Q2 2021 Yalla Group Ltd Earnings Call
[music].
Good morning, and good evening, ladies and gentlemen, thank you for standing by for Yellow groups Limited's second quarter 2021 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 call is being recorded now I will turn the call over to your speaker host today Miscarry Gal.
IR director of the company. Please go ahead ma'am.
Thank you.
And they'll come to Yao of second quarter of plenty of bunch of 1 earnings conference call. We released our earnings earlier today and the release is now available on our IR website, that's about as the only a small services before the continue. Please note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U S private securities.
The litigation Reform Act of 1995 forward looking statements involve inherent risks and uncertainties as such our future results may be materially different from the Vuzix craft. The today for the information regarding these and other risks and uncertainties is included in our earnings release and our registration statements filed with the SEC.
Yeah that does not assume any obligation to update any forward looking statements except as required by law. Please also note that you lost earnings press release and this conference call include discussion of unaudited GAAP financial information as well as on.
Audited non-GAAP financial measures. The press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.
Good day, you'll hear from each of how young our chairman and Chief Executive Officer, who will provide an overview of our recent achievements and growth strategies. He will be followed by Mr. <unk>. If my view of the company's President who will give a brief review of our recent development Mrs. Karen who our Chief Financial Officer would then provide additional details on.
The Companys financial results and discuss financial outlook. Following the management's prepared remarks, we will open up the call to questions.
I would now like to turn the call over to our chairman and Chief Executive Officer, Mr. Tao Yang. Please go ahead Sir.
Thank you Carrie and thank you everyone for joining our 2021 second quarter earnings Conference call.
The second quarter was another solid 1 for yellow.
Yellow groups total revenue reached 66.6 million USD, representing a year on year.
The growth of 110.3%.
Despite some impact from the Ramadan holiday falling in the second quarter this year.
That could be grew our user community and the wallet of our monetization capabilities in the and the initiatives.
In the second quarter of 2021, we also maintain the robust profitability as demonstrated by our non-GAAP net margin of 48, 2%.
With strong execution of our effective marketing campaigns tailored to local culture monthly active users for our group increased 17, 3 Q1, Q2, 'twenty $2.1 million.
We have also observed diverse impacts from the Ramadan holiday all different types of product our social good yellow is the paying users suddenly decreased from 1.2 million to $1.1 million, while our cards of your game products of the yellow Ludo so of $14.6 Q on Q increase.
In paying users to $5.3 million, leading to a group of paying user of 29%.
Our new products have also been performing impressively, we are very happy to announce that we have officially launched 1 of the wild okay yellow for Turkish users.
Which is already receiving positive feedback from the market.
And has recently reached number 1 in the board game category in terms of downloads in Turkey.
Additionally, yellow pollute the card game, we designed for Saudi users.
It's also a fine in the.
Final stage of development.
We look forward to sharing more of updates about this with you next quarter.
That's what the other check.
Since the launch of this better version in the first quarter. Our team has been consistently working to refine the house of the product based on user feedback.
We expect to gradually improve the performance of the products system and the rollout new design features and functions true iterations over the next several months.
We are committed to perfect getting specific features and customizing our product to cater to local users the theirs and firmly believe of.
Of the precise attention to detail will be fruitful.
Besides the 3 new product design for our main market measured about the other.
The purchase.
Our South American version of Ludo App.
It's also officially launched and have already received the very good feedback from our users leveraging our experience running the Ela ludo.
We facilitated a yellow purchased development much more effectively and efficiently. We also added the in game was chat function, we have in yellow ludo into your other patches of feature that is gaining popularity of malware.
The American users and helps to build out of our commodity.
As a result users average day rates have found on the yellow patches.
<unk> already reached 18 minutes.
<unk> also reached the number 1 in the board game category in terms of downloads numbers in 8 countries, including Colombia, Venezuela and Ecuador.
Another important update we would like to share with you is that yellow initiated its internal ESG guidelines from this year.
And it's also working of summarizing core values that we think will play an important role in stealing our teams to see them, making yes.
Yellow has the.
Experienced exponential growth over the last 5 years and this period has given us a clear picture of the sort of company yellow wants to be kind of vision for our core values all of this journey.
The first of the LAE based technology of Unicorn to the listed in the U S. We have always felt a sense of responsibility to contribute to the broader development of the digital economy of Mena.
And to build a commodity with a share future.
Your line is owners to be participating as a partner in the UAE government recently unveiled the national program for Coders, our present Safi will share more details of this program with you later.
And the UAE based the company yet.
Yes.
The committed to respecting local users and local culture.
At the same time, we also embrace diversity and the proactively at global talent to our team we have hired employees from more than 15 countries around the world.
We learn from each other every day.
And the pre prioritize clustering of efficient innovative.
Friendly and inclusive working environment.
We believe our strong management capabilities as seamless collaboration of cross borders as well as a deep sense of trust. Among the teams have led to less robust growth.
We are so proud of the fact that over the last 5 years.
In lockstep with Dell as development as the company.
We have also witnessed more and more young talents become experts equipped with deep knowledge of the Mena Internet industry.
We have gradually built.
Global team with strong extra cash.
Passion.
Creativity and diversity.
And deep trust in our company.
In 2020, yellow group's employee turnover rate was only 14% incredible number.
For the Internet industry.
In conclusion.
I would like to reaffirm our mission to build the most popular destination for online social networking and entertainment activities of EMEA.
As we continue to enrich any house in the products, we offer to better serve local users we have established and proven our leadership in this field and are confident about the development of the digital economy in this region.
Looking ahead, we will.
We will continue to closely watch chance of meter local culture and develop yet as the ecosystem with various products and services tailored to meet local users need.
Now I will turn the call over total president Mr. Southeast MA Yu for a closer look at our recent developments.
Thanks.
Hello, everyone and thanks for joining us today.
I would like to highlight our people.
And you brought up the operating 2 beta of encourage user engagement on our platform.
Continue to look a lot of operating.
Ben.
With the immuno culture. For example, you didn't get them all done in every day in May we hosted the Ramadan current event on your love doing got it.
Our platform every day and you could eat the Bryan.
Michelle.
We certainly for Ramadan the event attracted more than 600000 users.
We also hosted a series of events online the silly.
Great Yeah lots of it.
Any bad debt in our community more than 2 million of virtual gifts and during the event the administrating the embracing of engagement level of our participating users.
Additionally, the.
Just mentioned we are very excited about our participation in an important industry to the national broke ground for the.
While the U E government in July.
The program is a testament to the U E government the dedication to developing talent.
And the innovation in the digital economy, and we are thrilled that Youre line is the only local Internet company.
For the universities and other global technology Giants to be short listed as a partner the.
For the Brooklyn thickness to the government's commitment to Iraq.
The more talents from all of the war for.
The improving the local social infrastructure and supporting the new ideas.
With academic developments over the next 5 per year.
On the to be bought off the debt.
The program and is dedicated to contributing to the development of the U. It use digital economy, and delivering online social and entertainment products. They look to the immuno culture, we will share more details with our shareholders. Once the government makes a more detailed announcements regarding the collaboration.
Yes Claude.
<unk> been in the program not only the administrator the company's commitment to facilitating the development of local digital economy, but also to the fan.
Your line of reliable.
That's what the local partner this debt.
The other brands.
Open our doors to more talent to provide best in class of products and services. There are lots of them you know the user needs and preferences and continue to enhance our influence in the local community a lot of mission is to become the number 1 online social networking.
And then platform in the immune not Egypt, and we are well on our way to achieving the.
With that I will now turn the call over to our free up okay.
We'll discuss our financial and operation of other though.
Thank you for say Hello, everyone and thank you for joining us.
Our robust of your own Yahoo indicate our system the strong performance despite the Ramadan holiday falling during this quarter.
This is a testament to the status of the activation of our outgrowth strategy, that's already cheeses user experience and the community feedback from it.
The second quarter revenue grew by 100 of 10, 3% year over year, 2 of $66.6 million U S dollars.
Our non-GAAP net income reached 32 point of 1 meaning U S dollars with the gross <unk> of 100, and the 1.4% year over year.
Our non-GAAP net margin remained elevated at 48, 2%, reflecting our unique monetization strategy marketing positioning and strong operating efficiency.
Now I would like to walk you through our financial details for the second quarter of 'twenty 'twenty 1.
Our revenues were $66.6 million U S dollars in the second quarter of 'twenty 'twenty 1.
110, 3% increase from 31.7 million U S dollars in the same period last year.
The increase was primarily driven by the widening of both the yellow and the Yale I knew the user base and the new Hoffman of E of the groups the monetization capability.
The average M E. The interest by 77% from child 0.5, meaning in the second quarter of 2020.
2 of 22 point of 1 meeting in the second quarter of 'twenty 'twenty 1.
Yes, and he was increased by 73, 2% to $8 for meaning in the second quarter of 2021.
From 4.8 meeting in the same period of last year and yeah. The alluded to you the increased by 79, 5% to 13.7, meaning in the second quarter of 2021 from 7.6.
The same period last year.
Now, let's look at our costs and expenses.
Our cost of revenue was 23.8, meaning U S dollars in the second quarter of 'twenty 'twenty 1.
Excluding share based compensation expenses.
Cost of revenues in the second quarter of 2021 was 22 point of 1 meaning U S dollars.
100, and the trough point of 1% interest from pinpoint for many U S dollars for the same quarter last year.
The increase was primarily due to higher commission fees for the third party payment platforms. These option from our expanding business scale.
Excluding share based compensation expenses other.
The components of cost of revenues as percentage of the total revenues remained relatively stable at 33, 2% in the second quarter of 2021, compared with 32, 9% in same period in 2020.
Our selling and marketing expenses was 9.8 million U S dollar from the second quarter of 2021.
Excluding share based compensation expenses other components of setting and the marketing expenses for the second quarter of 2021 was $6.6 million U S dollars.
Oh 139, 8% increase from 2.7 million U S dollars for the same quarter last year.
The free and the increase was primarily due to higher advertising and marketing promotional expenses as the results of our continued use acquisition efforts.
As a result of these reasons other components of setting and the marketing as a percentage of our total revenue increased from 8.6% in the second quarter of 2020, 298% in the same period in 2021.
Our general and administrative expenses were 11 points of 1 meaning U S dollars in the second quarter of 'twenty 'twenty 1.
Excluding share based compensation expenses other components of the general and administrative expenses for the second quarter of 2021 what true full meaning U S dollars.
72% increase from 1 point for meeting the restaurants for the same quarter last year.
Which was primarily due to an increase in salaries and other benefits for our general and administrative staff, which was insurance driven by an expansion of our general and administrative staff.
Excluding share based compensation expenses other components of the general and administrative expenses at San <unk>. Our total revenue dropped from 4.4% in the second quarter of 2022.3 points.
In the second quarter of 2021 due to economies of scale.
Our technology and the product development expenses was $3.2 meaning U S. Dollar of in the second of culture of 'twenty 'twenty 1.
East crude ex.
Excluding share based compensation expenses other components of technology and product development expenses for the second quarter was 2021 for 3.
3.1, meaning U S dollars.
And 100, and the 92, 7% increase from 1 meaning U S dollars for the same quarter last year.
The increase was primary due to an E Hoffman in salaries and the dates for our technology and the product development staff.
Which was in turn driven by an expansion of our technology and product.
The vacuum and stuff of rising from Harrington investments of 8 new products and services.
As a result of these reasons other components of technology and product development expenses as percentage of our total revenue both from 3.3% 2 for 6% year over year.
As such our operating income was 19.8.
$18.8 million U S dollars in the second quarter of 2021, compared with operating income of 16 point of 1 meaning U S dollars in the thing here at the lab.
Yes.
Excluding share based compensation non-GAAP operating income for the second quarter of 2021 was 32.5, meaning U S dollars.
102 points of 1% improvement from the same quarter last year.
Our income tax expenses was <unk> 38 million U S dollars in the second of the culture of 2021.
In comparison to 23, meaning U S dollars in the second quarter of 2020.
Moving to the bottom line, our net income was $18 for meaning U S. Dollar of in the second quarter of 2021 of.
15, 2% increase from 15 meeting U S dollars in the same period last year Easter.
Excluding share based compensation expenses non-GAAP net income for the second quarter of 2021 was 32.1, meaning U S dollars.
100, and the 1 point for them.
Percentage improvement year over year.
Next I would like to briefly go through our liquidity and capital resources.
As of June 30, 2021 we had cash and cash equivalents of <unk>.
For 192 point for meaning U S dollars as comparable as compared to cash and cash equivalents of <unk>.
200, and the 61.7 million of U S dollars as of March 31.
The country 1.
This improvement demonstrates our resolve and the capability to ameliorate.
The other groups operation as the consistent basis.
On May 21, 2000, the 21, we announced the 2021share repurchase program.
And as an update we have repurchased 441931, a D S representing 441931 class a ordinary shares from the open market with cash for an aggregate amount of approximately.
8 point <unk>.
<unk> 9 meaning U S dollars.
As of June 32021.
For the third quarter of 2021, we expect our revenues to be between 6 to 7 meeting 272, meaning U S dollars.
The Bob outlook is based on the current market condition and the reflects the company's management's current and the preliminary estimates of market and operating foundation and the customer demand.
Each of our subject to change.
This concludes our prepared remarks for today, operator, we're now ready to take questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
If you are using the speaker phone please pickup your handset before pressing the keys.
If at any time your question that's been the dressing you'd like to withdraw your question. Please press Star then 2.
For the benefit of all participants on today's call. If you wish to ask you ask your question the management in Chinese. Please immediately repeat your question in English at this time were of a pause momentarily to assemble our roster.
Our first question will come from shaky G with the ICC. Please go ahead.
Hi management, Thanks for taking my question and congrats on your strong quarter.
So I have 2 questions and I'll ask them 1 by 1 of my first question is regarding the regulatory risks since you have an R&D team in China do you see any potential influence on your business from Richmond tighter regulation to Internet companies in China.
Hi.
Thank you for question.
First of all we highly value of the importance of complying with the local policy of low no matter, which countries we operate our business in.
China, there are a lot of experienced talent in the internet in the technology industry. Our R&D team in China has played an important role in July of substantial growth over the past failures. We really appreciate the support from the local government.
The open business the environment and our teams the expertise.
And that's also the key reason of why we decided to have our R&D center in China.
In addition, I would like to emphasize that yellow doesn't have.
E structure.
Yes headquarters in Dubai.
And we don't have revenue from China thinks of our products are not available in China App stores.
As such there is no impact.
All of our business from China's recent tighter regulation.
The other companies.
Our main market is the meter and our product of design based on munis culture, and a myriad of users' preferences. We highly appreciate meet our users' trust and the UAE of government support allow our development. Thank you.
Thank you that's very helpful and my second question is about the short selling reports that came out of a few months ago, although neither of them. What's written by big influential institutions could you. Please provide more details on their questions about your M of you and the business model may be helped.
Clarify whether there are robots chat room, and whether you hire of Kols to round the chat rooms, and also why does the company has a bank account in Singapore.
Okay.
First of all I would like to reiterate that those 2 short reports of poor quality and contained numerous arris.
They want the even able to provide Nf solid evidence to prove many of their claims.
Here I would like to provide.
Some additional details to our investors for free.
Regarding our Mou yellow clearly states in the press release that it has never played the robot in any of the charge offs.
Yeah.
<unk> centric social platform of which users need to talk and interact with each other to make sense people, who understand the this business could easily tail robots won't even work on our platform.
It is true that in some room there are accounts in the similar names.
Users create this alternative for accounts to collect extra virtual coins or GAAP.
Gift from the platform.
Similar cases exist of money other online platforms and the yellow has taken many measures to restrict such user behavior.
For example, we set very smooth to Glamming and block of accounts with suspicious user behavior. However, the.
The replicated the account or like a.
The game of hide.
It's very difficult to radical and remove them at once.
And what we can confirm is that alternative account only.
The minority.
On the yellow.
Evidenced by the strong growth in our revenues every quarter. If the majority of users who only alternative of accounts, which have limited spending power. We won't we won't have been able to deliver such strong revenue growth.
Secondly.
Regarding our business model, we can.
Resolutely effort.
We have never paid money or share of revenue was end of Q out for any professional content creators and the yellow.
Ludo.
These 2 products of both designed to be pure UGC platforms. This is our strategy for those 2 products and we remain unchanged in the foreseeable future.
The company and our pure UGC platform.
No cash out feature.
Which is the important reason why yellow is able to achieve high net margin every quarter.
Certainly.
And contrary to the claims of those short sellers, who tried to mislead.
They're.
Oh. It is we didn't have any and professional audio partner in fact, yes auditor KPMG 1 of the before.
And we have been working with KPMG things 2019 lumpy for yellow what the public.
Integrating is 1 of our top priority.
We have very high standard.
Our financial reporting.
And we highly value of the importance of complying with the ECS requirements all of this culture.
And lastly regarding cash <unk> cash balance as always being consistent with our reported revenues kind of.
Cash is always the most of the record to lie about in any business.
We disclosed in our 20-F.
That we have bank accounts in 3 countries, including the biofuel a.
Singapore, and Hong Kong, China Dubai.
Goodbye is where our headquarters building.
In both Singapore, and Hong Kong of global financial centres.
The company need to consider of lots of factors when allocate its cash flow.
For example, we're better it's convenient for our daily operation.
Whether we have instant access to it et cetera.
Yeah that has a solid business in the Mena region.
We are very confident in our business model.
The our business and potential to grow.
<unk> is also solid.
Hope that answers your question. Thank you.
Thank you very clear thank you.
Yeah.
Yes.
Our next question will come from Bo Pei with Oppenheimer. Please go ahead.
Hi management, Thanks for taking my questions. So I haven't the 3 if I may the first 1 is about the repurchase plan. So I think during may of 'twenty first and the.
At the end of the last quarter, we bought by around $8.7 million of U S. Dollar share. So is this the sort of pace, we should be expanding for the future quarters.
Do we consider you know increased debt by that amount and given our cash balance has been growing pretty nicely and then my second question is about the progress of the new apps we.
We talk about some use of matrix.
Line span of engagement.
But can you talk about when should we expect to see some.
Meaningful monetization from these new apps should it be later this year or maybe next year and then the last question is about.
The margin so we have been achieved.
Achieving very healthy margins.
Since the IPO. So can you talk about with this new apps and potentially some advertising activities should we skew.
Should we still expect these kind of.
Healthy margin going forward. Thank you.
Thanks for all of this is hiring of I will take the number 1 and the number 3 question.
Finally, some of our rehab on May 21, 2021, we announced the share buyback program authorized for our board of directors, whereby we made the repurchase up to $150 million of our 80 S from time to time over the following Caffe monster.
And by the end of Q2, we have already repurchased 441931 assets from the open market with cash for average our Mt.
2.8 million U S dollars.
For the remainder of our authorized the period, we will continue to repurchase shares under this program depending on market conditions and always with the commitment to work for the Bachelor of long term interest all of our shareholders.
And therefore the margin question I think that's the way we're able to maintain our net margin at a relatively stable level of over the past several quarters out around the 45%.
Although we have been launching some new per box in the second of culture, but can we think of that the way, we're still able to maintain our net margin at this level.
And at this point, we don't expect to see significant changes to the net margin in the third quarter.
Thank you.
And for the progress on the new apps and the the implantation.
For you.
The.
As we just discussed the doing other prepared prepared remarks, we have officially launched 2 new products and are receiving good feedback from the market at the current stage.
I think we will still focus more all extending over initial user base and developing our commodity yorick modulation will come after that and the path that yellow Ludo went through can be a good reference we hope next quarter, we will have a group.
The operating members of our new App to share with you and our investors.
Thank you for.
Okay. Thank you that's helpful.
Thank you.
Our next question will come from the passing Jia with Citrix. Please go ahead.
Hi management, Thanks for taking my question.
You mentioned that you are the.
The new apps. So could you. Please provide more details let's try to gauge on building out a lot of it constantly.
Yes.
Okay.
Oh, we have built to Clark.
Applications yellow and yellow ludo.
Through years of the development well gradually building over yellow commodity.
Yeah.
Going forward 1 of our next generations of social products already we plan to drive traffic from yellow to the new social apps.
We were also elaboration ludo of user base to promote our new casual game product.
The upcoming mid to heavy games.
As most of them do their users of game lovers.
While we conducted for there.
Have shown very good conversion rate from Buda.
In this way.
We expect to introduce more of our products and services to our users continue improve our efficiency in user acquisition and further develop the yellow ecosystem.
For you.
Okay. Thank you learn from there.
Thank you.
Yeah.
Again, if you have a question. Please press Star then 1 our next question will come from Natalie <unk> with Haitong International. Please go ahead.
Hello, Thanks, Rene Avianca for on behalf of the afternoon.
Our international Thanks management for taking my question. The other congratulations on the strong quarter. My question is regarding your use of matrix credit the management share with us more colors on the trained all of you on maintenance figure of the matrix for younger in the yard Udo said transfer was there anything about graphics retention rates.
Transition cost thank you.
Thanks for reading this is Jeff and I will.
With respect to use of profile yeah lots of users are usually between 18 to 35 in the male to male female ratio is about 7% to 3 for yellow ludo since ease of popular traditional casual game age range of users is between 12 to 14 in the amount of female ratio is around 6.2 for but since we highly value our users' privacy we don't.
Require users to verify the idea of joined Us and.
No. We don't have lbs of either some of the demo demographic data is just for you referenced the.
In terms of the user acquisition cost since our business covers the home in the region cost can vary a lot of them on different countries. For example, the costume GCC countries is usually higher than that of the other countries. The airlines products are designed for RV users as well as users from some other countries with similar culture of backgrounds. As you can see we have a long.
The market in our current use of basically only accounts for a small portion of the total population of the region. So we still see a lot of untapped potential in this market.
Because of yellow <unk> unique business model.
<unk> doesn't require massive spanning the sales and marketing, which has been demonstrated by our stable sales and marketing expenses over the past years as such we think the user acquisition cost will be relatively stable for us at least in the near term and.
And we believe we still have ample room to grow in this region.
Okay.
Thanks for coming.
I have a part of.
Question is regarding your outlook.
First of all I'm, saying, if you can share with us your current.
The expectations on your end of your growth going into the third quarter under the fourth quarter and the last time you I just want to confirm if the southern part of the revenue guidance has included the revenue contribution from the U N keeps you on the Alex Thanks.
However, our guidance.
Q3 does that include the new App.
Okay. Thank you.
And the could you share with us your expectation for the union growth going into the third quarter and the fourth quarter. Thank you.
So the user growth as we told the investors always way, we haven't been to the Q on Q around the.
The 13% to 15% for the usage grew of sport yacht and yacht all of those and for the new products use the true, Sweden and conclude.
Conclude H in the expectations.
Okay. Thank you that's very helpful.
There are no further questions now I'd like to turn the call back over to management for closing remarks.
Thank you once again for joining US today, we look forward to speaking speaking with you next quarter. Thank you.
This concludes this conference call you May now disconnect. Your line. Thank you.
Okay.
Yes.