Yalla Group Limited Price & Performance (YALA)

Hello, everyone, and welcome to Yalla's fourth quarter and full year twenty twenty four earnings conference. We issued our earnings release earlier today and it is now available on our IR website as well as on Newswire outlet. 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 these 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 if required by law. Please also note that Yalla's earnings press release and its conference call include a discussion of an audited GAAP financial information as well as unaudited non GAAP financial measures. Yalla's 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 Executive Officer who will provide an overview of our latest achievements and growth strategies.

He will be followed by Mr. Sethis Ma Yu, 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 Shi, our Chief Operating Officer will join the Q and A session. With that said, I would now like to turn the call over to our Chairman and Chief Executive, Executive Officer, Mr. Tao Yalla. Please go ahead, sir. Thank you, everyone, for joining our fourth quarter full year twenty twenty four conference call. We concluded twenty twenty four with robust fourth quarter results.

Our revenue rose to USD91 million reaching a new record high for the second consecutive quarter and once again beating the upper end of our guidance. While bringing our annual revenue to USD $340,000,000. This exceptional performance is a testament deep commitment to enhancing user experiences and boosting user engagement across our vertical system. With content tailored to the local culture. Additionally, we have made significant in improving our operational efficiency. Enhancing management practices with our service providers optimizing user acquisition strategies, and refining our internal processes. Which led to 26% year over year increase in operating profitability for full year 2024. This impressive results further demonstrate our ability to drive high quality growth and fulfill many users evolving online social networking and gaming needs. Looking back at 2024, the thriving digital economy in the MENA region, continued to attract attention globally. An increasing number of global leading Internet companies are investing more resources and talent into the media market. Driving evolving demand trends. Among local users. This vibrant landscape underscores Mina's potential as one of the fastest growing mobile Internet markets, On a related note, according to industry research, the digital transformation market in Mina was valued at USD 55,000,000,000 in 2024, and it is expected to at a compound annual growth rate of 22.5%, reaching USD 418.

By 02/1934. This dynamic expansion creates tremendous profit and growth opportunities for businesses. Leveraging nearly a decade of experience in mineral aging, a well established product portfolio and flourishing online social and gaming community. Yalla is well positioned for continued market leadership in the MENA region. We remain dedicated to serving local users evolving needs for show show interaction. And entertainment. And we will stay closely at turned to local trends as we create and launch new products. Tailored to MINA users' preference. The Mina region has also experienced advancement in artificial intelligence. With countries such as Saudi Arabia and The UAE at the forefront of AI infrastructure investments. In the first half of twenty twenty four, [indiscernible] AI sector grew by 41.3% bringing the total number of AI companies to 400. We [indiscernible] Internet industry and our deep understanding of local culture and user behaviors, we continued to strengthen our capabilities in developing AI algorithm models that are tailored to local culture and user preference. Our dedicated AI team is rapidly integrating AI driven automation and data analytics into products and operations to optimize R and D efficiency and improve the user experience across our product offerings. For example, we have increased the role of our self developed AI art platform in virtual product design, training it to better align with the MINA users aesthetic preference.

This has significantly enhanced design efficiency and accuracy. Additionally, we [indiscernible] AI algorithm to comprehensively [indiscernible] personalized recommendations to improve user interaction and reengage domain users. These enhanced features not only boost user engagement, but also drive profitability. And going forward, we will continue to drive innovation in AI applications to provide local users more efficient and engaging services. At the same time, Miya's gaming industry continues to maintain a strong growth trend. As one of the fastest growing regions in terms of global gaming industry revenue, The media market shows a high willingness to download and pay for various types of games. As always, we remain committed to enriching our gaming product portfolio with continuous focus on R and D for Yalla game. And we've shared the privacy. Yalla Game's product line is vibrant. With several self developed metal games in the pipeline. Two of these games have completed development and are in testing phase. We are also consistently discussing collaboration opportunities. To proactively potential partners from gaming studios around the world. We look forward to seeing these new products capture their corresponding user base and the drive revenue growth in the coming year? 2025 marks the tenth anniversary of Yalla Group We are excited to see our new products and the diverse efforts we've made recently come to fruition this milestone year.

The middle market is experiencing in incredible opportunity for growth with local governments out for digital development laying a solid foundation for future expansion. Asmina's largest online social networking, and gaming company, we remain confident in our ability to navigate the ever evolving digital landscape and deliver value to all of our stakeholders. Now I will turn this call over to our President, [indiscernible] For a closer look at our recent developments, Hello, everyone.

Thanks for joining us today.

Let's take a closer look at our fourth quarter operations and our products performance. As of 12/31/2024, our MAU increased by 14.4% year over year to $41,400,000 Paying users increased by 3.2% year over year to 12,300,000.0 with ARBO reaching $7.24 an increase of 10.2% year over year. During the quarter, we continued to launch innovative features and engaging operational events for our flagship products, strengthening users' engagements and maintaining these products profitability. For our regional products, we continued to unleash their immense potential with iterations and upgrades. Revenue from 101 Okei Allah reached a new record high. Contributing to our overall growth. We are delighted to see our legacy product exhibits during popularity and generate strong results as we continue to invest in new opportunities to drive future growth. We continue to strengthen Yalla Aludo's momentum with a series of outstanding offline events this year. In December 2024, we held our Yalalud Ochabian Tournament in Riyadh in Saudi Arabia. Featuring a host of customized experiences inspired by local culture traditions to suit local gamer states We also provided VR gaming experiences and other immersive activities to strengthen users' engagement. With these influential events, we create unique opportunities for talented gamers and game enthusiasts.

To connect while cementing our bond with users and extending our reach to the broader gaming community. In terms of regional products, we announced in the third quarter of twenty twenty four that one hundred and one Okay Yalla had set a new quarterly revenue record. A milestone It swiftly surpassed this quarter Meanwhile, the product achieved a significant year over year increase in monthly average MAU during quarter four. These remarkable results have inspired us to remain laser focused on crafting high quality regional products [indiscernible] and challenge ourselves to seize every opportunity for success in their respective markets. Our dedication to enhancing Mina's digital lifestyles continued to enhance social recognition. On the group level, we are proud to announce that Yalla Group was awarded the Powerhouse Partnership Award at the AppGallery developer conference twenty twenty four in Abu Dhabi in November 2024. The award was presented by the Co Chairman of the UAE Esports Federation, in recognitions of Yalla pivotal contributions to the AppGallery ecosystem, including an array of innovative digital experiences tailored to MENA users' unique needs. Additionally, Yalla Ludo won a Gold Stevie Award for Innovation in Entertainment Applications at the sixth Annual Middle East and North Africa STEVE Awards in 2025.

The STEVE Awards are widely considered to be the world's premier business awards and are the only business awards to recognize innovation in the workplace in 18 nations in MENA. This marked the third consecutive win for Yalla's industry leading social apps underscoring our unwavering commitment to the pursuit of innovation, excellence and the ultimate end user experience. In short, as the largest MENA based online social networking and gaming company, Yalla stands at the forefront of Mina's digital transformation, looking ahead we will remain dedicated to pushing the boundaries of innovation delivering unparalleled experience to meet our users' evolving needs and desires. [indiscernible] to grow and thrive, we will leverage our core strengths and strategic partnership to explore new opportunities and shape the future of social networking and online inter With that, I will now turn the call over to our CFO, Karim. Who will discuss our key financial and operational results.

Thank you, Sethi. And hello, everyone. Thank you for joining us today. We delivered robust 2024 results reflecting our unwavering commitment to driving high quality growth in dynamic and rapidly evolving market. For full year 2024, our revenues reached US369.7 million dollars In the fourth quarter alone, our revenues increased by 12.2% year over year to US90.8 million dollars Exceeding the up end of our guidance, and underscoring the ongoing success of our user acquisition and the monetization [indiscernible] Moreover, we remained focused on enhancing our operational efficiency and optimizing cost which has significantly contributed to our operating profitability. Our operating income increased by 29.4% year over year to $30,000,000 in the fourth quarter and by 26% year over year to US121.4 dollars for the full year. This meaningfully boosted our overall profitability. With net income increasing by 18.7% to US134.2 million dollars for the full year 2024. As we move into 2025, we will continue to prioritize quality development focusing on both product innovation and refined operational processes. We will also deepen our commitment to enriching the user experience. And expanding our services to cater to the regions involving needs. With our deep local insights and strong financial fundamentals, we are well positioned to navigate the market dynamics and see future growth opportunities.

Let's move on to our detailed financials for the fourth quarter of twenty twenty four. Our revenues were $8,090,800,000.0 dollars in the fourth quarter of twenty twenty four, a 12.2% increase from US80.9 million dollars in the same period last year. The increase was primarily driven by our burgeoning user base, Our solid revenue growth was also partially attributable to the substantial increase in the number of paying users. Which grew to 12,300,000.0 in the fourth quarter of twenty twenty four from $11,900,000 in the same period last year. Turning to our costs and expenses. Our total costs and expenses were US6.7 million dollars in the fourth quarter of twenty twenty four. A 5.3% increase from US57.6 million dollars in the same period last year. Cost of revenues was $31,000,000 in the fourth quarter of twenty twenty four, a 1.5% increase from US30.6 million dollars in the same period last year. Primarily due to higher commission fees paid to third party payment platforms as a result of increasing revenues generated Cost of revenues as percentage of total revenues decreased from 34.2% in the fourth quarter of twenty twenty four from 37.8% in the same period last year. Our selling and marketing expenses were US7.4 million dollars in the fourth quarter of twenty twenty four, a 28.5% decrease from US10.4 million dollars the same period last year.

Primarily driven by our more disciplined advertising and promote approach. Selling and marketing expenses as a percentage of total revenues decreased to 8.2% in the fourth quarter of twenty twenty four, from 12.8% in the same period last year. Our general and administrative [indiscernible] the fourth quarter of twenty twenty four. Of 15.6% increase from US11.3 million dollars in the same period last year. Primarily due to an increase in incentive compensation General and administrative expense as a percentage of total revenues increased to 14.4% in the fourth quarter of twenty twenty four from 14% in the same period last year. Our technology and product development is were US9.2 million dollars in the fourth quarter of twenty twenty four, a 69.6% increase from US5.4 million dollars in the fourth same period last year. Primarily due to an increase in salaries and benefits for our technology and product development staff, driven by an increase in the headcounts of these staff to support the development of new businesses and expansion of our product portfolio. Technology and product development expenses as percentage of total revenues increased to 10.1% in the fourth quarter of twenty twenty four from 6.7% in the same period last year. [indiscernible] As such, our operating income was US30.1 million dollars in the fourth quarter of twenty twenty four.

A 29.4% increase from $23,300,000 in the same period last year. Interest income was US7.1 million dollars in fourth quarter of twenty twenty four compared with US6.5 million dollars in the fourth quarter of twenty twenty three. Income tax expense was RMB3.35 million dollars in the fourth quarter of twenty twenty four. Compared with US0.54 million dollars the fourth quarter of twenty twenty three. The increase was primarily due to an increase in income taxes expenses recognized for recognition of deferred tax liabilities the undistributed written earnings unconsolidated subsidiaries. As a result of our foregoing our net income was US32.5 million dollars in the fourth quarter of twenty twenty four, a 9.7% increase from US29.7 million dollars the fourth quarter of twenty twenty three. [indiscernible] And our non GAAP net income in the fourth quarter of twenty twenty four was US35.7 million dollars a 6.8% increase from US33.3 $400,000 the same period last year. [indiscernible] Moving on to our liquidity and capital resources. Our cash position remains solid and healthy. As of 12/31/2024, we had cash and cash equivalents restricted to cash term deposits and short term investments of US656.3 million dollars compared with US595.3 and $35,700,000 as of 12/31/2023.

We continued to return value through our share repurchase program. Our Board of Directors has approached an extension of the expiration date of the share repurchase [indiscernible] To 05/21/2026, the company's share repurchase program beginning on 05/21/2021. During the fourth quarter, we repurchased $1,595.000879 ADS or Class A ordinary shoes. From the open market totaling approximately US6.9 million dollars [indiscernible] as of 12/31/2021, 2024, we had completed cash repurchases in the open market of 7,305,138 ADS or Class A ordinary shares totaling approximately US49.4 million dollars Moving to our outlook. For the first quarter of twenty twenty five, we expect our revenues to be between US75 million dollars and USD 82,000,000. The above outlook is based on the current market conditions and reflects the company's management's current and preliminary and operating conditions, customer demand which are all subject to change. In the interest of time, please refer to our earnings press release for further details on our first quarter and full year 2024 financial results. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Our first question today comes from Shuking Zhang with CICC. Please go ahead.

Good morning, management. Thanks for taking my question. My question about the RGA business. Could management share the latest progress of new game products and what's our insights into commercialization Thank you.

Thanks, Cheyqin for your question. This Jeff. I will take your question.

Throughout 2024, we focus on advancing the research and development of of our new gaming products, consistently exploring new avenues to extend our product footprint portfolio. [indiscernible] have completed the version of one point zero development of two Mythical games and are now in the process of fine tuning them. Meanwhile, we have been proactively pursuing external collaborations that [indiscernible] our business. Leveraging Yalla's extensive experience in The Middle East, We are working with more potential partners to unlock the local markets of [indiscernible] and establish a deeper foothold in The Middle East. As the largest MENA based online social networking and entertainment platform, we aim to curate top tier games and offer game players a rich [indiscernible] We hope Yalla Games' recent achievement will contribute new revenue streams to the group this year. The specific financial guidance will be disclosed in due course. Thank you very much, about your question.

Thank you.

And our next question comes from Shao Yu Hu with Haitong International.

Hello, So can management elaborate on the company's strategy priorities and key initiatives for 2025? Thank you.

Thank you, Xiaoyi. This is Yang. I will answer your question. I think 2025 marks the tenth anniversary of our company's founding. Our two flagship products continue to thrive. And are immensely grateful for our Mina based users and wavering support. And in association over the years. We will continue to iterate this flagship app by enhancing gamification. And rolling out innovative new content, while leveraging advanced technology to offer diverse and engaging experience for our users. Additionally, as we mentioned earlier, we have a number of new apps in our pipeline that have potential to contribute to the company's revenue growth in the second half of this year. Going forward, we plan to further expand our local team in The Middle East to enhance our local presence and align with the region's sweeping digital transformation trend. We will keep a sharp eye on Mina's evolving user needs. And stay open to the new market opportunities while consistently delighting local users with products that appeal to their culture values and taste. Thank you, Xiaoye. Thank you. Thank you. And our next question comes from Kaifeng Zhao with CITIC. Please go ahead.

Hi, management. Thanks for taking my question. I have a question about how should we think about the revenue and the margin trends in 2025? Thank you.

Hello, Hebong. Glad to see you here. This is Karen. 2025, even without factoring in potential revenue from new products, we anticipate at least maintaining our current revenue size. We also think that maintaining a net profit margin of around 40% is reasonable. Of course, our upcoming products are likely to generate new revenue streams this year, but we will we will wait until these products are launched to provide revenue guidance. Given the necessary steps of marketing investments for these new products, we expect a margin of around 35% but we will adjust our investment budget depending on the specifics of these new product launches. Thank you.

And our next question comes from Rachel Guo with Nomura. Please go ahead.

Hi, good morning management.

Thanks for taking my question. My question is about the shareholder returns. Can management to provide us an update on your share repurchase plan?

Thank you, Richard. This is Yong. I think we are committed to delivering value to our shareholders through our share repurchase program. In 2024, we repurchased around 3,000,000 ADS amounting to approximately USD14 million. Moving into this year, we will accelerate shareholders' returns. Through our share repurchase program. We are fully committed to achieving our target of at least doubling our buyback activity to USD 28,000,000. This year. We may escalate this amount later this year and we will provide quarterly updates on the plan's progress. We host strong confidence in Yalla long term potential and dedicated to generating sustainable long term value for all stakeholders. I hope that helps. Thank you.

Thank you. And our next question comes from Lincoln Kong at Goldman Sachs.

Thank you, management, for taking my question. So can management elaborate about our strategic vision for leveraging AI to drive growth and innovation here?

Thank you. Hi, Dinkie. This is Yang. Thank you for raising this. As we noted earlier, we have a dedicated algorithm team And proprietary AI task platform. And we are already capitalizing on AI to empower our products. Boosting efficiency and elevating user experience. Meanwhile, we see tremendous upside potential in further integrating AI into our ecosystem. We are actively evaluating various user cases. Across our products. Exploring how to synergize our internal teams with external AI resources. To deepen user engagement. And expand our market reach.

We aim to harness AI not only at the two for enhancing efficiency but also catalyst for innovation, ensuring that our products remain at the forefront of NINA's digital entertainment market.

I hope this offers a clear picture. Thank you, Lincoln.

Thank you.

Thank you. And our next question comes from Jenny Yuan with UBS.

Thanks management for taking my question. My question regarding our regional strategy. Could you please provide any update on whether our company's future development will still be being non focused or if we have any plans to expand our portions to other regions? Thank you.

Thanks, Jinhee. This is Saifi, and I'll take this question. We have always viewed MENA as our core market and strategic home base making it the solid foundation supporting our business growth.

At the same time, as our products portfolio expands, we may reach users elsewhere. Diversifying our user base Some of our new products may also have the potential for distribution in other regions. We will also carefully evaluate such situations based on the market data and market good decisions. That maximize our potential and enhance our ROI. However, wherever else we may go, the MENA region will always remain at the heart of our business and we will continue to deepen our presence in this region to strengthen our market leadership. Thank you.

Thank you. This concludes our question and answer session. I'd like to turn the conference back over to the company for 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 Investor Relations or PSNT Financial Communications. Parties' contact information is available in today's press release as well as on our company website. Thank you.

Thank you. This concludes today's conference call.

You may now disconnect your lines and have a wonderful day.