Yalla Group Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 11, 2025

Key Takeaways

  • Positive Sentiment: Yala posted Q2 revenue of $84.6 million, beating the high end of guidance, and expanded net margin year-over-year to 43.2%, driven by optimized acquisition and operational efficiency.
  • Positive Sentiment: Monthly active users rose 8.8% year-over-year to 42.4 million, as the company shifted spending to acquire and retain high-quality, engaged users and expects full-year MAU growth around 10%.
  • Positive Sentiment: Yala is expanding its gaming portfolio with a robust mid-core and hardcore pipeline, releasing two match-three titles in Q3, a roguelike game in Q4, and partnering for global game distribution.
  • Positive Sentiment: The firm has repurchased over $41 million of ADS in 2025 toward a $50 million minimum commitment, canceled 6.2 million shares so far, and plans to continue or exceed its repurchase program.
  • Neutral Sentiment: Guidance for Q3 suggests flat to low single-digit growth year-over-year in revenues and a net margin near 40%, reflecting a conservative outlook pending visibility on upcoming game launches.
AI Generated. May Contain Errors.
Earnings Conference Call
Yalla Group Q2 2025
00:00 / 00:00

There are 8 speakers on the call.

Operator

Hello, everyone, and welcome to Yala's second quarter twenty twenty five earnings conference call. We issued our earnings press release earlier today, and it is now available on our IR website as well as on newswire outlets. Before we continue, please note that the discussion today will contain forward looking statements made under the Safe Harbor provision of The U. S. Private Securities Litigation Reform Act of 1995.

Operator

Forward looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our earnings release and our annual report filed with the SEC. Yala does not assume any obligation to update any forward looking statements, except as required by law. Please also note that Yala's earnings press release and this conference call include a discussion of unaudited GAAP financial information as well as unaudited non GAAP financial measures.

Operator

Yala's press release contains a reconciliation of the unaudited non GAAP measures to the unaudited most directly comparable GAAP measures. Today, you will hear from Mr. Tao Yang, our Chairman and Chief Executive Officer, who will provide an overview of our latest achievements and growth strategies. He will be followed by Mr. Sai Fei Ismail, the company's President, who will briefly review our recent business developments.

Operator

Mrs. Karen Hu, our Chief Financial Officer, will then provide additional details on the company's financial results and discuss our financial outlook. Following management's prepared remarks, we will open the call to questions. Mr. Jeff Xu, our Chief Operating Officer, will join the Q and A session.

Operator

With that said, I would now like to turn the call over to our Chairman and Chief Executive Officer, Mr. Tao Yang. Please go ahead, sir.

Speaker 1

Thank you, everyone, for joining our second quarter twenty twenty five earnings conference call. We delivered another strong set of results in the second quarter of this year. Our total revenue is close to USD 84,600,000.0, once again beating the high end of our guidance. We also made significant strides in improving our operational efficiency by optimizing user acquisition strategies and refining our internal processes, which contributed to a year over year expansion in our net margin to 43.2%. This impressive performance demonstrates our ability to increase user engagement across our ecosystem and achieve high quality efficient growth by anticipating and meeting the Mina's evolving social networking and entertainment needs.

Speaker 1

Throughout Yala's history, the company has been committed to the long term development of Mina's local Internet industry. We were one of the first to explore online entertainment in the region. And over the past ten years, our team has grown from 60 boat to over 800 employees, serving over 40,000,000 MAUs across MENA region. Our product strategy prioritizes creating products with the potential to reach a massive user base while also demonstrating a long life cycle. We strive to develop sustainable business models for long term growth, and we remain confident that our commitment and the patience will pay off as it has over the last decade.

Speaker 1

This q two marks the ninth anniversary of Yala's launch. For Yala Luda, one of our flagship products and MENA's leading casual game platform, we expect its life cycle to reach ten to fifteen years or even beyond. We continue to operate our products with great dedications, fostering a friendly, positive, and vibrant online community. Building on our core business strong fundamentals, we are also strategically expanding into new verticals to capitalize on Mina's digital transformation, leveraging our substantial user base, localized exercise, and the strong user acquisition capabilities. We have broadened our business footprint with game distribution services.

Speaker 1

We hope to become a indispensable resource for leading global game content providers who are as excited as we are about the MIRROR market. We are proud to have good games of all kinds launching Mira efficiently and effectively. Furthermore, as our user scale grows, we are also exploring opportunities to expand into additional online local services to reach even more users across EMEA. Moving on to our new gaming pipeline for this year, we have continued to strategically invest in mid core and hardcore games with a robust product pipeline featuring multiple new titles scheduled for release in the coming two quarters. In the first quarter, we expect to release two Max three titles targeting distinct user segments.

Speaker 1

In the fourth quarter, we aim to release another self developed roguelike game while also preparing for games distribution in collaboration with a leading game developer. We will continue to refine our gaming business strategy and plan plan to ramp up external partnerships and our games distribution capabilities going forward to more effectively diversify our product portfolios. This allows us to explore a broader range of game genes and offer users more diverse options while gaining deeper insight into market dynamics and a more precise understanding of user appetite in the middle region. Technology is another key factor driving our growth as part of our efforts to propel technology innovation and talent development, we initiated in the new round of internship collaborations with Mohammed Bin Zaida University of Artificial Intelligence with a focus on AI application projects by integrating cutting edge academic research insights with real world industry practices, with partnership among industry, academia, and research institutions injected fresh ideas and intellectual resources into our ongoing technology innovation, while also deepening Yela's long term commitment to advancing the development of Mina's AI ecosystem. Before I turn the call over to Saifi, update on our shareholder repurchase plan.

Speaker 1

In the first quarter, we allocated additional $22,000,000 bringing our total minimum commitment to $50,000,000 for the full year. We continue to execute our share repurchase program, consistently enhancing shareholder returns. In the first half of this year, we made encouraging progress. As of 06/30/2025, the company had repurchased a total of more than 6,200,000.0 ADS. There's to totally 41,000,000 USD in this year, completing 82 of our twenty twenty five minuteimum goal.

Speaker 1

We will continue with displaying the execution of the share repurchase program through the end of the year and expect to reach or potentially exceed our full year goal. We remain open to further scaling up our execution under the current share repurchase program. Furthermore, as we mentioned on our last call, the company has decided to cancel all shares repurchased this year. As of 08/11/2025, the company had canceled more than 6,200,000.0 ADS. We will consistently place shareholders' interest at the core of our capital allocation decisions and continuously refine our shareholder return strategy to generate long term value for our shareholders.

Speaker 1

Overall, our second quarter performance once again affirmed Yealas strategic effectiveness and the EMEA market's vast potential. We are steadily compounding our advantages in this compelling market where we have cultivated deep roots over many years going forward. Yellow Group will continue to unlock monetization opportunities through a diversified gaming lineup while working alongside partners to foster a sustainable digital ecosystem. We are excited to have your support as we have propel Mina's transformation from a digital hotspot into a true global innovation center. Now I will turn this call over to our president, mister Safi Ismail, for a closer look at our recent developments.

Speaker 2

Hello, everyone. Thanks for joining us today. Let's take a closer look at our second quarter operations and our products performance. First, I would like to share our operational and product performance highlights in the second quarter. We increased our group's average monthly active users by 8.8% year over year to 42,400,000.

Speaker 2

In light of the sharp MAU increase during Ramadan in the first quarter, we adjusted our user acquisition strategy in quarter two, allocating more resources to acquiring and returning high engagement, high quality users and reducing spending on channels, demonstrating less efficient conversion metrics. This approach will allow us to scale our community while ensuring a vibrant and engaged user base. As a result, the group delivered year over year and sequential revenue growth this quarter despite a short term sequential dip in MAU. Starting next quarter, we expect MAU growth to normalize at 2% to 3% quarter over quarter with full year MAU growth projected at around 10% year over year as we remain focused on consistent user base expansion. Next, I would like to delve into the meaningful strides we made in the second quarter across product operations and brand building.

Speaker 2

During the quarter, we conducted several strategically designed campaigns and fostered in-depth brand partnership, further solidifying our market position and driving stronger user retention. One highlight was this quarter's scope branded campaign between Yalla Lulu and the Dubai Department of Economy and Tourism. We embedded Dubai's culture icons and signature landmarks into gameplay and mission design, delighting users with a richly immersive experience. Its dynamic blend of Yalla Ludders entertaining gameplay and Dubai's tourism appeal garnered highly positive user feedback and sparked substantial organic social media buzz, significantly boosting in game activity. This quarter also marked the successful conclusion of Yalla's ninth anniversary celebration.

Speaker 2

We launched a platform wide event series featuring exclusive missions and generous rewards, mechanisms, user intelligence, reached an all time high with gold coin consumption reaching a new record for this This event's performance demonstrated the strongly affinity users have for our platform, while also reaffirming our event design capabilities and the vibrancy of our online community. We also leveraged our strength in event design and user engagement to deepen our corporate responsibility efforts. During the Needle Adha twenty twenty five, we designed a public welfare initiative with far reaching impact, inviting users to contribute by participating in online events to accumulate goodwill credits as a gesture reflecting the events shared goodwill Yalla Group donated to the UNICEF MENA regional office on behalf of all users. We were delighted to see this campaign enrich users' digital experience while encouraging participation in meaningful social good.

Speaker 2

On a related note, we released our 2024 ESG report this quarter, marking another key milestone in our journey toward greater transparency and standardization in sustainable development. The report systematically outlines the Allah Group's vision, practices and commitments in driving sustainable growth, fulfilling social responsibilities and strengthening corporate governance, highlighting our concrete actions and positive outcomes in area, including promoting digital inclusion, safeguarding user well-being, supporting community development and advancing responsible governance. In short, we drove notable gains in user engagement and commercial value across our core businesses during the 2025. Looking ahead, we remain committed to driving product innovation, deepening strategic partnerships and actively fulfilling our corporate social responsibilities as we advance with firm conviction toward our vision of becoming the most popular platform for online social networking and entertainment activities in MENA. With that, I will now turn the call over to our CFO, Karen, who will discuss our key financial and operational results.

Speaker 3

Thank you, Sophie, and hello, everyone. Thank you for joining us today. Excellent execution across our operations drove this quarter's strong results, underscored by better than expected revenues and enhanced profitability. Our revenue sustained a healthy growth trajectory, up 4.1% year over year. We also continue execute disciplined cost management and improved our overall efficiency, boosting our net income by 16.4% year over year to US36.5 million dollars with net margin expanding by 4.6 percentage points year over year to 43.2%.

Speaker 3

Boistered by this success, we continue to accelerate our expanded share buyback program. We remain committed to driving product innovation, optimizing operations and elevating shareholder value as we advance towards our vision of becoming the most popular platform for online social networking and entertainment activities in MENA. Let's move on to our detailed financials for the 2025. Our revenues were US84.6 million dollars in the 2025, a 4.1% increase from US81.2 million dollars in the same period last year. The increase was primarily driven by our growing user base and enhanced monetization capability.

Speaker 3

Turning to our costs and expenses. Our total costs and expenses were US53.9 million dollars in the 2025, a 4.6% increase from US51.6 million dollars in the same period last year. Our cost of revenues was US27.9 million dollars in the 2025, a 3.7 decrease from US29 million dollars in the same period last year, primarily due to lower commission fees paid to third party payment platforms as a result of diversified payment channels and the lower share based compensation expenses recognized in the 2025. Cost of revenues as a percentage of total revenues decreased from 33% in the 2025 from 35.7% in the same period last year. Our selling and marketing expenses were US8.7 million dollars in the 2025, a two percent increase from US8.5 million dollars in the same period last year, primarily due to higher advertising and the market promotion expenses attributable to our continued user acquisition efforts and expanding product portfolio.

Speaker 3

Selling and marketing expenses as a percentage of total revenue decreased to 10.2% in the 2025 from 10.5% in the same period last year. Our general and administrative expenses were US9 million dollars in the 2025, a 18.8% increase from US7.6 million dollars in the same period last year, primarily due to an increase in incentive compensation and higher exchange loss. General and administrative expenses as a percentage of total revenues increased to 10.8% in the 2025 from 9.3% in the same period last year. Our technology and product development expenses were US8.3 million dollars in the 2025, a 28.6% increase from US6.5 million dollars in same period of last year, primarily due to an increase in salaries and the benefits for our technology and the product development staff, driven by an increase in their headcount to support the development of new businesses

Operator

of our product

Speaker 3

portfolio. Technology and product development expenses as a percentage of total revenues increased to 9.9% in the 2025 from 8% in the same period last year. As such, our operating income was US30.9 million dollars in the 2025, a 3.4% increase from US29.6 million dollars in the same period last year. Interest income was US6.8 million dollars in the 2025 compared with US7.1 million dollars in the same period last year. Income tax expense was US1.5 million dollars in the 2025 compared with US5.8 million dollars in the same period last year, primarily due to a decrease in UAE corporate tax.

Speaker 3

As a result of foregoing, our net income was US36 million dollars in the 2025, a 16,400,000.0 increase from US31.4 million dollars in the same period last year. And our non GAAP net income in the 2025 was US39.4 million dollars 11.7% increase from US35.2 million dollars in the same period last year. Moving to our liquidity and capital resources. Our cash position remains solid and healthy. As of 06/30/2025, we had cash and cash equivalents, restricted cash, term deposits and short term investments of US704.1 million dollars compared with US656.3 dollars of 12/31/2024.

Speaker 3

We continue to return values through our share repurchase program, pursuant to the company's current share repurchase program beginning on 05/21/2021, with an extended expectation date of 05/21/2026 as of 06/30/2025. The company has cumulatively completed cash repurchases in the open market of 13,535,437 ADS or Class A ordinary shares for an aggregate amount of approximately US90 .4 million dollars since the inception of the current share repurchase program. The aggregate value of ADS or Class A ordinary shares that remain available for purchase under the current share repurchase program was US59.6 million dollars as of 06/30/2025. In addition, the company had canceled 6,230,299 ADS or Class A ordinary shares as of 08/11/2025. Moving to our outlook.

Speaker 3

For the 2025, we expect our revenues to be between US78 million dollars and US85 million dollars The above outlook is based on the current market conditions and reflects company's management's current and preliminary estimates of the market and operating conditions and customer demand, which are all subject to change. In the interest of time, please refer to our earnings press release for further details on the second quarter twenty twenty five financial results. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Speaker 4

Thank you. Apologies everyone, this is the operator. Apologies for not being able to hear me earlier. Our first question comes from Chloe Wei at CICC. Please go ahead.

Speaker 5

Yes. Okay. This is Chloe Wei from CICC Internet. So firstly, congratulations on the solid results. And my question is about the outlook.

Speaker 5

So regarding the Q3 outlook mentioned in the prepared remarks, we see a potential year over year decline in the following quarter. So could you help us understand the thinking behind this? And should we think that this projection is still considered conservative at the early stage? And also could management please provide commentary on the 2025 guidance specifically on the expected revenue growth trajectory and margin trends? Thanks.

Speaker 3

Hello, Chloe. This is Karen, and thank you for this question. And for the 2025, we are confident of maintaining a solid revenue performance. Excluding share contributions for the new products, we expected full year revenue to be flat and deliver low single digit growth compared to 2024. Our new game titles may also generate additional revenue growth later this year.

Speaker 3

We will provide an update to the market after those games are launched and we have better visibility into this performance. Said about the revenue growth and net margin trends, we believe an estimate of around 40% is reasonable. Excluding any potential investments in new products, we've set aside 5% of our full year revenue for selling and marketing expenses for these new products. And we will flexibly adjust the budget according to the users' feedback on these new products. Basically, if we decide to spend more on selling and marketing, we expect to see good growth in our company's revenue with your update to the market later.

Speaker 3

Thank you. Thank you for your question.

Speaker 5

Thank you.

Speaker 4

Thank you. And our next question today comes from Shukun Zhong with CICC. Please go ahead.

Speaker 5

Hey, thanks management for taking my question. My question about your user strategy. As you mentioned in your prepared remarks, there is a shift in your acquisition strategy this quarter. Could management share more color on the specific adjustment and the personnel? Thank you.

Speaker 6

Thank you for the question, Shi Qing. We delivered outstanding MAU growth during Ramadan in the first quarter. In light of that, in the second quarter, we'll adjust our user acquisition strategy by refining our evaluation standards for user acquisition channels and optimizing our channel mix. We also allocated more resources towards acquiring and retaining highly engaged users. We believe this will result in vibrant, deeply engaged community as we expand our user base over the long term, despite a slight short term fluctuation in MAU during the quarter.

Speaker 6

Starting next quarter, we expect our MAU growth to return to 2% to 3% quarter over quarter and we target around 10% year over year growth in MAU for the full year. Furthermore, if our new initiative performed well in the second half of the year, they should drive even stronger user acquisition. We'll continue to provide updates on our user growth strategy as it evolves. Thank you.

Speaker 4

Thank you. And our next question today comes from Tianhu Liu with CITIC. Please go ahead.

Speaker 6

Good morning, management. Thanks for taking my question. This is Alex Suk from CITIC Securities. And I have a follow-up on the game pipeline. Could the management share the progress on your mid core and hardcore games and provide more details on the pipeline?

Speaker 6

Thanks. Hi, Alex. Thank you for your continued interest in Yeola's gaming business. We've been efficiently advancing our new game pipeline as planned. This quarter, we will release two match three titles targeting different user segments, both of which are in the final stages of fine tuning.

Speaker 6

We also plan to release our first roguelike mobile game in Q4. Additionally, we're working closely with a leading game developer in preparation for hardcore games distribution and expect to get it down this year. Overall, our pipeline for the next two quarters is very robust. And at the same time, we're also looking for opportunities to ramp up our pipeline more efficiently through collaboration on game distribution. We'll keep you updated on the progress of this new initiative.

Speaker 6

Thank you, Alex. Thank you. That's very clear.

Speaker 4

Thank you. And our next question comes from Xiaoyu Hu with Huaytai Haikong. Please go ahead.

Speaker 3

Hello. Thank you management for taking my question. So could management provide an update on the execution of the share repurchase program and share any future plans for shareholder returns? Thank Thank you. You, Xiaoyue.

Speaker 3

This is Karen. I will answer this question. Thank you for your question about the shareholder returns. We continue to efficiently execute our buyback program with progress in line with our expectations. With the additional US22 million dollars we announced last quarter, the minimum share repurchase commitment for the full year has reached US50 million dollars As of 06/30/2025, we have repurchased over 6,200,000.0 shares for approximately US41 million dollars so far this year.

Speaker 3

Additionally, we completed the consolidation of these shares, which we purchased in this year. For the remaining four months of this year, we will continue to execute our share repurchase program and plan to complete or potentially exceed our committed amount. We will provide a further update on our repurchase plans next quarter. Thank you. Thank you.

Speaker 4

Thank you. And our next question comes from Lincoln Tong with Goldman Sachs. Please go ahead.

Speaker 7

Thank you management for taking my question. So my question is about the game business. Can management share your game distribution strategy for the new mid core and hardcore titles? Thank you.

Speaker 6

Sure, Lincoln. Thank you for your question. Our strategy for new mid core and hardcore game distribution is anchored on our three core competitive advantages. First, deep localization. With a decade of experience in The Middle East, our dedicated in market team has extensive local knowhow, allowing us to accurately grasp user preferences in both aesthetics and content.

Speaker 6

This ranges from incorporating Arabic design principles to weaving in narrative to ensure meaningful cultural resonance. Second, efficient user acquisition. Our marketing team is highly experienced with the user acquisition in MENA. In addition to acquiring users from external online channels, we will also leverage our existing user base from our product ecosystem for precise targeting, creating a unique low cost high conversion acquisition channel. Third, strong community operations.

Speaker 6

Our local operations team creates tailored in game events, while our large scale customer service team provides dedicated user care. This combination builds strong community ties and high emotional engagement among our users. This is an issue position as well to expand our influence in the middle market. Thank you.

Speaker 7

Thank you, Yanfa.

Speaker 4

And our next question comes from Jenny Yuan with UBS. Please go ahead.

Operator

Hi, thanks management for taking my questions. So my question is regarding our long term growth strategy. So how does management assess the long term potential of the MINAR market and what is our growth going forward? Thank you.

Speaker 2

Thanks for the question, Jenny. The MENA region has a young population of 500,000,000 and remarkably high mobile internet penetration, placing it at a pivotal moment in its digital transformation. We believe several Internet verticals in The Middle East are still in their early stages. With substantial untapped opportunity to bring offline activities online, there is still considerable room for growth in both users' online spending habits and overall size of the addressable market. From Yella perspective, our legacy businesses have relatively long life cycles and currently deliver solid revenue, providing us with a strong business foundation.

Speaker 2

Building on this, we are committed to investing in the development and distribution of mid core and hardcore games over the long term. In many parts of the world, gaming has been a key sector since the early days of the internet, driving deeper thought around user acquisition, Internet monetization, talent development, and technological innovation. We are committed to continuously refining our team and products with this in mind. On the social networking front, we will also continue to explore new opportunities to expand our service offerings to a broader user base. Beyond online entertainment, we are also evaluating potential opportunities in local lifestyle services.

Speaker 2

We will actively explore new areas to capitalize on the opportunities presented by the MENA's digital transformation. Thank you.

Speaker 4

Thank you. This concludes the question and answer session. I'd like to turn the conference back over to management for any closing remarks.

Operator

Thank you once again for joining us today. We look forward to speaking with you in the next quarter. If you have further questions, please feel free to contact Yala's Investor Relations or PSNC Financial Communication. Both parties' contact information is available in today's press release as well as on our company website. Thank you.

Speaker 4

Thank you. This concludes today's conference call. You may now disconnect your lines and have a wonderful day.

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