Good morning and good evening, ladies and gentlemen. Thank you for standing by for Yalla Group 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, Ms. Kerry Gao, IR Director of the company. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to Yalla's second quarter 2021 earnings conference call. We released our earnings earlier today, and the release is now available on our IR website as well as on newswire services. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provision of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in our earning release and our registration statements filed with the SEC. Yalla does not assume any obligation to update any forward-looking statements, except as required by law. Please also note that Yalla's earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Yalla's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. Today, you will hear from Mr. Tao Yang, our Chairman and Chief Executive Officer, who will provide an overview of our recent achievements and growth strategies. He'll be followed by Mr. Saifi Ismail, the company's President, who will give a brief review of our recent development. Mrs. Karen Hu, our Chief Financial Officer, will then provide additional details on the company's financial results and discuss financial outlook. Following management's prepared remarks, we will open up the call to questions. With that said, 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 Kerry, and thank you everyone for joining our 2021 second quarter earnings conference call. The second quarter was another solid one for Yalla. Yalla Group's total revenue reached US$66.6 million, representing a year-on-year growth of 110.3%. Despite some impacts from the Ramadan holiday falling in the second quarter this year, we effectively grew our user community and advanced our monetization capabilities and the initiatives. In the second quarter of 2021, we also maintained the profitability as demonstrated by our non-GAAP investment margin of 48.2%. With strong execution of our effective marketing campaigns tailored to Midas Group culture, monthly active users for our group increased 17.3 million Q-on-Q to 22.1 million. We have also observed diverse impact from the Ramadan holiday on different types of products. Our social products Yalla’s paying users slightly decreased from 1.2 million to 1.1 million, while card schedule game product, Yalla Ludo saw a 14.6% Q-on-Q increase in paying users to $5.3 million, leading to a group paying user about 29%. Our new products have also been performing impressively. We are very happy to announce that we have officially launched 101 Okey Yalla for Turkish users, which is already receiving positive feedback from the market and has recently reached number one in the ball game category in terms of downloads in Turkey. Additionally, Yalla Baloot, our car game we designed for Saudi users is also in a final stage of the development. We look forward to sharing more updates about this with you next quarter. As for YallaChat, since the launch of this better version in the first quarter, our team has been persistently working to refine and enhance the product based on user feedback. We expect to gradually improve the performance of the product system, and roll out new design features and functions…

Thanks, Tao. Hello everyone. Thanks for joining us today. First of all, I would like to highlight our efforts in product operating. To better encourage user engagement on our platform, we continue to roll out localized operating events that are tailored to the MENA culture. For example, during Ramadan in April and May, we hosted the Ramadan Kareem event on Yalla to encourage users to visit our platform every day and greed their friends with special gift, designed specially for Ramadan. The event attracted more than 600,000 users. Besides that, we also hosted a series of events online to celebrate Yalla's fifth anniversary in our community, more than 2 million of virtual gifts were sent during this event, demonstrating the impressive engagement level of our participating users. Additionally, as Tao just mentioned, we are very excited about our participation in an important initiative. The National Program for Coders, announced by the UAE government in July. This program is a testament to the UAE government dedication to developing talent, expertise and innovation in the digital economy and we are thrilled that Yalla is the only local internet company among universities and other global technology giants to be short-listed as a partner. The program signals to the UAE government's commitment to attracting more talent from all over the world, further improving the local social infrastructure and supporting innovative and new ideas, as well as academic development over the next five years. Yalla is honored to be part of this great program and is dedicated to contributing to the development of UAE's digital economy and delivering online, social and entertainment products tailored to the MENA culture. We will share more details with our shareholders, once the government makes a more detailed announcement regarding the collaboration. Yalla's close in the program, not only to demonstrate the company's commitment to facilitating the development of MENA's local digital economy but also attest to the fact that is Yalla reliable and trustworthy local partners. This serves to elevate the Yalla brand, as we open our doors to more talents to provide best-in-class products and services tailored to a MENA’s users' needs and preferences and continue to enhance our influence in the local community. Our mission is to become the number one online social networking and entertainment platform in the MENA region and we are well on our way to achieving this. With that, I will now turn the call over to our CFO, Karen, who will discuss our key financial and operational results.

Thank you, Saifi. Hello, everyone. Thank you for joining us. Our robust year-on-year growth indicates our sustained strong performance, despite the Ramadan holiday falling during this quarter. This is a testament to the steadfast execution of our growth strategy that reality is user experience and community development. Our second quarter revenues grew by 110.3% year-over-year to US$66.6 million, while our non-GAAP net income reached US$32.1 million, with a gross rate of 101.4% 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 2021. Our revenues were US$66.6 million in the second quarter of 2021, a 110.3% increase from US$31.7 million in the same period last year. The increase was primarily driven by the widening of both Yalla and Yalla Ludo's user base and the enhancement of Yalla Group's monetization capabilities. Our average MAU increased by 77% from 12.5 million in the second quarter of 2020 to 22.1 million in the second quarter of 2021. Yalla's MAUs increased by 73.2% to 8.4 million in the second quarter of 2021 from 4.8 million in the same period of last year. And Yalla Ludo's MAU increased by 79.5% to 13.7 million in the second quarter of 2021 from 7.6 million in the same period last year. Now let's look at our costs and expenses. Our cost of revenues was US$23.8 million in the second quarter of 2021. Excluding share-based compensation expenses, cost of revenues in the second quarter of 2021 was US$22.1 million, a 112.1% increase from US$2.4 million for the same quarter last year. The increase was primarily due to higher commission fees for the third-party payment platforms, resulting from our expanding business scale. Excluding share-based…

[Operator Instructions] Our first question will come from Shi Gee [ph] with CITC. Please go ahead.

Hi management, thanks for taking my question and congrats on your strong quarter. So I have two questions and I'll ask them one by one. 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 recent tighter regulation to Internet companies in China?

Hi Shi Gee. Thank you for this question. First of all, we highly value the importance of complying with the local policy and law, no matter which countries we operate our business in. In China, there are a lot of experienced talent in the Internet and technology industry. Our R&D team in China has played an important role in Yalla substantial growth over the past five years. We really appreciate the support from the local government, the open business environment and our team's expertise. And that's also the key reason why we decided to have our R&D center in China. In addition, I would like to emphasize that Yalla doesn't have a VIE structure. Yalla's headquarters in Dubai and we don't have revenue from China since our products are not available in China's app stores. As such there is no impact on our business from China's recent tighter regulation on Internet companies. Our main market is MENA and our products are designed based on MENA's culture and MENA users' preferences. We highly appreciate MENA users trust and UAE government support along our development. Thank you.

Thank you. That's very helpful. And my second question is about the short selling report that came out a few months ago, although neither of them was written by big influential institutions. Could you please provide more details on their questions about your MAU and the business model, maybe help clarify whether there are robots in your chat room and whether you hire KOLs to run the chat rooms? And also why does the company has a bank account in Singapore?

First of all, I would like to reiterate that those two short reports are of poor quality and contained numerous errors. They weren't even able to provide any solid evidence to prove many of their claims. Here I would like to provide some additional details to our investors. Firstly, regarding our MAU. Yalla clearly stated in the press release that it has never placed a robot in any of its chat-offs. Yalla is a world centric social platform, on which users need to talk and interact with each other to make sense. People who understand this business can easily tell, robots won't even work on our platform. It is true that in some rooms there are accounts with similar names, users create this alternative accounts to collect extra virtual coins or gift from the platform. Similar cases exist on many other online platforms and Yalla has taken many measures to restrict such user behavior. For example, we set various rules to examine and block accounts with suspicious user behavior. However, the replicated accounts are like a game of hide and seek. It's very difficult to radically remove them at once. But what we can confirm is that alternative accounts are only a minority on Yalla as evidenced by the strong growth in our revenues every quarter. If the majority of users were only alternative accounts, which have limited spending power, we won't have been able to deliver such strong revenue growth. Secondly, regarding our business model, we can resolutely after that we have never paid money or shared revenue with any KOLs or any professional content creators on Yalla or Yalla Ludo. These two products are both designed to be pure UGC platforms. This is our strategy for those two products and we may remain unchanged in the foreseeable future.…

Thank you very clear. Thank you.

Our next question will come from Bo Pei with Oppenheimer. Please go ahead.

Hi, management. Thanks for taking my questions. So I have three if I may. The first one is about the repurchase plan. So I think during May 21 and the end of last quarter, we bought back around US$3.7 million shares. So is this the sort of pace we should be expecting for the future quarters? Do we consider increase that buyback amount, given our cash balance has been growing pretty nicely? And then my second question is about the progress of new apps. We talked about some user metrics, time spent, 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 achieving very healthy margins since the IPO. So can you talk about with these new apps and potentially some advertising activities, should we still expect this kind of healthy margin going forward? Thank you.

Thanks, Bo. This is Karen. I will take the number one and the number three questions. By means of our rehab on May 21, 2021, we announced a share buyback program authorized for our Board Directors, whereby we repurchased up to US$150 million of our ADS from time to time over the following 12 months. And by the end of Q2, we have already repurchased 441,931 ADS from the open market with cash for an average amount of around US$ 8 million. For the remainder of our authorized period, we will continue to repurchase shares in this program, depending on market conditions and always with the commitment to work for the best long-term interest of our shareholders. And for the margin question, I think, that we were able to maintain our net margin at a relatively stable level over the past several quarters at around 45%. Although, we have been launching some new products in the second quarter, but we think that we will 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 monetization, I will answer you. As we just discussed during our prepared remarks, we have officially launched two new products and are receiving good feedback from the market. At the current stage, I think, we will still focus more on expanding our initial user base and developing our community. Yearly [ph] monetization will come after that. And the part that Yalla Ludo went through can be a good reference. We hope next quarter we will have a good operating numbers of our new apps to share with you and our investors. Thank you, Bo.

Okay. Thank you. That’s helpful.

Thank you.

Our next question will come from [Indiscernible]. Please, go ahead.

Hi, management. Thanks for taking my questions. And you mentioned that you released your new apps. So could you please provide more details on your strategy in building Yalla ecosystem?

Okay. I will answer this question. We have built two flagship applications, Yalla and Yalla Ludo, through years of development we’re gradually building our Yalla community. Going forward, when our next generations of social products are ready, we plan to drive traffic from Yalla to these new social apps. We will also leverage Ludo's user base to promote our new casual game product, as well as upcoming mid to heavy games. As most of Ludo users are game lovers, the trial we conducted earlier have shown very good conversion rate from Ludo. 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 Yalla ecosystem. Thank you.

Okay. Thank you. Very clear.

Thank you.

[Operator Instructions] Our next question will come from Natalie Wu with Haitong International. Please go ahead.

Hello thanks. This is Rene [ph] on behalf of Natalie Wu, Haitong International. Thanks management for taking my question and a congratulations on the very strong quarter. My question is regarding your user metrics. Could the management share with us more counters on the trend of your latest user matrix for Yalla and Yalla Ludo such as user demographics, retention rates, and acquisition costs? Thank you.

Thanks Rene. This is Jeff and I will -- with respect to user profile, Yalla's users are year between 18 to 35 and the male-to-female ratio is about 7:3. For Yalla Ludo, since it's a popular traditional casual game, age range of users is between 12 to 40 and the male-to-female ratio is around 6:4. But since we highly value our users' privacy, we don't require users to verify the IDs to join Yalla and we don't have LBS leader. So, the demographic data is just for your reference. In terms of user acquisition cost, since our business covers the whole MENA region, costs can vary a lot among different countries. For example the cost in GCC countries is usually higher than that of the other countries. Yalla's products are designed for Arabi users as well as users from some other countries with similar culture backgrounds. As you can see we have a large market and our current user base only accounts for a small portion of the total population in the region. So, we still see a lot of untapped potential in this market. Because of Yalla and Yalla Ludo's unique business model, their development doesn't require massive spending in 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 we believe we still have ample room to grow in this region.

Thanks. That's very clear. I have follow-up questions regarding your outlook. I was wondering if you could share with us your expectations on your MAU growth going into the third quarter and the fourth quarter. And a last one here, I just want to confirm if the third quarter revenue guidance has included the revenue contribution from the new ITT Knox? Thanks.

Our guidance of Q3 didn't include the US.

Okay. Thank you. And could you share with us your expectation for the user growth going into the third quarter and the fourth quarter? Thank you.

For the users growth, as we told the investors always, we can be the Q-on-Q around 13% to 15% for the user groups both Yalla and Yalla Ludo. And for the new product user growth, we don't conclude it in the expectation.

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 with you next quarter. Thank you.

This concludes this conference call. You may now disconnect your line. Thank you.