JOYY Inc. (YY) Q3 2024 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a mixed outlook. Financial performance shows a slight decline in revenues, but improvements in non-GAAP operating income and share repurchases are positive. The Q&A highlights growth in non-live streaming and advertising revenues, yet concerns remain about declining live streaming revenue and unclear guidance on capital returns. Despite a strong cash position, the market may react cautiously due to regulatory issues and cost challenges. The company's market cap suggests a moderate reaction, leading to a neutral prediction for stock movement.

Key Financial Performance

Total Net Revenues $558.7 million, down from $567.1 million year-over-year.

BIGO Revenues $496 million, slight year-over-year increase.

BIGO Non-Livestreaming Revenues $78.2 million, up 15.5% quarter-over-quarter.

BIGO Livestreaming Revenues Decreased year-over-year due to optimization of content and user acquisition costs.

Cost of Revenues $350.5 million, down 2.1% year-over-year.

Gross Profit $208.1 million, with a gross margin of 37.3%.

BIGO Gross Profit $183.4 million, with a gross margin of 37%.

Operating Expenses $192 million, slightly up from $191.3 million year-over-year.

Sales and Marketing Expenses $83.5 million, down from $92.5 million year-over-year.

GAAP Operating Income $16.4 million, up 623.5% quarter-over-quarter.

Non-GAAP Operating Income $34.9 million, up 16.4% quarter-over-quarter.

GAAP Net Income $60.6 million, down from $72.9 million year-over-year.

GAAP Net Margin 10.8%, down from 12.9% year-over-year.

BIGO GAAP Net Income $63.3 million, down from $70.2 million year-over-year.

Non-GAAP Net Income $61.2 million, down from $81.2 million year-over-year.

Non-GAAP Net Income Margin 10.9%, down from 14.3% year-over-year.

Operating Cash Flow $61.1 million.

Share Repurchases $117.8 million in Q3, totaling $243.7 million for the first three quarters.

Net Cash Position $3.3 billion as of September 30, 2024.

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Operating Highlights

BIGO Live: BIGO Live's revenue reached $496 million, with a slight year-over-year increase. The platform has seen consistent user growth in Developed Countries, with MAUs growing 3.4% year-over-year and paying users increasing 9.1% year-over-year.

Likee: Likee's advertising revenue grew 33.4% year-over-year, maintaining profitability. The platform is focusing on core markets in the Middle East and Europe, with a new social livestreaming product being developed.

Hago: Hago's total revenue grew 6.1% quarter-over-quarter, with improved monetization metrics and positive cash flow.

Developed Countries: Revenue from Developed Countries increased by 21.6% year-over-year, contributing 54.9% to group revenue.

Middle East: Revenue from the Middle East showed a sequential growth of 2.1%.

Operational Efficiency: Group non-GAAP operating profit increased by 16.4% quarter-over-quarter to $34.9 million, driven by improved operational efficiency.

Cost Management: Sales and marketing expenses decreased to $83.5 million from $92.5 million in the same period of 2023, reflecting a focus on ROI.

Globalization Strategy: Continued focus on optimizing products and enhancing global operational capabilities, with a series of upgrades to content recommendation algorithms.

Shareholder Returns: In Q3, the company repurchased $117.8 million worth of shares, with $283 million remaining under the repurchase program.

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Risk or Challenges

Competitive Pressures: The company is facing competitive pressures in the market, particularly in the live streaming segment, which has seen a year-over-year decline in revenue. This is attributed to proactive adjustments made to optimize content costs and user acquisition strategies.

Regulatory Issues: Management mentioned the need for compliance and sustainable growth, indicating potential regulatory challenges that could impact operations, especially with adjustments made to non-core audio livestreaming products.

Supply Chain Challenges: There are indications of increased traffic acquisition costs paid to third-party partners, which may suggest challenges in managing supply chain costs effectively.

Economic Factors: The company is focusing on Developed Countries for growth, which may expose it to economic fluctuations in these regions. Additionally, foreign currency exchange losses have impacted net income, highlighting economic risks.

User Acquisition Costs: The company has reduced spending on user acquisition through traditional advertising channels, indicating a shift in strategy that may pose risks if not executed effectively.

Operational Efficiency: While operational efficiency has improved, the adjustments to the non-core audio livestreaming product may negatively affect BIGO's top-line growth in the short term.

Market Fluctuations: The company anticipates fluctuations in user metrics due to its strategy of optimizing resources towards core developed countries and premium users, which may impact overall user growth.

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Guidance & Outlook

Group Revenue: In Q3, JOYY's group revenue reached $558.7 million, with BIGO segment revenues at $496 million, showing a slight year-over-year increase.

Globalization Strategy: Continued advancement of globalization strategy, enhancing user interactions and content offerings across 30 languages.

Operational Efficiency: Focused on optimizing global operations, resulting in improved operational efficiency and a 16.4% increase in non-GAAP operating profit quarter-over-quarter.

Diversification of Revenue Streams: Non-livestreaming revenue grew 13.1% sequentially to $119.2 million, representing 21.3% of group revenue.

Shareholder Returns: Accelerated share repurchases, buying back $117.8 million worth of shares in Q3, with $283 million remaining under the repurchase program.

Q4 Revenue Guidance: Expect net revenues for Q4 2024 to be between $546 million and $563 million.

2025 Outlook: BIGO is expected to return to growth in live streaming revenue and maintain double-digit growth in non-livestreaming revenue.

Operating Profit Expectations: Expect slight decline in BIGO's non-GAAP operating profit in Q4 due to adjustments in non-core products, but anticipate overall improvement in 2025.

Advertising Revenue Growth: BIGO's advertising revenue is expected to continue robust growth, driven by optimization strategies and expansion in key markets.

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Shareholder Return Plan

Share Repurchase: In the third quarter, JOYY repurchased an additional $117.8 million worth of shares. For the first three quarters of 2024, the total repurchased amount reached $243.7 million, which accounts for approximately 12% of the outstanding ADSs as of December 31, 2023. The company has $283 million remaining under its repurchase program.

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Key Q&A

Q:Can management comment about the trend in user, as well as our revenue? On top of that, can management also comment about the trend in operating expenses and profit?

A:Management discussed that BIGO's non-live streaming revenue continued to grow substantially year-over-year, while live streaming revenue experienced a decline due to optimized content costs and adjustments to non-core products. They expect BIGO's paying users to gradually return to growth in 2025, with non-live streaming revenue maintaining double-digit growth. They acknowledged that the adjustments may negatively impact overall growth rates.

Q:Could management share the general monetization trends across different key regions in fiscal year 2025?

A:Management indicated that developed countries continue to provide growth momentum, with revenues from these regions increasing by 21.6% year-over-year. They expect both developed countries and the Middle East to remain top priorities for monetization.

Q:Could you give us a little bit more color on the progress in capital return? Should we expect the company to fully utilize the repurchase program in '25?

A:Management confirmed that they have been active in shareholder return initiatives, repurchasing $244 million worth of shares in the first three quarters of the year. They plan to continue considering shareholder returns as a strategic priority in 2025.

Q:Can management discuss the outlook for our advertising and other new initiative business into 2025?

A:Management stated that BIGO's advertising revenue showed robust growth, with Likee's advertising revenue growing 33.4% year-over-year. They emphasized that future growth will depend on expanding DAU and refining operations to increase market share.

Q:Review of Unclear Management Responses

A:Management did not provide specific numerical guidance for user growth or detailed projections for operating expenses and profit trends in 2025, which could be seen as a lack of clarity. Additionally, while they mentioned adjustments to the non-core audio livestreaming product, they did not elaborate on the expected impact on overall profitability.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call highlights a stable financial performance with year-over-year revenue growth and a strong cash position. The continuation of the share repurchase program further supports positive sentiment. While there are concerns about regulatory risks and competitive pressures, management's optimistic guidance and stable margins offset these. The Q&A section suggests confidence in revenue growth and margin stability. Given the company's market cap, the positive factors are likely to result in a modest stock price increase over the next two weeks.

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