JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Joy Inks' fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there'll be a question and answer session. I'd now like to hand the conference over to your host today, Jane Chee, the Company Senior Manager of Investor Relations. Please go ahead, Jane.

Thank you, operator. Hello, everyone. Welcome to Joy's fourth quarter and four-year 2021 earnings conference call. Joining us today are Mr. David Sherling 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 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 Shillingly. Please go ahead.

Hello, everyone. Welcome to our first quarter of 2021 earnings call. Let me start the call with an overview of our first quarter results. We grew our total revenues by 16.8% year-over-year to $663.7 million. Specifically, Beagle's revenue increased by 30.2% year-over-year to $576.1 million. Meanwhile, we further improved our non-GAAP profitability at the group level when excluding YY Live as We earned a non-GAAP net profit for $98.3 million and improved our non-GAAP net margin to 40.8%. Beagle's non-GAAP net profit expanded to $103.5 million while its non-GAAP net margin improved to 18% from 8.7% in the previous quarter. As a result, for the full year of 2021, we generated $2.62 billion in total revenue and an increase of 36.5% from 2020. Notably, we grow Bigelow's full-year 2021 revenues by 34.1% to $2.32 billion at the group level. Our global business reached another major milestone As we attended full-year non-GAAP profitability for the first time, we excluded YY Live, having booked $108.9 million in non-GAAP net profit with a 4.2% non-GAAP net margin. This was mainly attributed to Beagle's strong financial performance as it's turned profitable for the full year for the first time by generating $182 million in non-GAAP net profit with a corresponding non-GAAP net margin of 7.8%. Look back 2021 as a year marked by growth, strategic adaptation, and breakthroughs. On the growth front in 2021, we continued to expand our revenue, driven by our enhanced monetization capabilities across multiple social entertainment products. Consequently, for the full year of 2021, Bigelive's revenue grew by 31.3%, Leite's revenue grew by 97.8%, and Harvard's revenue grew by 54.6%, all contributing to the 36.5% top line growth at the group level. On the strategic adaptation front, we proactively implemented some strategic in early 2021 because we value the long-term growth health, and sustainability of our products. We made certain adjustments to Nike and Hargo's marketing strategies and priorities investment in their content and social ecosystems, which we believe are fundamental to the user experience and the long-term compatibility competitiveness of our products. After a few quarters of executing those adjustments under a more prudent marketing strategy, we are pleased to report a significant improvement in the monetization efficiency, financial, and operational healthiness of these products. As a result, we substantially narrowed their operating losses, even though their MAUs experienced fuel short-term fluctuations. The combination of the increased monetization of the aforementioned products, our proactive adjustment in marketing strategies, the growing synergy among our products, and our enhanced operation efficiency across the board had led us to an important breakthrough, enabling us to achieve full-year profitability for our global business for the first time since the deconsolidation of YY Live. Our healthy cash flows demonstrate that we have entered into a new phase of sustainable development. Following a positive operating cash flow of $177.6 million in the third quarter. We generated another positive operating cash flow of $150.2 million in the fourth quarter. Looking back, we continue to achieve innovative breakthroughs as evidenced by our proven track record of incubating developing and monetization of our products. With our existing global market presence, healthy cash flows, and sustainable growth momentum, we are confident in our future prospect as we continue to reinvent ourselves, explore the global market, increase our global market share, and capture future growth opportunities in the social entertainment industry. Next, let me share greater details of the progress we made in each of our product lines during the first quarter. Let's start with BeagleLive. Our efforts in cultivating a diversified global content ecosystem have been fruitful in expanding our product reach as Big O Life's MAU grew by 11.9% year-over-year to 32.2 million in the first quarter. macroeconomic uncertainties, challenges posed by the resurgence of COVID-19, and some desperate depreciation of certain currencies against the U.S. dollar that partially offset our growth momentum. Our business demonstrated super resilience on a year-over-year basis, BeagleLive's live streaming revenue and paying users increased by 12.5% and 10.3%, respectively, in the first quarter. As we continue to make headway with BeagleLive's growth trajectory in multiple geographic regions. In particular, revenues and paying users from Europe increased by 42.2% and 40.7% respectively, while revenues and paying users from Southeast Asia and other emerging markets increased by 16.6% and 24.4% respectively. In the first quarter, we made additional progress in diversifying our content ecosystem, enriching our localized content offerings, increasing our supply of premium content and improving user engagement. In December 2021 and January 2022, we hosted a series of online events in multiple regions across the globe, such as Europe and the Middle East. Those events featured many popular regional artists, musicians, singers, and dancers, in addition to the region's top live streamers. To provide users with a refreshing and immersive social experience, we launched an innovative product features in the first quarter, incorporating computer vision, virtual reality, augmented reality, and many other cutting-edge technologies. In December, we introduced a brand-new feature called Virtual Live, which enables users to create customers' 3D digital avatars. as their virtual representations and that mirror their live body movements and facial expressions via camera when streaming on BeagleLive. We plan to upgrade the virtual live feature continuously in the future to increase our user personalization, boosting user interactions, and enhance user engagement. Beyond that, we also introduced into BeagleLive a virtual background feature for single user live streaming rooms and implemented a tiered system for granting special user privileges in multi-user live streaming rooms. All these technology innovations have produced encouraging results as an average and cumulative duration of live streaming sessions increased year-over-year by 12.1% and 8.3% respectively in the first quarter. To enhance our brand influence, we continue to organize signature events by leveraging the extensive localized operational experience of our international talent For example, in January this year, we hosted the Beagle Live annual gala, inviting around 100 streamers from a variety of cultural backgrounds to perform through video feeds in front of their global fans during the annual gala through the grand debauch of our recently launched virtual live 3D avatar feature in collaboration with toys. A Thai singer Beagle Live delivered a brand new video experience through seamless integration of physical and virtual realities. As is the tradition for this annual event, we selected BeagleLive's most influential streamers of the year and featured them on advertisement billing boards at famous landmarks around the world, including Times Square in New York and many more. Going forward, BeagleLive will continue executing its globalization strategy to enhance its leadership position in the social and entertainment live streaming industry across the world. It will continue to focus on key regions like North America, Europe, and the Middle East, and the East Pacific, while accelerating investments in emerging markets. BeagleLive will also continue to localize, diversify its social content ecosystem with a focus on content categories such as music, dance, comedy, games, and e-commerce, and further increase the proportion of its premium content to elevate user expansion and engagement. Meanwhile, through content products, innovation, and localized operations, Big Online will seek to construct interest-based online communities to help users establish small, fulfilling social connections on the platform. We believe that diversified content and positive social relationships on the platform will further enrich our users' social entertainment experience, attract more users to our community, cultivate their spending habits, and ultimately drive Big O Live's monetization growth. Next, let me share some recent updates on Leakey. As discussed on our previous earning course, we have been fine-tuned Leakey marketing strategy since the first quarter of 2021 and prioritizing our investment in our content and the social ecosystem. Also, like its overall, MAU experienced some short-term influx tuitions as a result and reached 67 million. The downward trend moderated further during the first quarter, especially in the Gulf states in the Middle East region. Lack of live streaming revenue continued to grow during the first quarter, increasing by 26.5% year-over-year. Its revenue from the Middle East increased by 59.1% year-over-year. with a focus on identifying and cultivating talented content creators where its comprehensive creator support program likely continues its efforts in fostering a friendly and vibrant content creation community motivated by a series of incentive programs. The number of certified creators likely increased by 22%, consequently, in the first quarter. The number of certified creators for the gaming category, which are widely popular among general Z users, 73%, consequently. And the average quantity of premium gaming content produced per day increased by 97%, consequently. As part of our effort to cultivate and support creators, Leakey rolled out a series of upgrades of its product features during the first quarter. Leakey expanded the implementation of Super Like feature to a broader user base, leading Super Like to become a unique icon for users to publicly endorse their favorite creators and support premium content. certified creatures receive nearly six times more incentives through the SuperLAC feature in December than September. In addition, we introduced another field feature called SuperFollow to enable creatures to publish exclusive content for their super followers by earning monthly subscription fee on Likey. All these new features provide more diverse monetization channels to creators, enrich their interactions with fans and incentive them to produce more individualized and high-quality content. In 2022, we will continue to invest more resources in identifying and nurturing talented creators. We will provide these creators across various content vertical with abundant user traffic support, sufficient content creation tools, professional support for our localized operation teams, and diverse monetization methods to pave a path for their long-term personal growth and career development. We believe a vibrant content community and likely interactions between creators and fans are fundamental to sustaining Likey's monetization growth and reversing Likey's user downward trend in the future. In addition to monetization via live streaming, we are also steadily steering the growth of Leakey's brand advertising business and further diversifying its revenue stream. Going forward, we are confident that Leakey will be able to maintain its top-line growth trajectory, further narrow its operation loss, and gradually resuming user expansion over a long period of time. Last on HAGO, during the first quarter, HAGO continued its monetization growth momentum as its live streaming revenue and paying users increased by 32.1% and 33.9% year-over-year, respectively, mainly driven by the Optimizing of several fan engagement features and the launch of a new couple features in dating themed live streaming rooms. We also upgrade the Hargo's products to better satisfy the user demand for multiple players' social interactions. Considering the difference in user life circles and user regions, we implement an updated recommendation algorithm for users to easily locate their favorite live streaming rooms. As a result, in the first quarter, the penetration rates for Hargo's feature channels increased by 2.2%. sequentially. In 2022, HAGO will continue to provide users with a better multiplayer interactive entertainment experience by optimizing its product features, enhancing user matching capabilities, and diversifying user interactions to culture and interest-based social entertainment community. We believe that we will continue to drive Hargo's monetization growth, further narrow its operation loss, and make further progress on its path toward breakeven in 2022. In summary, 2021 was a fruitful year for Joy. The enhanced monetization capability across multi-products help us achieve full-year revenue growth of 36.5%. The combination of our increased monetization for the aforementioned products, proactive adjustment in marketing strategies, better synergy among multiple products and enhanced operation efficiency across the board led us to full-year profitability, not only for Beagle, but also for the whole group. On capital return front, for the full year, our board directors have authorized additional share purchase program for of $1.2 billion as of December 31, 2021, we have bounced back a cumulative $393 million of our shares. $236 million of which was out of the $1.2 billion newly added purchase plan. Additionally, we have paid out a total of $160 million in dividends. These efforts are to demonstrate our confidence in the company's long-term growth perspectives and to reward our shareholders for their long-term support of the company. Looking ahead, we will continue to localize our diversified global social entertainment ecosystem, expand our market reach, and fortify our leadership position in core geographic regions. As an innovator and a pioneer, we remain committed to our vision of bridging communications among people from around the globe and bring them joyful and youthful experiences. 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 financial results.