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

Thanks David. Hello everyone.

Now let me go through the details of our financial results. Please note that the financial information and the non-GAAP financial information disclosed in our Earnings Price Release is presented on a continuing operating basis unless advice specifically stated The sale of VavaLife was substantially completed on February 8, 2021, with certain customary matters to be completed in the future. We have ceased consolidation of VavaLife business since February 2021. Our total net revenues for the third quarter was US $586.7 million. compared to US dollar 650.5 million in the same period of 2021, primarily due to macroeconomic uncertainties and unfavorable exchange rates which negatively affect paying user sentiment. As we continue to execute a sustainable growth strategy and proactively implemented a series cost optimization measures, we maintained a healthy growth trajectory in our growth and operating profitability. Cost of revenues for the third quarter decreased by 16.7% year-over-year to US$366.5 million. Revenue-sharing fees and content costs were USD 245.8 million in the third quarter compared with USD 290.1 million in the same period of 2021, primarily due to optimization of revenue-sharing costs. Other operating costs such as bandwidth costs also decreased year-over-year. as a result of our continued optimization of operational efficiency. Gross profit increased to US dollar 220.2 million in the third quarter, with our gross margin improved to 37.5% from 32.4% in the same period of 2021. Our operating expenses for the third quarter decreased by 3.1% to US$202.2 million from US$208.7 million in the same period of 2021. Among the operating expenses, sales and marketing expenses decreased to US$96.8 million from US dollar 106.3 million due to disciplined and efficient spending on user acquisition. Our gap operating income for the third quarter was US dollar 19.8 million compared to US dollar 6.9 million in the same period of 2021. Operating income margin for the third quarter was 3.4 percent compared to 1.1% in the same period of 2021. Our non-GAAP operating income for the third quarter excludes share-based compensation expenses, amortization of intangible assets from business acquisitions, as well as impairment of goodwill and investments and gain of disposal of subsidiaries and business. was US dollar 43.1 million in this quarter compared to US dollar 31.3 million in the same period of 2021. Our non-GAAP operating income margin for the third quarter was 7.4 percent compared to 4.8 percent in the prior year period. GAAP net income for continuing operations attributable to controlling interest of Joy in the third quarter of 2022 was US$515.3 million, compared to net income of US$7.5 million in the same period of 2021, mainly due to the one-off remitment of an equity investment recorded upon the company's consolidation of invested as announced on August 22, 2022. Net income margin was 87.8% in the third quarter of 2022, compared to net income margin of 1.2% in the corresponding period of 2021. Non-GAAP net income from continuing operations attributable to controlling interest of joy in the third quarter was US dollar 76.9 million, compared to US dollar 35.1 million in the same period of 2021. The group's non-GAAP net income margin was 13.1% in the third quarter of 2022, compared to 5.4% in the same period of 2021. Notably, vehicles' non-GAAP net income expanded to 84.1 million in the third quarter, with its non-GAAP net income margin improved to 17.4 percent from 8.7 percent in the prior year period. It means that for the first three quarters of 2022, vehicle segments accumulated non-GAAP net profit has reached to $130.4 million, up by 193.3% year-over-year. Together with our improving profitability, we have maintained a strong operating cash flow as well. For the third quarter of 2022, we booked net cash inflows from operating activities of $117.1 million. We remain a healthy balance sheet with a strong calculation of US dollar 4.28 billion as of September 30 of 2022. Importantly, we have continued to enhance returns to shareholders through dividends and share repurchase. In accordance with our previous announced quarterly dividend plans approved in August and November 2020, We will be distributing a dividend of US dollar 0.51 per ADS for the third quarter of 2022 to shareholders of record as of the close of business on December 23, 2022. Additionally, we have repurchased US dollar 14.1 million of our shares and our previously announced share repurchase program during the third quarter. As of September 30, 2022, we have in total repurchased approximately US$342 million of our 1.2 billion share repurchase programs. Given our current We should be able to balance between keeping sufficient cash to invest in building our long-term capabilities and enhancing return for our shareholders. We will continue to actively utilize share repurchase to create value for our shareholders and the current market condition. Going forward, we remain committed to delivering value to our users and creators. We will remain adaptive to the macro environment, continue to prioritize investment into building our long-term capabilities, and drive effective and high-quality growth of our community and global business. For our business outlook, we expect our net revenues for the first quarter of 2022 to be between US dollar 594 million and US dollar 690 million. We currently have limited visibility surrounding the macroeconomic uncertainties of our business and the markets in which we operate. Therefore, this forecast only reflects our current and preliminary views on the market and operational conditions. These are subject to change. That concludes our prepared remarks. Operator, we would now like to open up the call to questions.

Thanks. Thank you. If you do wish to ask a question, please press star then one on your telephone and wait for your name to be announced. And if you wish to cancel your request, please press star and then two. If you are on a speakerphone, please pick up your handset before asking your questions. When asking a question, please state your question in Chinese first and then repeat your question in English for the convenience of everyone on the call. Thank you. Your first question comes from Thomas Chong at Jefferies. Please go ahead.

早上好,谢谢管理层接受我的提问。 我的问题是关于Q4的guidance的拆分。 如果我们看BGO跟其他业务的趋势的未来的方向, 管理层可以分享一下吗? 然後如果是我們看Q4的情況,就是我們會預計宏觀還有全球開放對 Beagle還有各大地區的影響,會是什麼情況呢? Thanks management for taking my questions. My question is about the Q4 revenue guidance. Can management provide a breakdown among Beagle and other business trends? And also, if we look into the current macro environments as well as the reopening, how should we think about the trend across different geographies? Thank you.

Thank you for your question. I'm David.

According to our current observation, I think the uncertainty from the red line still exists due to the negative impact on the rich and the poor. It mainly includes inflation in the country, as well as the rise in the currency value of the US dollar to the local currency, and the trend of users traveling after the outbreak of the epidemic has continued to exist. And then our current guidance, especially the guidance of the bottom line, reflects a part of the negative impact of the red line. The fourth quarter, as our annual habit, Beagle will hold annual festivals in various areas, The local operation activities will also upgrade the productivity of bloggers and users. It is expected that we will be able to eliminate some of the negative effects of the flood in a certain degree. From the reaction of each area, there may be different flood challenges in the global market at the moment. However, over the past three seasons this year, Big Live has also achieved positive growth in many areas. For example, a part of the South Asian region, Australia, the Philippines, Western European countries, the UK, and Italy. These markets may have something to do with the macroeconomic performance of the various markets, as well as the development differences between the government's financial policy, the epidemic prevention policy, and the various cities. This also confirms that the global development of the economy is beneficial to us. We will continue to closely monitor the changes in the environment and the market,

Thank you, Thomas. This is David. I will take your first question. From our latest observation, we can see that macro uncertainties such as inflation, aggressive appreciation of the U.S. dollar against local currencies, and reopening trends post-lifting of travel restrictions are still negatively affecting users' paying sentiment. The low end of our current Q4 guidance reflects part of the negative macro impacts. Yet in Q4, as our tradition, Beagle will host its annual gala and together with an increased number of operational activities in various regions around the world to promote user and creator activity. So we expect that to offset some of the negative macro impacts. And if we are to take a closer look at the respective regions, we can see that each market is currently facing different levels of the macro challenges. But at the same time, we could also see that in the first three quarters of 2022, BeagleLive still managed to achieve positive year-over-year growth in some countries, like some countries in Asia Pacific regions, such as Australia and New Zealand, and also Philippines, and also some Western European countries, such as the UK and Italy. So that might sometimes be related to their respective macro environment, the tools, that the government has been employing to contain the pandemic and their fiscal policies. And also, it could be related to the level of development of our business in those markets. But ultimately, we believe that it improves, that it's meaningful to remain diversified across different markets. We will continue to closely monitor the shifting market conditions and devote more resources towards those markets that outperform as compared to others in order to generate a higher ROI. Thank you.

Thank you. Thank you. Your next question comes from Alex Poon at Morgan Stanley.

Please go ahead.

Hi. My question is related to margins. Can management share with us the progress on cost discipline and how should we look at margin in 2023? Thank you very much.

Hello, Alex. Thank you for your question. I'm Alex.

Let me answer your question. In the third quarter, our overall profit was better than expected. Beagle Segment achieved 17.4% non-GAAP operating power. The entire group also achieved 13.1% non-GAAP operating power. So if you look at the Beagle segment alone, the profit margin of the Beagle segment has been increased. Last year, the same period was 30.5%, and this year Q3 was 39.4%, which increased by 5 points. This is mainly due to the optimization of content cost and the payment cost and operating manpower cost of the channel are reduced. In addition, in the case of relatively limited market investment costs, a growth in the user efficiency of the core product BeagleLive has been achieved. In the fourth quarter, considering the seasonal impact of the year-end holiday activities, we expect the profit of the non-GAAP of the Beagle version to fall slightly below Q3. Combined with the performance of the first three quarters of this year, the non-GAAP of the Beagle version of the first three quarters of 2022 has reached 15.1% in total. Compared with 2021, it is 7.8%. The increase is very obvious. It has exceeded our original expectation. We hope that next year, we will closely monitor the global supply chain environment, maintain a flexible operating strategy, and adhere to a high-quality growth strategy to continue to optimize costs and expenses, and promote a continued increase in overall operating efficiency. Without the influence of the exchange rate, as more and more products achieve profit and loss balance, we believe that the Group will continue to steadily increase the operating level of Non-GAAP. Thank you.

Thank you, Alex, for the question. This is Alex Liu. I will take your question. Our profits were better than expected in the third quarter with Eagle Segment achieved a non-GAAP net margin of 17.4% and the group achieved a non-GAAP net margin of 13.1%. And if we take a closer look, at the BGO segment. You can see that BGO segment's gross margin was improved year over year from 34.5% in last year in third quarter to 39.4% in this quarter, up by 5%. And that was mainly due to our continual optimization of content costs lower payment channel expenses as well as lowering operational personnel costs. And also you can see that even when we stick to a disciplined marketing spending in the quarter, we still manage to achieve effective and efficient growth of BeagleLife MAU. For the fourth quarter, considering the impact, the seasonality impact of our annual gallows, we expect our gross margin and non-GAAP net margin for the Beagle segment to decrease over the previous quarter. Still, if you look at the first three quarters, the accumulated non-GAAP net margin for Beagle segment has already reached 15.1%, up from 7.8% for the full year of 2021. So the improvement was quite significant and has profoundly outlined our original expectations. So for the coming year in 2023, we will still remain flexible and adaptive to the global macro environment. We'll continue to prioritize high-quality growth and optimize our costs and expenses to further improve our operational efficiency. We believe that as an increasing number of our products are turning self-sufficient, we will be able to steadily improve our non-GAAP profitability on a constant currency basis. Thank you.

Thank you. Your next question comes from Jasmine Wang at Credit Suisse. Please go ahead.

我感谢管理层接受我的提问。 我的问题是我们应该如何看待2023年以及未来的用户增长趋势以及驱动因素。 Thanks, management, for taking my question. My question is on the user side. So what is the user growth outlook for next year and beyond, and what are the drivers? Thank you. 你好,I'm David. 我来回答您的问题。 首先我们看一下BeagleLive。

In this quarter, Biggolive's MAU's comparison increase reached 14.2%, and the comparison increase reached 8.4%. And this is still achieved under the premise that the product and the market have no real growth. This means that we have more natural new users. The overall efficiency of the customers has been improved. This is related to our steady introduction of diversified quality content and exploration of innovative market operations. For example, as mentioned in the speech, we organize activities in the landmarks of more than a dozen countries around the world. This is the trend of resuming offline activities to the offline local community to interact with users. Use this relatively low cost and close to life way to improve the exposure of this product. In the future, we will continue to explore the innovation of various market operations, including online and offline, as well as the innovation of product functions and content. to help Bigelow achieve efficient and high-quality user growth. As for LiteKey and Hargo, our main task is to explore the growth of the transformation and to achieve a positive cycle as soon as possible, and to focus on the core of the product, and to improve the effective delivery capacity of the product. In the third quarter, the loss and return ratio of these two products have been further narrowed. The balance point between profit and loss in the quarter has become closer. Hi, thank you for your question. This is David. I will take your question. Firstly, we can look at Beagle Live.

We can see that in the third quarter BeagleLive MAU increased by 14.2% with a Q on Q increase of 8.4% achieved without meaningful increase of marketing spending in the products in the quarter. It means that a large proportion of its growth was organic and that our use acquisition strategy has become more effective And that was mainly contributed to our continued cultivation of BeagleLive's diverse and premium content offerings and our continuous efforts to innovate our localized operational activities. For example, as I've just highlighted in my prepared remarks in the quarter, we organized a world tour for BeagleLive with our local teams and live streamers visiting dozens of cities in various countries around the world, interacting with users offline and promoting our brand awareness among the local communities in a cost-effective manner. We will continue to explore innovations in our localized operational activities, both offline and online, together with innovation in our product features and content. in order to help BeagleLife sustain its high-quality and efficient user growth. For Leike and Hago, our current priority of these products is still to enhance their monetization capability and to achieve self-sufficiency. At the same time, we'll continue to focus on the fundamentals of these products and improve their organic growth. If we look at the operating loss of these two products in the recent quarter, we can see that both products' operating loss have narrowed and are one step further to break even at quarter level. And their user retention rates were also improved on a sequential basis. So we believe that with both Lykey and Hargle approaching self-sufficiency, they would be in a better position to revisit user-based expansion after the adjustment. Thank you.

Thank you. Your next question comes from Yiwen Zhang from China Renaissance. Please go ahead.

Good morning, everyone. Thank you for your question. I just want to ask what the impact of the business is on us. Because this year is also held in China, which is also a very important market for us. Let's take a look at how this affects our user contracts, including fees. Thanks for taking my question. My question is regarding the World Cup. This year, it was hosted in the Middle East, which is one of our important markets. Can you comment on its impact on our operation, including the user engagement and also user spending? Thank you.

Hello, let me answer this question. This is the world cup. I think this is for us. It should be considered that this has a positive impact and a negative impact Yes, and then during the world cup, users will definitely spend a part of their time watching TV and then through this TV media or offline entertainment venues to watch the competition And then for users, this is a live broadcast on the mobile end, short video, social media, etc. The market of products has a certain divide and then it may also affect the daily life of users especially in the Middle East and the World Cup. But in order to meet the needs of the world cup audience, we also created a series of content and activities related to football. For example, we invited KAL to do some commentary, Then the topic of the team and the content of the World Cup are related activities. Considering the fourth quarter, we are already in the active period of market operation. There are more activities that can drive the activity of the host and users. We believe that in the future, we can further neutralize the negative impact of the World Cup on users' activity and income.

Thank you. This is David. I will answer your question. I believe that the World Cup both have positive and negative impacts on our business. During the World Cup, we expect users to spend more time watching the games through traditional media such as TV or engage in an increased number of offline entertainment activities. which will divert some of our users' time spent from mobile products such as our social entertainment products such as live streaming and short videos. Therefore, there might be some negative impacts on our DAU's user time spent, especially in the Middle East where the event is held and possibly in countries with a participating team. However, this also could be an opportunity for us to bring in a special content activity for our users. For example, to help our users better enjoy the World Cup, we have launched a series of special activities related to the theme, such as inviting football KOLs to host World Cup commentary sessions on BeagleLife. and also Laiki, and also launching World Cup team-specific and event-specific live streaming rooms, et cetera. So considering that in Q4, BeagleLive will host its annual gala together with an increased number of operational activities to promote user and creator activity, we expect the impact from World Cup on user activity and monetization should be neutralized. Thank you.

Thank you. Your next question comes from Brian Gong at Citi. Please go ahead.

I will translate myself. How does management view the geopolitical risks to our business and the latest regulatory trend in different overseas markets? And also, can management update any plan on usage of our strong cash ahead? Thank you.

Thank you for your question. I think the first one is what I want to say is that in fact, the geopolitical risks are not only emerging today, but have always existed.

And he is I think he is such a problem that has always existed. Yes, so on the other hand, if a company is really doing a good globalization and income from the dispersal of various different regions, the risks of geopolitical risks have actually become a normal risk of daily operation. There will always be some areas where there are opportunities and some areas where there may be risks, and then balance it out like this. In fact, it is a relatively advantage of a global, truly globalized company compared to a company in a single country and a single region. This is one aspect, and then the second question is about the planning of funds. I think considering the current red line, there are some uncertainties. We have done a lot of priority processing. In terms of expenditure, we still prioritize the strategic focus of this business and focus on long-term competitiveness, long-term effective business direction. Yes, both to ensure the continuous stable growth of our current core business and to be able to get enough funds to ensure that a business that we have long-term vision can have enough time to grow. Yes, in fact, this is a balance. I think our balance is quite good. You can see that our current operating cash flow is very healthy. It has been growing steadily. There is also a very abundant cash reserve. Another thing is that as a company that is still growing, we are also more sincere in terms of shareholding. In the first three seasons, we have accumulated 2.167 billion yuan in cash and repurchase funds. more than 145% of the total in the first three seasons. We currently have a return plan of $800 million and a share of $1.5 billion. This is a very large amount for our market share. So we will continue to maintain this resilience and flexibility in finance, and take good care of the needs and shareholder feedback for the investment of our own business, and create greater value for shareholders for the long term.

Thank you, Brian, for your question. This is David. I will answer your question. For your first question on geopolitical risk, I'd say that global geopolitical political risk does not just emerge today, but they are always a long-lasting risk for a global company. And we would like to say that it's a normal operational risk. risk factor for a global company with global exposure but we would say that it's also created a positive impact for global players as compared to a single market player because of the fact that we have operations in various regions and usually it means that for some regions there would be growth opportunities but for some reasons in some time such geopolitical risk might emerge. And then when you look at the global level, it's actually neutralized and better when it comes to risk diversification. We are in a better position as compared to a single market player in the industry. With regards to our cash usage, given the current macro uncertainties, we have been reviewing and sharpening our focus on a clear set of business priorities and become more selective in our expenditure. We have prioritized investment in our core businesses and also businesses that we believe that will be crucial for our mid- to long-term growth. So it's a matter of balancing, balancing between making sure that we ensure sufficient capital for our own organic growth of our core businesses and also making sure that we have enough capital to return to our holders. You can see that from our operating cash flow, we have been very healthily improving our operating cash flow and have a very strong cash position. As a company that is still seeking growth, we have been very generous in enhancing shareholder returns. If you look at the first three quarters, we have already distributed in total U.S. dollar $216.7 million via dividends and share purchases, which is equivalent to 145% of our non-GAAP net profit in the first three quarters. And as of today, we still have a remaining share repurchase program of up to $800 million and dividend program of approximately $150 million, which is very sizable, especially when you compare it to our market cap. So to sum up, we will continue to remain financially flexible and strike a balance between keeping sufficient cash to invest in our business and enhancing return for our shareholders. So I believe that we have already taken all of the questions, and thank you very much for joining our call. We look forward to speaking with everyone next quarter. Thank you.

Thank you, everyone.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. Thank you. Thank you. Thank you. Ladies and gentlemen, thank you for standing by and welcome to the Joy Incorporated third 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 Shirling 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. 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 reopening chains 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. People's lives and use 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 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 BeagleLine. Despite the macro headwinds and monetization challenges, BeagleLine 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 trend in Bitcoin 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 sequential 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, we go live 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 iteration of the Community feature and localized creator support continue to contribute to content diversification and user engagement. Improvements in the bar channel. 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 Hargo, 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, Laki officially introduced Loop to other regions around the world. This feature has helped users with similar interests better connected to shared content and has further improved the quality of Laki'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 1 million users. Next, we can turn to HAGO. During the third quarter, Pago's live streaming revenue and the number of pay users both increased year over year, while its operating loss further narrowed substantially over the previous quarter, thanks to enhanced monetization and disciplined 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. Pago also introduced further updates to its new feature, PagoSpace. 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

Thanks David.

Hello everyone. Now let me go through the details of our financial results. Please note that the financial information and the non-GAAP financial information disclosed in our Earnings Price Release is presented on a continuing operating basis unless advice specifically stated The sale of VavaLife was substantially completed on February 8, 2021, with certain customary matters to be completed in the future. We have ceased consolidation of VavaLife business since February 2021. Our total net revenues for the third quarter was US $586.7 million. compared to US dollar 650.5 million in the same period of 2021, primarily due to macroeconomic uncertainties and unfavorable exchange rates which negatively affect paying user sentiment. As we continue to execute a sustainable growth strategy and proactively implemented a series cost optimization methods, we maintained a healthy growth trajectory in our growth and operating profitability. Cost of revenues for the third quarter decreased by 16.7% year-over-year to US$366.5 million. Revenue-sharing fees and content costs were USD 245.8 million in the third quarter compared with USD 290.1 million in the same period of 2021, primarily due to optimization of revenue-sharing costs. Other operating costs such as bandwidth costs also decreased year-over-year. as a result of our continued optimization of original efficiency. Gross profit increased to US dollar 220.2 million in the third quarter with our gross margin improved to 37.5% from 32.4% in the same period of 2021. Our operating expenses for the third quarter decreased by 3.1% to US$202.2 million from US$208.7 million in the same period of 2021. Among the operating expenses, sales and marketing expenses decreased to US$96.8 million from US dollar 106.3 million due to disciplined and efficient spending on user acquisition. Our gap operating income for the third quarter was US dollar 19.8 million compared to US dollar 6.9 million in the same period of 2021. Operating income margin for the third quarter was 3.4%. compared to 1.1% in the same period of 2021. Our non-GAAP operating income for the third quarter excludes share-based compensation expenses, amortization of intangible assets from business acquisitions, as well as impairment of goodwill and investment and gain of disposal of subsidiaries and business. was US dollar 43.1 million in this quarter compared to US dollar 31.3 million in the same period of 2021. Our non-GAAP operating income margin for the third quarter was 7.4% compared to 4.8% in the prior year period. GAAP net income for continuing operations attributable to controlling interest of Joy in the third quarter of 2022 was US$515.3 million, compared to net income of US$7.5 million in the same period of 2021. Mainly due to the one-off remitment of an equity investment recorded upon the company's consolidation of investment as announced on August 22, 2022. Net income margin was 87.8% in the third quarter of 2022, compared to net income margin of 1.2% in the corresponding period of 2021. Non-GAAP net income from continuing operations attributable to controlling interest of joy in the third quarter was US dollar 76.9 million, compared to US dollar 35.1 million in the same period of 2021. The group's non-GAAP net income margin was 13.1% in the third quarter of 2022, compared to 5.4% in the same period of 2021. Notably, vehicles' non-GAAP net income expanded to 84.1 million in the third quarter, with its non-GAAP net income margin improved to 17.4% from 8.7% in the prior year period. It means that for the first three quarters of 2022, vehicle segments accumulated non-GAAP net profit has reached to $130.4 million, up by 193.3% year-over-year. Together with our improving profitability, we have maintained a strong operating cash flow as well. For the third quarter of 2022, we booked net cash inflows from operating activities of $117.1 million. We remain a healthy balance sheet with a strong calculation of US dollar 4.28 billion as of September 30 of 2022. Importantly, we have continued to enhance returns to shareholders through dividends and share repurchase. In accordance with our previous announced quarterly dividend plans approved in August and November 2020, We will be distributing a dividend of US dollar 0.51 per ADS for the third quarter of 2022 to shareholders of record as of the close of business on December 23, 2022. Additionally, we have repurchased US dollar 14.1 million of our shares and our previously announced share repurchase program during the third quarter. As of September 30, 2022, we have in total repurchased approximately US $342 million of our 1.2 billion share repurchase programs. Given our current We should be able to balance between keeping sufficient cash to invest in building our long-term capabilities and enhancing return for our shareholders. We will continue to actively utilize their approaches to create value for our shareholders and the current market condition. Going forward, we remain committed to delivering value to our users and creators. we will remain adaptive to the macro environment, continue to prioritize investments into building our long-term capabilities, and drive effective and high-quality growth of our community and global business. For our business outlook, we expect our net revenues for the first quarter of 2022 to be between US dollar 594 million and US dollar 690 million. We currently have limited visibility surrounding the macroeconomic uncertainties of our business and the markets in which we operate. Therefore, this forecast only reflects our current and preliminary views on the market and operational conditions. These are subject to change. That concludes our prepared remarks. Operator, we would now like to open up the call to questions. Thanks.

Thank you. If you do wish to ask a question, please press star then one on your telephone and wait for your name to be announced. And if you wish to cancel your request, please press star and then two. If you are on a speakerphone, please pick up your handset before asking your questions. When asking a question, please state your question in Chinese first and then repeat your question in English for the convenience of everyone on the call. Thank you. Your first question comes from Thomas Chong at Jefferies. Please go ahead.

早上好,谢谢管理层接受我的提问。 我的问题是关于Q4的guidance的拆分。 如果我们看B狗跟其他业务的趋势了, 未来的方向,管理层可以分享一下吗? 然後如果是我們看Q4的情況,就是我們會預計宏觀還有全球開放對 Beagle還有各大地區的影響,會是什麼情況呢? Thanks management for taking my questions. My question is about the Q4 revenue guidance. Can management provide a breakdown among Beagle and other business trends? And also, if we look into the current macro environments as well as the reopening, how should we think about the trend across different geographies? Thank you.

Thank you for your question. I'm David.

According to our current observation, I think the negative impact of uncertainty on the rich and the poor from Hong Kong is still there. It mainly includes inflation in the country, as well as the rise in the currency value of the US dollar to the local currency, and the trend of users traveling after the outbreak of the epidemic has continued to exist. And then, our current guidance, especially the guidance of the bottom line, reflects a part of the negative impact of the red line. The fourth quarter, as our annual habit, Beagle will hold annual festivals in various areas, The local operation activities will also upgrade the productivity of bloggers and users. It is expected that we will be able to reduce some of the negative effects of the pandemic to a certain extent. From the reaction of each area, it is possible that there will be different pandemic challenges in the global market at the moment. However, over the past three seasons this year, Big Live has also achieved positive growth in many areas. For example, some areas in South Asia, such as Auxin, the Philippines, Western European countries, the UK, Italy, these markets may be related to the macroeconomic performance of the various markets, the financial policy, the epidemic prevention policy of the government, and the difference in development between the various cities. This also confirms that what we are talking about, which is to insist on globalization, is beneficial to us. We will continue to closely monitor the changes in the environment and market,

Thank you, Thomas. This is David. I will take your first question. From our latest observation, we can see that macro uncertainties such as inflation, aggressive appreciation of the US dollar against local currencies, and reopening trends post-lifting of travel restrictions are still negatively affecting users' paying sentiment. The low end of our current Q4 guidance reflects part of the negative macro impacts. Yet in Q4, as our tradition, Beagle will host its annual gala and together with an increased number of operational activities in various regions around the world to promote user and creator activity. So we expect that to offset some of the negative macro impacts. And if we are to take a closer look at the respective regions, we can see that each market is currently facing different levels of the macro challenges. But at the same time, we could also see that in the first three quarters of 2022, BeagleLive still managed to achieve positive year-over-year growth in some countries, like some countries in Asia Pacific regions, such as Australia and New Zealand, and also Philippines, and also some Western European countries, such as the UK and Italy. So that might sometimes be related to their respective macro environment, the tools, that the government has been employing to contain the pandemic and their fiscal policies. And also, it could be related to the level of development of our business in those markets. But ultimately, we believe that it improves, that it's meaningful to remain diversified across different markets. We will continue to closely monitor the shifting market conditions and devote more resources towards those markets that outperform as compared to others in order to generate a higher IOI. Thank you.

Thank you. Thank you. Your next question comes from Alex Poon at Morgan Stanley.

Please go ahead.

Hi. Thank you. My question is related to margins. Can management share with us the progress on cost discipline and how should we look at margin in 2023? Thank you very much.

Hello, Alex. Thank you for your question. I'm Alex. Let me answer your question.

In the third quarter, our overall profit was better than expected. Beagle Segment achieved 17.4% non-GAAP operating power. The entire group also achieved 13.1% non-GAAP operating power. So if you look at the Beagle segment alone, the profit margin of the Beagle version has been increased in the third quarter. Last year, the same period was 34.5%, and this year, Q3 was 39.4%, which increased by 5 points. This is mainly due to the optimization of content cost and channel payment cost and operating manpower cost are reduced. In addition, in the case of relatively limited market share cost, a growth of BeagleLive users is still achieved. In the fourth quarter, considering the seasonal impact of the year-end holiday activities, we expect the profit of the non-GAAP of the Beagle version to fall slightly below Q3. Combined with the performance of the first three quarters of this year, the non-GAAP of the Beagle version of the first three quarters of 2022 has already reached 15.1%. Compared with 2021, it is 7.8%. The increase is very obvious. It has exceeded our original expectation. In the coming year, we will closely monitor the global supply chain environment, maintain a flexible operating strategy, and adhere to a high-quality growth strategy to continue to optimize costs and fees, and promote overall operating efficiency. In addition to the impact of the exchange rate, as more and more products achieve profit and loss balance, we believe that the Group will continue to steadily improve the operating level of Non-GAAP. Thank you.

Thank you, Alex, for the question. This is Alex Liu. I will take your question. Our profits were better than expected in the third quarter with ego segment achieved a non-GAAP net margin of 17.4% and the group achieved a non-GAAP net margin of 13.1%. And if we take a closer look, at the BGO segment. You can see that BGO segment's gross margin was improved year over year from 34.5% in last year in the quarter to 39.4% in this quarter, up by 5%. And that was mainly due to our continual optimization of content costs lower payment channel expenses as well as lowering operational personnel costs. And also you can see that even when we stick to a disciplined marketing spending in the quarter, we still manage to achieve effective and efficient growth of BeagleLife MAU. For the fourth quarter, considering the impact, the seasonality impact of our annual gallows, we expect our gross margin and non-GAAP net margin for the Beagle segment to decrease over the previous quarter. Still, if you look at the first three quarters, the accumulated non-GAAP net margin for Beagle segments has already reached 15.1%. up from 7.8% for the full year of 2021. So the improvement was quite significant and has profoundly outdone our original expectations. So for the coming year in 2023, we will still remain flexible and adaptive to the global macro environment. We'll continue to prioritize high-quality growth and optimize our costs and expenses to further improve our operational efficiency. We believe that as an increasing number of our products are turning self-sufficient, we will be able to steadily improve our non-GAAP profitability on a constant currency basis. Thank you.

Thank you. Your next question comes from Jasmine Wang at Credit Suisse. Please go ahead.

Thanks, management, for taking my question. My question is on the user side. So what is the user growth outlook for next year and beyond, and what are the drivers? Thank you.

Hello, I'm David. Let me answer your question.

First of all, let's take a look at BeagleLive. In this quarter, BeagleLive's MAU has reached 14.2% in the same ratio, and 8.4% in the same ratio. Moreover, this is achieved under the premise that there is no real growth in the product and the market. This means that we have more natural users. Overall, the efficiency of the customers has been improved. This is related to our steady introduction of diversified high-quality content and exploration of innovative market operations. For example, as mentioned in the speech, we organize activities in the landmarks of more than 10 countries around the world, from the trend of resuming offline activities to interacting with users in offline local communities, using low-cost and close-to-life ways to improve the exposure of this product. In the future, We will continue to explore the innovation of all kinds of market operations, including online and offline, as well as the innovation of product functions and content, in order to help Bigola achieve efficient and high-quality user growth. Regarding LIKEY and HAGO, our main task is to explore the growth of the transformation, to realize the positive cycle as soon as possible, and to focus on the core of the product, and to improve the effective delivery capacity of the product. In the third quarter, the loss-loss ratio of these two products has been further revised. The loss-loss balance point of the quarter is closer. The ratio of the flow of these two products has also been improved. I believe that when they gradually recover and approach this loss-loss balance, there will be an opportunity to bring new guidelines in terms of user growth.

Hi.

Thank you for your question. This is David. I will take your question. Firstly, we can look at Beagle Live. We can see that in the third quarter, Beagle Live MAU increased by 14.2% with a Q on Q increase of 8.4% achieved without meaningful increase of marketing spending in the product in the quarter. it means that a large proportion of its growth was organic and that our youth acquisition strategy has become more effective. And that was mainly contributed to our continued cultivation of BeagleLive's diverse and premium content offerings and our continuous efforts to innovate our localized operational activities. For example, as I've just highlighted, in my preparing months. In the quarter, we organized a world tour for BeGo Live with our local teams and live streamers visiting dozens of cities in various countries around the world, interacting with users offline and promoting our brand awareness among the local communities in a cost-effective manner. We will continue to explore innovations in our localized operational activities, both offline and online, together with innovation in our product features and contents in order to help BeagleLive sustain its high-quality and efficient user growth. For Leike and Hago, our current priority of these products is still to enhance their monetization capability and to achieve self-sufficiency At the same time, we'll continue to focus on the fundamentals of these products and improve their organic growth. If we look at the operating loss of these two products in the recent quarter, we can see that both products' operating loss have narrowed and are one step further to break even at quarter level. And their user retention rates were also improved on a sequential basis. So we believe that with both Leaky and Hago approaching self-sufficiency, they would be in a better position to revisit user-based expansion after the adjustment. Thank you.

Thank you. Your next question comes from Yiwen Zhang from China Renaissance. Please go ahead.

Good morning, everyone. Thank you for your question. I'd like to ask how this cup has affected our business, because it was also held in the Middle East this year, and it's also one of our most important markets. I'd like to see how this has affected our user contracts, including pay. Thanks for taking my question. My question is regarding the World Cup. This year it was hosted in the Middle East, which is one of our important markets. Can you comment on its impact on our operations, including the user engagement and also user spending? Thank you.

Hello, let me answer this question.

I think the World Cup has a positive and negative impact on us. During the World Cup, users will definitely spend a part of their time watching TV, watching competitions through TV media or offline entertainment venues, and there will be a certain divide in the market of products such as live broadcasts, short videos, social media, and so on. It may also affect The impact on the market is significant, especially in the Middle East and the world cup. But in order to meet the needs of the world cup, there are also some shortcomings. We have also uploaded a series of content and activities related to football. For example, we invited KAL to do some commentary. Then, the topic of the line-up team and the content of the World Cup are related activities. Considering the fourth quarter, we are already in the active period of market operation. There are many activities that can drive the activity of the host and users. We believe that in the future, we can further neutralize the negative impact of the World Cup on users' activity and income.

Thank you. This is David. I will answer your question. I believe that the World Cup both have positive and negative impacts on our business. During the World Cup, we expect users to spend more time watching the games through traditional media such as TV or engage in an increased number of offline entertainment activities. which will divert some of our users' time spent from mobile products such as our social entertainment products such as live streaming and short videos. Therefore, there might be some negative impacts on our DAU's user time spent, especially in the Middle East where the event is held and possibly in countries with a participating team. However, this also could be an opportunity for us to bring in a special content activity for our users. For example, to help our users better enjoy the World Cup, we have launched a series of special activities related to the theme, such as inviting football KOLs to host World Cup commentary sessions on BeagleLife. and also Laiki, and also launching World Cup team-specific and event-specific live streaming rooms, etc. So considering that in Q4 BeagleLive will host the Zano Gala together with an increased number of operational activities to promote user and creator activity, we expect the impact from World Cup on user activity and monetization should be neutralized. Thank you.

Thank you. Your next question comes from Brian Gong at Citi. Please go ahead.

我们在资金使用上是否有一些更新的规划? 谢谢。 I will translate myself. How does management view the geopolitical risks to our business and the latest regulatory trend in different overseas markets? And also, can management update any plan on usage of our strong cash ahead? Thank you. 谢谢你的问题啊。

foreign foreign

There will always be some areas where there is a chance and there are some areas where there may be risks. Even if it is balanced like this, it is actually a relatively advantage that I think is a relatively advantage compared to this company of a single country and a single area. This is on the one hand, and then the second question is about the planning of funds. I think considering the current red line, there are some uncertainties. We have done a lot of priority processing. In terms of spending, we are still prioritizing the strategic focus of this business and also focusing on long-term competitiveness, long-term effective business direction. Yes, both to ensure the continuous stable growth of our existing core business and to be able to get enough funds to ensure that a business that we have long-term vision can have enough time to grow up. Yes, in fact, this is a balance. I think our balance is quite good. You can see that our current cash flow is very healthy. It has been growing steadily, and there is also a very abundant cash reserve. Another thing is that as a company that is still growing, we are also more sincere in terms of shareholding. In the first three seasons, we have accumulated a total of 216.7 billion yuan in cash and repurchase funds. More than 145% of the total in the first three seasons. We currently have a total of $800 million in rebates and $150 million in shares. For us, this is a very large amount of market value. So we will continue to remain resilient and flexible in finance, and take good care of the needs and shareholder returns invested in our own business, creating greater value for shareholders for the long term.

Thank you, Brian, for your question. This is David. I will answer your question. For your first question on geopolitical risk, I'd say that global geopolitical political risk does not just emerge today, but they are always a long-lasting risk for a global company. And we would like to say that it's a normal operational risk. risk factor for a global company with global exposure but we would say that it's also created a positive impact for global players as compared to a single market player because of the fact that we have operations in various regions and usually it means that for some regions there would be growth opportunities but for some reasons in some time such geopolitical risk might emerge. And then when you look at the global level, it's actually neutralized and better when it comes to risk diversification. We are in a better position as compared to a single market player in the industry. With regards to our cash usage, given the current macro uncertainties, we have been reviewing and sharpening our focus on a clear set of business priorities and become more selective in our expenditure. We have prioritized investment in our core businesses and also businesses that we believe that will be crucial for our mid- to long-term growth. So it's a matter of balancing, balancing between making sure that we ensure sufficient capital for our own organic growth of our core businesses and also making sure that we have enough capital to return to our holders. You can see that from our operating cash flow, we have been very healthily improving our operating cash flow and have a very strong cash position. As a company that is still seeking growth, we have been very generous in enhancing shareholder returns. If you look at the first three quarters, we have already distributed in total US dollar $216.7 million via dividends and share repurchases, which is equivalent to 145% of our non-GAAP net profit in the first three quarters. And as of today, we still have a remaining share repurchase program of up to $800 million and dividend program of approximately $150 million, which is very sizable, especially when you compare it to our market cap. So to sum up, we will continue to remain financially flexible and strike a balance between keeping sufficient cash to invest in our business and enhancing return for our shareholders. So I believe that we have already taken all of the questions and thank you very much for joining our call. We look forward to speaking with everyone next quarter. Thank you.

Thank you everyone.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.