If one were to evaluate the performance of Yalla Group Ltd. (NYSE: YALA) over the past year, they would probably feel satisfactory towards its latest fourth quarter and full year 2021 earnings report, released on March 14th. In the fresh financial results, Yalla achieved revenue of US$67.6 million and a Non-GAAP net income of US$27.6 million for the fourth quarter, increasing by 39.7% and 18.2% respectively over the same period in 2020.
Despite doubling the revenue growth rate in the previous three quarters did not run into the fourth quarter, the Middle East-based unicorn still stunningly wrapped up in the year with continued growth and profitability.
However, the trajectory of Yalla's stock price over the past year might dissatisfy many. Year 2021 witnessed the relentless international conflicts, reoccurrence of the pandemic across the world, coupled with discouraging market factors, and all above pulled Yalla into a downward trend. For long-term institutional investors, it probably will be a good chance to buy in when the price is now at a relatively low level, but for individual investors and others come only confusion and disappointment.
Yalla's stock price once skyrocketed to the zenith of US$41.35 from its IPO of US$7.5 within 5 months after its listing on the NYSE. On the sprawling rise journey, many hailed its flagship product Yalla as the "Middle East Clubhouse", a voice-social platform that hit an overnight success at the very beginning of 2021.
Labeling as voice-social networking app, Clubhouse features on "celebrity lectures", but Yalla targets more on users in recreation and allows to freely express themselves on the platform. Yalla, as the first voice-social networking app in the Middle East and North Africa (MENA) region, not only accesses the market, but also lays the groundwork for its voice- social networking model.
In the company's latest earnings conference call, the management disclosed some updates that "the lead plaintiffs in a securities class action lawsuit against the Company and its CEO voluntarily dismissed the lawsuit on January 12th, 2022, which marks a successful and final conclusion of the lawsuit for the Company." This also verified the Company's claims that "short-seller reports issued in May 2021 contained numerous errors as well as distorted, misleading and unsubstantiated claims regarding the Company."
Unfortunately, Yalla's stock price still lingers on the ground, though the impact of the short selling incident has already faded. It is currently valued less than US$1 billion, with a price-to-earnings (P/E) ratio around 10, an unimaginable low price for a unicorn with annual revenue growth of over 100% and a non-GAAP net profit margin of 46.3%.
The new offering would be the next engine
Looking into the Yalla's latest operating performance, it can be found a solid and vigorous business in 2021. With the company logging a staggering 150% year-on-year revenue growth in the fourth quarter of 2020, a slowdown in revenue was expected in the fourth quarter of 2021. Financials for the three months to December 31st showed that Yalla's revenue grew synchronously with expectations by 39.7% year-on-year to US$67.6 million.
In terms of business structure, Yalla is endeavoring to shift from social-oriented to the gaming section, with some fruition already. Revenue generating from games services to the total revenue rose exponentially from 8.8% in 2020 to 23.7% in 2021. New products such as Yalla Parchis, a board game that targets South American users, 101 Okey Yalla for users in Turkey, and tailor-made Yalla Baloot for gamers in Saudi Arabia are also available in app stores.
In the company's conference call, it further detailed that Yalla Parchis is in the top 5 of the board game apps in 10 countries, and the 101 Okey Yalla still sitting in the No.1 board game in Turkey. On the other hand, Yalla currently is splurging on the development of mid-and hard-core games in pursuit of a bigger presence in the gaming industry in the MENA region.
It is worth noting that WAHA, initially mentioned in the third quarter report as the MENA region's first-ever social metaverse app, sets to be released in March 2022 as scheduled.
In terms of profits, Yalla Group nearly doubled its growth for the full year 2021, with a non-GAAP net income of US$126.5 million. The increase was primarily driven by the expansion of Yalla's monthly active users (MAUs) and the paying users who are attracted by the company's new products. In the fourth quarter alone, the number of paying users jumped by 62.1% year-on-year and 9.5% quarter-on-quarter; while the number of MAUs soared by 71% year-on-year to 28.06 million.
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