GUANGZHOU, China, Nov. 13, 2018 (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 2018.

Third Quarter 2018 Highlights

• Net revenues increased by 32.6% to RMB4,100.5 million (US$597.0 million) from RMB3,092.3 million in the corresponding period of 2017.
• Net income attributable to YY was RMB650.7 million (US$94.7 million) compared to RMB636.0 million in the corresponding period of 2017.
• Non-GAAP net income attributable to YY1 increased by 19.7% to RMB787.0 million (US$114.6 million) from RMB657.3 million in the corresponding period of 2017.

Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY, stated, “During the third quarter of 2018 we recorded outstanding operating results, highlighted by a 20.7% year-over-year growth in our mobile live streaming monthly active users (MAU) and a 26.3% year-over-year growth in our total live streaming paying users. Our strong performance in the third quarter was attributable to the continuous market expansion for both YY Live and Huya. For YY Live, we continued to leverage our industry-leading AI technology to increase the accuracy and effectiveness of our content recommendation process. Meanwhile, we have initiated a strategic cooperation with Xiaomi to exclusively operate certain entertainment live streaming services on Xiaomi Live. The cooperation will provide Xiaomi’s users with a better experience in entertainment live streaming services and enable both YY and Xiaomi to explore additional monetization opportunities. Looking ahead, we will remain focused on cementing YY’s leadership in the live streaming industry through product innovation and technology advancements.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We once again achieved solid financial performance in the third quarter of 2018. Our total net revenues increased by 32.6% year over year to RMB4,100.5 million, exceeding the high end of our previous guidance range. The increase in net revenues was driven by the robust growth of our live streaming revenues which increased by 35.6% year over year to RMB3,894.5 million. Our non-GAAP net income attributable to YY also increased by 19.7% year over year to RMB787.0 million in the third quarter of 2018. We are confident that our strategies to enhance our content offerings and AI technologies will continue to yield sustainable growth, and increase our market share in the live streaming industry.”

Third Quarter 2018 Financial Results

NET REVENUES Net revenues increased by 32.6% to RMB4,100.5 million (US$597.0 million) in the third quarter of 2018 from RMB3,092.3 million in the corresponding period of 2017, primarily driven by an increase in live streaming revenues. Live streaming revenues increased by 35.6% to RMB3,894.5 million (US$567.1 million) in the third quarter of 2018 from RMB2,871.6 million in the corresponding period of 2017.

Other revenues2 decreased by 6.7% to RMB205.9 million (US$30.0 million) in the third quarter of 2018 from RMB220.7 million in the corresponding period of 2017.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 41.6% to RMB2,674.5 million (US$389.4 million) in the third quarter of 2018 from RMB1,889.3 million in the corresponding period of 2017, primarily attributable to an increase in revenue-sharing fees and content costs to RMB2,212.6 million (US$322.2 million) in the third quarter of 2018 from RMB1,604.9 million in the corresponding period of 2017. The increase in revenue-sharing fees and content costs paid to performers, guilds and content providers was in line with the increase in live streaming revenues for both YY Live and Huya segments, respectively. In addition, bandwidth costs increased to RMB249.5 million (US$36.3 million) in the third quarter of 2018 from RMB160.5 million in the corresponding period of 2017, primarily reflecting continued user base expansion and live streaming quality improvements.

Gross profit increased by 18.5% to RMB1,426.0 million (US$207.6 million) in the third quarter of 2018 from RMB1,203.0 million in the corresponding period of 2017. Gross margin was 34.8% in the third quarter of 2018 compared to 38.9% in the corresponding period of 2017, primarily due to the increase in revenue-sharing fees and content costs. In addition, the relatively low gross margin of the Huya segment had negative impact to the overall gross margin, since the Huya segment’s contribution to net revenues increased significantly year-over-year.

OPERATING INCOMEOperating expenses were RMB864.7 million (US$125.9 million) in the third quarter of 2018 compared to RMB560.3 million in the corresponding period of 2017, primarily due to increased investments in talent recruitment as part of the Company’s efforts to enhance its research and development capabilities.

Operating income was RMB610.9 million (US$88.9 million) in the third quarter of 2018 compared to RMB661.4 million in the corresponding period of 2017. Operating margin was 14.9% in the third quarter of 2018 compared to 21.4% in the corresponding period of 2017, primarily due to the increase in research and development expenses and the decrease in gross margin.

Non-GAAP operating income3 increased by 12.9% to RMB774.2 million (US$112.7 million) in the third quarter of 2018 from RMB685.8 million in the corresponding period of 2017. Non-GAAP operating margin4 was 18.9% in the third quarter of 2018 compared to 22.2% in the corresponding period of 2017.

NET INCOMENet income attributable to YY Inc. increased by 2.3% to RMB650.7 million (US$94.7 million) in the third quarter of 2018 from RMB636.0 million in the corresponding period of 2017.

Non-GAAP net income attributable to YY Inc. increased by 19.7% to RMB787.0 million (US$114.6 million) from RMB657.3 million in the corresponding period of 2017. Non-GAAP net margin5 was 19.2% in the third quarter of 2018 compared to 21.3% in the corresponding period of 2017.

NET INCOME PER ADSDiluted net income per ADS6 was RMB10.01 (US$1.46) in the third quarter of 2018 compared to RMB10.51 in the corresponding period of 2017.

Non-GAAP diluted net income per ADS7 increased by 11.1% to RMB12.07 (US$1.76) in the third quarter of 2018 from RMB10.86 in the corresponding period of 2017.

BALANCE SHEET AND CASH FLOWS As of September 30, 2018, the Company had cash and cash equivalents of RMB4,921.1 million (US$716.5 million) and short-term deposits of RMB8,302.6 million (US$1,208.9 million). For the third quarter of 2018, net cash from operating activities was RMB822.4 million (US$119.7 million).

SHARES OUTSTANDING As of September 30, 2018, the Company had a total of 1,269.6 million common shares, or the equivalent of 63.5 million ADSs, outstanding.

Business OutlookFor the fourth quarter of 2018, the Company expects net revenues to be between RMB4.39 billion and RMB4.54 billion, representing a year-over-year growth of 21.1% to 25.2%. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentsIn October 2018, the Company entered into a strategic cooperation agreement with Xiaomi Corporation (“Xiaomi”). Pursuant to the agreement, YY has the exclusive right to operate certain entertainment live streaming services on Xiaomi Zhibo, or Xiaomi Live, the primary platform for Xiaomi’s live streaming services. Through this partnership, YY will enrich Xiaomi’s ecosystem by integrating its high quality streaming content and extensive experience in live streaming operations with Xiaomi Live. The agreement will provide Xiaomi’s users with a superior experience in entertainment live streaming services, while both parties continue to explore additional monetization opportunities.

Conference Call InformationThe Company will hold a conference call on Monday, November 12, 2018, at 9:00 pm Eastern Time or Tuesday, November 13, 2018, at 10:00 am 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
China Domestic:		400-6208-038
Hong Kong:		+852-3018-6771
Conference ID:		#8227539

The replay will be accessible through November 20, 2018, by dialing the following numbers:

United States:		+1-646-254-3697
International:		+61-2-8199-0299
Conference ID:		#8227539

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 RateThis 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 RMB6.8680 to US$1.00, the noon buying rate in effect on September 28, 2018 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 StatementThis 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 MeasuresThe 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 YY Inc., non-GAAP net margin, 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, 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, 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 loss on derivative liabilities, and income tax effects of above non-GAAP reconciling items. Non-GAAP net income attributable to YY Inc. is net income attributable to YY Inc. excluding share-based compensation expenses, 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, fair value loss on derivative liabilities, deemed dividend to subsidiary’s Series A 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. Non-GAAP net margin is non-GAAP net income attributable to YY Inc. as a percentage of net revenues. Basic and diluted non-GAAP net income per ADS is non-GAAP net income attributable to 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, 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, fair value loss on derivative liabilities, and deemed dividend to subsidiary’s Series A 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 ContactYY Inc.Matthew ZhaoTel: +86 (20) 8212-0000Email: [email protected]

ICR, Inc. Jack WangTel: +1 (646) 915-1611Email: [email protected]

____________________________

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, impairment of goodwill and investment, 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 loss on derivative liabilities, deemed dividend to subsidiary’s Series A preferred shareholders, 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 RMB136.3 million (US19.8 million) and RMB21.3 million in the third quarter of 2018 and 2017, respectively. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

2 Starting from the first quarter of 2018, the Company re-classified its revenues from online games, revenues from memberships, and other revenues (which mainly represent revenues from the Company’s online advertising revenues) to the category “other revenues” in order to better reflect the Company’s continued strategic shift towards its live streaming business.

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

4 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.

5 Non-GAAP net margin is 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 YY Inc. 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 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.

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)
		December 31,2017		September30,2018		September30,2018
		RMB		RMB		US$
Assets
Current assets
Cash and cash equivalents		2,617,432		4,921,114		716,528
Short-term deposits		6,000,104		8,302,609		1,208,883
Restricted short-term deposits		1,000,000		-		-
Short-term investments		124,550		1,249,267		181,897
Accounts receivable, net		153,944		206,060		30,003
Inventory		315		-		-
Amounts due from related parties		11,190		70,887		10,321
Prepayments and other current assets		221,939		1,030,584		150,055
Total current assets		10,129,474		15,780,521		2,297,687
Non-current assets
Deferred tax assets		113,017		41,432		6,033
Investments		1,153,019		4,565,401		664,735
Property and equipment, net		1,016,998		1,188,341		173,026
Land use rights, net		1,832,739		1,796,663		261,599
Intangible assets, net		37,481		74,671		10,872
Goodwill		11,716		11,765		1,713
Amounts due from related parties		20,000		-		-
Other non-current assets		144,275		197,061		28,693
Total non-current assets		4,329,245		7,875,334		1,146,671
Total assets		14,458,719		23,655,855		3,444,358
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities
Convertible bonds		-		6,878		1,001
Accounts payable		76,351		109,656		15,966
Deferred revenue		758,044		696,785		101,454
Advances from customers		80,406		97,987		14,267
Income taxes payable		146,298		134,964		19,651
Accrued liabilities and other current liabilities		1,465,963		1,978,000		288,002
Amounts due to related parties		30,502		20,763		3,023
Short-term loans		588,235		-		-
Total current liabilities		3,145,799		3,045,033		443,364
Non-current liabilities
Convertible bonds		6,536		-		-
Deferred revenue		57,718		79,947		11,641
Deferred tax liabilities		10,810		25,166		3,664
Total non-current liabilities		75,064		105,113		15,305
Total liabilities		3,220,863		3,150,146		458,669

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
		December31,2017			September 30,2018		September 30,2018
		RMB			RMB		US$
Mezzanine equity		524,997			-		-
Shareholders’ equity
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 945,245,908 and 981,384,448 shares issued and outstanding as of December 31, 2017 and September 30, 2018, respectively)		57			59		9
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 317,982,976 and 288,182,976 shares issued and outstanding as of December 31, 2017 and September 30, 2018, respectively)		23			21		3
Additional paid-in capital		5,339,844			11,014,105		1,603,684
Statutory reserves		62,718			62,718		9,132
Retained earnings(1)		5,218,110			6,263,853		912,035
Accumulated other comprehensive (loss) income(1)		(9,597	)		350,054		50,969
Total YY Inc.’s shareholders’ equity		10,611,155			17,690,810		2,575,832
Non-controlling interests		101,704			2,814,899		409,857
Total shareholders’ equity		10,712,859			20,505,709		2,985,689
Total liabilities, mezzanine equity and
shareholders’ equity		14,458,719			23,655,855		3,444,358

(1) On January 1, 2018, the Company adopted ASU 2016-1, “Classification and Measurement of Financial Instruments”. After the adoption of this new guidance, the Company measures long-term investments other than equity method investments at fair value through earnings. For those investments without readily determinable fair values, the Company elects to record these investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. Changes in the basis of these investments are reported in current earnings. Following the adoption of this guidance, accumulated fair value gain, amounting to RMB87.8 million, was reclassified from accumulated other comprehensive loss to retained earnings as of January 1, 2018.

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 30,2017			June 30,2018			September 30,2018			September 30,2018			September30,2017			September30,2018			September30,2018
	RMB			RMB			RMB			US$			RMB			RMB			US$
Net revenues(1)
Live streaming	2,871,610			3,559,666			3,894,548			567,057			7,302,434			10,486,249			1,526,827
Others	220,695			213,564			205,924			29,983			665,820			636,384			92,659
Total net revenues	3,092,305			3,773,230			4,100,472			597,040			7,968,254			11,122,633			1,619,486
Cost of revenues(2)	(1,889,313	)		(2,313,772	)		(2,674,502	)		(389,415	)		(4,829,753	)		(7,004,071	)		(1,019,812	)
Gross profit	1,202,992			1,459,458			1,425,970			207,625			3,138,501			4,118,562			599,674
Operating expenses(2)
Research and development expenses	(166,139	)		(295,946	)		(314,128	)		(45,738	)		(499,059	)		(859,539	)		(125,151	)
Sales and marketing expenses	(249,480	)		(246,130	)		(343,839	)		(50,064	)		(542,516	)		(825,627	)		(120,214	)
General and administrative expenses	(144,678	)		(237,532	)		(206,738	)		(30,102	)		(325,875	)		(608,246	)		(88,562	)
Total operating expenses	(560,297	)		(779,608	)		(864,705	)		(125,904	)		(1,367,450	)		(2,293,412	)		(333,927	)
Gain on deconsolidation and disposal of subsidiaries	-			-			-			-			37,989			-			-
Other income	18,667			33,922			49,640			7,228			68,653			95,936			13,969
Operating income	661,362			713,772			610,905			88,949			1,877,693			1,921,086			279,716
Interest expense	(3,651	)		(1,548	)		(4,910	)		(715	)		(28,378	)		(8,477	)		(1,234	)
Interest income and investment income	47,505			128,850			141,110			20,546			105,853			362,151			52,730
Foreign currency exchange (losses) gains, net	(251	)		(2,823	)		(3,072	)		(447	)		(1,825	)		824			120
Gain on deemed disposal and disposal of investments	-			13,999			-			-			45,861			13,999			2,038
Gain on fair value change of investments	-			1,205,049			31,670			4,611			-			1,663,266			242,176
Fair value loss on derivative liabilities	-			(2,273,355	)		-			-			-			(2,285,223	)		(332,735	)
Other non-operating expenses	-			(2,000	)		-			-			-			(2,000	)		(291	)
Income (loss) before income tax expenses	704,965			(218,056	)		775,703			112,944			1,999,204			1,665,626			242,520
Income tax expenses	(74,684	)		(147,419	)		(74,929	)		(10,910	)		(264,288	)		(370,593	)		(53,959	)
Income (loss) before share of income in equity method investments, net of income taxes	630,281			(365,475	)		700,774			102,034			1,734,916			1,295,033			188,561
Share of income (loss) in equity method investments, net of income taxes	6,806			88,992			(19,957	)		(2,906	)		15,467			78,214			11,388
Net income (loss)	637,087			(276,483	)		680,817			99,128			1,750,383			1,373,247			199,949
Less: Net income (loss) income attributable to the non-controlling interest shareholders and the mezzanine equity classified non-controlling interest shareholders	1,120			(139,596	)		30,127			4,387			(2,446	)		(73,978	)		(10,771	)
Deemed dividend to subsidiary’s Series A preferred shareholders	-			-			-			-			-			(489,284	)		(71,241	)
Net income (loss) attributable to YY Inc.	635,967			(136,887	)		650,690			94,741			1,752,829			957,941			139,479

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 30,2017		June30,2018			September 30,2018		September 30,2018		September 30,2017		September 30,2018		September 30,2018
	RMB		RMB			RMB		US$		RMB		RMB		US$
Net income (loss) per ADS
—Basic	10.60		(2.14	)		10.12		1.47		30.30		14.98		2.18
—Diluted	10.51		(2.14	)		10.01		1.46		29.72		14.80		2.15
Weighted average number of ADS used in calculating net income (loss) per ADS
—Basic	60,008,235		63,839,293			64,301,796		64,301,796		57,857,025		63,952,614		63,952,614
—Diluted	60,503,529		63,839,293			64,829,757		64,829,757		59,681,394		64,738,363		64,738,363

(1) On January 1, 2018, the Company adopted ASC 606, "Revenue from Contracts with Customers" using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Based on the Company’s assessment, the adoption of ASC 606 did not have any material impact on the Company’s consolidated financial statements.

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

	Three Months Ended									Nine Months Ended
	September 30,2017			June 30,2018		September 30,2018		September 30,2018		September 30,2017		September 30,2018		September 30,2018
						RMB		US$		RMB		RMB		US$
Cost of revenues	(434	)		24,059		16,022		2,333		6,210		59,689		8,691
Research and development expenses	(6,049	)		67,912		52,752		7,681		15,847		175,131		25,500
Sales and marketing expenses	(74	)		2,406		290		42		738		4,565		665
General and administrative expenses	9,700			124,978		92,340		13,445		26,406		253,881		36,966

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 30,2017		June 30,2018		September 30,2018		September 30,2018		September 30,2017			September 30,2018		September 30,2018
	RMB		RMB		RMB		US$		RMB			RMB		US$
Share-based compensation expenses	3,143		219,355		161,404		23,501		49,201			493,266		71,822
Impairment of goodwill and investments	21,285		-		1,900		277		41,619			20,249		2,948
Gain on deconsolidation and disposal of a subsidiary	-		-		-		-		(37,989	)		-		-
Non-GAAP operating income	685,790		933,127		774,209		112,727		1,930,524			2,434,601		354,486

Net income (loss)	637,087			(276,483	)		680,817		99,128		1,750,383			1,373,247			199,949
Share-based compensation expenses	3,143			219,355			161,404		23,501		49,201			493,266			71,822
Impairment of goodwill and investments	21,285			-			1,900		277		41,619			20,249			2,948
Gain on deconsolidation and disposal of a subsidiary	-			-			-		-		(37,989	)		-			-
Gain on deemed disposal and disposal of investments	-			(13,999	)		-		-		(45,861	)		(13,999	)		(2,038	)
(Gain) loss on fair value change of investments and equity investees’ investments	-			(1,287,301	)		3,428		499		-			(1,710,420	)		(249,042	)
Fair value loss on derivative liabilities	-			2,273,355			-		-		-			2,285,223			332,735
Income tax effects on non-GAAP adjustments	(3,000	)		30,601			1,014		148		9,264			76,081			11,078
Non-GAAP net income	658,515			945,528			848,563		123,553		1,766,617			2,523,647			367,452

Net income (loss) attributable to YY Inc.	635,967			(136,887	)		650,690			94,741			1,752,829			957,941			139,479
Share-based compensation expenses	3,143			219,355			161,404			23,501			49,201			493,266			71,822
Impairment of goodwill and investments	21,285			-			1,900			277			41,619			20,249			2,948
Gain on deconsolidation and disposal of a subsidiary	-			-			-			-			(37,989	)		-			-
Gain on deemed disposal and disposal of investments	-			(13,999	)		-			-			(45,861	)		(13,999	)		(2,038	)
(Gain) loss on fair value change of investments and equity investees’ investments	-			(1,287,301	)		3,428			499			-			(1,710,420	)		(249,042	)
Fair value loss on derivative liabilities	-			2,273,355			-			-			-			2,285,223			332,735
Deemed dividend to subsidiary's Series A preferred shareholders	-			-			-			-			-			489,284			71,241
Income tax effects on non-GAAP adjustments	(3,000	)		30,601			1,014			148			9,264			76,081			11,078
Non-GAAP adjustments for net loss attributable to the non-controlling interest shareholders	(84	)		(211,884	)		(31,449	)		(4,579	)		(1,678	)		(237,513	)		(34,583	)
Non-GAAP net income attributable to YY Inc.	657,311			873,240			786,987			114,587			1,767,385			2,360,112			343,640

Non-GAAP net income per ADS
—Basic	10.95		13.68		12.24		1.78		30.55		36.90		5.37
—Diluted	10.86		13.46		12.07		1.76		29.96		36.31		5.29
Weighted average number of ADS used in calculating Non-GAAP net income per ADS
—Basic	60,008,235		63,839,293		64,301,796		64,301,796		57,857,025		63,952,614		63,952,614
—Diluted	60,503,529		64,701,643		64,829,757		64,829,757		59,681,394		64,738,363		64,738,363

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
		Three Months Ended
		September 30, 2018
		YY Live			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) gains, 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 Live	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 Live		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
Loss on fair value change of investments and equity investees’ 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

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
		Three Months Ended
		June 30, 2018
		YY Live			Huya			Elimination(1)			Total			Total
		RMB			RMB			RMB			RMB			US$
Net revenues
Live streaming		2,567,854			991,812			-			3,559,666			537,950
Others		167,044			46,520			-			213,564			32,275
Total net revenues		2,734,898			1,038,332			-			3,773,230			570,225
Cost of revenues(2)		(1,441,807	)		(871,965	)		-			(2,313,772	)		(349,666	)
Gross profit		1,293,091			166,367			-			1,459,458			220,559
Operating expenses(2)
Research and development expenses		(235,982	)		(59,964	)		-			(295,946	)		(44,724	)
Sales and marketing expenses		(204,448	)		(41,682	)		-			(246,130	)		(37,196	)
General and administrative expenses		(149,059	)		(88,473	)		-			(237,532	)		(35,897	)
Total operating expenses		(589,489	)		(190,119	)		-			(779,608	)		(117,817	)
Other income		27,463			6,459			-			33,922			5,126
Operating income (loss)		731,065			(17,293	)		-			713,772			107,868
Interest expenses		(1,548	)		-			-			(1,548	)		(234	)
Interest income and investment income		86,406			42,444			-			128,850			19,472
Foreign currency exchange losses, net		(2,823	)		-			-			(2,823	)		(427	)
Gain on deemed disposal and disposal of investments		13,999			-			-			13,999			2,116
Gain on fair value change of investments		1,003,050			-			201,999			1,205,049			182,111
Fair value loss on derivative liabilities		-			(2,273,355	)		-			(2,273,355	)		(343,558	)
Other non-operating expenses		(2,000	)		-			-			(2,000	)		(302	)
Income (loss) before income tax expenses		1,828,149			(2,248,204	)		201,999			(218,056	)		(32,954	)
Income tax (expenses) benefits		(126,522	)		6,070			(26,967	)		(147,419	)		(22,278	)
Income (loss) before share of income in equity method investments, net of income taxes		1,701,627			(2,242,134	)		175,032			(365,475	)		(55,232	)
Share of income in equity method investments, net of income taxes		147,337			116,687			(175,032	)		88,992			13,449
Net income (loss)		1,848,964			(2,125,447	)		-			(276,483	)		(41,783	)

(1) Elimination represents the gain resulting from change in fair value of an investment of one of the Company's subsidiaries, on which YY Live segment and Huya segment have joint control and accounted for as equity method investment.

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

		Three Months Ended
		June 30, 2018
		YY Live	Huya	Total	Total
		RMB	RMB	RMB	US$
Cost of revenues		21,406	2,653	24,059	3,636
Research and development expenses		62,071	5,841	67,912	10,263
Sales and marketing expenses		1,674	732	2,406	364
General and administrative expenses		60,100	64,878	124,978	18,887

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, 2018
		YY Live			Huya			Elimination			Total			Total
		RMB			RMB			RMB			RMB			US$
Operating income (loss)		731,065			(17,293	)		-			713,772			107,868
Share-based compensation expenses		145,251			74,104			-			219,355			33,150
Non-GAAP operating income		876,316			56,811			-			933,127			141,018
Net income (loss)		1,848,964			(2,125,447	)		-			(276,483	)		(41,783	)
Share-based compensation expenses		145,251			74,104			-			219,355			33,150
Gain on deemed disposal and disposal of investments		(13,999	)		-			-			(13,999	)		(2,116	)
Gain on fair value change of investments and equity investees’ investments		(1,143,680	)		(116,654	)		(26,967	)		(1,287,301	)		(194,541	)
Fair value loss on derivative liabilities		-			2,273,355			-			2,273,355			343,558
Income tax effects on non-GAAP adjustments		3,634			-			26,967			30,601			4,625
Non-GAAP net income		840,170			105,358			-			945,528			142,893

YY INC.
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$
Net revenues
Live streaming		2,319,251			552,359			2,871,610			431,607
Others		189,520			31,175			220,695			33,171
Total net revenues		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		(107,342	)		(37,336	)		(144,678	)		(21,745	)
Total operating expenses		(452,891	)		(107,406	)		(560,297	)		(84,213	)
Other income		18,569			98			18,667			2,806
Operating income (loss)		695,433			(34,071	)		661,362			99,405
Interest expenses		(3,651	)		-			(3,651	)		(549	)
Interest income and investment income		42,738			4,767			47,505			7,140
Foreign currency exchange losses, net		(251	)		-			(251	)		(38	)
Income (loss) before income tax expenses		734,269			(29,304	)		704,965			105,958
Income tax expenses		(74,684	)		-			(74,684	)		(11,225	)
Income (loss) before share of income in equity method investments, net of income taxes		659,585			(29,304	)		630,281			94,733
Share of income in equity method investments, net of income taxes		6,806			-			6,806			1,023
Net Income (loss)(2)		666,391			(29,304	)		637,087			95,756

(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

(2) Starting from the three months ended December 31, 2017, the Company reviews the financial performance of the operating segments up to the net income of each segment. Segment information for comparative periods has been revised to be presented on the same basis as the three months ended December 31, 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)		695,433			(34,071	)		661,362			99,405
Share-based compensation expenses		(796	)		3,939			3,143			473
Impairment of goodwill and investments		21,285			-			21,285			3,199
Non-GAAP operating income (loss)		715,922			(30,132	)		685,790			103,077
Net income (loss)		666,391			(29,304	)		637,087			95,756
Share-based compensation expenses		(796	)		3,939			3,143			473
Impairment of goodwill and investments		21,285			-			21,285			3,199
Income tax effects on non-GAAP adjustments		(3,000	)		-			(3,000	)		(451	)
Non-GAAP net income (loss)		683,880			(25,365	)		658,515			98,977

Source: YY Inc.

Press Releases

YY Inc, (YY) PT Lowered to $75 at Nomura/Instinet Following 3QNovember 13, 2018 7:38 AM YY, Inc. (YY) Tops Q3 EPS by 9cNovember 12, 2018 5:34 PM