JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Joy, Inc.' 's first quarter 2024 earnings call. At this time, all participants are in listen-only mode. After the 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 2024 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 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 would like to remind you that we may make forward-looking statements, which are entirely 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 SEC. Finally, please note that unless otherwise stated, all figures mentioned during this conference call on U.S. dollar. I will now turn the call over to our Chairman and CEO, Mr. David Hsieh-Ling Lee. Please go ahead, sir.

David Hsieh- Hello, everyone. Welcome to our first quarter 2022 earnings call. To start, let me briefly review our performance in the first quarter. We kick off 2024 with a solid quarter. Group's revenue coming at $565 million, with our core Bitcoin segment contributing $505 million. Group's non-GAAP net profit reached $67 million, and Bitcoin's non-GAAP net profit hit $71 million, both surpassing our expectations. BigGo sustained its top-line recovery trend for the third consecutive quarter, achieving at 8% year-over-year growth. Live streaming revenues from our core global products, which include BigGo Live, Likey, Emo, increased by 2.8% year-over-year, driven by a continued expansion of paying users, which was upped by 6.9% on an annual basis. We have prioritized and channeled our advertising spend and other operational resources toward premium users and developed countries where we observe improved ROI and spending sentiment across all big gold markets developed countries continue to outperform with live streaming revenues achieving double digital growth year over year. Importantly, as we continue to strategically expand and diversify our revenue streams. Because non-live streaming revenues, primarily advertising revenues, grows substantially year over year. At the same time, we continue to improve our profitability at group level. Our non-GAAP net profit reached 67 million in the first quarter, up 34.8% year-over-year. Non-GAAP net margin increased by 3.4%, points to 11.9%. Notably, despite the negative impact of seasonality, The all-over segment steadily narrowed its non-GAAP operation loss on a sequential basis. This improvement was driven by further cost optimization and enhanced operational and management efficiency at both the group and the product levels. We sustained our positive operation cash flow in the first quarter. Generating a robust $75 million with its foundation of healthy cash flows and our solid financial position. We repurchased an additional of $554.5 million worth of shares during the quarter. have outlined previously, despite the last developments regarding the sales of YY Live, we remain committed to retaining value to our shareholders. We will continue to actively execute our current share reporting program and enhance execution consistently. Looking ahead, well, we have seen some green shots of recovery. Global macroeconomic uncertainties persisted. Our live streaming ARPO was sealed down slightly year over year, and the regional recovery trends diverged and remained uneven. As such, we will maintain our efficiency-oriented approach to our operational investments. We will continue to focus on ROI and nimbly adjust our strategies to alien with prevailing market dynamics. Prevailing market dynamics, we expect to drive healthy sustainable growth of our business while maintaining stable profitability and positive cash flow. Based on our current operational plans, we expect Bigel to resume sequential growth in the second half of the year and maintain its year-over-year revenue recovery for the full year. We anticipate that Beagle's revenue mix will become more diversified in 2024 with a further increase in the contribution from non-livestreaming revenue on a year-over-year basis. Now, let's delve deeper into our operational strategies by optimizing product features, providing diverse premium content, and leveraging innovative marketing activities. We continuously enhance our users' content and the social experience. Notably, our global operations teams collaborated with KOLs and industry partners to execute a range innovative online and offline marketing activities in the first quarter. In addition to hosting galleries and culture themes region activities and resonate deeply with our users, we elevated our presence in the offline exhibitions and roadshows We also hosted creature parties and family events to further connect with our community. These initiatives drove deeper engagement with our global communities of users and significantly enhanced both product awareness and our brand influence. Furthermore, as a global technology company, we remain steadfast in our commitment to promoting corporate social responsibilities and sustainable development, and integrating these principles into the core of our local operations worldwide. In March, we launched a series of regional events in Middle East and Southeast Asia to celebrate Ramada, fostering a sense of community among users during this festival period. We also forged partners with several international charitable organizations, including the Indonesia cancer foundations saudi arabia's nama national association and bangladesh's jaguar foundations we made a number of donations to those international charitable organizations inspiring hundreds of thousands of our users to join our costs and provide assistance to local families, patients, and children in need. We have also actively engaged in biologics with government agencies, industry leaders, entrepreneurs, and other stakeholders in our key markets to alien our regional operations with the economic and sustainable development global goals of local communities. For example, in January, we attended the Jordan-Singapore Tech Aliens Forum. with FIGO and the Information and Communications of Technology Associations of Jordan jointly signed MOU. This partnership aims to strengthen bilateral cooperation, promote regional technological innovation, and facilitate economic growth. In March, Beagle participated in LEAP, the largest technology exhibition in the Middle East, where we showcased Beagle's technologies and AI-driven solutions. Beagle's presence underscores our support for the region's sustainable development and our commitment to promoting entrepreneurship, innovation, and digital transformation. Now, let's take a closer look at our product. We will start with Big O Line. In the first quarter, Big O Line's revenue continued its year-over-year rebound, especially Revenue from developed countries grew by 40.8%, accompanied by a 17.2% increase in paid users in those regions. During the quarter, we remain focused on Big O Line's user acquisition strategy. channeling more resources into developed countries to enhance our monetization efficiency. As a result, legalized MAU was slightly down year over year, starting at 37.1 million. However, MAU in developed countries rose by 8%. 8.9% on an annual basis, in contrast with a 4% decline in Southeast Asia and other emerging markets. Moving forward, we will continue to execution our focus user acquisition strategy as we strive to optimize BeagleLive's user mix. While we anticipate some short-term fluctuations in MAU growth, we are confident that these adjustments will enhance the long-term variety of BeagleLive. In the fourth quarter, BeagleLive organized a variety of innovative marketing initiatives enriching the platform with diverse the high quality content and broadening our reach within the global community a highlight was our participating in the ceremonial music festival the word famous italian song contest and award ceremony, held in early February. As a part of Agonizer, Beagle Live showcased 10 of our most talented streamers in a two-hour music extravaganza that was streamed worldwide. In addition, Beagle Live launched an intelligent management system for streamers and agencies which significantly streamlines the contracting and the management process by reducing the average duration from days to mere hours. This efficiency both lead to 4.9 percent, quarter-over-quarter increase in newly contract streamers. We anticipate the automation initiatives such as these will further improve our overall operational efficiency in the long run. Family-based operational activities also played a key role in this quarter, strengthening social balance within our user community in a sequential basis. Our approach yield 1.1% increase in paying family user and 1.5% raise in contacted streamers within families and 6.2% uptake in daily active user in family groups. We also simplified and upgraded BigoLive's homepage and rolled out a refined AI-driven content recommendation algorithm that better catered to our core users' preferences and their real-time feedback. This resulted in an increase of 1.1 percent in next-day user retention and 5.4 percent in average viewers' time spent per live session. Enhancement to live streaming room tools and interactive features contribute to 5.3 percent sequential rates in average during per live session. 4.4% sequential increase in the number of users going live in multi-gathrooms. Next, let's take a look at Leckie. In the first quarter, Leckie's revenue continued to recover year over year, and it maintained its profitability. Advertising revenue grew by 1.1 times on an annual basis, and the DAU in the core European market maintained sequential growth. LACC's recent launch of interactive gaming features has been instrumental in breaking the ice and fostering connections between users, leading to substantial growth in paying users. During the fourth quarter, Leike launched a series of engaging community events for creators, users, and brands. This included the Global Leike Party and MENA Gala in the Middle East, co-hosted with Big O Live. As Leike continued to enhance its creators and expanded its optimization tools and incentives for premium creatures. Its number of core creatures increased by 30.6%, quarter over quarter. Finally, turning to HAGO, HAGO sustained a positive operation cash flow during the first quarter. HAGO's implementation of more gaming field interactions and paid features has effectively boosted user engagement and monetization. Standout success was the role of the Fly Across the World event, spanning HAGO's major operation countries. By participating in the event, users could travel virtually to various countries, collect treasures, claim and nurture their travel company's past, and keep virtual gift trailers to each location's unique culture and traditions. The event received Enthusiastic feedback with nearly one-third of our HAGO's total paid user participating. User engagement on HAGO also increased noticeably with daily average time spent in social channels raising by 2.8% to 102 minutes, and the time spent Multi-guest audio live streaming rooms upped by 2.9% from the previous quarter. To sum up, we are off a good start in 2022. Figo has sustained its year-over-year revenue recovery trajectory while further diversifying its revenue mix. The group has a delivered profit growth. Look ahead. We will continue to harness our product experience and drive operational innovations. At the same time, we will further optimize our efficiencies to propel sustainable, profitable growth across our global business. This concludes my prepared remarks. I will now turn the call to our Vice President of Finance, Alex Liu, for our financial updates.

Thanks, David. Hello, everyone. Before I go into the details, I would like to remind you that despite the latest developments in the shield of one of our lives, To the date of this press release, we have not obtained control over VavaLife and therefore have not consolidated the business. The financial results presented in our press release and this conference call primarily consisted of Beagle and all other segments, excluding VavaLife. I will now provide a recap of some key financial highlights. for the first quarter. Overall, we observed improving fundamentals supported by Beagle's continued top-line recovery and efficiency improvement at group level. Our total net revenues were $564.6 million in the first quarter. Revenues from Beagle segment were $505.2 million. up by 8% year-over-year. In particular, Beagle's non-live streaming revenues were 63 million, which was up substantially year-over-year, primarily due to the increase of advertising revenues. Geographically speaking, as we prioritized to allocate our operational resources towards developed countries, Our revenues from developed countries was up by double digits year-over-year after performing on other regions. Cost of revenues for the quarter decreased to $369.2 million, among which our revenue sharing fees and content costs increased to $268.4 million. Equals cost of revenues was 328.6 million, which was up year-over-year, consistent with the rebound in revenue and elevated creative support during the quarter. Gross profit was 195.4 million in the quarter, with a gross margin of 34.6%. Beagle's gross profit was $176.6 million with a gross margin of 35%. Beagle's gross margin was lower year over year due to change of revenue mix and higher contribution of Beagle audience network advertising revenues. Our groups updated expenses for the quarter were 195.4 million compared with 205.3 million in the same period of 2023. Among the operating expenses, R&D expenses decreased to 69 million from 75.8 million, primarily due to decreased personal expenses and share-based compensation expenses. Our sales and marketing expenses decreased to $94.6 million from $97.6 million in the same period of 2023. Beagle's total operating expenses for the quarter were $129.5 million, which was slight year over year, while its total operating expenses ratio was 25.6% during the quarter, down from 27.6% last year. Our group's gap operating income for the quarter was $3.5 million. Our group's non-gap operating income for the quarter with excluded SBC expenses, amortization of intangible assets from business acquisitions, loss on the consolidation and the deferral of subsidies, as well as impairment of goodwill and investments was $24.8 million in this quarter, with a non-GAAP operating income margin of 4.4%. Beagle's GAAP operating income for the quarter was $50.4 million, and Beagle's non-GAAP operating income was 63 million, representing a non-GAAP operating income margin of 12.5%. The GAAP and non-GAAP operating loss for all other segments during the quarter was further narrowed to 46.8 million and 38.2 million on a sequential basis. Respectively, despite the negative impact of Other groups' gap net income as beautiful to controlling interest of Joy in the quarter was 45.3 million compared to 28 million in the same period of 2023. Gap net income margin was 8% in the first quarter of 2024. compared to 4.8% in the same period of 2023. Beagle's gap net income in the quarter was $69 million with a gap net margin of 12.1% up from 9.3% in the same period last year. Non-gap net income attributable to controlling interest of joint in the quarter was 67.2 million compared to 49.9 million in the same period of 2023. The group's non-GAAP net income margin was 11.9% in the quarter compared to 8.5% in the same period of 2023. Beagle's non-GAAP net income was 71.2 million Compared with 56.8 million in the same period of 2023, Beagle's non-GAAP net margin was 14.1% in the quarter, up from 12.1% in the same period last year. For the first quarter of 2024, we booked net cash inflows from operating activities of 75 million we remain a healthy balance sheet with a strong cash producing of 3.6 billion as of March 31st of 2024. In the first quarter, we continued to enhance returns to shareholders and repurchased an additional of approximately 54.5 million of our shares. As of the end of March, we still have around $472 million unutilized quota in our current share repurchase program. We intend to actively utilize our current share repurchase program and proceed with a steady execution of additional share buyback in 2024. Turning now to our business outlook, we anticipate continued top-line recovery in the B-goal segment. However, due to the ongoing uncertainty in the global macro landscape, we recognize that the pace of recovery may be uneven across different markets, and there may be short-term fluctuations in user-paying segment. At group level, we expect our net net revenues for the second quarter of 2024 to be between $538 million and $569 million. This forecast reflects our preliminary views on the market and operational conditions, which are subject to changes. Looking forward, we will remain dedicated to our strategic priorities optimizing product and innovating our operations to create value for our users and stakeholders. We continue to execute our ROI-oriented operational strategy in order to deliver profitable, sustainable growth. That concludes our prepared remarks. Operators, 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 Henry Sun with J.P. Morgan.

Thank you, Mr. Guan. This is my question. Can you share with us the revenue trend for 2024 and the prediction trend for the next half of the year? Thank you. I'll translate myself. Thanks, management, for taking my question. My question is about the revenue and Big O Live. Could management share the revenue outlook for 2024 and what are the expected trends for Big O Live by region in the second half of this year? Thanks.

Thank you for your question. First of all, let's look back at the trend of Q1. In the first quarter, overseas live streaming revenue of the three core products of BGO remained the same as before. It fell slightly, mainly due to the impact of Q1. Currently, the revenue recovery is driven by the growth of paid users. The AR pool is still declining. From the market point of view, the revenue of developed countries in the first quarter has maintained a two-digit growth. The overall growth of major regions such as the Middle East and Southeast Asia has not yet returned to its obvious recovery. From the perspective of ARP and other regional trends, the uncertainty and risk of the global global economy still exists. We need to remain focused and targeted, and spend money on the knife. with a priority of ROI and efficiency, based on stable profit and healthy cash flow to seek sustainable growth. To maintain a targeted operation strategy, we need to integrate the efforts of customers, content, algorithm, and other teams, including in-depth analysis of the ROI and content consumption compensation behavior of different user groups. Based on the data in the investment strategy, In terms of content delivery and revenue activities, flexible adjustment is required. This string of adjustment needs to be synchronized. In addition, we also observed that the diversity and compatibility of platform culture can indeed provide unique emotional value to users. The data shows that ARPUs that value users pay attention to are often higher than the average value of the big plate and have a strong loyalty. We will continue to maintain a targeted business strategy to further expand the advantages of platform multi-border culture and multi-border market. Next, let's take a look at the revenue forecast. Due to the impact of the end of the harvest month and the opening of the harvest festival, the number of offline social activities of users will increase, and the optimization of content policy and operation policy in some areas. Our current guidance has already contained the impact of the above factors. Hi, this is David. I will take a question. First, let's review the monetization trends for Q1. In the first quarter,

Beagle's three core products saw positive year-over-year growth in their live streaming revenue, although there was a Q-on-Q decline, primarily due to the impact of a low season. The current revenue recovery is primarily driven by the growth in paying users, while our pool is still showing a year-over-year decline. Looking at the trends across different markets, the revenue in developed countries maintained double-digit growth year-over-year in the first quarter, while other regions such as Middle East and Southeast Asia have not yet returned to recovery trend. Taking the R-pool decline and uneven trend across different regions, we believe that uncertainties and risks still persist. regarding the global macro environment. Therefore, we still need to remain focused and targeted, spend our money wisely, with our ROI and efficiency as the top priorities, seeking a healthy growth based on stable profitability and healthy cash flows. maintaining a targeted and focused operational strategy actually requires the combined efforts of multiple teams, including our user acquisition, our content operation, and our content recommendation algorithm team. And this actually involves the in-depth analysis of different demographics of users, content, and also tipping behavior and their ROI. And based on those data, we then flexibly adjust our advertising span, our content recommendation, and our monetization-driven activities accordingly, making sure that these adjustments are coordinated and synchronized. While doing that process, we figured that actually our platform's diverse culture provides extra and unique emotional values to users. And those who value such aspects tend to have a higher R pool than the overall average and exhibit a very strong loyalty. Therefore, we will continue to uphold our value to cultivate a diverse and inclusive culture and combine them with our targeted operational strategy and amplify our advantages of diverse culture and multi-market operation. And looking ahead to the revenue trend in the following quotas, first of all, for Q2, because of the influence of Ramadan and the celebration of Eid, during which we believe users' offline social activities will increase, and also together with some of our optimization of content policies in certain regions, we expect a relatively softer Q2, and that was reflected in our current guidance. However, given that we expect to have elevated level of operational activities and marketing in the second half of the year. We do expect Beagle's revenue growth will be better in the second half of the year. And for the full year of 2024, we're still expecting Beagle to maintain a revenue recovery trend on a year-over-year basis. Thank you. Next question, please.

Your next question comes from Alex Soon with Morgan Stanley.

Thank you for your question, Mr. Guan. My question is about the trend of the whole Group and Beagle's profit rate in the second half of the year. Thank you. Alex, thank you for your question. Let me answer it.

In the first quarter, the non-GAAP net profit of the entire group achieved a growth of 34.8%. First, let's look at the Beagle block. The non-GAAP net profit of Beagle increased by 25.3% compared to the same period last year. The absolute amount of non-GAAP net profit is basically flat compared to last year. This is generally in line with our expectations. The non-GAAP efficiency rate of QE Beagle is 35% compared to last year, mainly due to the strategic upgrade of Beagle advertising business. If we exclude this factor, QE Beagle's efficiency is basically in line with the rule of law. Q1, All Other's version continues to maintain a trend of reduction in download loss. Non-GAAP's current loss is reduced by 2.1%. Thank you. This is

Alex, I will take your question. In the first quarter, the group's non-GAAP net profit achieved a year-over-year increase of 34.8%. First, looking at Beagle's segment, Beagle's non-GAAP net profit grew by 25.3% year-over-year. And the amount of non-GAAP operating profit was flattish in line with our expectations. In Q1, BeGo's non-GAAP gross margin was 35% decline year-over-year, mainly due to the strategic upgrade of BeGo's advertising business and some change in the revenue mix. Excluding that impact, BeGo's Q1 gross margin is consistent with our expectation for a low season. In terms of operating expenses, thanks to our continued cost optimization and improvement of our operational efficiency, Beagle's operating expenses increased by a slower rate than its revenue growth. Regarding the all other segments, despite the impact of a low season and also the proactive adjustment of certain non-core audio live streaming business that we did last year. The segment continued to book reduced operating losses in Q1 on a sequential basis, with its non-GAAP operating losses narrowing by 2.1% QOQ. So looking ahead to the rest of 2024, expect to continue to focus on ROI and efficiency. For Beagle segment, we expect Beagle to continue its top line recovery year over year and deliver a stable amount of non-GAAP operating profits while excluding the impact of some adjustments to non-core audio live streaming business. And for the other segment, for the all other segments, We expect it to further narrow its non-GAAP operating losses Q&Q. Thank you. Next question, please.

Your next question comes from Lei Zheng with Bank of America.

Hi, Director, good morning. Thank you for accepting my question. I mainly want to ask what kind of rhythm we have in the future with regard to the overall Thank you, management, for taking my question. I want to follow up on the shared reporters' plan. What we can expect in the following quarter since we have reporters' U.S. dollar amount of $55 billion in the fourth quarter? Thank you.

Hello, Director. Thank you for your question. Let me answer it. Actually, as we just mentioned, even though there is no conclusion in the current Vamalive transaction, it does not affect our determination and sincerity to promote shareholder return. From the data, you can see that in the first quarter, our new stock return amount is up to $54.5 million. By the end of the first quarter, we still have a reusable return of $4.72 billion. 我们会继续积极推进回购的执行,并且尽量的提升回购执行的一个稳定性。 谢谢。 Thank you, Lei.

This is Alice. I will take a question. As we've just mentioned, although the sale of wild wildlife is not yet conclusive, we remain committed to returning value to our shareholders. In the first quarter, you can see that we have repurchased an additional $54.5 million worth of our shares. At the end of June 1, we still have around $772 million unutilized quota under our current share repurchase program. We intend to continue to execute additional share repurchases and we'll strive to improve our execution consistency in 24. Thank you. Our last question, please.

Your last question comes from Yuwen Zhang with China Renaissance.

Hello, thank you for your question. I would like to ask Mr. Guo to talk about the current progress of our advertising business and the direction it is going in. Thank you. So thanks for taking my question. To show you regarding our now live streaming business, can you discuss the latest trend there and our future plan? Thank you. Hello, thank you for your question.

Our current live streaming method is mainly through ads. We currently have two types of ads, mainly social platform ads that we have. and our third-party traffic partner, Beagle Audience Network. Looking back at the past two or three years, we have seen some small breakthroughs in the non-streaming industry based on advertising. In the past two or three years, Beagle's non-streaming revenue has increased by 14%. Likey's advertising has increased by nearly 2.5 times. In the first quarter, Beagle's non-streaming revenue has increased significantly. This is partly due to the strategic upgrade of Bigo Audience Network's advertising alliance business. Except for the advertising alliance business, Bigo's non-live broadcast revenue has also increased by 50%. Among them, LIKEY's advertising revenue has increased by 1.1 times. However, it needs to be admitted that our advertising business is still in a relatively early stage. Thank you. This is David. I will ask you a question. Currently, our non-live streaming revenue

primarily include advertising revenues, which could be further diverted into two categories, including advertising revenues generated on our own social platforms and advertising revenues generated on Beagle Audience Network, where we work with third-party traffic. Looking back at the year of 23, we've made some progress. regarding our non-live streaming business, with Beagle's non-live streaming revenue increased by 14% year-over-year, and Leike's advertising revenue increased by nearly 2.5 times year-over-year. And in Q1, we continue to see significant year-over-year growth in Beagle's non-live streaming revenues. That was partially driven by the strategic upgrade of our Beagle Audience Network advertising business, excluding our network advertising revenues. Beagle's non-live streaming revenue grew by over 50% year-over-year. Among this, Likey's advertising revenue increased by 1.1 times the culture. However, we'd like to acknowledge that our advertising business is still in a relatively early stage. We will continue to optimize our products and services, focus on growing our core market DAU and also our merchant advertiser corporation network. We expect to continue to expand and diversify our revenue streams and drive a long-term sustainable growth with a much diversified engine. So that was the last question. Thank you so much for joining our call. We look forward to speaking with everyone next quarter.

That does conclude our conference for today. Thank you for participating. You may now disconnect.