Ladies and gentlemen, thank you for standing by, and welcome to the JOYY Inc.'s Second Quarter 2024 Earnings Call. [Operator Instructions] I'd now like to hand the conference over to your host today, Jane Xie, the company's Senior Manager of Investor Relations. Please go ahead, Jane.

Thank you, operator. Hello, everyone. Welcome to JOYY's second quarter 2024 earnings conference call. Joining us today are Ms. Ting Li, Chairperson and CEO of JOYY; Mr. David Xueling Li, Co-Founder and Director; 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. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in U.S. dollar. I will now turn the call over to our Chairperson and CEO, Ms. Ting Li. Please go ahead, Ms. Li.

Hello, everyone. I'm Li Ting. Welcome to our second quarter 2024 earnings call. This is my first time addressing you as JOYY's Chairperson and CEO. I am truly excited to connect and share ideas with you all. Today we are pleased to be joined by our founder David, who I would like to invite to say a few words to kick-off our call. David, over to you.

Thank you, Li Ting. Welcome, everyone. As we announced earlier this month, with the Board's approval, I have officially resigned from my role as the Chairman of the Board and CEO as of August 3, passing the baton to Li Ting to oversee the company's daily management and operations. This carefully planned leadership transition marks an important milestone to JOYY's development. It underscores our commitment to enhancing our corporate governance and strengthen our regional -- organizational capabilities to foster sustainable, long-term growth. Li Ting has been an integral part of our leadership team as COO since 2016, and has played an instrumental role in driving our strategic transformations and navigating key growth phases. Her operational experience makes her the ideal person to lead YY into its next chapter. I have complete confidence in Li Ting and our current management team, and I am pleased to entrust the company's leadership to her capable hands. To ensure continuity and maintain our business momentum, I will remain actively involved as a member of our Board. In this capacity, I look forward to offering strategic guidance and supporting JOYY as we prudently explore long-term opportunities. With that, I'd like to hand the call back to [Li Ting].

Okay. Thanks, David. I'm grateful for your support and your trust. I look forward to building on the strong foundations you have laid. Under David's leadership, we've established our globalization strategy, and our business has achieved remarkable growth on a worldwide scale. According to Data.AI, our flagship products are ranked among the top social apps by consumer spend globally. And, importantly, our business continues to generate robust cash flows. Together, these lay a strong foundation for our future, which empowers us to strike a balance between focusing on our core strategy in the near term while exploring long-term growth prospects. We uphold our corporate mission of enriching lives through technology. Moving forward, our strategic focus remains clear and consistent: First, we remain committed to executing on our global strategy. We will advance continuous product innovation, with a focus on optimizing user social interactions and content experience to enhance user satisfaction. We see significant growth potential in our global business, and we will leverage our strong product capabilities and user-centric approach to drive healthy expansion of our global user community. From day one, we have been dedicated to building an inclusive, diverse global community. Our platform transcends geographical boundaries, allowing users from different cultures to connect, interact, and form meaningful relationships. Today, what sets us apart is the truly global nature of our user community and the widespread cross-regional social connections across our platform. To fully leverage our platform's unique value, we're sharpening our ability to match our diverse global users with their preferred content and connections. Our R&D team constantly finetunes our recommendation algorithms to better understand our users and the content they engage with. Our goal is to create more precise and effective connections between people and the content they love. While enhancing our recommendation algorithms is crucial, it's…

Now, let's welcome the VP of Finance, Mr. Alex Liu, to provide our financial updates.

Thanks, Ms. Xie. Hello, everyone. Before I go into the details, we would like to remind you that despite the latest development in the sale of YY Live, to the date of this press release, we have not obtained control over YY Live,and therefore, have not consolidated the business. The financial results presented in our press release and this conference call primarily consisted of BIGO and all other segments, excluding YY Live. I will now provide a recap of some key financial highlights for the second quarter. Our total net revenues were $565.1 million in the second quarter, up by 3.3% year-over-year. Revenues from BIGO segment were $507.2 million, up by 7.7% year-over-year. In particular, BIGO's non-live streaming revenues were $67.8 million, which was up substantially year-over-year, primarily due to the increase of advertising revenues. Geographically speaking, as we prioritized to allocate our operational resources towards developed countries, our revenues from developed countries was up by double digits year-over-year, outperforming all other regions. Cost of revenues for the quarter increased to $366.2 million, among which our revenue-sharing fees and content costs increased to $263.9 million. BIGO's cost of revenues were $327.7 million, which was up year-over-year, mainly driven by increased traffic acquisition costs paid to third-party partners in relation to our advertising business. Gross profit was $198.9 million in the quarter, with a gross margin of 35.2%. BIGO's gross profit was $179.4 million, with a gross margin of 35.4%. BIGO's gross margin was lower year-over-year due to change of revenue mix with higher contribution of BIGO Audience Network advertising revenues. Our Group's operating expenses for the quarter were $198.7 million, compared with $191.7 million in the same period of 2023. Among the operating expenses, R&D expenses decreased to $69.9 million from $75.5 million, primarily due to decreased salary and welfare…

[Operator Instructions] Your first question is from the line of Thomas Chong with Jefferies.

My first question is about the company's strategy in the future. Should we expect there will be any changes after the recent management change? And my second question is about the BIGO outlook. Can management share about the revenue trend in the second half as well as the trend across the different geographies?

[Foreign Language]

Thank you, Thomas. This is Ting Li. I will answer your first question, and then Alex can answer your second question. For the first question, I think we go through this in the prepared remarks that our strategic priorities will remain quite consistent and I will elaborate in my following part. First, we will remain committed to our globalization strategy. And second, specifically regarding to our product operations, we will continue to strengthen our unique value proposition as a truly global social platform. To take an example, Bigo Live in itself, it's a highly globalized product and our users can actually watch content in over 30 languages. And our users have actually demonstrated a content consumption platform where they enjoy cross-regional social interactions. For example, if you look at our users from U.S., U.K. or other developed countries, actually around 35% to 50% of their virtual gifts go to creators from other regions. So going forward, the next phase of our operational optimization will be basing on our users across regional social activities and their pattern to ensure an effective content cultivation and also a matching of their social network. And thirdly, given the current macro environment, we will continue to have higher demand over the sophistication of our localized operations, and we will demand further improvement of our operating efficiency. Our goal is to achieve a steady profitability growth of our core businesses. And lastly, we will continue to explore new revenue streams and profit streams. Currently, we do have some development in our new businesses, but they are still relatively young and early in an early stage of development. We will take a long-term view and continue to merger them, while we will continuously push for improvement in their economic and financial health every year. Our goal is to develop a sustainable and multi-tier growth engine for the Group's sustainable long-term growth. Thank you. And Alex will answer the second question.

[Foreign Language]

This is Alex. I will take your second question. Based on our second -- our performance in the second quarter, the live streaming revenue from BIGO's 3 core global products has actually maintained a positive growth. And if we look behind the main driver, it's still the growth of paying users that is driving our revenue recovery, which has maintained a high single-digit growth year-over-year. While our ARPU has -- our live streaming ARPU has continued to fluctuate. Looking at the performances among different regions, developed countries have consistently outperformed other regions, both in terms of sequential and year-over-year growth rates in the past quarters. While looking ahead to the second quarter -- to the second half of the year, while we enter into a period of elevated operating activities, we expect the streamers and users to be more active and their activities likely to increase. Therefore, some regions might be likely to return to positive revenue growth sequentially. And that's what we're seeing -- already seeing in the Middle East. However, to improve efficiency and enhance the sustainability of our global business, we have taken some proactive actions to optimize Bigo Live's content cost. And also, we are gradually making some additional adjustments on to BIGO's non-core audio live streaming products starting in Q3. We expect these adjustments mainly to short-term fluctuation of BIGO's live streaming revenue, which we've already taken those into account when we deliver the current revenue guidance for Q3. But we'd like to emphasize that the adjustments that we are making today aiming at refining a healthier profit model and building our sustainable business ecosystem. And these short-term fluctuations will not affect our long-term commitment to continuously drive for a long-term growth of our revenue and profit of our global business. And lastly, for the full year of the year '24, given that our advertising business has maintained such a strong growth momentum. We still expect the BIGO segment to achieve single-digit revenue growth for the full year. Next question, please.

Your next question comes from the line of Lei Zhang with Bank of America.

Just want to get more color on the margin trend for BIGO and the group in second half?

[Foreign Language]

Thank you, Zhang Lei. This is Alex. I will answer your question. First, let's look at our profit details in the second quarter. The Group's non-GAAP net profit achieved a 10.2% Q-o-Q growth. And within that, BIGO segment's non-GAAP operating profit was up by 10.1% sequentially, mainly due to the optimization of Bigo Live's content costs, which drove an improvement in BIGO's gross margin. And on the operating expense side, BIGO's sales and marketing expenses were also down meaningfully Q-on-Q, primarily due to our reduced spending on user acquisition due to our higher requirement on ROI. Looking ahead to the second half of the year as we continue to optimize our content costs and our user acquisition strategy, we expect Bigo Live's profit margin to remain stable or even deliver a slight increase. However, considering the accumulated negative impact of the adjustments that we made to BIGO's non-core audio live streaming product, we expect on our profits, we expect the absolute amount of BIGO's segment's non-GAAP operating profit to modestly decline compared to last year. And for the all other segment, we're expecting the amount of this total non-GAAP operating loss for the full year to also narrow slightly compared to last year. Next question, please.

Your next question comes from the line of [Derek Faye] with Morgan Stanley.

My question would be, could you share with us the latest progress of your share repurchase program and your outlook for the capital return in the future?

[Foreign Language]

Thank you. This is Ting Li. I will answer your question. Regarding our capital return, we remain committed to return value to our shareholders. In the second quarter, we have altogether repurchased an additional of 2.3 million of our ADS for a total consideration of USD 71.4 million, which represents 3.9% of our outstanding ADS as of the end of Q1. And the Board has just authorized an extension of our unutilized share repurchase program under which we may repurchase up to $400 million of our shares. We will remain active executing our share repurchase program and continue to reward the long-standing support of our shareholders. Last question, please.

Your last question is from the line of Brian Gong with Citi.

I have a quick question on ad business. Could management comment on the business trend and your thoughts on outlook for our ad business?

[Foreign Language]

This is Ting Li. I will take your question. Looking at our advertising business performance in the second quarter, you can see that BIGO has maintained -- BIGO's advertising revenue has maintained a strong growth momentum. Specifically, Likee's advertising revenue increased by 34.7% year-over-year. And BIGO's audience network revenue increased by 12.8% quarter-over-quarter. The contribution of non-live streaming revenue, primarily advertising revenue has now contributed to 13.4% to BIGO segment total revenue. And looking ahead for the second half of the year, which is traditionally a peak season for advertising, we're expecting our advertising revenue to continue to grow on a sequential basis. However, it's worth noting that BIGO Audience Network, it's a new adventure under the development of our advertising business. It has grown quite substantially in the past few years. But still -- it's still in an early stage of development. And although that it has already managed to achieve a positive gross margin and operating margin, it still takes time for us to accumulate scale to drive further profit growth. We aim to continue to find our differentiated value proposition and continue to take a long-term view to explore and refine our operations and products and steadily drive a further improvement of our market share over time. Okay. So that was the last question, and thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you.

Thank you. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.