JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Joy Incorporated 3rd Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to hand the conference over to your host today, Jane Shee, the Company's Senior Manager of Investor Relations. Please go ahead, Jane.

Thank you, Operator. Hello, everyone. Welcome to Joy's Third Quarter 2022 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'd 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 SPC. 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 Shalini. Please go ahead, sir.

Hello, everyone. Welcome to our third quarter 2022 earnings call. Let me start with an overview of our quarterly results. Despite global macroeconomic uncertainties, we recorded $586.7 million in revenues, including $483.3 million of revenues from Beagle. In line with our previous guidance, our deceased decisive and proactive optimization measures to improve our operational efficiency have been proven effective. During the third quarter, we generated a non-GAAP net profit of 76.9 million as the group level with a non-GAAP net margin of 13.1% when excluding YY line. The bigger segment required 84.1 million in non-GAAP net profit with a non-GAAP net margin of 17.4%. More importantly, our operating cash flow remains strong reaching 117.1 million for the quarter. As present, increasing global macro uncertainty continues to impact our short-term monetization growth. Ongoing inflation and unfavorable exchange rates are adversely affecting users' purchasing power and decretionary suspending. Meanwhile, as international travel restrictions in some regions are lifted and the reopening teams continue, users' time and spending are being further diverted to offline activities. Since the first half of 2021, we have been comprehensively and constantly reviewing the cost structures and the management process of our core business. At the same time, we undertook a series of operational adjustments to enhance product synergies, improve operational efficiency, and ultimately ensure the health and the sustainability of our business. Our forward-looking strategic plans and effective execution of our optimization measures to the above stated goals have equipped us to better navigate through the current macro challenges. As a result, we achieved full-year profitability in 2021. and further expand our profits and improve our operational cash flow during 2022. Even as global macro conditions deteriorated during the first three quarters of 2022, our bigger segment expanded its non-GAAP net profit to $230.4 million. up to 193.3% year-over-year. Given the current macroeconomic error, we will continue to prioritize the sustainable high-quality growth while further enhancing our operational efficiency. Going forward, We are confident that our increasing business resilience will position us to better capture long-term growth opportunities. Despite near-term micro-high winds, we remain focused on our long-term product strategy of delivering value to our users and creators. Our efforts have yielded positive results. Figo Labs' MAUs increased by 13.2% year-over-year in the quarter, reaching a new historic high of $35.4 million. Sequentially, growth was also encouraging with the scale of growth comparable to that we witnessed during the pandemic period. This is particularly impressive considering such growth as achieved in the period of disciplined marketing spending. Demonstrating the increasing efficiency and effectiveness of our user acquisition strategy. Looking ahead, we will continue to cultivate diverse premium content, innovate interactive product features, and organize activities tailored to local market. These initiatives will further improve our user experience and ultimately facilitate the growth of our user community and monetization, two facts that correlated positively with user satisfaction over time. In addition, our diversified operations across all number of regions include North America, Europe, the Middle East, the Southeast Asia, and have given us greater overall flexibility and allow us to mitigate the risks that arise from relying on any single market. As markets and governments employ differing measures to contain the pandemic and tackle current micro challenges, we will closely monitor safety market conditions and devote more results towards outperforming markets. Compared with a single market focus, this refined strategy of dynamic adjustment will enable us to generate a higher ROI against the backdrop of macro volatility. well, volatilities. Going forward, we remain committed to our globalization strategy. We will continue to enhance our international and localized operational capabilities by further strengthening our local talent teams' technological experience efforts. global vision and local knowledge. Now, let's take a closer look at the developments in each of our product lines. We will start with BeagleLive. Despite the macro headwinds and monetization challenges, BeagleLive maintains its user growth trajectory thanks to effective local operations and product features upgrades. During the third quarter, Big O Life's MAUs increased 14.2% year-over-year to 45.4 million. Notably, MAUs in Europe and in the Middle East increased by 9.8%. and 7.8% respectively, while MAUs in Southeast Asia and other emerging markets increased by 19.2% year-over-year. We also observed a recovery change in Big O Live's number of paying users across various regions. As the number of paying users in Europe, North America, the Middle East, and Southeast Asia assumed sequentially growth this quarter. During the quarter, BeagleLive further cultivated its content ecosystem by emphasizing localized operations and developing diverse premium content. For example, in Malaysia, Bigo Live launched Bigo Ga Ga Ga, an all-new online variety show featuring entertainment content including gaming and stand-up comedy. The show starred Bigo Live's most popular streamers and some of Malaysia's top radio broadcasters and combine the elements of live streaming with pre-existing forms of mainstream media to create a fresh and unique viewing experience. In the Middle East, Bigo Live once again collaborated with mobile legends bound to stream one of the largest for professional tourism in Middle East and North Africa region. PicoLive also held a world tour for its mascot, Dino, the 16 foot wide mascot. visited landmarks in thousands of countries across the globe, including Singapore, Thailand, the UK, Italy, Germany, France, and the US, appearing at a series of one-site events to interact with local users. During the tour, BeagleLive invited popular local streamers to host a number of performances for local audiences. This helped stimulate interest in our product and promoted brand awareness among local communities. At the same time, BeagleLive launched a number of tour-related videos and online challenges. encouraging local users to join the festivities and meet their friends at these events. These efforts combined to create a unique, memorable experience for BeagleLive users, bringing online and offline interaction. Our integration of the Community feature and localized creator support continue to contribute to content diversification and user engagement. Improvements in the bar channel, potentially the volume of bars video content increased by 14.5% and its average views per user increased by Next, let's turn to Leakey. As mentioned in previous quarters, for products that are currently still loss-making, such as Leakey and Hargle, we continue to focus on the steady improvement of their respective monetization capabilities. automatic or automatic growth we aim to stick to discipline the sales and the marketing strategies and optimize their local structures in order to steadily narrow their respective operation loss and ultimately achieve self-sufficiency In the third quarter, in line with our expectations, we made further progress in narrowing Nike's operation loss. Nike's operation loss in the first three quarters this year was reduced by 86% compared to the same period last year. On the product update front, following the chill launch of the loop feature in the U.S. and Europe in the second quarter, Leaky officially introduced the loop to other regions around the world. This feature has helped the users with similar interests better connected to share content and has further improved the quality of Leaky's user interactions. As a result, the number of videos shared per user per day in the anime community increased by 379% sequentially, while in-app instant messaging user growth by 7.1% in the anime community. Overall, average user time spent on Leike increased by 21.5% sequentially. In addition to its regular localized activities, Leike expanded its operational efforts to include activities that have a positive impact on local communities For example, after flooding in some Southeast Asia countries, Leakey launched dedicated pages for local users to share information on government relief, emergency response, and other breaking details of the disaster in real time. Separately, as a number of Leakey users are currently facing an energy crisis. Likely partnered with 10 Minutes School to launch a campaign aiming to raise public awareness of energy conservation. During the campaign, teachers from 10 Minutes School and other creators posted videos about power saving chips and the importance of conserving electricity, providing users with convincing access to important and useful information. The campaign attracted the participation of more than one million users. Next, we can turn to HAGO. During the third quarter, Pago's live streaming revenue and the number of paid users both increased year over year, while its operating loss further narrowed substantially over the previous quarter, thanks to enhanced monetization and declined spending. Pago launched a one-on-one voice chat feature and upgraded its user loyalty benefits which promoted user interaction and improved the loyalty of its paying user. Both initiatives drove growth in long-tail users' spending. Hago also introduced further updates to its new feature, HagoSpace. Users were granted greater freedom in designing the appearance and the customers of their 3D avatars and gave the opportunity to engage and interact with new 3D virtual things such as karaoke. Both updates contribute to an increasing initiative in innovative immersive and interactive experience. Thanks to these upgrades, cargo space penetration rates and average user time spent both improved significantly over the previous quarter. More importantly, revenues from cargo space increased by 409 percent sequentially. although hardware space revenue contribute to is still relatively small. We're seeking to bring more innovations to the future to further improve its user experience and further diversify hardware monetization streams. Finally, some updates on capital return. During the third quarter, we brought back an additional $14.1 million of our shares. As of September 13, we have purchased a total of $342 million of our shares. out of the previously announced repurchase program of 1.2 billion. Our board has extended the expiry date of the program, under which we may repurchase up to US dollar 800 million until November 2023. We will continue to actively utilize our share repurchase program in order to reward the long-term support of our shareholders. To conclude, the combination of our forward-looking strategic planning and effective execution of our optimization measure drove a further improvement in our profitability during the third quarter. In spite of the volatile macroeconomic by adhering to our long-term growth strategy, focusing on products updates and emphasizing localized diverse content offerings, we achieved a steady, efficient growth of BeagleLive's user community. We will remain flexible and adaptive to the macro elements, continue to invest in building our long-term capabilities, and focus on delivering value to users and creators via our products. We are confident that as we become increasingly efficient and resilient, we will be better positioned to capture long-term growth opportunities and generate sustainable shareholders' value. This concludes my prepared remarks. I will now turn the call to our General Manager of Finance, Alex Liu, for financial