JOYY, Inc. Sponsored ADR Class A

Thank you, operator. Hello, everyone.

Welcome to JOYY's First Quarter 2026 Earnings Conference Call. Joining us today are Ms.

Ting Li, Chairperson and CEO of JOYY; and Mr. Alex Liu, the Vice President 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.joyy.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, including, but not only limited to the future development of our products and businesses, the expected future financial performance of the company, our share repurchases and other future events, which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations.

For detailed discussions of these uncertainties please refer to our latest annual report on Form 20-F and other documents filed with the SEC. We will also discuss certain non-GAAP financial measures.

They are included as additional clarifying items to aid investors in further understanding the company's performance and the impact of these items in advance had on the financial results. The non-GAAP financial measures provided above should not be considered as a substitute for or superior to the measures of the financial performance prepared in accordance with GAAP.

You may find a reconciliation of the differences between GAAP and non-GAAP financial measures in our earnings release. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in U.S.

dollars. I will now turn the call over to our Chairperson and CEO, Ms.

Ting Li. Please go ahead.

Hello, everyone. I'm Li Ting.

Thank you for joining us today. I apologize, but I have got a cold recently, and my voice is quite weak.

For efficiency of this meeting, I'm going to have our IR team read through the prepared remarks for me. I will be back to take your questions during the Q&A.

Thank you for the understanding.

Thank you. As we enter 2026, our Social Entertainment business has returned to year-over-year growth, while our second growth curve, ad tech and smart commerce is progressing with strong momentum.

Our globally diversified ecosystem is taking shape with social entertainment, advertising and smart commerce bolstering one another in a self-reinforcing strategic flywheel. This flywheel is propelling JOYY into its next phase of growth.

Let me begin with an overview of our Q1 results. Total revenues reached $556 million up 12.4% year-over-year, marking our strongest year-over-year growth rate in recent years.

Social entertainment revenue was $400 million, up 3.2% year-over-year. BIGO Ads contributed $125 million, up 55.6% year-over-year, among which our third-party BIGO Audience Network delivered 78.8% year-over-year growth.

Shopline revenue reached $31 million, up 16.1% year-over-year. Q1 non-GAAP operating profit and EBITDA reached $38 million and $46 million, up 22.5% and 13.2% year-over-year, respectively.

Operating cash flow for the quarter was $46 million. As of March 31, 2026, we held $3.18 billion in net cash.

Our strong cash generation continues to support meaningful shareholder returns. Since the start of 2026, we have accelerated our buyback program through May 22, 2026, we have repurchased a cumulative $88 million in shares and paid $69 million in dividends for a total return of $157 million to shareholders.

In light of our solid operational performance and robust balance sheet, the Board has just approved an updated shareholder return program totaling $1.5 billion under which we could repurchase up to $600 million worth of our shares and distribute approximately $900 million in dividends over the next 3 years. This underscores our strong confidence in the long-term potential of business and demonstrates our continued commitment to delivering sustainable value to our shareholders and enabling shareholders to benefit from our operational improvements.

This quarter marked the first quarter, we are reporting results under our new three-segment structure, Social Entertainment, BIGO Ads and Shopline. I'd like to take this opportunity to reaffirm our long-term strategic vision.

We are building a global technology ecosystem driven by AI. This ecosystem is designed to unlock compounding returns from our data assets through the deep integration of social entertainment, programmatic advertising and omnichannel e-commerce, creating a self-reinforcing growth flywheel.

Social entertainment is our foundational business, providing the user base, data assets and cash flow that support the broader ecosystem. By building a highly engaged global user community, we have accumulated a valuable first-party data asset and a scaled global traffic pool, supported by established technology infrastructure and localized operational networks across key markets.

Social Entertainment underpins our cash flow generation and serve as the long-term anchor of the group. BIGO Ads accelerates our flywheel, strengthening our data and algo advantages.

Through advanced predictive models and algo optimization, we convert traffic into measurable, scalable advertiser ROI. Each iteration further enriches our data assets and deepens our algo moat, building competitive advantage.

Shopline is the engine of our one-stop omnichannel e-commerce offering and provides merchants with open connectable infrastructure that puts data ownership back in their hands. This control empowers them to maximize business performance across the full customer life cycle.

AI is the backbone of this entire ecosystem, seamlessly connecting our social data assets, algos and e-commerce capabilities. Together, these 3 pillars form a closed-loop system that deepens our economic moat and drives long-term value creation for JOYY.

Now let me walk through our Q1 performance and share our outlook on the future. In Q1, Social Entertainment revenue returned to year-over-year growth of 3.2%, with live streaming revenue up 2.4% year-over-year.

Core live streaming paying users grew 5.9% year-over-year. On the traffic side, global average mobile MAUs reached 276 million, up 6.1% year-over-year and 1.5% Q-o-Q, driven by high user stickiness and fully organic growth, traffic from Instant Messenger increased by 3.1% Q-o-Q.

For our flagship products, we improved our streamer incentive structure, launched targeted support programs for high-quality content categories and integrated new AI capabilities. These initiatives drove ongoing gains in both content engagement and payment conversion.

Streamer activity improved sequentially despite seasonal impacts. Number of active streamers increased 1.5% Q-o-Q and average effective streaming hours per streamer rose 1.4% Q-o-Q.

We have now fully rolled out our AI smart tools for streamers across key markets, meaningfully improving interaction efficiency. As of April, AI-generated interactive virtual gifts accounted for 34% of total virtual gift consumption on Bigo Live.

Our new product lineup continued to gain traction with revenue up over 500% year-over-year and 45% Q-o-Q, setting new monthly revenue records. Our current Q2 guidance implies low to mid-single-digit year-over-year growth for Social Entertainment revenue.

Building on this momentum, we are confident that our Social Entertainment business will achieve full year revenue growth in the '26 and sustain this positive trajectory going forward. Moving to BIGO Ads.

In Q1, BIGO Ads generated $125 million in advertising revenue, up 55.6% year-over-year. Our third-party business, the BIGO Audience Network delivered 78.8% year-over-year despite the seasonal softness of Q1.

Broader traffic coverage, multi-vertical advertiser expansion and ongoing algo optimization fueled this momentum. On the supply side, SDK traffic maintained strong growth of 109% year-over-year and 7% Q-o-Q in Q1.

On demand side, our strategic presence across multiple verticals, including lead generation, e-commerce and IAA drove an enrichment of our advertiser mix and enhanced ecosystem density. This multi-vertical approach not only accelerated data accumulation and algo iteration, but also strengthened our traffic bidding capabilities.

Notably, web-based demand, primarily from lead gen and e-commerce advertisers grew 90% year-over-year and delivered positive sequential growth. Incremental spend from both new and existing advertisers fully offset the typical seasonal softness of Q1.

IAA spending sustained 97% year-over-year growth. Geographically, we prioritize high-value developed markets.

North America remains our largest market for BIGO As, while Western Europe delivered notable momentum with revenue up 27% Q-o-Q. On the algo side, we are steadily and prudently scaling our computing infrastructure and strengthening our R&D talent base.

By integrating data feedback from advertisers across channels and leveraging the dual growth of traffic scale and advertiser density, we have built a rich behavioral data layer. This enables multidimensional precise user profiling and real-time model iteration, which in turn improves ad delivery efficiency.

The fact that we are seeing positive feedback across multiple verticals validates the generalization capabilities of our model framework. As our data scale accelerates and the vertical-specific models mature, we expect our algo flywheel will increasingly serve as the primary engine of our revenue growth going forward.

We reiterate our strategic commitment to reaching $1 billion in BIGO Audience Network revenue by 2028. As our third-party advertising business continues to scale, we expect a steady structural improvement in profitability.

Turning to Shopline. This is the first quarter we're reporting Shopline as a stand-alone segment.

The decision to do so now reflects our belief that Shopline has reached a critical mass in terms of its importance to the group and that Shopline will become an increasingly meaningful contributor to our growth going forward. As global commerce enters the omnichannel era, merchants increasingly desire autonomy and full funnel data ownership.

We have built Shopline as AI-native one-stop omnichannel e-commerce infrastructure. What we offer merchants is not simply a storefront building tool and a fully open connectable retail operating system.

Through deep integration with payments, logistics and marketing modules, we empower merchants across every stage of their journey from store setup and transactions to fulfillment and full life cycle customer retention. Globally, very few vendors are capable of delivering this kind of OS level closed-loop solution.

We are also accelerating the integration of a suite of AI-powered capabilities. The tools will drive Shopline's ongoing evolution from an enablement tool to an AI-driven commerce engine that represent a fundamental shift in how merchants operate.

AI-powered traffic allocation and automated decision-making will unlock new growth opportunities and new levels of precision across omnichannel retail. On monetization, beyond high retention subscription fees, we generate revenue through transaction-based value-added services and payment and marketing.

These reflect the fundamental distinction from traditional seat-based software tools. This monetization model deeply aligned with merchants' full life cycle growth will fuel Shopline's ongoing accelerating performance.

Q1 is traditionally a slow season for e-commerce, yet Shopline delivered solid results. Revenue was $31 million, up 16.1% year-over-year, with gross margin expanding further to 51.5%.

Revenue growth from cross-border merchants remain robust, sustaining over 60% year-over-year growth. Our Q2 guidance implies Shopline's revenue growth accelerating to above 25% year-over-year in Q2.

This meaningful progress mark Shopline's transition from incubation to a phase of scaled growth propelled by accelerated revenue and gross profit growth, Shopline is on a clear and visible path to achieve breakeven by 2028. Additionally, as BIGO Ads marks -- makes steady progress in the DTC e-commerce vertical and moves past its cold start phase, we anticipate increasingly tangible synergies between these 2 businesses going forward.

These marks a crucial long-term strategic objective of JOYY and we are committed to solid execution to unlock this untapped potential. Finally, in summary, our strategic layout and the unlocking of our ecosystem's value remain in their early stages.

Looking ahead, we expect our 3 business segments to generate stronger structural synergy, further deepening our competitive moat and driving JOYY's long-term value to its next level. With that, I will now hand the call over to Alex Liu, our Vice President of Finance, to walk you through our financial results in detail.

Thanks, Ms. Li and Jane.

Hello, everyone. Beginning this quarter, we are reporting Social Entertainment, BIGO Ads and Shopline as standalone segments.

This reflects a strategic inflection point. BIGO Ads and Shopline have evolved from incubating projects into scalable growth engines.

Now let's turn to financial overview of the quarter. In the first quarter of 2026, we recorded total net revenues of $555.7 million, securing a year-over-year growth of 12.4%, our strongest year-over-year growth rate in the same year.

Our non-GAAP EBITDA for the quarter was $45.7 million, our operating cash flow was $46 million in quarter 1 and we ended the quarter with roughly $3.18 billion in net cash. As previously communicated, we accelerated share buyback since we entered into 2026, buying back $87.9 million worth of our shares as of May 22.

In light of our solid operational performance and robust balance sheet, we have just announced an updated shareholder return program totaling $ 1.5 billion in which we could repurchase up to $600 million worth of our shares and distribute up to $900 million in dividends over the next 3 years, which represents a 67% expansion from the previous program, showing our strong confidence in the company's long-term prospects. I will now dive deeper into our detailed financial performance.

Social Entertainment revenues were $400.4 million for the first quarter, delivering its first year-over-year recovery of 3.2% year-over-year. In particular, live streaming revenues returned to 2.4% year-over-year growth, which marks an inflection point and a result of the strategic adjustments we've executed over the past several quarters.

Core live streaming paying users increased by 5.9% year-over-year, while live streaming revenues from developed countries increased by 11.2% year-over-year. BIGO Ads continued to deliver exceptional growth with its revenue up by 55.6% year-over-year to $124.8 million.

In particular, our third-party [ ads ] revenue, BIGO Audience Network delivered outstanding results, recording 38.8% revenue growth year-over-year. On the traffic front, SDK network and request was up by 109% year-over-year and 7% quarter-on-quarter in quarter 1.

Our multi-industry strategy has helped us capture broadened market opportunities. Web-based demand was up by 90% year-over-year.

Mobile-based demand continued to be strong with IAA spending up by 97% year-over-year. We are right on track to achieve our 3-year strategic goal for BIGO Audience Network, which is maintaining high velocity growth and reaching 3-year revenue milestone of $1 billion.

While we are prudently investing in the expansive of our R&D and sales capabilities as well as our network and computing infrastructure, Audience Network economics remain healthy. We are confident that as we scale, we will remain profitable and potentially further enhance Audience network economics in the midterm.

Shopline kicked off its debut quarter, generating revenue of $30.5 million, delivering a 16.1% year-over-year revenue growth. Cross-border merchant revenue was up by 66% with its revenue contribution up by 8% compared to quarter 1 last year.

We expect cross-border merchant revenue to maintain a high velocity growth going forward, while less revenue contribution from this merchant segment will lead to gradual acceleration of Shopline's overall revenue growth. Group's gross profit was $189.3 million in the quarter with a gross margin of 34.1%.

BIGO Ads gross margin was down quarter-over-quarter due to a shift in our revenue mix, which saw an increased contribution from our lower-margin network ad revenues. Shopline's gross margin was up by 6.8 percentage points year-over-year to 51.5%, primarily due to growth in high-margin subscription revenues as well as improving gross margin for its value-added service revenues.

Our group's operating expenses for the quarter were $183.4 million. Sales and marketing expenses were higher year-over-year, consistent with revenue increase.

G&A expenses were also higher year-over-year, primarily due to increased share-based compensation expenses. Our group's non-GAAP operating income for the quarter was $38 million.

Non-GAAP net income attributable to controlling interest of JOYY in the quarter was $55.9 million. The group's non-GAAP net income margin was 10.1% in the quarter.

Our non-GAAP net income was lower due to higher FX loss of $13.6 million due to the weakening U.S. dollar.

Excluding the impact of FX losses, our non-GAAP net income was $69.5 million, up by 8.7% year-over-year. For the first quarter of 2026, we booked net cash inflows from operating activities of $46 million.

Our balance sheet remains healthy with a strong net cash position of $3.18 billion as of March 31, 2026. As of May '22, we have returned $156.8 million to our shareholders through dividends and share buyback.

Our accelerated share buybacks in the past quarters and the newly introduced 3-year shareholder return program reaffirms our previous statement. Shareholder return has been and will continue to be an important component of our capital allocation strategy.

We will remain focused on delivering strong results, actively executing our new programs and enable our shareholders to benefit from our operational improvements. Turning now to our business outlook.

At group level, we expect our net revenues for the second quarter of 2026 to be between $562 million and $581 million. This implies a 10.7% to 14.4% year-over-year growth for the group's revenue.

With Social Entertainment sustaining positive growth year-over-year. BIGO Ads mid-double-digit growth while top line growth accelerating in the second quarter.

To summarize, Q1 2026 marks a pivotal milestone for JOYY. We have delivered our strongest year-over-year revenue growth in recent years realigned our reporting structure to match our strategic priorities and accelerated our commitment to capital returns through enhanced buybacks.

Looking ahead, we are extremely excited about the tremendous synergy potential and the powerful flywheel momentum that our business segments will deliver in medium to long term. That concludes our prepared remarks.

Operator, we would now like to open up the call to questions.

[Interpreted] My first question is that this is the first time the company disclosed its performance in 3 business segments, namely Social Entertainment, BIGO Ads and Shopline. So for Social Entertainment, live streaming revenue achieved positive year-on-year growth in Q1.

Can management further elaborate whether this is a sustainable recovery? And my second question is about our full year outlook.

Can management comment about our 2026 revenue and profit guidance for each business line this year?

[Interpreted] Thank you, Thomas. This is Li Ting.

I will answer your question. So for the first question, first of all, in Q1, as expected, our Social Entertainment revenue was up by 3.2% year-over-year with live streaming revenue up 2.4% year-over-year, returning to positive year-over-year growth trajectory.

Well, we have been executing a series of structural enhancements since the second half of 2024, particularly with our streamer incentive mechanism. And these, we believe, have continued to strengthen our live streaming ecosystem.

Despite Q1 typically being a low season for streamer activity, we still achieved a sequential increase in the number of active streamers and also the average effective streaming hours per streamer. Notably, the music streamers, which is one of our key quality content genre, also saw a meaningful uptick in streamer participation.

Building on the improved content supply and streamer engagement, we continue to refine our user segmentation and also upgrade our tiered paying user benefit system, combined with AI-driven optimization on content distribution and also payment experience, these efforts drove further improvement in paying conversion with core live streaming paying users growing nearly 6% year-over-year. Our new product lineup also continued to gain traction in Q1 with revenue up over 500% setting new monthly records and contributing incremental revenue to Social Entertainment.

Looking ahead, our current Q2 guidance implies a low to mid-single-digit year-over-year growth for social entertainment revenue, which represents an acceleration from Q1. Building on this momentum, we are confident that live streaming revenue and also Social Entertainment revenue will achieve steady positive growth in 2026.

[Interpreted] This is Alex. I will take your second question.

So for Q2, our current guidance implies 10.7% to 14.4% year-over-year growth for our group revenue. By segment, we expect Social Entertainment to deliver low to mid-single-digit year-over-year growth, BIGO Ads to sustain mid-double-digit year-over-year growth and Shopline's revenue growth to accelerate to about 25% year-over-year.

For the full year of '26, we expect Social Entertainment to deliver steady year-over-year growth rate. For BIGO Ads with continued traffic expansion, deepening multi-vertical advertiser coverage and ongoing algo optimization, we expect a strong mid-double-digit year-over-year growth for the full year.

For Shopline, with accelerating cross-border merchant penetration and also new market expansion, we expect it to sustain double-digit revenue growth with all segments -- all 3 segments now entering into an upward trajectory, we are confident that the group will deliver positive solid revenue growth for the full year of 2026. Turning to operating profit.

For Q2, we expect sequential improvement in the group operating profit in line with our Q-o-Q revenue growth across all segments. For the full year, on Social Entertainment side, with live streaming revenue back to growth, we expect live streaming profit to remain stable or grow modestly.

For BIGO Ads, our audience network is rapidly scaling, and we will need to continue to invest in R&D, sales and also our network infrastructure. But given the healthy economics of the Audience Network at this stage, we are confident that as we scale, we will remain profitable, and we expect to see further improvement in its economics over the medium term.

For Shopline, with its operating expenses relatively fixed on revenue and gross profit growth will drive continued narrowing of its operating losses. Overall speaking, we expect the group's non-GAAP operating profit and EBITDA to continue the improving trend that we achieved in '25, delivering a steady teens year-over-year growth in 2026.

At the net profit level, I do want to provide some additional context on FX fluctuations due to the continued weakening of the U.S. dollar against RMB, we recorded significant unrealized FX losses in Q1, and we expect similar impact from FX in Q2.

However, we'd like to remind you that these are nonoperational mark-to-market fluctuations. So when the dollar strengthens, they will be reversed.

Our next question, please.

[Foreign Language]

Thank you, Cici. This is Li Ting.

I will take your questions. In Q1, BIGO Ads delivered 55.6% year-over-year growth with third-party Bigo Audience Network growing by 78.8% year-over-year and also delivering a modest positive sequential growth.

The overall performance was ahead of our expectations, and I would attribute it to the following key drivers. First of all, our multi-vertical strategy is definitely delivering great results, leveraging our established capabilities and lead generation direct-to-customer e-commerce and also IAA, our web-based demand grew by 90% year-over-year in Q1 and delivered positive sequential growth despite Q1 being a slow season.

IAA demand by 97%, and this was the primary reason that we were able to deliver better-than-expected results in -- during Q1. Secondly, continuous upgrade of our algo capabilities, we have been driving broader cross-channel data feedback from advertisers combined with AI-powered labeling and richer user behavioral data, which significantly enhance our user profiling and ad delivery efficiency on platform.

We've also completed a framework upgrade to our core predictive model with specialized optimizations across lead gen, IAA and e-commerce verticals. As data accumulates and algo iterate, we are seeing sustained improvements in monetization efficiency with higher advertiser retention and also growing average spend per advertiser, forming a self-reinforcing effect.

Going forward, we will continue to optimize and iterate our algo models. The positive results that we have already achieved across multiple verticals have validated that the generalization capability of our model framework.

As data continue to accumulate at an accelerating pace and vertical-specific models continue to mature, the algo flywheel is gaining momentum, and we expect it to increasingly serve as the primary engine for our advertiser revenue growth in the following stage, particularly in the second half and also even beyond. Regarding your question on mediation partnerships on traffic side, we are actively advancing integrations with industry-leading mediation platforms.

One of our partnership has already entered the beta testing phase, and we expect to complete our official integration within 2026. Once live, it will enable advertisers to reach a broader pool of high-quality traffic globally, further expanding our traffic coverage and depth and breadth and injecting new momentum into the flywheel.

We have very strong confidence in sustaining rapid growth for BIGO Audience Network. Thank you.

Next question, please.

[Interpreted] Thanks, management for the opportunity to ask questions. Noticing that Shopline made it's first stand-alone disclosure, could management elaborate more insights on the latest business update and the path to breakeven profitability?

[Interpreted] Thank you, Raphael, for your question. This is Li Ting.

Yes, this is the first quarter that we are reporting Shopline as a standalone segment, as we mentioned in our prepared remarks, we have positioned Shopline as an AI-native one-stop omnichannel commerce infrastructure. What we are building is not a simple storefront building tool but rather than open and connectable extensible retail operating system that deeply integrates payments, logistics and marketing modules, allowing merchants to manage everything from store setup and transactions to fulfillment and full life cycle customer retention on one single platform.

Globally speaking, very few vendors are capable of delivering this kind of OS level closed-loop solution. In terms of revenue model, we have built a differentiated monetization framework anchored by high stickiness, subscription fees and accelerated by high-growth value-added services.

On one hand, a stable subscription revenue serves as the foundational entry point, building a robust merchant base and generating recurring revenue. And on the other hand, through deeply penetrating the transaction loop and monetizes GMV to rapidly growing value-added services, including payment and also marketing.

This monetization model, which is deeply aligned with the full life cycle growth of merchants will serve as the primary engine driving the continuous growth in Shopline's financial performance. When we look at Shopline's merchant base.

We currently serve major -- 2 major categories, local merchants and also cross-border merchants. Revenues from cross-border merchants predominantly key accounts, the larger brands have maintained high velocity growth since last year.

Our R&D spend, which has been our primary OpEx has largely stabilized, and the improvement in revenue and gross profit is generating operating leverage and Shopline's losses are narrowing meaningfully. Looking ahead, we see a clear and achievable path for Shopline to reach breakeven by 2028, and we are fully committed to delivering on that.

Thank you. Maybe one last question, please.

[Interpreted] My question about shareholder returns. The company announced a new 3-year shareholder return plan of USD 1.5 billion this quarter, including $600 million in share buyback and $900 million in dividends.

Could management share the thinking behind the significant increase in shareholder returns? Thank you.

[Interpreted] Thank you, Xueqing for the question. This is Alex.

We are very pleased to announce this quarter our new 3-year shareholder return plan totaling $1.5 billion, covering fiscal years 2026 through 2028. This replaces our previous program totaling $900 million, representing a roughly 67% expansion in our total commitment.

Specifically, the new plan comprises 2 components: annual dividend of $300 million per year, that would be up by 50% from our previous $200 million per year. And our annual share buyback, the share repurchase authorization per year, the annualized buyback quota would be $200 million, and that would be nearly doubling the average quota of $100 million under the previous plan.

There were several key considerations behind our decision. First of all, all 3 business segments are now on a clear growth trajectory, providing a very, very solid foundation for a higher level of shareholder returns.

At the same time, our strong net cash position as of the end of Q1, we still have around $3.2 billion of net cash on hand. This gives us a full financial capacity to execute on this commitment.

And we do believe that the current share price still materially undervalues our long-term potential and our commitment to increasing buyback is a very direct expression of the management's strong conviction in the future of the company. Looking ahead over the next 3 years, we are firmly committed to executing this plan and enabling our shareholders to benefit from improving operations.

That was the last question, and thank you so much for joining us today. We look forward to speaking with everyone next quarter.

Thank you.