Hello, ladies and gentlemen. Thank you for standing by for the LIZHI INC 's fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host, Effy Kang, Head of Capital Markets for the company. Please go ahead.
Thank you very much. Hello, everyone, and welcome to LIZHI INC 's fourth quarter and fiscal year 2021 earnings conference call. We released our financial and operating results via Newswire services earlier today, and they are available online. Participants on today's call will include our Founder and CEO, Mr. Marco Lai, our COO, Mr. Zelong Li, and our acting CFO, Ms. Chengfang Lu. Mr. Li and Ms. Lu will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, our earnings highlights presentation and a webcast replay of this conference call will be available on the IR section of our website at ir.lizhi.fm. Before we continue, please note that today's discussions will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995.
These statements typically contain words such as may, will, expect, target, estimate, intent, believe, potential, continue, or other similar expressions. Forward-looking statements involve inherent risks and uncertainties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, many of which factors are beyond our control. The company, its affiliates, advisors, representatives, and underwriters do not undertake any obligation to update this forward-looking information except as required under the applicable law. Please also note that LIZHI's earnings press release and this conference call include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. Please refer to LIZHI's earnings press release for a reconciliation of unaudited non-GAAP measures to unaudited GAAP measures. I will now turn the call over to our COO, Mr. Zelong Li. Please go ahead.
Hello, everyone, and thank you for joining our fourth quarter and full year 2021 earnings conference call. First of all, on behalf of the LIZHI management team, I would like to express my deep gratitude to our shareholders and investors who have supported us. Throughout 2021, we made continuous progress and a successful implementation of our strategic plan, achieving rapid growth. While continuously expanding our global footprint, we elevated our efforts to optimize our diversified product portfolio, strengthen the development of our core technologies, pursue efficiency, and maximize value with more refined operational strategies. As a result, we continue to achieve key goals on our journey towards building a sustainable audio ecosystem. In the fourth quarter of 2021, LIZHI maintained a steady growth.
We continuously heightened our efforts to enrich the audio-centric ecosystem, strengthen user connections and engagement, and advance commercialization initiatives, all of which lay the solid foundation for our sustainable growth. Thanks to the effective execution of our operational strategy, average monthly paying users in the fourth quarter increased by 18% year-over-year to RMB 497.3 thousand, and fourth quarter revenue hit a new record high of RMB 560 million, representing a year-over-year increase of 33%. In addition to strong revenue growth, we are also encouraged by the continued expansion of our gross margin, which grew to 32% in the quarter, up 400 basis points year-over-year. In addition, we further improved our profitability.
Notably, we turned profitable for the first time on a GAAP basis in the fourth quarter, reporting a net income of RMB 8.92 million in addition to a non-GAAP net income of RMB 18.25 million, increasing 2.37 times year-over-year.
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In 2021, our successful commercialization strategy execution fueled full year revenue growth of 41% to RMB 2.1 billion. The full year growth margin grew to 29%, an increase of 400 basis points compared with 2020. We are also delighted to see that our domestic business achieved operational profitability in fiscal 2021, reaffirming our competitive advantage in the online audio space while establishing a solid foundation for our future growth.
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In terms of audio entertainment, in the second half of 2021, we adjusted our operational and marketing strategy to harness our resources and efforts to target core content categories with greater monetization potential. Through our fine-tuned operation, management and marketing strategies, we continuously expanded our most active user groups while improving user experience and increasing user engagement. In the fourth quarter of 2021, we organized and hosted a series of events and activities accentuated by the LIZHI Annual Voice Gala, unleashing the creativity and enthusiasm of our content creators, attracting more medium to long tail creators to engage in creating and interacting on the platform, which in turn increases user engagement and boosts community connectivity.
We were pleased to see that the average MAU of our audio entertainment business continued to expand to RMB 9.4 million in the fourth quarter, with both the paying user base and revenue maintaining a robust growth momentum. For ramping up our commercialization capabilities, in the future, we will continue to expand the commercialization potential of our audio entertainment business, remain steadfast in our efforts to enhance our commercialization efficiency, and ultimately deliver overall growth over the long term.
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In the fourth quarter, we continue to optimize product features and functions of our global social product TIYA, including adding access to the YouTube SDK. We remain focused on boosting user engagement through product innovation for improving user stickiness and active interaction rate. In December, the average time spent daily in real-time voice room per user increased by 68% year-over-year, and the number of pairs of friends connections continued to grow in December 2021, exceeding 14-fold increase compared with December 2020. In addition, by the end of 2021, the cumulative downloads of TIYA reached close to 20 million. Recently, we rolled out a brand-new version of TIYA. In addition to optimizing user interface design, we further improved the product versatility and usability for the upgraded version. Notably, we launched the innovative feature referred to as real-time interactive group space.
This new feature is designed to help users form online connections more easily and efficiently, as well as build their online community more engaging. More specifically, only one click is needed for users to switch to the multi-user real-time interactive space via the novel group space, which enables faster and more efficient real-time voice communication. Through voice, text, image, screen sharing, YouTube SDK, and other multimedia functions, users can have a richer set of real-time group interactions. In addition, this new version of TIYA is able to support both private and public group interaction spaces, enabling users to connect with their acquaintances and friends through private group space. In the meantime, public group spaces on TIYA can be recommended and discovered based on user preferences, which may help users enrich their online social network.
Next, we are also planning to entice more offline groups and KOLs to join TIYA and create vibrant, diverse, interest-based communities.
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This new TIYA edition marks another milestone on our product innovation roadmap. In 2022, we will continue to adhere to a balanced growth strategy and drive robust organic growth while maintaining cost control. Another highlight of our international expansion is that TIYA recently officially established its global headquarters in Singapore. The headquarters will serve as the global hub for innovation for TIYA as well as the LIZHI Group to help nurture teams of talent and fully support the expansion of LIZHI's international business.
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Looking back on 2021, while focusing on product innovation, we also actively advanced the development of our in-house suite of technologies. We are convinced that their core technologies help us provide users with richer audio entertainment offerings and more interactive social experiences, building a deep moat for our business. We are very pleased to see that our in-house developed RTC real-time audio and video streaming technology solutions, DOREME, and the instant voice messaging platform, VoderX, are continuing empowering our product enhancement capabilities. By providing tailored technology solutions, DOREME and VoderX collectively allow us to consistently innovate and enrich product features and functions to align with users' diverse needs, ultimately creating unparalleled value for our users.
In addition, our in-house suite of technologies also bolsters our multi-device product roadmap, including enhancing compatibility with a variety of in-car operating systems and Internet of Vehicles platforms, supporting various applications of LIZHI products under diverse usage scenarios, and improving in-car user experience through voice processing and high-definition audio transmission technologies. In the next phase, we will continue to invest in leading-edge technologies, encompassing in-house R&D to strengthen our core technology capabilities and create an industry-leading real-time engagement, RTE ecosystem, to power the development of our product portfolio.
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In summary, in 2021, the robust growth across our diversified businesses, advancements in our in-house technologies, and the continuous optimization of our organizational system have built a solid base for our long-term development. Moving to 2022, we remain unwavering in our globalization strategy, exploring more regions and territories with diversified product portfolio, leveraging well-established operational experience, and localized innovation to tap into more commercialization potential, building an increasingly competitive audio ecosystem, and ultimately creating more value for our shareholders as well as the wider society.
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Thank you all. With that, I will now turn the call over to our Acting CFO, Ms. Chengfang Lu, who will discuss our financial results in more detail.
Okay. Thank you, Zelong Li, and hello, everyone. Our strong financial performance in the fourth quarter and in fiscal 2021 exemplifies the company's successful execution of our strategy in meeting growing user demand for audio-based entertainment and social networking. Benefiting from the continuous fine-tuning of our operations and optimization of the cost structure, our gross margin in the fourth quarter had a record high at 32%, up 400 basis points year-over-year, also adding up to a 400 basis points increase in the full year gross margin. In the fourth quarter, we achieved a net income of RMB 8.9 million, as the non-GAAP net income increased by 237% to RMB 84.3 million. We're encouraged by the robust growth in our audio entertainment business and our efficient and effective commercialization strategy.
As we further unroll our global expansion plans in 2022, we will maintain our intense focus on providing innovative and valuable products and services to our users while building a more competitive audio ecosystem. Now, I'm providing a brief overview of our financial results for the fourth quarter of 2021. First, in the fourth quarter, our total net revenues were RMB 516.3 million, representing an increase of 33% year-over-year, primarily driven by the increase in the number of average monthly paying users and the average amount users spend on our audio entertainment products.
Cost of revenue was RMB 378.4 million in the fourth quarter of 2021, representing an increase of 26% year-over-year, mainly attributable to an increase in revenue share fees to our content creators, salary and welfare benefits expenses, and bandwidth costs as we expanded our business. Gross profit was RMB 181.9 million in the fourth quarter of 2021, representing an increase of 53% year-over-year. Non-GAAP gross profit was RMB 184.4 million in the fourth quarter of 2021, representing an increase of 50% year-over-year. Gross margin for the fourth quarter of 2021 increased to 32% from 28% in the fourth quarter of 2020. Non-GAAP gross margin for the fourth quarter of 2021 grew to 33% from 29% in the fourth quarter of 2020.
Operating expenses increased by 41% year-over-year to RMB 176.6 million in the fourth quarter of 2021. Research and development expenses were RMB 73.5 million in the fourth quarter of 2021, representing a year-over-year increase of 30%. The increase was mainly due to the increase in salary and welfare benefits expenses related to the increase in the number of our research and development staff and their average salary. Selling and marketing expenses were RMB 17.9 million in the fourth quarter of 2021, representing an increase of 46% year-over-year. The increase was attributable to the increase in the marketing expenses to promote the company's audio entertainment products, the promotional expenses for our international business, and the higher salary and welfare benefits expenses.
General and administrative expenses were RMB 38.22 million in the fourth quarter of 2021, representing a year-over-year increase of 59%. The increase was mainly due to the increased salary and welfare benefits expenses, rental expenses and other general and administrative expenses. Operating income was RMB 5.4 million in the fourth quarter of 2021, compared to a loss of RMB 6.4 million in the fourth quarter of 2020. The non-GAAP operating income was RMB 14.7 million in the fourth quarter of 2021, compared to RMB 4.9 million in the fourth quarter of 2020. Net income was RMB 8.9 million in the fourth quarter of 2021, compared to net loss of RMB 5.8 million in the fourth quarter of 2020.
Non-GAAP net income was RMB 18.3 million, representing a year-over-year increase of 237%. Basic and dilutive net income per ADS were RMB 0.70 in the fourth quarter of 2021, compared to basic and dilutive net loss per ADS of RMB 0.30 in the fourth quarter of 2020. Non-GAAP basic and dilutive net income per ADS were RMB 0.36 in the fourth quarter of 2021, compared to RMB 0.12 in the fourth quarter of 2020. As of December 31st, 2021, we had cash and cash equivalents and restricted cash of RMB 537.4 million. Okay, this concludes all of our prepared remarks today, and I will now turn the call to questions. Operator, please go ahead.
For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Your first question comes from the line of Vincent Yu from Needham & Company. Please ask your question.
Thank you, management, for taking my question. I have two questions. The first question is on the profitability. I do see that in our Q4 we have become profitable in terms of GAAP net income. What's our view for the profitability in 2022 and our mid- to long-term prospects for the profitability. My second question is, can management elaborate more on the paying rates improvements? Thank you.
Okay. Thank you, Vincent from Needham. Firstly, I will translate the questions. The first questions from Needham.
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I'll translate for Marco. The first question from Vincent from Needham is about the profitability and our long-term expectations for the profitability.
We are delighted to see that for the first time we achieved profitability on a GAAP basis and substantially increased our non-GAAP net income in the fourth quarter of 2021, which is mainly due to our effective execution of our strategies on the cost reduction and efficiency enhancement. As for the profit forecast for the full year of 2022, in terms of top line, we'll continue to expand the user base, increase the number of paying users, and user spending levels in the audio entertainment segment in order to unleash the commercialization potential of the audio entertainment business.
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Meanwhile, we also plan to explore more markets, and develop new commercialization models, and drive the overall revenue growth. For different quarters of the year, there may be fluctuations caused by factors such as festivals and holidays, but we expect that the overall revenue will maintain a solid growth momentum in the year.
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In terms of operating expenses, we'll dynamically adjust the resources allocation according to the progress made during each phase. For the domestic business, we will further implement strategies to control costs and enhance efficiency in order to achieve profitability at the operating level. For the international business, we will adopt a strategy of balanced growth while controlling the investment size, maximizing the operational efficiency, establishing a network effect for our products, and achieving organic growth in our user numbers. Overall, we are confident we will further narrow our losses in 2022 and build a solid foundation for us to achieve our mid to long term profitability targets.
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For mid- to long-term growth, we hope to further diversify our revenue, including developing new markets and incubating new products to gradually increase the income from the international business to boost the overall revenue growth. Meanwhile, we will continue to optimize the cost structure, improve operating efficiency, reduce the overall expense ratio, and promote business growth with the goal of achieving overall profitability in the mid- to long-term. This concludes Marco's answers.
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Right.
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In the fourth quarter of 2021, we achieved an 18% year-over-year increase in the average monthly paying user base to RMB 500,000, while our quarterly revenue hit a new record high. This is mostly due to two reasons. First of all, we focused on the audio entertainment business and launched diverse promotional activities to further trigger the creativity and enthusiasm of our content creators in order to boost the user participation and effectively promote the paying user conversion. On the other hand, on the marketing strategy front, we focused more on the core content categories to acquire customers accurately. By strengthening ties between the users and the content creators, and leveraging the advantages of audio, we can consolidate user connection and engagement to promote the conversion of the paying users.
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In 2022, in addition to continuing to explore the domestic market, we will also leverage our experience to continue to expand our business into more countries and regions through our fine tuning operations, increase the overall paying user base, raise user spend levels, and drive the top line growth this year.
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[Non-English content] Thank you Marco。
Your next question comes from the line of Vicky Wei from Citi. Please ask your question.
[Non-English content] Good evening management, thanks for taking my questions and congrats on the profitable quarter. Will management share some color about the 2022 growth strategy as well as audio entertainment sector outlook for 2022? Thank you.
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I'll translate for Marco Lai.
We are confident we can continue to scale our growth in the future. With the effective implementation of our globalization strategy, we are expecting the international business to generate incremental growth for our overall user base. Recently, we have focused on the continuous optimization and upgrading of our products, which we believe will effectively increase the user engagement and grow our user base.
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Moving forward, we will actively explore and expand into the new markets and build a more diversified product portfolio. We are looking to reproduce our successful experience and business models in the domestic audio entertainment sector into other markets and localize operations according to differences of these various markets, ultimately growing and expressing new commercialization potentials. We have been preparing for this expansion. We are expecting our international business user base to achieve strong growth in the mid to long term and contribute to future revenue growth.
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In terms of our domestic business, we mainly focus on the user base expansion in the audio entertainment sector and monetization of the core user groups. Our excellent performance in the fourth quarter also demonstrated the effectiveness of our operational strategies. We will continue to optimize our marketing strategy and target content categories with greater monetization potential, as well as execute on our precise user acquisition strategy to reach core user groups with strong spending power and higher willingness to pay. In addition, through optimizing product function and launching the diversified activities, we can successfully improve user engagement and paying user conversion, thereby driving the top-line growth.
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Regarding the auto entertainment sector, we think the sector has strong commercialization potential. In the second half of last year, we began to optimize our operational and marketing strategies, which effectively improved the conversion of paying user base and of the auto entertainment and in turn drove the revenue growth. At the same time, we also optimized our cost structure to further improve the gross margin. While the gross profit was up 53% year-over-year. In addition, we turned profitable on a GAAP basis in the fourth quarter, while LIZHI's domestic business already achieved the operational profitability in 2021.
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In 2022, we will continue to implement our optimized operational strategies in the audio entertainment sector, expand our most active user groups, and launch the diversified functions in order to promote the conversion of paying users, increase user spend levels, and improve overall revenue and profitability.
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Thank you.
Thank you.
As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.
Thank you once again for joining us today. If you have further questions, please feel free to contact LIZHI Investor Relations through the contact information provided on our website at ir.lizhi.fm and the Piacente Group Investor Relations. Thank you.
This concludes today's.