JOYY Inc. Q2 FY2025 Earnings Call

Thank you, operator. Hello, everyone. Welcome to JOYY's Second 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 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. dollars. 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. Thank you for joining us today. This call marks my first anniversary as CEO, and I'm excited to share some of our latest progress with you. We've stabilized our livestreaming business while driving robust growth in our non-livestreaming businesses, particularly our ad tech business. We continue our transformation into a global tech company powered by multiple growth engines. Today, I will first briefly summarize our Q2 results, followed by a review of our progress over the past year to highlight the key pillars that will guide our growth. Finally, I will share detailed updates on each of our business units. Starting with our Q2 results, we delivered a solid performance as our livestreaming business reached a stable footing, while our advertising business achieved robust and accelerated growth. We recorded total revenue of $508 million, representing 2.7% Q-o-Q growth. Our non-GAAP operating profit reached $38 million with year-over-year growth of 27.9%. Non-GAAP EBITDA reached $48 million, growing 25.7% year-over-year. To break this down, livestreaming revenue grew 1.1% Q-o-Q, while non-livestreaming revenue achieved 25.6% year-over-year growth, contributing 26.1% of total revenues. Meanwhile, our operating cash flow reached $58 million. As of June 30, we maintained $3.3 billion in net cash on our balance sheet, a sign of our strong financial resilience. Next, I want to highlight the four keywords that have driven our progress in the past year and will continue to guide our growth: high-quality operations, sustainable growth, AI-driven innovation and organizational vitality. First, high-quality operations. Temporary app removals in late 2024 prompted us to take decisive actions to further enhance our community safety infrastructure and proactively strengthen our business ecosystem. By turning adversity into community opportunity, we have emerged more resilient and better positioned for the future. We are committed to continuous improvement as a cornerstone of our competitive advantage, building a robust business that delivers long-term value while pursuing our vision of creating a great enterprise. Next, sustainable growth. Our strong operational foundation has allowed us to cultivate our huge growth engine and achieve sustainable growth. Building on a diverse product portfolio, localized operations and enhanced global market penetration, our livestreaming operations continue to generate reliable profit and cash flows. Leveraging our operational strength and technological expertise accumulated in the 2C sector, we accelerated our expansion into the 2B sector, and we have seen huge progress in our ad tech business in the past year. Thirdly, AI-driven innovation. We believe that AI holds tremendous potential to empower our business. Today, we are applying AI extensively in our recommendation systems and advertising algorithm. In livestreaming, our AI usage is all about boosting user engagement. Early this year, for instance, we launched multilingual real-time voice recognition and translation function for our products. This enables users across languages to interact in real time, strengthening relationships between people from vastly different backgrounds and driving monetization. We have merged large language models with multimodal content understanding to create dynamic topic summarized and interactive comments that deepen the user-streamer connection. Our use of AIGC has transformed how we produce virtual items and images. We are able to create personalized, localized items in a much shorter time span. In advertising, we leverage AI to deeply analyze and dynamically model user intentions, interest and behavioral patterns. This allows us to previously profile mid- to long-tail traffic segments, greatly enhancing targeting accuracy, especially in cold-start scenarios. AI powers our entire advertising value chain from user profiling and targeting to generative ad creation, real-time building and dynamic budget allocation. Our automated data-driven decision-making is constantly improving, driving higher conversion rates, better third-party developer monetization and fueling BIGO Ads expansion across more verticals. Lastly, organizational vitality. After 20 years of building milestone successes, we are turning our entrepreneurial drive into enhancing organizational execution and efficiency. By modularizing our foundational R&D and operational processes, we are building agile, scalable capabilities that empower us to replicate past wins across emerging products and businesses. We are also prioritizing the creation of an empowering workplace for our global talent. Above all, our people are the cornerstone of our ability to achieve our strategic ambitions. Next, let me share with you the latest update for the respective businesses. In the second quarter, our group's livestreaming revenue reached $375 million with BIGO livestreaming revenue at $355 million, both stabilizing Q-o-Q. During the quarter, our global average mobile MAUs grew sequentially to 263 million. We continued to refine our user acquisition with an ROI-driven approach. As a result, BIGO LIVE's user numbers grew 2.3% Q-o-Q while 30 days ROI from new devices improved 4.4% sequentially. Our organic user growth was also strong, driven by improving user experience. Today, the majority of our total global MAUs are from our IM product. High-frequency usage and strong user stickiness, fueled by enhanced features such as HD audio-video calling and rich media messaging have been pivotal to add organic expansion. In the second quarter, the MAUs of IM increased by 3 million with average daily user time spent up 12.8% year-over-year. We are building our long-term strategy on the foundation of high-quality global traffic that drives sustained monetization across livestreaming, advertising and potentially others. As we prioritize quality over volume, we will continue to closely monitor the effectiveness of our user acquisition through ROI and our long-term user stickiness. We enhanced content quality and refined the paying user experience during the second quarter, which drove higher user engagement and conversion efficiency. Specifically, we optimized BIGO LIVE's cross-regional content distribution algorithm and real-time AI translation. These changes significantly drove continued growth in cross-regional tipping, particularly in Europe and the Americas. We launched the Streamer Academy, which provides tiered training, enhanced livestreaming tools and operational support to help streamers improve quality and reach. This fueled a 1.6% Q-o-Q increase in active streamers on BIGO LIVE. We also revamped BIGO LIVE premium paying user benefit system during the quarter, introducing refined tiered incentives and executive privileges. This drove a 13% Q-o-Q increase in premium paying users. As a result, BIGO's overall livestreaming paying users grew 3.7% Q-o-Q. Looking at our performance by region. In the second quarter, our livestreaming revenue in developed countries returned to positive Q-o-Q growth. In particular, BIGO LIVE's revenue in Europe rose 6.5% Q-o-Q, marking the first significant rebound in revenue since we implemented a series of content strategy optimizations in the second half of last year. Our livestreaming revenue in Southeast Asia was also up Q-o-Q, with BIGO LIVE's revenue in this market rising 3.9%. We anticipate continued growth in paying users in the second half from heightened localized campaigns, enhanced content and payment experiences and the incremental contribution from our new audio product line up in the Middle East. We are confident that our livestreaming business will regain momentum and continue to deliver sustainable cash flow. In the second quarter, BIGO Ads achieved $87 million in ad revenue, representing approximately 29% year-over-year growth and 9% Q-o-Q growth. In particular, revenues from our ad network recorded mid double-digit year-over-year growth. Last quarter, I outlined our strategic rationale for entering into the ad tech business and how we can utilize our inherent advantages to build a sustainable competitive edge. Today, I want to focus on where we stand in this trillion-dollar market and the BIGO Ads strategic positioning for long-term growth. We are building significant scale on the traffic side. Our reach stands at roughly 263 million users through our own social apps and we extend this reach substantially by seamlessly integrating developer traffic across major channels. Our first-party traffic monetization remains stable. We believe steady first-party ad revenue with strong profitability, and we expect to maintain growth through improved user engagement and ad fill rates. In the meantime, we have significantly scaled our third-party network traffic through successful integrations with AppLovin MAX and Unity LevelPlay mediation platforms. Growing developer SDK adoption has driven nearly 80% traffic growth versus the second half of 2024, while new integrations with multichannel platforms further expanded our traffic reach, including CTV. Meanwhile, we saw robust growth across IAP, IAA and web-based channels with daily transaction volumes reaching record levels. Web-based lead generation continued to post double-digit gains, powered by pixel features, optimization, enriched customer data feedback, and improved bidding strategy. In IAA, we expanded partnerships with top gaming companies, with firms expanding their campaigns on BIGO Ads, which contributed to faster sequential growth. Geographically speaking, we are seeing strong performance in multiple regions. In the first half of 2025, North America delivered approximately 24.2% sequential growth. In Europe, where we kicked off our expansion during the second quarter, revenue grew by a high single-digit percentage Q-o-Q. Finally, our proprietary user data asset, enhanced by customer feedback and multichannel attribution, continuously improved our profiling and targeting protection. Deep synergies across our business segments, including accumulated vertical insights, data assets, established algorithm capabilities and the relevant experience in cold-start scenarios have given us a head start in developing specialized models tailored to each vertical. Additionally, our global network infrastructure and tech capabilities, originally built for our livestreaming businesses, offer significant cost advantages. In summary, our advertising business has delivered consistent sequential growth and profitability for multiple consecutive quarters. This success stems from a number of key strengths, including expansion of our traffic, rising advertiser demand across channels and verticals and quickly evolving algorithms supported by our global tech and the network infrastructure, fostering a self-reinforcing strategic flywheel. BIGO Ads has emerged as our second major growth engine, representing a strategic long-term priority for the group. We are pursuing expansion in North America, Japan and Europe, unlocking substantial new opportunities, leveraging JOYY's ecosystem and deep insight into e-commerce and social major verticals. We are accelerating the training and optimizing vision of AI-driven models to establish a distinct competitive advantage. On our product front, we are enriching our ad format, strengthening calibration with attribution platforms, enhancing advertisers' data feedback and advancing algorithms to maximize targeting, precision and drive long-term ROI. BIGO Ads' structural advantages combined with our proven execution capabilities and the vast market opportunity ahead reinforce our commitment to building a meaningful and lasting presence in the ad tech industry. We are determined to execute on our strategic plan and retain full confidence in our team and our ability to drive long-term success. Finally, let's turn to capital allocation. As discussed previously, we are actively exploring new growth engines and have already seen promising initial results. In the short term, we expect to prudentially expand headcount and the marketing resources to support our ad tech business while maintaining a healthy profit margin. In the mid to long term, when our non-livestreaming businesses reach a certain scale, investments in infrastructure upgrades, tech development, talent expansion and marketing efforts are all potentially high-return capital allocation options. From January 1 through June 30, we have distributed $135 million to our shareholders through dividends and share buybacks. We view our share as substantially undervalued and remain committed to actively utilize buybacks under the previous approached program. 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 long-term profitable growth. In closing, our core livestreaming business has stabilized in Q2, positioning us for sustained growth. Our ad tech platform is rapidly scaling as our second growth engine, and we are building our long-term capabilities, particularly in our data and algorithms and establishing our differential competitive advantages across markets and verticals. We look forward to sharing ongoing positive developments in the coming quarters.

Thanks, Ms. Li. Hello, everyone. I will now dive deeper into our financial performance for the second quarter. In the second quarter of 2025, we recorded total net revenue of $507.8 million, securing a quarter-over-quarter growth of 2.7%. This was achieved as our livestreaming reached a stable footing and delivered our first sequential recovery in the past several quarters. Our non-livestreaming business, particularly advertising business, sustained strong growth momentum in the past consecutive quarters. We expect our livestreaming business to gradually regain momentum and other non-livestreaming revenues to continue to deliver impressive growth in the following quarters. Our non-GAAP operating income was $38.3 million, up by 27.9% year-over-year, beating market expectations. Non-GAAP EBITDA for the quarter was $48.2 million, up by 25.7% year-over-year. We are disclosing our non-GAAP EBITDA metric since this quarter as we believe it's a standard measure of regional performance, which strips out non-operating sectors like interest, tax and noncash expenses, which could help our shareholders better assess the performance of our core business. Our total livestreaming revenues were $375.4 million for the second quarter, $355.3 million of which was from the BIGO segment, both up quarter-over-quarter. Our ROI-driving user acquisition and continued optimization of our content quality and paying user experience have contributed to improved payment conversion with BIGO's total paying users increasing by 3.7% quarter-over-quarter. By region, total livestreaming revenue from developed countries increased by 3.4% quarter-over-quarter, while livestreaming revenues from Southeast Asia increased by 2.1% quarter-over-quarter. Our non-livestreaming revenues were $132.4 million during the second quarter, up by 25.6% year-over-year. Non-livestreaming now contributes 26.1% of our total group revenues, up from only 18.7% contribution in the same period last year. In particular, BIGO's non-livestreaming revenues, primarily advertising revenues, increased by 29% year-over-year and 8.9% quarter-over-quarter to $87.4 million. As Ms. Li just shared, BIGO Ads has emerged as our second major growth engine with exceptional momentum. We are making substantial progress on all fronts, including expansion of our traffic and rising advertiser demand across different channels and verticals. As we accumulate in scale, we are accelerating the training and optimization of our algorithm to further improve our campaign performance and ROI, which we believe in turn will drive accelerated growth in advertisers' demand and publisher traffic, fostering a self-reinforcing strategic flywheel. At present, BIGO Ads has made a positive contribution to our bottom line. We expect it to be increasingly meaningful over time. All Other segment's non-livestreaming revenues was $45.2 million, increasing by 19% year-over-year. Group's gross profit was $185.2 million in the quarter, with a gross margin of 36.5%, up from 35.2% last year, while BIGO's gross margin was relatively stable. All Other segment's gross margin was substantially up by 9.5% percentage year-over-year to 43.5% due to growth in high-margin SaaS revenues. Our group's operating expenses for the quarter were $179.8 million compared with $198.7 million in the same period of 2024. Our GAAP G&A expenses were higher during the quarter due to a non-operational impairment of certain equity investments, while we saw a decline in other operating expenses. The decline in our other operating expenses was in line with our current operating strategy across both livestreaming and non-livestreaming business. For our livestreaming business, we are consistently optimizing our user acquisition expenses to enhance ROI. For our non-livestreaming business, while it has seen robust revenue growth, we maintained prudence and discipline in spending with our operating expenses rising at a slower rate than revenue. Our group's non-GAAP operating income for the quarter was $38.3 million in this quarter, up by 27.9% from $30 million year-over-year. Non-GAAP net income attributable to controlling interest of JOYY in the quarter was $77 million, up by 3.9% year-over-year. The group's non-GAAP net income margin was 15.2% in the quarter. For the second quarter of 2025, we booked net cash inflows from operating activities of $57.6 million. Our balance sheet remains healthy with a strong net cash position of $3.3 billion as of June 30, 2025. Now moving to capital allocation. Shareholder return continued to be an important component of our capital allocation strategy. We have returned $49.4 million to our shareholders through dividends during the second quarter and repurchased $36.5 million worth of our shares during the year as of June 30, 2025. We remain firmly committed to actively utilize our outstanding share repurchase program. Turning now to our business outlook. At the group level, we expect our net revenues for the third quarter of 2025 to be between $525 million and $539 million. Our guidance accounts for certain seasonal fluctuations and reflects our preliminary views on the current market operational conditions and business adjustment decisions which are subject to changes. In conclusion, our efforts to cultivate new growth engines continue to bear fruit, as evidenced by the impressive revenue growth of BIGO Ads and our livestreaming business reaching a stable footing and continue to contribute strong operating profits. With our global regional capabilities, tech infrastructure and vibrant ecosystem, we are well positioned to establish a distinctive competitive edge and build a meaningful and lasting presence in the tech industry while delivering 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.

Thanks to the management for addressing my question. My first question is about the livestreaming business. Given that Q2 livestreaming revenue is stabilizing sequentially, what is the outlook for the long-term development of this business? Additionally, could management provide insights on the group level revenue expectations for the second half of the year?

Thank you, Thomas Chong. This is Li Ting. I will address your two questions. We view the first quarter as a clear bottom for BIGO's livestreaming revenue, which was negatively affected by seasonal factors and a temporary app removal. In the second quarter, we observed a sequential recovery in revenue from BIGO's core global products, with all three showing sequential growth in livestreaming revenue. The primary factor for this recovery was an increase in paying users. Geographically, developed countries, particularly in Europe, demonstrated stronger resilience, leading to a rebound in our livestreaming revenues following earlier content cost optimizations. Southeast Asia and other regions are also beginning to show recovery signs. Overall, I would like to emphasize that the sequential recovery we experienced in the second quarter is supported by significant improvements made in prior quarters, including content optimization and enhancements in operating efficiency. We believe these initiatives will continue to propel our livestreaming revenue growth in the upcoming quarters. Looking forward to the second half of the year, we anticipate the sequential recovery trend will persist. Key operational activities like our gala are expected to further boost streamer and user engagement, driving regional monetization. Preliminary data from BIGO LIVE indicates that our July gala resulted in a month-over-month revenue increase in livestreaming. We will keep optimizing our content operations, emphasizing refined content management and improved incentives for mid-tier streamers. Together with our music acquisition strategy focused on higher-quality users and overall product experience optimization, we expect to maintain growth in BIGO's paying users in the second half. With a more diverse content ecosystem and improved quality, we also foresee additional contributions from our new audio social products in the MENA region. Based on these factors, we are confident that our livestreaming revenue will return to steady year-over-year growth by 2026. Now, moving on to your second question, in the second quarter, our total revenue increased by 2.7% to $507.8 million quarter-over-quarter. This growth was attributed to the stabilization and recovery of our livestreaming revenue, while our non-livestreaming revenue maintained strong momentum, growing by 25.6% year-over-year and now accounting for 26.1% of the group's total revenue. Looking ahead to the third quarter, we expect our livestreaming revenue to continue its sequential recovery. On the non-livestreaming front, as advertising enters a peak season, we anticipate ongoing double-digit year-over-year growth from ad tech, contributing to further quarter-over-quarter revenue growth at the group level. Since the second quarter, our group's top line has entered a phase of sequential recovery, with livestreaming stabilizing and returning to growth while non-livestreaming accelerates and becomes a new growth driver. We expect both year-over-year and quarter-over-quarter growth in the fourth quarter.

I have two questions regarding your financials. First, you have included non-GAAP EBITDA disclosure this quarter; what led to that decision? My second question concerns the trend in operating expenses and the profit outlook for the second half of this year.

Thank you, Xueqing, for the question. This is Alex. First of all, we believe that EBITDA is a key operating metric that we closely monitor. Because EBITDA excludes interest, depreciation, amortization, and taxes, which are nonoperational factors, we think it better represents our ability to generate cash flow from our core operations. It also serves as a better metric for comparing with our peers, considering the differences in capital structure, tax rates, and depreciation policies. We believe EBITDA removes these external factors, allowing us to more effectively compare our operational efficiency with that of our peers. In summary, we think that the trend in our EBITDA more accurately reflects the improvement in our operating efficiency under the current dual growth engine strategy and will aid us in evaluating our capital allocation prudently and comprehensively in the future. Now, regarding your next question on expenses and margins for the second half of the year, let's quickly review our second quarter performance. In Q2, we delivered better-than-expected profitability in terms of our gross margin, operating margin, and net margin. Our non-GAAP operating profit increased by 23.6% quarter-over-quarter to $38.3 million, and our non-GAAP EBITDA rose by 19.3% to $48.2 million. Looking at it by segment, for the BIGO segment, our non-GAAP gross margin was 35.6% and our operating margin was 14% in Q2, both improving quarter-over-quarter. These gains were driven by our ongoing efforts in refined operations, our content ecosystem, and improved operational efficiency, enhancing the gross and operating margins in our livestreaming business. For the All Other segment, the Q2 non-GAAP gross margin increased significantly from the previous quarter, rising from 42.1% in Q1 to 43.8% in Q2, primarily driven by increased contributions from our higher-margin non-livestreaming revenue. Meanwhile, we narrowed our non-GAAP operating loss to $23.6 million from $26.5 million in Q1, a 10.8% decrease quarter-over-quarter, mainly due to disciplined spending and a lower operating expenses margin ratio. Looking ahead to Q3, we expect revenue growth in the BIGO segment with non-GAAP operating profits continuing to improve steadily. However, in the All Other segment, due to seasonal fluctuations in certain expenses, we anticipate non-GAAP operating losses may slightly widen compared to Q2 but will show significant year-over-year improvement compared to 2024. For the full year of 2025, we expect our overall non-GAAP operating profit and non-GAAP EBITDA to show an improving trend.

Our advertising business has consistently achieved strong growth this year, outperforming the industry average. Can you explain the primary factors driving this growth and the unique advantages contributing to our advertising revenue? Additionally, what is our perspective on the potential for synergy among various business segments?

Thank you, Cici. I'm Li Ting. I will take this question. For the growth driver of our ad tech business, we can examine it from both technical and market opportunity perspectives. On the technology side, as we continue to enhance our algorithm, we are improving campaign performance for our advertisers, which has increased demand from them. Additionally, we are making strides in vertical models, creating new opportunities across various sectors. Currently, our advertising algorithm is still in the early stages of development and is continuously refining and optimizing through self-learning. Our team is focused on finding practical ways to enhance our algorithm's efficiency and effectiveness in the full range of advertising services, such as estimated fitting and dynamic budget allocation. We believe that certain innovations or breakthroughs in these models will significantly propel the growth of our ad tech business. Moreover, we are not limited to web advertising and IAA game advertising; we are also training and optimizing our IAP advertising models in sectors like social entertainment and e-commerce. Geographically, we are continuing to expand in North America and Japan while also exploring new markets like Europe. Our competitive edge comes from proprietary data assets derived from our first-party traffic and ecosystem synergies. We have exclusive access to JOYY's 263 million users, and by leveraging our diverse ecosystem, BIGO Ads has enjoyed inherent advantages in technology, data, and advertiser outreach, which lays a solid foundation for business expansion and unique advantages in specific verticals. For example, our e-commerce SaaS business clearly aligns with BIGO Ads regarding advertiser resources and business scenarios. As we accelerate the growth of our advertising business, we will also develop our user insights and effective targeting technology, which will likely enhance our livestreaming and other business lines, further strengthening our flywheel effect. Overall, BIGO Ads is one of our strategic focuses. We are confident in our growth prospects and our ability to establish a differentiated competitive edge in this $1 trillion market over time. Regarding your next question on our synergy, I want to emphasize that there are strong synergies among our businesses. I believe that the benefits from these synergies and operating leverage will increase as we grow in scale and enhance our tech capabilities. Our current advancements in the ad tech sector build on the operational capabilities we have established in livestreaming. Previously, we developed a large user base through our social entertainment products. We discovered that traffic monetization efficiency varies significantly across different regions. In some areas, advertising has proven to be a more effective monetization tool than livestreaming, prompting us to launch BIGO Ads. Furthermore, referencing our competitive edge in ad tech, our ad tech business possesses inherent resources and technical capabilities, utilizing the group's extensive user data and established advertiser relationships along with our network and technology infrastructure. Consequently, BIGO Ads has the tools necessary for sustained growth. As our ad tech business expands, we expect that our advancements in this area will ultimately also empower our livestreaming business, enhancing our synergy benefits and operating leverage. We are confident that as we continue to grow our ad tech business, we will evolve beyond our current stage and transition into a diversified, high-growth tech company. Thank you for joining this call. We look forward to speaking with everyone next quarter.

Thank you also, ma'am, for your time, and to the rest of the management team. The conference call has now concluded. Again, we thank you all for attending today's presentation. At this time, you may disconnect. Thank you.