Yalla Group Limited Q2 FY2025 earnings call

• Tao Yang mentioned strong second quarter results with revenues close to USD 84.6 million, beating guidance, and net margin at 43.2%. Yalla has a long history in MENA's Internet industry, with products like Yalla Ludo having a potential life cycle of 10-15 years. They are expanding into new verticals like game distribution and exploring online local services. The gaming pipeline includes new titles in the coming quarters, and they collaborated with a university on AI projects. Share repurchase: USD 50 million minimum commitment, repurchased over 6.2 million ADS shares totaling USD 41 million by June 30, 2025, and canceled those shares.
• Saifi Ismail noted MAU increased 8.8% year-over-year to 42.4 million, adjusted user acquisition strategy in Q2 to focus on high engagement users. Q3 MAU expected to normalize at 2%-3% quarter-over-quarter with full-year MAU growth projected at ~10% year-over-year. Highlighted co-branded campaign with Dubai Department of Economy and Tourism, successful ninth anniversary celebration, and release of 2024 ESG report.

Total revenues in the second quarter of 2025 were close to USD 84.6 million, beating the high end of guidance. Average monthly active users (MAU) increased 8.8% year-over-year to 42.4 million. Cost of revenues decreased due to lower commission fees and share-based compensation. Selling and marketing expenses increased slightly but as a percentage of revenue decreased. General and administrative expenses increased due to incentive compensation and exchange loss. Technology and product development expenses increased due to headcount growth. Net income was USD 36.5 million, a 16.4% increase year-over-year, with net margin at 43.2%.

• Q3 2025 revenue expected to be between USD 78 million and USD 85 million. Full-year 2025 revenue expected to be flat with low single-digit growth compared to 2024, with new game titles potentially adding growth later. Net margin estimate around 40% excluding potential investments in new products. Set aside 5% of full-year revenue for selling and marketing expenses for new products, to be flexibly adjusted based on user feedback.

Q: Chloe Wei from CICC asked about Q3 outlook and 2025 guidance, specifically the potential year-over-year decline in Q3 and 2025 revenue growth trajectory and margin trends.

A: Karen Hu responded that for the second half of 2025, they are confident in solid revenue performance, full-year revenue flat with low single-digit growth excluding new products, net margin estimate around 40% excluding new product investments, and 5% of full-year revenue set aside for selling and marketing expenses for new products with flexible budget adjustment.

Q: Xueqing Zhang from CICC asked about user strategy shift.

A: Jianfeng Xu replied that there was a shift in user acquisition strategy in Q2 to focus on acquiring and retaining high engagement users, with Q3 MAU expected to normalize at 2%-3% quarter-over-quarter and full-year MAU growth projected at ~10% year-over-year.

Q: Xiaoyue Hu with Haitong asked about share repurchase execution and future shareholder returns.

A: Karen Hu said they continue to execute the share repurchase program with over 6.2 million shares repurchased for ~USD 41 million by June 30, 2025, and plan to complete or exceed the USD 50 million commitment by year-end.

Q: Lincoln Kong with Goldman Sachs asked about game distribution strategy for mid-core and hard-core titles.

A: Jianfeng Xu outlined three core competitive advantages: deep localization with in-market know-how, efficient user acquisition leveraging existing user base, and strong community operations with tailored events and user care.

Q: Jenny Yuan with UBS asked about long-term growth strategy and MENA market potential.

A: Saifi Ismail stated the MENA region has a young population and high mobile Internet penetration, with untapped opportunities in Internet verticals. Yalla's legacy businesses provide a strong foundation, and they are committed to investing in mid-core and hard-core games, exploring social networking expansions and local lifestyle services.