimates the Group is using to manage the underlying businesses. Valuation allowances are established for deferred tax assets based on a more likely than not threshold. The Group's ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. The Group has provided a full valuation allowance for the deferred tax assets as of December 31, 2023 and 2024, as management is not able to conclude that the future realization of those net operating loss carry forwards and other deferred tax assets are more likely than not.

Our projections of future income and qualified tax-planning strategies are subject to change due to the macroeconomic conditions and our business development. The DTAs can be utilized in the future years to the extent of the taxable profits we make in the future, and the related valuation allowance will be reversed, which can have a material impact on our income taxes and ETR in our financial statements. We recognized valuation allowance of RMB1,064.0 million, RMB1,111.6 million and RMB811.7 million (US$111.2 million) as of December 31, 2022, 2023 and 2024, respectively.