Q4 2020 JOYY Inc Earnings Call
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Please note that unless otherwise stated all figures mentioned during this conference call I'm joined M. B a.
I will now turn the call that you all of our chairman and CEO Mr. David Li. Please go ahead Sir.
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Hello, everyone and welcome to our fourth quarter of 2020 earnings Conference call.
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Hello, and capitalize on a number of growth initiatives, including YY live who we are.
The go live Likey huddle and more.
Today, excluding YY live Joy serves over 350 million users worldwide through a diverse portfolio of online entertainment products and live streaming shelf on video casual games instant messaging and audio based social media.
The nearly five years of development, our overseas business Beagle has already generated loss of revenue in.
In 2020.
Our track record of success has validated the only on long term growth strategy, but also our unique capability in leading continuous innovation and all of a commitment to generating impressive YY for shareholders.
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Going forward, we will remain focused on fueling our live streaming and show up on video growth engines.
Celebrating our overseas expansion.
In the joy into an increasingly.
Divers on engaging social and entertainment ecosystem.
We firmly believe that sees a nice a separate.
The key at least four times the scale of YY live in terms of revenue.
We also foresee a great monetization potential for Nike.
It enjoys substantial competitive advantage in low entry barrier for use of content production.
User engagement on into activity and the intrinsic social features.
We plan to realize the potential of both platforms from a combination of global footprints and localized operations.
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To put a localized a product offerings and business operations will further strengthen our talent team with technology expertise global vision and local knowledge as of December 2020 over 25 per cent of legal staff were hired locally.
With local language cultural background and consumer insights on <unk>.
Police are able to tailor our products to the unique user preferences and each target market and thus the extent our local use of base.
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Now turning to our quarterly performance as we prepare our next phase of growth in the post pandemic World. We continue to witness a rising demand for online entertainment and socialization as evidenced by all of a solid financial and operational results in the fourth quarter.
The gross revenue increased by 87, 9% year over year to RMB, three 4 billion in the fourth quarter, primarily driven by continued use of batesville and improved monetization capabilities of several platforms.
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For the fourth quarter of license.
The revenue decreased by 155.
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On the life Governor of things that look not just increase back from the 98, 8% year over year.
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131, 6% year over year increase in paying users.
Additionally, revenues in the Middle East grew by 87, 4% year over year, driven by a 63 per cent year over year increase in May use an 85, 4% year over year increase in paying users.
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During the fourth quarter. In addition to fulfilling users' needs for kind of entertainment content people live also augmented its use of activity and engagement a continuously innovating its social interaction feature.
For example, our newly released features enabled users to seamlessly move between single and multi use a group chat rooms, empowering ordinary users to easily integrate live streaming into the regular social interactions.
As a result on a sequential basis all the use of base penetration rates increased by 10, 9% for multi use of video chat rooms, and two 3% for a multi use of audio check booms.
As we continue executing such a product strategy.
We are laying a solid foundation for sustainable growth going forward.
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On the brand enhancements pumps, we hosted the second annual Beagle Awards Gala in January which feature a variety of life performances, including fire dancers DJ sets and.
And K pop dances bye.
By top streamers from around the world.
Although this year's gala was healthy entirely on line due to travel and social gathering restrictions Eagles influential brands attracted approximately 4 million views globally and over 20 million viewers boats for their favorite performances.
To put a boost beagles grant recognition, we place billboards for a what winnings tumors at landmarks of plus 23 different countries, including Nyc's Times square. So it's co ex Convention center, he stumbles supply of tower and many others.
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For the expanded use of free and accelerated amortization.
The first quarter license I mean outside of India grew by a 119% during the year two of $114 million.
In addition, its user base continued to expand rapidly in many regions with the maybe it's ramping up by 55, 2% year over year instead of the countries on 233, 9% year over year from the Middle East.
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While maintaining its rapid global use of base expansion on the fourth quarter like he also made significant progress in monetization mainly through live streaming policies.
Consequently, <unk> revenue increased by 407, 5% year over year, and 41, 4% quarter over quarter, largely driven by growth in developed worlds and the middle East revenue from developed market grew by 299% year over year, while revenue from the middle East multiplied by 31.
Times year over year.
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To help like East uses further enhance the efficiency effectiveness and quality of their content production. We continue to improve the platforms video capturing an image enhancement tools in the quarter.
Our free of AI powered music recommendation feature and automatically provide users with suitable background music options with a self produced videos as.
As a result, the average daily number of video uploads featuring our recommended song tracks increased by 300000 in the quarter.
Moreover, a continuously optimizing our search engine algorithms, we were able to boost our use of search satisfaction rates by 3% quarter over quarter.
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As the leading global which of them video platform, we prioritize the quality and availability of content at the core engine to drive like a sustainable growth.
Such we seek to attract top tier content creators optimized content recommendation algorithms and we find all of the use of experiences continuously.
In 2020, one we plan to further localize like east content ecosystem, and social community by reducing its entry barriers to content production boosting its content creators enthusiasm on productivity and empowering content creators in all aspects.
We just social community and a user infection propensity and accelerated monetization via a live streaming like he enables the talented creators to reach large audiences and gain more economic rewards who in turn produce more quality content for like thus forming of the virtuous cycle.
As a result, we believe that we are able to attract a broader range of content creators further enrich our content offerings and ultimately for new users to the platform.
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As Hock will increase its quarterly back pre paid user count by a 121 two per cent is revenue grew by 69, 4% year over year.
In line with our previous forecast has achieved the first single breakeven month in the fourth quarter of 2020, a narrowed its quarterly loss as compared to the average of the first three quarters in 2020.
Brought a wise, we'll introduce a game feature called party. So that multiple users can play a casual games and interact with one another through our audio chat rooms at the same time.
Such update enhanced use of interactions on the platform as the use of base penetration rate for <unk>.
Our featured channels improved by 51% year over year to 41, 9%.
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Summary, during the fourth quarter rapid user growth.
And promising monetization progress for a second.
Alex.
Moving forward, we will uphold our mission for people and we enrich their lives on the video expand on a global footprint through localization and construct an increasingly tight.
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The on expanding our existing business. We also stay attuned to new opportunities in the industrial AI Internet and cross border E. Commerce sectors. In addition, leveraging on our established technical expertise and real time audio and video of infections.
<unk> expenses for the entertainment.
We have already made a preliminary exploration in cloud based on the enterprise services.
Looking ahead, we will continue to explore new business sort of development opportunities and generate greater returns for a long term shareholders.
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Before I turn the call to our CFO of being gene I would like to take a moment to thank him for his years of dedication and the contributions to joy as previously disclosed in our SEC filings being is pursuing a new job opportunity and will leave his position at the Companys CFO at the end of April on behalf of all of our.
The colleagues here at Joy I wish him the best in his future endeavors in the meantime, we have commenced a search process when you're CFO.
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That concludes my prepared remarks, I will now turn the call to being for a more detailed explanation of a public financial results.
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Thanks.
Thanks, David and Hello, everyone a state.
A bit noted I will leave my current position at the company simple at the end of April to pursue a new job opportunities.
I would like to start off by saying that he has been a true honor to serve a joy CFO and go together with the company over the past several years.
I will always cherish this experience and we'd like to thank David and all of my colleagues here for the guidance support and friendship.
Looking ahead I firmly believe that this company remain well positioned to continue developing it's a competitive advantage increasing its share of global social entertainment market and debt.
The very outstanding results.
Now as Joy CFO.
Talk about the financial results.
Please note that the financial information on non-GAAP financial information disclosed in our fourth quarter earnings press release is presented on a continuing operation basis, unless otherwise described.
<unk> stated.
After the deconsolidation of who we are the company accounts for our investment in Korea, as an equity method investment and applied the equity method of accounting one quarter of years to enable us to provide financial disclosures independent of the reporting schedule P. A.
Also at the company entered into definitive agreements with Baidu.
On November 16 2020 the.
The ceiling to which Baidu a quiet choice domestic a video based and it's entertainment live streaming business YY live.
And the sale of YY live was substantially completed on February to February eight 2021, the historical financial results of YY live are reflected in the company's consolidated financial statements as discontinued operations Accordingly.
Turning from the fourth quarter of 2020.
During the fourth quarter of 2020, we maintain our strong momentum and delivered robust financial and operating metrics.
Our total net revenue for the fourth quarter increased by 77, 5% year over year to RMB 378 billion from RMB 213 billion in the same period of 2019.
In particular, our live streaming revenues for the fourth quarter increased by 93, 3% year over year to RMB 359 billion.
Driven by live streaming revenues growth on Beagle.
Other revenues in the fourth quarter decreased by 35% to on beef.
$189 6 million.
Cost of revenues for the fourth quarter increased by 76, 6% year over year to RMB 267 billion.
Revenue sharing fees and content costs increased to RMB 169 billion in the fourth quarter from RMB $708 6 million in the same period of 2019, which was in line with the increase in live streaming revenues.
Bandwidth costs decreased to RMB $179 5 million from RMB $221 8 million in the same period of 2019.
Primarily related to the Companys improved efficiency and the elimination of bandwidth usage for users in India. After these measures two blocks sitting on Chinese mobile apps in late June 2020.
Actually offset by the continued use of base expansion outside of India.
Gross profit increased by 79, 6% year over year to RMB, one 1 billion.
Gross margin in the fourth quarter of 2020 improved to 29, 3% from 29% in the same period of 2019.
Operating expenses for the fourth quarter increased from RMB 168 billion from RMB, One 8 billion in the same period of 2019.
Among the operating expenses sales and marketing expenses increased to RMB $973 8 million in the pivot from RMB $782 million in the same period of 2019.
Primarily due to the company's increased efforts in sales marketing activities in overseas markets.
Our general and administrative expenses.
Expenses for the first quarter decreased on the 2036.
$6 3 million from RMB $319 8 million in the same period of 2019.
Mostly due to a decrease in provision for loss allowances of the.
Receivables.
Our GAAP operating loss for the fourth quarter decreased to RMB $537 6 million from RMB $863 3 billion in the same period of 2019.
Operating loss margin for the fourth quarter was narrowed to a 14, 7%.
For the period.
Primarily from China.
Operating at peak.
Operating income.
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Which ex.
Expenses.
Amortization of intangible assets from business acquisitions.
As well as impairment of goodwill and investments and gain on disposal of subsidiaries and business.
Decreased by <unk> 67 per cent.
The $220 7 million.
On pad to RMB 561, finding a name in the same period of 2019.
Non-GAAP operating loss margin for the fourth quarter was narrowed to five 8% on.
From 26 three per cent in the prior year period.
Notably <unk> has achieved a positive non-GAAP operating income for the second consecutive quarter of RMB 49, 2 million with non-GAAP operating margin improved to one five per cent from negative 11, 3% in the prior year period.
GAAP net loss attributable to controlling interest of joy for the fourth quarter of 2020 was RMB $791 9 million compared to RMB $816 6 million in the same period of 2019.
Net loss margin was 29% in the fourth quarter of 2020 compared to 38, 3% in the corresponding period of 2019.
Non-GAAP net loss attributable to controlling interest in common shareholders of joy.
Was RMB $149 4 million.
From RMB $465 7 million in the same period of 2019.
Non-GAAP net loss margin was narrowed to three 9% in the fourth quarter of 2020 from 21, 4% in the same period of 2019.
Diluted net loss per ads in the fourth quarter of 2020 was RMB 10 points of seven compared to RMB 10 points for screen in the same period of 2019 non.
Non-GAAP diluted net loss per ads was narrowed to RMB 186 from RMB five seven in the same period of 2019.
Now turning to our results for the full year of 2020.
Our total net revenues increased by a 112, 1% year over year on.
On the 13th <unk>, two 3 billion.
Driven by the same practice the led to the quarterly increase.
Our net loss attributable to controlling interest of joy for the full year of 2020 decreased by 79 seven per cent to RMB 105 points.
From RMB $510.
Seven day in 2019.
Our non-GAAP net loss attributable to controlling interest on common shareholders of joy for the full year of 2020 force.
One 5 billion.
Paired to RMB 496 landscape.
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The full year of 2020, which improved eight.
Hum.
We reported one 5% in 2019.
Diluted net loss per ads for the full year of 2020 narrowed by 71, 6% year over year.
RMB two one for from RMB seven five for in 2019, and non-GAAP diluted net loss per ads for the full year of 2020 was narrowed to RMB 14 points to two eight compared to RMB 25 points for two Inc. 2019.
In addition, Inc.
Quarters with a quarterly dividend plan approved on August 11, 2020, and on November 16th we will be distributing a dividend of.
A 0.51 U S dollar per.
A D S.
For the fourth quarter of 2020, which is expected to be paid on April 32021 to shareholders of record as of the close of business on April 19 2021.
Also we would like to provide the update to our execution of the share repurchase program announced on May 2020 on the which the company may repurchase up to U S. Dollar.
A million obvious shifts to August 2021.
As of December 31, 2021, the company had repurchased approximately U S dollar $139 5 million of its shares.
As mentioned and David speech, we will continue to invest in business development initiatives.
On the expand our global market reach.
Cultivate a highly engaged user community and augment our high quality content offerings.
We're also actively explore other ways to return value to our shareholders and maximize shareholder value, especially as a potential of dividend payout or share buyback programs.
For the first quarter of 2021 weeks.
We expect our net revenue to be between U S dollar a $590 million.
And U S dollar of 605 million.
Representing a year over year increase between 72, 5% to 76, 9% if excluding.
Excluding the revenue contribution from who you are and one of the lives in the same period of last year.
We currently have limited visibility surrounding the COVID-19 at the.
That makes long term impacts and geopolitical uncertainties in our business and the markets in which we operate.
Therefore, this forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change.
That concludes our prepared remarks, operator, we would now like to open up the call to questions. Thank you.
Thank you.
We'll now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced so the <unk>.
Convenience of everyone on the call. Please ask one question at a time, if you wish to ask more questions. Please rejoin the queue.
When asking a question. Please state your question in Chinese.
Then immediately repeat your question in English. Thank you.
<unk>.
Our first question comes from Thomas Chong of Jefferies. Please go ahead.
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On a Saturday I catch it most of it on Saturday.
Thanks management for taking my questions and congratulations on a strong set of results.
My question is about a peak of life.
Can management share about.
The the paying ratio as well that's the a people.
At the moment and if we got for our turnkey trend revenue growth a.
What's the contribution coming from user.
And the way you show a S.
As a people thank you.
Thank you Thomas let me address those questions in terms of the current the pain Richard a couple of big lives a.
Let's talk about the the English of first are the pay ratio of People's lives the still lower than in a day in China all of life, but we have seen a good ramp up of the paying ratio.
For people at a particular equalized strategies penetrating the developed markets. They were market as a as a revenue contribution to be go live is over 43 per cent already.
So as we had a couple of more to growth markets.
For the paying behavior of the pain capability of those type of market as users of this is much higher than the original emerging market. So we.
We will continue to see a ramp up of the paying ratio.
But it's still a what that in China at this stage, we see a good future potential.
In terms of the op, who a as we explained to the investor but for one analyst for the general a pool of people lives. It is around three times of YY live.
And as we penetrate through more of the boat market. We would also see a future ramp up of the optimal level for people like a in general.
In terms of the contribution.
For our revenue in 2020, a as you can see we have achieved more than a 110% year on year growth for both for revenue contribution I would say a roughly a one third is from the use of expansion. Many of the end of your gross for people like.
A part of which of them by the book market as I mentioned and the one third for a paying ratio of expansion and also a one third for all of the expansion.
Thank you.
Thank you.
Our next question comes from Alex <unk>.
Stanley. Please go ahead.
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My question is related to like a.
Could management share of the user and revenue target in the next one to two years and in terms of the user engagement revenue diversification a G.
You're a graphic of distribution how is it different from the go live and are.
In terms of user behavior is there any notable difference between like here in the short video platforms in China, a thank you very much.
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Okay.
Hi, This is David let me answer your question as I mentioned on the previous speech.
He just started monetization recently and in the past three years of development. We have focused on user expansion and also on the cultivation I believe that on in the long run on that we expect.
Some changes to like ease of long term strategy and the flow.
On the FX, especially on in terms of.
On the coming on from a competitive.
Landscape for like two hours of Tai Chi features of.
On a Nike a first one is the social community and user interaction second and it's on our content creators I believe that on if we continue to cultivate our social community input of user interaction and continue to empower our cash.
Content creators in all aspects would be able to achieve a differentiated a.
Competitive advantage against all competitors, especially on based on our understanding of.
On and our knowledge, we believe that a lot of our competitors a fee.
We are having a very completely different ecosystem, whereby it's more like a media feature whereby the kols of dominated platforms well a lot.
The key is more on.
Content on a it's more of a community of which emphasize the user interactions and also on.
On a content creator a focused so I believe that on based on such a longtime strategy, we'd be able to have a differentiated competitive advantage in the global on industry.
The industry.
And that would also help the company a nike to achieve a long term sustainable growth.
Yeah.
To go through a hook with uneven pillar.
Yeah.
Okay.
Our next question comes from <unk> Zhang at C.
Please go ahead.
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Taking my questions some of that country of the AUM. The overseas live streaming we have a input of interest market for final true up to a 60 years and a way to enter a different market different time coitus costs at what stage of live streaming in niche markets and we don't use the on US a America kind of Europe also can you touch Oh and the recent change.
For the singing that's 2 million Dutch any of us at market. Thank you.
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The causes of it.
This is David let me take your question on.
I'd love to clarify here is that.
If a look at our a quarter.
Quarterly over quarter of growth range for vehicle in RMB.
Instead of a growth rate relatively flat from a minor decrease but if you actually exclude the other.
Thanks, a lot of fluctuation and you look at it on a constant currency basis in terms of U S. Dollar a we actually accomplish a quarterly over the course of increase of 4% and year over year increase of 82%.
That actually proves the point that the.
Overseas live streaming industry.
The growing at a very fast speed.
On in terms of especially if you look at the scale of D. A.
On the revenue right now the already surpassed the 10 billion RMB.
In terms of revenue for the full year.
And on the.
That will be able to sort of feel of the role of our revenue is such a rapid speed of such a scale prudent stance on the potential of the overseas live streaming industry and also on.
And in the.
It was a.
A tradition for.
The my Kid on to believe that the U S. Users does not actually have the habit of picking on live streaming platforms well actually in the past few years the business practice with actually a witness a very strong growth in the live streaming sector in the U S market. So it's not.
A China's a specific business model it's a.
Already a.
A well established and well accepted model to monetize your users and we believe the is actually a quite a.
Not only mature, but a very user friendly business model in a way that it does not interrupt the users from.
On enjoying the use of the of these applications and it does not inc.
Corrupt the user and user experience improvement while using a thereafter, so it's actually on a.
A very good business model as compared to a lot of other monetization tools. So on if you look back on.
We launched our audio live streaming and video like Genie back in 2010, I think that on we witnessed a the growth protest on the trajectory and the pads on 10 years and we're seeing that today. It has come to a point in China, the almost all internet companies small.
And they all include the live streaming is a very essential unemployed on or even main monetization on tool. So I think that on it would be the same for U S and also the.
Other overseas countries, especially in U S on the platform such of Youtube.
The Gwen of Facebook I think it's very likely that it will all kick of monetization via live streaming on soon so it's just a matter of time and a different in terms of on on the stage of development on it.
Tween, the PRC live streaming sector and the overseas sector, we believe that.
Such evolve and we'll continue to drive the market potential of the overseas live streaming sector to even larger and also everyone will be able to conscious beach Chi the whole ecosystem in China, we have seen that even with the major of the big conglomerates entering into the live streaming sector.
It does not affect those existing players market share for their revenue scale.
On a what we thought of is that the market began to recognize a increasingly recognize on.
On the business model and the scale of the total market on a.
In Q2 increased to a new level and I think that's on and also on for the applications. It was previously mainly focused on entertainment live streaming and then throughout the development in several years, we began to see multiple applications via a live streaming.
In areas, such as Education E Commerce and also other a bunch on the application. So I think the such trend is likely to replicate in the overseas sector and we believe that would be able to on.
Hum a C.
The potential of the whole market and be able to continue to capture such market potential. Thank you.
One of the hits here.
Our next question comes from Zhang.
<unk> of America. Please go ahead.
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The consolidated for the whole of drums on kisses shouldn't be a hammer on toward the three counties that we may or may all of you see it as a true it up on the OTC for a woman that eagle the highlight of the tolls on the.
Well, it's I thought you got a spending apply a root cause of the Halloween guys from a column on kind of RDR Union Eagle the eco margin of trying to Nokia all of the things that a mad men for taking my question can you give us more color on the use of cash on the spending plan for vehicles. So a worthy of our case and then how should we.
The two cats, the margin trend for Pico in 'twenty or 'twenty one.
Oh, Thanks for let me address those two questions first is regarding the use of proceeds we had a good cash balance right now and obviously off to a baidu is acquisition of a bargain is completed we will have additional you a sort of a coming in.
And then we will have several matters of utilize the cash.
One is obviously, we still need to organic growth.
Business, a particular given the global overseas market is much bigger potential. So we'll continue to invest in terms of sandbox sales marketing R&D, a artificial intelligence et cetera.
Secondly, we had a lumpy on a U S. All of the convertible bond outstanding.
So at the right time.
We will pay back that the convertible bonds. So that some of the one being a you asked all of the cash.
Cash usage.
Certainly as we mentioned in the prepared remarks, we are thinking about a potential the dividend or additional share buyback programs.
Albeit depending on the share price.
Of returning more value to shareholders of will keep a.
Flexible in terms of the cash usage.
We will not do big scale M&A at this stage.
So.
In general we will make sure that we generate a.
Good value for the shareholders.
Secondly in terms of the investment for Beagle.
The two parts one is people live utilized already very profitable over 20% a.
A margin profile. So I think the margin on People's lives will continue to improve.
Given that will further enhance the overseas payments.
Efficiency and then with the rapidly revenue of growth scale will achieve more operating leverage on various expenses and cost items.
For Nike the strategy going forward will be a more balanced approach, we will pay more attention to the ally.
Of the spending and focus on the key areas, where like he has a very strong a presence and we will find a way of a further monetizing the like ease of use of based.
So as a result, I think the investment of like he will also be a further.
Are there a I will say monitored according to the a lot return so in general if you combine these two together a.
The net non-GAAP net margin for the Eagle will obviously be a positive.
We said we have already achieved breakeven for two consecutive quarters. If you look at the full year 2021 of I think we will be able to achieve a cow.
And of a low single digit margin profile for people as a whole hopefully that answers your question.
Thanks, a lot of clear.
Thank you that's all the time, we have for questions I will hand back to management for closing remarks.
Thank you for joining our call and we look forward to speaking with everyone next quarter.
Yeah.
Thank you everyone.
Thank you bye bye.
Yeah.
Yeah.
Yeah.
Yeah.
Ladies and gentlemen that does conclude our conference for today. Thank you for your attendance you may now disconnect.
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