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YY Reports Third Quarter 2017 Unaudited Financial Results

GUANGZHOU, China, Nov. 14, 2017 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ:YY) ("YY" or the "Company"), a leading live streaming social media platform in China, today announced its unaudited financial results for the third quarter of 2017.

Third Quarter 2017 Highlights

  • Net revenues increased by 48.0% to RMB3,092.3 million (US$464.8 million) from RMB2,089.8 million in the corresponding period of 2016.
  • Net income attributable to YY increased by 59.0% to RMB636.0 million (US$95.6 million) from RMB400.0 million in the corresponding period of 2016.
  • Non-GAAP net income attributable to YY1 increased by 46.7% to RMB639.1 million (US$96.1 million) from RMB435.6 million in the corresponding period of 2016.

“We continued to deliver robust financial and operating results in the third quarter of 2017,” stated Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY. “Our mobile live streaming monthly active users (MAU) increased by 36.6% year over year to 73.0 million, and our total live streaming paying users increased by 46.5% year over year to over 6.3 million. Our solid performance is a testament to our highly effective strategies in introducing more initiatives to attract younger generation users and to enhance existing user’s engagement and consumption on our live streaming social media platform.  In the past quarter, we rolled out a series of innovative social functionalities and features in the latest version of YY Live 7.0, including Accompany Me, Happy Basketball, and Clip Doll Online. In addition, we launched several new short-form video products to tap into more segmented video verticals and fulfill the diversified demands of users across China. On the Huya side, we are pleased to see that it continued its trajectory of user growth and revenue generation in the third quarter. Looking ahead, by leveraging our dual growth engines, YY Live and Huya, we will continue to invent new ways to attract users and stimulate user engagement, further build our content ecosystem, and explore more monetization opportunities. We believe that we have the right strategy in place to stay ahead of the competition in China’s live streaming social media industry.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “This was another quarter with solid financial growth for YY. In the third quarter, our total net revenues increased by 48.0% year over year to RMB3,092.3 million, exceeding the high end of our previous guidance range. The growth was primarily attributable to the significant increase of our live streaming revenues, which grew by 60.4% year over year to RMB2,871.6 million. Both YY Live and Huya broadcasting contributed to such rapid revenue growth. Our non-GAAP net income attributable to YY increased by 46.7% to RMB639.1 million in the quarter, of which Huya’s Non-GAAP operating loss further shrank year over year from RMB159.3 million to RMB10.1 million. In addition, during the quarter, we completed a secondary offering and received approximately USD442.2 million in net proceeds, thus further demonstrating investors’ confidence in YY and laying a solid capital foundation for YY’s future development.”

/EIN News/ -- Third Quarter 2017 Financial Results

NET REVENUES
Net revenues increased by 48.0% to RMB3,092.3 million (US$464.8 million) in the third quarter of 2017 from RMB2,089.8 million in the corresponding period of 2016, primarily driven by the increase in live streaming revenues. Live streaming revenues increased by 60.4% to RMB2,871.6 million (US$431.6 million) in the third quarter of 2017 from RMB1,790.4 million in the corresponding period of 2016. Live streaming revenues from the YY Live segment were RMB2,319.2 million (US$348.6 million) and from the Huya segment were RMB552.4 million (US$83.0 million) in the third quarter of 2017. 

Revenues from online games were RMB122.0 million (US$18.3 million) in the third quarter of 2017 as compared to RMB149.5 million in the corresponding period of 2016.

Revenues from membership were RMB49.5 million (US$7.4 million) in the third quarter of 2017 as compared to RMB68.8 million in the corresponding period of 2016.

Other revenues, mainly representing revenues from the Company's online advertising revenues, were RMB49.2 million (US$7.4 million) in the third quarter of 2017, compared with RMB81.1 million in the corresponding period of 2016. The declines in online gaming, membership, and other revenues mainly reflected the Company’s continued strategic shift towards its live streaming business.

COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 48.2% to RMB1,889.3 million (US$284.0 million) in the third quarter of 2017 from RMB1,275.0 million in the corresponding period of 2016, primarily attributable to an increase in revenue-sharing fees and content costs to RMB1,604.9 million (US$241.2 million) in the third quarter of 2017 from RMB967.4 million in the corresponding period of 2016. The increase in revenue-sharing fees and content costs paid to performers, guilds and content providers was in line with the increase in revenues and was primarily due to the higher level of user engagement and spending driven by promotional activities. In addition, bandwidth costs increased to RMB160.5 million (US$24.1 million) in the third quarter of 2017 from RMB149.2 million in the corresponding period of 2016, primarily reflecting continued user base expansion and video quality improvements, but largely offset by the Company’s improved efficiency and pricing terms.

Gross profit increased by 47.6% to RMB1,203.0 million (US$180.8 million) in the third quarter of 2017 from RMB814.8 million in the corresponding period of 2016. Gross margin was 38.9% in the third quarter of 2017 as compared to 39.0% in the corresponding period of 2016 and 40.1% in the second quarter of 2017. The sequential decline of gross margin was mainly attributable to the increased revenue sharing with entry-level hosts on the Company’s platform to develop a more healthy and balanced ecosystem.

OPERATING INCOME
Operating expenses in the third quarter of 2017 increased by 49.4% to RMB560.3 million (US$84.2 million) from RMB375.0 million in the corresponding period of 2016.

Operating income in the third quarter of 2017 increased by 39.9% to RMB661.4 million (US$99.4 million) from RMB472.9 million in the corresponding period of 2016. Operating margin in the third quarter of 2017 was 21.4% as compared to 22.6% in the corresponding period of 2016.

Non-GAAP operating income2 increased by 30.7% to RMB664.5 million (US$99.9 million) in the third quarter of 2017 from RMB508.4 million in the corresponding period of 2016. Non-GAAP operating margin3 was 21.5% in the third quarter of 2017 as compared to 24.3% in the corresponding period of 2016.

NET INCOME
Net income attributable to YY Inc. increased by 59.0% to RMB636.0 million (US$95.6 million) in the third quarter of 2017 from RMB400.0 million in the corresponding period of 2016. Net margin in the third quarter of 2017 increased to 20.6% from 19.1% in the corresponding period of 2016.

Non-GAAP net income attributable to YY Inc. increased by 46.7% to RMB639.1 million (US$96.1 million) from RMB435.6 million in the corresponding period of 2016. Non-GAAP net margin in the third quarter of 2017 was 20.7% as compared to 20.8% in the corresponding period of 2016.

NET INCOME PER ADS
Diluted net income per ADS4 increased by 52.3% to RMB10.51 (US$1.58) in the third quarter of 2017 from RMB6.90 in the corresponding period of 2016.

Non-GAAP diluted net income per ADS5 increased by 41.2% to RMB10.56 (US$1.59) in the third quarter of 2017 from RMB7.48 in the corresponding period of 2016.

BALANCE SHEET AND CASH FLOWS
As of September 30, 2017, the Company had cash and cash equivalents of RMB1,129.0 million (US$169.7 million), short-term deposits of RMB6,474.2 million (US$973.1 million) and restricted short-term deposits of RMB1,000.0 million (US$150.3 million). For the third quarter of 2017, net cash from operating activities was RMB1,045.0 million (US$157.1 million).

SHARES OUTSTANDING
As of September 30, 2017, the Company had a total of 1,260.8 million common shares, or the equivalent of 63.0 million ADSs outstanding.

Business Outlook
For the fourth quarter of 2017, the Company expects net revenues to be between RMB3.4 billion and RMB3.5 billion, representing a year-over-year growth of 36.5% to 40.6%. This forecast reflects the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Conference Call Information
The Company will hold a conference call on Tuesday, November 14, 2017 at 8:00 pm Eastern Time, or Wednesday, November 15, 2017 at 9:00 am Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

     
United States:    +1-845-675-0438
International Toll Free:   +1-855-500-8701
China Domestic:   400-1200-654
Hong Kong:    +852-3018-6776
Conference ID:   # 4599539
     

The replay will be accessible through November 22, 2017 by dialing the following numbers:

     
United States Toll Free:   +1-855-452-5696
International:   +61-2-9003-4211
Conference ID:    # 4599539
     

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://investors.yy.com/

Exchange Rate
This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars, in this press release, were made at a rate of RMB6.6533 to US$1.00, the noon buying rate in effect on September 30, 2017 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

About YY Inc.
YY Inc. (“YY” or the “Company”) is a leading live streaming social media platform in China. The Company’s highly engaged users contribute to a vibrant social community by creating, sharing and enjoying a vast range of entertainment content and activities. YY enables users to interact with each other in real-time through online live media and offers users a uniquely engaging and immersive entertainment experience. YY Inc. was listed on the NASDAQ in November 2012.

Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as YY's strategic and operational plans, contain forward-looking statements. YY may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about YY’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: YY’s goals and strategies; YY's future business development, results of operations and financial condition; the expected growth of the online communication social platform market in China; the expectation regarding the rate at which to gain  active users, especially paying users; YY’s ability to monetize the user base; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in YY’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and YY does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Use of Non-GAAP Financial Measures
The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except that the consolidated statement of changes in shareholders’ equity, consolidated statements of cash flows, and the detailed notes have not been presented. YY uses non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributable to YY Inc., non-GAAP net margin, non-GAAP net income attributable to common shareholders, and basic and diluted non-GAAP net income per ADS, which are non-GAAP financial measures. Non-GAAP operating income is operating income excluding share-based compensation expenses. Non-GAAP operating margin is non-GAAP operating income as a percentage of net revenues. Non-GAAP net income attributable to YY Inc. is net income attributable to YY Inc. excluding share-based compensation expenses. Non-GAAP net margin is non-GAAP net income attributable to YY Inc. as a percentage of net revenues. Non-GAAP net income attributable to common shareholders is net income attributable to common shareholders excluding share-based compensation expenses. Basic and diluted non-GAAP net income per ADS is non-GAAP net income attributable to common shareholders divided by weighted average number of ADS used in the calculation of basic and diluted net income per ADS. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation expenses, which have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company’s net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “YY Inc. Reconciliations of GAAP and Non-GAAP Results” near the end of this release.

Investor Relations Contact
YY Inc.
Matthew Zhao
Tel: +86 (20) 8212-0000
Email: IR@YY.com 

ICR, Inc.
Xueli Song
Tel: +1 (646) 915-1611
Email: IR@YY.com

__________________________________

1 Non-GAAP net income attributable to YY Inc. is a non-GAAP financial measure, which is defined as net income attributable to YY Inc. excluding share-based compensation expenses. Please refer to the section titled "Reconciliation of GAAP and Non-GAAP Results" for details.

2 Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses. Please refer to the section titled "Reconciliation of GAAP and Non-GAAP Results" for details.  

3 Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues. Please refer to the section titled "Reconciliation of GAAP and Non-GAAP Results" for details.

4 ADS is American Depositary Share. Each ADS represents twenty Class A common shares of the Company. Diluted net income per ADS is net income attributable to common shareholders divided by weighted average number of diluted ADS.

5 Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders divided by weighted average number of ADS used in the calculation of diluted net income per ADS. Please refer to the section titled "Reconciliation of GAAP and Non-GAAP Results" for details).

 
YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)
             
    December
 31,
2016
  September
30,
2017
  September
30,
2017
    RMB   RMB   US$
Assets            
Current assets            
Cash and cash equivalents   1,579,743    1,129,024    169,694
Short-term deposits   3,751,519    6,474,206    973,082
Restricted short-term deposits   -    1,000,000    150,301
Short-term investment   -    89,070    13,387
Accounts receivable, net   169,571    167,551    25,183
Inventory   2,266    332    50
Amount due from related parties   135,245    52,876    7,947
Prepayments and other current assets   224,732    180,422    27,118
             
Total current assets   5,863,076   9,093,481   1,366,762
             
Non-current assets            
Deferred tax assets(1)   117,811    121,637    18,282
Investments   918,602    1,076,111    161,741
Property and equipment, net   838,750    925,233    139,064
Land use rights, net   1,872,394    1,836,493    276,027
Intangible assets, net   58,926    37,488    5,634
Goodwill   14,300    14,257    2,143
Amount due from related parties   -    20,000    3,006
Other non-current assets   101,933    71,334    10,722
             
Total non-current assets   3,922,716   4,102,553   616,619
             
Total assets   9,785,792   13,196,034   1,983,381
             
Liabilities, mezzanine equity and shareholders’ equity            
Current liabilities            
Convertible bonds   2,768,469   -   -
Accounts payable   137,107   102,242    15,367
Deferred revenue   430,683   630,911   94,827
Advances from customers   56,152   66,743    10,032
Income taxes payable   140,754   90,389   13,586
Accrued liabilities and other current liabilities   1,066,038   1,275,704    191,740
Amounts due to related parties   91,245   29,456    4,427
Short-term loan   -   597,213    89,762
             
Total current liabilities   4,690,448   2,792,658   419,741
             
Non-current liabilities            
Convertible bonds   -   6,636   997
Deferred revenue   25,459   49,222   7,398
Deferred tax liabilities   8,058   17,282   2,598
             
Total non-current liabilities   33,517   73,140   10,993
             
Total liabilities   4,723,965   2,865,798   430,734
             


YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
             
    December
31,
2016
  September
 30,
2017
  September
 30,
2017
    RMB   RMB   US$
             
Mezzanine equity   9,272   522,426   78,521
             
Shareholders’ equity            
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 750,115,028 and  922,793,788 shares issued and outstanding as of December 31, 2016 and September 30, 2017, respectively)   44    56    8
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 359,557,976 and 337,982,976 shares issued and outstanding as of December 31, 2016 and September 30, 2017, respectively)   26    24    4
Additional paid-in capital   2,165,766    5,161,606   775,796
Statutory reserves   58,857    58,857    8,846
Retained earnings   2,728,736    4,471,612   672,089
Accumulated other comprehensive income   93,066    60,671    9,119
             
Total YY Inc.’s shareholders’ equity   5,046,495   9,752,826   1,465,862
             
Non-controlling interests   6,060   54,984   8,264
             
Total shareholders’ equity   5,052,555   9,807,810   1,474,126
             
Total liabilities, mezzanine equity and shareholders’ equity   9,785,792   13,196,034   1,983,381
             
_________________________________________________________             
(1) Effectively January 2017, ASU 2015-17 issued by FASB requires entities to reclassify deferred tax assets and liabilities as non-current in the balance sheet. Accordingly, the Company retrospectively reclassified RMB107.3 million of deferred tax assets from current assets into non-current assets as of December 31, 2016.


 
YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(All amounts in thousands, except share, ADS and per ADS data)
         
    Three Months Ended   Nine Months Ended
    September
 30,
2016
  June
30,
2017
  September
 30,
2017
  September
30,
2017
    September
30,
2016
  September
30,
2017
  September
30,
2017
 
    RMB   RMB   RMB   US$     RMB   RMB   US$  
                   
Net revenues                  
Live streaming   1,790,373   2,373,397    2,871,610    431,607      4,809,037    7,302,434    1,097,566  
Online games   149,530   153,959    122,035    18,342      508,901    415,742    62,487  
Membership   68,768   52,204    49,486    7,438     210,210    147,111    22,111  
Others   81,134   29,431    49,174    7,391     191,752    102,967    15,476  
                   
Total net revenue   2,089,805   2,608,991   3,092,305   464,778     5,719,900   7,968,254   1,197,640  
                                 
Cost of revenues(1)   (1,275,002 ) (1,563,445 ) (1,889,313 ) (283,966 )   (3,543,873 ) (4,829,753 ) (725,918 )
                                 
Gross profit   814,803   1,045,546   1,202,992   180,812     2,176,027   3,138,501   471,722  
                                 
Operating expenses(1)                  
Research and development expenses   (163,236 ) (167,359 ) (166,139 )  (24,971 )   (515,112 ) (499,059 )  (75,009 )
Sales and marketing expenses   (109,075 ) (204,434 ) (249,480 )  (37,497 )   (275,735 ) (542,516 )  (81,541 )
General and administrative expenses   (102,683 ) (104,545 ) (144,678 )  (21,745 )   (276,245 ) (325,875 )  (48,979 )
                                 
Total operating expenses   (374,994 ) (476,338 ) (560,297 ) (84,213 )   (1,067,092 ) (1,367,450 ) (205,529 )
                   
Gain on deconsolidation and disposal of subsidiaries   -   -   -   -     -   37,989   5,710  
Other income   33,065   30,166   18,667   2,806     64,477   68,653   10,319  
                                 
Operating income   472,874   599,374   661,362   99,405     1,173,412   1,877,693   282,222  
                                 
Gain on partial disposal of investments   -   45,861   -   -     -   45,861   6,893  
Interest expense   (20,357 ) (3,459 ) (3,651 ) (549 )   (60,327 ) (28,378 ) (4,265 )
Interest income   17,162   27,317   47,505   7,140     40,713   105,853   15,910  
Foreign currency exchange gains (losses), net   (16 ) (281 ) (251 ) (38 )   773   (1,825 ) (274 )
Other non-operating expense   -   -   -   -     (23,474 ) -   -  
                                 
Income before income tax expenses
  469,663   668,812   704,965   105,958     1,131,097   1,999,204   300,486  
                                 
Income tax expenses   (69,909 ) (100,531 ) (74,684 ) (11,225 )   (194,710 ) (264,288 ) (39,723 )
                                 
Income before share of (loss) income in equity method investments, net of income taxes   399,754   568,281   630,281   94,733     936,387   1,734,916   260,763  
                                 
Share of (loss) income in equity method investments, net of income taxes   (1,867 ) 4,726   6,806   1,023     3,879   15,467   2,325  
                                 
Net Income   397,887   573,007   637,087   95,756     940,266   1,750,383   263,088  
                                 
Less: Net loss attributable to the non-controlling interest shareholders and the mezzanine classified non-controlling interest shareholders   (2,152 ) (701 ) 1,120   168     (11,398 ) (2,446 ) (368 )
                                 
Net income attributable to YY Inc.   400,039   573,708   635,967   95,588     951,664   1,752,829   263,456  
                                         


YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended   Nine Months Ended
    September 30,
2016
  June 30,
2017
  September 30,
2017
  September 30,
2017
    September 30,
2016
  September 30,
2017
  September 30,
2017
 
    RMB   RMB   RMB   US$     RMB   RMB   US$  
                   
Net income attributable to YY Inc.   400,039   573,708   635,967   95,588     951,664   1,752,829   263,456  
                   
Other comprehensive income:                  
Unrealized gain (loss) of available-for-sales securities, net of nil tax   13,354   (39,818 ) (22,128 ) (3,326 )   190,506   (19,710 ) (2,962 )
Foreign currency translation adjustments, net of nil tax   (562 ) (712 ) (12,592 ) (1,893 )   (1,671 ) (12,685 ) (1,907 )
                                 
Comprehensive income attributable to YY Inc.   412,831   533,178   601,247   90,369     1,140,499   1,720,434   258,587  
                                 
                   
Net income per ADS                  
—Basic   7.07   10.09   10.60   1.59      16.91   30.30   4.55  
—Diluted    6.90   9.98   10.51   1.58      16.64   29.72   4.47  
Weighted average number of ADS used in calculating net income per ADS                  
—Basic   56,560,174   56,832,278   60,008,235   60,008,235     56,290,231    57,857,025   57,857,025  
—Diluted   60,814,662   57,488,989   60,503,529   60,503,529     60,773,398   59,681,394   59,681,394  
                                 

(1)     Share-based compensation was allocated in cost of revenues and operating expenses as follows:

         
    Three Months Ended   Nine Months Ended
    September 30,
2016
June 30,
2017
September 30,
2017
  September 30,
2017
    September 30,
2016
September 30,
2017
September 30,
2017
    RMB RMB RMB   US$     RMB RMB US$
                   
Cost of revenues    3,701 3,021 (434 ) (65 )   12,454 6,210  933
Research and development expenses    11,120 10,492 (6,049 ) (909 )   64,893  15,847  2,382
Sales and marketing expenses    612 303 (74 ) (11 )   2,392 738 111
General and administrative expenses    20,086 9,649  9,700    1,458     51,199  26,406  3,969


 
YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended   Nine Months Ended
    September 30,
2016
  June 30,
2017
  September 30,
2017
  September 30,
2017
    September 30,
2016
  September 30,
2017
  September 30,
2017
    RMB   RMB   RMB   US$     RMB   RMB   US$
                               
Operating income   472,874   599,374   661,362   99,405      1,173,412    1,877,693    282,222
Share-based compensation expenses   35,519   23,465    3,143   473      130,938   49,201   7,395
                               
Non-GAAP operating income   508,393   622,839   664,505   99,878     1,304,350   1,926,894   289,617
                               
Net income attributable to YY Inc.   400,039   573,708    635,967   95,588     951,664     1,752,829    263,456
Share-based compensation expenses   35,519   23,465    3,143    473      130,938    49,201    7,395
                               
Non-GAAP net income attributable to YY Inc.   435,558   597,173   639,110   96,061     1,082,602   1,802,030   270,851
                               
                               
Non-GAAP net income per ADS                              
—Basic    7.70   10.51    10.65    1.60      19.23    31.15    4.68
—Diluted   7.48   10.39    10.56    1.59      18.79    30.54    4.59
Weighted average number of ADS used in calculating Non-GAAP net income per ADS                              
—Basic   56,560,174   56,832,278   60,008,235    60,008,235     56,290,231    57,857,025    57,857,025
—Diluted   60,814,662   57,488,989   60,503,529    60,503,529     60,773,398    59,681,394    59,681,394


 
YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    September 30, 2017
           
    YY Live(2)   Huya(2)   Total   Total  
    RMB   RMB   RMB   US$  
                   
Net revenues                  
Live streaming   2,319,251    552,359    2,871,610    431,607  
Online games   113,188    8,847    122,035    18,342  
Membership   46,139    3,347    49,486    7,438  
Others   30,193    18,981    49,174    7,391  
                   
Total net revenue   2,508,771   583,534   3,092,305   464,778  
                   
Cost of revenues(1)   (1,379,016 ) (510,297 ) (1,889,313 ) (283,966 )
                   
Gross profit   1,129,755   73,237   1,202,992   180,812  
                   
Operating expenses(1)                  
Research and development expenses   (117,231 )  (48,908 )  (166,139 )  (24,971 )
Sales and marketing expenses   (228,318 )  (21,162 )  (249,480 )  (37,497 )
General and administrative expenses   (127,342 )  (17,336 )  (144,678 )  (21,745 )
                   
Total operating expenses   (472,891 ) (87,406 ) (560,297 ) (84,213 )
Other income   18,569   98   18,667   2,806  
                   
Operating income (loss)   675,433   (14,071 ) 661,362   99,405  
                   
  1. Share-based compensation was allocated in cost of revenues and operating expenses as follows:
     
    Three Months Ended
    September 30, 2017
           
    YY Live   Huya Total   Total  
    RMB   RMB   RMB     US$  
                 
Cost of revenues   (1,190 ) 756 (434 ) (65 )
Research and development expenses   (7,973 ) 1,924 (6,049 ) (909 )
Sales and marketing expenses   (106 ) 32 (74 ) (11 )
General and administrative expenses   8,473   1,227 9,700   1,458  
                 
  1. The Company revamped its internal organization and one sub-business stream previously presented and reviewed under YY Live was changed to be presented and reviewed under Huya from the first quarter of 2017. Segment information for the 3 months ended 30 September 2016 has been restated accordingly.
  2. As the Company has disposed of a great majority of its online education business before the end of 2016 and disposed of the remaining portion of its online education business in the beginning of 2017, 100 Education ceased to be an operating segment starting from the first quarter of 2017.
 
YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
      Three Months Ended
      September 30, 2017
             
      YY Live   Huya   Total Total
      RMB   RMB   RMB US$
               
Operating income (loss)   675,433   (14,071 ) 661,362 99,405
Share-based compensation expenses   (796 ) 3,939   3,143 473
               
Non-GAAP operating income (loss)   674,637   (10,132 ) 664,505 99,878
               


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    June 30, 2017
           
    YY Live   Huya   Total   Total  
    RMB   RMB   RMB   US$  
                   
Net revenues                  
Live streaming   1,931,569   441,828   2,373,397   350,095  
Online games   147,010   6,949   153,959   22,710  
Membership   50,014   2,190   52,204   7,701  
Others   19,034   10,397   29,431   4,341  
                   
Total net revenue   2,147,627   461,364   2,608,991   384,847  
                   
Cost of revenues(1)   (1,159,554 ) (403,891 ) (1,563,445 ) (230,620 )
                   
Gross profit   988,073   57,473   1,045,546   154,227  
                   
Operating expenses(1)                  
Research and development expenses   (132,223 ) (35,136 ) (167,359 ) (24,687 )
Sales and marketing expenses   (183,119 ) (21,315 ) (204,434 ) (30,156 )
General and administrative expenses   (86,678 ) (17,867 ) (104,545 ) (15,421 )
                   
Total operating expenses   (402,020 ) (74,318 ) (476,338 ) (70,264 )
Gain on deconsolidation and disposal of subsidiaries   -   -   -   -  
Other income   30,156   10   30,166   4,450  
                   
Operating income (loss)   616,209   (16,835 ) 599,374   88,413  
                   
  1. Share-based compensation was allocated in cost of revenues and operating expenses as follows:
     
    Three Months Ended
    June 30, 2017
           
    YY Live Huya Total Total
    RMB RMB   RMB   US$
           
Cost of revenues   2,372 649 3,021 446
Research and development expenses   8,229 2,263 10,492 1,548
Sales and marketing expenses   282 21 303 45
General and administrative expenses   6,872 2,777 9,649 1,423
           


YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
      Three Months Ended
      June 30, 2017
                 
      YY Live   Huya   Total   Total
      RMB   RMB   RMB   US$
                 
Operating income (loss)   616,209   (16,835 ) 599,374   88,413
Share-based compensation expenses   17,755   5,710   23,465   3,462
                 
Non-GAAP operating income (loss)   633,964   (11,125 ) 622,839   91,875
                 


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    September 30, 2016
     
    YY Live   Huya   100 Education   Total   Total  
    RMB   RMB   RMB   RMB   US$  
                       
Net revenues                      
Live streaming   1,593,495   196,878   -   1,790,373   268,482  
Online games   149,530   -   -   149,530   22,423  
Membership   68,768   -   -   68,768   10,312  
Others   20,240   -   60,894   81,134   12,167  
                       
Total net revenue   1,832,033   196,878   60,894   2,089,805   313,384  
                       
Cost of revenues(1)   (962,250 ) (279,710 ) (33,042 ) (1,275,002 ) (191,198 )
                       
Gross profit (loss)   869,783   (82,832 ) 27,852   814,803   122,186  
                       
Operating expenses(1)                      
Research and development expenses   (109,495 ) (47,551 ) (6,190 ) (163,236 ) (24,479 )
Sales and marketing expenses   (68,794 ) (21,753 ) (18,528 ) (109,075 ) (16,357 )
General and administrative expenses   (63,984 ) (18,087 ) (20,612 ) (102,683 ) (15,398 )
                       
Total operating expenses   (242,273 ) (87,391 ) (45,330 ) (374,994 ) (56,234 )
Gain on deconsolidation and disposal of subsidiaries   -   -   -   -   -  
Other income   33,065   -   -   33,065   4,958  
                       
Operating income (loss)   660,575   (170,223 ) (17,478 ) 472,874   70,910  
                       
  1. Share-based compensation was allocated in cost of revenues and operating expenses as follows:
 
    Three Months Ended
    September 30, 2016
             
    YY Live Huya 100 Education Total Total
    RMB RMB   RMB   RMB   US$
             
Cost of revenues   2,231 1,429  41  3,701  555
Research and development expenses   6,108  4,234  778  11,120  1,668
Sales and marketing expenses   575  37  -   612  92
General and administrative expenses   1,435  5,177 13,474 20,086 3,012
             




YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
      Three Months Ended
      September 30, 2016
                   
      YY Live   Huya   100 Education   Total   Total
      RMB   RMB   RMB   RMB   US$
                     
Operating income (loss)    660,575    (170,223 )  (17,478 )  472,874    70,910
Share-based compensation expenses    10,349   10,877   14,293   35,519    5,327 
                     
Non-GAAP operating income (loss)   670,924   (159,346 ) (3,185 ) 508,393    76,237 
                     

 

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