Ladies and gentlemen, thank you for standing by. And welcome to the JOYY Inc.’s Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants are in a 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 Xie, the company’s Senior Manager of Investor Relations. Please go ahead, Jane..

Thank you, Operator. Hello, everyone. Welcome to JOYY’s fourth quarter 2023 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of JOYY; Ms. 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&A session.

The financial results and webcast of this conference call are available at ir.joyy.com. A replay of this call will also be available on our website in a few hours.

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. I will now turn the call over to our Chairman and CEO, Mr. David Xueling Li.

Please go ahead, sir..

Hello, everyone. Welcome to our fourth quarter 2023 earnings call. First, we’ll provide a quick review of our performance for the quarter and the full year. During the fourth quarter, our group revenue came in at $570 million. Our core business segment BIGO recorded revenues of $491 million, a year-over-year increase of 3.1%.

Group’s non-GAAP net profit hit $64.2 million, with BIGO contributing $63.5 million. For the full year of 2023, group revenue reached $2.27 billion, with around $1.92 billion coming from BIGO. On reflection, 2023 proved to be a year of progress.

Our focus on continuous product enhancements, nimble operational strategies, and our strong execution yielded positive results, despite the prevailing macro challenges. First, our relentless optimization of operational efficiencies generated enhanced profitability for the third consecutive year.

In 2023, our non-GAAP net profit reached $293 million, increasing by 46.8% year-over-year. Our non-GAAP net margin was 12.9%, up by 4.6 percentage points year-over-year. BIGO’s non-GAAP operating profit reached $288 million, representing a non-GAAP operating margin of 15%, higher than our expectations.

Notably, all social products under the BIGO segment, including BIGO Live, Likee, and others, were profitable in 2023. Additionally, Hago, under the All Others segment, generated a positive operating cash flow for the year.

Second, our global average mobile MAUs have now resumed year-over-year growth for three consecutive quarters, even as we adhered to a disciplined marketing spending strategy. In the fourth quarter, our global average mobile MAUs increased by 2.6% year-over-year to 275 million.

Third, we solidified our leadership position within the global social entertainment industry. According to Data AI’s State of Mobile report released in January 2024, BIGO Live retained its position as the world’s second-largest Social App based on consumer spending in 2023.

Out of the 29 countries and regions spanning the Americas, Europe, the Middle East, and Asia-Pacific covered by Data AI, BIGO Live ranked among the Top 5 social apps in 18 countries and regions, and among the Top 10 social apps in seven countries and regions, in terms of consumer spending.

Other social products also achieved significant breakthroughs in key markets in 2023. In terms of consumer spending, Likee claimed the third place among social apps in Saudi Arabia, while Hago secured Top 10 positions in both Indonesia and the Philippines.

Despite this progress, the Group and BIGO segment’s revenues were down by 6% and 3.6%, respectively, year-over-year. The decline was primarily due to two factors.

First, despite mid-single-digit growth in BIGO’s paying users throughout the four quarters, BIGO’s ARPPU was still down year-over-year, primarily due to high inflation which negatively affected users’ paying sentiment.

Second, to strengthen our global positioning and foster sustainable growth, we proactively made proactive adjustments to certain non-core livestreaming operations starting in the second quarter. These adjustments had a negative impact on livestreaming revenues in certain regions.

However, by finetuning our operations and focusing resources on the more resilient Developed Countries Region, we saw BIGO’s ARPPU stabilizing and a recovery in BIGO’s revenue in the two most recent quarters. With our more focused operational strategy, we believe BIGO will continue to recover and grow steadily during 2024.

Looking ahead, we believe there is ample room for growth. To capture such potential, the key is to deliver unique experience and value to users, stay relevant, and achieve sustainable growth. As such, our priorities for 2024 are as follows. First, we remain committed to our globalization strategy.

While we acknowledge inquiries regarding the potential impact of the YY Live transaction on our future strategy, we are currently in discussion with Baidu on the next steps following the termination of the SPA, and we are unable to disclose any further information at this time.

However, we can confirm that our globalization strategy will remain unchanged. Globalization through localization has been our foremost strategy, and our strong global localized operational capabilities are the cornerstone of our global success.

In 2024, we will double down on our emphasis on local talent and drive innovative operations to further build our brand’s global influence. Our elevated collaborations with KOLs and local partners were instrumental in enhancing product awareness and catalyzing user growth in 2023.

Building on this success, we will uphold our efforts to drive further, steady growth of our global user community. Second, we will continue to strike a balance between growth and efficiency. In 2024, while we anticipate the sustained recovery of BIGO, we also expect to maintain profitability and our positive cash flows at group level.

This year, we remain committed to dedicating resources to build our core strengths, which encompass both our global operational capacity and our technology. At the same time, we will prudently explore long-term growth opportunities.

By driving innovations at the product and operational levels, we have been exploring new monetization models beyond livestreaming and achieved meaningful progress. In 2023, revenue from our non-livestreaming businesses made up 12.7% of our total revenues, up from 5.4% in 2021.

We expect this upward trend to continue in 2024, further expanding and diversifying our revenue streams, and ultimately fortifying a multi-level growth engine for our long-term development. Now, let’s take a closer look at our products. We’ll start with BIGO Live.

BIGO Live maintained its user growth momentum in the fourth quarter, with MAUs increasing by 4.5% year-over-year to $38.4 million. We saw growth across several regions, with year-over-year MAU increases of 10.9% in Europe, 8.4% in Eastern Pacific Region, and 12.6% in the Middle East.

BIGO Live’s revenue and paying users sustained their recovery trend and sequential growth. The fourth quarter is typically the peak season for local operational activities worldwide. To capitalize on this, BIGO Live organized a series of events to discover both outstanding creators across various domains and inspire new and diverse content creation.

In October, BIGO Live hosted the second season of its BIGO’s Most Talented creator contest in North America. This event attracted talented dancers, musicians, comedians, and more. BIGO Live also introduced a brand-new creator incentive program across major regions around the world.

While BIGO Live continues to support experienced professional streamers and PUGC, this program places a stronger emphasis on amateur streamers and UGC. As well as generous economic rewards, BIGO Live provides comprehensive training courses for amateur streamers, helping newcomers to develop their skills and learn the ropes of successful streaming.

As of the end of 2023, the UGC incentive program has already attracted over 300,000 amateur streamers. In January, we held our annual year-end flagship event, the BIGO Awards Gala, in Las Vegas. The online livestream of the event attracted over 1.2 million viewers from across the globe.

This year, we also hosted supplementary regional galas in various locations, including Indonesia, Vietnam and the Philippines. Both the flagship and regional galas saw BIGO Live recognize the most outstanding streamers and families of 2023, and talented creators were invited to give captivating, diverse performances.

The BIGO Awards Gala, an established tradition of BIGO Live, has helped a number of exceptional creators enhance their influence and gain exposure on the global stage. Our galas remain an essential component of our commitment to support our creators in their growth journeys and help them maximize their value creation.

In the fourth quarter, our Family-based activities encouraged users to further explore and engage in Family events. Families provide robust social attributes that resonate with users, and we amplified these to drive user acquisition, nurture long-tail streamers, and convert free users to paying users.

On a sequential basis, revenue contributed by Family members increased by 5.7%. The number of contracted streamers in Families rose by 16.5% and average DAUs in Families increased by 5.5%. Throughout the fourth quarter, we personalized the user experience by refining recommendation algorithms for our diverse user base.

Recommendations were continuously fine-tuned based on user behavior, ensuring each user receives the most relevant feeds. As a result, user engagement, user retention, and average viewer time spent per live session all improved.

The next-day user retention rate in the fourth quarter rose by 2.3% sequentially, while average viewer time spent per session surged by 6.4%. BIGO Live’s Real Match feature continues to foster high-quality social connections amongst users.

By refining and optimizing the overall matching process, including user profiles and matching strategies, we successfully leveraged Real Match to cultivate a greater number of stable user connections.

In the fourth quarter, the total number of connections increased by 23.3% sequentially, and the number of direct chat messages between matched users grew by 14.8%. Next, let’s take a look at Likee. Likee maintained its strategic focus on its core Middle East and Europe markets.

In recent quarters, Likee implemented a series of targeted operational and product optimizations to drive user recovery and stimulate monetization growth in its core regions.

Although Likee's overall MAUs trended down sequentially during the fourth quarter, its DAUs in the core Developed Countries, especially Europe, have maintained high-single-digit growth for the past four quarters. In terms of monetization, Likee's revenue for the full year was up year-over-year in 2023.

The recovery of DAUs in its core regions, an evolving creator services ecosystem, and a more established business and creator marketplace all contributed to Likee's advertising revenue growing by nearly 2.5x for the full year of 2023.

Despite a decline in its livestreaming ARPPU, which was negatively affected by macroeconomic uncertainties, the number of Likee’s paying users has grown for four consecutive quarters. Thanks to its progress on monetization and disciplined spending, Likee maintained its profitability during the fourth quarter.

This means that Likee achieved its first full year profitability in 2023, another significant milestone. On the product front, Likee continues to focus on delivering comprehensive creator services, incentivizing diverse content creation, and fostering community interactions.

In the fourth quarter, Likee introduced text and image posting features alongside new monetization options, enabling user subscriptions for both video collections and individual videos. These features offer creators greater flexibility in terms of content formats and open up new opportunities for monetization.

Likee also rolled out a variety of interactive games in the fourth quarter to better align with users' evolving entertainment preferences. During the fourth quarter, Likee continued to enhance its content production quality, leading to 2.7% sequential growth in average user time spent.

Thanks to upgraded interactive features, overall user engagement, as measured by the ratio of DAUs to MAUs, improved by 2.2% in the same period. Now, turning to Hago. In the fourth quarter, Hago’s innovative year-end events and new operational features drove mid-single-digit sequential revenue growth.

Hago continued to generate positive operating cash flow in the quarter, and therefore achieved its first full-year operating cash flow breakeven in 2023. Hago's user social interactions also improved during the fourth quarter. Average time spent per user in social channels increased by 4% sequentially, surpassing 99 minutes.

Average time spent per user in multi-guest voice rooms saw a similar trend, increasing by 4.9% Q-over-Q. Finally, let me provide some updates on cash flow and capital return. We continued to generate robust positive operating cash flows, reaching $97.2 million in the fourth quarter.

Our commitment to creating and returning value to our shareholders remains an important priority, and our track record is a testament to our long-term dedication. Over the course of 2023, we repurchased shares and distributed cash dividends in an aggregate amount of $355 million, equivalent to 121.5% of our annual non-GAAP net profit.

From 2020 to 2023, we have in total distributed approximately $1.38 billion in capital returns. As of the end of the fourth quarter, we still had approximately $530 million unutilized quota under our current share repurchase program. We intend to steadily execute additional share buybacks under the program in 2024.

Looking ahead, we will continue to cultivate our content and social ecosystems to steadily grow our thriving user community and reinforce our leadership in core geographic regions. At the same time, we will further dedicate our resources to build our core strengths, and carefully explore long-term growth opportunities.

By driving innovations in both our products and operations, we expect to further diversify our revenue streams and capture long-term sustainable growth. This concludes my prepared remarks. I will now turn the call to our Vice President of Finance, Alex Liu..

Thanks, David. Hello, everyone. Before I go into our financial details, we would like to remind you that despite the latest development in the sale of YY Live, to the date of this press release, we have not obtained control over YY Live and therefore have not consolidated the business.

The financial results presented in our press release and this conference call primarily consisted of BIGO, excluding YY Live. Now let me go through the details of our financial results. Despite the ongoing macro uncertainties, we ended 2023 with another strong quarter. Our total net revenues were $569.8 million in the fourth quarter.

Revenues from BIGO segment were $491.3 million, up by 3.1% year-over-year, driven by a strong annual increase of 7.9% in BIGO’s quarterly paying users and a stabilizing ARPPU which was down by 2.6%.

Geographically speaking, as we prioritized our operational resources towards Developed Countries and Regions, revenues from Developed Countries was up by double digits year-over-year, outperforming other regions.

Cost of revenues for the quarter decreased to $368.4 million, among which our revenue-sharing fees and content costs decreased to $242.2 million. BIGO’s cost of revenues were $309 million, which was up year-over-year, consistent with the rebound in livestreaming revenue and elevated creator support during the quarter.

Gross profit was $201.5 million in the quarter, with a gross margin of 35.4%. BIGO’s gross profit was $182.3 million, with a gross margin of 37.1%. Our group’s operating expenses for the quarter were $199.4 million, compared with $231.2 million in the same period of 2022.

Among the operating expenses, sales and marketing expenses decreased to $92.3 million from $100.8 million in the same period of 2022, primarily due to the optimization of overall sales and marketing strategies across various product lines to be more focused on ROI and effectiveness of user acquisition.

R&D expenses was $72.6 million, compared with $73.6 million in the same period of 2022. General and administrative expenses decreased to $34.6 million from $41.9 million in the same period of 2022, mainly due to the company's efforts to improve management efficiency during the year.

BIGO’s operating expenses for the quarter were $131.3 million, compared with $127.8 million in the same period of 2022. Our group’s GAAP operating income for the quarter was $4.8 million.

Our non-GAAP operating income for the quarter, which excludes SBC expenses, amortization of intangible assets from business acquisitions, loss on deconsolidation and disposal of subsidiaries, as well as impairment of goodwill and investments, was $27.9 million in this quarter, with a non-GAAP operating income margin of 4.9%.

BIGO’s GAAP operating income for the quarter was $53 million, and BIGO’s non-GAAP operating income was $67 million, representing a non-GAAP operating income margin of 13.6%. Our group’s GAAP net income attributable to controlling interest of JOYY in the quarter was $45.8 million compared to net loss of $377.5 million in the same period of 2022.

GAAP net income margin was 8% in the fourth quarter of 2023, compared to net loss margin of 62.4% in the same period of 2022. Our net loss last year was primarily due to an impairment loss from an equity investment recognized in that quarter. BIGO’s GAAP net income in the quarter was $52 million, with a GAAP net margin of 10.6%.

Non-GAAP net income attributable to controlling interest of JOYY in the quarter was $64.2 million, compared to $50 million in the same period of 2022. The Group’s non-GAAP net income margin was 11.3% in the quarter, compared to 8.3% in the same period of 2022. BIGO’s non-GAAP net income was $63.5 million, with a non-GAAP net margin of 12.9%.

For the fourth quarter of 2023, we booked net cash inflows from operating activities of $97.2 million. We remain a healthy balance sheet with a strong cash position of $3.7 billion as of December 31 of 2023. Now I would like to briefly walk through the full year financial highlights.

Our total net revenues for the full year were $2,267.9 million, compared to $2,411.5 million in 2022. BIGO’s revenues for the full year were $1,924.3 million. We have enhanced profitability at the group level for the third consecutive year.

Our non-GAAP net income attributable to controlling interest and common shareholders of JOYY for the full year of 2023 was $292.5 million, up by 46.8% from $199.3 million in 2022. Non-GAAP net income margin for the full year of 2023 was 12.9%, up from 8.3% in 2022.

Notably, BIGO’s non-GAAP net income expanded to 302.0 million in 2023, with its non-GAAP net income margin improved to 15.7% from 14.4% in the prior year. Importantly, we have continued to enhance returns to shareholders through dividends and share repurchases.

In the full year of 2023, we have returned an aggregate amount of $355.4 million to our shareholders through share buybacks and cash dividends, which altogether represent 121.5% of our non-GAAP net income. As of the end of 2023, we still have around $530 million unutilized quota under our current share repurchase program.

We intend to proceed with a steady execution of additional share buybacks in 2024. Turning now to our business outlook. We anticipate continued topline recovery in the BIGO segment.

However, due to the ongoing uncertainty in the global macro landscape, we recognize that the pace of recovery may vary across different markets, and there may be short-term fluctuations in users’ paying sentiment.

Separately, as we have implemented some proactive adjustments to certain operations in the previous quarters, they have had and will continue to have a negative impact on our revenues. At group level, we expect our net revenues for the first quarter of 2024 to be between $543 million and $560 million.

This forecast reflects our preliminary views on the market and operational conditions and business adjustments, which are subject to changes. In conclusion, balancing between growth and efficiency remains a priority in 2024.

We remain committed to dedicating resources to building our core strengths, and prudently explore long-term growth opportunities. With our proven execution capabilities and robust financial position, we are confident that we are well-positioned to seize growth opportunities and deliver sustainable value to our shareholders.

That concludes our prepared remarks. Operator, we would now like to open up the call to questions. Thanks..

Your first question comes from Yiwen Zhang from China Renaissance..

Thanks for taking my question. My question regarding our 2024 youth and monetization growth trends, could you discuss [inaudible]? Thank you..

Hi, Thank you, Yiwen. I will take your question. First of all, let's look back at the monetization trend in Q4. Thanks to elevated operational activities such as our year end gala, our revenue came in line with our expectation with BIGO sustaining its top line year-over-year growth for the second consecutive quarter.

And in particular, BIGO's three core social global products achieved mid-single digit year-over-year growth in terms of revenue. And this was mainly attributed to a strong growth in their number of paying users and a stabilizing ARPPU.

And geographically speaking, considering that we have a more targeted operational strategy, with prioritizing high end users and the developed countries, we can see a continued recovery in the developed countries region in Q4. The top line growth rate from developed countries actually reached double digits year-over-year for the BIGO segment.

In 2024, we expect to maintain our nimble and targeted operational strategy dependent on ROI and also the recovery pace of the global markets. We will continue to prioritize our resources to West regions with stronger growth, and we expect BIGO segment to continue its top line recovery trend in 2024.

In terms of our growth drivers, as we mentioned earlier, in the past two years, we've been exploring new monetization models beyond live streaming and achieved meaningful progress. Revenue contributed by our non-live streaming businesses has contributed a higher percentage of our group's revenue in the year ‘23.

For the coming year of ‘24, to better satisfy to development need for our non-live streaming business, we've made some business upgrades and strategy upgrades to these non-live streaming businesses. We expect our non-live streaming business to further grow and to take up a higher percentage of the group's revenue in the year ‘24.

Eventually, we'd like to fortify a multi-level growth engine for our long-term development. In terms of user growth, our group's MAU has resumed positive year-over-year growth for three consecutive quarters.

Going forward, even as we continue to adhere to a disciplined marketing spend strategy, and going forward into the year ‘24, we expect to continue to adopt a balanced and sustainable growth strategy at all products, focusing on the quality of user growth, and continue to enhance our overall user acquisition efficiency. Next question, please..

The next question comes from Alex Poon from Morgan Stanley..

Thanks management, for taking my question. My question is related to our margin trend for BIGO and overall group levels in 2024. Thank you very much..

This is Alex. I will take your question. If you look at our results for the full year, we actually deliver better than expected profits. In particular, if you're looking at BIGO segment, the non-GAAP gross margin of BIGO segment has been 38.3% up from 37.6% in ‘22. And the non‑GAAP operating margin has been improved to 15% from 14.4% in prior year.

And that was mainly due to our continued optimization of our payment channel expenses, our server depreciation expenses and also our sales and marketing expenses. And looking forward to the year ‘24, we will continue to optimize our cost structure and improve our operational and management efficiency.

At the same time, we expect to prudently reinvest some of our operating profits into operational activities that can drive further revenue growth and also businesses that align with our long-term strategy.

For example, we intend to prudently expand our collaboration with KOL and their incentives, therefore specifically for the BIGO segment, while excluding the impact from the proactive adjustment to some non-core live streaming business that we made since the second half of the year ‘23.

We expect BIGO to continue its top line recovery and with its non-GAAP operating profit to be roughly stable compared to the year of ‘23.

And for the all other segments, also excluding the impact from the proactive adjustments that we made to certain noncore live streaming businesses since the second quarter of 2023, we expect to continue to narrow the amount of non-GAAP operating loss of this segment for the year ‘24 as well.

So all-in-all, at group level, we will continue to strike a balance between profit and growth and we will value profit and cash flow self-sufficiency and drive further improvement of our operational efficiencies.

All-in-all, at group level, we expect to maintain profitable, maintain a positive operating cash flow and drive a long-term sustainable growth of the group's business. Thank you. Next question, please..

Your next question comes from Brian Gong from Citi..

[Foreign Language].

Thank you, Brian. I will take a -- this is David. I will take a question. So, since we established our globalization strategy, it's been nine years, and you can see that we have actually built a very global business with a diversified and balanced revenue mix across different regions.

Looking at our group's live streaming revenue for the year ‘23, developed countries and regions actually contributed around 38%, Middle East around 22%, Mainland China around 14% and the remaining 25% came from Southeast Asia and other area, which you can see is very, very diversified and balanced.

And even within the developed countries region, we can further break it down into second tier sub-regions such as North America, US, Europe, Eastern Pacific, and others, and the contribution among these second tier sub-regions are also very dispersed.

Taking North America as an example, it only accounts for low teens in terms of percentage contribution to the group's overall revenue.

And therefore, you can see that due to the comprehensive differences across the market either in terms of policy on economic cultural and industry differences, a multinational company will definitely encounter more operational complexity and greater macroeconomic and geopolitical uncertainties in terms of business operation than those who operate in a single market.

However, as we have established our own global operational capacity and accumulated a business of skill and also have a relatively proven business model, a globalization strategy with a balance mix can actually significantly lower the concentration risk of operating in a single market and it also enables us to tap into a much greater growth opportunities at the global level and therefore moving forward, we will continue to pursue a balanced globalization strategy and remain nimble and targeted in our operational strategy.

We will continue to prioritize our resources investment into regions with a stronger growth potential dependent on ROI and also market recovery. Thank you. Next question, final question please..

Your next question comes from Henry Sun from JP Morgan..

Thanks, management, for taking our questions. My question is about shareholder return. Could you share any new thoughts and outlook in this area? Thanks a lot..

This is Alex, I will answer your question. In the year ‘23, we remain very active in returning value to our shareholders for the full year. We have dedicated around $355 million US dollar in shareholder return, which is equivalent to around 121.5% of the group's annual non-GAAP net profit.

And for the year ‘24, we would say that creating and returning value to our shareholders remains an important priority for management. As of the end of ‘23, you still have around $530 million unutilized quota under our share repurchase program. And actually, from January to March 15, we have already repurchased an additional 25 million of our shares.

And for the year ‘24, we expect to continue to execute additional share buybacks and strive to improve our execution consistency in the new year. So that was the end of this conference call. Thank you so much for joining today and we expect speaking with everyone next quarter. Thank you..

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