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YY (YY -5.09%)
Q2 2022 Earnings Name
Aug 29, 2022, 9:00 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Contributors
Ready Remarks:
Operator
Good morning, girls and gents. Thanks for standing by, and welcome to the JOYY Inc. second quarter 2022 earnings name. [Operator instructions] I might now like at hand the convention over to your host, Jane Xie, the corporate’s senior supervisor of investor relations.
Please go forward, Jane.
Jane Xie — Senior Supervisor, Investor Relations
Thanks, operator. Hiya, everybody. Welcome to JOYY’s second quarter 2022 earnings convention name. Becoming a member of us at the moment are Mr.
David Xueling Li, chairman and CEO of JOYY, Ms. Ting Li, our COO, and Mr. Alex Leo, the overall supervisor of finance. For at the moment’s name, administration will first present a evaluation of the quarter after which we’ll conduct a Q&A session.
The monetary outcomes and webcast of this convention name can be found at ir.joyy.com. A replay of this name may even be accessible on our web site in a number of hours. Earlier than we proceed, I wish to remind you that we might make forward-looking statements, that are inherently topic to dangers and uncertainties which will trigger precise outcomes to vary from our present expectations. For detailed discussions of the dangers and uncertainties, please discuss with our newest annual Report on Kind 20-F and different paperwork filed with the SEC.
Lastly, please be aware that until in any other case said, all figures talked about throughout this convention name are in U.S. greenback. I’ll now flip the decision over to our Chairman and CEO, Mr. David Xueling Li.
Please go forward, sir.
David Xueling Li — Chairman and Chief Government Officer
Thanks. Hiya, everybody. Welcome to our second quarter 2022 earnings name. Let me begin with an summary of our quarterly outcomes.
Regardless of the worldwide macroeconomic uncertainties and the seasonality influence of Ramadan vacation within the Center East, we achieved the $598.1 million in revenues, together with $502.6 million of income from Bigo, approaching the upper finish of our earlier steering. We grew our non-GAAP internet revenue to $51.5 million at group degree, realizing our non-GAAP internet margin of 8.6%. Notably, the Bigo section expanded its non-GAAP internet revenue to $86.3 million and improved its non-GAAP internet margin to 17.2%. Our working money stream continued to be robust, reaching $61.7 million for the quarter.
The regular growth of our profitability and this present market situation demonstrated the improved effectivity and enhanced resilience of our enterprise. We’re in an setting of elevated macro uncertainty. Rising inflation and elevated value of residing continued to massively influence client spending. The lifting of lockdown and journey restrictions imposed through the pandemic contributed to resurgence in journey demand through the summer time season, additional diverting customers time and spending to offline actions.
The aggressive appreciation of the U.S. greenback was additionally an unfavorable issue as our worth rose in native foreign money phrases. These numerous hirings had and can have an effect on the softer monetization effectivity for all kinds of worldwide corporations, together with JOYY. Regardless of these macro-economic challenges, a big proportion of worldwide customers remains to be beneath served for social leisure providers.
In time elevated uncertainties, customers are in search of extra emotional worth from their merchandise resembling a way of belonging and significant connections with others. That is why we reply to this risky macro setting in the beginning by turning inward, persevering with to combine our merchandise and domesticate our person group, whereas maxing the emotional worth our providers can present. In current quarters, we launched a number of main merchandise options updates together with Bigo Stay’s digital reside and group, Likee’s loop interest-based group function, and HAGO, 3D HAGO Area. These options serve to enhance the standard and the effectivity of our customers social expertise, enabling them to higher have interaction and foster significant connections with those that have an analogous curiosity.
Along with our drivers and inclusive group tradition, we imagine these efforts will assist our merchandise ship essential and distinctive emotional worth to our customers. Along with maxing this emotional worth, we continued to be absolutely devoted to creating worth for our creators by offering creator-friendly video creation instruments and monetization options and cultivating a person group that’s constructed on fairness and connections. We’ve got established a creator-centric ecosystem that allow a lot of creators to showcase their skills in entrance of worldwide viewers and on the identical time having fun with from seeing financial returns. Over the previous few years, we’ve got invested a cumulative whole of our $1 billion in creators reward.
With the assist of our world operation groups and implementation of number of actions tailor-made to native customers evolving wants, we empower our creators to achieve publicity each domestically and internationally and allow them to understand the brand new ranges of private {and professional} success. Going ahead, we stay dedicated to delivering worth to our customers and creators. We are going to proceed to domesticate various premium content material, innovate interactive options and set up tailor-made native actions. We count on these efforts will additional enhance the person expertise and in the end facilitate the expansion of our person group and the worldwide enterprise.
To mitigate dangers towards the present market, we proactively carried out a collection of issues to additional enhance our effectivity and improve the resilience of our enterprise. As we proceed to execute sustainable development technique and emphasize our merchandise natural development, we shall be extra adaptive within the execution of our person acquisition technique. This implies we’ll dynamically alter our technique primarily based on our ROI and intently monitor shifting advertising circumstances. For merchandise which are nonetheless loss-making resembling Likee and HAGO, we’ll concentrate on the regular enchancment of their respective monetization capabilities, follow disciplined gross sales and advertising technique and optimize their value construction with a view to steadily slim their respectively operation loss.
We may even proceed to boost product synergy and optimize our enterprise course of to drive additional enchancment of our operation effectivity on the group degree. As we maintained a wholesome development trajectory in our revenue and money stream since 2021, we’re in a powerful monetary place that permits us to have larger flexibility and continued funding in core space that construct our long-term capabilities. We count on to emerge from the above recalibration as a extra centered and extra productive group, higher positioned to seize long-term development alternatives. Now, let me dive deeper into the progress we made in every of our product line.
Let’s begin with Bigo Stay. On account of macroeconomic uncertainties and the seasonality throughout to Ramadan vacation within the Center East, Bigo Stay’s reside streaming income and variety of paying customers declined through the second quarter. Sure, Bigo Stay’s person base and engagement reside continued to develop, due to our revolutionary function updates and localized actions with embraced authentic custom — regional traditions and person wants. In the course of the second quarter, Bigo Stay’s MAU elevated by 10.6% yr over yr to $32.6 million.
Notably customers in Southeast Asia and different rising market elevated by 18.6%, whereas person in Europe elevated by 8.7% yr over yr. To assist our customers within the Center East and sure Southeast Asia nations celebrated their Ramadan vacation, Bigo Stay launched a collection of reside occasions that tailor-made to native traditions. This embrace cooking periods, quiz exhibits and singing content material and in Likee, the native celebrities and influencers to display the distinctive cultural custom of their areas. Our new group function, which was launched final quarter continued to contribute to content material diversification and person engagement enchancment within the BAR channel.
BAR’s common views per person elevated by 14.1% and the amount of its video content material elevated by 7.3% sequentially. Bigo Stay additionally upgraded its Digital Stay function to allow tender live-streaming expertise for its customers, driving up each the variety of customers and cumulative time spent on Digital Stay session considerably over the earlier quarter. Subsequent, let’s flip to Likee. In the course of the second quarter, for related purpose to Bigo reside, Likee’s reside streaming income and the variety of paying person declined.
As talked about earlier, given the present macro setting and the truth that brief video monetization remains to be at an early stage of growth, Likee continued to train prudence in its gross sales and the advertising technique, additional optimize its value construction and actively explored new alternatives for monetization. We’ve got made progress in executing these targets. And we efficiently narrowed Likee’s working loss by 85% yr over yr and through the first half of 2022. In mid-June, Likee launched a brand new function known as Loop in Europe and the U.S.
Loop is group function that helps customers with related curiosity join with one another. And we’ve got up to now acquired constructive suggestions from our customers. For instance, shortly after Loop was launched, the anime group shared greater than 6 million episodes of video content material and over 50% of the person within the anime group are following each other. This means that Loop has contributed to the fostering of a excessive degree of connection.
We additionally noticed regular enchancment in person engagement and stickiness particularly within the area the place Loop was launched, and the common time spend on Likee per person elevated sequentially by 10.2% globally and 22.7% on this area. In the course of the second quarter, along with launching a wide range of localized campaigns, Likee partnered with our charity group in Center East and South Asia to launch cross-regional donation marketing campaign. By logging into Likee and collaborating within the Ramadan marketing campaign, person collected vitality factors each day, which might later be transformed to a sure donation quantity to be made by Likee’s native charity organizations. Greater than 200,000 customers participated on this marketing campaign, demonstrating that the person at the moment seeks to make a constructive influence on their communities whereas being entertained and engaged.
We are going to proceed to actively discover different alternatives to additional empower our person to make constructive distinction of their native communities. Subsequent we are able to flip to HAGO. In the course of the second quarter, HAGO’s reside streaming income elevated by 7.1% yr over yr, and it is variety of paying person grew by 12.8% over the identical interval. As we proceed to optimize HAGO’s content material advice algorithm, HAGO’s person engagement improved, as evidenced by a improve in its featured channel penetration charges of 1.8% sequentially.
In the course of the quarter HAGO centered on updating its newly launched 3D HAGO Area function. HAGO launched a extra localized make-up, clients and equipment, enabling person to design their 3D avatars in response to their private and tradition preferences. Further interactive merchandise and 3D digital scenes had been additionally launched, each of which had been well-received by HAGO person and demonstrated by the rise of HAGO Area next-day person retention charges by 14.9% sequentially. Within the coming quarter, HAGO plan to additional replace customers HAGO Area expertise by introducing extra 3D digital scenes and gadgets then to cater to native tradition and person wants.
We anticipated to repeatedly improve the person penetration charges of our HAGO Area function and additional enrich HAGO customers’ whole expertise. Lastly some updates on capital return. In the course of the second quarter we purchased again extra 12.1 million of our shares. We are going to proceed to actively make the most of our share repurchase program to boost return to shareholders.
To conclude, we’ll all the time try to ascertain the soundness and discover the chance within the uncertainty. The present macro setting doesn’t change our demonstrated nice track-record in capturing a few of the largest development alternative, nor our long-term outlook on the business. And we view the present market reflection as alternatives to deepen our focus and plan for the long run. We stay dedicated to producing worth for our customers and creators, whereas enhancing effectivity and improve the resilience.
As we proceed to put money into constructing our long-term capabilities, we firmly imagine that JOYY as an organization will emerge from the present uncertainties as a extra centered and productive group and be well-positioned to seize long-term development alternatives and generate sustainable shareholders worth. This conclude my ready remarks. I’ll now flip the decision to our common supervisor of finance, Alex Leo, for our monetary updates.
Alex Leo — Basic Supervisor, Finance
Thanks, David. Hiya, everybody. Now, let me undergo the small print of our monetary outcomes. Please be aware that the monetary info and the non-GAAP monetary info disclosed in our earnings press launch is offered on persevering with operations foundation, until in any other case particularly said.
Because the sale of YY Stay was considerably accomplished on February 8, 2021, with sure customary issues to be accomplished sooner or later. We’ve got achieved consolidation of YY Stay enterprise since February 2021. Our whole internet revenues for the second quarter was $596.1 million in comparison with $661.7 million in the identical interval of 2021, primarily as a consequence of macroeconomic uncertainties and unfavorable trade charges, which negatively affected paying person section. Price of revenues for the second quarter decreased by 17.6% yr over yr to $377.7 million.
Income sharing charges and content material prices was $247 million within the second quarter in contrast with $289.1 million in the identical interval of 2021, primarily as a consequence of optimization of income sharing prices. Bandwidth prices decreased to $20 million from $27.5 million in the identical interval of 2021, primarily because of the firm’s improved effectivity in bandwidth utilization. As we proceed to execute a sustainable development technique and proactively carried out a service of value optimization measures, this successfully improved our effectivity and enhanced the resilience of our enterprise and maintained a wholesome development in our development and working profitability. Gross revenue elevated to $218.4 million within the second quarter, with our gross margin improved to 36.6% from 30.7% in the identical interval of 2021.
Our working bills for the second quarter decreased by 41.1% to $185 million from $314 million in the identical interval of 2021. Among the many working bills, gross sales and advertising bills decreased to $98.4 million from $112.2 million as a consequence of disciplined and environment friendly spending on person acquisition. Basic and administrative bills decreased to $23.7 million for the second quarter of 2022 from $101.1 million within the corresponding interval of 2021. Our common and administrative bills was greater in second quarter of 2021 primarily as a consequence of a one-off impairment loss arising from sure fairness funding.
Our GAAP working revenue for the second quarter was $38.7 million, in comparison with working lack of $101.1 million in the identical interval of 2021. Working revenue margin for the second quarter was 6.5% in comparison with working loss margin of 15.3% in the identical interval of 2021. Our non-GAAP working revenue for the second quarter, which excludes share-based compensation expense, amortization of intangible property from enterprise acquisitions, in addition to impairment of goodwill and funding and achieve on disposal of subsidiaries and enterprise was $59.9 million on this quarter in comparison with non-GAAP working lack of $13 million in the identical interval of 2021. Our non-GAAP working revenue margin for the second quarter was 10% in comparison with non-GAAP working loss margin of two% within the prior yr interval.
GAAP internet revenue from persevering with operations attributable to controlling curiosity of JOYY within the second quarter of 2022 was roughly $18.7 million in comparison with internet lack of $109.3 million in the identical interval of 2021. Web revenue margin was 3.1% within the second quarter of 2022 in comparison with internet loss margin of 16.5% within the corresponding interval of 2021. Non-GAAP internet revenue from persevering with operations attributable to controlling curiosity of JOYY within the second quarter was $51.5 million in comparison with non-GAAP internet lack of $0.5 million in the identical interval of 2021. The group’s non-GAAP internet revenue margin was 8.6% within the second quarter of 2022 in comparison with non-GAAP internet loss margin of 0.1% in the identical interval of 2021.
Notably as a result of non-GAAP internet revenue expanded to $86.3 million within the second quarter with its non-GAAP internet revenue margin improved to 17.2% from 3.3% within the prior yr. Along with our enhancing profitability, we’ve got maintained a powerful working money stream as effectively. All through the second quarter of 2022 we booked internet money inflows from working actions of $61.7 million. We stay a wholesome stability state with a powerful money place of $4.29 billion as of June thirtieth of 2022.
Importantly we’ve got continued to boost returns to shareholders via dividends and the share repurchase. In accordance with our beforehand introduced quarterly dividend plans authorized in August and November 2020, we shall be distributing a dividend of $0.51 per ADS for the second quarter of 2022 to shareholders of file as of the shut of enterprise on September ’22. Moreover, we’ve got repurchased 12.1 million of our shares and our beforehand introduced share repurchase applications. As of June 30, 2022, we’ve got in whole repurchased roughly $327.9 million of our share repurchase applications.
Given our present money place, we should always have the ability to stability between protecting enough money to put money into constructing our long-term capabilities and enhancing return for our shareholders. We are going to proceed to actively make the most of share repurchase to create worth for our shareholders and present market situation. Going ahead, as David simply talked about, we stay dedicated to delivering worth to our customers and creators, and we’ll proceed to prioritize funding into the cultivation of our content material, product and energetic options and localized actions. We are going to proceed to boost our operational effectivity and successfully execute our long-term development methods.
For our enterprise outlook, we count on our internet revenues for the third quarter of 2022 to be between 561.5 and $593.5 million. With out contemplating provide, we presently have restricted visibility surrounding the macro-economic uncertainties of our enterprise and the markets during which we function. Subsequently, this forecast solely displays our present and preliminary views available on the market and operational circumstances, that are topic to vary. That concludes our ready remarks.
Operator, we’d now prefer to open up the decision to questions. Thanks.
Questions & Solutions:
Operator
[Operator instructions] Our first query comes from the road of Alex Poon from Morgan Stanley. Please go forward.
Alex Poon — Morgan Stanley — Analyst
[Foreign language] Thanks, administration, for taking my query. My first query is, how ought to we learn our third quarter income steering? And the way administration sees our development trajectory on this yr’s second half, and subsequent yr? And likewise for person development development within the second half of subsequent yr? Thanks very a lot.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
That is David. I’ll firstly discuss in regards to the present macro headwinds that we confronted relating to our income as effectively. The primary half primarily comes from lifting of lockdown and journey restrictions. We’re seeing a resurgence in journey demand through the quarter.
And likewise we’re seeing plenty of our creators and host are additionally having elevated exercise in offline touring as effectively. So that’s going to be a adverse influence on our income. Secondly, with the rising inflation we’re seeing the price of residing placing a better strain on our customers. And thirdly, the aggressive appreciation of U.S.
greenback implies that we might want to alter our worth in accordance with the appreciation and that’s going to create a adverse influence on our income development as effectively.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
In order our technique beneath such setting, we’re going to undertake to a ROI pushed gross sales and advertising technique, prioritize our effectivity over the dimensions of our enterprise. It implies that we’re going to proceed to iterate our merchandise and domesticate our providers and to rely extra on our services to realize natural and efficient development.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
So for our second query relating to the person development development, to begin with for Bigo Stay, I believe we would be able to observe that it has been repeatedly develop its product outreach by additional diversifying its contents and innovates product options. That is why regardless of our gross sales and advertising bills for Bigo Stay decline Q-on-Q, Bigo Stay’s nonetheless sustained its person development with its MAU rising by 10.6% yr over yr. And it proves the efficient person acquisition technique of Bigo Stay. In order for our second yr, we imagine that Bigo Stay will doubtless preserve its person development momentum given its efficient useracquisition technique.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
Thanks for the query, and we’ll now subsequent — go to the subsequent query.
Operator
Thanks. Our subsequent query comes from the road of Thomas Chong from Jefferies. Please go forward.
Thomas Chong — Jefferies — Analyst
[Foreign language] Thanks, administration, for taking my questions. My query is about our value efficiencies measures. Provided that we’ve got seen many Web corporations implementing measures on value management, simply wish to get some shade from administration in regards to the development in working bills resembling gross sales and advertising, R&D, G&A within the second half. And the way we should always take into consideration the margin development going ahead? Thanks.
Alex Leo — Basic Supervisor, Finance
Hello, Thomas. [Foreign language]
Unknown speaker
Thanks Thomas, that is Alex. I’ll reply your query. So you may see that within the second quarter, due to our sustainable development technique and continued optimization of prices, bills, we’ve got managed to boost working effectivity and obtain higher than anticipated profitability. Bigo section achieved a non-GAAP internet margin of 17.2%, whereas the Group achieved a non-GAAP internet margin of 8.6%.
And if we take a more in-depth take a look at Bigo section, our gross margin was improved each yr over yr and Q-on-Q within the second quarter. And that’s primarily as a consequence of optimization of content material prices, improved bandwidth utilization, effectivity and likewise value financial savings within the fee channel bills. And for our non-GAAP working bills resembling gross sales and advertising, G&A and R&D, we additionally noticed value financial savings occurring throughout these expense gadgets as effectively. And I wish to point out that the truth that we have been capable of enhance our effectivity regardless of short-term fluctuation in income display that we’ve got been ahead wanting in our technique planning whereas minimizing the potential adverse influence from mounted value.
So for our second half of the yr and likewise full yr of ’22, we count on Bigo section’s gross margins to stay steady. And likewise on condition that our localized gross sales and advertising actions can be extra energetic within the second half of the yr, the quantity of gross sales and advertising bills ought to be barely greater. And likewise we count on to proceed to realize sure value financial savings throughout different expense gadgets given improved effectivity. I used to be nonetheless assured to realize greater non-GAAP profitability for Bigo section within the full yr ’22 as in comparison with yr ’21.
Thanks. Subsequent query.
Operator
Thanks. Our subsequent query comes from the road of Daniel Chen from J.P. Morgan. Please go forward.
Daniel Chen — J.P. Morgan — Analyst
[Foreign language] I’ll translate myself. Can administration possibly share your view on the live-streaming and the brief video business within the abroad market, in every of those section market what are the foremost aggressive panorama and what is the newest change in every of the markets? Thanks.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
That is David. I’ll reply your query. We are able to firstly take a look at the brief video sector. We imagine that there was growing competitors within the brief video sector, on condition that we’ve got so many new merchandise coming into the sector together with growing the bigger corporations like Google and Fb, in addition to TikTok.
But when we take a look at live-streaming, particularly social live-streaming, we do not imagine that the competitors panorama has modified that a lot. I might imagine that for social live-streaming, it is a product and sector that’s vastly reliant on the group and the sticky connection among the many customers. If we glance again, and we take a look at YY Stay, which we used to function in Mainland China, even when the home or the aggressive panorama elevated competitors within the PRC markets, we see that YY Stay person scale and likewise income scale stay comparatively steady. And that’s as a result of for such a social live-streaming platforms normally takes 5 years to 10 years to construct up a social connection and group the place everybody is definitely deeply related.
So it is rather more sticky and subsequently having a comparatively restricted influence from extra competitors, so I imagine that we’ve got a powerful barrier within the world social live-streaming sector. Thanks. Subsequent query, please.
Operator
Thanks. Our subsequent query comes from the road of Yiwen Zhang from China Renaissance. Please go forward.
Yiwen Zhang — China Renaissance — Analyst
[Foreign language] Thanks for taking my query. First relating to the Bigo Stay. In ready remarks, you talked about our group tradition. Are you able to elaborate on that, together with how that had helped our person engagement and likewise the present ecosystem.
And secondly are you able to give us an replace on the Likee and HAGO enterprise? Thanks.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
Thanks for query. That is David. I’ll reply the query. So I’ve talked about Bigo Stay beforehand, so now, I’ll point out largely about HAGO and Likee.
HAGO launched 3D house digital actuality social interplay function final quarter, and it launched a wide range of digital 3D scenes and digital costumes through the quarter, considerably enhancing person expertise and engagement. HAGO additionally accomplished the setup of the digital costume shops for customers in order that they’ll freely store and gown their digital avatars. And this ought to be a significant step ahead to additional enhance HAGO’s monetization effectivity and diversifying its income stream. And for Likee, it is nonetheless specializing in the cultivation of creators and facilitating the expansion of interest-based communities.
So after the brand new group operate loop has launched in Europe and U.S. through the quarter, we’ve got noticed improved our social interactivity on Likee. We plan to make loop accessible in additional areas and facilitate the expansion of every vertical group via extra environment friendly curiosity content material matching. We may even discover new monetization alternatives beneath the function, extra community-based social commerce for instance.
David Xueling Li — Chairman and Chief Government Officer
[Foreign language]
Unknown speaker
And likewise some extra updates on Bigo Stay. We have talked about that the current launch of Bigo Stay Digital Stay and Neighborhood function has been launched within the earlier quarters and we’ve got acquired constructive feedbacks from our customers. Each have contributed to elevated exercise in live-streaming periods and likewise the content material range and social exercise on our BAR channel. Within the second half of the yr, we plan to launch some new options resembling match, to additional enhance our person’s social interplay expertise.
Thanks. In order that’s the top of our name. And we stay up for talking with everybody subsequent quarter.
Operator
[Operator signoff]
Length: 0 minutes
Name individuals:
Jane Xie — Senior Supervisor, Investor Relations
David Xueling Li — Chairman and Chief Government Officer
Alex Leo — Basic Supervisor, Finance
Alex Poon — Morgan Stanley — Analyst
Unknown speaker
Thomas Chong — Jefferies — Analyst
Daniel Chen — J.P. Morgan — Analyst
Yiwen Zhang — China Renaissance — Analyst
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