YY Inc
Nov 21, 2016

YY Reports Third Quarter 2016 Unaudited Financial Results

GUANGZHOU, China, Nov. 21, 2016 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ:YY) ("YY" or the "Company"), a live streaming platform, today announced its unaudited financial results for the third quarter of 2016.

Third Quarter 2016 Highlights 

"We are extremely pleased to have achieved solid results this quarter with both top- and bottom-line growth across the board," said Mr. Zhou Chen, Chief Executive Officer of YY. "This growth was primarily driven by the robust 54.5% year-over-year growth in our live streaming business, which was made possible through the successful execution of our business and content strategy. Importantly, we continued to focus on the development of PUGC (Professionally-curated User Generated Content) and PGC. In the third quarter of 2016, we launched a new relationships program and further developed our sports content. Additionally, Huya broadcasting continues to increase its content offerings for mobile game broadcasting and broaden its popularity. Going forward, we will continue to strengthen our content to meet the ever evolving demands of YY's 98.0 million PC MAU and 53.4 million mobile MAU in the third quarter of 2016. We believe in our ability to build a comprehensive content ecosystem across our two live streaming platforms, YY Live and Huya broadcasting, and are confident that we have the right strategy in place to further fortify our position as China's leading interactive, live streaming platform."

Mr. Eric He, Chief Financial Officer of YY, further commented, "For the third quarter of 2016, we continued to see strong revenue growth as total revenues increased by 40.3% year over year to RMB2,089.8 million, primarily driven by a 63.4% year-over-year growth in the total number of paying users to 4.6 million, as well as a solid live streaming revenues  growth of 54.5% year over year to RMB1,790.4 million. In particular, Huya broadcasting witnessed continued strong growth with a significant 139.0% year-over-year increase in revenues. Meanwhile, in the third quarter of 2016, mobile revenues contributed 52.8% to YY Live revenues, which demonstrated the improvement we have further made in mobilization. With these exciting growth momentum, we are confident in our ability to maintain healthy revenue growth in the coming quarters. Going forward, we will continue to expand our content offerings and remain agile in adopting new and innovative ideas to further differentiate the user experience on our platform from our competitors."

Third Quarter 2016 Financial Results

NET REVENUES1
Net revenues increased by 40.3% to RMB2,089.8 million (US$313.4 million) in the third quarter of 2016 from RMB1,490.0 million in the corresponding period of 2015, primarily driven by the increase in live streaming revenues. Live streaming revenues, which mainly consisted of revenues from YY Live, online dating, Huya broadcasting, PK Show, ME App, and other live streaming services, increased by 54.5% to RMB1,790.4 million (US$268.5 million) in the third quarter of 2016 from RMB1,159.2 million in the corresponding period of 2015. The increase in live streaming revenues was primarily driven by the growth of online dating revenues and Huya broadcasting revenues.

Revenues from online games were RMB149.5 million (US$22.4 million) in the third quarter of 2016, as compared to RMB168.3 million in the corresponding period of 2015, which primarily reflects the continued softness in China's web game market.

Revenues from membership were RMB68.8 million (US$10.3 million) in the third quarter of 2016, as compared to RMB76.3 million in the corresponding period of 2015.

Other revenues, mainly including revenues from the Company's online education platform and online advertising revenues, were RMB81.1 million (US$12.2 million) in the third quarter of 2016, compared with RMB86.2 million in the corresponding period of 2015.

COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 40.8% to RMB1,275.0 million (US$191.2 million) in the third quarter of 2016 from RMB905.5 million in the corresponding period of 2015, primarily attributable to an increase in revenue-sharing fees and content costs to RMB967.4 million (US$145.1 million) in the third quarter of 2016 from RMB572.6 million in the corresponding period of 2015. The increase in revenue-sharing fees and content costs paid to performers, channel owners 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, as well as the Company's investments in expanding the amount of new and innovative content it provides to users. In addition, bandwidth costs slightly increased to RMB149.2 million (US$22.4 million) in the third quarter of 2016 from RMB147.2 million in the corresponding period of 2015, primarily reflecting the continued user base expansion and video quality improvements, but partially offset by the Company's improved efficiency and pricing terms.

Gross profit increased by 39.4% to RMB814.8 million (US$122.2 million) in the third quarter of 2016 from RMB584.5 million in the corresponding period of 2015. Gross margin was 39.0% in the third quarter of 2016, as compared to 39.2% in the corresponding period of 2015.

OPERATING INCOME
Operating expenses for the third quarter of 2016 decreased by 6.6% to RMB375.0 million (US$56.2 million) from RMB401.3 million in the corresponding period of 2015.

Operating income in the third quarter of 2016 increased by 136.1% to RMB472.9 million (US$70.9 million) from RMB200.3 million in the corresponding period of 2015. Operating margin in the third quarter of 2016 increased to 22.6% from 13.4% in the corresponding period of 2015.

Non-GAAP operating income2 increased by 80.9% to RMB508.4 million (US$76.2 million) in the third quarter of 2016 from RMB281.0 million in the corresponding period of 2015. Non-GAAP operating margin3 increased to 24.3% in the third quarter of 2016 from 18.9% in the corresponding period of 2015.

NET INCOME
Net income attributable to YY Inc. increased by 155.8% to RMB400.0 million (US$60.0 million) in the third quarter of 2016 from RMB156.4 million in the corresponding period of 2015.  Net margin in the third quarter of 2016 increased to 19.1% from 10.5% in the corresponding period of 2015. Excluding  the government subsidy of RMB18.7 million, net income attributable to YY Inc. was RMB381.3 million (US$57.2 million), representing an increase of 143.8% year over year.

Non-GAAP net income attributable to YY Inc.4 increased by 83.7% to RMB435.6 million (US$65.3 million) from RMB237.1 million in the corresponding period of 2015. Non-GAAP net margin5 increased to 20.8% in the third quarter of 2016 from 15.9% in the corresponding period of 2015.

NET INCOME PER ADS
Diluted net income per ADS6 increased by 150.9% to RMB6.90 (US$1.03) in the third quarter of 2016 from RMB2.75 in the corresponding period of 2015.

Non-GAAP diluted net income per ADS7 increased by 79.4% to RMB7.48 (US$1.12) in the third quarter of 2016 from RMB4.17 in the corresponding period of 2015.

BALANCE SHEET AND CASH FLOWS
As of September 30, 2016, the Company had cash and cash equivalents of RMB746.5 million (US$111.9 million) and short-term deposits of RMB3,631.3 million (US$544.5 million). For the third quarter of 2016, net cash from operating activities was RMB652.5 million (US$97.8 million).

SHARES OUTSTANDING
As of September 30, 2016, the Company had a total of 1,107.3 million common shares outstanding, or the equivalent of 55.4 million ADSs outstanding.

Business Outlook
For the fourth quarter of 2016, the Company expects its net revenues to be between RMB2.4 billion and RMB2.5 billion, representing a year-over-year growth of approximately 26.3% to 31.6%. These forecasts reflect 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 November 21, 2016 at 8:00 am Eastern Time or 9:00 pm 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: # 16894086

The replay will be accessible through November 29, 2016 by dialing the following numbers:

United States Toll Free:+1-855-452-5696
International: +61-2-9003-4211
Conference ID: # 16894086

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 RMB6.6685 to US$1.00, the noon buying rate in effect on September 30, 2016 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 live streaming platform that enables users to interact in live online group activities through voice, text and video. Launched in July 2008, YY Client, the Company's core product, empowers users to create and organize groups of varying sizes to discover and participate in a wide range of activities, including online music and entertainment, online games, online dating, live game broadcasting and education. YY Inc. was listed on NASDAQ in November 2012 and generated revenues of US$910 million in the fiscal year 2015.

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 registered user accounts, active users, especially paying users; YY's ability to monetize the user base; YY's ability to continue attracting advertisers and offering popular online games; 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.

1From the third quarter of 2016, the Company changed revenue segmenting to live streaming, online games, membership and others. The Company believes this new method better captures the way it generates revenues and is more transparent and reliable than breaking down revenues by business lines as previously presented.

2Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses. 

3Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues. 

4Non-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.

5Non-GAAP net margin is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to YY Inc. as a percentage of net revenues.

6ADS 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.

7Non-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.

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)
 
  December 31,
2015 
 September 30,
2016
 September 30,
2016
  RMB RMB US$
Assets      
Current assets      
Cash and cash equivalents 928,934 746,454  111,937
Short-term deposits 1,894,946 3,631,269  544,541
Restricted short-term deposits 389,221  - -
Accounts receivable, net 132,353 145,919  21,882
Inventory 14,385 3,453  518
Amount due from related parties 5,297 35,622  5,342
Prepayments and other current assets 147,823 176,749  26,504
Deferred tax assets 116,921 106,179  15,922
       
Total current assets 3,629,880 4,845,645 726,646
       
Non-current assets      
Deferred tax assets 3,363  5,503  825
Investments 567,557 840,663 126,065
Property and equipment, net 843,449  841,155  126,139
Land use rights, net - 1,884,371  282,578
Intangible assets, net 146,437 120,822  18,118
Goodwill 151,638 132,311  19,841
Other non-current assets 1,960,430 126,779 19,012
       
Total non-current assets 3,672,874 3,951,604 592,578
       
Total assets 7,302,754 8,797,249 1,319,224
       
Liabilities ,mezzanine equity and shareholders' equity      
Current liabilities      
Convertible bonds** - 2,661,536 399,121
Accounts payable 129,819  106,025  15,899
Deferred revenue 385,300  395,227  59,268
Advances from customers 55,086  75,355  11,300
Income taxes payable 107,403  108,468  16,266
Accrued liabilities and other current liabilities 681,889  797,931  119,657
Amounts due to related parties 24,917  36,904  5,534
       
Total current liabilities 1,384,414 4,181,446 627,045
       
Non-current liabilities      
Convertible bonds* 2,572,119 - -
Deferred revenue 20,752 26,162 3,923
Deferred tax liabilities 16,817 14,645 2,196
       
Total non-current liabilities 2,609,688 40,807 6,119
       
Total liabilities 3,994,102 4,222,253 633,164
       


YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
 
  December 31,
2015
 September 30,
2016
 September 30,
2016
  RMB RMB US$
       
Mezzanine equity  61,833  58,458 8,766
       
Shareholders' equity      
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 728,227,848 and  747,719,608 shares issued and outstanding as of December 31, 2015 and September 30, 2016, respectively)    43  43 6
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 369,557,976 and 359,557,976 shares issued and outstanding as of December 31, 2015 and September 30, 2016, respectively)    27  27 4
Additional paid-in capital  2,011,799  2,137,287 320,505
Statutory reserves    56,507  56,507 8,474
Retained earnings  1,207,168  2,158,832   323,736
Accumulated other comprehensive (loss) income    (36,385) 152,450 22,861
Non-controlling interests  7,660  11,392 1,708
       
Total shareholders' equity  3,246,819  4,516,538 677,294
       
Total liabilities, mezzanine equity and shareholders' equity  7,302,754  8,797,249 1,319,224
       
       

*  Effectively January 2016, ASU 2015-3 issued by FASB requires entities to present the issuance costs of bonds in the balance sheet as a direct deduction from the related bonds rather than assets. Accordingly, the Company retrospectively reclassified RMB25.3 million of issuance cost of bonds from other non-current assets into convertible bonds as of December 31, 2015.
**  Convertible bonds represent Convertible Senior Notes which may be redeemed within one year.


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
,
2015
June
30,
2016
September
30
,
2016
September
30
,
2016
 September
 30,

2015
September
30,

2016
September
30,

2016
  RMBRMBRMBUS$ RMBRMBUS$
          
Net revenues         
Live streaming  1,159,178   1,661,060  1,790,373   268,482    2,974,629   4,809,037  721,157 
Online Games  168,332   188,261  149,530   22,423    599,484   508,901   76,314 
Membership  76,299  72,070  68,768  10,312   210,482  210,210  31,523 
Others  86,153  59,386  81,134  12,167   212,810  191,752  28,755 
          
Total net revenue  1,489,962  1,980,777  2,089,805  313,384   3,997,405  5,719,900  857,749 
          
Cost of revenues(1)  (905,489) (1,208,340) (1,275,002) (191,198)  (2,411,505) (3,543,873) (531,435)
          
Gross profit  584,473  772,437  814,803  122,186   1,585,900  2,176,027  326,314 
          
Operating expenses(1)         
Research and development expenses  (153,008) (172,228) (163,236)  (24,479)  (396,121) (515,112)  (77,246)
Sales and marketing expenses  (84,074) (88,699) (109,075)  (16,357)  (198,696) (275,735)  (41,349)
General and administrative expenses  (147,312) (90,155) (102,683)  (15,398)  (270,686) (276,245)  (41,425)
Goodwill impairment  (199,425) -  -  -   (310,124) -  - 
Fair value change of contingent consideration  182,476  -  -  -   292,471  -  - 
          
Total operating expenses  (401,343) (351,082) (374,994) (56,234)  (883,156) (1,067,092) (160,020)
          
Other income  17,156  22,507  33,065  4,958   49,486  64,477  9,669 
          
Operating income  200,286  443,862  472,874  70,910   752,230  1,173,412  175,963 
          
Foreign currency exchange (losses) gains, net  (37,119) 552  (16) (2)  (38,286) 773  116 
Interest expense  (24,983) (19,576) (20,357) (3,053)  (65,109) (60,327) (9,047)
Interest income  30,555  9,902  17,162  2,574   111,707  40,713  6,105 
Other non-operating expense  -  (23,474) -  -   (2,165) (23,474) (3,520)
          
Income before income tax expenses  168,739  411,266  469,663  70,429   758,377  1,131,097  169,617 
          
Income tax expenses  (45,862) (75,179) (69,909) (10,483)  (126,766) (194,710) (29,198)
          
Income before share of income (loss) in equity method investments, net of income taxes  122,877  336,087  399,754  59,946   631,611  936,387  140,419 
          
Share of income (loss) in equity method investments, net of income taxes  3,567  (28) (1,867) (280)  10,887  3,879  582 
          
Net Income  126,444  336,059  397,887  59,666   642,498  940,266  141,001 
          
Less: Net loss attributable to the non-controlling interest shareholders and the mezzanine classified non-controlling interest shareholders  (29,930) (7,227) (2,152) (323)  (31,529) (11,398) (1,709)
          
Net income attributable to YY Inc.  156,374  343,286  400,039  59,989   674,027  951,664  142,710 
                        


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
,
2015
June
30,
2016
September
30
,
2016
September
30
,
2016
 September
30,

2015
September
30,

2016
September
30,

2016
  RMBRMBRMBUS$ RMBRMBUS$
          
Net income attributable to YY Inc. 156,374 343,286   400,039  59,989  674,027 951,664  142,710 
          
Other comprehensive income :         
Unrealized gain of available-for-sales securities - 177,152  13,354  2,003  - 190,506  28,568 
Foreign currency translation adjustments, net of nil tax 673 (1,459) (562) (84) 4,774 (1,671) (251)
          
Comprehensive income attributable to YY Inc. 157,047 518,979  412,831  61,908  678,801 1,140,499  171,027 
          
Net income per ADS         
—Basic 2.80 6.10   7.07   1.06  11.96  16.91   2.54 
—Diluted 2.75 5.97    6.90   1.03  11.68  16.64   2.50 
Weighted average number of ADS used in calculating net income per ADS         
—Basic 55,918,954 56,244,094  56,560,174  56,560,174  56,371,472 56,290,231  56,290,231 
—Diluted 56,884,168 60,761,097  60,814,662  60,814,662  57,710,288 60,773,398  60,773,398 
                    

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

  Three Months Ended Nine Months Ended
  September
30
,
2015
 June
30,
2016
 September
30
,
2016
 September
30
,
2016
 September
30,

2015
 September
30,

2016
 September
30,

2016
  RMB RMB RMB US$ RMB RMB US$
               
Cost of revenues 8,723 141  3,701  555 15,092  12,454  1,868
Research and development expenses 27,121 26,473  11,120  1,668 41,711  64,893  9,731
Sales and marketing expenses 1,191 941  612  92 2,194  2,392  359
General and administrative expenses 43,695 13,934  20,086  3,012 65,166  51,199  7,678
               


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
,
2015
 June
30,
2016
 September
30
,
2016
 September
30
,
2016
 September
30,

2015
 September
30,

2016
 September
30,

2016
  RMB RMB RMB US$ RMB RMB US$
               
Operating income 200,286 443,862  472,874  70,910 752,230  1,173,412  175,963
Share-based compensation expenses 80,730 41,489  35,519  5,326 124,163  130,938  19,636
               
Non-GAAP operating income 281,016 485,351 508,393 76,236 876,393 1,304,350 195,599
               
Net income attributable to YY Inc. 156,374 343,286 400,039 59,989 674,027 951,664 142,710
Share-based compensation expenses 80,730 41,489  35,519  5,326 124,163  130,938  19,636
               
Non-GAAP net income attributable to YY Inc. 237,104 384,775 435,558 65,315 798,190 1,082,602 162,346
               
Non-GAAP net income per ADS              
—Basic 4.24 6.84  7.70  1.15 14.16  19.23  2.88
—Diluted 4.17 6.65 7.48  1.12 13.83  18.79  2.82
Weighted average number of ADS used in calculating Non-GAAP net income per ADS              
—Basic 55,918,954 56,244,094 56,560,174  56,560,174 56,371,472 56,290,231 56,290,231
—Diluted 56,884,168 60,761,097 60,814,662  60,814,662 57,710,288 60,773,398 60,773,398
               


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 broadcasting
 100 Education
 Total
 Total
  RMBRMBRMBRMBUS$
       
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)  (972,553) (269,407)  (33,042)  (1,275,002)  (191,198)
       
Gross profit (loss)   859,480   (72,529)  27,852   814,803   122,186 
       
Operating expenses(1)      
Research and development expenses   (125,637)  (31,409)  (6,190)  (163,236)  (24,479)
Sales and marketing expenses   (80,373)  (10,174)  (18,528)  (109,075)  (16,357)
General and administrative expenses   (70,514)  (11,557) (20,612)  (102,683)  (15,398)
       
Total operating expenses   (276,524)  (53,140)  (45,330)  (374,994)  (56,234)
Other income   33,065   -   -   33,065   4,958 
       
Operating income (loss)   616,021   (125,669)  (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 broadcasting 100 Education Total Total
  RMB RMB   RMB   RMB   US$
           
Cost of revenues  2,726  934  41  3,701  555
Research and development expenses  7,985  2,357  778  11,120  1,668
Sales and marketing expenses  586  26  -  612  92
General and administrative expenses  4,383  2,229 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  broadcasting
 100 Education
 Total Total
  RMBRMBRMB RMB US$
         
Operating income (loss)  616,021  (125,669)  (17,478)  472,874  70,910
Share-based compensation expenses  15,680  5,546  14,293  35,519 5,327
         
Non-GAAP operating income (loss)  631,701  (120,123) (3,185) 508,393 76,237
         


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
  Three Months Ended
  June 30, 2016
   
  YY Live Huya broadcasting
 100 Education
 Total
 Total
  RMBRMBRMBRMBUS$
       
Net revenues      
Live streaming  1,517,983  143,077  -  1,661,060  249,938 
Online games  188,261  -  -  188,261  28,327 
Membership  72,070  -  -  72,070  10,844 
Others  28,749  -  30,637  59,386  8,935 
       
Total net revenue  1,807,063  143,077  30,637  1,980,777  298,044 
       
Cost of revenues(1)  (965,291) (216,606) (26,443) (1,208,340) (181,817)
       
Gross profit (loss)  841,772  (73,529) 4,194  772,437  116,227 
       
Operating expenses(1)      
Research and development expenses  (130,170) (33,811) (8,247) (172,228) (25,915)
Sales and marketing expenses  (63,038) (12,247) (13,414) (88,699) (13,346)
General and administrative expenses  (76,169) (11,115) (2,871) (90,155) (13,566)
       
Total operating expenses  (269,377) (57,173) (24,532) (351,082) (52,827)
Other income  22,507  -  -  22,507  3,387 
       
Operating income (loss)  594,902  (130,702) (20,338) 443,862  66,787 
       

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

  Three Months Ended
  June 30, 2016
          
  YY Live Huya broadcasting 100 Education
 Total Total
  RMB RMB RMB   RMB   US$
          
Cost of revenues  (1,432) 1,441 132  141 21
Research and development expenses  17,976  6,501 1,996  26,473 3,983
Sales and marketing expenses  729  212 -  941 142
General and administrative expenses  10,227  3,807 (100) 13,934 2,097


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, 2016
        
  YY Live Huya broadcasting
 100 Education
 TotalTotal
  RMBRMBRMB RMBUS$
        
Operating income (loss) 594,902 (130,702) (20,338) 443,862  66,787 
Share-based compensation expenses 27,500 11,961  2,028  41,489 6,243 
          
Non-GAAP operating income (loss) 622,402 (118,741) (18,310) 485,351  73,030 
          


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
  Three Months Ended
  September 30, 2015
   
  YY Live Huya broadcasting
 100 Education Total
 Total
  RMBRMBRMBRMBUS$
       
Net revenues      
Live streaming  1,076,801  82,377  -  1,159,178  182,387 
Online games  168,332  -  -  168,332  26,486 
Membership  76,299  -  -  76,299  12,005 
Others  46,489  -  39,664  86,153  13,556 
       
Total net revenue  1,367,921  82,377  39,664  1,489,962  234,434 
       
Cost of revenues(1)  (695,373) (171,212) (38,904) (905,489) (142,471)
       
Gross profit (loss)  672,548  (88,835) 760  584,473  91,963 
       
Operating expenses(1)      
Research and development expenses  (123,378) (18,233) (11,397) (153,008) (24,075)
Sales and marketing expenses  (62,754) (8,788) (12,532) (84,074) (13,228)
General and administrative expenses  (72,254) (6,021) (69,037) (147,312) (23,178)
Goodwill impairment  (128,034) -  (71,391) (199,425) (31,378)
Fair value changes of contingent consideration  108,858  -  73,618  182,476  28,711 
       
Total operating expenses  (277,562) (33,042) (90,739) (401,343) (63,148)
Other income  17,156  -  -  17,156  2,699 
       
Operating income (loss)  412,142  (121,877) (89,979) 200,286  31,514 
       

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

  Three Months Ended
  September 30, 2015
           
  YY Live Huya broadcasting 100 Education Total Total
  RMB RMB   RMB   RMB   US$
           
Cost of revenues 8,194 367 162 8,723 1,372
Research and development expenses 23,065 1,559 2,497 27,121 4,267
Sales and marketing expenses 1,189 2 - 1,191 187
General and administrative expenses 15,381 130 28,184 43,695 6,875


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, 2015
         
  YY Live Huya  broadcasting
 100 Education
 Total Total
  RMBRMBRMB RMB US$
         
Operating income (loss) 412,142 (121,877) (89,979) 200,286 31,514
Share-based compensation expenses 47,829 2,058  30,843  80,730 12,701
         
Non-GAAP operating income (loss) 459,971 (119,819) (59,136) 281,016 44,215


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

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