GUANGZHOU, China, Nov. 13, 2019 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ: YY) (“YY” or the “Company”), a global social media platform, today announced its unaudited financial results for the third quarter of 2019. 

Third Quarter 2019 Financial Highlights

• Net revenues increased by 67.8% to RMB6,882.2 million (US$962.9 million) from RMB4,100.5 million in the corresponding period of 2018.
• Net income attributable to controlling interest of YY Inc.¹ was RMB109.9 million (US$15.4 million), compared to RMB650.7 million in the corresponding period of 2018.
• Non-GAAP net income attributable to controlling interest of YY Inc.² was RMB574.1 million (US$80.3 million), compared to RMB787.0 million in the corresponding period of 2018, primarily due to the impact of the consolidation of Bigo Inc (“Bigo”).

Third Quarter 2019 Operational Highlights

• Global average mobile MAUs³ reached 470.1 million, among that approximately 77.9% were from markets outside of China.
• Average mobile MAUs of imo reached 212.0 million.
• Average mobile MAUs of global short-form video services increased by 670.6% to 150.4 million from 19.5 million in the corresponding period of 2018, including 100.2 million from Likee (formerly known as Like), which increased by 413.4% year over year, and 50.2 million from imo’s embedded short-form video services.
• Average mobile MAUs of global live streaming services increased by 26.5% to 157.8 million from 124.8 million in the corresponding period of 2018, among that (i) 103.7 million were from China, including 39.9 million from YY, which increased by 3.0% year over year and 63.8 million from Huya, which increased by 29.1% year over year; and (ii) 54.1 million were from outside of China, including 21.9 million from BIGO LIVE, which increased by 9.7% year over year, and 32.3 million from HAGO, which increased by 92.4% year over year.
• Total number of paying users⁴ of YY increased by 14.4% to 4.3 million from 3.8 million in the corresponding period of 2018.
• Total number of paying users of Huya increased by 28.5% to 5.3 million from 4.2 million in the corresponding period of 2018.

Mr. David Xueling Li, Chairman and Chief Executive Officer of YY, commented, “Our solid operating and financial performance demonstrates the effectiveness of our strategies in product globalization, content innovation and technology advancement. During the third quarter of 2019, we extended the global footprints of Likee, imo, BIGO LIVE and HAGO. Through content localization, cross-platform synergy and AI technology enhancement, our global user base grew rapidly to 470.1 million. Notably, Likee, our global leading short-form video platform, hit the milestone of 100 million average mobile MAUs in the third quarter of 2019, sporting a year-over-year growth rate of 413.4%. Meanwhile, HAGO, our casual game-oriented social platform also increased its average mobile MAUs by 92.4% year-over-year to 32.3 million. In addition, our technology advancement in AI enabled us to create personalized user experience at scale, distribute our short-form video and live streaming content with precision and speed, and enhance our operating efficiency while maintaining cost effectiveness. Going forward, we seek to capitalize on the growing market demand for global video-based social media by harnessing the synergy among our various products and markets, expanding our geographic coverage, innovating our content formats and advancing our technology development.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “During the third quarter of 2019, we generated a year-over-year net revenues growth rate of 67.8%, exceeding the high end of our previous guidance range. We also managed to sustain profitability while maintaining investment in our overseas expansion. Because we hold a strong conviction of the vast market potential for our global video-based social media platform, we are willing to be patient and prudent when striking a balance between near-term monetization and long-term market share. We believe that our abundant cash reserve combined with our methodical execution of corporate strategies will not only yield superior shareholder value, but also propel our engine of innovation forward into the next phase of our global growth cycle.”

Third Quarter 2019 Financial Results

NET REVENUES
Net revenues increased by 67.8% to RMB6,882.2 million (US$962.9 million) in the third quarter of 2019 from RMB4,100.5 million in the corresponding period of 2018, primarily driven by an increase in live streaming revenues and the contribution from Bigo’s consolidation.

Live streaming revenues increased by 66.2% to RMB6,473.9 million (US$905.7 million) in the third quarter of 2019 from RMB3,894.5 million in the corresponding period of 2018, primarily attributable to (i) the continued live streaming revenues growth in YY and Huya segments, amounting to RMB1,160.6 million (US$162.4 million), driven by user growth; and (ii) the contribution from the consolidation of Bigo segment, amounting to RMB1,418.8 million (US$198.5 million).

Other revenues increased by 98.3% to RMB408.3 million (US$57.1 million) in the third quarter of 2019 from RMB205.9 million in the corresponding period of 2018, primarily driven by the increase in advertising revenues from Huya and Bigo.

COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 76.2% to RMB4,713.2 million (US$659.4 million) in the third quarter of 2019 from RMB2,674.5 million in the corresponding period of 2018. Revenue-sharing fees and content costs increased to RMB3,460.0 million (US$484.1 million) in the third quarter of 2019 from RMB2,212.6 million in the corresponding period of 2018 as a result of the increase in live streaming revenues of the Company. Bandwidth costs increased to RMB496.8 million (US$69.5 million) in the third quarter of 2019 from RMB249.5 million in the corresponding period of 2018, as the overseas user base and time spent continued to expand following the Bigo consolidation.

Gross profit increased by 52.1% to RMB2,169.0 million (US$303.5 million) in the third quarter of 2019 from RMB1,426.0 million in the corresponding period of 2018. Gross margin was 31.5% in the third quarter of 2019, compared to 34.8% in the corresponding period of 2018. In addition to the increase in revenue-sharing fees and content costs, the gross margin contraction was also caused by the fact that the Huya and Bigo segments had lower gross margins but contributed significantly greater portions of net revenues in the third quarter of 2019 compared to the corresponding period of 2018.

OPERATING INCOME
Operating expenses were RMB2,161.5 million (US$302.4 million) in the third quarter of 2019, compared to RMB864.7 million in the corresponding period of 2018. Among the operating expenses, sales and marketing expenses increased to RMB1,079.6 million (US$151.0 million) in the third quarter of 2019, primarily due to the Company’s increased efforts in sales and marketing activities in overseas markets and the impact of depreciation and amortization related to the Bigo consolidation. Research and development expenses increased to RMB673.1 million (US$94.2 million) in the third quarter of 2019, mostly due to the increase in salaries mainly due to consolidation of Bigo.

Operating income was RMB160.3 million (US$22.4 million) in the third quarter of 2019, compared to RMB610.9 million in the corresponding period of 2018. Operating margin was 2.3% in the third quarter of 2019, compared to 14.9% in the corresponding period of 2018, primarily due to the decrease in gross margin, the impact of depreciation and amortization related to the Bigo consolidation and other overseas expansion initiatives.

Non-GAAP operating income⁵ was RMB611.4 million (US$85.5 million) in the third quarter of 2019, compared to RMB774.2 million in the corresponding period of 2018. Non-GAAP operating margin⁶ was 8.9% in the third quarter of 2019, compared to 18.9% in the corresponding period of 2018.

NET INCOME
Net income attributable to controlling interest of YY Inc. was RMB109.9 million (US$15.4 million) in the third quarter of 2019, compared to RMB650.7 million in the corresponding period of 2018. Net margin was 1.6% in the third quarter of 2019, compared to 15.9% in the corresponding period of 2018. The high effective tax rate in the third quarter of 2019 was primarily due to the profit (loss) structure and the different effective tax rates of YY, Huya and Bigo segments. Particularly, the Company was not getting as much benefit from losses incurred by Bigo as a majority of Bigo’s business that was subject to a low applicable tax rate in its jurisdiction.

Non-GAAP net income attributable to controlling interest of YY Inc. was RMB574.1 million (US$80.3 million) in the third quarter of 2019, compared to RMB787.0 million in the corresponding period of 2018. Non-GAAP net margin⁷ was 8.3% in the third quarter of 2019, compared to 19.2% in the corresponding period of 2018.

NET INCOME PER ADS
Diluted net income per ADS⁸ was RMB1.11 (US$0.16) in the third quarter of 2019, compared to RMB10.01 in the corresponding period of 2018.

Non-GAAP diluted net income per ADS⁹ was RMB6.42 (US$0.90) in the third quarter of 2019, compared to RMB12.07 in the corresponding period of 2018.

BALANCE SHEET AND CASH FLOWS
As of September 30, 2019, the Company had cash and cash equivalents, restricted cash and cash equivalents, short-term deposits, restricted short-term deposits and short-term investments of RMB25,334.3 million (US$3,544.4 million). For the third quarter of 2019, net cash from operating activities was RMB702.1 million (US$98.2 million).

SHARES OUTSTANDING
As of September 30, 2019, the Company had a total of 1,614.4 million common shares, or the equivalent of 80.7 million ADSs, outstanding.

Business Outlook
For the fourth quarter of 2019, the Company expects net revenues to be between RMB7.32 billion and RMB7.52 billion¹⁰, representing a year-over-year growth of 57.7% to 62.0%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Recent Developments
The Company had previously announced a share repurchase program of up to US$300 million, which was approved by the Company’s Board of Directors on August 13, 2019. As of September 30, 2019, the Company had repurchased approximately US$23.7 million of its shares.

Conference Call Information
The Company will hold a conference call on Tuesday, November 12, 2019, at 9:00 P.M. Eastern Time (or Wednesday, November 13, 2019, at 10:00 A.M. Beijing Time) to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:	+1-845-675-0437
International:	+65-6713-5090
Mainland China:	400-620-8038
Hong Kong, China:	+852-3018-6771
Conference ID:	#1957529
The replay will be accessible through November 20, 2019, by dialing the following numbers:
United States:	+1-646-254-3697
International:	+61-2-8199-0299
Conference ID:	#1957529

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.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 RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 2019 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 global social media platform. 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 owns YY Live, a leading live streaming social media platform in China and Huya, a leading game live streaming platform in China. In addition, YY completed the acquisition of Bigo in March 2019. Bigo is a fast-growing global tech company. Headquartered in Singapore, Bigo owns Bigo Live, a leading global live streaming platform outside China; Likee, a leading global short-form video social platform; imo, a global video communication app and other social applications. YY has created an online community for global video and live streaming users. 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”). YY uses non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributable to controlling interest of YY Inc., non-GAAP net margin attributable to controlling interest of YY Inc., non-GAAP net income attributable to common shareholders of YY Inc., 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, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, and gain on deconsolidation and disposal of subsidiary. Non-GAAP operating margin is non-GAAP operating income as a percentage of net revenues. Non-GAAP net income is net income excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, and income tax effects of above non-GAAP reconciling items. Non-GAAP net income attributable to controlling interest of YY Inc. is net income attributable to controlling interest of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, income tax effects of above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. Non-GAAP net margin is non-GAAP net income attributable to controlling interest of YY Inc. as a percentage of net revenues. Non-GAAP net income attributable to common shareholders of YY Inc. is net income attributable to common shareholders of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders and income tax effects of above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. After the non-GAAP reconciliation, non-GAAP net income attributable to controlling interests of YY Inc. is equal to the non-GAAP net income attributable to common shareholders of YY Inc. Basic and diluted non-GAAP net income per ADS is non-GAAP net income attributable to common shareholders of YY Inc. 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 above reconciling items 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 non-cash effect of (i) share-based compensation expenses and amortization of intangible assets from business acquisitions, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, which have been and will continue to be significant recurring expenses in its business, (ii) impairment of goodwill and investments, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, and accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders, which may not be recurring in its business, and (iii) income tax expenses and non-GAAP adjustments for net income (loss) attributable to non-controlling interest shareholders, which are affected by above non-GAAP reconciling items. 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
Maggie Yan
Tel: +86 (20) 8212-0000
Email: IR@YY.com

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

¹ Net income attributable to controlling interest of YY Inc., is net income less net (loss) income attributable to the non-controlling interest shareholders and the mezzanine equity classified as non-controlling interest shareholder.

² Non-GAAP net income attributable to controlling interest of YY Inc. is a non-GAAP financial measure, which is defined as net income attributable to controlling interest of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investment, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments (deemed disposal refers to dilution of equity interest in equity-method investments), gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds amortization to face value, income tax effects on non-GAAP adjustment and non-GAAP adjustment for net (loss) income attributable to non-controlling interests shareholders. These adjustments amounted to RMB464.1 million (US$64.9 million) and RMB136.3 million in the third quarters of 2019 and 2018, respectively. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for more details.

³ Refers to mobile average monthly active users. Average mobile MAU for any period is calculated by dividing (i) the sum of the Company’s mobile active users for each month of such period, by (ii) the number of months in such period.

⁴ Refers to a registered user that has purchased virtual items on YY’s platforms at least once during the period presented.

⁵ Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses, amortization of intangible assets from business acquisitions, impairment of goodwill and investments and gain on deconsolidation and disposal of a subsidiary. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

⁶ 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.

⁷ Non-GAAP net margin is non-GAAP net income attributable to controlling interest of YY Inc. as a percentage of net revenues.

⁸ADS 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 of YY Inc. divided by weighted average number of diluted ADS.

⁹ 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 of YY Inc. 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.

¹⁰ The outlook of net revenues for the fourth quarter of 2019 includes the impact from Bigo’s consolidation. However, when calculating the year-over-year growth rate, Bigo’s net revenues in the same period of 2018 was not included as the part of denominator.

 

YY INC.
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)

	December  31, 2018		September 30, 2019		September 30, 2019
	RMB		RMB		US$
Assets
Current assets
Cash and cash equivalents	6,004,231		3,979,081		556,694
Restricted cash and cash equivalents	-		71,018		9,936
Short-term deposits	7,326,996		16,576,276		2,319,106
Restricted short-term deposits	-		353,076		49,397
Short-term investments	979,053		4,354,839		609,264
Accounts receivable, net	198,428		820,933		114,853
Amounts due from related parties	193,559		18,860		2,639
Financing receivables, net	768,343		217,390		30,414
Prepayments and other current assets	1,019,019		1,183,778		165,619
Total current assets	16,489,629		27,575,251		3,857,922
Non-current assets
Long-term deposits	1,000,000		-		-
Deferred tax assets	70,834		130,601		18,272
Investments	4,591,524		1,646,836		230,401
Property and equipment, net	1,296,319		2,151,393		300,991
Land use rights, net	1,784,639		1,748,568		244,634
Intangible assets, net	74,685		3,315,171		463,809
Right-of-use assets, net(1)	-		275,991		38,613
Goodwill	11,763		13,126,509		1,836,466
Financing receivables, net	224,793		195,864		27,402
Other non-current assets	223,859		399,738		55,925
Total non-current assets	9,278,416		22,990,671		3,216,513
Total assets	25,768,045		50,565,922		7,074,435
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities
Convertible bonds	6,863		-		-
Accounts payable	114,589		193,364		27,053
Deferred revenue	951,616		1,251,781		175,131
Advances from customers	101,690		123,595		17,292
Income taxes payable	235,561		410,639		57,451
Accrued liabilities and other current liabilities	2,414,371		3,835,738		536,639
Amounts due to related parties	28,336		45,528		6,370
Lease liabilities due within one year(1)	-		111,889		15,654
Short-term loans	-		288,574		40,373
Total current liabilities	3,853,026		6,261,108		875,963
Non-current liabilities
Convertible bonds	-		4,974,947		696,021
Lease liabilities(1)	-		165,859		23,205
Deferred revenue	91,710		173,547		24,280
Deferred tax liabilities	27,505		291,719		40,813
Other non-current liabilities	-		1,239		173
Total non-current liabilities	119,215		5,607,311		784,492
Total liabilities	3,972,241		11,868,419		1,660,455

 

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)

	December 31, 2018		September  30, 2019		September  30, 2019
	RMB		RMB		US$
Mezzanine equity	418,673		462,261		64,673
Shareholders’ equity
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 981,740,848 shares issued and outstanding as of December 31, 2018; 1,300,746,944  shares issued and 1,287,878,395 shares outstanding as of and September 30, 2019, respectively)	59		79		11
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 288,182,976 and  326,509,555 shares issued and outstanding as of December 31, 2018 and September 30, 2019, respectively)	21		24		3
Additional paid-in capital	11,168,866		21,560,965		3,016,490
Statutory reserves	101,725		101,725		14,232
Retained earnings	6,913,469		10,157,351		1,421,066
Accumulated other comprehensive income	336,152		1,162,927		162,699
Total YY Inc.’s shareholders’ equity	18,520,292		32,983,071		4,614,501
Non-controlling interests	2,856,839		5,252,171		734,806
Total shareholders’ equity	21,377,131		38,235,242		5,349,307
Total liabilities, mezzanine equity and
shareholders’ equity	25,768,045		50,565,922		7,074,435

(1) The Company has adopted ASC842 “Leases” beginning January 1, 2019 using the optional transition method. The only major impact of the standard is that assets and liabilities amounting to RMB145.2 million and RMB141.2 million, respectively, are recognized beginning January 1, 2019 for leased office space with terms of more than 12 months.

 

YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except share, ADS and per ADS data)

	Three Months Ended								Nine Months Ended
	September  30, 2018		June 30, 2019		September  30, 2019		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2019
	RMB		RMB		RMB		US$		RMB		RMB		US$
Net revenues
Live streaming(1)	3,894,548		5,922,761		6,473,946		905,738		10,486,249		16,881,727		2,361,840
Others	205,924		372,486		408,268		57,119		636,384		1,076,318		150,582
Total net revenues	4,100,472		6,295,247		6,882,214		962,857		11,122,633		17,958,045		2,512,422
Cost of revenues(2)	(2,674,502)		(4,173,841)		(4,713,175)		(659,397)		(7,004,071)		(12,047,341)		(1,685,485)
Gross profit	1,425,970		2,121,406		2,169,039		303,460		4,118,562		5,910,704		826,937
Operating expenses(2)
Research and development expenses	(314,128)		(655,421)		(673,058)		(94,164)		(859,539)		(1,733,215)		(242,486)
Sales and marketing expenses	(343,839)		(1,099,494)		(1,079,577)		(151,038)		(825,627)		(2,713,307)		(379,606)
General and administrative expenses	(206,738)		(335,973)		(408,834)		(57,198)		(608,246)		(1,021,231)		(142,875)
Total operating expenses	(864,705)		(2,090,888)		(2,161,469)		(302,400)		(2,293,412)		(5,467,753)		(764,967)
Other income	49,640		41,407		152,718		21,366		95,936		262,813		36,769
Operating income	610,905		71,925		160,288		22,426		1,921,086		705,764		98,739
Interest expenses	(4,910)		(12,268)		(123,456)		(17,272)		(8,477)		(141,943)		(19,859)
Interest income and investment income	141,110		156,619		203,137		28,420		362,151		508,045		71,078
Foreign currency exchange (losses) gains, net	(3,072)		13,801		16,393		2,293		824		31,527		4,411
Gain on deemed disposal and disposal of investments	-		-		-		-		13,999		-		-
Gain (loss) on fair value change of investments	31,670		14,291		(11,492)		(1,608)		1,663,266		2,652,642		371,118
Fair value change on derivative	-		-		(1,753)		(245)		(2,285,223)		(1,753)		(245)
Other non-operating expenses	-		-		-		-		(2,000)		-		-
Income before income tax expenses	775,703		244,368		243,117		34,014		1,665,626		3,754,282		525,242
Income tax expenses	(74,929)		(143,896)		(86,571)		(12,112)		(370,593)		(354,438)		(49,588)
Income before share of (loss) income  in equity method investments, net of income taxes	700,774		100,472		156,546		21,902		1,295,033		3,399,844		475,654
Share of (loss) income in equity method investments, net of income taxes	(19,957)		6,947		21,261		2,975		78,214		35,364		4,948
Net income	680,817		107,419		177,807		24,877		1,373,247		3,435,208		480,602
Less: Net income (loss) attributable to the non-controlling interest shareholders and the mezzanine equity classified as non-controlling interest shareholders	30,127		65,342		67,879		9,497		(141,054)		162,770		22,772
Net income attributable to controlling interest of YY Inc.	650,690		42,077		109,928		15,380		1,514,301		3,272,438		457,830
Less: Accretion of subsidiaries’  redeemable convertible preferred shares to redemption value	-		9,476		9,715		1,359		67,076		28,556		3,995
Cumulative dividend on subsidiary’s Series A Preferred Shares	-		6,811		6,982		977		-		20,523		2,871
Deemed dividend to subsidiary’s Series A preferred shareholders	-		-		-		-		489,284		-		-
Net income attributable to common shareholders of YY Inc.	650,690		25,790		93,231		13,044		957,941		3,223,359		450,964

 

YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)

	Three Months Ended					Nine Months Ended
	September  30, 2018	June  30, 2019	September  30, 2019	September 30, 2019		September 30, 2018	September 30, 2019	September 30, 2019
	RMB	RMB	RMB	US$		RMB	RMB	US$
Net income per ADS
—Basic	10.12	0.32	1.16	0.16		14.98	42.24	5.91
—Diluted	10.01	0.27	1.11	0.16		14.80	41.20	5.76
Weighted average number of ADS used in calculating net income  per ADS
—Basic	64,301,796	79,682,966	80,033,607	80,033,607		63,952,614	76,310,648	76,310,648
—Diluted	64,829,757	81,167,679	80,973,447	80,973,447		64,738,363	81,040,767	81,040,767

(1) Live streaming revenues by geographical areas were as follows:

	Three Months Ended					Nine Months Ended
	September 30, 2018	June  30, 2019	September 30, 2019	September 30, 2019		September  30, 2018	September 30, 2019	September 30, 2019
	RMB	RMB	RMB	US$		RMB	RMB	US$
PRC	3,894,240	5,016,587	5,266,815	736,854		10,485,941	14,472,812	2,024,820
Non-PRC	308	906,174	1,207,131	168,884		308	2,408,915	337,020

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

	Three Months Ended					Nine Months Ended
	September 30, 2018	June  30, 2019	September 30, 2019	September 30, 2019		September  30, 2018	September 30, 2019	September 30, 2019
	RMB	RMB	RMB	US$		RMB	RMB	US$
Cost of revenues	16,022	15,604	20,608	2,883		59,689	50,521	7,068
Research and development expenses	52,752	160,029	129,174	18,072		175,131	359,810	50,339
Sales and marketing expenses	290	3,452	2,643	370		4,565	8,071	1,129
General and administrative expenses	92,340	85,197	95,210	13,320		253,881	275,284	38,514

 

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, 2018		June 30, 2019		September 30, 2019		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2019
	RMB		RMB		RMB		US$		RMB		RMB		US$
Operating income	610,905		71,925		160,288		22,426		1,921,086		705,764		98,739
Share-based compensation expenses	161,404		264,282		247,635		34,645		493,266		693,686		97,050
Impairment of goodwill and investments	1,900		-		10,000		1,399		20,249		10,000		1,399
Amortization of intangible assets from business acquisitions	-		188,740		193,487		27,070		-		444,227		62,150
Non-GAAP operating income	774,209		524,947		611,410		85,540		2,434,601		1,853,677		259,338

Net income	680,817		107,419		177,807		24,877		1,373,247		3,435,208		480,602
Share-based compensation expenses	161,404		264,282		247,635		34,645		493,266		693,686		97,050
Impairment of goodwill and investments	1,900		-		10,000		1,399		20,249		10,000		1,399
Amortization of intangible assets from business acquisitions	-		188,740		193,487		27,070		-		444,227		62,150
Gain on deemed disposal and disposal of investments	-		-		-		-		(13,999)		-		-
Gain (loss) on fair value change of investments and equity investees’ investments	3,428		(13,332)		2,031		284		(1,710,420)		(2,666,639)		(373,077)
Fair value change on derivative	-		-		1,753		245		2,285,223		1,753		245
Interest expenses related to the convertible bonds’ amortization to face value	-		4,287		100,885		14,114		-		105,172		14,714
Income tax effects on non-GAAP adjustments	1,014		(31,891)		(40,166)		(5,619)		76,081		(89,053)		(12,459)
Non-GAAP net income	848,563		519,505		693,432		97,015		2,523,647		1,934,354		270,624

Net income attributable to common shareholders of YY Inc.	650,690		25,790		93,231		13,044		957,941		3,223,359		450,964
Share-based compensation expenses	161,404		264,282		247,635		34,645		493,266		693,686		97,050
Impairment of goodwill and investments	1,900		-		10,000		1,399		20,249		10,000		1,399
Amortization of intangible assets from business acquisitions	-		188,740		193,487		27,070		-		444,227		62,150
Gain on deemed disposal and disposal  of investments	-		-		-		-		(13,999)		-		-
Gain (loss) on fair value change of investments and equity investees’ investments	3,428		(13,332)		2,031		284		(1,710,420)		(2,666,639)		(373,077)
Fair value change on derivative	-		-		1,753		245		2,285,223		1,753		245
Interest expenses related to the convertible bonds’ amortization to face value	-		4,287		100,885		14,114		-		105,172		14,714
Accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders	-		16,287		16,697		2,336		556,360		49,079		6,866
Income tax effects on non-GAAP adjustments	1,014		(31,891)		(40,166)		(5,619)		76,081		(89,053)		(12,459)
Non-GAAP adjustments for net loss attributable to the non-controlling interest shareholders	(31,449)		(29,941)		(51,481)		(7,202)		(237,513)		(119,768)		(16,756)
Non-GAAP net income attributable to controlling interest and common shareholders of YY Inc.	786,987		424,222		574,072		80,316		2,427,188		1,651,816		231,096

Non-GAAP net income per ADS
—Basic	12.24		5.32		7.17		1.00		37.95		21.65		3.03
—Diluted	12.07		5.14		6.42		0.90		37.04		20.44		2.86
Weighted average number of ADS used in calculating Non-GAAP  net income per ADS
—Basic	64,301,796		79,682,966		80,033,607		80,033,607		63,952,614		76,310,648		76,310,648
—Diluted	64,829,757		81,855,180		91,400,547		91,400,547		64,738,363		81,040,767		81,040,767

 

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)       

	Three Months Ended
	September 30, 2019
	YY(1)		Huya		Bigo		Elimination(2)		Total		Total
	RMB		RMB		RMB		RMB		RMB		US$
Net revenues
Live streaming	2,899,044		2,156,106		1,418,796		-		6,473,946		905,738
Others	181,006		108,986		118,419		(143)		408,268		57,119
Total net revenues	3,080,050		2,265,092		1,537,215		(143)		6,882,214		962,857
Cost of revenues(3)	(1,729,389)		(1,858,772)		(1,125,157)		143		(4,713,175)		(659,397)
Gross profit	1,350,661		406,320		412,058		-		2,169,039		303,460
Operating expenses(3)
Research and development expenses	(249,620)		(134,969)		(288,469)		-		(673,058)		(94,164)
Sales and marketing expenses	(340,619)		(122,316)		(616,642)		-		(1,079,577)		(151,038)
General and administrative expenses	(225,281)		(96,318)		(87,235)		-		(408,834)		(57,198)
Total operating expenses	(815,520)		(353,603)		(992,346)		-		(2,161,469)		(302,400)
Other income	136,535		11,148		5,035		-		152,718		21,366
Operating income (loss)	671,676		63,865		(575,253)		-		160,288		22,426
Interest expenses	(123,456)		-		(11,078)		11,078		(123,456)		(17,272)
Interest income and investment income	127,068		86,539		608		(11,078)		203,137		28,420
Foreign currency exchange (losses) gains, net	2,798		645		12,950		-		16,393		2,293
Fair value change on derivative	(1,753)		-		-		-		(1,753)		(245)
Loss on fair value change of investments	(11,492)		-		-		-		(11,492)		(1,608)
Income (loss) before income tax expenses	664,841		151,049		(572,773)		-		243,117		34,014
Income tax (expenses) benefits	(146,835)		(27,879)		88,143		-		(86,571)		(12,112)
Income (loss) before share of income in equity method investments, net of income taxes	518,006		123,170		(484,630)		-		156,546		21,902
Share of income in equity method investments, net of income taxes	21,189		72		-		-		21,261		2,975
Net income (loss)	539,195		123,242		(484,630)		-		177,807		24,877

(1) In 2019 the segment of “YY Live” was renamed as “YY”.

(2) The elimination mainly consists of revenues and expenses generated from services among YY and Huya segments, and interest income and interest expenses generated from the loan between YY and Bigo segments.

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

	Three Months Ended
	September 30, 2019
	YY	Huya	Bigo	Total	Total
	RMB	RMB	RMB	RMB	US$
Cost of revenues	5,043	8,497	7,068	20,608	2,883
Research and development expenses	26,848	24,172	78,154	129,174	18,072
Sales and marketing expenses	419	1,468	756	2,643	370
General and administrative expenses	41,265	48,987	4,958	95,210	13,320

 

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, 2019
	YY		Huya		Bigo			Total		Total
	RMB		RMB		RMB			RMB		US$
Operating income (loss)	671,676		63,865		(575,253)			160,288		22,426
Share-based compensation expenses	73,575		83,124		90,936			247,635		34,645
Impairment of goodwill and investments	10,000		-		-			10,000		1,399
Amortization of intangible assets from business acquisitions	-		-		193,487			193,487		27,070
Non-GAAP operating income (loss)	755,251		146,989		(290,830)			611,410		85,540

Net income (loss)	539,195		123,242		(484,630)		177,807		24,877
Share-based compensation expenses	73,575		83,124		90,936		247,635		34,645
Impairment of goodwill and investments	10,000		-		-		10,000		1,399
Amortization of intangible assets from business acquisitions	-		-		193,487		193,487		27,070
Gain on fair value change of investments and equity investees’ investments	2,031		-		-		2,031		284
Fair value change on derivative	1,753		-		-		1,753		245
Interest expenses related to the convertible bonds’ amortization to face value	100,885		-		-		100,885		14,114
Income tax effects on non-GAAP adjustments	(188)		-		(39,978)		(40,166)		(5,619)
Non-GAAP net income (loss)	727,251		206,366		(240,185)		693,432		97,015

 

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)       

	Three Months Ended
	June 30, 2019
	YY		Huya		Bigo(1)		Elimination(2)		Total		Total
	RMB		RMB		RMB		RMB		RMB		US$
Net revenues
Live streaming	2,863,058		1,921,485		1,138,218		-		5,922,761		862,747
Others	190,758		88,976		92,752		-		372,486		54,259
Total net revenues	3,053,816		2,010,461		1,230,970		-		6,295,247		917,006
Cost of revenues(3)	(1,627,744)		(1,674,793)		(871,304)		-		(4,173,841)		(607,988)
Gross profit	1,426,072		335,668		359,666		-		2,121,406		309,018
Operating expenses(3)
Research and development expenses	(241,253)		(105,411)		(308,757)		-		(655,421)		(95,473)
Sales and marketing expenses	(335,602)		(119,592)		(644,300)		-		(1,099,494)		(160,159)
General and administrative expenses	(171,032)		(74,328)		(90,613)		-		(335,973)		(48,940)
Total operating expenses	(747,887)		(299,331)		(1,043,670)		-		(2,090,888)		(304,572)
Other income	8,602		31,332		1,473		-		41,407		6,032
Operating income (loss)	686,787		67,669		(682,531)		-		71,925		10,478
Interest expenses	(12,268)		-		(4,201)		4,201		(12,268)		(1,787)
Interest income and investment income	84,791		75,021		1,008		(4,201)		156,619		22,814
Foreign currency exchange (losses) gains, net	(4,181)		787		17,195		-		13,801		2,010
Gain on fair value change of investments	14,291		-		-		-		14,291		2,082
Income (loss) before income tax expenses	769,420		143,477		(668,529)		-		244,368		35,597
Income tax (expenses) benefits	(160,152)		(21,632)		37,888		-		(143,896)		(20,961)
Income (loss) before share of income (loss) in equity method investments, net of income taxes	609,268		121,845		(630,641)		-		100,472		14,636
Share of income (loss) in equity method investments, net of income taxes	6,991		(44)		-		-		6,947		1,012
Net income (loss)	616,259		121,801		(630,641)		-		107,419		15,648

(1) On March 4, 2019, YY completed the acquisition of Bigo. Therefore, Bigo’s financial results from March 4, 2019 to March 31, 2019 were included in YY’s consolidated financial statements.

(2) The elimination mainly consists of interest income and interest expenses generated from the loan between YY and Bigo segments.

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

	Three Months Ended
	June 30, 2019
	YY	Huya	Bigo	Total	Total
	RMB	RMB	RMB	RMB	US$
Cost of revenues	1,955	4,270	9,379	15,604	2,273
Research and development expenses	28,053	13,931	118,045	160,029	23,311
Sales and marketing expenses	655	907	1,890	3,452	503
General and administrative expenses	43,189	29,501	12,507	85,197	12,410

 

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, 2019
	YY		Huya		Bigo		Total		Total
	RMB		RMB		RMB		RMB		US$
Operating income (loss)	686,787		67,669		(682,531)		71,925		10,478
Share-based compensation expenses	73,852		48,609		141,821		264,282		38,497
Amortization of intangible assets from business acquisitions	-		-		188,740		188,740		27,493
Non-GAAP operating income (loss)	760,639		116,278		(351,970)		524,947		76,468
Net income (loss)	616,259		121,801		(630,641)		107,419		15,648
Share-based compensation expenses	73,852		48,609		141,821		264,282		38,497
Amortization of intangible assets from business acquisitions	-		-		188,740		188,740		27,493
Gain on fair value change of investments and equity investees’ investments	(13,332)		-		-		(13,332)		(1,942)
Interest expenses related to the convertible bonds’ amortization to face value	4,287		-		-		4,287		624
Income tax effects on non-GAAP adjustments	1,421		-		(33,312)		(31,891)		(4,645)
Non-GAAP net income (loss)	682,487		170,410		(333,392)		519,505		75,675

 

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)

	Three Months Ended
	September 30, 2018
	YY		Huya		Elimination(1)		Total		Total
	RMB		RMB		RMB		RMB		US$
Net revenues
Live streaming	2,678,081		1,216,467		-		3,894,548		567,057
Others	145,894		60,130		(100)		205,924		29,983
Total net revenues	2,823,975		1,276,597		(100)		4,100,472		597,040
Cost of revenues(2)	(1,591,645)		(1,082,857)		-		(2,674,502)		(389,415)
Gross profit	1,232,330		193,740		(100)		1,425,970		207,625
Operating expenses(2)
Research and development expenses	(239,503)		(74,625)		-		(314,128)		(45,738)
Sales and marketing expenses	(282,237)		(61,702)		100		(343,839)		(50,064)
General and administrative expenses	(135,537)		(71,201)		-		(206,738)		(30,102)
Total operating expenses	(657,277)		(207,528)		100		(864,705 )		(125,904)
Other income	38,568		11,072		-		49,640		7,228
Operating income (loss)	613,621		(2,716)		-		610,905		88,949
Interest expenses	(4,910)		-		-		(4,910)		(715)
Interest income and investment income	90,292		50,818		-		141,110		20,546
Foreign currency exchange (losses) gain, net	(3,170)		98		-		(3,072)		(447)
Gain on fair value change of investments	31,670		-		-		31,670		4,611
Income before income tax expenses	727,503		48,200		-		775,703		112,944
Income tax (expenses) benefits	(83,491)		8,562		-		(74,929)		(10,910)
Income before share of (loss) income in equity method investments, net of income taxes	644,012		56,762		-		700,774		102,034
Share of (loss) income in equity method investments, net of income taxes	(19,967)		10		-		(19,957)		(2,906)
Net income	624,045		56,772		-		680,817		99,128

(1) The elimination mainly consists of revenues and expenses generated from advertising services among YY Live and Huya segments.

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

	Three Months Ended
	September 30, 2018
	YY	Huya	Total	Total
	RMB	RMB	RMB	US$
Cost of revenues	12,120	3,902	16,022	2,333
Research and development expenses	41,139	11,613	52,752	7,681
Sales and marketing expenses	215	75	290	42
General and administrative expenses	43,701	48,639	92,340	13,445

 

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, 2018
	YY		Huya		Total		Total
	RMB		RMB		RMB		US$
Operating income (loss)	613,621		(2,716)		610,905		88,949
Share-based compensation expenses	97,175		64,229		161,404		23,501
Impairment of goodwill and investments	1,900		-		1,900		277
Non-GAAP operating income	712,696		61,513		774,209		112,727
Net income	624,045		56,772		680,817		99,128
Share-based compensation expenses	97,175		64,229		161,404		23,501
Impairment of goodwill and investments	1,900		-		1,900		277
Gain on fair value change of investments and equity investee’s investments	3,428		-		3,428		499
Income tax effects on non-GAAP adjustments	1,014		-		1,014		148
Non-GAAP net income	727,562		121,001		848,563		123,553

Source: YY Inc.