JOYY Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 29, 2023

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Joy Incorporates Third 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 Xie, the company's Senior Manager of Investor Relations. Please go ahead, Jane.

Speaker 1

Thank you, operator. Hello, everyone. Welcome to Joy's Q3 2023 earnings conference call. Joining us today are Mr. David Shueyeng Li, Chairman and CEO of Joy Ms.

Speaker 1

Ting Li, 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 and A session. The financial results and webcast 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.

Speaker 1

Before we continue, I would like to remind you that we may make forward looking Statements which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and uncertainties, Please refer to our latest annual report on Form 20 F 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.

Speaker 1

I will now turn the call over to our Chairman and CEO, Mr. David Shailin Li. Please go ahead, sir.

Speaker 2

Hello, everyone. Welcome to our 3rd quarter 2023 earnings call. First, we will provide a quick snapshot of our performance for the quarter. During the Q3, we once again delivered a strong performance. Our group revenue coming at RMB 567,100,000 at 3.6% Sequential increase.

Speaker 2

Approaching the hand of our guidance, we see a non GAAP Net profit of $81,200,000 a 5.5 percent year over year increase with a non GAAP net margin of 14.3%. Our core business segment, Bigo, maintained its recovery momentum and recorded Revenues of RMB 490 $4,100,000 a sequential increase for 4.9% and a year over year increase of 2.2%. The 1st year over year top line growth for Bigo in 6 quarters. Because revenue rate was accompanied by improvements in user activity and monetization efficiency. At the group level, our global average mobile MAUs grew by 2.6% year over year to 276,800,000.

Speaker 2

Notably, Bigo Life's MAUs maintained that it's a strong growth trajectory, increasing by 14% year over year to 40,300,000. Bigo's number of paying user experienced a steady increase for 6.6% year over year With ARPU also improving sequentially during the quarter, With monetization recovery and as we continue to enhance our operational Efficiency. Fugro's non GAAP operation profit grew by 11.7 percent year over year, reaching 81,900,000 representing expanding non GAAP operation profit margin of 16.6%. As one of the leaders in the global social entertainment sector, We have always been committed to building equitable device and inclusive global user community. We aim to provide users with Unique value and exceptional experience through our broad range of social entertainment products.

Speaker 2

We firmly believe that creating of positive user value and experience are the Foundations of effective user management and monetization To maximize product value for our users, we have Always, Our highly localized operations and We view product optimization, our most effective instrument for enhancing user content and improving user social interaction experience. To give you a better understanding of Our progress on those two fronts, I'd like to share some examples from the Q3. On the content front, Bigo Life sends its collaborations with top PULs and Introduce more diverse and viral content, we also launched several major updates For our content separation strategies and recommendation algorithm, This upgrade improved our ability to effectively efficiently channel user to content They are enjoyed, particularly our new user cohorts. On the social interaction front, we prioritize the optimization of interactive tools within Bigo Life family feature and allocated additional Operation resources to support families. We also further To enter new social features such as Real Match, which chatter to Different user case and help user expand their social networks.

Speaker 2

These targeted initiatives have effectively driven positive progress in user engagement and monetization. The introduction of more diverse and viral content alongside the collaborations with POLs And successfully enhanced our brand exposure, expanding products outreach and First, the organized user growth organic user growth. This acceleration of organic traffic has been the primary reason for our robust user growth in recent quarters, even as we had a high to a disciplined market expense. At the same time, Our amplification of Stanley's social functions has yielded positive results in terms of User acquisition, payment conversation and recruitment of long tail streamers. Our improved user engagement and user experience coupled with exciting seasonal Promotions such as regional, midyear, Dallas have fueled recovery in user paying And overall monetization, looking ahead to the Q4, We anticipate that Bebo's global business will maintain its recovery trajectory On a year over year basis, however, given the ongoing uncertainty in the global micro Lastly, we believe the pace of recovery across different markets We will vary and short term fluctuations in users paying Such sentiments may persist.

Speaker 2

We will remain cautiously optimistic. We focus on our operational strategy and priority High quality growth. We will also continue to exposure innovations across Our products and operations and drive the steady recovery also our global business with Sustained the focus on improving operational cash flow. Now Let's take a closer look at our products. We will start with BigoLive.

Speaker 2

BigoLive maintained its double digit user growth Momentum in the Q3 with MAUs increasing by 14% year over year to 40,300,000. We saw growth across several key regions with year over year increase by 12.9% in Europe and 15.3% in the Middle East and 40.4% in Southeast Asia and other emerging markets. In the Q3, Bigo Line recorded mid single digit revenue growth in a sequential basis. The developed country region, especially Europe and Eastern Pacific countries Outpaced other market and generated high single digitsequential growth in revenue. As mentioned earlier, Bigo Live introduced a diverse range of high quality and virtual content during the Q3.

Speaker 2

In the Middle East, Big O Live pre mired the acting coach Exclusive show in which legendary Jardan actor He shared his personal insights into the art of acting. In Indonesia, Bigo Live debuted Friends Off Life, a collaborative middle Series features in 3 Bigo live streamers and some local up and coming actors. The show was broadcast on a popular Indonesia video platform called Vidyo, Introducing Bigo Live streamers to new audience, Bigo Live also expand its collaboration with top KOLs In the Q3, we launched a summer wide campaign in the MENA region and Team up with several local KOLs who has tons of millions of followers to Share the freshest summer fashion trends and the travel experience significantly boosting user engagement and Inspiring creativity, building upon the success of last quarter's Family Month campaign, we continue to encourage users to explore and participate in Family activities on Big O Line. The 3rd quarter saw a steady increase in the size of families With 5.1 percent sequential increase in DUUs and 17.4 Percent sequential increase in the number of contracted streamers in families. And optimization of our product features, we retained our focus on content enrichment and improved social In the actions, we further refined our content recommendation algorithm and continue to incent We started to develop a premier content pool Our bar channel covering popular genres such as K Pop, Pets and Workout In the Q3, the number of users sharing videos on Bar, suggested by 42.8% from the period quarter, while the average effect of viewers views Per person for video content rose by 29.3% in the same period.

Speaker 2

At the same time, we fine tune the features to enhance the appeal and The inactivity inside the live streaming rooms. This drove 8.5 Percent sequential increase in the total number of live streamers, along with the 3.7% sequential increase In the number of live streamers in multi guest rooms, in line with our Commitment to fostering social interaction and forging relationships, We enhanced the Bigo Live's RealMite features to make it easier to connect with people Nearby by simply swiping through profiles, The upgrade field, 18.3 sequential increase in the number of people Same sequential increase in direct chat messages. Next, let me show some updates For our other products, as we have previously mentioned, we compared To BigoLive, our other products have a much larger aggregated user base, But they are generally in the early phase of monetization as their contributions to revenue and Profite relatively small. As such, our main objective of those products is Systematically enhance our monetization efficiency and profitability, while Strengthening their ability to organically acquire the new users Since this product has started to generate consistent profit, we will have a solid Growth. Let's begin with LaiKey in the Q3.

Speaker 2

LaiKey's revenue grew by mid single digitals Sequentially and it continued to be profitable at the product level. On the user front, Despite sequential decline in like this MAUs and this quarter, it's still used in core region, particularly in the developed country region maintained high single digital sequential Growth, in September, Lantie orchestrated a series of offline community events in Celebrating all of the National Day. This include streamers, 3rd parties and movie base accompanied by online discussion We signed to deepen connections among user creatures and the platform. During the quarter, Lucky also partnered with a number of popular creators to It's hybrid at the Asian Culture Festival event and have to fans of I mean K Pop and more highlighting the ACG That is an integral component of LIKI's content ecosystem and community. At the product level, LIKI remained dedicated to Posting community interaction during driving 40.7 percent over sequential increase in average user time spent.

Speaker 2

Overall, user engagement as measured by the ratio of DAUs So annuals increased by 1% sequentially, while the I'm penetration rate rose by 1.25% over the same period. Next, Let's take a look at Hago. During the Q3, Hago achieved a sequential middle single digit percentage increase revenue and its operation cash flow remained positive during the quarter. If you can see content remain a priority along with a refined pushing notification strategy designed to Both participation in multi guest interactive rooms across region. I will also iterate it, enhance its IR and interactive features helping to drive increase of social activity among users.

Speaker 2

Notably, average user time spent in Social channels reached nearly 90 5,800,000 per day And average time spent in multi guest audio live streaming rooms grew by 1.2% sequentially. Basis, besides the Hago's 3 d space, Hago is Actively exploring alternative social interactive vacations and combining Finally, Some updates on cash flow and capital return. We continue to drive to generate Robust positive operating cash flow reached RMB72 dollars 900,000 in the 3rd quarter. Meanwhile, we maintained active pace of Share repurchases and bounced back additional 43,500,000 of our shares. Our Board has authorized an extension of the buyback program, which assumes that at 530,000,000 as of the end of the 3rd quarter on to November 2024.

Speaker 2

To summarize effectively conclusion of our operational status and driving the ongoing recovery of Bigo's revenue Profit and user activity. Looking ahead into the remainder of 2023 and beyond, we remain committed to our long term Targeted strategy to pursue high quality growth. We will continue to explore ways to We know across our products and operations and driving the Steady recovery of our global business with continued focus on improving operation cash flows, We will further concentrate our resources on building our core strengths and the global business that align with our long term strategy and effectively pursue growth opportunities. And at the same time, we will continue to enhance shareholders' return through share buybacks. This concludes my prepared remarks.

Speaker 2

I will now turn the call to our Vice President of Finance, Alex Liu for our financial updates.

Speaker 3

Thanks, David. Hello everyone. Despite the ongoing macro uncertainties, we achieved solid progress in the 3rd quarter. Our global business segment Bigo booked positive year over year growth in both revenue and non GAAP operating income during the quarter. We continued to grow our global MAUs Even as we adhere to our disciplined marketing spend, the monetization efficiency resource were also up during the quarter with the number of Bigo's quarterly paying users up by 5.1% and ARPPU up by 2.2% quarter over quarter.

Speaker 3

It's a result of our continuing dedicated strategy to optimize product value and the user experience and the strong execution of our global operational team. Now let's look at the numbers in detail. Our total net revenues were RMB 567,100,000 in the 3rd quarter. Revenues from Bigo segment were $494,100,000 up by 2.2% year over year. The 1st year over year top line growth in 6 quarters, mainly driven by strong growth in the developed countries.

Speaker 3

Cost of revenues for the quarter decreased to $357,900,000 Among which, our revenue sharing fees and content costs decreased to 232,300,000 Bigo's cost of revenues were $299,200,000 which was up year over year, Consistent with rebound in live streaming revenue, gross profit was $209,200,000 in the quarter with a gross margin of 36.9 percent. Bigo's gross profit was $194,800,000 with a gross margin of 39 Our group's operating expenses for the quarter were $191,300,000 compared with $202,200,000 in the same period of 2022. Among the operating expenses, sales and marketing expenses decreased to $92,500,000 from $96,800,000 in the same period of 2022, primarily due to the Optimization of overall sales and marketing strategies across various product lines to be more focused on ROI and Effectiveness of user acquisition. R and D expenses increased to $71,600,000 from $61,200,000 in the same period of 2022, primarily due to increased R and D personnel related expenses as we prioritize the resources into building our Technological capabilities. Bigo's operating expenses for the quarter were $126,700,000 down by 5.3% year over year.

Speaker 3

Our gross GAAP operating income for the quarter was US12 $1,000,000 Our non GAAP operating income for the quarter, which excludes SBC expenses, Amortization of intangible assets from business acquisitions, loss on the consolidation and disposal of subsidiaries, as well as impairment of goodwill and investments was $40,400,000 in this quarter with a non GAAP operating income margin of 7.1%. Bigo's GAAP operating income for the quarter was $68,500,000 and Bigo's non GAAP operating income was $85,900,000 representing a non GAAP operating income margin of 16.6%, up from 15.2% in the same period last year. Our group's GAAP net income Attributable to controlling interest of Joy in the quarter was RMB72.9 million compared to net income of RMB515,300,000 in the same period of 2022. GAAP net income margin was 12.9% in the Q3 of 2023 compared to net income margin of 87.8 percent in the corresponding period of 2022. Our gross GAAP net income was larger in the Q3 last year, primarily due to a One off remeasurement gain of our active investment.

Speaker 3

Eagle's GAAP net income in the quarter was $70,200,000 with a GAAP net margin of 14.2%. Non GAAP net income attributable to controlling interest of Joy in the quarter was $81,200,000 Compared to $76,900,000 in the same period of 2022, the group's non GAAP net income margin was 40.3% in the quarter compared to 13.1% in the same period of 2022. Bigo's non GAAP net income was $81,900,000 with a non GAAP net margin of 16.6%. For the Q3 of 2023, We booked net cash inflows from operating activities of 72,900,000 We remain a healthy balance sheet with a strong cash position of $3,800,000,000 as of September 30 of 2023. During the Q3, we continued to enhance returns to shareholders and repurchased an additional approximately 43,500,000 of our shares.

Speaker 3

In the 1st 3 quarters of 2023, we have retained an aggregate amount of RMB 355,400,000 to our shareholders through dividends and share buybacks, which altogether represent 155.6 percent of our aggregated Non GAAP net income during the corresponding periods. We will continue to actively utilize our share repurchase program in the coming quarters. Turning now to our business outlook, We anticipate continued recovery in our global operations. However, due to the ongoing uncertainty In the global macro landscape, we recognize that the pace of recovery They vary across different markets and there may be short term fluctuations in users' paying sentiment. Separately, as previously communicated, we had made proactive adjustments to certain non core operations, in line with our commitment to high quality growth and global pricing.

Speaker 3

Taking all factors into consideration, we expect our net revenues for the Q4 of 2023 to be between $551,000,000 $579,000,000 This forecast reflects our preliminary views on the market and operational conditions and business adjustments, which are subject to changes. In conclusion, Our dedicated efforts to enhance product value and optimize user experience are yielding positive results simultaneously, our financial discipline has allowed us to further expand profitability and the 4th 5 of our financial standing. Moving forward, we will maintain a focused operational strategy and direct our resources towards high potential business that align with our long term Objectives. We will also strive for a steady recovery in our global operation, While prioritizing improvement in operating cash flows with a strong foundation and our proven execution capabilities, We are confident that we are well positioned to seize growth opportunities and deliver Sustainable value to our shareholders. That concludes our prepared remarks.

Speaker 3

Operator, We would now like to open up the call to Ke Chen.

Operator

Thank Your first question comes from Thomas Chong from Jefferies. Please go

Speaker 3

ahead. Thanks, management for taking my questions. My first question is about the margin trend for V Go in 2024 as well as the outlook for the group branded margin. And my second question is about shareholders' capital return. Can management share your thoughts on this front?

Speaker 3

Thank you.

Speaker 1

Thank you, Thomas. This is Alex. I will take your first question. So if you look at our Q3 results, we actually delivered better than our previous expectation. Bigo segment's non GAAP gross margin was improved from 39% to 39.5% this quarter with a non GAAP OP margin improved from 16% to 16.6%.

Speaker 1

Although we did spend more on content incentives and sales and marketing for our midyear gala, Our better than expected profit was mainly due to accelerating top line recovery. Looking ahead to Q4, as we enter the year end peak of operational activities, We expect Bigo's content cost and sales and marketing expenses to be sequentially up. Therefore, Bigo will have A slightly lower gross margin and non GAAP operating margin in Q4 as a result. However, if you look at Our progress so far in the 1st 3 quarters of 2023, we have already for Bigo segment, we have already achieved a non GAAP OP of 15.4%. So for the full year of 2023, we're still expecting the non GAAP OP Of Bigo segment to be higher than the level of 22%, which was 14.4%.

Speaker 1

And as for the outlook for 2024, we believe it's too early to give a detailed guidance As our profit potential offshore depends on the pace of top line recovery, in general, we aim to strike a balance between scale and And on a constant currency basis, we expect Bigo segment to pursue steadily top line recovery while maintain a relatively stable OP margin, non GAAP OP margin. As for the all other segments, excluding the impact from our proactive adjustments to certain products, It has been on a continuing trend of narrowing operating losses, which we expect to continue in 2024. So to sum up, we continue to value profit and positive cash flow and drive further improvement in our operating efficiency. And at group level, we do expect to remain profitable and continue to generate positive operating cash And for your second question on capital return, if you look at Q3, we have repurchased approximately 43,500,000 of our shares during the quarter. And in the 1st 3 quarters of 2023, our aggregated capital return has reached US355 1,000,000 through dividends and share buyback, which is representing 150 6% of our aggregated non GAAP net income during the corresponding periods.

Speaker 1

So as of the end of Q3, we still have 530,000,000 unused lines quota under our previous And our Board has just authorized an extension of the program for another year. So shareholder returns will remain one of our top focuses, and we will continue to steadily execute our share buyback. Thank you. Next question please.

Operator

Next question comes from Brian Gong from Citi. Please go ahead.

Speaker 2

I will translate myself. Good morning, management. Thanks for taking my question. Regarding Bigo Labs recovery, can you elaborate a little bit more on the expected growth momentum across different regions in 2024? What factors are driving this recovery?

Speaker 2

Thank you.

Speaker 1

Thank you, Brian. This is David. On your question about Eagle Live's recovery, if you look at our Q3 results, you can see that our revenue recovery in the quarter was better than expected. Looking at products done on a loan basis, Bigo Life actually delivered a higher Q on Q growth than the Bigo segment and that was mainly driven by a high single digit QoQ growth from the developed countries region. Actually, the developed countries have been on sequential recovery momentum for Quite a few quarters already.

Speaker 1

And we've also booked a positive growth, a decent Q on Q recovery for the Southeast Asia region as well during the quarter. And if we look at the driving factors, we believe it's mainly attributed to a strong MAU growth And also ARPU recovery. I think it's the result of our continued implementation of Highly targeted operational strategies, which actually prioritizes our user acquisition spending, Product optimization and other operational resources towards premium and However, as I've Just mentioned, given the global macro uncertainties, we believe the pace of recovery across different regions Do vary and that users paying sentiment are still in a fluctuating status. Therefore, in our Current Q4 guidance, we actually expect Bigo Live to achieve a modest growth year over year. I think it's still early To give guidance on 2024, but generally speaking, we expect Bigo Live to Resumes top line year over year recovery gradually, driven by MAU growth together with stabilizing monetization efficiency.

Speaker 1

Next question, please.

Operator

Your next question comes from Yuan Dang from China Renaissance. Please go ahead.

Speaker 4

Thank you for taking my questions. So a couple of questions. First, on user side, how should we think about overall user trend into 2024? And then secondly, we see the ongoing impact of the global macro environment. How should we think about this impact to our business such as in Europe?

Speaker 4

And what have the company done to mitigate such adverse

Speaker 1

Thank you, Yuwen. This is David. So on user growth, if we look at our progress in the past two quarters, We managed to achieve a rebound in our group's MAU on year over year, while we maintain a relatively Our group's MAU rebound achieved Positive year over year growth for 2 consecutive quarters and Bigo Live continued double digit user growth for the 6th consecutive I believe that overall speaking, our user acquisition efficiency has steadily improved as shown by an increasing Trend in our organic traffic, influencer led traffic and also a higher Percentage of premium users. So I think that believe the current user growth strategy of Bigo Life has been Effective and moving forward, we believe that there are a few actionable points for continuing our user growth. First of all, we will continue to remain targeted in terms of our user acquisition strategy and prioritizing Quality of user growth with a focus on ROI.

Speaker 1

And second, we'll continue to leverage our localized Operations with primary focuses on content and social experiences as the key drivers So, of our user acquisition, in the recent quarters, you can see that Spiegel Life has successfully expanded Product outreach by with our original content, for example, our variety shows, mini series as well as some third party high quality content. And our new feature, Real Match, Actually, we see very positive user feedback in Southeast Asia and drove an increase of downloads in those markets. And by collaborating with KOLs, we have maintained a positive momentum in influencer led traffic, especially in Southeast Asia and Latin America and other emerging countries. And thirdly, we will continue to work on product features and user experiences for targeting user groups to further improve our user retention. In the recent quarters, we have actually introduced refined content segregation policies and differentiated recommendation Algorithms for tailored to different target user groups.

Speaker 1

And after several rounds of Iterations focused in on premium users, new users and female user cohorts. We've actually found that the retention rate and also their user time spent has been consequently improved within those target groups. And as we previously mentioned, Bigo Life has a very diverse global user community and there is empty room for targeted optimization, and we aim to continue to make perfection in each and every dimension and further enhance user experiences within each and every user groups. And to sum up, we expect Bigo Life To maintain a relatively healthy and steady user growth in the year 2024. For other products, I believe that Our goal is still to focus on the core functionalities and cultivation of core product value.

Speaker 1

And once they start to Generate a consistent profit, then we can then we will have a solid foundation to revisit user growth. The actual time line may vary. Some might be slightly ahead. The others may be slightly behind. However, I don't think that it will

Operator

Next question comes from Lei Zhang from Bank of America Securities. Please go ahead.

Speaker 1

I want to see any updates on your global business in terms of regulatory risk. Thank you. This is Alex. I will take the question. For a global social entertainment company, The regulatory landscape across different markets actually varies and has been and is subject to constant evolvement, and we have always considered business compliance and services safety as the crucial prerequisites for high quality growth of our global business.

Speaker 1

And To achieve that, we will remain vigilant in monitoring the regulatory development and actively We are engaged with the local regulatory authorities and internally we will continue To optimize our compliance frameworks and execution and more proactively adapt our business and operations with The regulatory changes to ensure alignment with the evolving So that was the end of our Q and A session. It's Great catching up with everyone. Thank you so much for joining our call. We look forward to speaking with you next quarter.

Operator

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

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Key Takeaways

  • Joy delivered a strong Q3 with total revenue of RMB 567.1 million (up 3.6% sequentially) and non-GAAP net profit of $81.2 million (up 5.5% year-over-year) for a 14.3% non-GAAP net margin.
  • Core segment Bigo achieved its first year-over-year revenue growth in six quarters, booking RMB 494.1 million (up 4.9% sequentially, 2.2% YoY), while global mobile MAUs rose 2.6% YoY to 276.8 million and Bigo Live MAUs climbed 14% YoY to 40.3 million.
  • Product optimizations—such as upgrades to content recommendation algorithms and new social features like Real Match—boosted engagement metrics, including a 42.8% increase in videos shared and an 8.5% rise in live streamers.
  • Other apps like LaiKey and Hago saw mid single-digit sequential revenue growth and positive cash flow, with LaiKey user time spent up 40.7% and Hago multi-guest audio room time up 1.2% sequentially.
  • Operating cash inflow reached RMB 72.9 million in Q3, ending with $3.8 billion in cash, and the company repurchased $43.5 million of shares, extending its buyback program through November 2024.
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Earnings Conference Call
JOYY Q3 2023
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