DouYu International Holdings Limited Reports Third Quarter 2022 Unaudited Financial Results

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 third quarter ended September 30, 2022 .

Third Quarter 2022 Financial and Operational Highlights

Total net revenues in the third quarter of 2022 were RMB1,798.3 million ( US$252.8 million ) compared with RMB2,348.0 million in the same period of 2021.
Gross profit in the third quarter of 2022 was RMB251.2 million ( US$35.3 million ), compared with RMB278.5 million in the same period of 2021.
Net loss in the third quarter of 2022 was RMB6.6 million ( US$0.9 million ), compared with RMB143 .5 million in the same period of 2021.
Adjusted net income (loss) ^[1] in the third quarter of 2022 was RMB25.7 million ( US$3.6 million ), compared with an adjusted net loss of RMB72.7 million in the same period of 2021.
Average mobile MAUs ^[2] in the third quarter of 2022 decreased by 7.7% to 57.1 million from 61.9 million in the same period of 2021.
Quarterly average paying user ^[3] count in the third quarter of 2022 was 5.6 million, compared with 7.2 million in the same period of 2021.

Mr. Shaojie Chen , Chief Executive Officer of DouYu, commented, "During the third quarter, we achieved stable and holistic business development as we navigated through a challenging macro environment. We stabilized our user base through continuous innovation and investment in our content and service offerings, while further improving revenue quality and augmenting our cost control initiatives. This quarter, our mobile MAUs grew by 2.5% to 57.1 million compared to last quarter. We also delivered a steady financial performance, realizing an adjusted net profit of RMB25.7 million . Going forward, we will further advance our game-centric ecosystem and deepen our collaboration with game developers, leveraging games' unique features and our abundant streamer resources to cultivate and iterate game content and interactive features. Driven by the vibrancy of our gaming communities, we endeavor to execute our growth strategy to develop and enrich our comprehensive game-centric content platform. We will maintain our leading position in the traditional livestreaming industry while exploring new initiatives to drive sustainable and healthy growth."

Mr. Hao Cao, Vice President of DouYu, commented, "Our total revenue in the third quarter reached RMB1.8 billion , and our gross profit was RMB251.2 million , representing a gross margin of 14%. We also achieved an adjusted net income of RMB25.7 million . During this quarter, we continued to invest in high-quality self-produced content, and maintained a steady performance of our livestreaming business, while exploring new game-related business models. At the same time, we delivered an adjusted net profit for the second consecutive quarter, a result of our ongoing efforts to implement cost controls and optimize expenses. As of the end of the third quarter, we had cash and cash equivalents, restricted cash, and short-term and long-term bank deposits of RMB6,872.7 million . Our abundant cash reserves would allow us to retain agility despite of the challenging macro environment, meaning that we can continue to stabilize and improve the financial performance of our core business. Looking ahead, we will proactively explore diversified avenues for monetization and refine our operating model in order to generate long-term shareholder value."

Third Quarter 2022 Financial Results

Total net revenues in the third quarter of 2022 decreased by 23.4% to RMB1,798.3 million ( US$252 .8 million), compared with RMB2,348.0 million in the same period of 2021.

Livestreaming revenues in the third quarter of 2022 decreased by 22.9% to RMB1,705 .0 million ( US$239 .7 million) from RMB2,210.5 million in the same period of 2021. The decrease was primarily due to the ongoing implementation of prudent operating strategies which primarily included the Company's adjustments to certain interactive features and related operations to promote the long-term development of its platform.

Advertising and other revenues in the third quarter of 2022 were RMB93 .3 million ( US$13.1 million ), compared with RMB137.5 million in the same period of 2021. The decrease was primarily due to the continued exploration of new commercialization models by using a portion of advertising traffic that could have been directly monetized, as well as the soft demand for advertisements under the weak macro economy. The decrease was partially offset by the increase in other revenues contributed by game-specific membership services.

Cost of revenues in the third quarter of 2022 was RMB1,547.1 million ( US$217 .5 million), a decrease of 25.2% compared with RMB2,069.5 million in the same period of 2021.

Revenue sharing fees and content costs in the third quarter of 2022 decreased to RMB1,319 .6 million ( US$185 .5 million) from RMB1,839.9 million in the same period of 2021. The decrease was primarily due to decreased revenue sharing fees which outpaced the decrease in livestreaming revenues, as well as a significant decrease in copyright costs.

Bandwidth costs in the third quarter of 2022 decreased by 17.4% to RMB135.0 million ( US$19.0 million ) from RMB163.4 million in the same period of 2021. The decrease was mainly due to higher bandwidth efficiency achieved from dynamic bandwidth allocation, as well as a year-over-year reduction in peak bandwidth usage.

Gross profit in the third quarter of 2022 was RMB251.2 million ( US$35 .3 million), compared with RMB278.5 million in the same period of 2021. Gross margin in the third quarter of 2022 improved to 14.0% from 11.9% in the same period of 2021. The increase in gross margin was primarily due to the decreases in both copyright costs and revenue sharing fees as a percentage of total net revenues, which was partially offset by the increase in other costs as a percentage of total net revenues.

Sales and marketing expenses in the third quarter of 2022 decreased 25.9% to RMB162.1 million ( US$22.8 million ) from RMB218.9 million in the same period of 2021. The decrease was mainly attributable to the significant decrease in marketing expenses for user acquisition and branding expenses.

Research and development expenses in the third quarter of 2022 decreased 31.5% to RMB84.4 million ( US$11.9 million ) from RMB123.2 million in the same period of 2021. The decrease was primarily attributable to the decrease in personnel-related expenses.

General and administrative expenses in the third quarter of 2022 decreased 39.5% to RMB52.3 million ( US$7.4 million ) from RMB86.5 million in the same period of 2021, mainly due to the decrease in share-based compensation expenses and professional service fees.

Other operating income, net in the third quarter of 2022 was RMB36.5 million ( US$5.1 million ), compared with RMB25.8 million in the same period of 2021.

Loss from operations in the third quarter of 2022 was RMB11.1 million ( US$1.6 million ), compared with RMB124.3 million in the same period of 2021.

Adjusted operating loss in the third quarter of 2022, which adds back share-based compensation expenses, was RMB8.4 million ( US$1.2 million ), compared with adjusted operating loss of RMB91 .0 million in the same period of 2021.

Net loss in the third quarter of 2022 was RMB6.6 million ( US$0.9 million ), compared with RMB143 .5 million in the same period of 2021.

Adjusted net income(loss) in the third quarter of 2022, which excludes share-based compensation expenses, share of loss in equity method investments, and impairment loss of investments, was RMB25.7 million ( US$3.6 million ), compared with adjusted net loss of RMB72.7 million in the same period of 2021.

Basic and diluted net loss per ADS ^[4] in the third quarter of 2022 were RMB0.01 (US$0.001) and RMB0.01 (US$0.001) , respectively. Adjusted basic and diluted net income per ADS in the third quarter of 2022 were RMB0.09 (US$0.01) and RMB0.09 (US$0.01) , respectively.

Cash and cash equivalents, restricted cash and bank deposits

As of September 30, 2022 , the Company had cash and cash equivalents, restricted cash, short-term and long-term bank deposits of RMB 6,8 72.7 million ( US$966.2 million ), compared with RMB6,643.5 million as of December 31, 2021 .

Conference Call Information

The Company will hold a conference call on November 21, 2022 , at 7:00 am Eastern Time (or 8:00pm 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:	2596363

The replay will be accessible through November 28, 2022, by dialing the following numbers:

International:	1-412-317-0088
United States Toll Free:	1-877-344-7529
Conference ID:	7404748

A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://ir.douyu.com/ .

^[1] "Adjusted net income (loss)" is calculated as net loss before share-based compensation expenses, and share of loss in equity method investments, and impairment loss on investments. For more information, please refer to "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and Non-GAAP Results" at the end of this press release.

^[2] Refers to the number of mobile devices that launched our mobile apps in a given period. Average mobile MAUs for a given period is calculated by dividing (i) the sum of active mobile users for each month of such period, by (ii) the number of months in such period.

^[3] "Quarterly average paying users" refers to the average paying users for each quarter during a given period of time calculated by dividing (i) the sum of paying users for each quarter of such period, by (ii) the number of quarters in such period. "Paying user" refers to a registered user that has purchased virtual gifts on our platform at least once during the relevant period.

^[4] 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 to bring users access to immersive and interactive games and entertainment livestreaming, a wide array of video and graphic contents, as well as opportunities to participate in community events and discussions. By nurturing a sustainable technology-based talent development system and relentlessly producing high-quality content, DouYu consistently delivers premium content through integration of livestreaming, video, graphics, and virtual communities with a primary focus on games, especially on eSports. This enables DouYu to continuously expand its user base and enhance its user experience. For more information, please see https://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 (loss) is calculated as net income (loss) adjusted for share-based compensation expenses, share of income (loss) in equity method investments and impairment loss on investments. Adjusted net income (loss) attributable to DouYu is calculated as net income (loss) 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 impact of (i) share-based compensation expenses, (ii) share of income (loss) in equity method investments, (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 RMB7.1135 to US$1.00 , the noon buying rate in effect on September 30, 2022 , 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 September 30, 2022 , 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, including but not limited to the following: the Company's results of operations and financial condition; the Company's business strategies; general market conditions, in particular the game live streaming market; the ability of the Company to retain and grow active and paying users; changes in general economic and business conditions in China ; the impact of the COVID-19 to the Company's business operations and the economy in China and globally; any adverse changes in laws, regulations, rules, policies or guidelines applicable to the Company; and assumptions underlying or related to any of the foregoing. 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. 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

Lingling Kong
DouYu International Holdings Limited
Email: ir@douyu.tv
Phone: +1 (646) 224-6934

Robin Yang
ICR, LLC
Email: DouYu.IR@icrinc.com
Phone: +1 (646) 224-6934

Media Relations Contact

Lingling Kong
DouYu International Holdings Limited
Email: pr_douyu@douyu.tv
Phone: +1 (646) 308-1475

Edmond Lococo
ICR, LLC
Email: DouYu.PR@icrinc.com
Phone: +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 September 30
	2021	2022	2022
ASSETS	RMB	RMB	US$ ⁽¹⁾
Current assets:
Cash and cash equivalents	4,456,406	4,356,693	612,454
Restricted cash	10,703	6,057	851
Short-term bank deposits	2,076,355	2,509,960	352,845
Accounts receivable, net	191,389	129,058	18,143
Prepayments	80,717	47,657	6,700
Amounts due from related parties	37,159	37,987	5,340
Other current assets	376,367	345,486	48,568
Total current assets	7,229,096	7,432,898	1,044,901

Property and equipment, net	25,111	15,638	2,198
Intangible assets, net	161,540	124,470	17,498
Long-term bank deposits	100,000	-	-
Investments	491,425	485,317	68,225
Goodwill	12,637	14,072	1,978
Right-of-use assets, net	72,309	49,512	6,960
Other non-current assets	64,785	68,862	9,680
Total non-current assets	927,807	757,871	106,539
TOTAL ASSETS	8,156,903	8,190,769	1,151,440
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable	824,128	675,158	94,912
Advances from customers	7,476	8,181	1,150
Deferred revenue	235,134	294,312	41,374
Accrued expenses and other current liabilities	458,328	270,992	38,095
Amounts due to related parties	293,508	265,548	37,330
Lease liabilities due within one year	30,417	26,270	3,693
Total current liabilities	1,848,991	1,540,461	216,554

Lease liabilities	31,278	19,707	2,770
Deferred revenue	18,045	10,047	1,412
Total non-current liabilities	49,323	29,754	4,182
TOTAL LIABILITIES	1,898,314	1,570,215	220,736

⁽¹⁾ Translations of of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1135 to US$1.00, the noon buying rate in effect on September 30, 2022, in the H.10 statistical release of the Federal Reserve Board.

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 September 30
	2021	2022	2022
	RMB	RMB	US$ ⁽¹⁾
SHAREHOLDERS' EQUITY
Ordinary shares	23	23	3
Treasury shares	(802,250)	(911,217)	(128,097)
Additional paid-in capital	10,618,538	10,670,287	1,500,005
Accumulated deficit	(3,445,102)	(3,565,846)	(501,279)
Accumulated other comprehensive (loss) income	(112,621)	423,827	59,583
Total DouYu Shareholders' Equity	6,258,588	6,617,074	930,215
Noncontrolling interests	1	3,480	489
Total Shareholders' Equity	6,258,589	6,620,554	930,704
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	8,156,903	8,190,769	1,151,440

⁽¹⁾ Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1135 to US$1.00, the noon buying rate in effect on September 30, 2022, in the H.10 statistical 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					Nine Months Ended
	Sep 30, 2021	June 30, 2022	Sep 30, 2022	Sep 30, 2022	Sep 30, 2021		Sep 30, 2022	Sep 30, 2022
	RMB	RMB	RMB	US$ ⁽¹⁾	RMB		RMB	US$ ⁽¹⁾
Net revenues	2,347,955	1,833,205	1,798,333	252,806	6,837,414		5,427,184	762,941
Cost of revenues	(2,069,476)	(1,524,167)	(1,547,091)	(217,487)	(5,992,198)		(4,623,131)	(649,909)
Gross profit	278,479	309,038	251,242	35,319	845,216		804,053	113,032
Operating (expenses) income ⁽²⁾
Sales and marketing expenses	(218,859)	(167,463)	(162,137)	(22,793)	(723,688)		(515,959)	(72,532)
General and administrative expenses	(86,521)	(90,659)	(52,308)	(7,353)	(277,219)		(233,066)	(32,764)
Research and development expenses	(123,165)	(101,847)	(84,371)	(11,861)	(357,444)		(302,525)	(42,528)
Other operating income, net	25,811	20,375	36,459	5,125	66,416		104,633	14,709
Total operating expenses	(402,734)	(339,594)	(262,357)	(36,882)	(1,291,935)		(946,917)	(133,115)
Loss from operations	(124,255)	(30,556)	(11,115)	(1,563)	(446,719)		(142,864)	(20,083)
Other expenses, net	(32,921)	(28,884)	(32,577)	(4,580)	(32,615)		(62,609)	(8,801)
Interest income, net	18,806	23,570	34,402	4,836	59,503		74,602	10,487
Loss before income taxes and share of Loss in equity method investments	(138,370)	(35,870)	(9,290)	(1,307)	(419,831)		(130,871)	(18,397)
Income tax expense	-	-	-	-	-		-	-
Share of (loss) income in equity method investments	(5,161)	(2,887)	2,647	372	(7,191)		(1,386)	(195)
Net loss	(143,531)	(38,757)	(6,643)	(935)	(427,022)		(132,257)	(18,592)
Less: Net loss attributable to noncontrolling interest	(22,115)	(7,841)	(3,672)	(516)	(96,580)		(11,513)	(1,618)
Net loss attributable to ordinary shareholders of the Company	(121,416)	(30,916)	(2,971)	(419)	(330,442)		(120,744)	(16,974)
Net loss per ordinary share
Basic	(3.71)	(0.97)	(0.09)	(0.01)	(10.16)		(3.78)	(0.53)
Diluted	(3.71)	(0.97)	(0.09)	(0.01)	(10.16)		(3.78)	(0.53)
Net loss per ADS ⁽³⁾
Basic	(0.37)	(0.10)	(0.01)	-	(1.02)		(0.38)	(0.05)
Diluted	(0.37)	(0.10)	(0.01)	-	(1.02)		(0.38)	(0.05)
Weighted average number of ordinary shares used in calculating net loss per ordinary share
Basic	32,692,871	31,827,240	31,966,417	31,966,417	32,520,952		31,953,780	31,953,780
Diluted	32,692,871	31,827,240	31,966,417	31,966,417	32,520,952		31,953,780	31,953,780
Weighted average number of ADS used in calculating net loss per ADS ⁽³⁾
Basic	326,928,712	318,272,401	319,664,172	319,664,172	325,209,521		319,537,795	319,537,795
Diluted	326,928,712	318,272,401	319,664,172	319,664,172	325,209,521		319,537,795	319,537,795

⁽¹⁾ Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1135 to US$1.00, the noon buying rate in effect on September30, 2022, in the H.10 statistical release of the Federal Reserve Board.
⁽²⁾ Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows:

		Three Months Ended			Nine Months Ended
	Sep 30, 2021	June 30, 2022	Sep 30, 2022	Sep 30, 2022	Sep 30, 2021		Sep 30, 2022	Sep 30, 2022
	RMB	RMB	RMB	US$ ⁽¹⁾	RMB		RMB	US$ ⁽¹⁾
Research and development expenses	5,449	5,437	605	85	16,217		11,476	1,613
Sales and marketing expenses	1,214	1,213	135	19	3,609		2,560	360
General and administrative expenses	26,610	24,184	1,958	275	79,052		52,705	7,409

⁽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				Nine Months Ended
	Sep 30, 2021	June 30, 2022	Sep 30, 2022	Sep 30, 2022	Sep 30, 2021	Sep 30, 2022	Sep 30, 2022
	RMB	RMB	RMB	US$ ⁽¹⁾	RMB	RMB	US$ ⁽¹⁾
Loss from operations	(124,255)	(30,556)	(11,115)	(1,563)	(446,719)	(142,864)	(20,083)
Add:
Share-based compensation expenses	33,273	30,834	2,698	379	98,878	66,741	9,382
Adjusted Operating (loss) income	(90,982)	278	(8,417)	(1,184)	(347,841)	(76,123)	(10,701)

Net Loss	(143,531)	(38,757)	(6,643)	(935)	(427,022)	(132,257)	(18,592)
Add:
Share-based compensation expenses	33,273	30,834	2,698	379	98,878	66,741	9,382
Share of loss (income) in equity method investments	5,161	2,887	(2,647)	(372)	7,191	1,386	195
Impairment loss of investments	32,357	28,571	32,298	4,540	32,357	32,298	4,540
Adjusted net (loss) income	(72,740)	23,535	25,706	3,612	(288,596)	(31,832)	(4,475)

Net loss attributable to DouYu	(121,416)	(30,916)	(2,971)	(419)	(330,442)	(120,744)	(16,974)
Add:
Share-based compensation expenses	33,273	30,834	2,698	379	98,878	66,741	9,382
Share of loss (income) in equity method investments	5,161	2,887	(2,647)	(372)	7,191	1,386	195
Impairment loss of investments	32,357	28,571	32,298	4,540	32,357	32,298	4,540
Adjusted net (loss) income attributable to DouYu	(50,625)	31,376	29,378	4,128	(192,016)	(20,319)	(2,857)

Adjusted net (loss) income per ordinary share
Basic	(1.55)	0.99	0.92	0.13	(5.90)	(0.64)	(0.09)
Diluted	(1.55)	0.99	0.92	0.13	(5.90)	(0.64)	(0.09)

Adjusted net (loss) income per ADS ⁽²⁾
Basic	(0.15)	0.10	0.09	0.01	(0.59)	(0.06)	(0.01)
Diluted	(0.15)	0.10	0.09	0.01	(0.59)	(0.06)	(0.01)

Weighted average number of ordinary shares used in calculating Adjusted net (loss) income per ordinary share
Basic	32,692,871	31,827,240	31,966,417	31,966,417	32,520,952	31,953,780	31,953,780
Diluted	32,692,871	31,827,240	31,966,417	31,966,417	32,520,952	31,953,780	31,953,780

Weighted average number of ADS used in calculating net (loss) income per ADS ⁽²⁾
Basic	326,928,712	318,272,401	319,664,172	319,664,172	325,209,521	319,537,795	319,537,795
Diluted	326,928,712	318,272,401	319,664,172	319,664,172	325,209,521	319,537,795	319,537,795

⁽¹⁾ Translations of certain RMB amounts into U.S. dollars at a specified rate are solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1135 to US$1.00, the noon buying rate in effect on September 30, 2022, in the H.10 statistical release of the Federal Reserve Board.
⁽²⁾ Every ten ADSs represent one ordinary share.

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NorthStar Gaming Reports Year-End 2024 Results

Annual Revenue Growth of 57%, Gross Margin up 91%

NorthStar Gaming Holdings Inc. (TSXV: BET) (OTCQB: NSBBF) ("NorthStar" or the "Company") today announced its financial results for the three months and year ended December 31, 2024. The Company also announced that it will discuss the results on an investor webinar to be held Thursday, May 15, 2025 at 11:00am (please see below for details). All dollar figures are quoted in Canadian dollars.

"We delivered strong financial results in 2024, highlighted by 57% growth in revenue and a 91% increase in gross margin. At the same time, we held marketing expense to a 10% increase and reduced G&A expense, demonstrating the continually improving operating leverage built into our business model," said Michael Moskowitz, Chair and CEO of NorthStar. "Equally important, our team rolled out innovations in both our sportsbook and casino that have further differentiated NorthStar Bets as a premium offering and helped drive the retention of, and engagement with, our loyal customers."

Restatement of Results

The comparative results for the three months and twelve months ended December 31, 2023 have been restated in the financial statements and management's discussion & analysis ("FY2024 MD&A") for the year ended December 31, 2024 to include additional merchant fees and player bonus expenses which were not captured in the previously published financial statements (note 2 of the Financial Statements for the year ended December 31, 2024). The Company's payment processor deducted the additional merchant fee from the daily remittances to the Company, and the deductions were not accounted for by the Company. These additional fees were identified as part of the year-end reconciliation of the amount due from the payment processor, and the financial statements and FY2024 MD&A have been adjusted accordingly. These restatements did not impact the cash balances reported for the years ended December 31, 2022, 2023, or 2024. However, they did result in adjustments to the reported current asset balances for those periods.

Financial Highlights for the Fourth Quarter Ended December 31, 2024 ("Q4 2024"):

Total Wagers¹ at Northstarbets.ca were $303.0 million in Q4 2024, a 42% increase compared to $213.3 million in Q4 2023.
Gross Gaming Revenue² at Northstarbets.ca was $10.0 million in Q4 2024, a 31.6% increase from $7.6 million in Q4 2023.
Revenue² was $9.5 million in Q4 2024, a 51% increase from $6.3 million in Q4 2023. Revenue in Q4 2024 includes $1.5 million of managed services revenue, which compares to $0.2 million in Q4 2023.
Gross Margin was $3.6 million, a 71% increase from $2.1 million in Q4 2023, while the Gross Margin percentage increased to 38.1%, up from 33.6% in Q4 2023.
Profit/(loss) before marketing and other expenses¹ was $0.6 million in Q4 2024 compared to a loss of $2.5 million in Q4 2023, indicating that gross margin is now sufficient to cover the Company's overhead expenses.

Financial Highlights for the Year Ended December 31, 2024 ("FY 2024"):

Total Wagers² at Northstarbets.ca were $980.0 million in FY 2024, a 51% increase compared to $648.8 million in the year ended December 31, 2023.
Gross Gaming Revenue² at Northstarbets.ca was $34.0 million in FY 2024, a 51% increase from $22.5 million in FY 2023.
Revenue² was $29.6 million in FY 2024, a 57% increase from $18.8 million in FY 2023. Revenue in FY 2024 includes $2.3 million of managed services revenue, which compares to $0.5 million in FY 2023.³
Gross Margin was $10.5 million, marking a 91% increase from $5.5 million in FY 2023, with the Gross Margin increasing to 35.7%, up from 29.3% in FY 2023.
Profit/(loss) before marketing and other expenses¹ was $0.1 million in FY 2024 compared to a loss of $6.7 million in YTD 2023, an improvement of $6.8 million.

"Early in 2025, we completed our most significant fund-raising to date, with a $43.4 million debt financing. This capital gives us a long runway on which to continue our trajectory of growth in wagering, gross margins and improving operating leverage. This was a milestone event for our business," added Mr. Moskowitz.

2024 Operating Highlights:

Completed the inaugural Blackjack Championship tournament, an innovative online competition that helped drive the acquisition of new high-value players and engagement for existing customers while increasing Blackjack wagering activity.
Implemented a series of enhancements to the NorthStar Bets platform, highlighted by streamlined navigation in both the Casino and Sportsbook sections, a doubling of Casino game selection since the start of 2024, personalized prop bets and intelligent parlay suggestions.
Introduced the "NorthStar Elite" program and branded tables to help secure the loyalty and satisfaction of our most active players and reinforcing the Company's positioning as a premium offering.
Launched "Sports Insights 2.0," a robust suite of enhancements to our content vertical that includes a redesigned home page, comprehensive team and player statistics, injury and player news feeds, added coverage of popular sports and strengthened casino content.
Gained significant traction outside the Ontario market with managed services revenue from Northstarbets.com site, owned by the Abenaki Council of Wolinak, increasing from $0.5 million in FY 2023 to $2.3 million in FY 2024.
Outpaced the industry growth rates reported by iGaming Ontario in 2024 in both Total Wagers (51% for NorthStar vs. 33% for the industry) and Gross Gaming Revenue (51% for NorthStar vs. 31.5% for the industry).

Outlook

"We expect our consistent pattern of year-over-year revenue increases to continue throughout 2025, based on our ongoing success in attracting and engaging high-value players," said Mr. Moskowitz. "We will maintain disciplined control over costs so that incremental gross margin falls primarily to the bottom line. As we continue to focus on operational excellence, we remain confident that we have the capital necessary to reach profitability based on our current business platform."

FY 2024 Corporate Update Webinar

On May 15, 2025, Michael Moskowitz will present an in-depth Corporate Update, including a discussion of the Company's FY 2024 Earnings, current operations and strategic priorities. All investors and other interested parties are invited to register for the webinar at the link below.

Date: Thursday, May 15, 2025
Time: 11:00 am EDT
Register: Webinar Registration

Management will be available to answer your questions following the presentation on the webinar platform. You may also submit your question(s) beforehand in the registration form linked above.

Extension of Strategic Marketing Agreement

The Company also announced that its wholly owned subsidiary, NorthStar Gaming (Ontario) Inc. ("NorthStar Ontario"), has extended its strategic partnership with Playtech Software Limited ("Playtech Software") through the renewal of their previously announced strategic marketing agreement. Under the agreement, Playtech Software contributes services designed to accelerate NorthStar Ontario's player acquisition strategy in the province. The agreement was first implemented in June 2023 and has since been renewed several times. Pursuant to the latest renewal, Playtech Software will reimburse marketing expenses valued at a total of up to $1.5 million over a 3-month period through to March 31, 2025. Playtech Software will be compensated through a share of revenue from the income generated in connection with the marketing initiatives to which it contributes. The Transaction between Playtech and NorthStar Ontario is exempted from Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions.

"We are very pleased to renew the marketing services agreement with Playtech Software," said Michael Moskowitz, Chair and CEO of NorthStar. "The agreement serves to extend our marketing budget and has contributed to our tremendous growth in Ontario. Playtech plc continues to be a valuable strategic partner and we look forward to further collaboration."

Continuous Disclosure

Further to a review by the staff of the Ontario Securities Commission (the "OSC") of the Company's continuous disclosure, the FY2024 MD&A includes enhanced disclosures with respect to:

the Company's regulatory framework, licensing regimes applicable to its business operations and the legal authorizations necessary to conduct its business operations;
specific risk factors relating to the Company's business operations which include risks relating to operating in a heavily regulated industry, cyber security risks and risks relating to conflicts of interest with respect to directors and officers of the Company; and
the relationship between the Abenaki Council of Wolinak and the Company as well as its subsidiary, Slapshot Media Inc.

Such amended disclosure is being included in the FY2024 MD&A to address comments received from the OSC on its management's discussion & analysis, for the period ended September 30, 2024, and to improve the Company's disclosure.

As a result of having to include such enhanced disclosure after the OSC review, the Company will be placed on the public list of Refilings and Errors in accordance with OSC Staff Notice 51-711 (Revised) - Refilings and Corrections of Errors for a period of three (3) years.

Additional Information

For additional information, please refer to the Company's condensed consolidated financial statements for the year ended December 31, 2024, and the corresponding FY2024 MD&A. These documents are available on SEDAR+ at www.sedarplus.ca, and on the Company's corporate website at www.northstargaming.ca.

About NorthStar

NorthStar proudly owns and operates NorthStar Bets, a Canadian-born casino and sportsbook platform that delivers a premium, distinctly local gaming experience. Designed with high-stakes players in mind, NorthStar Bets Casino offers a curated selection of the most popular games, ensuring an elevated user experience. Our sportsbook stands out with its exclusive Sports Insights feature, seamlessly integrating betting guidance, stats, and scores, all tailored to meet the expectations of a premium audience.

As a Canadian company, NorthStar is uniquely positioned to cater to customers who seek a high-quality product and an exceptional level of personalized service, setting a new standard in the industry. NorthStar is committed to operating at the highest level of responsible gaming standards.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. Neither the TSX Venture Exchange ("TSXV") nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Non-IFRS Financial Measures [/ Reconciliation of Non-IFRS Measures to IFRS Measures]

Throughout this document, management uses certain non-IFRS financial measures and supplementary financial measures to evaluate the performance of the Company. The terms "Gross Gaming Revenue" "Total Wagers" and "Profit/(Loss) before marketing and other expenses" are non-IFRS financial measures. These measures are not recognized measures under International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS and are, therefore, not necessarily comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective and to discuss NorthStar's financial outlook. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including industry metrics, in the evaluation of companies in our industry. Management also uses non-IFRS measures and industry metrics in order to facilitate operating performance comparisons from period to period, the preparation of annual operating budgets and forecasts and to determine components of executive compensation.

Total Wagers

Total Wagers are calculated as the total amount of money bet by customers in respect of bets that have settled in the applicable period. Total Wagers does not include free bets or other promotional incentives, nor money bet by customers in respect of bets that are open at period end. Total Wagers is used to provide investors with supplemental measures of our operating performance and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures.

Gross Gaming Revenue

Gross Gaming Revenue is calculated as dollar amounts bet by customers less the dollar amounts paid out to the customers in respect of such bets which have settled in the applicable period.

Reconciliation of Non-IFRS Measures to IFRS Measures

In Q4 2024, the Company reported $10.0 million of Gross Gaming Revenue ($34.0 million in FY 2024) and has provided a reconciliation to the most comparable IFRS financial measure (Revenue) as follows: $ Millions (unaudited)	Unaudited Three months ended		Year ended
	Dec 31, 2024	Dec 31, 2023	Dec 31, 2024	Dec 31, 2023
Gross gaming revenue from wagered games	$10.0	$ 7.6	$ 34.0	$22.5
Bonuses, promotional costs and free bets	(2.0)	(1.5)	(6.7)	(4.2)
Sub-total Gaming revenue	8.0	6.1	27.3	18.3
Other revenue from managed services	1.5	0.2	2.3	0.5
Revenue	$ 9.5	$ 6.3	$ 29.6	$ 18.8

Operating Results

Marketing expenses are a key driver of the business but are completely discretionary. Management considers "Profit/(Loss) before marketing and other expenses" to be a good indication of the extent to which the business' Gross Margin is in excess of its overhead costs, and therefore offsetting some portion of marketing expenses, reflecting improving economies of scale.

$ Millions (unaudited)	Unaudited Three months ended		Year ended
$ Millions (unaudited)	Dec 31, 2024	Dec 31, 2023	Dec 31, 2024	Dec 31, 2023
Revenue	$ 9,478	$ 6,275	$ 29,556	$ 18,845
Cost of Revenues	5,868	4,167	19,013	13,317
Gross Margin	3,610	2,108	10,543	5,528
General and administrative expenses	3,033	4,452	10,453	12,277
Profit/(Loss) before marketing and other expenses (1)	577	(2,344)	90	(6,749)
Marketing	5,249	5,472	15,456	14,094
Loss before other expenses (1)	(4,672)	(7,816)	(15,366)	(20,843)
Other expenses	(1,070)	149	3,645	6,547
Net loss	$ (3,602)	$ (7,965)	$ (19,011)	$ (27,390)

(1) These measures are not defined by IFRS, do not have standard meanings and may not be comparable with other industries or companies.

Cautionary Note Regarding Forward-Looking Information and Statements

This communication contains "forward-looking information" within the meaning of applicable securities laws in Canada ("forward-looking statements"), including without limitation, statements with respect to the following: expected performance of the Company's business, the Company's growth plans being fully funded, expansion into new markets and future growth opportunities, and expected benefits of transactions. The foregoing are provided for the purpose of presenting information about management's current expectations and plans relating to the future and allowing investors and others to get a better understanding of the Company's anticipated financial position, results of operations, and operating environment. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates" or "believes", or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. This forward-looking information is based on management's opinions, estimates and assumptions that, while considered by NorthStar to be appropriate and reasonable as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, levels of activity, performance, or achievements to be materially different from those expressed or implied by such forward-looking information. Such factors include, among others, the following: risks related to the Company's business and financial position; risks associated with general economic conditions; adverse industry risks; future legislative and regulatory developments; the ability of the Company to implement its business strategies; and those factors discussed in greater detail under the "Risk Factors" section of the Company's most recent annual information form, which is available under NorthStar's profile on SEDAR+ at www.sedarplus.ca. Many of these risks are beyond the Company's control.

If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking statements. Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements, there may be other risk factors not presently known to the Company or that the Company presently believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking statements. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this press release represents NorthStar's expectations as of the date specified herein, and are subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

All of the forward-looking information contained in this press release is expressly qualified by the foregoing cautionary statements.

For further information:

Company Contact:

Corey Goodman
Chief Development Officer 647-530-2387
investorrelations@northstargaming.ca

Investor Relations:
RB Milestone Group LLC (RBMG)
Northstar@rbmilestone.com

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Investor Insight

Overview

Financial Performance

Company Highlights

Key Brands

NorthStarBets.ca

NorthStarBets.com

Management Team

Michael Moskowitz – CEO and Chairman

Corey Goodman – Chief Development Officer, Counsel and Corporate Secretary

Chin Dhushenthen – Chief Financial Officer

Barry Shafran – Lead Director

Vic Bertrand – Director

Brian Cooper – Director

Sylvia Prentice – Director

Dean MacDonald – Director

Chris McGinnis – Director

Alex Latner – Director, General Counsel, Playtech

Mike Cormack – Head of Content & Integrations

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