Yalla Group Ltd (YALA) 2023 Q2 法說會逐字稿

Good morning and good evening, ladies and gentlemen. Thank you for standing by for Yalla Group Limited's Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded.

早上好，晚上好，女士們先生們。感謝您出席雅拉集團有限公司 2023 年第二季度收益電話會議。 （操作員指示）今天的電話會議正在錄音。

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

現在我將把電話轉給今天的演講主持人，公司IR總監高嘉瑞。請繼續。

Hello, everyone, and welcome to Yalla's Second Quarter 2023 Earnings Conference Call. We released our earnings press release earlier today, and the release is now available on our IR website as well as on Newswire outlets.

大家好，歡迎參加 Yalla 2023 年第二季度收益電話會議。今天早些時候，我們發布了收益新聞稿，該新聞稿現已在我們的投資者關係網站和新聞專線網站上發布。

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, except as required by law.

在我們繼續之前，請注意，今天的討論將包含根據 1995 年美國私人證券訴訟改革法案的安全港條款做出的前瞻性陳述。前瞻性陳述涉及固有風險和不確定性。因此，我們未來的結果可能與今天表達的觀點大不相同。有關這些以及其他風險和不確定性的更多信息包含在我們向 SEC 提交的收益發布和年度報告中。除法律要求外，Yalla 不承擔更新任何前瞻性陳述的義務。

Please also note that Yalla's earnings press release and this conference call include a discussion of unaudited 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.

另請注意，Yalla 的收益新聞稿和本次電話會議包括對未經審計的 GAAP 財務信息以及未經審計的非 GAAP 財務指標的討論。 Yalla 的新聞稿包含未經審計的非 GAAP 衡量標準與未經審計的最直接可比較的 GAAP 衡量標準的調節表。

Today, we'll hear from Mr. Tao Yang, our Chairman and Chief Executive Officer, who will provide an overview of our latest achievements and growth strategies. He will be followed by Mr. Saifi Ismail, 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 the management's prepared remarks, we will open up the call to questions.

今天，我們將聽取我們的董事長兼首席執行官楊濤先生的講話，他將概述我們的最新成就和增長戰略。緊隨其後的是公司總裁 Saifi Ismail 先生，他將簡要回顧我們最近的業務發展。我們的首席財務官胡凱倫女士隨後將提供有關公司財務業績的更多詳細信息並討論我們的財務前景。在管理層準備好發言後，我們將開始提問。

With that said, I'd now like to turn the call over to our Chairman and Chief Executive Officer, Mr. Tao Yang. Please go ahead, sir.

話雖如此，我現在想將電話轉給我們的董事長兼首席執行官陶陽先生。請繼續，先生。

Thank you, everyone, for joining our second quarter 2020 earnings conference call. We delivered robust performance this quarter, growing both our top and bottom line. Despite the impact of the Ramadan holiday, our Q2 revenue reached USD 79.2 million, showing Q-on-Q growth of 7.8%. This exceeds the upper end of our guidance by 5.7%, manifesting the popularity of our products.

感謝大家參加我們的 2020 年第二季度收益電話會議。本季度我們取得了強勁的業績，收入和利潤均實現增長。儘管受到齋月假期的影響，我們第二季度的收入仍達到 7920 萬美元，環比增長 7.8%。這超出了我們指導上限 5.7%，體現了我們產品的受歡迎程度。

Our continued efforts to drive quality growth and enhance our operating efficiency are also paying off. In Q2, our non-GAAP net margin reached 42.6%. Our robust quarterly performance showcases our dedication and ability to successfully refine our operations. We have the unification of our flagship applications and optimize our user acquisition strategies. All of this holistically elevated the experience for our users, further boosting Yalla and Yalla Ludo's users' willingness to stay and pay on our app.

我們持續推動高質量增長和提高運營效率的努力也取得了回報。第二季度，我們的非 GAAP 淨利潤率達到 42.6%。我們強勁的季度業績展示了我們成功改進運營的奉獻精神和能力。我們統一了我們的旗艦應用程序並優化了我們的用戶獲取策略。所有這些都全面提升了我們用戶的體驗，進一步提高了 Yalla 和 Yalla Ludo 的用戶留在我們的應用程序上並付費的意願。

As we discussed on our last call, 2023 has been a year of growth and development. We are witnessing rapid digital transformation in the Middle East. The momentum we are seeing is arising from the recognition that the region's market opportunity may be strategically significant for global Internet games as well as robust support from local MENA governments, who are determined to build local industries.

正如我們在上次電話會議中討論的那樣，2023 年是增長和發展的一年。我們正在見證中東地區快速的數字化轉型。我們看到的勢頭源於我們認識到該地區的市場機會對於全球互聯網游戲可能具有重要的戰略意義，以及中東和北非地區政府決心建設當地產業的大力支持。

So they are dedicated to offering collaboration with various nations worldwide, actively participating in local ventures to drive global investment to domestic industries and increasing investments in disruptive products overseas to create future strategic opportunities.

因此，他們致力於與世界各國合作，積極參與當地企業，帶動全球對國內產業的投資，並加大對海外顛覆性產品的投資，創造未來的戰略機遇。

As the largest MENA-based online social networking and gaming company, Yalla is committed to facilitating this change in the MENA market, and we're be glad to see more conversations taking place. As we discussed last quarter, external collaborations are an important component of our go-forward growth strategy. We are happy to share our experiences and localization competitive with more industry peers who are interested in exploring the MENA market. Our goal is to secure mutually beneficial collaborations that expand businesses in our dynamic markets where we see great potential in working together.

作為中東和北非最大的在線社交網絡和遊戲公司，Yalla 致力於促進中東和北非市場的這一變化，我們很高興看到更多的對話發生。正如我們上季度所討論的，外部合作是我們前進增長戰略的重要組成部分。我們很高興與更多有興趣開拓中東和北非市場的同行分享我們的經驗和本地化競爭力。我們的目標是確保互惠互利的合作，在我們充滿活力的市場中拓展業務，我們看到合作的巨大潛力。

Next, I'd like to share some important updates on Yalla Game's recent development. We're happy to report that Merge Kingdom has been officially launched across MENA and is now available on both the Apple Store and Google Play. Merge Kingdom is a strategy game that takes players on a foreign journey through the Arabian scene landscape. It brings the world on Arabian folklore to life with stunning visuals, rich landscapes and beautiful Middle-Eastern music. The integration of Yalla's unique voice chat of games enhances the game's real time strategy element.

接下來，我想分享一下Yalla Game近期開發的一些重要動態。我們很高興地報告，《合併王國》已在中東和北非地區正式推出，現已在 Apple Store 和 Google Play 上架。 《合併王國》是一款策略遊戲，帶領玩家踏上穿越阿拉伯場景的異國旅程。它以令人驚嘆的視覺效果、豐富的風景和優美的中東音樂將阿拉伯民間傳說世界帶入生活。融入Yalla獨特的遊戲語音聊天功能，增強了遊戲的即時策略元素。

Merge Kingdom is the first hard-core game to collaborate with Yalla Group on distribution. The game is being promoted on the homepages of (inaudible), and was ranked as the #2 downloaded game in Saudi Arabia on our app after it launched. We plan to gradually increase our investment in user acquisition in the next couple of months to increase the game's reach.

《Merge Kingdom》是第一款與Yalla Group合作發行的硬核遊戲。該遊戲正在（聽不清）的主頁上進行推廣，並在推出後在我們的應用程序中被評為沙特阿拉伯下載遊戲排名第二的遊戲。我們計劃在未來幾個月內逐步增加在用戶獲取方面的投資，以擴大遊戲的影響力。

In terms of Yalla's first development -- developed hard-core game, Age of Legends, the team has been working on new game iterations. And the first step, Age of Legends was first launched in Turkey. And at the beginning of August, we successfully launched the Arabic version across the Gulf country. The game was the #1 downloaded game in the low-tech game category on iOS in both UAE and Saudi Arabia. We will continue to monitor Age of Legends' operating and financial performance, and we look forward to sharing more details with you on our next earnings call.

在Yalla首款開發的硬核遊戲《英雄時代》方面，團隊一直致力於新的遊戲迭代。第一步，《英雄時代》首先在土耳其推出。 8月初，我們在整個海灣國家成功推出了阿拉伯語版本。該遊戲在阿聯酋和沙特阿拉伯的 iOS 低技術遊戲類別中下載量排名第一。我們將繼續關注《英雄時代》的運營和財務表現，並期待在下一次財報電話會議上與您分享更多詳細信息。

The establishment of Yalla Game is an important strategic move for us. We will keep exploring opportunities in mid-core and hard-core games. For the 2 hard-core games we just launched, we will continue to work on future iterations to gain regional traction. We will also continue to expand our pipeline of games through both staff development and external distribution collaboration. We look forward to building our mid-core and hard-core game portfolios and expect this to serve as important growth drivers going forward.

Yalla Game的成立是我們的一項重要戰略舉措。我們將繼續探索中核和硬核遊戲的機會。對於我們剛剛推出的兩款硬核遊戲，我們將繼續致力於未來的迭代，以贏得區域關注。我們還將繼續通過員工發展和外部發行合作來擴大我們的遊戲渠道。我們期待建立中核和硬核遊戲產品組合，並期望這將成為未來重要的增長動力。

Other vision is for Yalla to become the largest online social networking and gaming company in MENA. We have high aspirations in this region, and the whole team has been working tirelessly to achieve this goal. We are deploying many of possibilities and identifying how we can better serve MENA users' evolving needs for online services. Our strong cash flow and solid cash position are well suited to support this journey. Digital transformation in the Middle East is foreseeable, and the next 3 to 5 years will be a crucial period of development.

Yalla 的另一個願景是成為中東和北非地區最大的在線社交網絡和遊戲公司。我們對這個地區抱有遠大的抱負，整個團隊一直在為實現這一目標而不懈努力。我們正在部署許多可能性，並確定如何更好地滿足中東和北非地區用戶不斷變化的在線服務需求。我們強勁的現金流和堅實的現金狀況非常適合支持這一旅程。中東地區的數字化轉型是可以預見的，未來3至5年將是發展的關鍵時期。

We are confident in our ability to capture growth opportunities in this promising and growing market. We will continue to enhance our investments in research and development and further explore new business opportunities while we work with potential partners from around the world to generate more global participation in MENA's exciting future of digital transformation.

我們對在這個充滿希望和不斷增長的市場中抓住增長機會的能力充滿信心。我們將繼續加大研發投資，進一步探索新的商機，同時與世界各地的潛在合作夥伴合作，讓更多的全球人參與中東和北非令人興奮的數字化轉型未來。

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

現在我將把這個電話轉給我們的總統賽菲·伊斯梅爾先生，以便更仔細地了解我們最近的事態發展。

Hello, everyone. Thanks for joining us today. Let's take a closer look at our quarter 2 operations and the performance of our products. We are pleased to deliver robust quarter 2 results. Our monthly active users increased by 14.3% year-over-year, reaching 34.2 million. In quarter 2, we rolled out an array of operation event on both Yalla and Yalla Ludo, defined our product features and systematically improved our customer service management. As a result, Yalla Group's paying user increased by 26.6% year-over-year to 13.4 million in quarter 2, demonstrating users' increasing willingness to pay on our platform.

大家好。感謝您今天加入我們。讓我們仔細看看我們第二季度的運營情況和產品的表現。我們很高興能夠交付強勁的第二季度業績。我們的月活躍用戶同比增長 14.3%，達到 3420 萬。第二季度，我們在Yalla和Yalla Ludo上推出了一系列運營活動，明確了我們的產品功能並系統地改進了我們的客戶服務管理。因此，第二季度Yalla Group的付費用戶同比增長26.6%至1,340萬，表明用戶在我們平台上的付費意願不斷增強。

Our team will continue to refine our user acquisition and operational strategy to further improve operating efficiency. I'm pleased to share with you that during quarter 2, Yalla Group launched a new product developed to serve Arabic users' traditions in prayer, which played a significant role in Arabic users' daily lives.

我們的團隊將繼續完善我們的用戶獲取和運營策略，以進一步提高運營效率。我很高興與大家分享，第二季度，雅拉集團推出了一款為阿拉伯用戶祈禱傳統服務而開發的新產品，在阿拉伯用戶的日常生活中發揮了重要作用。

Our team launched this user friendly and ad-free app to provide users in the Arabic community with accurate praying time and a number of other customized functions related to prayer. The introduction of this app aligned with Yalla Group's ESG program, demonstrating our dedication to honoring Arabic culture, which represents a significant portion of today's culturally diverse society.

我們的團隊推出了這款用戶友好且無廣告的應用程序，為阿拉伯社區的用戶提供準確的祈禱時間以及許多其他與祈禱相關的定制功能。該應用程序的推出與 Yalla Group 的 ESG 計劃相一致，體現了我們致力於尊重阿拉伯文化，阿拉伯文化代表了當今文化多元化社會的重要組成部分。

Next, it's my privilege to announce that, as a leading local gaming company, Yalla was invited by the Department of Economy and Tourism of Dubai to participate in the Dubai eSport and Game Festival 2023. Attending the festival in late June, we showcased our latest hard-core games and discussed the future of mobile games in MENA.

接下來，我很榮幸地宣布，作為當地領先的遊戲公司，Yalla受迪拜經濟和旅遊部邀請，參加2023年迪拜電子競技和遊戲節。在6月下旬的活動中，我們展示了我們最新的產品硬核遊戲並討論了中東和北非地區手機遊戲的未來。

Held under the government of the rural of Dubai, the Dubai eSport and Game Festival is the premier esport and gaming event in the MENA region. It introduces the latest development in the gaming industry through games, exports, esports, tournaments, influencer challenges and a game industry conference. This event has also solidified Dubai as a global gaming destination and encourage a sense of community among gaming centers, offering an exceptional gaming experience teed in Arabic customs.

迪拜電子競技和遊戲節由迪拜農村政府主辦，是中東和北非地區首屈一指的電子競技和遊戲盛會。它通過遊戲、出口、電子競技、錦標賽、影響力挑戰和遊戲行業會議介紹遊戲行業的最新發展。此次活動還鞏固了迪拜作為全球遊戲目的地的地位，並鼓勵遊戲中心之間的社區意識，提供符合阿拉伯習俗的卓越遊戲體驗。

Our 2 new games, Merge Kingdom and Age of Legends, gained great popularity among players at the festival. This reflects our strong local expertise, and the event also strengthened our brand awareness across the region.

我們的兩款新遊戲《融合王國》和《英雄時代》在此次盛典上受到了玩家的熱烈歡迎。這體現了我們強大的本地專業知識，此次活動還增強了我們在該地區的品牌知名度。

We are also pleased to report that in collaboration with Mohamed bin Zayed University of Artificial Intelligence, MBZUAI, we have launched a trailblazing program to cultivate new AI talents. As the first graduate-level research-based AI university in the world, MBZUAI works to enable the advancement of graduate students, businesses and government in artificial intelligence in the Arabic environment. In addition to the internship program that's taking place at Yalla Group's headquarters in Dubai, the 2 parties will also focus on industrial development and explore the future application of cutting-edge technology to strengthen the alliance between industry and academia.

我們還很高興地報告，我們與穆罕默德·本·扎耶德人工智能大學 (MBZUAI) 合作，啟動了一項開拓性計劃，以培養新的人工智能人才。作為世界上第一所研究生水平的研究型人工智能大學，MBZUAI 致力於促進阿拉伯環境中的研究生、企業和政府在人工智能方面的進步。除了在迪拜雅拉集團總部進行的實習項目外，雙方還將重點關注產業發展，探索前沿技術的未來應用，以加強產學界的聯盟。

As the largest online social networking and gaming company in MENA, over the past 7 years, Yalla Group has amassed a great deal of practical experience in natural language processing, computer vision and recommendation system that's set with Arabic sentiment and Arabic users custom. We believe our cooperation with MBZUAI will provide both parties with the new ideas, enhance the application of AI innovation in the Arabic environment and support the acceleration of digital transformation in the region at large.

作為中東和北非最大的在線社交和遊戲公司，在過去的7年裡，Yalla Group在自然語言處理、計算機視覺和符合阿拉伯語情感和阿拉伯語用戶習慣的推薦系統方面積累了大量的實踐經驗。我們相信，與MBZUAI的合作將為雙方提供新思路，加強人工智能創新在阿拉伯環境中的應用，支持整個地區數字化轉型的加速。

Last but not least, we are very proud to announce that for 3 years in a row, Yalla Group was selected by Data.ai as 1 of the top 30 publishers headquartered in Europe, the Middle East and Africa, EMEA, in the 2023 publisher awards. In the Middle East region, we were also recognized as being the #1 publisher based on consumer spending. Data.ai is a well-known global unified data analysis platform for the mobile application market.

最後但並非最不重要的一點是，我們非常自豪地宣布，Yalla Group 連續3 年被Data.ai 在2023 年出版商評選中評選為總部位於歐洲、中東和非洲(EMEA) 的30 強出版商之一獎項。在中東地區，根據消費者支出，我們也被認為是排名第一的發行商。 Data.ai是全球知名的移動應用市場統一數據分析平台。

Our #1 rating validates our deep local know-how in this increasingly competitive market and the strength of our monetization capabilities. We are honored to receive the Data.ai prestigious award and look forward to continuously providing MENA users with high-quality customized digital products to meet the fast growing demand of online users.

我們的第一名評級驗證了我們在這個競爭日益激烈的市場中深厚的本地專業知識以及我們的貨幣化能力的實力。我們很榮幸獲得Data.ai享有盛譽的獎項，並期待繼續為MENA用戶提供高質量的定制數字產品，以滿足在線用戶快速增長的需求。

In conclusion, I would like to echo the sentiment that Yalla's vision is to become the #1 online social networking and entertainment platform in MENA region. As MENA's digital transformation gathers pivotal momentum over the next 3 to 5 years, we will leverage our extensive operating experience in this region, continue to invest in R&D and roll out new products tailored to local user habits and references. We will also work to expand our partnership with local channels and look forward for collaboration opportunities with industry peers around the globe who are eager to explore the MENA market.

最後，我想重申 Yalla 的願景是成為中東和北非地區排名第一的在線社交網絡和娛樂平台。隨著中東和北非地區數字化轉型在未來3至5年內聚集關鍵動力，我們將利用我們在該地區豐富的運營經驗，繼續投資研發，推出適合當地用戶習慣和參考的新產品。我們還將努力擴大與當地渠道的合作夥伴關係，並期待與全球渴望開拓中東和北非市場的業界同行的合作機會。

Keeping our group vision in mind, we will remain faithful to our core values of prioritizing our users, embracing diversity and operating within a simple, pragmatic, pioneering and enterprising approach as we work to achieve our goals.

牢記集團願景，我們將堅守用戶優先、擁抱多元化、簡單務實、開拓進取的核心價值觀，努力實現我們的目標。

With that, I will now turn the call over to our CFO, Karen, who will discuss our key financial and operating results.

現在，我將把電話轉給我們的首席財務官凱倫，她將討論我們的主要財務和運營業績。

Thank you, Saifi. Hello, everyone. Thank you for joining us today. In the second quarter, we achieved solid top and bottom line growth as we continue to pursue the high-quality development of our business. We remain committed to executing our disciplined cost management and ROI-based marketing strategy, further elevating our overall operational efficiency. We have also strategically leveraged the high interest rates to achieve higher return to support our strong cash position.

謝謝你，賽菲。大家好。感謝您今天加入我們。二季度，我們繼續追求業務高質量發展，實現了營業收入和淨利潤的穩健增長。我們仍然致力於執行嚴格的成本管理和基於投資回報率的營銷策略，進一步提高我們的整體運營效率。我們還戰略性地利用高利率來實現更高的回報，以支持我們強勁的現金狀況。

As a result, we maintained a healthy level of profitability with a net margin of 35.7% and a non-GAAP net margin of 42.6%. As we move into the second half year 2023, we will continue to leverage our high-quality growth strategy and further enhance our efficiency. We believe our ample cash position and strong execution capabilities will equip us to see future opportunities that foster sustainable growth and generate value for all of our stakeholders.

因此，我們保持了健康的盈利水平，淨利潤率為 35.7%，非 GAAP 淨利潤率為 42.6%。進入2023年下半年，我們將繼續實施高質量增長戰略，進一步提升效率。我們相信，充足的現金狀況和強大的執行能力將使我們能夠看到未來的機遇，促進可持續增長並為所有利益相關者創造價值。

Now I would like to walk you through our detailed financials for the second quarter of 2023. Our revenues were USD 79.2 million in the second quarter of 2023, a 4.1% increase from USD 76.1 million in the second quarter of last year. The increase was primarily driven by the broadening of our user base and our enhanced monetization capabilities.

現在我想向您介紹我們 2023 年第二季度的詳細財務數據。2023 年第二季度我們的收入為 7920 萬美元，比去年第二季度的 7610 萬美元增長 4.1%。這一增長主要是由於我們用戶群的擴大和貨幣化能力的增強。

Now let's take a look at our costs and expenses. Our total costs and expenses remained relatively stable at USD 55.3 million in the second quarter of 2023 compared with USD 55.2 million in the same period last year. Our cost of revenues decreased by 3.2% to USD 28.3 million in the second quarter of 2023, down from USD 29.3 million in the same period last year. The decrease was primarily due to a lower commission fees paid to third-party payment platforms as we diversified our payment channels as well as lower technical service fees as a result of our more disciplined cost management.

現在讓我們來看看我們的成本和費用。 2023 年第二季度，我們的總成本和費用保持相對穩定，為 5530 萬美元，而去年同期為 5520 萬美元。 2023 年第二季度，我們的收入成本下降 3.2%，至 2830 萬美元，低於去年同期的 2930 萬美元。減少的主要原因是我們支付渠道多元化，支付給第三方支付平台的佣金較低，以及由於我們更加嚴格的成本管理，技術服務費較低。

Cost of revenues as a percentage of total revenues decreased from 35.8% in the second quarter of 2023 compared with 38.5% in the same period last year. Our selling and marketing expenses were USD 12.4 million in the second quarter of 2023, a 10.4% increase from USD 11.2 million in the same period last year. The increase was primarily due to higher advertising and marketing promotion expenses related to increased user acquisition efforts and the promotions associated with our expanding product portfolio.

收入成本佔總收入的百分比從 2023 年第二季度的 35.8% 下降到去年同期的 38.5%。 2023年第二季度我們的銷售和營銷費用為1240萬美元，比去年同期的1120萬美元增長10.4%。這一增長主要是由於與增加用戶獲取工作相關的廣告和營銷推廣費用增加以及與我們不斷擴大的產品組合相關的促銷所致。

Selling and marketing expenses as a percentage of total revenues remained relatively stable at 15.6% compared with 14.7% in the same period last year. Our general and administrative expenses were USD 8 million in the second quarter of 2023, a 15.4% increase from USD 6.9 million in the same period last year, primarily due to an increase in incentive compensation and an increase in professional service fees.

銷售及營銷費用佔總收入的比例相對穩定，為 15.6%，而去年同期為 14.7%。 2023年第二季度我們的一般和管理費用為800萬美元，比去年同期的690萬美元增長15.4%，主要是由於激勵薪酬的增加和專業服務費的增加。

General and administrative expenses as a percentage of total revenues remained relatively stable at 10.1% compared with 9.1% in the same period last year. Our technology and product development expenses were USD 6.6 million in the second quarter of 2023, a 14.8% decrease from USD 7.7 million in the same period last year, primarily due to the appreciation of U.S. dollar, which resulted in a decrease in the reporting currency amount of salaries and benefits for our technology and product development team, showing one of the benefits of our globalized talent acquisition strategy.

一般及行政費用佔總收入的比例相對穩定，為 10.1%，而去年同期為 9.1%。 2023年第二季度我們的技術和產品開發費用為660萬美元，比去年同期的770萬美元下降14.8%，主要是由於美元升值導致報告貨幣減少我們的技術和產品開發團隊的薪資和福利金額，顯示了我們全球化人才獲取戰略的好處之一。

Technology and product development expenses as a percentage of total revenues decreased from 10.2% in the second quarter of 2022 to 8.3% in the second quarter of 2023. As such, our operating income increased to USD 23.9 million in the second quarter of 2023 compared with USD 20.9 million in the same period last year.

技術和產品開發費用佔總收入的百分比從2022 年第二季度的10.2% 下降至2023 年第二季度的8.3%。因此，與2023 年第二季度相比，我們的營業收入增加至2,390 萬美元。去年同期為2090萬美元。

Excluding share-based compensation, our non-GAAP operating income in the second quarter of 2023 was USD 29.4 million. Our interest income was USD 4.6 million in the second quarter of 2023 compared with USD 176,000 in the same period of 2022, primarily due to a significant increase in interest rates applicable to our bank deposits and the continued increase in the company's cash position. Our income tax was USD 821,000 in the second quarter of 2023 compared with USD 780,000 in the same period last year.

不計入股權激勵，我們 2023 年第二季度的非 GAAP 營業收入為 2,940 萬美元。 2023年第二季度我們的利息收入為460萬美元，而2022年同期為176,000美元，主要是由於我們的銀行存款利率大幅上升以及公司現金狀況持續增加。 2023 年第二季度我們的所得稅為 821,000 美元，而去年同期為 780,000 美元。

Moving to our bottom line. Our net income increased by 39% to USD 28.3 million in the second quarter of 2023 compared with USD 20.4 million in the same period last year. Excluding share-based compensation expenses, non-GAAP net income for the second quarter of 2023 increased by 18% year-over-year to USD 33.8 million.

轉向我們的底線。 2023 年第二季度，我們的淨利潤增長 39%，達到 2830 萬美元，而去年同期為 2040 萬美元。不計入股權激勵費用，2023年第二季度非公認會計準則淨利潤同比增長18%，達到3380萬美元。

Next, I would like to briefly go through our liquidity and cash capital resources. Our cash position remains solid. As of June 30, 2023, we had cash and cash equivalents, term deposits and short-term investments of USD 510.5 million compared with USD 453 million as of December 31, 2022. Under our share repurchase program that began May 21, 2021, and has since extended by our Board through May 21, 2024, we have repurchased 2,302,141 ADS or Class A ordinary shares in the open market cash repurchases, totaling approximately USD 27 million as of June 30, 2023.

接下來我想簡單介紹一下我們的流動性和現金資本資源。我們的現金狀況依然穩固。截至2023 年6 月30 日，我們的現金和現金等價物、定期存款和短期投資為5.105 億美元，而截至2022 年12 月31 日為4.53 億美元。根據我們於2021 年5 月21 日開始的股票回購計劃，自董事會將期限延長至2024 年5 月21 日以來，我們已在公開市場現金回購中回購了2,302,141 股ADS 或A 類普通股，截至2023 年6 月30 日，總額約為2,700 萬美元。

Moving to our outlook. For the third quarter of 2023, we expect our revenues to be between USD 73 million and USD 80 million. The above outlook is based on the current market conditions and reflects the company's management's current and preliminary estimates of the market and operating conditions and the customer demand, which are all subject to change.

轉向我們的展望。 2023 年第三季度，我們預計收入將在 7300 萬美元至 8000 萬美元之間。上述展望基於當前市場狀況，反映了公司管理層對市場和經營狀況以及客戶需求的當前和初步估計，這些估計可能會發生變化。

This concludes our prepared remarks for today. Operator, we are now ready to take questions.

我們今天準備好的發言到此結束。接線員，我們現在準備好回答問題。

(Operator Instructions) Our first question today comes from Xueqing Zhang with CICC.

（操作員指令）我們今天的第一個問題來自中金公司的張學清。

Congrats on the strong quarter. I have 3. First, with regard to Yalla Ludo, based on stable growth yield quarter-on-quarter, which indicated that the company, I believe, has more growth potential as the paying ratio or ARPU. And to regard to your hard-core games, can management share what you see as the advantage of getting more involved with the hard-core games? And what are the expected marketing expenses for the 2 games in the third quarter and first quarter? And how will they impact with our community?

祝賀季度表現強勁。我有3.首先，關於Yalla Ludo，基於季度環比穩定的增長收益率，這表明我認為該公司具有更大的增長潛力，即付費比率或ARPU。至於你們的硬核遊戲，管理層能否分享一下您認為更多地參與硬核遊戲的優勢？而這兩款遊戲第三季度和第一季度的營銷費用預計是多少？它們將如何影響我們的社區？

Thank you very much for the questions. I will take the first 2, and I think our CFO, Karen Hu, will take third one. For the first question for the paying ratio, or ARPU, we started our Yalla and Yalla Ludo early in the MENA market and we're able to obtain a group of users who are highly loyal and have high needs for online social networking and gaming services.

非常感謝您的提問。我將選擇前 2 個，我認為我們的首席財務官 Karen Hu 將選擇第三個。對於第一個問題，即ARPU，我們很早就在中東和北非市場推出了Yalla和Yalla Ludo，我們能夠獲得一批忠誠度高、對在線社交和遊戲服務有高需求的用戶。 。

Our users have shown a strong willingness to engage and pay on our platform over the past 7 years. Our paying ratio in Q1 reached 41%. This quarter, it came down slightly to approximately 39%. So for the first half of the year, our paying ratio has remained strong, which is higher than we see from many tier products in the industry.

過去 7 年裡，我們的用戶在我們的平台上表現出了強烈的參與和付費意願。一季度我們的付費比例達到了41%。本季度略有下降至 39% 左右。因此，今年上半年，我們的付費比率仍然保持強勁，高於我們從行業許多級別產品中看到的水平。

We have hosted the area for our operating events in the past few quarters, which are designed to convert more users into paying users. I don't want to guide you to a higher paying ratio at this stage. I think it's already robust. In terms of ARPU, I think, yes, they are more tactics we can try to improve its performance.

在過去的幾個季度中，我們在該區域舉辦了運營活動，旨在將更多用戶轉化為付費用戶。現階段我不想引導您提高支付比例。我認為它已經很強大了。就 ARPU 而言，我認為，是的，它們是我們可以嘗試提高其性能的更多策略。

And for the hard-core games question, we are dedicated to serving the MENA market. And we are also the largest local online social networking and gaming company. With this reach and our expansion goals, exploring the mid-core and hard-core game business is a necessary move for the company. It's also an important step towards achieving our vision in terms of advantages. I think there are 2 important parts.

對於硬核遊戲問題，我們致力於服務中東和北非市場。我們也是當地最大的在線社交網絡和遊戲公司。有了這樣的影響力和我們的擴張目標，探索中核和硬核遊戲業務是公司的必要舉措。這也是實現我們的優勢願景的重要一步。我認為有兩個重要部分。

First of all, gaming is the fast-growing market in MENA. And it's also the industry that many MENA countries are focusing on developing. We identified mid-core and hard-core games to be one of the important business drivers for our company in the future. And we also have a highly engaged user community that we can leverage on. Secondly, gaming business is the cash driving, and with support from the strong cash position, we may be able to explore more Internet-related business in the region.

首先，遊戲是中東和北非地區快速增長的市場。這也是許多中東和北非國家重點發展的產業。我們認為中硬核遊戲是我們公司未來重要的業務驅動力之一。我們還有一個高度活躍的用戶社區可供我們利用。其次，遊戲業務是現金驅動，在強大現金狀況的支持下，我們或許能夠在該地區探索更多互聯網相關業務。

As you may already know, money workers now don't have a dominant player in MENA working yet. Hope this answers your question, Xueqing. And our CFO will be taking the last question. Thank you.

您可能已經知道，貨幣工作者現在在中東和北非地區還沒有佔據主導地位。希望這能回答你的問題，學清。我們的首席財務官將回答最後一個問題。謝謝。

Oh, sorry, I'm muted. Thank you, Tao. Thank you for your question, Xueqing. For the second half of this year, we budgeted at least more than USD 1 million to invest in promoting these 2, mid-core and hard-core games. Our budget is dynamic, and we will adjust it according to our users' feedback, and it's possible for us to invest more if we see it's needed. We have just started to promote Merged Kingdom in our Yalla community, and we were already seeing better retention and willingness to pay. Early feedback has been positive, and we will continue to monitor user trends. Hope I answered your question. Thank you.

哦，對不起，我靜音了。謝謝你，濤。謝謝你的提問，雪晴。今年下半年，我們預算至少超過100萬美元來投入推廣這兩款中核和硬核遊戲。我們的預算是動態的，我們會根據用戶的反饋進行調整，如果我們認為有需要，我們可能會進行更多投資。我們剛剛開始在 Yalla 社區推廣合併王國，我們已經看到了更好的保留率和付費意願。早期反饋是積極的，我們將繼續監控用戶趨勢。希望我回答了你的問題。謝謝。

And our next question today comes from Chenghao Li with CICC.

今天我們的下一個問題來自中金公司的李成浩。

Congratulations on management's solid quarter. I have 2 questions. First, which is a follow-up question. Can management share more detail about what will the financial impact be of launching the mid and hard-core games. And secondly, we can see that Yalla Group often achieves quite a high performance in the second quarter during the off-season of Ramadan. So what are the main driving forces behind this? And how should we think about this in terms of the signal changes in the third and fourth quarter?

祝賀管理層取得了穩定的季度業績。我有 2 個問題。首先，這是一個後續問題。管理層能否分享更多關於推出中核和硬核遊戲對財務影響的細節？其次，我們可以看到雅拉集團在齋月淡季的第二季度往往能取得相當高的業績。那麼這背後的主要驅動力是什麼？而從三季度、四季度的信號變化來看，我們又該如何看待呢？

Thank you, Chenghao. I'll take the first question and leave the second one to our CEO. If you are referring to the impact of the potential investments in these 2 hard-core games' promotion to our group margin, I would like to emphasize that our annual margin guidance, which is over 30%, we provided at the beginning of the year already includes this anticipated expenses.

謝謝你，成浩。我將回答第一個問題，並將第二個問題留給我們的首席執行官。如果您指的是這兩款硬核遊戲推廣的潛在投資對我們集團利潤率的影響，我想強調的是，我們年初提供的年度利潤率指引超過30%已經包括了這筆預期費用。

So far, our margin trend is consistent with our expectations. And because of our quality growth strategy at the group level, our group margin is actually doing a little better than we promised at the beginning of this year. In terms of potential revenue contribution, we started the official promotion of both products in Q3, and we are gradually increasing the investments in sales and marketing.

到目前為止，我們的利潤率趨勢與我們的預期一致。由於我們在集團層面的質量增長戰略，我們的集團利潤率實際上比我們今年年初承諾的要好一些。從潛在的收入貢獻來看，我們從第三季度開始正式推廣這兩款產品，並且正在逐步加大銷售和營銷方面的投入。

Looking at the ranking on some third-party data platforms, we see that Merge Kingdom's growth in ranking under the same category in MENA is already about the same level as some successful SLG games. The whole team is working on that, and our goal is to improve the game's performance further. I hope I answered your question.

從一些第三方數據平台的排名來看，《Merge Kingdom》在中東和北非同品類排名的增長已經與一些成功的SLG遊戲持平。整個團隊正在為此努力，我們的目標是進一步提高遊戲的性能。我希望我回答了你的問題。

Chenghao, thank you very much for your question. The second one for the like Ramadan or the main driving forces, I think the most influential seasonality impact we see is still Ramadan, which really falls in Q2. For the other quarters, I don't see seasonality as a very strong factor.

程浩，非常感謝你的提問。第二個是齋月或主要驅動力，我認為我們看到的最有影響力的季節性影響仍然是齋月，它真正落在第二季度。對於其他季度，我不認為季節性是一個非常重要的因素。

Yes. We delivered a very good performance in Q2 this year. But if we look into our revenue turns on a daily or weekly basis in Q2 users, this show less willingness to pay during Ramadan. However, our product and operational teams were able to roll out popular events and new features on our platform after Ramadan ended, and in the later part of Q2 our revenue growth showed solid recovery.

是的。我們今年第二季度的表現非常好。但如果我們查看第二季度用戶每日或每週的收入變化，就會發現齋月期間的支付意願較低。然而，我們的產品和運營團隊能夠在齋月結束後在我們的平台上推出熱門活動和新功能，並且在第二季度後期，我們的收入增長顯示出穩健的複蘇。

I think the key driver of this quarter's strong performance is still closely tied to our ability to roll out the event at our customers for local user preference as well as our ability to provide users with better experience on the platform. Thank you.

我認為本季度強勁表現的關鍵驅動力仍然與我們針對本地用戶偏好向客戶推出活動的能力以及我們在平台上為用戶提供更好體驗的能力密切相關。謝謝。

And our next question today comes from Kaifang Jia with CITIC.

今天我們的下一個問題來自中信的賈開芳。

I have a question about your gaming business. So what's the specific launch strategy and monetization plan for the mid- and hard-core gaming businesses?

我有一個關於您的遊戲業務的問題。那麼中硬核遊戲業務的具體上線策略和變現計劃是怎樣的呢？

Kaifang, thank you for your question. Regarding the sales and marketing strategy for our hard-core games, there are 2 important points we care about. First of all, for any new mid and hard-core games promotions, building user communities with good dynamics is very significant. And that's highly related to the pace and tactics we use in marketing. Additionally, the pace is quite different for SLG games and RPG games. A lot of know-how is involved, and we need to be pretty accurate in controlling the pace.

凱芳，謝謝你的提問。關於我們的硬核遊戲的銷售和營銷策略，我們關心的有兩點。首先，對於任何新的中硬核遊戲的推廣來說，建立具有良好動態的用戶社區是非常重要的。這與我們在營銷中使用的節奏和策略密切相關。此外，SLG遊戲和RPG遊戲的節奏也有很大不同。這涉及到很多技巧，我們需要非常準確地控制節奏。

Secondly, we really care about the ROI. We're monitor ROI on a daily basis as one of the key metrics we refer to. And in terms of the monetization of the hard-core games, I will say in-app purchase are the main parts.

其次，我們非常關心投資回報率。我們每天監控投資回報率，將其作為我們參考的關鍵指標之一。而就硬核遊戲的變現而言，我想說的是內購是主要部分。

And our next question comes from Xiaoyue Hu with Haitong.

我們的下一個問題來自胡曉月和海通。

Congratulations on a very strong quarter. So I have 2 questions today. Firstly, could you please provide updates on YallaChat and other new products? And my second question is what are the future growth drivers for the Yalla and Yalla Ludo legacy products?

祝賀本季度業績非常強勁。所以我今天有兩個問題。首先，您能否介紹一下YallaChat和其他新產品的最新情況？我的第二個問題是 Yalla 和 Yalla Ludo 傳統產品的未來增長動力是什麼？

I'll take the 2 questions. As we shared earlier, our YallaChat is the instant message product customized for Arabic users and with that, our conservations with respect to local communities' social habits and preferences. The product has met the goal with that for its first stage of promotion soon after its launch and has shown strong retention since then. Recently, we have focused more on designing the product features and rolling out new functions. For example, YallaChat now supports 32 users joining the same group video chat and we also launched the in-app emoji shop. We will invest more resources in refining the product before we begin the second round of promotion.

我來回答2個問題。正如我們之前分享的，我們的 YallaChat 是為阿拉伯用戶定制的即時消息產品，因此我們尊重當地社區的社交習慣和偏好。該產品上市後不久就達到了第一階段的推廣目標，並表現出強勁的留存率。最近，我們更加專注於產品功能的設計和新功能的推出。例如，YallaChat 現在支持 32 個用戶加入同一群視頻聊天，我們還推出了應用內表情符號商店。在開始第二輪促銷之前，我們會投入更多的資源來完善產品。

Another update I would love to share with you is about what's building on the animation social world and about how we build it. We plan to fill it in combination with mid-core and hard-core games to boost the gamification of the product. We will keep you posted on our progress on our new product.

我想與您分享的另一個更新是關於動畫社交世界的構建以及我們如何構建它。我們計劃結合中硬核遊戲進行填充，提升產品的遊戲化程度。我們將隨時向您通報新產品的進展情況。

And for the second question about the future growth drivers for Yalla and Ludo. Our 2 flagship apps, Yalla and Yalla Ludo, have shown strong popularity in the MENA market, and we are very confident this trend will continue. In terms of user growth, we'll stick with our current strategy to obtain quality growth and focus more on the ROI instead of only the community side. We will also continue to strategically refine our operations and keep rolling out new features and breaking events tailored to local users' preferences to boost user engagement and ARPU. We expect our flagship applications to keep their current steady pace of growth.

第二個問題是關於 Yalla 和 Ludo 未來的增長動力。我們的 2 個旗艦應用程序 Yalla 和 Yalla Ludo 在中東和北非市場表現出了強勁的受歡迎程度，我們非常有信心這一趨勢將持續下去。在用戶增長方面，我們會堅持目前的策略，獲得有質量的增長，更多地關注投資回報率，而不僅僅是社區方面。我們還將繼續戰略性地完善我們的運營，並不斷推出適合本地用戶偏好的新功能和重大事件，以提高用戶參與度和 ARPU。我們預計我們的旗艦應用程序將保持當前的穩定增長速度。

And our next question comes from Lincoln Kong with Goldman Sachs.

我們的下一個問題來自高盛的 Lincoln Kong。

So the management team discussed this trend after increasing interest from global Internet companies to the Middle East market during this prepared remarks session. How is this going to affect Yalla's stability in the region? How do you see the competitive landscape changing under this context?

因此，在全球互聯網公司對中東市場興趣日益濃厚的情況下，管理團隊在這次準備好的發言會上討論了這一趨勢。這將如何影響亞拉在該地區的穩定？您如何看待在此背景下競爭格局的變化？

Thank you very much, Lincoln. As we discussed in our remarks session, MENA's macro environment is very good, and the local government's vocation to development is strong. More and more resources, including talent and investments are being directed to this market. I think one important thing we have noted is that since the second half of last year, we have been more frequently invited to discuss opportunities in the new end market with industry peers.

非常感謝你，林肯。正如我們在發言中討論的那樣，中東和北非地區的宏觀環境很好，當地政府的發展意願很強。越來越多的資源，包括人才和投資，正在流向這個市場。我認為我們注意到的一件重要的事情是，從去年下半年開始，我們越來越頻繁地被邀請與業界同行討論新終端市場的機會。

More conversations are happening. And in this process, we are able to learn from each party's insights and intentions in what they have and what they need at this point and discuss ways to collaborate that are mutually beneficial. With all these creative minds and resources, it's not hard to see that the market is going to grow in the next 3 to 5 years.

更多對話正在發生。在這個過程中，我們能夠了解各方目前擁有的和需要的見解和意圖，並討論互利的合作方式。憑藉所有這些創意思維和資源，不難看出該市場將在未來 3 到 5 年內增長。

In terms of the competitive landscape, in recent years from strong Internet companies gradually entered the market, such as (inaudible). Some mobile gaming apps are also performing very well in this market. This is very exciting. It's a testament to the region's market potential as well as it's also a sign of its vibrant development.

從競爭格局來看，近年來有實力的互聯網公司逐漸進入市場，比如（聽不清）。一些手機遊戲應用程序在這個市場上也表現出色。這非常令人興奮。這證明了該地區的市場潛力，也是其蓬勃發展的標誌。

I want to reiterate that competition is never bad. It inspires us to better serve our users, research new technologies and industry trends and drive collaboration and innovation. As a leading player in this region, we see the unfolding of this event as an opportunity. We are taking proactive steps to cement our leadership position and remain confident in our capabilities after all this year.

我想重申，競爭從來都不是壞事。它激勵我們更好地服務用戶、研究新技術和行業趨勢並推動協作和創新。作為該地區的領先企業，我們將此次活動的開展視為一次機遇。我們正在採取積極措施鞏固我們的領導地位，並對我們的能力在今年之後保持信心。

And our next question comes from Edward Wang with Credit Suisse.

我們的下一個問題來自瑞士信貸銀行的愛德華·王。

Congratulations on the robust results. So my question is that can management share more color about revenue growth target in the second half of the year?

祝賀取得了穩健的結果。所以我的問題是，管理層能否分享更多有關下半年收入增長目標的信息？

Edward, thank you. Thank you for your question. For our flagship applications, we expect their current steady pace of growth to continue, in line with the annual revenue guidance we provided at the beginning of the year. As a reminder, this guidance excludes the potential contribution from our mid-core and hard-core games business. We recently started the official promotion of our 2 games, and there are still 4 more months from now on to the end of this year. So we will keep you posted on our progress once we have a more accurate prediction.

愛德華，謝謝你。謝謝你的問題。對於我們的旗艦應用程序，我們預計其當前的穩定增長速度將繼續下去，這與我們年初提供的年度收入指導一致。提醒一下，本指引不包括我們的中核和硬核遊戲業務的潛在貢獻。我們最近開始了兩款遊戲的正式推廣，距離今年年底還有4個月的時間。因此，一旦我們有了更準確的預測，我們將隨時向您通報我們的進展。

And our next question comes from [Rachel Gu] with Nomura.

我們的下一個問題來自野村證券的[Rachel Gu]。

Congratulations on the very good outlook. I have a question about the net profit margin. Could management share more color on net profit margin trend in the second half of this year?

恭喜您擁有非常好的前景。我有一個關於淨利潤率的問題。管理層能否分享更多有關今年下半年淨利潤率趨勢的信息？

Thank you. Thank you for your question. Since we have promotions for our mid-core to hard-core games in quarter 3 and quarter 4, there may be some fluctuations in our quarterly net margin. It depends on our users' feedback and how much we will end up investing. Taking the potential expenses of mid-core to hard-core games' sales and marketing into account plus the benefits of our operating refinements and the higher interest rates that -- which we are driving better returns on our cash position, we expect Yalla's 2023 annual non-GAAP net margin to increase to about 35%. Hope I answered your question.

謝謝。謝謝你的問題。由於我們在第三季度和第四季度對中核到硬核遊戲進行促銷，因此我們的季度淨利潤可能會出現一些波動。這取決於我們用戶的反饋以及我們最終將投資多少。考慮到中核到硬核遊戲銷售和營銷的潛在費用，加上我們運營改進的好處和更高的利率——我們正在推動我們的現金狀況獲得更好的回報，我們預計 Yalla 的 2023 年年度收入非GAAP 淨利潤率將增至35% 左右。希望我回答了你的問題。

As there are no further questions now, I'd like to turn the call back to the management for closing remarks.

由於現在沒有其他問題了，我想將電話轉回管理層以供結束語。

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's Investor Relations or Piacente Financial Communications. Both parties' contact information is available on today's press release as well as on our company website. Thank you.

再次感謝您今天加入我們。我們期待在下個季度與您交談。如果您還有其他疑問，請隨時聯繫 Yalla 投資者關係部或 Piacente Financial Communications。雙方的聯繫信息可在今天的新聞稿以及我們公司的網站上找到。謝謝。

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You can now disconnect your lines, and have a wonderful day.

謝謝。今天的電話會議到此結束。我們感謝大家參加今天的演講。您現在可以斷開線路，祝您度過美好的一天。