Ladies and gentlemen, thank you for standing by and welcome to the JOYY Inc.'s First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the management’s prepared remarks, there will be a question-and-answer session. 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 first quarter 2022 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of JOYY; Ms. Ting Li, our COO; and Mr. Alex Liu, the General Manager 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.joy.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 US dollars. I will now turn the call over to our Chairman and CEO, Mr. David Xueling Li. Please go ahead, sir.

Hello everyone. Welcome to our first quarter 2022 earnings call. Let me start the call with an overview of our first quarter results. In line with our previous expectations as various parts of the world started to emerge from pandemic restrictions, a combination of course, including macroeconomic weakness, seasonality, and unfavorable foreign exchange impact contributed to a drag on our topline growth during the first quarter. For the first quarter of 2022, our group's total revenue was $623.8 million, decreasing by 3% year-over-year. Among which BIGO's revenue was $534.6 million, decreasing by 8% year-over-year. However, our global business has demonstrated resilience despite the challenging market environment and weak seasonality. Such resilience is mainly attributable to our sustainable growth model and further improvement to our operating efficiency. When compared to prior year period, we achieved a steady improvement in profitability during the first quarter of 2022. Excluding YY Live, we recorded a non-GAAP net profit of $20.9 million, and expanded our non-GAAP net margin to 3.3% compared to a non-GAAP net loss margin of 3.7% in the prior year period. BIGO's non-GAAP net profit grew to $59.9 million, while its non-GAAP net margin improved to 11.2%. In addition, our operation cash flow remained healthy and reached positive $59.2 million in the fourth quarter. I talked the last quarter about some of the increasing macro complexities facing our business. As a global company, with worldwide operations, we are not immune to international macroeconomic volatilities. During the initial outbreak of COVID-19 from early 2020 to mid-2021, we experienced an acceleration in business growth, as the online social entertainment industry, in general, enjoyed a greater user engagement and activities amidst previous [ph] lockdowns. However, as a word implied into the post-pandemic era, the long-term effect of COVID lingered and the global economy suffered from…

Thanks David. Hello everyone. Now, let me go through the details of our financial results. Please note the financial information and non-GAAP financial information disclosed in our earnings press release is presented on a continuing operations basis, unless otherwise specifically stated. As the sale of YY Live was substantially completed on February 8, 2021, with certain customary matters to be completed in the future. We have ceased consolidation of YY Live business since February 2021. During the first quarter of 2022, due to increased macroeconomic uncertainties, seasonality and some depreciation of certain currencies against US dollar, our total net revenues for the first quarter decreased to US$623.8 million from US$643.1 million in the same period of 2021. In particular, our live streaming revenues for the first quarter was US$590.1 million and other revenues in the first quarter increased by 16.3% to US$33.7 million. Cost of revenues for the first quarter decreased by 4.6% year-over-year to US$422.6 million. Revenue-sharing fees and content costs was US$279.9 million in the first quarter compared with US$282 million in the same period of 2021. Bandwidth costs decreased to US$20.9 million from US$29.5 million in the same period of 2021, primarily due to the company's improved efficiency in bandwidth usage, partially offset by the increased bandwidth usage as a result of continued user-based expansion of BIGO LIVE. Gross profit increased to US$201.2 million in the first quarter, with our gross margin improved to 32.2% from 31.1% in the same period of 2021. As we continued to enhance our operating leverage and execute a prudent marketing strategy, operating expenses for the first quarter decreased by 28.1% to US$200.6 million from US$279 million in the same period of 2021. Among the operating expenses, sales and marketing expenses decreased to US$104.4 million from US$137.4 million due to disciplined sales…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Alex Poon at Morgan Stanley. Please go ahead.

[Foreign Language] My first question is related to the post-COVID normalization and costing our revenue weakness in the first half. So can management share with us, when do you expect revenue growth to return to positive year-over-year growth? And just now management also mentioned about the weaker macro environment impact on our business, how should we look at the full year 2022 revenue growth? My second question is related to TikTok, we recently has started a subscription business like Twitch and also plan to start casual game business in Vietnam. Can management share with us on new monetization strategy? Do we have any new plans? Thank you.

Thank you, Alex. For your first question, as I just mentioned, since the second half of last year as global users resume offline travel, there has been a negative impact on users' online social activities. And yet, we have noticed that the long-term effects of the pandemic on the global economy actually are still continuing in 2022, especially as multiple regions have adopted financial stimulus plans during the pandemic as well as easing monetary policy. As these policies being gradually removed, we see increased uncertainty of the global economic growth and also the raising inflation affected consumers' consumption confidence and also their paying capability. So, such adverse macro trends definitely pose uncertainties and challenges for our business growth in the short-term. And these challenges are not for us alone, they actually apply to all of the companies with world-wide operations. But we've also want to point out is that opportunities often come with challenges. So, as you can see in the past two years, between 2020 and 2021, we successfully navigated multiple uncertainties during the pandemic and capture growth opportunities. Through the years of market operations, our business has reached a meaningful scale. We grow our revenue from $900 million in the year 2019 to $2.6 billion in the year of 2021 and we have achieved non-GAAP profitability since 2021. And also, we have managed to maintain a relatively healthy operating cash flow. So, this experience will all lay a solid foundation for us to navigate the current challenges posed by the macro environment and help us better see further growth opportunity. So, for our 2022 outlook, our keyword remains the same is to balance growth and profit. And given the rising uncertainties of the macro environment, we'll continue to act prudently and closely track market dynamics as we progress.…

Our next question will come from Thomas Chong at Jefferies. Please, go ahead.

[Foreign Language] Thanks management for taking my questions. My first question is about the competitive landscape for the different regions? And how should we think about the second half business trend? And my second question is about the operating expenses side. How should we think about the expense outlook, as well as the margin in 2022? Thank you.

[Foreign Language]

Thank you, Thomas, for your question. Regarding your question, on competitive landscape, I think that the main pressure comes from the macro environment. As I've just mentioned, there would be a short-term fluctuation of users online activity, time spend and beginners and at the same time under paying capacity as well. So this means that for all industry players, we need to gain user engagement and monetization opportunity by providing better products with better service and compete with a wider range of competitors both online and offline. So that's why I believe that we should revisit the original intention of users, what drives them to use these products and focus on the fundamentals when we were -- when we are planning our product strategy. So we will continue to focus on the fundamentals of our products, cultivate our content and social ecosystem and continuously innovate our products to improve users' social experience. I still believe that from the long-term perspective, the global social entertainment market has huge potential. And competition will always be there. It will be a long-term marathon as compared to a short-term game. And in such times of increasing macro uncertainty, risk control and ensuring long-term sustainable growth are more critical than ever. As I've just mentioned, two years of operation, our business have already reached a meaningful scale. And we have established worldwide operational capacity and achieve non-GAAP profitability. And our cash flow remains to be relatively healthy as well. And I believe that we have already gained additional competitive advantage by being proactive and forward-looking in terms of risk control and ensuring our sustainable growth model. We believe that with the support of our strong cash flow and also our prudent growth model, we’ll be able to better grasp the growth opportunities and further increase…

Our next question will come from Yiwen Zhang at China Renaissance. Please go ahead.

[Foreign Language] Thanks for taking my question. So I have question regarding cash usage. We know that there's abundant cash on our balance sheet. How should we think about the usage priority, namely, how do we balance business investments overseas share repurchase or even dividend payout? Thank you. A – Unidentified Company Representative: Thank you for your question. In terms of cash usage, we will continue to be prudent and plan based on the long-term business development needs. I believe that based on our current cash position, we should be able to balance between keeping a sufficient cash flow for our earning growth and also enhancing return for our shareholders. So, in terms of our business, we will continue to invest in our global business to fuel organic growth and also execute -- continue to execute ROI-oriented growth strategy to create more value. And in the meantime, to reward our investors for their long-term support, we have been actively enhancing shareholder returns via dividends and share buybacks. In the year 2020, we have announced dividend plans with a total size of US$500 million to be quarterly distributed in the following three years. And as of the end of the first quarter, we have already declared approximately $250 million of cash dividends under such dividend plan. And in the third quarter in the year 2021, we have expanded our share repurchase program by $1.2 billion and by the end of the first quarter, we had repurchased approximately $320 million under these plans. So, if you look at our overall capital return to shareholders, as the percentage of our current market cap, that is a very sizable amount. We believe that our investors can see our sincerity from our actions as well.

And that's the end of our call. Thank you for joining and we look forward to speaking with everyone next quarter. Thank you.

Thank you very much. This does conclude the call today. Thank you all for joining. You may now disconnect.