• Revenue: USD88.9 million, a 4.4% increase from USD85.2 million in Q3 2023.
• Net Income: USD39.2 million, an 11.2% increase from USD35.2 million in Q3 2023.
• Net Margin: 44.1%; Non-GAAP net margin of 47.9%.
• Average Monthly Active Users: 40.2 million, up 14.5% year-over-year.
• Paying Users: 12.6 million, up 12% year-over-year.
• Total Costs and Expenses: USD56.4 million, a 6.9% increase from USD52.8 million in Q3 2023.
• Cost of Revenues: USD31.8 million, a 14.6% increase from USD27.8 million in Q3 2023.
• Selling and Marketing Expenses: USD7.4 million, a 34.9% decrease from USD11.3 million in Q3 2023.
• General and Administrative Expenses: USD10.1 million, a 38.3% increase from USD7.3 million in Q3 2023.
• Technology and Product Development Expenses: USD7.1 million, an 11.1% increase from USD6.4 million in Q3 2023.
• Interest Income: USD7.8 million, compared with USD5.6 million in Q3 2023.
• Income Tax Expenses: USD1.29 million, compared with USD0.71 million in Q3 2023.
• Cash and Cash Equivalents: USD570.1 million as of September 30, 2024.
• Share Repurchase Program: USD7 million in Q3 2024; cumulative repurchases totaling approximately USD42.5 million.
• Q4 2024 Revenue Outlook: Expected to be between USD77 million and USD84 million.

• Warning! GuruFocus has detected 4 Warning Signs with YALA.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Yalla Group Ltd (NYSE:YALA) reported record high revenues of USD88.9 million for the third quarter, exceeding guidance by 8%.
• Net income increased by 11.2% year-over-year to USD39.2 million, showcasing enhanced profitability.
• The company achieved a significant increase in average monthly active users, reaching 40.2 million, up 14.5% year-over-year.
• Yalla Ludo and 101 Okey Yalla set new quarterly revenue records, demonstrating strong product performance.
• The company maintained a solid cash position with USD570.1 million in cash and equivalents as of September 30, 2024.

Negative Points

• Total costs and expenses increased by 6.9% to USD56.4 million, impacting overall profitability.
• Cost of revenues rose by 14.6% due to higher commission fees, increasing the cost of revenues as a percentage of total revenues to 35.8%.
• General and administrative expenses increased by 38.3%, primarily due to higher incentive compensation.
• The introduction of the UAE Corporate Tax Law led to an increase in income tax expenses.
• Revenue guidance for the fourth quarter of 2024 is projected to be between USD77 million and USD84 million, indicating potential revenue decline compared to the third quarter.

Q & A Highlights

Q: Could management share more information about your new game products such as testing and launching schedules? And how does management view the performance of the game business in 2025? A: Jianfeng Xu, Chief Operating Officer, stated that they have three new self-developed mid-core games in the pipeline, with some entering testing in Q4 2024. They expect Yalla Ludo's performance to remain strong with single-digit growth next year, and additional growth will come from new products and potential external collaborations.

Q: Regarding flagship products, what are the strategies for flagship products moving forward, and what's the trend for flagship products in Q4 and next year? A: Tao Yang, CEO, mentioned that they will continue to roll out new features for Yalla and Yalla Ludo to boost user engagement. They are confident that both flagship products will maintain their current scale and have the potential for single-digit growth in 2025.

Q: Could management elaborate more on the drivers of growth for Yalla Ludo and 101 Okey Yalla? A: Saifi Ismail, President, explained that their efforts to optimize user experience and refine operational procedures have paid off. Yalla Ludo's diverse operational events and offline tournaments strengthened their brand, while 101 Okey Yalla's new features received excellent feedback, highlighting their localization capabilities.

Q: Can management give us an update on the shareholder returns? A: Yang Hu, CFO, stated that Yalla is committed to returning value to shareholders through their share repurchase program. They repurchased over 1.7 million ADS for approximately USD7 million this quarter and have deployed a total of USD42.5 million for share repurchases. They are considering cash dividend payments in due course.

Q: Could management share updates about external cooperation and expansion into new areas? A: Tao Yang, CEO, mentioned that Yalla is engaging in discussions with top-tier overseas Internet companies interested in the MENA market. They focus on social networking and gaming, and while the Middle East remains their primary focus, they have users in Europe, South America, and Southeast Asia and may consider global promotions for suitable products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.