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YALA Yalla Group Limited

Participants
Kerry Gao Investor Relations, Director
Tao Yang Chairman & Chief Executive Officer
Saifi Ismail President
Karen Hu Chief Financial Officer
Jeff Xu Chief Operating Officer
Bo Pei Oppenheimer
Call transcript
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Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by for Yalla Group Limited's Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today’s conference call is being recorded.

the to turn today, speaker will Ms. I call your over host Now, Director the Gao, of Kerry IR company. ahead, go Please ma'am.

Kerry Gao

our and Thank you. on newswire earnings released services. XXXX Yalla's our second earlier Hello, everyone, well and conference welcome IR website call. as now release is the to as quarter earnings available today, on We

Before forward-looking the the XXXX. under provision of statements US Act please Securities safe that Reform discussion the note continue, made we today contain Litigation Private will harbor of

uncertainties. and risks inherent involve statements Forward-looking

additional our provide Mr. Saifi then Mrs. development. recent Karen and of on non-GAAP give will will the of As except may information note a recent Please by Officer, the from this our non-GAAP discuss Hu, uncertainties such, financial review results measures statements be views Mr. and achievements as and growth Yang, statements, the Officer, the will as Yalla expressed earning financial results directly and comparable and unaudited unaudited by unaudited followed filed press from our discussion Chief outlook. brief materially overview different release registration well Yalla's GAAP will Ismail, measures. SEC. obligation the our required that does Tao future contains who conference earnings be of reconciliation Chairman financial Executive press risks to and strategies. also the in today. call regarding He'll is Chief company's include GAAP not unaudited measures. our a financial our this hear provide with most Financial of release any assume law. Yalla's an Further company's Today, who included you President, to as and details update our other information forward-looking release any

Yang. Mr. remarks, and now to I Executive will Officer, the questions. management's sir. that to call Following go to like Chief over ahead, our Please the open would Chairman Tao With up we turn prepared said, call

Tao Yang

you and thank everyone for you conference XXXX call. joining Kerry, our earnings Thank second quarter

In Midas initiatives. margin for for reached maintained investment another Group's of impacts XXXX, was the quarter the profitability XXX.X%. and our user demonstrated effectively representing quarter holiday marketing second execution effective to revenue Despite Yalla year, Yalla. a solid advanced total Ramadan Group the XX.X by this our second strong our quarter the we million, Q-on-Q in The active monthly of falling from one community of monetization With capabilities the grew culture, million. second users year-on-year million growth some non-GAAP tailored of US$XX.X group we XX.X to our XX.X%. campaigns as our also increased and

observed on diverse from different the of products. have impact We types Ramadan also holiday

users Yalla’s saw product, schedule XX.X% paying a paying slightly increase Our user group about Ludo paying to in users while million Q-on-Q X.X Yalla decreased to million, game card from million, social products X.X $X.X a to XX%. leading

have Our new performing impressively. been products also

one number downloads We feedback reached which are announce the Yalla market have receiving in launched positive happy users, game in Okey officially terms Turkish for ball category the has in and very we is Turkey. of from that XXX to already recently

more Baloot, of you Yalla stage look the final development. designed car in also with for to a forward quarter. Additionally, Saudi next users game is our sharing We about we updates this

quarter, feedback. first and user on of the product to persistently the since launch enhance As this version working our been team YallaChat, refine has better for in the based

functions design the features over of and We product through roll several expect the and to out gradually improve months. the new next performance iterations system,

as local to app, users mentioned ludo for products believe three Ludo, was desires main development Yalla received be are to Parchis our new our the facilitated our more customizing We we a running good launched designed much Leveraging from to Yalla products also and version and attention and firmly users. precise these experience have fruitful. committed very effectively perfecting Yalla our already our officially specific South Parchis will market, feedback American to of efficiently. detail features Besides about and cater

Ludo check We is word our also feature function, among added we South users in-game have the Parchis, in community. Yalla into build to helps American and Yalla popularity gaining a that our

Parchis members countries, the spent a As Colombia, daily XX time broad Venezuela including one terms in and reached game user's minutes, download and reached average category result, number in Yalla on eight has also Parchis in Ecuador. already of

we has years. given values on core also to five guidelines is this this Yalla over with share that has is vision ESG role be on initiated sort internal clear experienced think update, play of like an important would team's we in Another this important Yalla a summarizing us the wants values working core its and picture for steering last And of year, to period exponential you that company decision-making. our will Yalla and the a growth our journey.

UAE-based US, program to Government's first listed as in a we technology the partner in coders. development recently shared Yalla be future. the a to to have unicorn honored of economy of digital and with a unveiled the community MENA, to the sense is a felt in the build broader As participating UAE for national always contribute be responsibility to

this will program with President, Our of share you more Saifi details later.

to committed the team. our local UAE-based At deeply users we culture. time, talents is diversity a same company, respecting and to add proactively and Yalla also global local As embrace

believe deep sense management each cross well borders XX hired and as from fostering have our led inclusive day, growth. as of a the countries and around have learn robust more and employees from to Yalla's We efficient, strong of environment. innovative, capabilities collaboration friendly teams trust among We world. prioritize other seamless every than working We

last industry. as internet up a deep talents are the with We of more so the more that and development locks it also young become over we experts, the of proud fact with Yalla's company, have five witnessed knowledge equipped MENA years

Yalla expertise, rate our turnover the XX%, creativity mission to for Internet in industry. was entertainment I networking would strong MENA. the passion, company. social in with team, popular and online activities Group's diversity global In employee trust deep only number a built build in and an like reaffirm destination gradually have conclusion, to and We incredible most In XXXX, our

As and local about continue we and enrich products our development offer of leadership in serve digital the proven confident in established enhance have the field users, are better we to economy to we this the this region. and

in local Yalla's Looking various will users' ahead, and watch develop with continue and tailored closely products to to services meet changes needs. MINA’s local we ecosystem culture

turn for this call will recent look Ismail, at President, Saifi closer Mr. I a Now, development. our to over our

Saifi Ismail

Thanks, Tao. Hello everyone. Thanks today. for joining us

would culture. efforts better To encourage we platform, that on engagement our product tailored in I all, of continue highlight to localized to operating. to out user First MENA events like the are operating our roll

XXX,XXX Ramadan friends designed of users. event, events and of April were than level every Yalla's Besides our community, Ramadan. X engagement Ramadan in event with hosted For Yalla gift, greed in hosted the the that, example, The during to participating event sent to million anniversary and we series more online special more on day this Kareem to their encourage May, also specially a impressive during fifth our our of platform users. demonstrating we visit celebrate attracted users for than virtual gifts

expertise honored in the a well initiative. the participation over to in infrastructure next of very as delivering program program an signals UAE to and academic new development are short-listed of only to social testament and just Program world, improving the UAE be talent, five partner. digital tailored attracting we more universities years. thrilled to local great this to global a government The Tao as to in other economy social our dedication from innovation Yalla about internet be technology the is products and that mentioned, and all entertainment among developing and talent the UAE is program giants government's to is as are the UAE's Yalla we commitment This the ideas, important company and development culture. and the excited as to innovative digital contributing further is July. government the National online, local supporting and MENA announced over for The Additionally, part dedicated the by Coders, to economy

a shareholders, the MENA’s to fact is Yalla the the collaboration. commitment our program, elevate government development open the reliable demonstrate serves to preferences details company's of users' more This local to our doors We provide a attest trustworthy makes best-in-class regarding announcement will local to detailed with in MENA's close that and only to as brand, services the partners. not influence and facilitating the share also and our to to enhance needs to the tailored we talents in more products Yalla's but once community. local and the more continue economy digital Yalla

achieving entertainment call to the and is online on to the operational this. region I well platform one way now discuss our financial will over CFO, become networking are and will With mission the turn social number to our results. who that, and key Karen, MENA Our we our in

Karen Hu

Hello, Thank you, Thank everyone. for joining you Saifi. us.

development. Ramadan growth year-on-year and the steadfast this robust quarter. is to Our falling strong the a community indicates holiday performance, despite our is experience sustained testament of growth during This reality user our strategy execution that

US$XX.X Our year-over-year of with million, XXX.X% XXX.X% by US$XX.X non-GAAP while gross second to income grew a million, reached revenues year-over-year. our rate quarter net

efficiency. margin reflecting monetization strong strategy, marketing non-GAAP our positioning XX.X%, unique remained operating Our elevated at and net

details you for the through I financial second Now quarter would like XXXX. walk of to our

base in million of the by capabilities. US$XX.X XXXX, and increase was Yalla million The same driven of Group's both a primarily US$XX.X second from Ludo's Yalla monetization user increase period revenues quarter enhancement Our in widening year. last were of XXX.X% the Yalla the and the

Yalla million XX.X% Our second increased XXXX. of in period second average the X.X the increased second XX.X XX.X to XXXX the last the quarter million MAU X.X the in year. in in And of year. by from same XX.X million in by second million quarter last the XX% MAUs to to Yalla's from from million of X.X MAU of Ludo's of same increased by period quarter XX.X% quarter million XXXX in XXXX

expenses. at look Now let's and costs our

US$XX.X XXXX. the second quarter Our cost revenues of million in of was

of payment expenses, for US$XX.X the our was the due the scale. same million, resulting US$X.X primarily quarter platforms, Excluding higher share-based third-party commission from million expanding from XXX.X% second compensation The a cost revenues increase in quarter last was of business increase fees year. XXXX for to

stable of as at revenues second in compensation in relatively total Excluding components XXXX. compared XX.X% period the cost a the in quarter same of revenues expenses, with XXXX remained share-based XX.X% percentage of other of

marketing million second XXXX. the Our quarter in expenses selling of $X.X and were

marketing expenses, other a and compensation result same The expenses components million. the of and $X.X for was as primarily from higher XXX.X% quarter share-based of year. million for marketing $X.X our selling Excluding last second efforts. acquisition to continued advertising quarter increase the of due expenses was increase promotional XXXX use

percentage a of as result As increased X.X% our these the of components of of selling marketing in second a in other XXXX. XXXX in period same quarter X.X% total reasons, to revenues and from the

general $XX.X the XXXX. and of were second Our in administrative million quarter expenses

compensation to primarily share-based expansion salaries due our XX% expenses components benefits general same general were staff, year, which and by in in the driven administrative quarter an for increase for of other second staff. which expenses, a quarter our administrative million was from general last $X.X million, was an of of $X.X increase the other Excluding and turn and for administrative and XXXX

quarter compensation due our of to and the the of administrative share-based a quarter in XXXX $X.XXX dropped second general in XXXX expenses, from to scale. other revenue percentage X.X% economies Excluding total expenses of components second as of of

the development product and in of second Our expenses were quarter $X.X million technologies XXXX.

for to of compensation for was increase last XXX.X% development $X.X new services. of product year. quarter and arising share-based salaries The turn technology the was million, development base components investments an and from in an higher our XXXX our and and same increase staff second technology product was was other by from development a enhancement million for in the expansion expenses which due and quarter benefit $X Excluding in product primarily driven expenses staff technology products

from percentage of our result X.X% reasons, and X.X% components other year-over-year. revenues total our expenses, development goes As of a to product these of technology

of quarter period operating last our $XX.X -- income the second same in such year. was operating As compared in million of with XXXX $XX.X million XX.X income the

quarter Excluding last operating non-GAAP a the for share-based of XXX.X% XXXX was $XX.X the same second improvement compensation, income year. quarter million, from

quarter expenses the million income in $X.XX second Our $X.XX second quarter was XXXX. in to XXXX the million tax in comparison of of

to Moving bottom line. the

of Our increase $XX the period net quarter from million second XXXX, in income same a $XX.X year. was in XX.X% last million

second the improvement was for income net non-GAAP year-over-year. XXX.X% expenses, compensation share-based XXXX Excluding $XX.X of of quarter million

capital Next, to I go through would liquidity like briefly our resources. and

And we ADS of XXXX On aggregate and update Yalla million the to As result XX, operations as cash March to as ordinary equivalents A shares repurchase cash of with million million share demonstrates of equivalents the consistent we our and announced XXX,XXX a May had and XX, from Group's compared of program. June for $XXX.X XXX,XXX basis. an ameliorate XX, capability cash as an cash we Class approximately of improvement XXXX. XXXX. XXXX $XXX.X as market XXXX $X.XX cash repurchased XX, of representing amount have as June open This

the today. of all demand concludes are we to Operator we subject is million. of based between $XX management expect current the reflects remarks estimates our take This conditions preliminary ready operating our and above are and to market to customer $XX which For conditions company's for and quarter and to be outlook million questions. XXXX, now on third current prepared The change. the market the revenues

Operator

[ph] with Please go question Our Gee Instructions] CITC. [Operator will ahead. Shi from come first

Unidentified Analyst

question for your management, taking my congrats strong Hi quarter. on and thanks

have by question in you one. tighter an to your regarding have risks, China, So is them China? first do companies potential Internet ask My I any the I'll since one from regulation R&D recent and influence in regulatory two on business you see questions team

Tao Yang

this Thank for Gee. Hi question. you Shi

In highly we in value matter industry. no lot of complying in. law, of local with technology Internet the China, a all, of and talent experienced operate our countries which importance and policy are we there First the the business

that's business team's key Our important over center the have also in support our an R&D China in the China. why appreciate expertise. and R&D the We five from the team past years. has really And to we in Yalla role growth decided reason local open the government, our substantial environment played

In since stores. revenue our would structure. have available app doesn't Dubai VIE that are emphasize in in we from addition, products Yalla to I like headquarters have China's a don't not Yalla's China and

on tighter from there companies. China's on Internet As is recent no our such impact business regulation

support MENA based Thank is and development. culture UAE our trust MENA's you. market users' MENA on along designed users preferences. and are highly main government MENA Our We products and appreciate our

Unidentified Analyst

out you. That's helpful. their And short Could are about a business does Singapore? of was selling my few ago, provide written very model, robots chat the your run help you whether on account and the big MAU chat also influential in months your questions why a details you came about by more the institutions. KOLs there in company And that hire room Thank maybe please question to second clarify is although neither whether them has bank the and rooms? report

Tao Yang

even First quality any short all, those their prove like to I of of numerous claims. would that to reiterate They solid contained and two reports to provide are weren't poor evidence errors. able many of

would some provide our to investors. additional like details I Here to

tell, release world there and to can true MAU. regarding make in is has users stated Yalla extra it who robot to cases this It accounts a platform. other any Yalla has our the business collect placed on names, similar that that alternative many understand platform, gift in robots Firstly, social such the other a on restrict many sense. coins with its easily are platforms is work each users on with from and press our create clearly centric or chat-offs. talk to Similar People behavior. to of platform. taken in even never measures need which this user accounts exist won't virtual some online Yalla rooms interact

block behavior. and with accounts rules examine we example, set various For to suspicious user

and accounts, able Yalla accounts majority deliver in only to radically seek. at as the won't minority remove the users It's game our which growth. every that accounts But such revenue very what growth power, we are quarter. a However, is like only limited been we alternative confirm once. of them to the have replicated a can on hide difficult evidenced revenues have spending strong by alternative strong of were If are

money strategy Secondly, UGC reason foreseeable are resolutely to important both with margin or model, is in after an paid future. our and products content products feature, is high on shared we our two or any Yalla cash-out we we platforms. our pure designed business is why can may two pure every any that regarding never no those Ludo. is to remain achieve UGC quarter. Yalla This revenue professional These able have be unchanged the net or KOLs creators which for Yalla platform Accompanying

since of Yalla to any sellers audience, of have auditor contrary one integrating didn't have is went the we And try with in who unprofessional to priority. public claims Thirdly, XXXX before partner. short one their Instead working Yalla's those KPMG, of mislead audit before. our top KPMG the been is long we

in We company countries Yalla's XX-F Hong standards UAE, And most always bank the both well Kong, reporting consider the its is of compiling our are of always accounts closure. cash, consistent and value revenues importance on three need reported in high financial requirements headquarters global SEC's balance about to been disclosed highly business. A centers. very lastly any We China. the have with that have Hong our and and rely financial allocate we and has our we in including with our lot a of in difficult Dubai Kong cash to Dubai cash cash. when facing Singapore Singapore is factors and regarding

operations the it's whether a business whether It's for where solid to have has and nature. example MENA Yalla in our region. access it. we For daily convenient

our We answers you. this are confident business grow your is and solid. very in potential Thank and business questions. our model also Hope to

Unidentified Analyst

Thank Thank very you. clear. you

Operator

Please next question go will from come with Our ahead. Bo Oppenheimer. Pei

Bo Pei

Thanks Hi, questions. for management. taking my

if three may. I I So have

plan. one is first about repurchase the The

So last back I US$X.X end we and think around quarter, million bought shares. the during May of XX

this balance that increase my buyback second nicely? about So new quarters? sort been We be amount, we for talked is should given expecting But maybe pace when or spent, expect of progress of question see new this we is apps. the pretty then the to And cash the our year? metrics, growing consider engagement. Do the then has these it is And future meaningful time the monetization apps? about some some next you about talk can margin. later should user Should from about be we question last year

very So since the been we margins healthy achieving have IPO.

So can going kind new you apps healthy expect forward? about some still you. Thank talk should activities, with advertising this potentially of margin these we and

Karen Hu

ADS program Board Thanks, three following announced take the one XX time authorized to of US$XXX I million US$ rehab our repurchased months. to Karen. and the on have with over of by XXX,XXX up for X will an already XXXX, is million. repurchased And we open share our time number for Bo. of from the XX, we from of market the May cash end around we questions. average amount means buyback By number QX, This Directors, whereby a our the ADS

of quarters stable the long-term remainder the our I maintain For our will think, to And program, for the around depending we authorized at interest market at best continue to this a several with shareholders. net for repurchase question, of always to XX%. level able the shares in were period, conditions the that over margin commitment past on margin we our and work relatively

point, to have been margin new to some net this still launching maintain the level. you. able third to but Although, will that And we changes at second significant we the at we net products don't we this Thank in margin expect in see think quarter. the quarter, our

Tao Yang

apps answer progress the you. for will I and on the new And monetization, the

we remarks, feedback our good discussed products and think, have the during prepared will the our will our went Yalla on just developing current two we with that. still initial reference. next and apps from good new good Bo. We Thank community. our receiving will part At And share launched you more operating expanding and can come of be market. a stage, Yearly hope we I are officially base As we numbers the have you, monetization investors. to user a focus after our that Ludo new quarter [ph] through

Bo Pei

Okay. helpful. That’s Thank you.

Tao Yang

you. Thank

Operator

Please, question from Our go ahead. next come will [Indiscernible].

Unidentified Analyst

my apps. new questions. released you mentioned And Hi, you your management. Thanks that taking for

building So could strategy in more ecosystem? on Yalla you please details your provide

Tao Yang

Okay. answer I will question. this

gradually two Ludo, applications, our years Yalla Yalla community. development building of and we’re have built We flagship through Yalla

products Going our are these we social when ready, forward, new traffic drive Yalla from social plan to generations next of to apps.

leverage games. also well our to promote to will heavy as We user mid casual Ludo's base upcoming product, new as game

conversion are user of way, ecosystem. we our As most our improve users users, Ludo. Ludo and we develop products acquisition the shown our rate from have earlier continue conducted expect the very good in this efficiency Yalla to game more of services and In you. to lovers, further trial introduce Thank

Unidentified Analyst

clear. Very you. Thank Okay.

Tao Yang

you. Thank

Operator

Our next come International. Instructions] go from Natalie with [Operator will Please ahead. Haitong question Wu

Unidentified Analyst

us user Natalie Hello your metrics. user Yalla the Could very question rates, and costs? Rene latest thanks. such management Haitong demographics, Thanks the you. strong my My is trend is of with your of taking retention question [ph] Yalla a International. matrix behalf This Wu, for congratulations regarding more on counters share the on Thank on and for management and as acquisition user Ludo quarter.

Tao Yang

Thanks and and Jeff XX profile, ratio user year This between XX I respect are is about users to to Rene. X:X. Yalla's the is will -- with male-to-female

game, since highly to age is and XX since and traditional popular casual to privacy, leader. join X:X. For ratio have we require the don't we Yalla Yalla it's of users we LBS male-to-female Ludo, the users' to users don't But between IDs is value verify XX range our around a

just data is your reference. demographic So, the for

since different lot region, can costs user cost, business among our acquisition terms whole of In vary covers MENA the countries. a

from cost countries. with other other in users the is of usually that backgrounds. well than GCC countries Yalla's users example some higher for similar are products as For culture as countries the Arabi designed

region. As base you user portion have the for the population in only market a and total accounts large we can see a of small our current

model, development require business expenses by stable and market. marketing demonstrated Yalla So, sales years. we Yalla which past sales Ludo's marketing, in their doesn't the untapped see has spending been in of still massive and lot a of over potential and this Because our unique

to stable we have the think grow we relatively region. such cost believe acquisition near-term be and this we As us, in at will room the ample user in for still least

Unidentified Analyst

us questions wondering third follow-up was here, share the one regarding the your growth your Knox? on going revenue with have has want included into outlook. if fourth confirm I last expectations Thanks. your third quarter you the to if clear. ITT And the I MAU just revenue quarter. new from quarter guidance and contribution could very the a That's Thanks. I

Jeff Xu

of guidance QX include Our US. didn't the

Unidentified Analyst

Thank going user Okay. third expectation the into quarter growth for your you. us you the and you. fourth with share And quarter? the Thank could

Tao Yang

For the users we told the around to growth, it be we investors Yalla XX% And the new conclude Yalla we the groups always, as Ludo. and for can the Q-on-Q for both XX% user expectation. growth, the don't product in user

Unidentified Analyst

Okay. you. helpful. very That’s Thank

Operator

no are questions. There further

Now, to back for the I'd like remarks. call closing to turn over management

Tao Yang

Thank you with quarter. once again We forward speaking for next Thank today. joining look you. us to you

Operator

this conference concludes call. This

You disconnect line. may you. Thank now your