Q4 2020 Yalla Group Ltd Earnings Call
Good morning, and good evening, ladies and gentlemen.
Thank you for standing by for Yellow group Limited's fourth quarter and full year 'twenty 'twenty earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session.
Today's conference.
Being recorded.
Now I will turn the call over to your speaker host today, Ms. Carrie Gal IR director of the company. Please go ahead ma'am.
Thank you.
Everyone and they'll come through you off fourth quarter and full year of 2020 earnings conference call we have.
Coal is the earnings results earlier today and it is now available on the IR website as well as all of your cloud services before the coating you. Please note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995 forward looking statements involve.
<unk> risks and uncertainties.
Much of our future results may be materially different from the views expressed today for information regarding these and other risks and uncertainties is included in our earnings release and our registration statements filed with the SEC.
A lot of does not assume any obligation to.
The update any forward looking statements.
In fact as required by law. Please also note that <unk> earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures net loss.
The press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited.
For the most directly comparable GAAP measures.
Day, you'll hear from me said, how you all of our Chairman and Chief Executive Officer will then provide an overview of our reset of the shipment growth strategies, let's say, yeah, but the followed by me if the southeast My you the company's Providence, well gave a brief review of our recent developments.
Finally, Mrs. Karen Who's our Chief Financial Officer will provide additional details on the company's financial results and discuss its financial outlook for.
Management's prepared remarks, we will open up the call to questions, our Chief operating officer, Mr. Jeff Chu, who will join the call for our Q&A section, but that's that.
I would now like the turn the call over to our Chairman and Chief Executive Officer of Mr. Tao Yang. Please go ahead Sir.
Thank you Carrie.
And thank you everyone for joining our fourth quarter and full year clinical on the earnings conference call.
Got it when he was a milestone year for yellow what became the first the weighting of.
According to the listed all of the New York Stock Exchange.
Publishment, we are very proud of and the <unk>.
Testament to our business model.
Our fundamentals and our per delivery.
Operationally, we also saw strong growth momentum across the board as we continued to expand.
Our user community and of the walls of our monetization capabilities.
We are pleased to report of our strong fourth quarter.
Where are the other groups total revenue increased 42 per Nike on Q in the raised 48.3 million USD in Q4.
The only thing the upper <unk>.
End of the guidance range. We also maintained our non-GAAP net margin of 48.3 per cent.
Well I'll wear.
That's the IPO of your bond in Dubai generated far reaching brand awareness and the middle East and North Africa of aging.
Explore that for me that are highly experienced marketing team has been running in the relative.
And the revenue.
The resonating campaigns tailored to the local couch or more.
Monthly active users for our group.
Increased 15% of ground Q and the reached.
The acting point 4 million.
In addition, our ability to monetize our user base also continued to improve at our groups of all pool grew rapidly by 38.5% quarter over quarter kind of reached the high point too in Q4.
Yellow group paying users also increased to five 2 million.
Let me pull out of example of how we are approaching modernization.
A great example is the other ludo.
It started out of the casual game platform and have strong stronger use of girls thinks of the beginning.
Beginning of 2020 to boost its monetization capabilities in July of 2020 will introduce the chat from a functionality into the platform.
And the effort to strengthen the social connections amongst all of our casual game users.
With improved the user engagement and for their monetization.
Vision.
The other ludo of call it for more than half of our group quarterly revenue in Q4.
Going forward, we are focused on three key priority areas in order to expand our business first.
Growing our yellow community to calculating of friendly and engaging environment.
Government second.
Providing users with the quality and the localized product experience of third.
Diversifying our platform's product offerings to create brand extension and deeper loyalty.
Mena severity in breadth of more balanced lifestyle.
And having casual chat at the cafe or making phone calls for hours with France.
The common way for people to socialize and other Tang during daily leisure time based.
Based off of our deep understanding of me no use of social needs and habits with design of both of our products.
To be worth centric bring me the tradition traditional offline social activity of code modules to our online platform and enabling our users to enjoy their show show traditions of anywhere and anytime.
Expanding our user base is.
One of our top priorities.
With new products a lot of up for launch the theatre, we are increasing our marketing efforts.
Budget in order to pursue new users more heavily well balancing growth and the maintaining.
The community culture in end of atmosphere.
Every community has its own characteristics and the yellow is the platform for people to make new friends and have Kathy Chad to enjoy each other's company.
Users are having pure and the relax social experiences on our platform.
Think of the very beginning.
We have been growing yellows community gradually with care and in the <unk>.
Tenable way without harming the committee of the culture and the intimate feel.
Our persistence and the patients.
Has paid off.
Over the past five years.
Well the user of space continues to grow we were still able to maintaining of the healthy community culture every day yellow user spend the average more than for hours on our platform and in Q4 yellow daily active real reached to more than 500 salad.
Making gala of unique destination of mall was chatting levers of.
Goal is to continue delivering 30 and sustainable user growth with active user engagement in our community the.
Second priority is to continue providing users with quality products.
For the <unk>.
For instance.
Our deep local insights and a perceptive of attention to product detail.
GAAP being.
Part of poverty in the core.
Free creating a platform that provides customers with the superior and personalize the.
Of user experience.
This has resulted in robust organic growth driven by word of mouth, among our users in the Mena region.
Sorry for all of our experienced management, who have all been working and living on ground through Alcmena for many years of pre.
The team in Dubai also proactively.
Lee come back for research and gather it's for Tenda about local users providing significant guidance had feedback for our R&D team and they look to optimize the old product.
The team's strong capability in product development with making yellow of competitive player in minutes.
What's going on line shows, we're not working and the entertainment market.
We will continue to focus on perfecting the details and the developing good products tailored to the local culture delivering our users of best in class product experience yet of mission is to build the most popular destination.
Nation for our large social networking and the other payment acceptance of Mena by continually expanding our brand.
In order to achieve this goal we have been dedicated to expanding our platform's offerings.
Besides the he will share with you momentarily.
The details about our new products.
Looking back over the past year, we successfully launched and the.
New termed two highly popular per.
Product.
Yellow and yellow Ludo looking ahead yellow group will continue to embrace leading edge technologies continued to analyze the study.
<unk> of the chance of local culture, and the continued to rollout new social networking and the entertainment products.
Accordingly, and.
In order to capture more opportunities in the connected market in <unk>.
Salary.
We are tremendously encouraged with our momentum as we enter.
2021, and this is going to be another important year for five years ago, we started with a single product yellow.
Through which we identified the potential of voice centric social networking in the Mena region and six of them dedicated ourselves to building and running.
Centric social community.
We're excited to see more and more people starting to recognize the advantages of west centric social networking and going forward. We will continue to explore and identify opportunities to stay a minute of areas of Lai social networking and entertainment.
Line.
What we have learned into a comprehensive platform with a wide range of product offerings.
Now all the turns Colbert to all of the pregnant with society is Mario to.
To give you a closer look of our recent development.
Thanks Tyler.
Hello, everyone.
Thanks for joining us today.
During our last earnings call, we introduced two new products for all of our pipeline yellow balloon with two of traditional card game favored by a lot of people in Saudi Arabia, and one O. One okay, which is also a popular traditional board games in Turkey.
The beat.
The victims of both have been made available online and we will launch the products officially in quarter two with full on promotional campaign.
You also have more of exciting new product line up for this year.
One important new product that we would love to share with you is the law.
Net.
And the instant message or I am product designed specifically for Arabic users.
And products are closely related to People's Daily life.
It serves as an important part of the social infrastructure and modern society.
<unk> all around the world many countries or regions like.
At the day, China, Japan, Korea, Russia, and Vietnam to name just a few have their own I am products that are designed based on local culture and catering to local users' needs.
Keeping the other ambition in mind, we believe it will be bean and call for Arabic users to have.
Their own products and thus we aim to launch Seattle of Chad This year.
The plan is to start it off as of communication platform and continue to add additional functionalities that share Mena users particular needs over time this new product will be an important strategic efforts for.
For the Allegro as the.
It has the potential to significantly expand our scope of the business leveraging our existing highly active user base. We look forward to cultivating another growth engine for our business.
Another product, we would love to share the here is the other Berkshire.
We found the.
The Ludwig Gabe is not only popular around the mean of area. But also has the large fan base in South America and yellow parishes as the casual game platform redesign for South American Ludo levels from a strategic standpoint, we will continue to Minnesota, The South America market closely for future.
The opportunities as we entered that the the theory with patches.
Let's turn to our true flagship application yellow and the alluded to better enrich the content offering on our platform and further promote our platform's awareness among local users in December 2020, we invited family of total.
The host of suite would be at EPS life D V broke ground. The kingdom. This morning, the lunch here on chat room on yellow Mr. Bobby <unk> is well known for here resilient personality and passion for her career and media. She is also our old model, who can encourage and in spite of the young people to.
Positive and healthy lives, both online and offline during the event on yellow hundreds of users grabbed mines to discuss numerous topics, including life attitude, social skills and peso and the development to name just a few more than 149000 users joined the Lafayette.
The lift bra during post season, one and season two spending a total of 20 million of minutes in the chatroom was bad yeah on the Mike with 250, thousands of virtual gift Center and.
Susan to each episode lasted for 90 minutes and participants average daily time spent.
We are broke each 72 of minutes.
Which of them illustrates the impressive engagement level of all other users at the event.
We also recently launched yet a lot of other or yellow of sports program with one of the most famous for broadcasters and experts in the region, Mr luxury of zombie instead of Derby.
And the recent exciting games and sporting events with sport lovers on dial of platform. The program provides opportunities for our users from all age groups, specifically us interested in sports to discuss their views on football and other sports more than 147000.
The users have joined since the other sports launched this February with 270000 virtual gifts. In every episode is on our lung and our users have been spending more than 40 minutes on average every day, but the submitting in the program.
The other sports drives more sports lover.
And the other platform, creating higher engagement by running operations activities that the Taylor to hot topics in the region and local users interest looking ahead, we expect to see more operation activities on Yelp platform with.
Popular personalities and subject matter experts.
As we continue to harm.
And on local popular culture, and social trends of Mena and provide our user for.
What they love.
With that I will now turn the call all of us to our T of all current.
Who will discuss our key financial and operational.
Thank you Savi.
Hello, everyone and thank you for joining us.
Our leadership position as a voice centric social networking and entertainment platform in Mena is clearly being demonstrated by our the past topline and bottom line growth that continued in the quarter.
Our first quarter.
Revenues grew 159% year over year to 48.3% U S. Dollar Wow, our non-GAAP net income reached 23.3, meaning U S. Dollar vis group of 181, 6%.
Our non-GAAP net margin remained elevated at.
48, 3%, reflecting our unique business strategy marketing positioning and the strong operating efficiency.
The <unk> 2021 well underway, we are very confident we can deliver another year.
<unk> strong growth and profitability as we continue to execute on our strategic roadmap.
Now I would like to walk through our financial details for the fourth quarter of 2020.
Our revenues for 48.3 meeting U S dollars.
The first quarter of 2020.
100, and the 50.9% increase from $19 3 million U S dollars in the same period last year.
The increase was primarily driven by the widening of both yellow and the <unk> user base and the robust.
Enhancement in chatting services monetization capability.
Our average <unk> increased by 295, 4% from.
For two meeting in the fourth quarter of 2019 to $16 for meaning in the fourth quarter of 2020.
Yeah I'll ask of you increased by four of 40 94, 8% to six point for meeting in the fourth quarter of 2020 from.
Three three meeting in the same period of last year and the yellow lose miu increased by one.
57, 5% to $10 million in the fourth quarter of 2020 from point of 9 million in the same period of last year.
In addition, another primary contributor to our solid revenue growth of all the significant increase in the number of paying users.
So the move from <unk> 7 million in the fourth quarter of 2019 to five 2 million in the fourth quarter of 2020.
Now, let's look at our costs and expenses our.
Our cost of revenues was $18 for meaning U S dollars in the fourth quarter of 2000.
<unk> X.
Excluding share based compensation expenses cost of revenues for the fourth quarter of 2021, 16 point true, meaning U S dollars, a 100 and the 77, 8% increase from 5.8 meeting U S dollars for the same.
<unk> last year.
The increase was in line with our revenue growth and primarily due to our expanding business scale, excluding share based compensation expenses cost of revenues as the percentage of our total revenues increased from 33%.
<unk> in the fourth quarter of 2019 to 33, 6% in the same period in 2020, primarily due to.
Number one reason and the increase in salaries and the benefits for our staff related to the accretion which was interest driven by an expansion of.
Same code off related to the operations due to the increasing user base of our products and number two an increase in commission fee for the third party payment platforms.
Our selling and marketing expenses were seven 6 million U S dollars in the fourth quarter.
Quarter of 2020.
Excluding share based compensation expenses, selling and marketing expenses for the fourth quarter of 2020 or for for meeting U S dollars of <unk>.
<unk> 43, 9% increase from.
<unk> three point of one meeting for the.
Our quarter last year the.
The increase was primary due to higher advertising and marketing promotional expenses as a result of our continued use of acquisition efforts.
Excluding share based compensation expenses, selling and marketing expenses as a percentage of our total revenues decreased from <unk>.
The <unk> in the first quarter of 2019 to nine 2% in the same period in 2020, primarily due to organic user acquisition through word of mouth reference and the economics of.
Scale.
Our general and administrative expenses were 11.
<unk> 3 million U S dollars in the fourth quarter of 2028.
Excluding share based compensation expenses general and administrative expenses for the fourth quarter of 2020 was $2 6 million.
66, 6% increase from $1 six meaning for.
11 same quarter last year, the increase was primarily due to an increase in salaries and other benefits for our general and administrative staff, which was in turn driven by an expansion of our general and administrative staff.
Excluding share based compensation expenses general and.
For the administrative expenses as percentage of our total revenues decreased to five 4% in the fourth quarter of 2020 from eight 1% in the fourth quarter of 2019 due to economies of scale.
Our technology and the product development expenses were one.
And at a meeting U S dollars in the fourth quarter of 2020.
Excluding share based compensation expenses technology and product development expenses for the fourth quarter of 2021 4 million of 223% increase from point for meeting for the same quarter last.
Six.
The increase was primarily due to an increase in.
Salaries and benefits for our technology and product development staff, which was interest driven by an expansion of our technology and product development.
Our investment in new products and.
Yes. Please.
As a result of these reasons excluding share based compensation expenses technology and product development expenses also increased as a percentage of our total revenue from two 3% in the fourth quarter of 2019% to 2.9%.
So in the same period in 2020.
As such our operating income was $9 3 million U S dollars in the fourth quarter of 2020, compared with operating income of eight three meaning U S.
In the same period last year.
Share based compensation non-GAAP operating income for the fourth quarter of 2020 was $23 7 million in U S dollars, a 183, 4% increase from the same quarter last year.
Our income tax expense.
It was 300 and the 31 point for solar in the U S dollars in the fourth quarter of 2020.
As a result of the foregoing our net income was $9 million in the fourth quarter of 2020, compared with $8 3 million in U S dollars in the same.
Failure period last year, excluding share based compensation expenses non-GAAP net income for the fourth quarter of 2020 was $23 three meetings.
181, 6% increase from 8.3 million for the same quarter last year.
I would like to briefly look at our liquidity and capital resources.
As of December 31, 2020, we had cash and cash equivalents of $236 9 million U S dollars as compared to the cash and cash equivalents of <unk>.
75.
Net meeting as of September 32020.
For our 2024 year financial results. Please refer to our earnings earnings.
Press release for further details.
For the first of quarter of 2021, we expect our revenues to be.
Seven between <unk> meeting and the 63 million U S dollars.
The above outlook is based on the current market conditions and reflects the company's management's current and preliminary estimates of market and operating conditions and customer demand which are all.
If the change.
This concludes our prepared remarks for today operator, we are now ready to take questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on.
On your telephone keypad.
If you are using a speaker phone.
Please pick up your handset before pressing the keys.
At any time of your question has been addressed and you would like to withdraw your question.
Please press Star then two.
Subject for the benefit of all participants.
On today's call.
If you wish to ask your question to management.
In Arabic or Chinese please.
Please the immediately repeat your question in English.
At this time, we will pause moment.
Clearly to assemble our roster.
The first question comes from.
The your how high total international.
Please go ahead.
Hi, total and Carolyn <unk>.
The carry.
Gary Thank you for taking my question and congrats on the solid quarter I have one question for you on what is the outlook for yellow and the yellow new zone in 2021 and what are your strategies to Richard immune target. Thank you.
Hi, Thanks.
Should we expect <unk>.
And they used to grow by chance of 15% quarter over quarter, this year and thats around 50% to 70% growth Anthony.
Please note. This number is the only for yellow angle of Ludo. We haven't included the potential contributions from our new products from this outlook.
In terms of growth of the new products, where we really need to get more feedback.
From the markets to get a bit of sense of it we will keep monitoring the performance of our new products. After we have officially launched them and we will keep you posted of our progress. Thank you.
Yes.
Thanks.
The next question.
Comes from.
Chi Fong from <unk>.
Please go ahead.
Yes.
The Humira question on the congratulations for a strong quarter.
I have a question.
How about some of the competition. So lets say some Chinese game companies have inherited them in the market. So how dramatic demand just from the competition.
Once all of our strategies for this thank you.
Hi, co founders of.
Australia.
I would like to take the questions.
The.
Our tree are true we will now the first company the large mobile games in the.
In the market there were more than 100 loyal games apps in the market in the middle market Middle market before we introduced the yellow Ludo in addition.
Yellow Ludo is also competing with other bowl games. So it has being fishing competition since day one.
Against the competition yellow Ludo is the number of one board gave me in the Mena region in terms of revenue generated.
And the most important difference between <unk> and the other ludo platforms.
<unk>.
We have built a very strong social features into it and we run the Honolulu is not only a game platform, but also of social community.
The current we haven't seen strong competitors in this vertical but the way we will be alert to two dynamic competitive landscape.
The style setup catching up at the.
That's for them. So we have ever of games on the social networking apps for.
Kind of give us more detail of the biology of applying about two of the platform.
The other charge for care.
Oh yeah.
Very interesting question.
Sure.
Yes building the platform as the important strategic move for US, we aim to build and strengthen the connections among our individual apps.
And create.
The.
The logistic ecosystem.
Or we can drive traffic from one of our apps.
The other three.
Through us or of breaking activities.
Of this stage, we think of yellow Chad can be a good starting point to.
Facilitate our implementation of this strategy.
S chassis mentioned earlier, our plan is to start at your other channels.
Two on the other.
Of the communication platform and continue to add.
The additional functionalities connecting all of our apps and services into one large platform.
Thank you Catherine Hu question.
Yeah very clear. Thank you. Thank you.
Thank you very much.
Again, if you would like to ask the question.
Please press Star then one on a touchtone phone.
The next question comes from Bo Pie of.
Oppenheimer. Please.
Go ahead.
Hi management thanks for.
For taking my question congrats on the strong results. So I have two questions. If the mark. So first can you talk about what percentage of <unk> users use the chat feature for Q.
And then.
Notice of <unk> bin.
We have.
Please go.
With the entered the South American market.
Can you briefly discuss the geographic expansion opportunity for example, the total addressable market in South America.
And also in terms of the competition, how does that compare with the Mena market and.
No.
The other market for except the South East Asia and the other.
The regions you plan.
And for Us well thank you.
Thank you Mr <unk>.
Good morning.
The Ah <unk>.
Simply the over 10% of your of the user from yellow Ludo.
Using over much of assumptions.
The.
Alright, thank Mina and will for the for the second question I think meter for sure of it is our most important market. The main focus for yellow of one of the most.
Importantly, the advantages we have is our teams deep understanding into the art.
All of the culture, and our strong of localization capabilities.
One way of considering expanding into other regions, where you already begin with countries, having similar culture of background for the.
Example of our first flagship top yellow only supported Arabic at the beginning.
The other.
We gradually added Turkish Hindi will do and the Indonesia et cetera, but other app is also available for download in more than 100 countries around the world.
In addition, we also over Spanish and Portuguese all yellow the cow.
Sure of people who speak Spanish.
And Paul the guests with very different from the cultures of other countries.
The English.
Already operates for through operating products in Spanish speaking countries of serving local users. There. Our team has gained valuable consumer insights and share.
All of this about this market over.
Over the past three years.
Margaret the good example way for the tissue is a very popular traditional ballgame in the South American market and.
Similar to Toledo.
Yellow atrocious launch this year, we expect to grow our presence in.
This market weighted.
We will continue to monitor the south American market closely for future opportunities.
Mitchell.
Thank you.
Yeah.
The next question comes from.
From Iris.
See the ICC. Please go ahead.
Hi management, Thanks for taking my question and congrats on your strong financial performance of my.
Question is regarding your expense plan and the margins because historically the non-GAAP net margins.
At the very high almost the 50% I'm wondering can you. Please share more color on your investment and the expenses on like sales and marketing R&D and others and how do you how do you expect them to impact your margin level. Thank you.
And I think it.
That's a really interesting question.
Our net net margin of being a very good level of if I round. The 40, 45% in the past several quarters.
This year, we don't think maintaining our margin is our top priority with the new product line lineup.
Average launch wakes up to increase our efforts to pursue new users has our budget in the marketing. This is important for the company from a growth perspective.
And we will benefit the company in the mid to long run.
Thank you thank you for sushi.
Thank you that's very helpful.
The board.
Yes.
For the next question comes from Vincent Yu of Needham and company.
Please go ahead.
Thank you management for taking my question. My question is about monetization a very general question until.
Yes.
<unk> products and our products in the.
The beta testing version.
The other new mandates in the pre the opportunity that the company is most excited about.
For the next few years.
Well, thank you provision or the other.
The monetization capability is already a very healthy and strong I think in the foreseeable future.
Total networking and the entertainment will still be our main focus and for US if we decided to give it a try we will do it gradually and cautiously.
For.
Colorado businesses like the E Commerce, that's not in our plan at this point.
We will share with all of our investors. If we have any updates I will now account for the strategy of pipeline.
That's the region.
Thank you.
For the art as there are no further questions now I'd like to turn the call back over to management for closing remarks.
Yes.
Thank you once again for joining us today, and we look forward to speaking with you in the next quarter and for other questions. Please feel free to contact the investor.
Just sort of the contact information provided of upside or the pizza in the group Investor Relations.
This concludes this conference call you May now disconnect. Your line. Thank you.
Okay.
Every day.
[music].