Ladies and gentlemen, thank you for standing by and welcome to JOYY Inc.'s Fourth Quarter and Full Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note, this event is being recorded. I'd now like to hand the conference over to your host today Mr. Matthew Zhao, IR Director of the company. Please go ahead.

Thank you, operator. Good morning, and good evening, everyone. Welcome to JOYY's fourth quarter and full year 2019 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of JOYY; CFO, Bing Jin and COO, Ms. Ting Li. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The fourth quarter and full year 2019 financial results and webcast of this conference call are available at ir.yy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi. I will now turn the call over to our Chairman and CEO, Mr. David Xueling Li. Please go ahead, sir.

[Foreign Language] Thank you, Matthew. Hello everyone. Welcome to our earnings conference call today. Hope everyone stay safe and sound and healthy in this particular coronavirus period. On December 20, 2019, our shareholders approved the name change of YY to JOYY, which stands for more joyable and reachable. This name change reflects our commitment to remain joyable and useful experiences not only to those inside China but also to those around the world as we continue our global expansion. In line with our mission to connect people around the world and enrich their lives through video. We continue to make steady progress on both the domestic and international grounds in the fourth quarter of 2019, expanding our user base, upgrading our products and further advancing our monetization capabilities. [Foreign Language] Notably our better than expected top-line performance for the fourth quarter and full year of 2019 has illustrated our success in driving growth both at home and abroad. In addition to the strong financial performance, our video based product and services including Likee, BIGO Live, HAGO, YY Live and Huya have all become leaders in their respective markets. Such success is a result of our few engine expansion strategy which enabled us to pursue the simultaneous development of both our short form video and live streaming business to construct a truly global video-centric social media ecosystem. [Foreign Language] First, let me share with you the progress we have made in developing our short-form video growth engine Likee. As we continue to super charge Likee's growth through geographic expansion, product updates and the monetization. During the quarter, Likee maintained its robust user base expansion momentum, which was largely driven by the growing user base throughout Southeast Asia and developed world. This total mobile MAUs swell to 115.3 million representing an increase…

That concludes David's prepared remarks. Now as JOYY's CFO, I will talk about the financial results. We maintain our strong momentum and delivered our robust financial and operating metrics during the fourth quarter of 2019. Our total net revenues for the fourth quarter increased by 64.2% year-over-year to RMB 7.62 billion exceeding both the high-end of our previous guidance beat consensus. In particular, our live streaming revenues for the fourth quarter increased by 62.7% year-over-year to RMB 7.15 billion driven by RMB 5.51 billion in live streaming revenues from both our YY and Huya segments and RMB 1.64 billion contribution from BIGO. Other revenues in the fourth quarter increased by 89% to RMB 471.6 million driven by higher advertising revenues from Huya and BIGO. Cost of revenues for the fourth quarter increased by 69.3% year-over-year to RMB 5.1 billion. Revenue sharing fees and content costs increased to RMB 3.73 billion in the fourth quarter from RMB 2.56 billion in the same period of 2018 which was inline with the increase in live streaming revenues. Bandwidth cost increased to RMB 505 million from RMB 246.5 million in the same period of 2018 mainly reflecting the continued expansion of our global user base. Gross profit for the fourth quarter increased by 54.6% year-over-year to RMB 2.52 billion. Gross margin in the fourth quarter of 2019 decreased to 33% from 35.1% in the same period of 2018. The decrease in gross margin was primarily caused by the fact that Huya and BIGO segment have lower gross margins, but contributed significantly greater portion of our net revenues in the fourth quarter of 2019 as compared to the corresponding period of 2018. Operating expenses for the fourth quarter increased to RMB 2.3 billion from RMB 931.2 million in the same period of 2018 primarily due…

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

Hi, Good morning. I thank management for taking my questions and congratulate…

Hi, Thomas. Sorry, could you just please ask the question in Chinese first please then translate into English. Thank you.

[Foreign Language] Thanks management for taking my questions and congratulate a strong momentum of BIGO. I have a question about the 2020 outlook for BIGO in particular the revenue and the user trends across different geographies? And also any expectations in terms of the timeline for narrowing the losses and achieving breakeven? And how should we think about the spending for BIGO across different geographies during the year? Thank you.

Thanks. Thomas let me address these questions. So, first on the trend or on the different markets, BIGO has different components. I think let me talk about BIGO Live. First, BIGO Live has enjoyed tremendous user growth and [indiscernible] in 2019. I would expect similar pattern continue in 2020. The key driver come from the developed markets. As you can see from the fourth quarter number, the developed markets accounts for more than 31% of the total revenue on the BIGO Live that compared with 26% in the third quarter and 22% in the second quarter, you can see obviously continued increasing trends and we expect that trend to continue across different developed markets including U.S., Europe, Japan, Korea and other parts of the world. One of the building for those developed markets is that the paying ratio and outlook tend to be very high. And also we have demonstrated that monetization in the developed world has increased by 50% in December of 2019 compared with June 2019. So that is itself is very encouraging. So we expect BIGO Live will continue to focus on developed world in 2020. That's on BIGO Live. On the Likee business, we have also achieved a balanced approach, traditionally we are very strong in South Asia, particularly India starting from last year and also continuously into 2020, we will be more balanced approach, meaning we'll focus more on developing into other non-India markets including Russia, Indonesia where we are performing very well and catch up very quickly with the leading player. And also we'll continue expanding other parts of equally developed world as of now. So that's on the user growth for Likee. Now, on the monetization of Likee, we also ramped up the live streaming capability as BIGO's live streaming, as I say,…

[Operator Instructions] Your next question comes from the line of Lei Zhang from Bank of America Securities. Please go ahead. Your line is now open Lei.

[Foreign Language] I will translate myself. For so long, the oversea effects only on the Likee user trend, how should those user end and monetization balance and what's your target for Likee user in 2020. And secondly, on the competitive landscape of domestic live streaming, how do I think competitors like a short video platform even feature music, can you give us more color on the updates on competition. Thank you.

Thank you so much. Let me address the question. So on the global expansion strategy for Likee, as I mentioned we are focused both on -- in terms of the user growth and monetization. So I don't think the comments is right in a way that if we focus too much on monetization, we will focus less on the user growth. But as I said, we focus ROIs, so as long as the user retention, meaning the 30-day, 60 user retention base is good in some of the markets, we will continue to spend money. But after we spend money, we also need to make sure that the user we attract can be converted to live streaming users. So we also pay particular attention in terms of the trends, in terms of the gifting et cetera. So that's for short. And you also -- in terms of user growth, you expect similar pattern that we have seen in 2019, we will track our product performance, you can see that Likee is having 15 million to 20 million users on a pro rata basis and we expect still the patter will continue. But, as I said, we need to make sure that the ROI make sense and we will generate decent profitability for Likee business. So that's the answer to the first question. The answer to second question, domestic competition is not a new thing. We have been operating under a highly competitive live streaming business in China for several years. However, we still continue to grow. Now, if you look at the prospect of 2020 for the live segment, I would say the revenue will continue to grow at a low single digit. The reason why it's low single digit because when we cut down some of the business including the PC games which we sold, and also we have scaled down the domestic small lending business given the uncertainty for people in the online lending business. So which those three business scaled back and scaled down, the lives revenue will -- will be down a little bit as we tell people before, it used to be 5% to 8% year-on-year growth, now we're looking at no single digit growth attracting the close down of those two business. But for the main domestic license, I think it is still solid. For Huya live you can treat it as a traditional kind of PC games where the user base [indiscernible] as we continue to come back, we have seen a very sticky timespan and user behavior on our platform -- taken from the broadcaster perspective. So I think even amidst this domestic competition while Huya live will continue to grow.

Okay. Thank you. Can I have two follow up? First, on the HAGO side, giving you shared more color in the prepared remarks. Can you remind us, we have hit the HAGO revenue books that's under YY Live, right? HAGO growth in 2020, that means, so YY Live streaming actually are down on a year-on-year basis? And also on the HAGO side, what's the [indiscernible] user scale of HAGO? And secondly, also on the domestic side, I know that eCommerce live streaming is popular right now. And even some of your competitors actually ask the host to do ecommerce through live streaming. I know we have ecommerce doing [indiscernible], can you share a more color with us on the ecommerce live streaming. Thank you.

Sure. On the HAGO, it is booked on YY Live segments. But given the absolute scale of HAGO's revenue is very small compared with the total for YY domestic live streaming. So in terms of absolute dollar, it is not contributing that much. Yes. So if you strip out the HAGO, YY Live domestic market, I think the business is still stable, put it that way. And then for ecommerce, we have been doing ecommerce YY Live for awhile. So again, our strategy is different from the others. Our ecommerce is more focused on longstanding products meaning [indiscernible] et cetera or global piece. And then, we pulled this on introducing high quality broadcast to help improve the productivity of the traditional long standup product that'll change. And hopefully it will create a win-win situation for both the seller and for the users. So that part of the business is running off very quickly. But, at the right time, we would start disclosing the right metrics to the actual investors, at this point, there are few things that gives us relatively early.

Your next question comes from the line of Brian Gong of Citi Group. [Operator Instructions]

[Foreign Language] Okay. I will translate myself. So, Likee wondering which has competitive dynamics with TikTok from different region. And I think Likee probably can make little impact on the different tools, BIGO Live in 2019 but as far as customer see, how much ground contribution from Likee to BIGO for being in 2020. Thank you.

[Foreign Language] Sorry, let me do the translation firstly and then answer your question. So firstly, as a company and founder or the management, we are really looking [indiscernible] future, right? So, if you look at the past few years, [indiscernible]. So rather than the proper pattern, we are seeing that's a positioning as well as market share for the short-form video, it's more important for us. And in the past several years, although we continue to suffer loss from the Likee business, but after our [indiscernible] for the short-form videos especially outside of China. At the beginning times, in terms of the technology as well as the investment scale, we are much less than our competitors. But, after two years, [indiscernible] senior kind of level that's our growth competitors. So, I still believe Likee business will enter to the second stage, which is new, it's more healthy and more balanced at this stage. So, we mentioned in the prepared remarks for this year, Likee will focus on the money addition. So, hopefully at the end of this year, as a whole BIGO business will achieve the single month breakeven. If HAGO could achieve, it means in the future we have become more dynamically to control the investment cycle especially in terms of the marketing other user acquisition cost for the Likee business. So that will help us to build up more business model compared with our peers and that in turn help us for the next five to 10 years, long run competition for the short-form video business global. Thank you.

[Foreign Language]

Yes. Let me handle that question. I think we are still observing the progress that I think at this point it's somewhere around 10% of BIGO total segment will be coming from Likee, that number can be depending on the progress.

Your next question comes from the line of Daniel Chen of JPMorgan. Your line is now open Daniel.

[Foreign Language] I would translate myself. So I have a housekeeping question regarding cash, so we have a very healthy balance sheet and a very rich net cash of over U.S.1 billion and so what ways are key strategy in cash management in 2020. Thank you.

Let me address the question. Thanks Daniel. In terms of cash option, we have around U.S.$900 million which were put into different charge of savings and investment. I think generally decent returns return. And meanwhile we're also observing latest market turmoil. And obviously, [indiscernible] is very undervalued and particularly in the recent turmoil continue to go down. So we will seriously consider share buyback and other methods of returning some of this cash to the shareholders.

[Operator Instructions] Your next question comes from the line of Lee Joon from Goldman Sachs. Your line is now open. Mr. Joon?

[Foreign Language] I'll translate myself. So thank you management for taking my question. So I have two questions regarding the impact of the COVID-19, in overseas markets for BIGO. So the first question is, have you observed any similar surge in user time spend or engagement in the development markets given the fast spread of the virus? And the second question is on whether that will give us any refreshed thoughts on user growth strategy or new monetization methods. Thank you very much.

[Foreign Language] This is David Xueling answering your question. So firstly, in terms of the COVID-19 impact outside China, so we can look at the practice in China for the last quarter. So, while it [indiscernible] China, we don't see that [indiscernible] impact from the COVID-19 operate in China. So from the China's practice we actually forecast overseas business also won't see any of the significant impact from the COVID-19 in the short-term period. BIGO Live currently is in the very healthy growth stage as I mentioned in the prepared remarks, rather than the monetization, actually BIGO also focused on the social features, especially its community operation has become one of the key focus for the BIGO Live in the recent stage. 42% of the users has started to use the BIGO Live [indiscernible] of the functions of the platform. So going forward, we tap on directly [indiscernible] growth so BIGO Live also will see the continuously user growth in the future. And for Likee business, as I mentioned before, [indiscernible] we also will be more focused on the monetization of this year. If the two part can build out the more [indiscernible] for the business, definitely we will be more confident overall our three business will be aligning for the future. Thank you.

[Operator Instructions] Your next question comes from the line of Thomas Chong from Jefferies. You're line is now open Thomas.

[Foreign Language] Thanks for management for taking my follow-up question. My question is about the domestic market. Given, PS end to end including lower [indiscernible] and have we fortunate enough developing other applications to penetrate into Tier-3 and Tier-4 cities going into the future? Thank you.

[Foreign Language] Thomas let me adjust the question. So you are right that on top of YY Live as a main app, we are also developing different products. Of course, something we have audio based license product several of them that's focused on third tier cities and even fifth tier cities. We also have as I said eccommerce licensing products. We're also developing other social media product all based around probably based because that's all for competence. But we tried to country into different demographics and trying to conceive some focus on lower tier cities and of course, on the first tier cities. So, many of those products initial stage, so we haven't systematically disclosed to the actual investor about the metrics that we will do so at the right time. Though, you are right, [indiscernible]. And by the way, I also mentioned that we have partner with other big traffic platforms such as Xaomi and we have right now final these two and three additional big traffic platform. We may call it export [indiscernible] competence. And then let me share with those traffic platforms. So with that we also hope that we can continue to enhance our management communities to our different platforms. Thank you.

Next question comes from the line Yu Zhiqiang from CICC. Your line is now open Yu.

[Foreign Language] I'm on behalf of Natalie Wu. We have two questions. The first one is that, could the management share some color on the promotion of Likee? What's their plan for the investment in content and user acquisitions this year? And the second question is, could the management share some color? On the margin outlook for the domestic live broadcasting business of buyback this year? Thank you.

Thank you. Let me address those questions. First, in terms of the proportion of the Likee, regarding content as I said before, Likee focused on UGC, user generated content. So by nature we encourage the user to voluntarily create and upload short-form video content. As a result, we don't tend to spend that much money to acquire the PGC, but we will do so in some of the key markets to partner with some celebrities to produce. But I don't think that will cost that much money. We will also probably some of the song copyright owners to sign kind of a long-term contract, so that live broadcaster can live broadcast their songs et cetera. So that will cost some money. In terms of the Direct Gift acquisition, again, we're closely tracking the KPIs, meaning user retention base and then typically in those market we are much slower than in China in terms of per user acquisition cost plus after usage tactics [indiscernible] to realize as user as many times [indiscernible] that will create a closed end loop for the user. So that's on 19. On the domestic margin, if you look at 2019, our operating margin will [indiscernible] 20%. In 2020, we are looking at somewhere of those 20%, there might be some -- so the decrease of the margin for YY Live, but again, it's not only about domestic but because YY segment also showed the responsibility of [indiscernible] expansion. So we will continue to add some research in marketing plus we'll continue to recruit some of the high caliber AI expert technologist, so as a percentage of revenue and sales and marketing revenue will increase a little bit resulting to somewhere like 20 something percent for the operating margin for domestic 25%

As there are no further questions at this time. Now, I hand the call over back to Matthew. You may go ahead.

Thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you, operator.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.