JOYY Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 28, 2024

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Joy Inc. 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.

Operator

Please go ahead, Jane.

Speaker 1

Thank you, operator. Hello, everyone. Welcome to Joy's Q1 2024 earnings conference call. Joining us today are Mr. David Shirlin 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 Shilin Li. Please go ahead, sir.

Speaker 2

Hello, everyone. Welcome to our Q1 2022 earnings call. To start, let me briefly review our performance in the Q4. We kick off 2024 with a solid quarter. Gross revenue coming at $565,000,000 with our core business Bigo segment contributing $505,000,000 Group's non GAAP net profits reached $67,000,000 and Bigo's non GAAP net profit hit 71,000,000 dollars both surpassing our expectations.

Speaker 2

Bigo sustained its top line recovery trend for the 3rd consecutive quarter, achieving at 8% year over year growth. Live streaming revenues from our core global products, which include the Big Go Live, LIKI, IMO increased by 2.8% year over year, driven by continued expansion of paying users, which was up by 6.9% on an avenue 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 Bigos markets developed countries continued to outperform with live streaming revenues achieving double digit growth year over year. Importantly, as we continue to strategically expand and diversify our revenue streams because non live streaming revenues, primarily advertising revenues, grew substantially year over year. At the same time, we continued to improve our profitability at group level.

Speaker 2

Our non GAAP net profit reached $67,000,000 in the 4th quarter, up

Speaker 3

to 34.8%

Speaker 2

year over year. Non GAAP net margin increased by 3.4 percentage, 0.2 11.9 percent. 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.

Speaker 2

We sustained our positive operation cash flow in the Q1, generating a robust $75,000,000 with its foundation of healthy cash flows and our solid financial position. We repurchased an additional of 54,500,000 both of shares 1,000,000 worth of shares during the quarter. As we have outlined previously, despite the last developments regards the sales of YY Live, we remain committed to retaining value to our shareholders. We will continue to actively execute our current share repurchasing repurchase program and enhance execution consistently. Looking ahead, well, we have seen some green shots of recovery.

Speaker 2

Global macroeconomic uncertainties persisted. Our live streaming ARPU was still 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 Bigo to resume sequentially growth in the second half of the year and maintain its year over year revenue recovery for the full year.

Speaker 2

We anticipate that Bigo's revenue mix will become more diversified in 2024 with further increase in the contribution from non live streaming 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 of innovative online and offline marketing activities in the Q4. In addition to hosting Dallas and Culture themes region activities and resonated deeply with our users.

Speaker 2

We elevated our presence in the offline exhibitions and road shows. We also hosted creator 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 work community meant 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 users during this festival period.

Speaker 2

We also both partners with several international charitable organizations include the Indonesia Cancer Foundations, Saudi Arabia's NAMA National Association and Bangladesh's JAGO Foundations. We made a number of donations to those international charitable organizations, inspiring 100 or 1000 of our users to join our calls and provide assistance to local families, patients and children in need. We have also actively engaged in dialogics 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 of goals of local communities. For example, in January, we attended the Jordan Singapore Tech Aliens Forum with Bigo and the Information and Communications of Technology Associations of Jordan jointly signed MOU. This partnership aimed to strengthen bilateral cooperation, promote regional technological innovation and facilitate economic growth.

Speaker 2

In March, Bigo participated in LEAP, the largest technology exhibition in Middle East, where we showcased Bigo's technologies and AI driven solutions. Bigo'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 Q1, Big O Line's revenue continued its year over year rebound, especially revenue from developed country grew by 40.8%, accompanied by 17.2 increase in paid user in those regions.

Speaker 2

During the quarter, we remained focused on Bigo Life's user acquisition strategy, centering more resources into developed countries to enhance our monetization efficiency. As a result, Bigo Life's MAU was slightly down year over year, starting at $37,100,000 However, MAU in developed countries rose by 8.9% on an annual basis. In contrast with 4% decline in Southeast Asia and other emerging markets. Moving forward, we will continue to execution our focused user acquisition strategy as we strive to optimize Big O Live's user mix. While we anticipate some short term fluctuations in MAU growth, we are confident that this adjustment will enhance the long term validity of Bigo Line.

Speaker 2

In the Q4, Bigo Line organized a variety of innovative marketing initiatives in reaching the platform with diverse high quality content and broadening our reach within the global community. Highlights was our participating in the Ceremon Music Festival, the world famous Italian song contest and award ceremony held in early February. As a part of organizer, Big O Live showcased 10 of our most talented streamers in through our music, Extreme that was streamed worldwide. In addition, Bigo Live launched an intelligent management system for streamers and agencies, which significantly stream in lines the contracting and the management process by reducing the average duration from days to mere hours. This efficiency both lead to 4.9% quarter over quarter increase in newly contract streamers.

Speaker 2

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 events 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% uptick in daily active user in family groups. We also simplified and upgrade Bigo Live's homepage and rolled out refined AI driven content recommendation algorithm that better chatter to our call users' preference and their real time feedback. This resulted in sequentially increase of 1.1 percent in next day user retention and 5.4% in average viewers' time spent per live session.

Speaker 2

Enhancement to live streaming rooms, tools and interactive features contributed to 5.3% sequential rate in average during per live session and 4.4% sequential increase in the number of user going live in multi guest room. Next, let's take a look at Leki. In the Q1, Leki's revenue continued to recover year over year and it's maintained its profitability. Advertising revenue grew by 1.1 times on an avenue basis and DAU in the core European market maintained the sequential growth. Like its 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.

Speaker 2

During the Q4, Nike launched a series of engaging community events of creatures, users and brands. This include the Global Nike Party and MENA Gala in the Middle East co hosted with Bigo Live as likely continued to enhance its creators services 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 positive operational cash flow during the Q1.

Speaker 2

HAGO's implementation of more gaming field interactions and effectively boosted user engagement and monetization. Sign out's success was the role of the Fly Across the World event spanning Hoggle's major operation countries. By participating in the event, user could travel virtually to various countries, collect the treasures, claim and nurture their travel companies' path and give virtual gifts trailers to each location's unique culture and traditions. The event received enthusiastic feedback with nearly 1 third of our Hago's total paid user participating. User engagement on Hago also increased with daily average time spent in social channels raising by 2.8% to 102 minutes and the time spent in multi guest audio live streaming rooms up by 2.9% from the previous quarter.

Speaker 2

To sum up, we are off a good start in 2022. Bigo has sustained its year over year revenue recovery trajectory, while further diversifying its revenue mix. The group has delivered profit growth. Looking 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.

Speaker 2

This concludes my prepared remarks. I will now turn the call to our Vice President of Finance, Alex Liu for our financial updates.

Speaker 3

Thanks, David. Hello, everyone. Before I go into the details, we would like to remind you that we filed the latest development in the sale of VAMA Live. To the date of this press release, we have not obtained control over Vamalai and therefore have not consolidated the business. The financial results presented in our press release and this conference call primarily consisted of Bigo and all other segments, excluding Walmart Live.

Speaker 3

I will now provide a recap of some key financial highlights for the Q1. Overall, we observed improving fundamentals supported by Bigo's continued top line recovery and efficiency improvement at group level. Our total net revenues were $564,600,000 in the 1st quarter. Revenues from Bigo segment were $505,200,000 up by 8% year over year. In particular, Bigo's non live streaming revenues were $63,000,000 which was up substantially year over year, primarily due to the increase of advertising revenues.

Speaker 3

Geographically speaking, as we prioritized to allocate our operational resources towards developed countries, And the revenues from developed countries was up by double digits year over year, outperforming other regions. Cost of revenues for the quarter decreased to $369,200,000 dollars among which our revenue sharing fees and content costs increased to 268,400,000 dollars Eagle's cost of revenues were $328,600,000 which was up year over year, consistent with the rebound in revenue and elevated creator support during the quarter. Gross profit was $195,400,000 in the quarter with a gross margin of 34.6 percent. Bigo's gross profit was 176,600,000 dollars with a gross margin of 35%. Bigo's gross margin was lower year over year due to change of revenue mix and higher contribution of Bigo audience network advertising revenues.

Speaker 3

Our gross operating expenses for the quarter were RMB195,400,000 compared with $205,300,000 in the same period of 2023. Among the operating expenses, R and D expenses decreased to 69,000,000 dollars from $75,800,000 primarily due to decreased personnel expenses and share based compensation expenses. Our sales and marketing expenses decreased to $94,600,000 from $97,600,000 in the same period of 2023. Bigo's total operating expenses for the quarter were 129,500,000 dollars which was flat year over year, while its total operating expenses ratio was 25.6% during the quarter, down from 27.6% last year. Our Group's GAAP operating income for the quarter was $3,500,000 Our Group's non GAAP operating income for the quarter which excludes SBC expenses, amortization of intangible assets from business acquisitions, not on the consolidation and the disposal of subsidiaries, as well as impairment of goodwill and investments was $24,800,000 in this quarter.

Speaker 3

Based on non GAAP operating income margin of 4.4 percent, Bigo's GAAP operating income for the quarter was $50,400,000 and Bigo's non GAAP operating income was $63,000,000 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 46,800,000 dollars $38,200,000 on a sequential basis, respectively, despite the negative impact of seasonality. And the group's GAAP net income attributable to controlling interest of Joy in the quarter was $45,300,000 compared to $28,000,000 in the same period of 2023. GAAP net income margin was 8% in the Q1 of 2024 compared to 4.8% in the same period of 2023. Bigo's GAAP net income in the quarter was 65 $1,000,000 with a GAAP net margin of 12.1 percent, up from 9.3% in the same period last year.

Speaker 3

Non GAAP net income attributable to controlling interest of Joy in the quarter was 67,200,000 dollars compared to $49,900,000 in the same period of 2023. The group's non GAAP net income margin was 11.9% in the quarter, compared to 8 0.5% in the same period of 2023. Bigo's non GAAP net income was 71,200,000 dollars compared with $56,800,000 in the same period of 2023. Eagle's non GAAP net margin was 14.1 percent in the quarter, up from 12.1% in the same period last year. For the Q1 of 2024, we booked net cash inflows from operating activities of $75,000,000 We remain a healthy balance sheet with a strong cash position of $3,600,000,000 dollars as of March 31, 2024.

Speaker 3

In the Q1, we continued to enhance returns to shareholders and repurchased an additional approximately 54,500,000 of our shares. As of the end of March, we still have around 470 $2,000,000 unutilized quota and 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 Bigo segment.

Speaker 3

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 premium sentiment. At group level, we expect our net revenues for the Q2 of 2024 to be between $538,000,000 $569,000,000 This forecast reflects our preliminary views on the market and operational conditions, which are subject to changes. Looking forward, we will remain dedicated our strategic priorities, optimizing product and innovating our business 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.

Speaker 3

Operator, we would now like to open up the call to questions.

Operator

Thank Your first question comes from Henry Sun with JPMorgan.

Speaker 3

Thanks management for taking my question. My question is about the revenue and Bigo Live. Could management share the revenue outlook for 2024? And what are the expected trends for Bigo Live by region in the second half of this year? Thanks.

Speaker 1

Hi, this is David. I will take a question. First, let's review the monetization trend for Q1. In the Q1, Bigo's 3 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 ARPU is still showing a year over year decline.

Speaker 1

Looking at the trends across different markets, the revenue in developed countries maintained double digit growth year over year in the Q1, while other regions such as Middle East and Southeast Asia have not yet returned to recovery trend. Taking the ARPU 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 flow, 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 shipping behavior and their ROI. And based on those data, we then flexibly adjust our advertising spend, our content recommendation and our monetization driven activities accordingly making sure that these adjustments are coordinated and synchronized.

Speaker 1

While during 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 ARPU than the overall average and exhibit 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 quarters. 1st of all, for Q2, because the influence of Ramadan and the celebration of Eid during which we believe users offline social activities will increase.

Speaker 1

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 activities in the second half of the year. We do expect Bigo's revenue growth will be better in the second half of the year. And for the full year of twenty twenty four, we're still expecting Bigo to maintain revenue recovery trend on a year over year basis. Thank you.

Speaker 1

Next question please.

Operator

Your next question comes from Alex Hu with Morgan Stanley.

Speaker 3

Thank you, management, for taking my question. My question is related to our group margin trend and Bigo margin trend in the rest of the year. Thank you very much.

Speaker 1

Thank you. This is Alex. I will take your question. In the Q1, the group's non GAAP net profit achieved a year over year increase of 34.8%. First looking at Bigo segment, Bigo's non GAAP net profit grew by 25.3% year over year.

Speaker 1

And the amount of non GAAP operating profit was flattish in line with our expectations. In Q1, Bigo's non GAAP gross margin was 35% on decline year over year, mainly due to the strategic upgrade of Bigo's advertising business and some change in the revenue mix. Excluding that impact, Bigo'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, bigger operating expenses increased by a slower rate than its revenue growth. Regarding the all other segment, despite the impact of the low season and also the proactive adjustment of certain non core audio live streaming business that we did in last year.

Speaker 1

The segment continued to book reduced losses, reduced operating losses in Q1 on sequential basis with its non GAAP operating losses narrowing by 2.1% QoQ. So looking ahead to the rest of 2024, we expect to continue to focus on ROI and efficiency. For Bigo segment, we expect Bigo to continue its top line recovery year over year and deliver a stable amount of non GAAP operating profit, 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 on Q. Thank you.

Speaker 1

Next question please.

Operator

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

Speaker 1

I want to follow-up on the share repurchase plan. What's retained back in the following quarter since we have repurchased almost $55,000,000,000 in the 4th quarter? Thank you. Thank you, Lei. This is Alex.

Speaker 1

I will take a question. As we've just mentioned, although that the sale of YY Life is not yet conclusive, we remain committed to returning value to our shareholders. In the Q1, you can see that we have repurchased additional RMB54.5 million worth of our shares. As of the end of Q1, we still have around 772,000,000 unutilized quota under our current share repurchase program. We tend to continue to execute additional share repurchases and we'll strive to improve our execution consistency in 2024.

Speaker 1

Thank you. Our last question please.

Operator

Your last question comes from Yuan Zhang with China Renaissance.

Speaker 3

So thanks for taking my question. The question regarding our non live streaming business, can you discuss the better trend there and our future plan? Thank you.

Speaker 1

Thank you. This is David. I will answer your question. Currently, our non live streaming revenue primarily include advertising revenues, which could be further diverted into 2 categories, including advertising revenue generated on our own social platforms and advertising revenues generated on Bigo Audience Network where we work with 3rd party traffic. Looking back at the year of 2023, we've made some progress regarding our non live streaming business with Bigo's non live streaming revenue increased by 14 percent year over year and LIKI's advertising revenue increased by nearly 2.5x year over year.

Speaker 1

And in Q1, we continue to see significant year over year growth in Bigo's non live streaming revenues. That was partially driven by the strategic upgrade of our Bigo audience network advertising business. Excluding the our network advertising revenues, bigger non live streaming revenue grew by over 50% year over year. Among this, YY's advertising revenue increased by 1.1 times in the Q3. However, we'd like to acknowledge that our advertising business is still in the relatively early stage.

Speaker 1

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.

Operator

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

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Key Takeaways

  • Joy Inc reported Q1 2024 gross revenue of $565 M, with its core Bigo segment contributing $505 M, and delivered non-GAAP net profits of $67 M for the group and $71 M for Bigo, exceeding expectations.
  • Bigo achieved 8% year-over-year revenue growth, with live streaming revenues up 2.8% driven by a 6.9% rise in paying users and double-digit growth in developed markets, while non-live streaming (advertising) revenues grew substantially.
  • The group’s non-GAAP net margin expanded to 11.9% (up 3.4 ppt), operating cash flow was a positive $75 M, and cost optimization helped further narrow losses in non-core segments.
  • Joy repurchased $54.5 M of its shares in Q1 and has approximately $772 M remaining under its current share repurchase program, signaling continued commitment to shareholder returns.
  • Looking ahead, management will maintain an ROI-focused, efficiency-oriented strategy amid global uncertainties, expects sequential growth for Bigo in H2 and full-year year-over-year recovery, and plans to further diversify into non-live streaming revenues.
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Earnings Conference Call
JOYY Q1 2024
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