User Engagement and Growth - The company plans to enhance user engagement and expand its user base by attracting and nurturing hosts, which is critical for driving net revenue growth [645]. - The company aims to strengthen monetization efforts by providing innovative products and developing a diversified content creator base [736]. Financial Performance - Net revenues for the year ended December 31, 2023, were RMB 2,071,772 thousand, a decline from RMB 2,185,266 thousand in 2022, representing a decrease of approximately 5.2% [658]. - The average total mobile MAUs decreased from 51,495 thousand in March 2022 to 36,022 thousand by December 2023, reflecting a decline of approximately 30% [647]. - The average total monthly paying users dropped from 482.2 thousand in March 2022 to 365.3 thousand by December 2023, indicating a decrease of about 24% [654]. - The company reported a net loss attributable to ordinary shareholders of RMB 126,651 thousand for the year ended December 31, 2023, compared to a net income of RMB 86,517 thousand in 2022 [658]. - Operating income for the year ended December 31, 2023, was a loss of RMB 147,668 thousand, compared to an operating income of RMB 66,651 thousand in 2022 [658]. - Net revenue for fiscal year 2023 was RMB2,071.8 million (US$291.8 million), a decrease of 5.2% from RMB2,185.3 million in 2022, primarily due to a decline in average paying users on audio entertainment products [674]. - Gross profit for fiscal year 2023 was RMB585.4 million (US$82.4 million), down from RMB716.3 million in the prior year [676]. - Operating loss for fiscal year 2023 was RMB147.7 million (US$20.8 million), compared to an operating income of RMB66.7 million in 2022 [680]. - Net loss for fiscal year 2023 was RMB134.5 million (US$18.9 million), compared to net income of RMB86.5 million in the prior year [680]. Revenue Sources - Audio entertainment accounted for 99.6% of total net revenues in 2023, with RMB 2,063,346 thousand generated from this segment [660]. - The company generates most of its net revenues through virtual gift sales, with a strategy to attract more paying users by enhancing content quality and host interactions [650]. Expenses and Costs - Cost of revenues increased by 1% to RMB1,486.4 million (US$209.4 million) in 2023, driven by higher revenue sharing fees and increased salary and welfare benefits [675]. - Total operating expenses rose by 13% to RMB733.0 million (US$103.2 million) in 2023, compared to RMB649.7 million in 2022 [676]. - Research and development expenses increased from RMB 283,349 thousand in 2022 to RMB 301,490 thousand in 2023, reflecting a rise of approximately 6.5% [658]. - Selling and marketing expenses decreased to RMB237.6 million (US$33.5 million) in 2023, down from RMB259.6 million in 2022, mainly due to reduced branding and marketing expenses [678]. - General and administrative expenses surged to RMB193.9 million (US$27.3 million) in 2023, compared to RMB106.7 million in the prior year, driven by increased provisions for credit losses and professional services expenses [679]. Cash Flow and Capital Management - Net cash used in operating activities was RMB117.0 million in 2023, with a net loss of RMB134.5 million attributed to various factors including depreciation and share-based compensation [743]. - Net cash generated from investing activities was RMB105.7 million in 2023, primarily from maturities of short-term investments of RMB111.0 million [747]. - Net cash used in financing activities was RMB71.7 million in 2023, mainly due to third-party loans net repayment by the subsidiary and VIEs [749]. - Capital expenditures were RMB7.2 million (US$1.0 million) in 2023, with expectations for increased spending on long-term assets in the coming year [752]. - The company plans to finance future working capital requirements through cash generated from operations and funds raised from financing activities, including proceeds from the initial public offering [737]. Tax and Regulatory Matters - The company is subject to a value-added tax (VAT) at a rate of 6% on the services provided, which impacts overall revenue recognition [697]. - The company operates primarily through its PRC subsidiaries and VIEs, which are subject to various restrictions under PRC laws regarding dividend payments [759]. - The company has full valuation allowances on deferred tax assets as of December 31, 2022, and 2023, due to insufficient positive evidence for recoverability [773]. Shareholder and Governance Information - The company has a share incentive plan that allows for the issuance of up to 170,000,000 Class A ordinary shares under the Second Amended and Restated 2019 Share Incentive Plan [719]. - The board of directors consists of 5 members, with 1 female and 4 male directors, reflecting a commitment to diversity [815]. - The audit committee is responsible for overseeing the accounting and financial reporting processes and the audits of the financial statements of the company [809]. - The company has established an audit committee, a compensation committee, and a nominating and corporate governance committee [808]. - The company relies on "home country practice" for corporate governance matters, not having a majority of independent directors on its board [805]. Employee and Compensation Matters - The company has not set aside or accrued any amount for pension, retirement, or similar benefits for executive officers and directors [785]. - The compensation committee is responsible for reviewing and approving executive compensation and evaluating management succession plans [810]. - The company participates in various employee social security plans under PRC law, including pension and medical insurance [819]. - As of December 31, 2023, the company had a total of 563 employees, with 68.6% (386 employees) in research and development [817]. - The company reported that 50 of its full-time employees were located outside of China as of December 31, 2023 [817].
LIZHI(LIZI) - 2023 Q4 - Annual Report