JOYY Inc. (YY Quick QuoteYY - Free Report) delivered third-quarter 2022 non-GAAP earnings of 96 cents per American depositary shares (ADS), which beat the Zacks Consensus Estimate by 84.6% and increased significantly from the year-ago reported earnings of 42 cents per share.

Revenues totaled $586.8 million, down 9.8% year over year. The figure beat the Zacks Consensus Estimate by 1.13%. The decrease in the top line was due to a decrease in the average revenue per paying user of BIGO, as global macroeconomic uncertainties and the appreciation of the U.S. dollars against certain other local currencies affected users’ paying activities.

Top-Line Details

Live streaming revenues (92% of total revenues) decreased 11.3% year over year to $542.7 million. Notably, other revenues (7% of total revenues) increased 14.6% to $43.9 million.

Global average mobile monthly active users (MAUs) decreased 6.6% year over year to 269.8 million, primarily due to the decrease in average mobile MAUs of Likee and Hago.

BIGO and All Other contributed 82% and 18%, respectively, to total live streaming revenues in the third quarter. During the third quarter, Bigo Live’s average MAUs increased 14.2% year over year to 35.4 million.

Average mobile MAUs of Likee decreased 34.1% year over year to 50.6 million, primarily due to reduced spending on user acquisition through advertisement.

During the third quarter, the average mobile MAUs of Hago decreased 29.6% year over year to 7.6 million.

The cost of revenues decreased 16.7% to $366.5 million in the third quarter of 2022. Revenue-sharing fees and content costs were $245.8 million, down from $290.1 million in the corresponding period of 2021.

Operating Details

Gross profit climbed 4.5% from the year-ago quarter to $220.2 million. Gross margin expanded 510 basis points (bps) to 38% in the third quarter, primarily due to the optimization of revenue sharing cost and improved bandwidth usage efficiency.

Operating expenses totaled $202.2 million, down 3.1% from the year-ago quarter. Research & development (R&D) and sales & marketing (S&M) expenses declined 2.4% and 8.9% year over year, respectively, while general & administrative (G&A) expenses increased 11.3% year over year.

As a percentage of revenues, R&D expanded 80 bps while S&M expenses expanded 20 bps year over year. G&A expenses, as a percentage of revenues, expanded 140 bps year over year.

The company reported non-GAAP operating income of $19.82 million against $6.86 million in the year-ago period. The operating income margin expanded 230 bps to 3% in the third quarter.

Balance Sheet & Cash Flow

As of Sep 30, 2022, the company had cash and cash equivalents, restricted cash and cash equivalents, short-term deposits, restricted short-term deposits and short-term investments of $4.2 billion. For the third quarter of 2022, the net cash inflow from operating activities was $117.1 million.

As of Sep 30, 2022, the company had a total of 1,416.9 million common shares, or the equivalent of 70.8 million ADSs, outstanding.

Q4 Guidance

For the fourth quarter of 2022, the company expects net revenues to be between $594 million and $619 million.

Zacks Rank & Stocks to Consider

Currently, JOYY carries a Zacks Rank #3 (Hold).

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