JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Joy Incorporated's first quarter 2023 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'd now like to hand the conference over to your host today, Jane Zee, the company's senior manager of investor relations. Please go ahead, Jane.

Thank you, operator. Hello, everyone. Welcome to Joy's first quarter 2023 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 Vice President 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.joi.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 entirely subject to risks and certainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and certainties, please refer to our latest annual report on Form 20F, and other documents filed with the SEC. 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.

Hello, everyone. Welcome to our first quarter 2023 earnings call. We kick off 2023 with a strong quarter despite ongoing micro uncertainties. Let me first touch briefly upon some of our most notable achievements, which I will discuss in more detail shortly. First, during the quarter, we recorded $583.6 million in revenues, including 467.9 million of revenue from Beagle is sitting in the high end of our guidance. Notably, we maintained our profit growth momentum. Our group's non-GAAP net profit reached 49.9 million. Representing year-over-year increase of 138.7%, with a non-GAAP net margin of 8.5%. The big gold segment recorded a non-GAAP net profit of 56.8 million, with a non-GAAP net margin of 12.1%. We also maintained a healthy positive operating cash flow of 67.5 million during the quarter, further enhancing our robust financial position. Second, our global average mobile MAUs returned to positive quarter-over-quarter growth. In the first quarter, our global average mobile MAUs reached 272.9 million, increasing by 1.9% from the previous quarter. Big old lives MAUs grew steadily, increasing by 19% year-over-year. And third, Following two years of operational adjustment and optimization, Leakey continued to make significant progress. Importantly, Leakey once again achieved financial break-even after first hit its milestone in the second half of last year. At the same time, Leakey's revenue increased by 9% sequentially, and its core user base by 5.2% on a quarterly basis. While we have seen some green shots of recovery, we remain curiously optimistic regarding industry outlook. Given that ongoing microeconomy uncertainties may still pressure consumers confidence, and user spending on online social entertainment. Looking to the future, we remain committed to our long-term growth strategy. Globalization remains a key driver of our business growth. We will continue to prioritize a high-quality, sustainable growth, improve monetization and profitability across all business units and further strengthen our financial resilience by generating robust operation cash flows. Harnessing our global technical and localized operation capabilities continue to be our top priority and fundamental to our worldwide business success. We will cultivate our global user community and provide exceptional interactive experience to our users through product innovation, drivers, content, and localized offering. In line with our global positioning and commitment to high-quality, substantial We intend to further concentrate our resources on building our core strategies and the global business that align with our long-term strategies.

Involving our core

Competencies in both global localized operations and technically required continuous commitment. We have mentioned many of our recent efforts on localized operations. Today, I would like to take this opportunity to discuss some of our progress on technology implementation and development. Our technological approach has always been leveraging cutting-edge technology to drive product innovations, improve user experience, and optimize our operation efficiency. At Beagle, we employed around 1,400 R&D persons, including approximately 115 experts and energy engineers specializing in the development of AI. Their expertise spans a wide range of AI applications, including computer vision, facial recognition, image comprehension, and natural language processing. Our team leveraged AI to advance our text, image, and video recognition capabilities, analyze the user behavior data, improve intelligent recommendations to users, and manage content quality. In BeagleLive and Leike, we use AI to identify non-standard user interests and direct users toward more relevant and personalized content. It has also improved our discovery process for talented creators and allowed us to more efficiently channel resources to them. This is highly valuable for developing our interest-based communities and thriving content ecosystems. As we operate in over 150 countries and regions, we have established local regulatory teams and professional content and moderators all over the world to ensure regulator compliance and alias our content with local cultural normals. AI has proven to be a powerful tool for improving content quality and cultivating our content ecosystem. By utilizing AI, we have significantly improved the efficiency of our content moderation. We have developed various AI recognition models based on a database of millions of policy variations and created directly for filtering improper rating content in more than 20 languages. With approximately 1.5 to 1.6 million live streaming rooms and 4 to 5 million short videos on Beagle every day, we needed to review over 600 million images on a daily basis. Our successful implementation of AI has reduced the manual moderation rate to a mere 0.05 percent and brought the accuracy rate of our AI detection system to over 99.8%. We have also leveraged the technology to bring innovation, interactive experience to our users. For example, Hago's new 3D space empowers the user to create virtual avatars and interact with each other in virtual 3D virtual sense, enabling users to engage in immersive social experience. HAGO's 3D avatar model can be generated and adjusting various facial parameters or directly from photos uploaded by our users. Using deep learning technology, we synchronize multilingual pronunciation, mouth movements, and visual expressions between users and their digital avatars in real time. For the karaoke scene, virtual characters can even dance to the rhythm of musical beats. The rapid evolution of the rapid evolution of AI technology is set to transform the industry and economies worldwide. It also presents a multitude of opportunities for companies to create value and enhance operational efficiency across various applications. We are committed to exploring and interacting ways to integrate AI into our business. In order to deliver accessible and captivating interactive experience to our users across the globe, to further improve our operational efficiency. Now, let's take a closer look at our products. We will start with BeagleLine. During the first quarter, Figo Live sustained its double digital user growth momentum for the first consecutive quarter, with its MAUs increased by 19% year-over-year to 37.7 million. Growth was observed across several key regions, 7.3% growth in Europe, 13.2% growth in the Middle East, and 23.6% growth in Southeast Asia and other emerging markets year-over-year. In terms of monetization, Big O Live saw steady recovery in its paying user growth in the first quarter. The number of paying users in Europe and North America increased year-over-year by 9.9% and 10.2% respectively. Big O Live's live streaming revenues in Europe, North America, and the Middle East all rebounded from the previous quarter. We launched a series of operational events across major regions. in the first quarter and successfully engaged with and encouraged active participation from our creators and users. In February, Beagles Live launched the Big Star Search event, a talent competition open in North American participants and enabled us to recruit the most exceptional creators across a wide range of categories, such as dance, music, cosplay, cooking, etc. The event's six-month duration and a wide variety of content genres make its bigger lives the longest-running, the most impactful talent competing to date. In the Middle East, BeagleLive boasted user engagement when it once again collaborated with mobile legend BonBon to livestream the M4 World Championships. The quarter also marked the first collaboration between BeagleLive and Ultra Upper Hobby. Ultra Upper Hobby is the first Middle East edition of the world-famous ultra music festival. BeagleLive brought exhaustive live concert experience, exciting performances, and behind these things, footage to online audience. BeagleLive also set up a booth at the festival venue to interact with thousands of audience further enhancing its brand awareness in the local community. In terms of content development, BeagleLive remains focused on incentivizing broad channel content products. In the first quarter, our strategic efforts to enhance the creating and distribution of high-quality content results in 18.7% sequential increase in video content in bar. Furthermore, by utilizing computer vision technology, we have also improved the channel's automatic content tagging and its recommendation algorithm. These improvements resulted in a 8.8% sequential growth in average impressor per user in the bar channel. For live streaming and social interaction, user engagement has continued to grow. This is mainly due to optimized multi-person room interfaces and few features include sound effects and interactive tools. Sequentially, the number of multi-user rooms hosted increased by 9.3%, and the number of users going live increased by 8.7%. Next, let's turn to Leakey. To ensure the healthiness and the sustainability of our ecosystem and growth model, we have been actively adjusting LACIS marketing strategy since the first quarter of 2021 and focusing on enhancing its monetization efficiency and organic user acquisition capabilities. We are happy to announce that we have seen some meaningful progress during the first quarter. LACIS revenue increased by 9% sequentially in the first quarter, it also achieved a break-even during the quarter after the first hit of its milestone in the second half of last year. In terms of user engagement, Leike's interest-based community grew, and the quality of user interactions improved. During the first quarter, Leike's core user base de-use increased by 5.2% sequentially. In the first quarter, Leakey further optimized its creator services and delved deeper into understanding creators' needs. The number of official creators increased by 6.2% sequentially. Leakey also reinforced its positioning as an interest-based community by collaborating with professionals in various fields, including music, racing, food, and sports. This actively encourages them to create high-quality content on the platform, fostering an already vibrant content ecosystem. We also continue to integrate corporate social responsibility into our daily operations and create a positive impact on the community. During Renam Day, Nike partnered with Jordanian charitable organization, TUA for the Share a Meal campaign. This initiative encourages users to post videos of their Ramadan experience and share blessings during the holiday. For every user who participated in the campaign, like a donate a certain amount of money to TUE on their behalf. Nearly 100,000 users participated in the event.

Next, on to HAGO.

During the quarter, HAGO remained dedicated to enhance user activity by boosting social engagement. As we have mentioned previously, over the past two years, HAGO has been gradually transitioning its strategic focus to become a multi-user social platform by utilizing social channels, including video and audio multiplayer chat rooms. HAGO's space and the groups of families, HAGO offers users a growing rate of social interaction opportunities. And it has created a highly interconnected user community. In the first quarter, the penetration rate of HAGO's social channels increased by 4.4% sequentially. In addition, the daily average time spent by users continued to grow, reaching 90.8 minutes. We have also conducted multiple rounds of net promoter survey among users, the results of which indicated consistent enhancement of user satisfaction particularly in Indonesia and the Philippines, Brazil, and Mexico. Furthermore, many users have experienced their appreciation for how HAGO enhances their social experience. HAGO will continue to adhere to a disciplined marketing spending strategy and optimize its cost structures. We expect a gradual improvement in Hargo's operating loss over the coming quarter. Finally, some updates on capital return. During the first quarter, we bought back an additional 15.7 million of our shares. Given recent market volatility, we will set up our share repurchase in the second quarter to reward the long-term support of our shareholders. To conclude, despite the near-term micro-challenges, we delivered solid results in the first quarter as we maintained strong profitability at the group level and achieved accelerated growth in BeagleLive's MAUs. Looking ahead, we remain committed to enrich lives through technology. We will continue to cultivate our global user community and provide exceptional interactive experience to our users through product innovations. diverse content and localized offerings. We are confident that we are well-placed to size long-term growth opportunities and generate sustainable shareholders' value. This concludes my prepared remarks. I will now turn the call to our Vice President of Finance, Ax Liu, for our

financial updates. Thanks, David. Hello, everyone.

Despite macro uncertainties, we achieved solid results in the first quarter. Our revenue in the first quarter exceeded the higher end of our guidance and we continued to deliver better profits both at group level and at product level, thanks to our effective execution of cost optimization measures and improved operational efficiency. We were also encouraged to see continued sequential recovery in Beagle's paying users for the third consecutive quarter. as it increased by 7.8% year-over-year and 1.3% quarter-over-quarter to 1.57 million. As we continued to cultivate diverse premium content and carry out effective localized operational activity, we boosted user engagement and drove further progress in user-based expenses. in the quarter. We reversed the trend of our global FAO in the first quarter, which increased by 1.9% sequentially to 272.9 million. Next, let me walk you through our performance for the first quarter of 2023 in detail. Our total net revenues were US$583.6 million in the first quarter. Cost of revenues for the quarter decreased to US$379 million, among which our revenue sharing fees and content cost decreased to US$248.1 million. Gross profit was $204.6 million in the quarter, with our gross margin improved to 35.1% from 32.2% in the same period of 2022. Primarily due to optimization of revenue sharing costs and other operational costs, Our operating expenses for the quarter were USD 205.3 million, increased from USD 200.6 million in the same period of 2022. Among the operating expenses, sales and marketing expenses decreased to USD 97.6 million from USD 104.4 million due to our effective control over marketing expenses and optimization of overall sales and marketing strategies. R&D expenses increased to US$35.8 million from US$64.1 million in the same period of 2022, primarily due to increased R&D personal related expenses as we try already ties the resources into building our technological capabilities. Our gap operating income for the quarter was US dollar 2.5 million. Compared to operating income, US dollar 6.3 million in the same period of 2022. Our non-gap operating income for the quarter, which excludes SBC expenses, amortization of intangible assets from business acquisitions, as well as impairment of goodwill and investments was U.S. dollar 27.8 million in this quarter compared to U.S. dollar 33.3 million in the same period of 2022. Our non-GAAP operating income margin for the quarter was 4.8 percent compared to 5.3% in the prior year period. GAAP net income attributable to controlling interest of Joy in the quarter was US dollar 28 million compared to the net loss of US dollar 27.5 million in the same period of 2022. GAAP net income margin was 4.8% in the first quarter of 2023. compared to net loss margin of 4.4% in the corresponding period of 2022. Non-GAAP net income attributable to controlling interest of Joy in the quarter was US dollar 49.9 million compared to US dollar 20.9 million in the same period of 2022. The growth non-GAAP net income margin was 8.5% in the quarter compared to 3.3% in the same period of 2022. Together with our improving profitability, we have maintained a strong operating cash flow as well. For the first quarter of 2023, we booked net cash inflows from operating activities of US dollar 67.5 million. We remain a healthy balance sheet with a strong cash pricing of US dollar 4.29 billion as of March 31st of 2023. Importantly, we have continued to enhance returns to shareholders through dividends and share repurchase. In the quarter, we have in total repurchased approximately US dollar 15.7 million of our shares and declared cash dividends in an aggregate amount of US dollar 35.5 million. This altogether represents 102.8% of our non-GAAP net income. As of March 31, 2023, we still have around US dollar $784 million unutilized quarter and our 2021 share repurchase program. Given the current market circumstance and our current cash pricing, we will step up our share repurchase in the second quarter. As David just mentioned, in line with our global positioning and commitment to high quality, sustainable growth, we plan to strategically streamline some of our non-core operations so that we can concentrate our resources, both financial and management, towards building our core stresses and business that along with our long-term strategic goals. Therefore, possibly as a result of the adjustments for our business outlook, we expect our net revenues for the second quarter of 2023 to be between US dollar 520 million and US dollar 541 million. This forecast reflects our preliminary views on the market and operational conditions and business adjustment plans, which are subject to change. In summary, technology and our global localized operational capabilities continues to be the backbones to our global business success. We will continue to cultivate our global user community and provide better interactive experiences to our users through product innovation, diverse content, and localized offerings. In the meanwhile, we will continue to pursue high-quality growth and improve operating efficiency across all business units. We expect to continue to prioritize our resources into high potential business that align with our long-term strategies and building our core capabilities while maintaining self-sufficient in our cash flows. With our robust financial position, we are confident that we are in good position to better seize long-term growth opportunities and generate sustainable shareholder value. That concludes our prepared remarks. Operator, we would now like to open up the call to questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. When asking a question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. Your first question comes from Thomas Chong with Jefferies. Please go ahead.

早上好,謝謝管理層接受我的提問。 我的問題是關於 Beagle Life 的。 管理層可以分享一下在不同地區的表現, 就是我們會怎麼去看... Thanks management for taking my questions. My question is about Beagle Life. Can management comment about the expected performance across different regions in the second half, as well as the overall user and the monetization trend?

Thank you. Let me answer this question.

From the first quarter, the overall performance of BeagleLive is better than we expected. First of all, the growth of users is very strong. MAU has increased by 19% compared to the previous few quarters. And the structure of users is also very uniform. All major regions, including Europe, the United States, the Middle East, and Southeast Asia, have increased by the same percentage. This is mainly due to the fact that the growth strategy of the product is relatively effective. Under the premise of maintaining a solid market expenditure, it can effectively drive the organic growth of users in each area. In general, we analyze the interests of different users in each area, and continue to introduce high-quality and diversified content by targeting layers and changing clouds in the content ecosystem. For example, the e-sports competition I just mentioned, The content of the music festival, these are all quality content introduced by Q1. We are inviting excellent creators of all kinds, such as Beagle Beagle Star Search in North America, and QOL, which is influential, to carry out cross-border cooperation and marketing. At the same time, we are combining the trend of user offline travel recovery. We are also combining more and more online activities and offline roadside sightseeing to develop local operation activities. Thank you.

Thank you, Thomas, for the question. This is David. I will take your first question. First of all, if we look at the performances of first quarter, BeagleLife actually beat our previous expectations. First of all, if you look at user growth, BeagleLife achieved elevated user growth than the previous quarter, increasing its MAUs by 19% year over year. And we saw that the growth momentum was almost across all regions, including Europe, America, Middle East, and Southeast Asia. All of these regions have recorded positive year-over-year and QOQ growth. And this is mainly due to our effective user growth strategy, which empowers organic growth while we adhere to a disciplined marketing spend strategy. During the quarter, we further analyzed the interests of various regions and different user groups and carry out a deeper content layering and more targeted cultivation of our content offerings. And our collaboration with MLBB and Ultra Abu Dhabi Music Festival are examples of our efforts to introduce premium and diverse content. And Bigo Big Star Search in North America is another example of our efforts to recruit top talents across the field. We also cooperated with influential KOLs and launched a series of online campaigns and offline roadshows, and that is consistent with our observation of users increasing offline activities post-pandemic lockdown removal. And together, these efforts have successfully enhanced our exposure and influence in the local user community, enabling us to reach a wider range of users and efficiently drive organic user growth. In the coming quarters, we expect BeagleLive to continue this strategy and maintain a strong user growth momentum.

The overall change in the U.S. and China region also has a return to recovery of two consecutive seasons. In the Middle East region, in the first quarter, the overall user and change growth return has also been restored. In the Southeast Asian region, because some countries have some traditional holidays in the first quarter, so the return to the overall change may be affected more by the season. In the second quarter, because April is a disaster, If we look at the regional trends, early signs of recovery can continue to be seen in Europe and North America.

We saw that the number of paying users

Both substantially increased quarter over quarter, and the overall monetization improved in these regions for two consecutive quarters as well. In the Middle East, we saw monetization rebounded from the previous quarter, driven by strong yielded growth, while Southeast Asia appeared to be more affected by weaker seasonality in June 1, as there were some traditional holidays during the quarter. As for Q2, we expect Ramadan in April to affect Middle East and some Southeast Asian countries. However, we believe that legal life will gradually stabilize and resume quarter-over-quarter growth in the second half of the year.

Next question, please. Thank you. Your next question comes from Yuen Zhang with China Renaissance. Please go ahead.

So thanks for taking my question. My question is about margin path. How should we think about our, you know, for example, the cost optimization, operating expense trends, and also margin outlook for second half? Thank you.

Thank you for your question, Alex. Let me answer this question. For the performance guidance for the second quarter, we mainly have two aspects to consider. On the one hand, it is a systematic consideration. Although in the first quarter, our globalized business has recovered in some areas, but it still belongs to a gentle rebound. In the second quarter, because of the impact of the disaster, there may be some systematic changes. On the other hand, we just mentioned that from Q2, Thank you, Yiwen. This is Alex. I will take your questions.

First of all, I'd like to elaborate a little bit more about our Q2 guidance. There are mainly two considerations. First, there is the impact of seasonality. Although we've seen some recovery in Q1 in some regions, the recovery is still relatively moderate, and Ramadan may still have some effect on the marginalization of some regions. And second, as we've just mentioned, starting In Q2, in line with our global positioning, we plan to strategically streamline some of our non-core operations so that we can concentrate our resources towards our core global businesses. And the current guidance reflects the impact of seasonality and some impact from the above-mentioned business adjustments.

For profits, our first quarter's profits are better than expected. The non-GAAP net profit rate of the Beagle version has increased by 1.6 points compared to last year, from 12% to 13.6%. Among them, the interest rate has increased significantly, from 34.7% to 37.4%. In addition, even though Q1 is a short-term income, The non-GAAP financial loss of the UDERS version has also been further reduced, narrowing 18.2% in return. This is an effective result of product profit margin improvement and operating capital control. We are in the second quarter. The above-mentioned business adjustment may have short-term disruptions in terms of profits, but as we enter the second half of the year, which is the beginning of global business, we expect business financial profits to return to the trend of repayment improvement. In general, we will still pay attention to the quality of growth and continue to promote the steady improvement of the profit of each line. In the first three years of the year, we expect the net profit rate of the Beagle version to remain stable with the R2 level. The group level will continue to maintain profit and stable cash flow. Thank you.

And second on your question on profitability trends, if you look at our performance in the first quarter, we actually did better than our expectations. Beagle segment achieved a non-GAAP operating margin of 13.6%, which is up by 1.6 percentage points from 12% last year. And that was mainly due to higher gross margin, which was improved from 34.7% to 37.4%. And if we look at the other segment, the non-GAAP operating loss also further narrowed quite substantially by 18.2% despite the Q1 seasonality impact. And that was mainly due to our product's improved gross margin profile and also continue expenses optimization. So looking forward to Q2, we expect the above-mentioned business adjustment might cause a sequential decline in our margin during the quarter. But as we enter into the second half of the year, when business growth accelerates, we expect both business segments to resume a sequential margin improvement. To sum up, we will still prioritize high quality growth. And for the full year of 23, we expect the non-GAAP operating profit margin of the Beagle segment to remain roughly stable when compared with what we achieved in the year 22. And at group level, we expect to remain profitable and self-sufficient in our operating cash flows. Thank you. Next question, please.

Your next question comes from Henry Sun with JP Morgan. Please go ahead.

Good morning. Thank you for accepting my question. I have a question about stock repurchase. I would like to ask how the management is thinking about the next repurchase execution rhythm. Thank you. Thanks, management, for taking my question. So I have a question regarding the share repurchase program. Could management share some details on your execution plan going forward?

Thanks. Okay, thank you for your question.

I will talk about our repurchase. In the first quarter, we repurchased $15.7 million of this stock. In addition, we sent $3,550 million this quarter. Then we accumulated the amount of return shareholders accounted for 103% of the non-GAF net profit this quarter. By the end of the first quarter, we have accumulated a repurchase plan of $7.8 billion. Then considering the current market environment, our QR will increase the return strength in return for the support of shareholders. In general, we will continue to maintain the resilience and flexibility in finance to monitor the needs of our own business investment and the rhythm of shareholder return.

Thank you, Henry, for your question. This is David. Regarding your question on capital return, If we look at the Q1 numbers, we have in total repurchased approximately $15.7 million of our shares and declared cash dividends in an amount of $35.5 million, and altogether representing approximately 103% of our non-GAAP net profits. At the end of Q1, we have around $118 million on U.S. under our existing share repurchase program. Given the current market circumstances, we will step up our share repurchases in the second quarter. And overall speaking, we will continue to maintain financially flexible and strike a balance between keeping sufficient cash and investing in our core businesses while enhancing return for our shareholders. Next question, please.

Your next question comes from Jasmine Wang with Credit Suisse. Please go ahead.

感谢管理层接受我的提问。 我有一个问题是关于产品矩阵的。 就想请问管理层能否分享一下像Likey的最近的发展势头, 然后今年的整体的展望, 以及我们什么时候能够看见Likey用户年对年的增长? Thanks, management, for taking my question. My question is related to the overall product matrix strategy, such as Leiki. So can management share with us any color on the update of Leiki's development and the outlook? And then looking ahead, when are we going to see the year-on-year resumption of user growth? Thank you.

Thank you for your question. I just shared with you some of the problems with Likey. Likey has made a lot of progress in this quarter. The first one is the 5.2% increase in the return rate of the core user type DAU. The second one is the 9% increase in the return rate of Q1. This is mainly due to the improvement of the penetration return rate of the live broadcast. and our advertising revenue has also increased significantly. After the first win-loss balance was achieved in the second half of last year, IP continued to maintain a win-loss balance in Q1 this year, and achieved a slightly weak profit. This is not easy, and it is also a positive response to our strategy of making business adjustments two years ago. Of course, I think this is still a gradual result. Next, LIKEY will focus on the key markets such as the Middle East and Europe, to cultivate and build a diversified and interesting community for creators, and to promote the improvement of users' social activity. These are all the foundations of user organic growth, product transformation, and profit improvement. With the progress of Q1, we believe that LIKEY will achieve the balance of profit and loss all year round, and the goal of recovering users' growth in the core area.

Thank you, Jasmine, for the question. This is David. As I mentioned in my prepared remarks, Leike made quite some significant progress during the quota. First of all, we can see that Leike's core user base, its DAUs, grew by 5.2% on a quarterly basis. And secondly, if we look at monetization, Despite the weak seasonality in Q1, Leike's revenue increased by 9% sequentially. And that was mainly due to an uptick in live streaming penetration rate and also the substantial increase of its advertising revenue from the previous quarter. And thirdly, Leike once again achieved financial break even in the first quarter and even made a small profit after hitting this milestone in the second half of last year. These are all meaningful progress and should be considered a positive answer to our proactive strategy adjustments in the past two years. And yet, we are also aware that it still takes a few additional steps for Leike to get back on the full recovery track. And going forward, Leike will continue to focus on key markets, such as the Middle East and Europe, and continue to work on creative support, cultivating interest-based content offerings and user community, and also advancing users' social interactions. So these are the fundamental drivers for sustainable organic growth of its user base and also monetization and profitability improvement. With our progress in Q1, we believe at Nike that has taken one step forward towards achieving full year break even and also reversing user growth trend in some key markets shortly. So that's the end of our Q&A and thank you so much for joining our call today. We look forward to speaking with everyone in the next quarter. Thank you.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. you Thank you. you Thank you. Thank you. Ladies and gentlemen, thank you for standing by and welcome to the Joy Incorporated's first quarter 2023 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'd now like to hand the conference over to your host today, Jane Zee, the company's senior manager of investor relations. Please go ahead, Jane.

Thank you, operator. Hello, everyone. Welcome to Joy's first quarter 2023 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 Vice President 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 entirely subject to risks and certainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and certainties, please refer to our latest annual report on Form 20F, and other documents filed with the SEC. 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.

Hello, everyone. Welcome to our first quarter 2023 earnings call. We kick off 2023 with a strong quarter despite ongoing micro uncertainties. Let me first touch briefly upon some of our most notable achievements, which I will discuss in more detail shortly. First, during the quarter, we recorded $583.6 million in revenues, including $467.9 million of revenue from Beagle exceeding the high end of our guidance. Notably, we maintained our profit growth momentum. Our group's non-GAAP net profit reached $49.9 million. Representing year-over-year increase of 138.7%, with a non-GAAP net margin of 8.5%. The big O segment recorded a non-GAAP net profit of 56.8 million, with a non-GAAP net margin of 12.1%. We also maintained a healthy positive operating cash flow of 67.5 million during the quarter, further enhancing our robust financial position. Second, our global average mobile MAUs returned to positive quarter-over-quarter growth. In the first quarter, our global average mobile MAUs reached 272.9 million, increasing by 1.9% from the previous quarter. Big old lives MAUs grew steadily, increasing by 19% year-over-year. And third, Following two years of operational adjustment and optimization, Leaky continued to make significant progress. Importantly, Leaky once again achieved financial break-even after first hit its milestone in the second half of last year. At the same time, Leaky's revenue increased by 9% sequentially, and its core user base DAUs grew by 5.2% on a quarterly basis. While we have seen some green shots of recovery, we remain curiously optimistic regarding industry outlook. Given that ongoing microeconomy uncertainties may still pressure consumers confidence, and user spending on online social entertainment. Looking to the future, we remain committed to our long-term growth strategy. Globalization remains a key driver of our business growth. We will continue to prioritize a high-quality, sustainable growth, improve monetization and profitability across all business units and further strengthen our financial resilience by generating robust operation cash flows. Harnessing our global technical and localized operation capabilities continue to be our top priority and fundamental to our worldwide business success. we will cultivate our global user community and provide exceptional interactive experience to our users through product innovation, drivers, content, and localized offering. In line with our global positioning and commitment to high-quality, substantial sustainable growth, we intend to further concentrate our resources on building our core strategies and the global business that align with our long-term strategies.

Involving our core

Competencies in both global localized operations and technically required continuous commitment. We have mentioned many of our recent efforts on localized operations. Today, I would like to take this opportunity to discuss some of our progress on technology implementation and development. Our technological approach has always been leveraging cutting-edge technology to drive product innovations, improve user experience, and optimize our operation efficiency. At Beagle, we employed around 1,400 R&D persons, including approximately 115 experts and energy engineers specializing in the development of AI. Their expertise spans a vast range of AI applications, including computer vision, facial recognition, image comprehension, and natural language processing. Our team leveraged AI to advance our text, image, and video recognition capabilities, analyze user behavior data, improve intelligent recommendations to users, and manage content quality. In Beagle Live and Leiki, we use AI to identify non-standard user interests and direct users toward more relevant and personalized content. It has also improved our discovery process for talented creators and allowed us to more efficiently channel resources to them. This is highly valuable for developing our interest-based communities and thriving content ecosystems. As we operate in over 150 countries and regions, we have established local regulatory teams and professional content and moderators all over the world to ensure regulator compliance and alias our content with local cultural normals. AI has proven to be a powerful tool for improving content quality and cultivating our content ecosystem. By utilizing AI, we have significantly improved the efficiency of our content moderation. We have developed various AI recognition models based on a database of millions of policy variations and create directory for filtering improper rating content in more than 20 languages. With approximately 1.5 to 1.6 million live streaming rooms and 4 to 5 million short videos on Beagle every day, we needed to review over 600 million images on a daily basis. Our successful implementation of AI has reduced the manual moderation rate to a mere 0.05% and brought the accuracy rate of our AI detection system to over 99.8%. We have also leveraged the technology to bring innovation, interactive experience to our users. For example, Hargo's new 3D space empowers the user to create virtual avatars and interact with each other in virtual 3D virtual sense, enabling users to engage in immersive social experience. HAGO's 3D avatar model can be generated and adjusting various facial parameters or directly from photos uploaded by our users. Using deep learning technology, we synchronize multilingual pronunciation, mouth movements, and facial expressions between users and their digital avatars in real time. For the karaoke scene, virtual characters can even dance to the rhythm of musical beats. The rapid evolution of the rapid evolution of AI technology is set to transform the industry and economies worldwide. It also presents a multitude of opportunities for companies to create value and enhance operational efficiency across various applications. We are committed to exploring and interacting ways to integrate AI into our business. In order to deliver accessible and captivating interactive experience to our users across the globe, to further improve our operational efficiency. Now, let's take a closer look at our products. We will start with BeagleLine. During the first quarter, Figo Live sustained its double digital user growth momentum for the first consecutive quarter, with its MAUs increased by 19% year-over-year to 37.7 million. Growth was observed across several key regions, 7.3% growth in Europe, 13.2% growth in the Middle East, and 23.6% growth in Southeast Asia and other emerging markets year-over-year. In terms of monetization, Big O Live saw steady recovery in its paying user growth in the first quarter. The number of paying users in Europe and North America increased year-over-year by 9.9% and 10.2% respectively. Big O Live's live streaming revenues in Europe, North America, and the Middle East all rebounded from the previous quarter. We launched a series of operational events across major regions. in the first quarter and successfully engaged with and encouraged active participation from our creators and users. In February, Beagles Live launched the Big Star Search event, a talent competition open in North American participants and enabled us to recruit the most exceptional creators across a wide range of categories, such as dance, music, cosplay, cooking, etc. The event's six-month duration and a wide variety of content genres make its bigger lives the longest-running, the most impactful talent competing to date. In the Middle East, Bigo Live boasted user engagement when it once again collaborated with mobile legend BonBon to livestream the M4 World Championships. The quarter also marked the first collaboration between Bigo Live and Ultra Upper Hobby. Ultra Upper Hobby is the first Middle East edition of the world-famous ultra music festival. Beagle Live brought to live concert experience, exciting performances, and behind these things, footage to online audience. Beagle Live also set up a booth at the festival venue to interact with thousands of audience. further enhancing its brand awareness in the local community. In terms of content development, BeagleLive remains focused on incentivizing broad channel content products. In the first quarter, our strategic efforts to enhance the creating and distribution of high-quality content results in 18.7% sequential increase in video content in bar. Furthermore, by utilizing computer vision technology, we have also improved the channel's automatic content tagging and its recommendation algorithm. These improvements resulted in a 8.8% sequential growth in average impressor per user in the bar channel. For live streaming and social interaction, user engagement has continued to grow. This is mainly due to optimized multi-person room interfaces, and few features include sound effects and interactive tools. Sequentially, the number of multi-user rooms hosted increased by 9.3%, and the number of users going live increased by 8.7%. Next, let's turn to Leakey. To ensure the healthiness and the sustainability of our ecosystem and growth model, we have been actively adjusting LACIS marketing strategy since the first quarter of 2021 and focusing on enhancing its monetization efficiency and organic user acquisition capabilities. We are happy to announce that we have seen some meaningful progress during the first quarter. LACIS revenue increased by 9% sequentially in the first quarter, it also achieved a break-even during the quarter after the first hit of its milestone in the second half of last year. In terms of user engagement, Leike's interest-based community grew and the quality of user interactions improved. During the first quarter, Leike's core user-based DAUs increased by 5.2% sequentially. In the first quarter, Leaky further optimized its creator services and delved deeper into understanding creators' needs. The number of official creators increased by 6.2% sequentially. Leaky also reinforced its positioning as an interest-based community by collaborating with professionals in various fields, including music, racing, food, and sports. This actively encourages them to create high-quality content on the platform, fostering an already vibrant content ecosystem. We also continue to integrate corporate social responsibility into our daily operations and creates a positive impact on the community. During Renam Day, like a partner with Jordanian charitable organization for the share a meal campaign. This initiative encourages users to post videos of their Ramadan experience and share blessings during the holiday. For every user who participated in the campaign likely donate a certain amount of money to TUA on their behalf. Nearly 100,000 users participated in the event.

Next, on to Huggle.

During the quarter, Huggle remained dedicated to enhance user activity by boosting social engagement. As we have mentioned previously, Over the past two years, HAGO has been gradually transitioning its strategic focus to become a multi-user social platform by utilizing social channels including video and audio multiplayer chat rooms. HAGO's space and groups of families, HAGO offers users growing rate of social interaction opportunities, and it has created a highly interconnected user community. In the first quarter, the penetration rate of HAGO's social channels increased by 4.4% sequentially. In addition, the daily average time spent by users continued to grow, reaching 90.8 minutes. We have also conducted multiple rounds of net promoter survey among users, the results of which indicated consistent enhancement of user satisfaction particularly in Indonesia and the Philippines, Brazil, and Mexico. Furthermore, many users have experienced their appreciation for how HAGO enhanced their social experience. HAGO will continue to adhere to a disciplined marketing spending strategy and optimize its cost structures. We expect a gradual improvement in Hargo's operating loss over the coming quarter. Finally, some updates on capital return. During the first quarter, we bought back an additional 15.7 million of our shares. Given recent market volatility, we will set up our share repurchase in the second quarter to reward the long-term support of our shareholders. To conclude, despite the near-term micro-challenges, we delivered solid results in the first quarter as we maintained strong profitability at the group level and achieved accelerated growth in BeagleLive's MAUs. Looking ahead, we remain committed to enrich lives through technology. We will continue to cultivate our global user community and provide exceptional interactive experience to our users through product innovations. diverse content and localized offerings. We are confident that we are well-placed to size long-term growth opportunities and generate sustainable shareholders' value. This concludes my prepared remarks. I will now turn the call to our Vice President of Finance, Ax Liu, for our

financial updates. Thanks, David. Hello, everyone.

Despite macro uncertainties, we achieved solid results in the first quarter. Our revenue in the first quarter exceeded the higher end of our guidance, and we continued to deliver better profits both at group level and at product level, thanks to our effective execution of cost optimization measures and improved operational efficiency. We were also encouraged to see continued sequential recovery in Beagle's paying users for the third consecutive quarter. as it increased by 7.8% year-over-year and 1.3% quarter-over-quarter to 1.57 million. As we continued to cultivate diverse premium content and carry out effective localized operational activity, they boosted user engagement and drove further progress in user-based expenses. in the quarter. We reversed the trend of our global FAO in the first quarter, which increased by 1.9% sequentially to 272.9 million. Next, let me walk you through our performance for the first quarter of 2023 in detail. Our total net revenues were US dollar 583.6 million in the first quarter. Cost of revenues for the quarter decreased to US dollar 379 million, among which our revenue sharing fees and content cost decreased to US dollar 248.5 million. Gross profit was $204.6 million in the quarter, with our gross margin improved to 35.1% from 32.2% in the same period of 2022. Primarily due to optimization of revenue sharing costs and other operational costs, Our operating expenses for the quarter were USD 205.3 million, increased from USD 200.6 million in the same period of 2022. Among the operating expenses, sales and marketing expenses decreased to USD 97.6 million from USD 104.4 million due to our effective control over marketing expenses and optimization of overall sales and marketing strategies. R&D expenses increased to US$25.8 million from US$64.1 million in the same period of 2022, primarily due to increased R&D personal related expenses as we try already ties the resources into building our technological capabilities. Our gap operating income for the quarter was US dollar 2.5 million. Compared to operating income, US dollar 6.3 million in the same period of 2022. Our non-gap operating income for the quarter excludes SBC expenses. amortization of intangible assets from business acquisitions, as well as impairment of goodwill and investments, was US dollar 27.8 million in this quarter, compared to US dollar 33.3 million in the same period of 2022. Our non-GAAP operating income margin for the quarter was 4.8 percent, compared to 5.3% in the prior year period. GAAP net income, attributable to controlling interest of Joy in the quarter, was US dollar 28 million, compared to the net loss of US dollar 27.5 million in the same period of 2022. GAAP net income margin was 4.8% in the first quarter of 2023. compared to net loss margin of 4.4% in the corresponding period of 2022. Non-GAAP net income attributable to controlling interest of Joy in the quarter was US dollar 49.9 million compared to US dollar 20.9 million in the same period of 2022. The group's non-GAAP net income margin was 8.5% in the quarter compared to 3.3% in the same period of 2022. Together with our improving profitability, we have maintained a strong operating cash flow as well. For the first quarter of 2023, we booked net cash inflows from operating activities of US dollar 67.5 million. We remain a healthy balance sheet with a strong cash pricing of US dollar 4.29 billion as of March 31st of 2023. Importantly, we have continued to enhance returns to shareholders through dividends and share repurchase. In the quarter, we have in total repurchased approximately US dollar 15.7 million of our shares and declared cash dividends in an aggregate amount of US dollar 35.5 million, which altogether represent 102.8% of our non-GAAP net income. As of March 31st, 2023, we still have around US dollar $784 million unutilized quarter and our 2021 share repurchase program. Given the current market circumstance and our current cash pricing, we will step up our share repurchase in the second quarter. As David just mentioned, in line with our global predicament and commitment to high quality, sustainable growth, we plan to strategically streamline some of our non-core operations so that we can concentrate our resources, both financial and management, towards building our core strength and business that along with our long-term strategic goals. Therefore, possibly as a result of the adjustments for our business outlook, we expect our net revenues for the second quarter of 2023 to be between US dollar 520 million and US dollar 541 million. This forecast reflects our preliminary views on the market and operational conditions and business adjustment plans, which are subject to change. In summary, technology and our global localized operational capabilities continues to be the backbones to our global business success. We will continue to cultivate our global user community and provide better interactive experiences to our users through product innovation, diverse content, and localized offerings. In the meanwhile, we will continue to pursue high-quality growth and improve operating efficiency across all business units. We expect to continue to prioritize our resources into high potential business that align with our long-term strategies and building our core capabilities while maintaining self-sufficient in our cash flows. With our robust financial position, we are confident that we are in good position to better seize long-term growth opportunities and generate sustainable shareholder value. That concludes our prepared remarks. Operator, we would now like to open up the call to questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. When asking a question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. Your first question comes from Thomas Chong with Jefferies. Please go ahead.

早上好,謝謝管理層接受我的提問。 我的問題是關於 Beagle Life 的。 管理層可以分享一下在不同地區的表現, 就是我們會怎麼去看... Thanks, management, for taking my questions. My question is about BeagleLife. Can management comment about the expected performance across different regions in the second half, as well as the overall user and the monetization trend?

Thank you. Let me answer this question.

From the first quarter, the overall performance of BeagleLive is better than we expected. First of all, the growth of users is very strong. MAU has increased by 19% compared to the previous few quarters. And the structure of users is also very uniform. All major regions, including Europe, the United States, the Middle East, and Southeast Asia, have increased by the same percentage. This is mainly due to the fact that the growth strategy of the product is relatively effective, and it can effectively drive the organic growth of users in each area under the premise of maintaining a solid market expenditure. In general, we analyze the interests of different users in each area, and continue to introduce high-quality and diversified content by dividing and balancing the content ecosystem, such as the e-sports competition I just mentioned, The content of the music festival belongs to the quality content of the Q1 introduction. Encourage excellent creators of all kinds, such as Beagle Beagle Star Search in North America, and the influential QOL to carry out cross-border cooperation and marketing. At the same time, to combine the trend of users' online travel recovery, we are also combining more and more online activities and offline recording in the form of local operations. Thank you.

Thank you, Thomas, for the question. This is David. I will take your first question. First of all, if we look at the performances of first quarter, BeagleLife actually beat our previous expectations. First of all, if you look at user growth, BeagleLife achieved elevated user growth than the previous quarter, increasing its MAUs by 19% year-over-year. And we saw that the growth momentum was almost across all regions, including Europe, America, Middle East, and Southeast Asia. All of these regions have recorded positive year-over-year and QOQ growth. And this is mainly due to our effective user growth strategy, which empowers organic growth while we adhere to a disciplined marketing spend strategy. During the quarter, we further analyze the interests of various regions and different user groups and carry out a deeper content layering and more targeted cultivation of our content offerings. In our collaboration with MLBB and Ultra Abu Dhabi Music Festival, examples of our efforts to introduce premium and diverse content. efforts to recruit top talents across the field. We also cooperated with influential KOLs and launched a series of online campaigns and offline roadshows and that is consistent with our observation of users increasing offline activities post-pandemic lockdown removal. Together, these efforts have successfully enhanced our exposure and influence in the local user community, enabling us to reach a wider range of users and efficiently drive organic user growth. In the coming quarters, we expect BeagleLive to continue this strategy and maintain a strong user growth momentum.

In some areas, in the first quarter, the overall recovery in Europe and North America is continuing, and the rate of fee users is increasing. The overall change in the U.S. and the U.S. region also has a rate of recovery of two consecutive quarters. In the Middle East, in the first quarter, the rate of overall user and change growth has also recovered. In Southeast Asia, because some countries have some traditional holidays in the first quarter, If we look at

If we look at the regional trend, early signs of recovery can continue to be seen in Europe and North America. We saw that the number of paying users both substantially increased quarter over quarter, and the overall monetization improved in these regions for two consecutive quarters as well. In the Middle East, we saw monetization rebounded from the previous quarter, driven by strong user growth. while Southeast Asia appeared to be more affected by weaker seasonality in June 1 as there were some traditional holidays during the quarter. As for Q2, we expect Ramadan in April to affect Middle East and some Southeast Asian countries. However, we believe that eagle light will gradually stabilize and resume quarter-over-quarter growth in the second half of the year.

Next question, please.

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

My question is about margin pop. How should we think about our, you know, for example, the cost optimization, operating expense trends, and also margin outlook for second half? Thank you.

Thank you. Thank you, Yiwen. This is Alex. I will take your questions.

First of all, I'd like to elaborate a little bit more about our Q2 guidance. There are mainly two considerations. First, there is the impact of seasonality. Although we've seen some recovery in Q1 in some regions, the recovery is still relatively moderate, and Ramadan may still have some effect on the marginalization of some regions. And second, as we've just mentioned, starting In Q2, in line with our global positioning, we plan to strategically streamline some of our non-core operations so that we can concentrate our resources towards our core global businesses. And the current guidance reflects the impact of seasonality and some impact from the above-mentioned business adjustments.

For profits, our first quarter, the profits are better than expected. The non-GAAP profit rate of the Beagle version has increased by 1.6 points compared to last year, from 12% to 13.6%. Among them, the interest rate has increased significantly, from 34.7% to 37.4%. In addition, although Q1 is a net profit, The non-GAAP financial loss of the UNDERS version has also been further reduced, narrowing 18.2% in return. This is an effective result of product margin rate improvement and operating cost control. We are in the second quarter. The above mentioned business adjustment may have short-term disruptions to profits, but as we enter the second half of the year, which is the beginning of global business, we expect business financial profits to return to the trend of repayment improvement. In general, we will still pay great attention to the quality of growth and continue to promote the stable improvement of each line of profit. In the first three years of the year, we expect the business profit rate of the Beagle version to remain stable with the R2 level. The group level will continue to maintain profit and stable cash flow. Thank you.

And second on your question on profitability trends, if you look at our performance in the first quarter, we actually did better than our expectations. Beagle segments achieved a non-GAAP operating margin of 13.6%, which is up by 1.6 percentage points from 12% last year. And that was mainly due to higher gross margin, which was improved from 34.7% to 37.4%. And if we look at the other segment, the non-GAAP operating loss also further narrowed quite substantially by 18.2% despite the Q1 seasonality impact. And that was mainly due to our product's improved gross margin profile and also continue expenses optimization. So looking forward to Q2, we expect the above-mentioned business adjustment might cause a sequential decline in our margin during the quarter. But as we enter into the second half of the year, when business growth accelerates, we expect both business segments to resume a sequential margin improvement. To sum up, we will still prioritize high quality growth. And for the full year of 23, we expect the non-GAAP operating profit margin of the Beagle segment to remain roughly stable when compared with what we achieved in the year 22. And at group level, we expect to remain profitable and self-sufficient in our operating cash flows. Thank you. Next question, please.

Your next question comes from Henry Sun with JP Morgan. Please go ahead.

Good morning. Thank you for accepting my question. I have a question about stock repurchase. I would like to know how the management is thinking about the next repurchase execution rhythm. Thank you. Thanks, management, for taking the question. So I have a question regarding the share repurchase program. Could management share some details on your execution plan going forward?

Thanks.

Okay, thank you for your question. I will talk about our repurchase. In the first quarter, we repurchased $15.7 million of this stock. In addition, we sent $3,550 million this quarter. Then we accumulated the amount of return shareholders accounted for 103% of the non-GAAP efforts in this quarter. By the end of the first quarter, we have accumulated a repurchase plan of $7.8 billion. Then considering the current market environment, our QR will increase the return strength in return for the support of shareholders. In general, we will continue to maintain the resilience and flexibility in finance to monitor the needs of our own business investment and the rhythm of shareholder return.

Thank you, Henry, for your question. This is David. Regarding your question on capital return, If we look at the Q1 numbers, we have in total repurchased approximately $15.7 million of our shares and declared cash dividends in an amount of $35.5 million, and altogether representing approximately 103% of our non-GAAP net profits. As of the end of Q1, we have around $780 million unused land quota under our existing share repurchase program. Given the current market circumstances, we will step up our share repurchases in the second quarter. And overall speaking, we will continue to maintain financially flexible and strike a balance between keeping sufficient cash and investing in our core businesses while enhancing return for our shareholders. Next question, please.

Your next question comes from Jasmine Wang with Credit Suisse. Please go ahead.

感谢管理层接受我的提问。 我有一个问题是关于产品矩阵的。 就想请问管理层能否分享一下像Likey的最近的发展势头, 然后今年的整体的展望, 以及我们什么时候能够看见Likey用户年对年的增长? Thanks, management, for taking my question. My question is related to the overall product matrix strategy, such as Leiki. So can management share with us any color on the update of Leiki's development and the outlook? And then looking ahead, when are we going to see the year-on-year resumption of user growth? Thank you.

Thank you for your question. I just shared with you some of the problems with Likey. Likey has made a lot of progress in this quarter. The first one is the 5.2% increase in the return rate of the core user type DAU. The second one is the 9% increase in the return rate of Q1. This is mainly due to the improvement of the penetration return rate of the live broadcast. And then our advertising revenue has also been significantly increased. After the first win-loss balance in the second half of last year, MAPI's Q1 continued to maintain a win-loss balance this year. In fact, it has achieved this slightly weak profit. This is very difficult. It is also a positive response to our strategy of doing business adjustments two years ago. Of course, I think this is still a stage-based result. Next, LIKEY will focus on the key markets such as the Middle East and Europe, to cultivate and build a diversified and interesting community for creators, and to promote the improvement of users' social activity. These are all the basis of user organic growth, product transformation, and profit improvement. With the progress of Q1, we believe that LIKEY will achieve the balance of profit and loss all year round, and the goal of recovering users' growth in the core area.

Thank you, Jasmine, for the question. This is David. As I mentioned in my prepared remarks, Leike made quite some significant progress during the quota. First of all, we can see that Leike's core user base, its DA youth, grew by 5.2% on a quarterly basis. And secondly, if we look at monetization, Despite the weak seasonality in Q1, Leike's revenue increased by 9% sequentially. And that was mainly due to an uptick in live streaming penetration rate and also the substantial increase of its advertising revenue from the previous quarter. And thirdly, Leike once again achieved financial break even in the first quarter and even made a small profit after hitting this milestone in the second half of last year. These are all meaningful progress and should be considered a positive answer to our proactive strategy adjustments in the past two years. And yet, we are also aware that it still takes a few additional steps for Leike to get back on the full recovery track. And going forward, Leike will continue to focus on key markets, such as the Middle East and Europe, and continue to work on creative support, cultivating interest-based content offerings and user community, and also advancing users' social interactions. So these are the fundamental drivers for sustainable organic growth of its user base and also monetization and profitability improvement. With our progress in Q1, we believe at Nike that has taken one step forward towards achieving full year breakeven and also reversing user growth trend in some key markets shortly. So that's the end of our Q&A and thank you so much for joining our call today. We look forward to speaking with everyone in the next quarter. Thank you.

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