JOYY(YY) - 2024 Q1 - Quarterly Report

Financial and Operational Highlights Fourth Quarter 2023 Financial Highlights In the fourth quarter of 2023, JOYY's net revenues were US$569.8 million, a decrease from the prior year, yet the company achieved a significant turnaround to a net income of US$45.8 million from a substantial net loss in Q4 2022, with Non-GAAP net income growing to US$64.2 million Fourth Quarter 2023 Financial Highlights | Financial Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | US$569.8 million | US$604.9 million | -5.8% | | Net Income/(Loss) Attributable to JOYY | US$45.8 million | (US$377.5 million) | Turnaround to Profit | | Non-GAAP Net Income Attributable to JOYY | US$64.2 million | US$50.0 million | +28.4% | Full Year 2023 Financial Highlights For the full year 2023, net revenues decreased to US$2,267.9 million, but both GAAP and Non-GAAP net income increased significantly, with GAAP net income more than doubling to US$301.8 million, driven by improved operational efficiency and investment gains Full Year 2023 Financial Highlights | Financial Metric | Full Year 2023 | Full Year 2022 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | US$2,267.9 million | US$2,411.5 million | -6.0% | | Net Income Attributable to JOYY | US$301.8 million | US$128.9 million | +134.1% | | Non-GAAP Net Income Attributable to JOYY | US$292.5 million | US$199.3 million | +46.8% | Fourth Quarter 2023 Operational Highlights Operationally, JOYY experienced mixed results in Q4 2023, with Bigo Live's average mobile MAUs growing by 4.5% year-over-year and BIGO's total paying users increasing by 7.9%, while MAUs for Likee and Hago declined due to reduced user acquisition spending - Global average mobile MAUs increased by 2.6% YoY to 274.9 million[3] Fourth Quarter 2023 Operational Highlights | Operational Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Bigo Live Avg. Mobile MAUs | 38.4 million | 36.8 million | +4.5% | | Likee Avg. Mobile MAUs | 39.1 million | 45.3 million | -13.7% | | Hago Avg. Mobile MAUs | 4.6 million | 6.7 million | -31.3% | | BIGO Paying Users | 1.67 million | 1.55 million | +7.9% | | BIGO Avg. Revenue per Paying User | US$244.8 | US$251.3 | -2.6% | Management Commentary CEO's Review of 2023 and Outlook for 2024 Chairman and CEO Mr. David Xueling Li highlighted 2023 as a year of progress, marked by enhanced profitability for the third consecutive year and a resumption of MAU growth, with the core strategy for 2024 being 'globalization through localization' to cultivate content ecosystems, explore long-term growth opportunities, and diversify revenue streams - Key achievements in 2023 included relentless optimization of operational efficiency, leading to enhanced profitability for the third straight year[4] - BIGO's revenue sustained its recovery in Q4, increasing by 3.1% annually, driven by a 7.9% YoY growth in paying users[4] - The core strategy for 2024 is 'globalization through localization' to grow the user community and reinforce leadership in key regions, aiming to diversify revenue streams and capture long-term sustainable growth[5] Detailed Financial Results Fourth Quarter 2023 Financial Results In Q4 2023, JOYY's net revenues decreased by 5.8% YoY to $569.8 million, yet the company successfully controlled costs and operating expenses, shifting from an operating loss of $14.2 million in Q4 2022 to an operating income of $4.8 million, with net income attributable to JOYY reaching $45.8 million Net Revenues Q4 2023 net revenues were $569.8 million, primarily impacted by a decline in live streaming revenues to $486.2 million due to adjustments to non-core products, partially offset by growth in BIGO's streaming revenue and a 7.9% increase in other revenues Net Revenues | Revenue Component | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Live Streaming Revenues | US$486.2 million | US$527.4 million | | Other Revenues | US$83.6 million | US$77.5 million | | Total Net Revenues | US$569.8 million | US$604.9 million | Cost of Revenues and Gross Profit Cost of revenues fell by 6.2% to $368.4 million in Q4 2023, resulting in a gross profit of $201.5 million and a slight improvement in gross margin to 35.4% from 35.1% in the corresponding period of 2022 Cost of Revenues and Gross Profit | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Cost of Revenues | US$368.4 million | US$392.6 million | | Gross Profit | US$201.5 million | US$212.3 million | | Gross Margin | 35.4% | 35.1% | Operating Expenses and Income Total operating expenses decreased to $199.4 million from $231.2 million year-over-year, driven by optimizations in sales and marketing strategies and improved management efficiency, leading to a GAAP operating income of $4.8 million - Sales and marketing expenses decreased to US$92.3 million due to optimization of marketing strategies to focus on ROI[8] Operating Expenses and Income | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Operating Income/(Loss) | US$4.8 million | (US$14.2 million) | | Operating Margin | 0.8% | -2.3% | | Non-GAAP Operating Income | US$27.9 million | US$27.8 million | | Non-GAAP Operating Margin | 4.9% | 4.6% | Net Income and EPS The company achieved a net income of $45.8 million, reversing a $377.5 million net loss from Q4 2022 primarily due to a one-time impairment loss, with Non-GAAP net income growing to $64.2 million and diluted net income per ADS at $0.74 Net Income and EPS | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net Income/(Loss) Attributable to JOYY | US$45.8 million | (US$377.5 million) | | Non-GAAP Net Income Attributable to JOYY | US$64.2 million | US$50.0 million | | Diluted Net Income/(Loss) per ADS | US$0.74 | (US$5.38) | | Non-GAAP Diluted Net Income per ADS | US$1.01 | US$0.65 | Balance Sheet and Cash Flows As of December 31, 2023, JOYY maintained a strong cash position with $3.69 billion in cash, cash equivalents, and short-term deposits/investments, generating $97.2 million in net cash from operating activities during the fourth quarter - As of December 31, 2023, the Company had cash and cash equivalents, restricted cash, short-term deposits, and short-term investments totaling US$3,685.6 million[12] - For the fourth quarter of 2023, net cash from operating activities was US$97.2 million[13] Full Year 2023 Financial Results For the full year 2023, net revenues were $2.27 billion, a decrease from 2022, but profitability improved substantially with net income attributable to JOYY increasing by 134.2% to $301.8 million, driven by disciplined marketing, investment gains, and higher interest income, while Non-GAAP net income also rose by 46.8% to $292.5 million Full Year 2023 Financial Results | Metric | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | Net Revenues | US$2,267.9 million | US$2,411.5 million | | Operating Income | US$28.8 million | US$50.7 million | | Non-GAAP Operating Income | US$130.5 million | US$164.0 million | | Net Income Attributable to JOYY | US$301.8 million | US$128.9 million | | Non-GAAP Net Income Attributable to JOYY | US$292.5 million | US$199.3 million | | Diluted Net Income per ADS | US$4.90 | US$1.59 | | Non-GAAP Diluted Net Income per ADS | US$4.13 | US$2.54 | Business Outlook and Recent Developments Business Outlook JOYY anticipates its net revenues for the first quarter of 2024 to be between US$543 million and US$560 million, a forecast subject to changes, particularly from macroeconomic uncertainties - For the first quarter of 2024, the Company expects net revenues to be between US$543 million and US$560 million[16] Recent Developments The company is actively managing its capital and corporate structure, having extended its share repurchase program with $25 million in shares repurchased recently, while also addressing the termination of the YY Live sale by Baidu and seeking legal advice on the matter - In November 2023, the board authorized the continued use of the unutilized US$530 million share repurchase quota for another 12 months, with US$25 million of shares repurchased as of March 15, 2024[17] - On January 1, 2024, Baidu terminated the share purchase agreement for YY Live, prompting JOYY to engage in discussions with Baidu, seek legal advice, and consider all available options[18] Financial Statements and Reconciliations Consolidated Balance Sheets As of December 31, 2023, JOYY's balance sheet showed total assets of $8.48 billion, down from $9.07 billion at the end of 2022, with total liabilities decreasing to $3.17 billion and total shareholders' equity standing at $5.29 billion, reflecting a solid financial position Consolidated Balance Sheets | Balance Sheet Item | Dec 31, 2023 (US$ thousands) | Dec 31, 2022 (US$ thousands) | | :--- | :--- | :--- | | Total Current Assets | 4,072,640 | 4,644,649 | | Total Assets | 8,483,865 | 9,071,653 | | Total Current Liabilities | 3,086,407 | 3,071,684 | | Total Liabilities | 3,171,716 | 3,568,921 | | Total Shareholders' Equity | 5,290,016 | 5,411,366 | Consolidated Statements of Operations The consolidated statements of operations for the year ended December 31, 2023, detail a net revenue of $2.27 billion and a gross profit of $813.0 million, achieving a net income attributable to controlling interest of $301.8 million, a significant increase from $128.9 million in 2022, despite lower revenues Consolidated Statements of Operations | Income Statement Item | Twelve Months Ended Dec 31, 2023 (US$ thousands) | Twelve Months Ended Dec 31, 2022 (US$ thousands) | | :--- | :--- | :--- | | Total Net Revenues | 2,267,870 | 2,411,516 | | Gross Profit | 813,028 | 852,128 | | Operating Income | 28,815 | 50,735 | | Net Income Attributable to Controlling Interest | 301,816 | 128,891 | Segment Reports The segment report for Q4 2023 highlights the BIGO segment as the company's core profit engine, generating $491.3 million in net revenues and $53.0 million in operating income, while 'All other' segments reported revenues of $79.0 million and an operating loss of $48.2 million Q4 2023 Segment Performance | Q4 2023 Segment Performance | BIGO (US$ thousands) | All other (US$ thousands) | Total (US$ thousands) | | :--- | :--- | :--- | :--- | | Total Net Revenues | 491,261 | 79,036 | 569,839 | | Operating Income (Loss) | 53,011 | (48,215) | 4,796 | Q4 2023 Non-GAAP Segment Performance | Q4 2023 Non-GAAP Segment Performance | BIGO (US$ thousands) | All other (US$ thousands) | Total (US$ thousands) | | :--- | :--- | :--- | :--- | | Non-GAAP Operating Income (Loss) | 66,973 | (39,042) | 27,931 | | Non-GAAP Net Income (Loss) | 63,507 | (4,124) | 59,383 |