JOYY Inc.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Joy, Inc.' 's second quarter 2022 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 would now like to hand the conference over to your host, Jane Shear, the company's senior manager of investor relations. Please go ahead, Jane.

Thank you, operator. Hello, everyone. Welcome to JOY's second quarter 2022 earnings conference call. Joining us today are Mr. David Shelling 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 would like to remind you that we may make forward-looking statements, which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed with the FCC. 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 Schillingly. Please go ahead, sir.

Thank you. Hello everyone, welcome to our second quarter 2022 earnings call. Let me start with an overview of our quarterly results. Despite the global macroeconomic uncertainties and the seasonality impact of Ramadan holiday in the Middle East, we achieved 98.1 million in revenues, including 502.6 million of revenue from Beagle, approaching the higher end of our previous guidance. we grow our non-GAAP net profit to $51.5 million at the group level, realizing our non-GAAP net margin of 8.6%. Notably, the Beagle segment expanded its non-GAAP net profit to $86.3 million and improved its non-GAAP net margin to 70.2%. Our operating cash flow continued to be strong, reaching $61.7 million for the quarter. The steady expansion of our profitability and its current market condition demonstrated improved efficiency and enhanced resilience of our business. We are in an environment of increased macro uncertainty, raising inflation and increase the cost of living continued to negatively impact consumer spending. The lifting of lockdown and travel restrictions imposed during the pandemic contributed to a resurgence in travel demand during the summer season. further diverting consumers' time and spending to offline activities. The aggressive application of the U.S. dollar was also an unfavorable factor as our price rose in local currency terms. Those various high winds had and will affect the short-term monetization efficiency for a wide variety of global companies, including Joy. Despite these macroeconomic challenges, a significant proportion of global users is still underserved for social entertainment services. In a time of increased uncertainties, users are seeking more emotional value from their products, such as a sense of belonging and meaningful connections with others. That's why we respond to this volatile microelement first and foremost by turning inward. continue to integrate our products and cultivate our user community while maximizing the emotional value our services can provide. In recent quarters, we launched several major product features updates, including bigger lives, virtual life, and community like this loop an interest-based community feature and hardware 3D hardware space. Those features serve to improve the quality and the efficiency of our users' social experience, enabling them to better engage and foster meaningful connections with those who have a similar interest, together with our drivers and divers inclusive community culture, we believe those efforts will help our products deliver an important and unique emotional value to our users. In addition to matching this emotional value, we continue to be fully dedicated to creating value for our creators by providing creator-friendly video creation tools and monetization features and cultivating a user community that is built on equity and connections. We have established a creator-centric ecosystem that enable a large number of creators to showcase their talents in front of a global audience and at the same time enjoying promising economic returns. Over the past few years, we have invested a cumulative total of our U.S. dollar one billion in creators' reward. With the support of our global operation team and implementation of a variety of activities tailored to local users' needs we empower our creators to gain exposure both locally and internationally and enable them to realize the new levels of personal and professional success going forward we remain community committed to delivering value to our users and creators we will continue to cultivate diverse premium content, innovate interactive features, and organize tailored local activities. We expect those efforts will further improve the user experience. ultimately facilitate the growth of our user community and global business. To mitigate risks against the current market, we proactive implemented a series of measures to further improve our efficiency and enhance the resilience of our business. As we continue to execute sustainable growth strategy and emphasize our products' organic growth. We will be more adaptive in the execution of our user acquisition strategy. This means we will dynamically adjust our strategy based on our ROI and closely monitor shifting marketing conditions. For products that are still loss-making, such as Leaky and Huggle, we will focus on the steady improvement of their respective monetization capabilities, stick to a disciplined sales and marketing strategy. and optimize their cost structure in order to steadily narrow their respectively operation loss. We will also continue to enhance product synergy and optimize our business process to drive further improvement of our operation efficiency as a group level. As we maintain a healthy growth trajectory in our profit and cash flow since 2021, we are in a strong financial position that allows us to have greater flexibility and a continued investment in core area that builds our long-term capabilities. We expect to emerge from the above recalibration as a more focused and more productive organization, better positioned to capture long-term growth opportunities. Now, let me dive deeper into the progress we made in each of our product lines.