JOYY(US:YY)2022-11-28 16:00markdown [Q3 2022 Performance Overview](index=1&type=section&id=JOYY%20Reports%20Third%20Quarter%202022%20Unaudited%20Financial%20Results) JOYY's Q3 2022 saw a **revenue decrease to US$586.7 million**, but **GAAP net income surged to US$515.3 million** due to a **one-off gain**, with **non-GAAP net income more than doubling to US$76.9 million**, driven by **improved margins and cost discipline**, while **Bigo Live's mobile MAUs growing 14.2%** [Financial Highlights](index=1&type=section&id=Third%20Quarter%202022%20Financial%20Highlights) In Q3 2022, JOYY's **net revenues decreased to US$586.7 million** year-over-year. However, **GAAP net income surged to US$515.3 million** due to a **one-off gain**, and **non-GAAP net income more than doubled to US$76.9 million**, driven by **improved margins and cost discipline** Q3 2022 Key Financial Metrics | Metric | Q3 2022 | Q3 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Revenues | US$586.7 million | US$650.5 million | -9.8% | | Net Income (GAAP) | US$515.3 million | US$7.5 million | +6770.7% | | Non-GAAP Net Income | US$76.9 million | US$35.1 million | +119.1% | - The **significant increase in non-GAAP net income** was primarily attributed to **improved gross margin**, **disciplined marketing spending**, and **enhanced operating efficiency** at the group level[2](index=2&type=chunk) [Operational Highlights](index=1&type=section&id=Third%20Quarter%202022%20Operational%20Highlights) Operational results showed a **strategic shift**, with **Bigo Live's mobile MAUs growing 14.2% to 35.4 million**. Conversely, **MAUs for Likee and Hago decreased by 34.1% and 29.6% respectively** due to **reduced user acquisition spending**. The **total number of paying users for BIGO remained stable**, but the **average revenue per paying user decreased** - **Bigo Live's average mobile MAUs grew by 14.2% YoY to 35.4 million**[3](index=3&type=chunk) - **MAUs for Likee and Hago decreased by 34.1% and 29.6% respectively**, primarily due to **reduced spending on user acquisition via advertisement**[3](index=3&type=chunk) BIGO Operational Metrics (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Paying Users | 1.51 million | 1.52 million | -0.5% | | Avg. Revenue per Paying User | US$259.8 | US$307.9 | -15.6% | [Management Commentary](index=1&type=section&id=Management%20Commentary) The Chairman and CEO, Mr. David Xueling Li, highlighted that **improved profitability** was achieved despite a volatile macro environment, crediting the company's **strategic planning and optimization measures**. The focus remains on **long-term growth** through **product upgrades, localized content, and enhancing user experience** to drive sustainable value - Management attributes the **improved profitability** to **forward-looking strategic planning and effective execution of optimization measures**[4](index=4&type=chunk) - The company's **long-term growth strategy focuses on product upgrades and diverse localized content offerings**, which resulted in a **14.2% YoY growth in Bigo Live's MAUs**[4](index=4&type=chunk) - Future strategy involves **adapting to the macro environment, bolstering resilience, optimizing efficiency, and capturing long-term growth opportunities**[4](index=4&type=chunk) [Detailed Financial Results](index=2&type=section&id=Third%20Quarter%202022%20Financial%20Results) Detailed financial results for Q3 2022 show a **9.8% decrease in net revenues** to **US$586.7 million**, primarily from live streaming, offset by a **significant improvement in gross margin to 37.5%** and **operating income nearly tripling to US$19.8 million** due to cost controls and a **one-off gain on investments** [Revenues](index=2&type=section&id=NET%20REVENUES) **Net revenues** for Q3 2022 were **US$586.7 million**, a decrease from **US$650.5 million** in Q3 2021. The decline was driven by a drop in **live streaming revenues**, which were negatively impacted by macroeconomic uncertainties and unfavorable currency exchange rates affecting user spending Revenue Breakdown (Q3 2022 vs Q3 2021) | Revenue Stream | Q3 2022 | Q3 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Live Streaming | US$542.8 million | US$612.2 million | -11.3% | | Other Revenues | US$44.0 million | US$38.4 million | +14.6% | | **Total Net Revenues** | **US$586.7 million** | **US$650.5 million** | **-9.8%** | - The **decrease in live streaming revenue** was primarily due to a **lower average revenue per paying user at BIGO**, influenced by **global macroeconomic uncertainties and the appreciation of the U.S. dollar**[5](index=5&type=chunk) [Cost of Revenues and Gross Profit](index=2&type=section&id=COST%20OF%20REVENUES%20AND%20GROSS%20PROFIT) **Cost of revenues decreased by 16.7% to US$366.5 million**, leading to a **4.5% increase in gross profit to US$220.2 million**. The **gross margin significantly improved to 37.5% from 32.4%** in the prior year, mainly due to the **optimization of revenue sharing and other operational costs** Gross Profit and Margin (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Cost of Revenues | US$366.5 million | US$439.8 million | -16.7% | | Gross Profit | US$220.2 million | US$210.8 million | +4.5% | | Gross Margin | 37.5% | 32.4% | +5.1 percentage points | [Operating Expenses and Income](index=2&type=section&id=OPERATING%20EXPENSES%20AND%20INCOME) **Operating expenses were reduced by 3.1% to US$202.2 million**, driven by **lower sales and marketing expenses from reduced user acquisition for Likee and Hago**. This cost control, combined with higher gross profit, resulted in **operating income nearly tripling to US$19.8 million** and the **operating margin expanding to 3.4%** - **Sales and marketing expenses decreased to US$96.8 million from US$106.3 million YoY**, primarily due to **reduced user acquisition spending for Likee and Hago**[7](index=7&type=chunk) Operating Income (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Operating Income (GAAP) | US$19.8 million | US$6.9 million | +187.0% | | Operating Margin (GAAP) | 3.4% | 1.1% | +2.3 percentage points | | Non-GAAP Operating Income | US$43.1 million | US$31.3 million | +37.7% | | Non-GAAP Operating Margin | 7.4% | 4.8% | +2.6 percentage points | [Net Income and EPS](index=2&type=section&id=NET%20INCOME) **GAAP net income attributable to controlling interest skyrocketed to US$515.3 million from US$7.5 million**, primarily due to a **one-off gain on fair value change of investments**. **Non-GAAP net income also showed strong growth, increasing to US$76.9 million**. Consequently, **diluted EPS (GAAP) was US$6.28**, and **non-GAAP diluted EPS was US$0.96** - The **substantial increase in GAAP net income** was mainly due to a **one-off remeasurement gain from the consolidation of a previously held equity investment**[9](index=9&type=chunk) Net Income and EPS (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Net Income (GAAP) | US$515.3 million | US$7.5 million | | Non-GAAP Net Income | US$76.9 million | US$35.1 million | | Diluted EPS (GAAP) | US$6.28 | US$0.07 | | Non-GAAP Diluted EPS | US$0.96 | US$0.42 | [Balance Sheet and Cash Flows](index=2&type=section&id=BALANCE%20SHEET%20AND%20CASH%20FLOWS) As of September 30, 2022, JOYY maintained a **strong liquidity position with cash, cash equivalents, and short-term investments totaling approximately US$4.28 billion**. The company generated a **net cash inflow from operating activities of US$117.1 million** during the third quarter - The company held a **total of US$4,276.7 million in cash and cash equivalents, restricted cash, short-term deposits, and short-term investments** as of September 30, 2022[12](index=12&type=chunk) - **Net cash inflow from operating activities for the third quarter of 2022 was US$117.1 million**[12](index=12&type=chunk)[13](index=13&type=chunk) [Business Outlook and Shareholder Returns](index=4&type=section&id=Business%20Outlook%20and%20Shareholder%20Returns) JOYY forecasts **Q4 2022 net revenues between US$594 million and US$619 million**, while continuing to **prioritize shareholder returns** through a **US$0.51 per ADS quarterly dividend** and an **extended US$800 million share repurchase program** [Q4 2022 Business Outlook](index=4&type=section&id=Business%20Outlook) For the fourth quarter of 2022, JOYY anticipates **net revenues to be in the range of US$594 million to US$619 million**. This forecast is subject to changes based on market conditions and macroeconomic uncertainties - The Company expects **net revenues for the fourth quarter of 2022 to be between US$594 million and US$619 million**[14](index=14&type=chunk) [Shareholder Returns (Dividend and Share Repurchase)](index=4&type=section&id=Shareholder%20Returns) JOYY **continues to return value to shareholders**, declaring a **quarterly dividend of US$0.51 per ADS for Q3 2022**. Additionally, the company **repurchased US$14.1 million of its shares** during the quarter and **extended its share repurchase program**, authorizing the use of the **remaining US$800 million for another 12 months** - A **dividend of US$0.51 per ADS for the third quarter of 2022** was declared, payable on January 6, 2023[15](index=15&type=chunk) - The company **repurchased approximately US$14.1 million of its shares in Q3 2022**[17](index=17&type=chunk) - In November 2022, the board authorized the **extension of the share repurchase program**, with an **unutilized quota of US$800 million**, for another 12-month period[17](index=17&type=chunk) [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for Q3 2022 reveal **total assets of US$9.39 billion**, a **significant GAAP net income of US$509.5 million** driven by a **US$430.6 million gain on fair value change of investments**, and the **Bigo segment as the primary revenue and profit driver** [Unaudited Condensed Consolidated Balance Sheets](index=9&type=section&id=JOYY%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheet as of September 30, 2022, shows **total assets of US$9.39 billion**, up from **US$9.12 billion** at the end of 2021. **Total liabilities remained stable at US$3.51 billion**. The **increase in assets was primarily driven by a rise in goodwill and non-current assets**, while **cash and short-term investments decreased** Key Balance Sheet Items (in thousands USD) | Account | Sep 30, 2022 (in thousands USD) | Dec 31, 2021 (in thousands USD) | | :--- | :--- | :--- | | Cash and cash equivalents | 1,226,602 | 1,837,185 | | Total current assets | 4,599,254 | 5,070,322 | | Goodwill | 2,656,137 | 1,958,263 | | **Total assets** | **9,393,243** | **9,120,012** | | **Total liabilities** | **3,509,442** | **3,491,714** | | **Total shareholders' equity** | **5,794,035** | **5,562,465** | [Unaudited Condensed Consolidated Statements of Operations](index=11&type=section&id=JOYY%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The income statement for Q3 2022 details the components leading to the **net income of US$509.5 million**. Key drivers include a **gross profit of US$220.2 million**, **operating income of US$19.8 million**, and a **significant gain on fair value change of investments of US$430.6 million** Q3 2022 Income Statement Highlights (in thousands USD) | Account | Q3 2022 (in thousands USD) | Q3 2021 (in thousands USD) | | :--- | :--- | :--- | | Total net revenues | 586,729 | 650,545 | | Gross profit | 220,215 | 210,784 | | Operating income | 19,827 | 6,864 | | Gain on fair value change of investments | 430,622 | (12,549) | | Net income from continuing operations | 509,518 | 4,125 | [Reconciliation of GAAP and Non-GAAP Results](index=14&type=section&id=JOYY%20INC.%20UNAUDITED%20RECONCILIATION%20OF%20GAAP%20AND%20NON-GAAP%20RESULTS) This section reconciles GAAP to non-GAAP financial measures. For Q3 2022, the **largest adjustment to net income was the exclusion of a US$430.6 million gain on fair value change of investments**. Other **significant adjustments** included **share-based compensation**, **amortization of intangible assets**, and reconciling items on **equity method investments** - To arrive at Non-GAAP net income of **US$70.5 million** from GAAP net income of **US$509.5 million**, the company made several adjustments, the **largest being the exclusion of a US$430.6 million gain on fair value change of investments** and a **US$56.2 million gain on extinguishment of debt**[47](index=47&type=chunk) - **Non-cash and non-recurring expenses added back to calculate non-GAAP operating income** included **US$9.8 million in share-based compensation** and **US$13.5 million in amortization of intangible assets from business acquisitions**[47](index=47&type=chunk) [Segment Performance Analysis](index=16&type=section&id=JOYY%20INC.%20UNAUDITED%20SEGMENT%20REPORT) The **Bigo segment remains the primary driver of JOYY's business**, **generating US$483.3 million in revenue and US$58.0 million in operating income in Q3 2022**. The **'All other' segments collectively reported revenues of US$103.4 million and an operating loss of US$38.1 million**, indicating **Bigo's central role in the company's profitability** Q3 2022 Segment Performance (in thousands USD) | Segment | Total Net Revenues (in thousands USD) | Operating Income (Loss) (in thousands USD) | | :--- | :--- | :--- | | Bigo | 483,332 | 57,965 | | All other | 103,446 | (38,138) | | **Total** | **586,729** | **19,827** | - The **Bigo segment's non-GAAP operating income was US$73.4 million in Q3 2022**, while the **'All other' segment had a non-GAAP operating loss of US$30.3 million**[54](index=54&type=chunk)