Good morning and good evening, ladies and gentlemen. Thank you for standing by for Yalla Group Limited First Quarter 2024 Earnings Conference Call. [Operator Instructions] After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. Now I would like to turn the call over to your speaker host today, Ms. Kerry Gao, IR Director of the company. Please go ahead, ma'am.

Hello, everyone, and welcome to Yalla's First Quarter 2024 Earnings Conference Call. We released our earnings press release earlier today, and the release is now available on our IR website as well as our newswire outlets. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. 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 these and other risks and uncertainties is included in our earnings release and our annual report 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 a 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, we'll hear from Mr. Tao Yang, our Chairman and Chief Executive Officer, who will provide an overview of our latest achievements and growth strategies. He will be followed by Mr. Saifi Ismail, the company's President, who will briefly review our recent business developments; Ms. Karen Hu, our Chief Financial Officer, will then provide additional details on the company's financial results and discuss our financial outlook. Following management's prepared remarks, we will open the call to questions. Mr. Jeff Xu, our Chief Operating Officer, will join the Q&A session. 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, everyone, for joining our First Quarter 2024 earnings conference call. We kicked off 2024 with solid first quarter results, even with the impact of Ramadan, which started on March 11 this year. Our Q1 revenue still reached to USD 78.7 million, landing in the upper end of our guidance and once again demonstrating the remarkable strength of our flagship applications, Yalla and Yalla Ludo. Our persistent efforts to deliver quality growth and enhance our operating efficiency are also yielding positive results. In Q1, our net margin reached 39.5%. Our solid quarterly performance showcases our dedication to refining our operations and our ability to enhance our flagship applications as well as optimize our user acquisition strategies. Thanks to these successes, we ultimately delivered a better experience for our users, further boosting Yalla and Yalla Ludo users' willingness to stay and pay. In 2024, we anticipated continued advancement in an acceleration of digital transformation across the MENA region. As the largest MENA-based online social networking and gaming company, Yalla will continue to enrich our services and expand the boundaries of our business, launching business products to fulfill MENA users' evolving needs a lot. Turning to Yalla Game development and further strategy. As we continue to explore and invest in new games, our growing expertise and capabilities have strengthened our determination to expand our footprint in MENA's mid-core and hard-core games. Looking ahead, we will continue to prepare our team and grow our gaming pipeline. As we mentioned on our last call, mid-core games, which we can leverage our extensive expertise, talented workforce and abundant resources in MENA's casual gaming sector will be one major focus for the team this year. We look forward to better utilizing our advantages and delivering exceptional gaming experiences to our users. The Middle East gaming…

Hello, everyone. Thanks for joining us today. I would like to start with a closer look at our operations and our product performances for quarter 1. Our average monthly active users increased by 14.6% year-over-year to 37.8 million. Our average revenue per paying user also increased to USD 6.03 in the first quarter from USD 5.39 in the same period last year. Furthermore, our ongoing adjustments to our game mechanism, aimed at improving user engagement and experience, have proven effective. Paying users increased by 7.3% quarter-over-quarter, demonstrating user's growing willingness to pay on our platform. Following our successful off-line Yalla Ludo tournament in Riyadh in quarter 4 last year, we hosted a second off-line tournament in Baghdad in quarter 1. Over 10,000 players registered, an impressive response; 128 outstanding finalists competed in the live final round. The success and popularity of these events reflects Yalla Ludo's growing influence and appeal in the mobile gaming world. Conducting off-line tournaments and other regional events also strengthened our partnerships with local channels, deepen our product penetration among local gamer communities and enhances our brand awareness. We are excited to bring more thrilling experiences to our users, continually pushing the boundaries of mobile gaming and ensuring that Yalla Ludo remains an industry leader. Now for a few highlights from our industry activities this quarter. We are very proud to announce that, for the fourth consecutive year, Yalla Group was recognized by Data.ai's annual Top Publisher Awards as 1 of the top 30 publishers headquartered in the Europe, the Middle East and Africa region. Data.ai is a premier global platform offering unified data analytics for the mobile app market. Since 2012, the Top Publisher Award has acknowledged outstanding mobile publishers worldwide. We extend our heartfelt gratitude to Data.ai for this distinguished award and remain committed…

Thank you, Saifi. Hello, everyone. Thank you for joining us today. Our financial performance remained robust throughout the first quarter of 2024. Our ongoing efforts to deliver high-quality growth and enhance our operating efficiency resulted in meaningful profitability improvements, with net income increasing 56.2% year-over-year to USD 31.1 million, and net margin expanding from 27.1% to 39.5%. Looking ahead, we are confident that our strong cash position and excellent execution will empower us to capitalize on future opportunities, driving sustainable growth and creating value for all our stakeholders. Let's move on to our detailed financials for the first quarter of 2024. Our revenues were USD 78.7 million in the first quarter of 2024, a 7.1% increase from USD 73.5 million in the first quarter of last year. The increase was primarily driven by our broadening user base and enhanced monetization capability. Our solid revenue growth was also partially attributable to the significant increase in ARPPU, which grew from USD 5.39 in the first quarter of 2023 to USD 6.03 in the first quarter of 2024. Now let's take a look at our costs and expenses. Our total costs and expenses were USD 49.6 million in the first quarter of 2024, a 12.7% decrease from USD 56.8 million in the same period of last year. Our cost of revenues increased by 2.6% to USD 28.6 million in the first quarter of 2024 from USD 27.9 million in the same period of last year, primarily due to higher commission fees paid to third-party payment platforms as a result of increasing revenue generated. Cost of revenues as a percentage of total revenues decreased to 36.3% in the first quarter of 2024 compared with 37.9% in the same period of last year. Our selling and marketing expenses were USD 8.1 million in the first…

[Operator Instructions] Our first question today will come from Xueqing Zhang of CICC.

Congratulations on the strong results.. I have two questions. The first one is about flagship products. Can management share some color on the recent progress of the two flagship products, Yalla and Yalla Ludo, and the main strategy this year? And the second one is about financial outlook. Can management update on the revenue growth and the net profit margin change this year?

This is Saifi, and I will answer your first question. Yalla and Yalla Ludo performances are currently remaining stable. Over the years, we have gradually cultivated a loyal user community that loves the Majlis culture and is highly vibrant and engaged on the platform. Of course, this year, we will continue working on upgrades and roll out more fresh features and functions for our users to enjoy. Additionally, as I just mentioned, for Yalla Ludo, the team is actively organizing more off-line tournaments to strengthen our brand's local impact and to better penetrate the market through off-line channels. We will also continue to look for growth opportunities for both legacy products.

Xueqing, this is Karen, and I will take the second question. For 2024, we are very confident of maintaining our current stable topline performance for our existing product portfolio. Our new products may also contribute to revenue growth later this year. We will update the market on our progress when we have a clear picture after our product launches. Regarding the net margin, we think it's fair to expect around 40%, excluding any potential investments in new products. However, if we take into account of the new products' potential impact, our margin may end up in the 35% range. Thank you for your questions.

Our next question today will come from Chenghao Li of CICC.

Congratulations on a solid quarter. My question is related to our external cooperation. Can we expect more external cooperation to settle this year? And could the management share more color about the strategy of future cooperation direction?

This is Tao Yang, and thank you very much for your questions. As MENA's digital transformation continues to advance rapidly, we are being approached by many companies from in Europe, in the States and China, to discuss potential opportunities in the region, mostly in the gaming and social networking sector. We are open to this discussion, and our strategic team is consistently exploring these opportunities. In terms of strategy, we consider the synergies with our current businesses, the teams' expertise or the fundamental quality of the assets, and lastly, the ROI, of course. In terms of the timeline, we will keep you updated once there is anything we can share with the public. Thank you, Chenghao.

Our next question comes from Xiaoyue Hu of Haitong.

Can I please ask what management think about the TikTok ban in the U.S.? What would be the impact on us?

Thank you for your question. TikTok entered the MENA market around 2021 and 2022. It's a very strong player that had a big impact on the live streaming landscape in MENA upon entry. Now that TikTok has been in the Middle East market for a while, we believe the competitive landscape has restabilized. I would like also to remind you that we don't compete with TikTok directly since we are not a live streaming platform. We need a different set of needs for our users. Unlike TikTok's global strategy, Yalla is rooted deeply in the MENA's tradition and serves a growth of loyal MENA users who love the Majlis culture, love voice chatting and love the pure and equal social networking atmosphere our platform offers. Our team has been monitoring the situation closely, but nothing significant has happened recently. So we would share new observation, if any, on future calls. Thank you.

Our next question will come from Kaifang Jia of Citic.

I have a question about your regional strategy. So does the company have any plan to expand into other regions outside MENA?

This is Tao Yang, and I will answer your question. As we always emphasized, our primary focus will continue to be in the Middle East. At the same time, we will remain alert and open to opportunities in overseas markets. With our current products, we have already gained access to certain user groups from overseas markets, including South America and Southeast Asia. For certain new products in our pipeline, we may conduct global promotional activities to realize greater potential and enhanced ROI. We identified solid opportunities for distribution beyond MENA market. However, our primary emphasis unquestionably lies in MENA, where we present distinct advantages and can utilize our core capabilities to drive growth. Thank you, Kaifang.

Our next question will come from Lincoln Kong of Goldman Sachs.

My question is, one, can you just share some color on Yalla Games outlook and publishing strategy? And what about strategy to expand in those gaming business? And my follow-up is on are there any updates in terms of share repurchase?

Thank you for the question. This is Jeff. I will take your first two questions and leave the last one to Karen. So we are working on the validation of one of our new products and optimizing its design before the official launch. For the other new products in our pipeline, we will keep you posted on the progress. Regarding our game strategy, first, going forward, we will look to collaborate with more mature gaming studios or those with successful track records in gaming publishing. We will also carefully select game content that is suitable for the MENA market, leveraging our localized expertise. Second, we plan to explore collaborations with global players who are interested in the MENA market, utilizing our expertise in community engagement and our deep local know-how to drive win-win outcomes. Finally, we are committed to growing our in-house development team and expect to introduce a series of new self-developed mid-core games this year. Thank you.

Lincoln, glad to hear you here. Yalla is dedicated to return value to shareholders throughout our share repurchase program. As of March 31, 2024, we have deployed a total of USD 35.5 million for share repurchases. Also, as we mentioned in our prepared remarks, we have extended our share repurchase program for another year to ensure that the company can repurchase shares from market at any time during the next 12-months. Given our solid fundamentals, we will continue to conduct our share repurchase program while considering cash dividend payments in due course. We will keep you posted if we have any more updates. In short, we believe strongly in Yalla's long-term potential and are dedicated to generating value for all parties involved. I hope this answer will make you feel satisfied.

As 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 in the next quarter. If you have any further questions, please feel free to contact Yalla's Investor Relations or Piacente Financial Communications. Both parties contact information is available in today's press release as well as on our company website. Thank you.

This concludes the conference call. You may now disconnect your lines. Thank you.