JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Joy Incorporated's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question and answer session. I'd now like to head the conference over to your host today, Jane Shi, the company's senior manager of investor relations. Please go ahead, Jane.

Thank you, Operator. Hello, everyone. Welcome to Joy's Third Quarter 2021 Earnings Conference Call. Joining us today are Mr. David Schilling-Lee, Chairman and CEO of Joy, Ms. Ting Lee, our COO, and Mr. Alex Liu, the General Manager of Finance. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The third quarter 2021 financial results and webcasts of this conference call are available at ir.joy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as well as we will make forward-looking statements. Finally, please note that unless otherwise stated, All figures mentioned during this conference call are in U.S. dollar. I will now turn the call over to our chairman and CEO, Mr. David Strelin Lee. Please go ahead, sir.

Hello, everyone. Welcome to our third quarter 2021 earnings call. Despite the increasing uncertainty due to COVID-19, we had another solid quarter as we grew our total quarterly revenues by 21.7% year-over-year to $651 million, while biggest revenue increased by 60.1% year-over-year to $569 million. Notably, we attended non-GAAP profitability at the group level for the first time since we deconsolidated YY Live and booked 35.1 million in non-GAAP net profits. This was mainly attributed to Beagle's margin expansion and improved operating leverage at the group level. During the quarter, Beagle's non-GAAP net profit expanded to 49.6 million, while its non-GAAP net margin improved from 3.3% to 8.7% in the previous quarter. The persistent execution of our globalization strategy has enabled us to deliver steady progress across multiple aspects, including, one, the continued expansion of our global business. Two, diversify content offering on various products that are neutral interest-based interactive social connections. Three, and better synergy among multiple products that drive steady improvements in profitability at the group level. Next, let me share greater detail on some quarterly updates for each of our core product lines. Let's start with BeagleLive. Despite global economy uncertainties and other challenges posted by the resurgence of COVID-19, our business demonstrated resilience as we entered the post-pandemic era. Big O Live's live streaming revenue increased by 8.6% year-over-year in the third quarter. Our efforts to cultivate a global diversified content pool has been effective in further expanding the product reach of Big O Live. As Big O Life's MAU increased by 10.7% year-over-year to 31 million in the quarter, the continued execution of our localized operation strategy has contributed a gradual buildup in the paying behaviors of our users, as the number of paying users increased by 60.1%. year-over-year. We also continue to deliver a robust performance of Big O Live in multiple regions. In particular, on a year-over-year basis, revenue and paying users from Europe increased by 50.6% and 26.7%, respectively. while revenues and paying users from Southeast Asia and other emerging regions increased by 29.6% and 31.7% respectively. As we expand Big O Live's operation into multiple regions, our revenue mix continued to diversify, avoiding reliance on any individual market. Looking at the development of the global live streaming industry, we believe that the penetration rates for live streaming remains at very low levels, leaving us with tremendous growth opportunities ahead. Going forward, we will continue to deepen penetration in multiple key markets, including North America, Europe, Middle East, and Eastern Pacific regions, and dedicate more resources toward the emerging markets as well. In doing so, we will further solidify our leading global market position in the social and entertainment live streaming sector. With regards to our content efforts, in the past few quarters, we have been enlarging our talent pool of content creators and expanding our localized premium content library via various cross-industry partnerships and a series of localized operational activities. We have focused on a handful of categories, including Penn Entertainment, Gaming, and Lifestyles, and further expanded our product reach. For example, for the Penn Entertainment category, the first live broadcast country music competition, Voice of Beagle. wrapped up recently achieving a huge success in Thailand, attracting more than 100,000 Pico concurrent viewers for its final event. In North America, PicoLive launched a new channel feature and attracted many influencers to create their own personal channels on the platform, covering some of the hottest topics and pop culture, including Canadian singer Chrystia Turner's finance channel, Sam Eskhar's fitness channel, and American variety star and singer Sarah Abraham's mental health channel. On the other hand, we provide a platform for those influencers to showcase their talent and creativity. On the other hand, we leverage our influencer to promote content diversification and high-quality engagement on Big O Live platform. In the gaming category, we partner with two mobile game heavyweights July, further enriching BeagleLive's gaming content. In France, BeagleLive partnered with a popular mobile RPG, Sincere Accords, which was published globally by G-Target and hosted a series of incentive events for BeagleLive's gaming content creators. Through our cooperation with Greenup, we hosted and streamed the Free Fire League, a national level esports tournament in South Asia. As a result, we further enriched our gaming UGC during the quarter. We are also further expanding our connections while unlocking new interactive sectors. In the lifestyle category, we made our initial foray into e-commerce live streaming in Southeast Asia. In August, we launched the Bigo Marketplace channel in Indonesia, Malaysia, and Thailand. And we conducted a controlled beta test of the in-app shop feature, which enabled a small group pilot users to compete their purchases through punch-out links with registered third-party merchants. While Beagle Marketplace is still in its infancy in terms of development, it has the potential to expand our product reach by providing a diversified interactive experience for our users. During the quarter, we continued to introduce innovative product features on BeagleLive to further improve our user experience. New features include picture-in-picture new live streaming modes supporting 12 simultaneous streamers for multi-user channels. and more. As a result, the number of streamers of multi-user chat rooms increased by 2.3%, and the average duration per live streaming session increased by 5.3% sequentially. In addition, we updated BeagleLive's non-real-time content sharing feature, BAR. and improved its user engagement further, achieving an 8.1% sequential increase in average user time spent viewing bar postings. Also, by optimizing its content recommendation algorithm with more precious user profiling, is the BeagleLive user discovery of interest-based content beyond live streaming rooms, increasing its next-day user retention rate by 0.5%. Going forward, we plan to further enrich our localized content offerings. We believe that it will help our users establish small, fulfilling, interest-based social connections, further expand our products reach to our user base extension, and ultimately help build a driver's inclusive global community. Next on likey. In line with our emphasis, long-term growth and sustainability, we have been fine-tuning Leike's marketing strategy since the first quarter of this year and prioritizing our investment on our content and the social ecosystem. As a result, Like its overall, MAU experienced some short-term flow mutations and declined to 76.8 million. However, we are starting to see a slowdown in the downward trend. especially in the Gulf states from the Middle East region. Therefore, LACIS live streaming revenue grew further by 58.1% year-over-year, mainly driven by the Middle East region, as revenues from the Middle East increased by 1.5 times year-over-year. In the past quarter, our efforts have been centered on identifying cultivating and supporting talent content creators to cultivate a friendly and vibrant content creation community. We launched a series of incentive programs offering both user traffic and other economic rewards to influential content creators with more than 10,000 fans. At the same time, we continued to uncover the most talented content creators through a variety of localized stems, events, and challenges. As a result, the number of certified creators increased by 17% sequentially in the third quarter. As part of the Incentive programs likely introduce new product features called Silverlight in Russia, Indonesia, the Middle East, and other regions. With the new feature, users are able to obtain Silverlight either through purchasing or viewing in-app commercials and then grant them to their favorite creators and short videos. Essentially, SilverLac enables creators to engage with a large range of same group in non-real-time manner, stimulating social interactions and adding a diversified monetization tool for creators, motivating the production of more premium content. As a result, in Russia, for example, launch of Silver Lake guaranteed widespread, garnered widespread interest from the creatures. And the evidence by 7.1% month to month increased the number of certified creatures joined the lychee community. Looking ahead with the recruitment recruitment of an increasing number of talented creators, we should be able to augment Leike's rich and dynamic content ecosystem and pave the way toward the revival of its user base extension. Lastly, on HAGO. HAGO's live streaming revenue continued its rapid growth momentum as its revenue rose by 78.7% year-over-year, and its number of paying users increased by 1.5 times. In terms of product development over the last few quarters, we made some strategic changes to Hargo's positioning, transitioning from the interactive platform primarily focus on casual games to audio and video multiplayer social interaction and entertainment platform. We made a successful, successive launches of features updates in the past few quarters, including the Hargo 4.0 update with a major revamp of its channel feature focus being on the improvement of multi-user social interactive activities. The virtual family group function and most recently, the came out audio live streaming service for mobile games. Those new features enable user continual meetings in entertainment and interactions needs for our users. Following the series of adjustments, we have achieved a preliminary transformation in HAGO's traffic structure, driving significant improvements in user interaction. On a sequential basis, channel penetration rates increased by 4.0%. In the penetration of our virtual family group, function increased by 9.9%. The average duration of voice chat room increased by 40.3% to 80 minutes. While the penetration rates of TeamUp audio live streaming service for mobile games increased significantly from 0 to 4.4%. In the future, we will continue to provide users with a more diverse multiplayer interactive entertainment experience and cultivate an interest-based social entertainment community. All in all, during the third quarter, despite the recent volatility in the macro and the increased uncertainty due to COVID-19. Our persistent execution of our globalization strategy help us to achieve substantial progress in multiple fronts. Our efforts of enhancing our diversified and localized content ecosystem have helped BeagleLive further expand its product reach and user base while continuing the cultivation of talented content creators and effectively increasing engagement levels in LACI's content community through the combination of improved synergy among various products, enhanced operation leverage, and Prudent marketing strategy, we have achieved a steady expansion in profitability for both Beagle segment and for the entire group. Going forward, we will continue to cultivate our localized content and social ecosystems, nurture interspace, interactive social connections, and pursue long-term sustainable growth for our global business. Lastly, in light of the current market condition, on top of the current US dollar 200 million new share purchase plan announced in September 2021, our board of directors had just authorized an addition share purchase plan under which the company may purchase up to US dollar one billion of our shares till November 2021 to demonstrate our confidence in the company's long-term growth prospects. and to reward our shareholders for their long-term support of the company. This concludes my prepared remarks. I will now turn the call to our General Manager of Finance, Alex Liu, for a more detailed explanation of our quarterly financial results.