Good morning and good evening, ladies and gentlemen. Thank you for standing by for Yalla Group Limited's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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.

Hello, everyone, and welcome to Yalla's Second Quarter 2025 Earnings Conference Call. We issued our earnings press release earlier today, and it is now available on our IR website as well as on 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 this 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. The last 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 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. Mrs. 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 second quarter 2025 earnings conference call. We delivered another strong set of results in the second quarter of this year. Our total revenues close to USD 84.6 million, once again beating the high end of our guidance. We also made significant strides in improving our operational efficiency by optimizing user acquisition strategies and refining our internal processes which contributed to a year-over-year expansion in our net margin to 43.2%. This impressive performance demonstrates our ability to increase user engagement across our ecosystem and achieve high-quality efficient growth by anticipating and meeting MENA's evolving social networking and entertainment needs. Throughout Yalla's history, the company has been committed to the long-term development of MENA's local Internet industry. We were one of the first to explore online entertainment in the region. And over the past 10 years, our team has grown from 6 people to over 800 employees serving over 40 million MAUs across MENA region. Our product strategy prioritizes creating products with the potential to reach a massive user base while also demonstrating a long-lasting cycle. We strive to develop sustainable business models for long-term growth, and we remain confident that our commitment and patience will pay off as it has over the last decade. This Q2 marks the 9th anniversary of Yalla's launch. For Yalla Ludo, one of our flagship products and MENA's leading casual game platform, we expect its life cycle to reach 10 to 15 years or even beyond. We continue to operate our products with great dedication, fostering a friendly, positive and vibrant online community. Building on our core business, strong fundamentals, we are also strategically expanding into new verticals to capitalize on MENA's digital transformation, leveraging our substantial user base, localized exercise and strong user acquisition capabilities. We have broadened our…

Hello, everyone. Thanks for joining us today. Let's take a closer look at our second quarter operations and our product performance. First, I would like to share our operational and product performance highlights in the second quarter. We increased our group's average monthly active users by 8.8% year-over-year to 42.4 million. In light of the sharp MAU increase during Ramadan in the first quarter, we adjusted our user acquisition strategy in quarter 2, allocating more resources to acquiring and retaining high engagement, high-quality users and reducing spending on channels, demonstrating less efficient conversion metrics. This approach will allow us to scale our community while ensuring a vibrant and engaged user base. As a result, the group delivered year-over-year and sequential revenue growth this quarter despite a short-term sequential dip in MAU. Starting next quarter, we expect MAU growth to normalize at 2% to 3% quarter-over-quarter with full year MAU growth projected at around 10% year-over-year as we remain focused on consistent user base expansion. Next, I would like to delve into the meaningful strides we made in the second quarter across product operations and brand building. During the quarter, we conducted several strategically designed campaigns and fostered in-depth brand partnership, further solidifying our market position and driving stronger user retention. One highlight was this quarter's co-branded campaign between Yalla Ludo and the Dubai Department of Economy and Tourism. We embedded Dubai's culture icons and signature landmarks into gameplay and mission design, delighting users with a richly immersive experience. Its dynamic blend of Yalla Ludo's entertaining gameplay and Dubai's tourism appeal garnered highly positive user feedback and sparked substantial organic social media buzz, significantly boosting in-game activity. This quarter also marked the successful conclusion of Yalla's ninth anniversary celebration. We launched a platform-wide event series featuring exclusive missions and generous rewards…

Thank you, Saifi, and hello, everyone. Thank you for joining us today. Excellent execution across our operations drove this quarter's strong results, underscored by better-than-expected revenues and enhanced profitability. Our revenues sustained their healthy growth trajectory, up 4.1% year-over-year. We also continue to execute disciplined cost management and improved our overall efficiency, boosting our net income by 16.4% year-over-year to USD 36.5 million with net margin expanding by 4.6 percentage points year-over- year to 43.2%. Bolstered by this success, we continue to accelerate our expanded share buyback program. We remain committed to driving product innovation, optimizing operations and elevating shareholder value as we advance towards our vision of becoming the most popular platform for online social networking and entertainment activities in MENA. Let's move on to our detailed financials for the second quarter of 2025. Our revenues were USD 84.6 million in the second quarter of 2025, a 4.1% increase from USD 81.2 million in the same period last year. The increase was primarily driven by our growing user base and enhanced monetization capability. Turning to our costs and expenses. Our total costs and expenses were USD 53.9 million in the second quarter of 2025, a 4.6% increase from USD 51.6 million in the same period last year. Our cost of revenues was USD 27.9 million in the second quarter of 2025, a 3.7% decrease from USD 29 million in the same period last year, primarily due to lower commission fees paid to third-party payment platforms as a result of diversified payment channels and lower share-based compensation expenses recognized in the second quarter of 2025. Cost of revenues as a percentage of total revenues decreased from (sic) [ to ] 33% in the second quarter of 2025 from 35.7% in the same period last year. Our selling and marketing expenses…

[Operator Instructions] Our first question comes from Chloe Wei with CICC.

Yes. Okay. This is Chloe Wei from CICC Internet. So firstly, congratulations on the solid results. And my question is about the outlook. So regarding the Q3 outlook mentioned in the prepared remarks, we see a potential year-over-year decline in the following quarter. So could you help us understand the thinking behind this? And should we think that this projection is still considered conservative at the early stage? And also, could management please provide commentary on the 2025 guidance, specifically on the expected revenue growth trajectory and margin trends?

Chloe, this is Karen, and thank you for this question. And for the second half of 2025, we are confident of maintaining a solid revenue performance. Excluding contributions for the new products, we expect the full year revenue to be flat and deliver low single-digit growth compared to 2024. Our new game titles may also generate additional revenue growth later this year. We will provide an update to the market after those games are launched, and we have better visibility into this performance. Said about the revenue growth and net margin trends, we believe an estimate of around 40% is reasonable, exclude any potential investments in new products. We've set aside 5% of our full year revenue for selling and marketing expenses for these new products, and we will flexibly adjust the budget according to the users' feedback on these new products. Basically, if we decide to spend more on selling and marketing, we expect to see good growth in our company's revenue. We will update to the market later. Thank you. Thank you for your question.

And our next question today comes from Xueqing Zhang with CICC.

My question about your user strategy. As you mentioned in your prepared remarks, there is a shift in your user acquisition strategy this quarter. Could management share more color on the specific adjustments and the recent [indiscernible].

Thank you for the question, Xueqing. We delivered outstanding MAU growth during Ramadan in the first quarter. In light of that, in the second quarter, we adjusted our user acquisition strategy by refining our evaluation standards for user acquisition channels and optimizing our channel mix. We also allocated more resources towards acquiring and retaining highly engaged users. We believe this will result in vibrant, deeply engaged community as we expand our user base over the long term despite a slight short-term fluctuation in MAU during the quarter. Starting next quarter, we expect our MAU growth to return to 2% to 3% quarter-over-quarter, and we target around 10% year-over-year growth in MAU for the full year. Furthermore, if our new initiatives perform well in the second half of the year, this should drive even stronger user acquisition. We'll continue to provide updates on our user growth strategy as it evolves. Thank you.

And our next question today comes from [indiscernible] with CITIC.

This is Alex from Citic Securities. And I have a follow-up on the gaming pipeline. Could the management share the progress on your mid-core and hard-core games and provide more details on the pipeline?

Alex, thank you for your continued interest in Yalla's gaming business. We've been efficiently advancing our new game pipeline as planned. This quarter, we released 2 Match-3 titles targeting different user segments, both of which are in the final stages of fine- tuning. We also plan to release our first roguelike mobile game in Q4. Additionally, we are working closely with a leading game developer in preparation for hard-core game distribution and expect to get it done this year. Overall, our pipeline for the next 2 quarters is very robust. And at the same time, we're also looking for opportunities to ramp up our pipeline more efficiently through collaboration on game distribution. We'll keep you updated on the progress of this new initiative. Thank you, Alex.

And our next question comes from Xiaoyue Hu with Haitong.

So could management provide an update on the execution of the share repurchase program and share any future plans for shareholder returns?

Thank you, Xiaoyue. This is Karen. I will answer this question. Thank you for your question about the shareholder returns. We continue to efficiently execute our buyback program with progress in line with our expectations. With the additional USD 22 million we announced last quarter, the minimum share repurchase commitment for the full year has reached USD 50 million. As of June 30, 2025, we have repurchased over 6.2 million shares for approximately USD 41 million so far this year. Additionally, we completed the cancellation of these shares, which repurchased in this year. For the remaining 4 months of this year, we will continue to execute our share repurchase program and plan to complete or potentially exceed our committed amount. We will provide a further update on our repurchase plans next quarter. Thank you.

And our next question comes from Lincoln Kong with Goldman Sachs.

So my question is about the game business. Can management share your game distribution strategy for the new mid-core and hard- core titles?

Sure, Lincoln. Thank you for your question. Our strategy for new mid-core and hard-core game distribution is anchored on our 3 core competitive advantages. First, deep localization. With a decade of experience in the Middle East, our dedicated in-market team has extensive local know-how, allowing us to accurately grasp user preferences in both aesthetics and content. This ranges from incorporating Arabic design principles to weaving in narrative to ensure meaningful cultural resonance. Second, efficient user acquisition. Our marketing team is highly experienced with user acquisition in MENA. In addition to acquiring users from external online channels, we will also leverage our existing user base from our product ecosystem for precise targeting, creating a unique low-cost, high conversion acquisition channel. Third, strong community operations. Our local operations team creates tailored in-game events where our large-scale customer service team provides dedicated user care. This combination builds strong community ties and high emotional engagement among our users. These advantages position us well to expand our influence in the MENA market. Thank you.

And our next question comes from Jenny Yuan with UBS.

So my question is regarding our long-term growth strategy. So how does management set the long-term potential of the MENA market? And what is our growth strategy going forward?

Thanks for the question, Jenny. The MENA region has a young population of 500 million and remarkably high mobile Internet penetration, placing it at a pivotal moment in its digital transformation. We believe several Internet verticals in the Middle East are still in their early stages with substantial untapped opportunity to bring off-line activities online, there is still considerable room for growth in both users' online spending habits and overall size of the addressable market. From Yalla perspective, our legacy businesses have relatively long life cycles and currently deliver solid revenue, providing us with a strong business foundation. Building on this, we are committed to investing in the development and distribution of mid-core and hard-core games over the long term. In many parts of the world, gaming has been a key sector since the early days of the Internet, driving deeper thought around user acquisition, Internet monetization, talent development and technological innovation. We are committed to continuously refining our team and products with this in mind. On the social networking front, we will also continue to explore new opportunities to expand our service offerings to a broader user base. Beyond online entertainment, we are also evaluating potential opportunities in local lifestyle services. We will actively explore new areas to capitalize on the opportunities presented by the MENA's digital transformation. Thank you.

This concludes the question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Thank you once again for joining us today. We look forward to speaking with you in the next quarter. If you have 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 today's conference call. You may now disconnect your lines, and have a wonderful day.