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JOYY (YY) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

JOYY Inc. YY reported fourth-quarter 2019 non-GAAP earnings of 96 cents per American depositary shares (ADS) that beat the Zacks Consensus Estimate by 18.5%.

Moreover, revenues of $1.09 billion surpassed the consensus mark by 2.6%.

In domestic currency, non-GAAP earnings per ADS declined 48.6% year over year to RMB6.70 while revenues jumped 64.2% to RMB7.62 billion.

Notably, on Dec 23, 2019, the company announced name change from YY Inc. to JOYY Inc. effective Dec 20.

YY Inc. Price, Consensus and EPS Surprise

YY Inc. Price, Consensus and EPS Surprise
YY Inc. Price, Consensus and EPS Surprise

YY Inc. price-consensus-eps-surprise-chart | YY Inc. Quote


Top-Line Details

Top-line growth can primarily be attributed to strong live streaming revenues, which surged 62.7% year over year to RMB7.147 billion and accounted for 93.8% of revenues in the reported quarter. Sold contribution from Huya, YY and Bigo segments drove live streaming revenues.

Notably, other revenues soared 89% to RMB471.6 million, primarily driven by robust growth in advertising revenues from Huya and Bigo.

Global average mobile monthly active users (MAUs) reached 485.2 million. Notably, 78.8% was recognized from markets outside China.

Moreover, average mobile MAUs of Likee, JOYY’s short-form video platform, surged 208.3% year over year to 115.3 million.

Further, average mobile MAUs of global live streaming services increased 21.5% to 158.9 million. Notably, 102.8 million was from China including 41.2 million from YY, which inched up 3.8% year over year and 61.6 million from Huya, which increased 21.5% year over year.

Moreover, the total number of paying users of YY rose 9.8% year over year to 4.5 million. Total number of paying users of Huya climbed 5.9% year over year to 5.1 million.

From outside China, average mobile MAUs of global live streaming services were 56.1 million including 23.1 million from Bigo Live, up 18.6% year over year and 33 million from HAGO, which jumped 57.9% on a year-over-year basis.

Additionally, average mobile MAUs of imo were 211 million in the reported quarter.

Operating Details

Cost of revenues soared 69.3% to RMB5.10 billion due to higher revenue-sharing fees and content costs and increased bandwidth costs.

The bandwidth costs increase was due to the expansion of the overseas user base following the Bigo consolidation.

Gross profit surged 54.6% from the year-ago quarter to RMB2.52 billion. However, gross margin contracted 200 basis points (bps) to 33%. In addition to higher revenue-sharing fees and content costs, the decrease was also attributed to low gross margin of Huya and Bigo.

Operating expenses totaled RMB2.30 billion, up 146.7% from the year-ago quarter. This was due to the company’s escalated investment in sales & marketing initiatives in overseas markets.   

Research & development (R&D), sales & marketing (S&M) and general & administrative (G&A) expenses grew 141.3%, 217.1%, and 70.3% year over year, respectively.

Non-GAAP operating income declined 12.1% year over year to RMB781.3 million.

Balance Sheet & Cash Flow

As of Dec 31, 2019, JOYY had cash and cash equivalents, restricted cash and cash equivalents, short-term deposits, restricted short-term deposits and short-term investments of RMB26.94 billion.

Moreover, net cash from operating activities was RMB1.79 billion.

First-Quarter 2020 Guidance

YY expects net revenues between RMB6.75 and RMB6.85 billion, indicating growth of 41.2-43.3% from the year-ago reported figure.

Zacks Rank & Stocks to Consider

JOYY currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Microsoft MSFT, Intel INTC and Garmin GRMN, all three sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Microsoft, Intel and Garmin is currently pegged at 13.2%, 7.5% and 7.4% each.

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