JOYY Inc. (JOYY) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to JOYY Inc.'s First Quarter 2025 Earnings Call. [Operator Instructions] I'd now like to turn 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 First Quarter 2025 Earnings Conference Call. Joining us today are Ms. Ting Li, Chairperson and CEO of JOYY; 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. We will also talk -- discuss certain non-GAAP financial measures. They are included as additional clarifying items to aid investors in further understanding the company's performance and the impact that these items and events had on the financial results. The non-GAAP financial measures provided above should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. You may find a reconciliation of the differences between GAAP and non-GAAP financial measures in our earnings release. 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 Chairperson and CEO, Ms. Ting Li. Please go ahead, Ms. Li. .

Hello, everyone. I'm Li Ting. Welcome to our first quarter 2025 earnings call. 2025 makes a key milestone for both JOYY and for me personally. JOYY has just celebrated its 20th anniversary, growing into a global technology leader with a sizeable, engaged user base worldwide. We -- diversified growth strategy is driving clear results as non-life streaming revenue continues to expand rapidly affirming the strength of our business model. As 2025 makes my first complete fiscal year as CEO, I'm excited to outline our medium- to long-term strategic vision and [ acquisitional ] roadmap as we advance into our next decade of growth. First, looking at our quarterly performance. We recorded total revenue of and $494 million in the first quarter of 2025. Our non-livestreaming revenue reached $123 million. A year-over-year increase of 25.3% with non-livestreaming revenue accounting for 25% of the group's total revenue for the first time. In the first quarter, we achieved a non-GAAP operating profit of $31 million, a year-over-year increase of approximately 25%. Meanwhile, we maintained strong operating cash flow, which reached $58 million. During the first quarter, we distributed approximately $49.1 million in dividends to shareholders. On top of that, we repurchased approximately $22.5 million worth of our shares as of May 23, reinforcing our commitment to returning value to our shareholders. In the past, we focused on expanding our global reach and influence of our user community, leveraging our diverse portfolio of products, spanning spending livestreaming, short videos, instant messaging and more. We have successfully monetized our global user base through livestreaming and delivered consistent profitability, which demonstrates our industry insight of regional agility and strong execution. Over the past 2 years, we have stepped up our innovation to direct new revenue streams, achieving significant progress toward our growth objectives of cultivating a multifaceted ecosystem. Since 2024, our global programmatic advertising platform, BIGO Ads has achieved remarkable growth, capitalizing on our stable global user base of approximately 260 million users, primarily young and middle-aged Internet users. With promising purchasing power, we have attracted a growing number of advertisers. BIGO Ads has further expanded its traffic pool by integrating premium population traffic with our first-party traffic. Consequently, delivery strong mirable results for the advertisers. This success has fueled a rapid expansion of our advertising revenue, reinforcing our confidence to further diversifying and expanding our ecosystem. Looking at the full picture of our non-livestreaming businesses, we believe that our advertising platform and smart commerce SaaS platform are also strategically complementary, driving synergy across the ecosystem as BIGO Ads expand its traffic pool and enhances its data-driven [ testing ] capabilities. It will empower merchants to scale its market presence through pieces and efficient customer packaging. This integrated approach generates significant value across our ecosystem and created a version, cycle of growth for both BIGO Ads and our smart commerce platform. Looking forward, we anticipate our non-livestreaming businesses including our advertising and smart commerce platform will emerge as JOYY's second growth entry. Our initial accomplishments in these areas have been encouraging. And I'm confident that this multi-agent approach will establish a sustainable, long-term growth road map for JOYY that will deliver major lasting value and enhanced returns for our shareholders. Next, let me share with you our latest business updates and operational strategies. First, our livestreaming business, In the first quarter, the group's livestreaming revenue was $371 million, with BIGO contributing $352 million, in line with our expectations. At present, we observed distinct regional divergences in online entertainment spending, especially users in developed markets have shown resilience, while those in emerging economies and long-tail paying users have reduced spending due to economic headwinds. To address that trend, we've adopted prudent strategies and efficient operational results allocation. Fourth, we are continuously optimizing our user acquisition strategy by prioritizing advertising spend on higher quality paying users in core market. Second, we are fine-tuning our revenue sharing mechanism, particular by streamingly underperformance agencies and channels that fail to deliver positive ROI. And third, we continue to strengthen our community content safety measures while improving content operations to boost user engagement. This strategy changes have already brought constructive results, while livestreaming revenue has fluctuated temporary. We have achieved a significant improvement in operating profit from our flagship product BIGO Live. Despite this transitional phase, we remain confident in the fundamental interactive value that livestreaming can offer to users and a monetization growth potential. To reestablish growth, our strategy forecasts on 2 actionable points: first, we will continue to optimize results allocation based on ROI and improved traffic quality, prioritizing user growth in growth in core markets such as developed countries and the Middle East. Second, we will drive content, product features and operational innovation to boost the user engagement, improve paying user experiences and increased conversion rates, but better identifying quality users and improving payment conversion, we expect a [ recogen ] in high-quality paying users, stabilizing livestreaming revenue and driving renewed growth. Next, let's look at the performance of our core products across key markets. First, the developed countries and region. In the first quarter, livestreaming revenue in developed countries continued to outperform. In particular, BIGO LIVE's North American region saw Q1 MAU growth exceeding 7% year-over-year. At the same time, the number of paying users and rating increased by approximately 4% Q-o-Q. Next, the Middle East region. Ramadan in 2025 started earlier this year, with the entire month falling within the fourth quarter, which caused expected seasonal impacts. Even so, our products actively promoted a series of operational activities which drove regional user activity and help boost our brand influence among our users. In the long run, the Middle East market continues to be one of our strategic priorities. Given its strong monetization potential as demonstrated by top-tier [ ARPU ] and users from affinity for interactive livestreaming and high engagement. We have remained a leader in the market, and we are committed to defending our penetration in the Middle East through our expanding diverse product portfolio. Looking at product improvements, our team have made important product feature updates that are creating clear operational benefits. In the fourth quarter, BIGO Live launched a entirely redesigned VIP benefit system and improved it's gifting experience, upgrading gift features for high-value users. These efforts delivered a 3% Q-o-Q increase in ARPU among BIGO LIVE's high-end user cohort. Likee also advanced its content strategy by building a more device and engaging content library. This led to impressive engagement metrics during the quarter. Videos views per user rose by 7% compared to the previous quarter. With overall video consumption time increasing by 10% over the same period. Our refined approach to top streamer management and development also produced a notable 3% Q-o-Q increase in Likee's average paying ratio during the quarter. In the first quarter BIGO achieved approximately $18 million in advertising revenue, a year-over-year growth of about 27%. Here, I would like to share my insights into the macro and industry changes in the advertising business, and how we plan to establish our long-term competitive advantage in advertising in the current environment. As you see, we believe JOYY is unique positioned to take advantage and current conditions of the advertising space to drive our long-term growth. First, the global macro landscape is highly dynamic with major shift taking place to advertising placement channels across key markets, advertisers need placement strategies spanning both domestic and international channels to maintain and grow their market share. This change actually favors organization with our unique profile, but especially those with both strong localized operations and extensive global reach. As such, we believe JOYY benefits clearly from this recent shift in the advertising landscape. Our market insight, premium global traffic and the localized operations have helped us build strong credibility with advertisers. This chart has allowed our bigger ad platform to grow quickly, which has increased both our manager traffic, volume and overall platform scale. Second, in this evolving landscape, advertisers now demand better returns from their placements, along with clearer measurement and a proof of placement impact. Specifically, we want to directly connect their ad cost to revenue and profit growth. This means that more than ever before, platform must find and engage specific audience segments and efficiency trends with interactions into measurable new customers. JOYY is uniquely positioned to meet this changing made with our large user base of 260 million people worldwide. Our users include the key target groups for many important advertising categories, and we understand the behavior and preferences. This creates an advertising system with detailed user profiles that help advertisers consistently reach their most valuable customers. Third, we are leveraging AI to transform our advertising strategy. The rapid advancement of AI technologies and infrastructure have greatly enhanced JOYY's capabilities, enabling us to capitalize on our diverse application scenarios and the proprietary data assets. BIGO Ads use our extensive global audience and years of quality data to build its own virtual model, integrating cutting-edge generative AI technologies. This has helped us build an intelligent, end-to-end advertising platform that covers user insights, creative development, precise targeting and real-time optimization. Our AI usage improves ad performance and ad returns while creating better revenue opportunities for our publisher partners. This success attracts both more advertiser spending and more publisher traffic, helping the BIGO Ads platform grow quickly. Fourth, our Advertising business enjoys significant economic advantages, thanks to our established global operational team, R&D capabilities and our network infrastructure. In particular, bandwidth and network-related expenses, a key component of operating costs and advertising platform are optimized through our global network infrastructure, originally built for our social and entertainment products. This allows BIGO Ads to enjoy significant cost savings. As our Advertising business scales, our server cost per unit decreased across the company, steadily enhanced overall operational efficiency. In summary, our Advertising business has delivered consistently strong growth in past quarter and continues to be profitable to the company. This success comes from our local operations, our advertisers and user base, our industry-leading algorithms and our global network infrastructure. Given these proven strengths and our growing market position, we are confident our Advertising business will continue to contribute to growth in our revenue and profitability over the long term. Now moving to our thoughts on capital allocation. With the preliminary progress that we made in diversifying our businesses, we are actively monitoring our business development and resources and carefully assessing long-term capital allocation opportunities to support our non-livestreaming business. In short term, we expect to prudently expand head counts and marketing resources to support our Advertising business while maintaining healthy profit margins. In the medium to long term, once our non-livestreaming business reach a certain scale, investments in infrastructure upgrades, technology development, talent expansion and marketing efforts are all potentially high-return capital allocation options. We aim to extend our competitive advantages through efficient capital use. Our shareholder returns. JOYY has established a consistent track record of delivering returns to our investors. Looking forward, with our livestreaming business stabilizing and the rising revenue and profit from advertising and other emerging businesses, we expect the company's consolidated operating profit to continue to improve and our shareholders to benefit from our long-term profitable growth. We remain deeply committed to disciplined capital allocation and balances strategic reinvestment with competitive shareholder returns. In short, we are currently experiencing a strategic transition in JOYY's business structure and reshaping our results allocation, focusing on high-quality organic growth. With the rapid advancement in our non-livestreaming businesses, we expect 2025 will be a year of implementation and validation of our multi-growth-engine strategy. I'm confident that our focus on value-accretive organic growth will drive expanding business and financial benefits, ultimately creating lasting values for our shareholders. I will now turn the call over to Mr. Alex Liu, the Vice President of Finance, to provide our financial updates.

Thanks, Ms. Ting. Hello, everyone. Please note that the financial information mentioned during this conference call is presented on a continuing operations basis, unless otherwise specifically stated. In the first quarter of 2025, we recorded total net revenues of $494.4 million, delivering the higher end of our previous guidance. Our non-GAAP operating profit was $31 million, also exceeding market expectations. Building on Ms. Li's inspiring presentation of our strategy, we have made significant strides in diversifying our revenue streams and fostering a dynamic, multifaceted ecosystem. I will now dive deeper into our financial performance for the first quarter. Our livestreaming revenues was $371.3 million for the first quarter, $351.6 million of which was from BIGO segment, in line with our expectations. In the past few quarters, we have been continuously optimizing our user acquisition strategy by prioritizing advertising spend on higher quantity paying users in core markets and simultaneously adjusting our revenue-sharing mechanism by streamlining underperforming agencies and channels that fail to deliver positive ROI. This, together with the impact of weak seasonality, has led to short-term fluctuations of our livestreaming revenue and user metrics. Our prudent and efficient operational resource allocation have yielded positive, measurable results. The percentage of total livestreaming revenues from developed countries have increased by 2.8 percentage points year-over-year to 47.4%. The operating margin of our flagship product, BIGO Live, has also been substantially improved year-over-year. Our non-livestreaming revenue were $123 million during the first quarter, contributing 24.9% of our total group revenues, up from only 17.4% contribution in the same period last year. This remarks a strategic transition in our revenue mix. In particular, BIGO'S non-livestreaming revenues, primarily advertising revenues, increased by 27.3% year-over-year to $80.3 million. As Ms. Li mentioned earlier, built on our high-quality first-party global user traffic, technology and network infrastructure as well as AI capabilities, BIGO Ads has emerged as a competitive programmatic advertising platform and attracted a meaningful base of global advertisers and publisher traffic. As we are currently accumulating in scale and enhancing our algorithm, we expect to further improve campaign performance and ROI for our advertisers, which in turn will drive accelerating growth in our advertiser's base and publisher traffic pool. At present, BIGO Ads has made a positive contribution to our bottom line. We expect it to be increasingly meaningful and eventually become another growth engine for our profit over time. All Other segment's non-livestreaming revenues was $43.2 million, increasing by 21.6% year-over-year. Group's gross profit was $178.6 million in the quarter with a gross margin of 36.1%, while BIGO's gross margin was relatively stable. All Other segment's gross margin was substantially up by 9.8 percentage points year-over-year to 41.7% due to segment's enhanced monetization, particularly growth in non-livestreaming revenues. Our group's operating expenses for the quarter were $167.2 million compared with $195.4 million in the same period of 2024. The decline in our operating expenses was in line with our current operating strategies across both livestreaming and non-livestreaming business. For our livestreaming business, we have continuously optimized our sales and marketing expenses to enhance ROI. For our non-livestreaming business, while it has seen robust revenue growth, we have maintained prudent and disciplined spending, with operating expenses rising at a slower rate than revenue. Our disciplined execution has driven enhanced operational efficiency. Our group's non-GAAP operating income for the quarter was $31 million in this quarter, up by 24.9% from $24.8 million year-over-year. Non-GAAP net income attributable to controlling interest of JOYY in the quarter was $63.2 million. The group's non-GAAP net income margin was 12.8% in the quarter. Our non-GAAP net income was lower this year, primarily due to lower interest income due to a decrease in our cash balance as we fully repaid our CB in June last year and a lower interest rate. For the first quarter of 2025, we booked net cash inflows from operating activities of $58 million. Our balance sheet remains healthy with a strong net cash position of $3.4 billion as of March 31, 2025. Now moving to capital allocation. Shareholder return continued to be an important component of our capital allocation strategy. We have returned $49.1 million to our shareholders through dividends during the first quarter and repurchased $22.5 million worth of our shares during the year as of May 23, 2025. Going forward, we remain firmly committed to unlocking shareholder value through our capital return initiatives. Turning now to our business outlook. At group level, we expect our net revenues for the second quarter of 2025 to be between $499 million and $519 million. Our guidance accounts for certain seasonality fluctuations and reflects our preliminary views on the current market, operational conditions and business adjustment decisions, which are subject to changes. In conclusion, the rapid growth of BIGO Ads and our other non-livestreaming business has driven substantial progress in building a dynamic, global multifaceted ecosystem. As we strategically realign our resource allocation to prioritize high-quality organic growth and operational efficiency, we remain confident in our ability to deliver sustainable, profitable growth and long-term value for our shareholders. That concludes our prepared remarks. Operator, we would now like to open up the call to questions.

[Operator Instructions] Your first question comes from Thomas Chong with Jefferies.

[Foreign Language] I have 2 questions about the second half business outlook. Can management comment about the overall monetization trend in the second half, in particular for BIGO Live? And my second question is about cost optimization and the trend in operating expenses and the margin outlook in 2025.

[Interpreted] Thank you, Thomas, for your question. This is Ting Li. I will take your first question. First of all, you may notice that in our communications -- in our recent communications, we will be giving updates based on revenue types, livestreaming and non-livestreaming rather than the previous BIGO and All Other segments. This is mainly because our livestreaming and non-livestreaming businesses are currently quite distinct in terms of growth momentum and phase of development. And updating by revenue type would make it easier for everyone to understand the trends and changes that is happening in our current business mix. So I'll try to answer your question in line with the previous mentioned framework and category. First, regarding our livestreaming business. Overall, since the third quarter of last year, we have rolled out a series of adjustments, including changes to the feature of our noncore audio livestreaming product, optimizing revenue sharing mechanism, phasing out negative ROI channels and upgrading the content safety mechanisms and systems. As a result, our livestreaming revenue has indeed experienced some fluctuations. From a Q-o-Q perspective, we believe that these adjustments have largely been fully implemented. Therefore, we expect livestreaming revenue to likely stabilize starting from second quarter and resume a positive quarter-over-quarter growth. When you look at our user acquisition strategy for livestreaming, we will continue to allocate or prioritize our budget towards high-quality users in developed countries based on real-time ROI. Simultaneously, we'll continue to optimize the design of pay features and user benefits systems tailored to different user segments to improve our paying conversion efficiency. We've seen some encouraging data from BIGO Live in February and March that the revenues in certain developed countries such as North American countries have already resumed to positive month-over-month growth driven by increase in the number of paying users. And looking at non-livestreaming businesses, our Advertising revenue from BIGO segment and our SaaS revenue from All Other segments are both maintaining year-over-year growth exceeding 20% in Q1. As our lives -- non-livestreaming businesses, particularly advertising, enters into its busier season in the second half of the year, we expect our revenue sequential growth for both non-livestreaming businesses to accelerate in the following quarters.

[Interpreted] And this is Alex. I will take your second question. First, let's have a quick look at our Q1 performance. For the BIGO segment alone, our non-GAAP gross margin for Q1 for the BIGO segment was 35.5% with a non-GAAP OP of 13.3%, both showing improvement compared to our Q1 level last year. This was primarily due to livestreaming business where we optimized our content cost mechanisms and also upgraded our user acquisition strategies to enhance ROI, leading to significant improvement in BIGO Live's gross margin and non-GAAP OP margins in Q1. For the All Other segment, our non-GAAP gross margin also was substantially improved year-over-year, rising from 32.4% last year to 42.1% in Q1 this year, which was 9.7 percentage points increase, mainly driven by strong growth in our non-livestreaming revenue in the segment. The non-GAAP operating loss for Q1 was $26.5 million, which despite being in the off-season, was narrowed by 23% compared to the previous quarter, and this was primarily due to our disciplined spending in our non-livestreaming businesses with a noticeable Q-o-Q decline in our operating expenses together with the impact of certain seasonality fluctuations in certain expenses. While looking ahead to Q2, with BIGO segment's revenue resuming to positive Q-o-Q growth, we also anticipate BIGO's non-GAAP operating profit will also return -- the amount of BIGO's non-GAAP operating profit will also return to positive Q-o-Q growth. For the full year of '25, excluding the impact that we -- of the adjustment that we made to the noncore audio livestreaming product features in BIGO since Q3 last year, we expect BIGO's overall non-GAAP operating profit amount to remain stable with certain potential for growth in the full year. And for All Other segment, we expect that with improving monetization and disciplined spending, its R&D expenses as a percentage of total revenue will continue to decline, and we foresee a meaningful reduction in its amount of non-GAAP operating loss in '25 compared to the previous year. At group level, we do believe that our group's non-GAAP operating profit amount will show an improving trend for the full year of '25.

Your next question comes from [ Zhiqing Xu ] with Goldman Sachs.

[Foreign Language] Can management share more updates on new initiatives in the 2025? And also, can management give us more color on the underlying reasons behind BIGO Advertising's accelerating growth? And also the outlook for BIGO Advertising?

[Interpreted] Thank you, [ Zhiqing ], for your question. This is Ms. Li Ting. I will take your question. why BIGO Ads can accelerate growth? First of all, when we talk about BIGO Ads, we refer to both its in-house first-party traffic and also the third-party traffic advertising revenue. And when we look at that, we look at it from both the advertisers perspective, our traffic pool and also the embedded advantage that we empower as a platform. First of all, let's look at advertising side. We believe that it's an answer to the growing advertisers' needs. We've noticed that advertisers need to allocate their placement budgets across multiple channels, and they demand a high ROI for their ad investments and factors such as geopolitical tensions and antimonopoly measures have led to changes in the advertising market that cause advertisers to demand further diversification over their placement channels. And second, because we have those existing relations with the advertisers, such relation has driven publishers and aggregation platforms to join our network, leading to a platform growth -- rapid growth in our traffic pool of BIGO Ads. And thirdly, because of those extensive user base and years of quality data and also our deep expertise and knowledge in user profiling, that was the foundation of effective and precise targeting and enabled us to deliver a positive ROI for advertisers. And as we continue to roll out a deeper training of our model, we expect our specific user scenario is going to improve our model, which is going to bring further improvement in our delivery results to the advertisers. And you've also may noticed that we mentioned that BIGO Ads in general, as a whole, has already begun to make a positive contribution in terms of operating profits. And we believe that the reason that we can achieve profitability at such a scale is due to a few reasons. First of all, it's always about ROI. We -- because of the fact that we have approximately 260 million first-party user traffic together with third-party traffic that is accumulating and that we have the AI-empowered user targeting model enabled us to deliver a positive ROI for advertisers. And together with an in-house algorithms such as our pacing strategies, which can optimize our ad delivery to balance advertisers' goals. For example, they have higher ROI goals, but we can balance it between their goal with our platform revenue. And that actually, as we continue to improve our vertical model, we expect that our algorithm is going to help us efficiently balance our advertisers' needs and our own revenue growth. And thirdly, BIGO Ads obviously benefits from the group's prior investments in our global infrastructure -- network infrastructure and also our R&D infrastructure. And that enables BIGO Ads to enjoy strong economic advantages with lower cost per unit. So in summary, our Advertising business has delivered consistently strong growth in the past quarters and continue to be profitable for the company. And this success actually comes from our localized operations, our existing advertisers and traffic pool, our industry-leading algorithm and also our global network infrastructure. Given this proven strength and our growing market position, we are confident that our Advertising business is going to contribute to long-term growth to our revenue and profitability.

Your next question comes from Raphael Chen with BOCI Research.

[Foreign Language] Congrats on the solid quarter. Could management give us some insights about shareholder return policies and other capital allocation strategies?

[Interpreted] Thank you, Raphael. This is Alex. I will take your questions on capital allocation. First of all, shareholder returns remain a key component of our capital allocation strategy. In the first quarter, we continue to execute our commitment to our shareholders, distributing $49.1 million in dividends and repurchasing $22.5 million worth of our shares as of May 23, consistently fulfilling our commitment to provide a competitive return to our shareholders. Additionally, as Ms. Li just shared, we are also actively monitoring our business development and resources and carefully assessing long-term capital allocation opportunities based on the current stage and performance of our respective businesses. Currently speaking, the livestreaming business maintained a relatively stable growth in cash flow, and we are actively optimizing our resource allocation to improve its ROI. Meanwhile, for our non-livestreaming business, such as advertising and SaaS in the phase of accelerated growth, in the short term, we expect to prudently expand our head count and marketing resources to these non-livestreaming businesses to support their growth while maintaining improving trends in their respective economics. In the long term, we will continue to enhance our competitive advantage through prudent and efficient resource allocation. We remain confident in our ability to drive sustained, diversified growth in our global revenue and operating profit while maintaining competitive shareholder results. Thank you.

And that was the last question. Thank you so much for joining our call today. We look forward to speaking with everyone next quarter. Thank you.

Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]