GUANGZHOU, China, March 05, 2019 (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 fourth quarter and full year of 2018.

Fourth Quarter 2018 Highlights

• Net revenues increased by 28.0% to RMB4,640.9 million (US$675.0 million) from RMB3,626.5 million in the corresponding period of 2017.
• Net income attributable to YY was RMB684.0 million (US$99.5 million), compared to RMB740.4 million in the corresponding period of 2017.
• Non-GAAP net income attributable to YY1 was RMB836.2 million (US$121.6 million), compared to RMB932.1 million in the corresponding period of 2017.

Full Year 2018 Highlights

• Net revenues increased by 36.0% to RMB15,763.6 million (US$2,292.7 million) from RMB11,594.8 million in 2017.
• Net income attributable to YY was RMB1,642.0 million (US$238.8 million), compared to RMB2,493.2 million in 2017.
• Non-GAAP net income attributable to YY increased by 18.4% to RMB3,196.4 million (US$464.9 million) from RMB2,699.4 million in 2017.

Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY, stated, “We are delighted to conclude 2018 with solid fourth quarter performances from both YY Live and Huya. Our strong growth momentum was driven by the healthy expansion of our loyal and highly-engaged live streaming community, evidenced by the number of mobile live streaming monthly active users increasing by 18.1% to 90.4 million and the number of live streaming paying users increasing by 36.6% to 8.9 million year-over-year in the fourth quarter of 2018. In addition, our initial foray into the global market has generated encouraging results in 2018. HAGO, a casual-game-oriented social networking platform that is currently available in 33 countries and regions worldwide with 20.9 million monthly active users in the fourth quarter of 2018. In addition, Hago consistently topped the charts as the most popular application on both App Store and Google Play in its primary markets, namely Indonesia and Vietnam in the fourth quarter of 2018. As we continue to enrich and diversify our live streaming content, we have also consistently upgraded our AI algorithms to more accurately match content to our users. Building on the successful growth of our domestic ecosystem, we will continue to execute our globalization strategy as a potential driver for our long-term growth going forward.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We once again recorded solid financial results in the fourth quarter of 2018. Our total net revenues increased by 28.0% year-over-year to RMB4,640.9 million, exceeding the high end of our previous guidance range. The increase in net revenues was driven by the strong growth of our live streaming revenues, which increased by 30.4% year-over-year to RMB4,391.4 million. We continue to invest in content enrichment, technology enhancements, and global expansion. We are confident that our strategies to upgrade our content offerings and AI technologies, buttressed by our increasing global footprint, will continue to yield sustainable growth and increase our market share in the global live streaming industry.”

Fourth Quarter 2018 Financial Results

NET REVENUES Net revenues increased by 28.0% to RMB4,640.9 million (US$675.0 million) in the fourth quarter of 2018 from RMB3,626.5 million in the corresponding period of 2017, primarily driven by an increase in live streaming revenues. Live streaming revenues increased by 30.4% to RMB4,391.4 million (US$638.7 million) in the fourth quarter of 2018 from RMB3,368.5 million in the corresponding period of 2017.

Other revenues2 decreased by 3.3% to RMB249.5 million (US$36.3 million) in the fourth quarter of 2018 from RMB258.0 million in the corresponding period of 2017.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 37.2% to RMB3,013.1 million (US$438.2 million) in the fourth quarter of 2018 from RMB2,196.6 million in the corresponding period of 2017, primarily attributable to an increase in revenue-sharing fees and content costs to RMB2,556.5 million (US$371.8 million) in the fourth quarter of 2018 from RMB1,828.0 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 RMB246.5 million (US$35.9 million) in the fourth quarter of 2018 from RMB181.2 million in the corresponding period of 2017, primarily reflecting continued user base expansion and live streaming quality improvements.

Gross profit increased by 13.8% to RMB1,627.9 million (US$236.8 million) in the fourth quarter of 2018 from RMB1,429.9 million in the corresponding period of 2017. Gross margin was 35.1% in the fourth quarter of 2018, compared to 39.4% in the corresponding period of 2017, primarily due to the increase in revenue-sharing fees and content costs. The decrease in gross margin was attributable to the impact caused by the relatively low gross margin of the Huya segment as its contribution to net revenues increased significantly year-over-year.

OPERATING INCOMEOperating expenses were RMB931.2 million (US$135.4 million) in the fourth quarter of 2018, compared to RMB652.9 million in the corresponding period of 2017, primarily due to our increased efforts in sales and marketing activities in both China and the overseas market.

Operating income was RMB718.6 million (US$104.5 million) in the fourth quarter of 2018, compared to RMB821.5 million in the corresponding period of 2017. Operating margin was 15.5% in the fourth quarter of 2018, compared to 22.7% in the corresponding period of 2017, primarily due to the increase in sales and marketing expenses and the decrease in gross margin.

Non-GAAP operating income3 was RMB888.5 million (US$129.2 million) in the fourth quarter of 2018, compared to RMB1,034.1 million in the corresponding period of 2017. Non-GAAP operating margin4 was 19.1% in the fourth quarter of 2018, compared to 28.5% in the corresponding period of 2017.

NET INCOMENet income attributable to YY Inc. was RMB684.0 million (US$99.5 million) in the fourth quarter of 2018, compared to RMB740.4 million in the corresponding period of 2017. Net margin was 14.7% in the fourth quarter of 2018, compared to 20.4% in the corresponding period of 2017.

Non-GAAP net income attributable to YY Inc. was RMB836.2 million (US$121.6 million) in the fourth quarter of 2018, compared to RMB932.1 million in the corresponding period of 2017. Non-GAAP net margin5 was 18.0% in the fourth quarter of 2018, compared to 25.7% in the corresponding period of 2017.

NET INCOME PER ADSDiluted net income per ADS6 was RMB10.54 (US$1.53) in the fourth quarter of 2018, compared to RMB11.53 in the corresponding period of 2017.

Non-GAAP diluted net income per ADS7 was RMB12.86 (US$1.87) in the fourth quarter of 2018, compared to RMB14.51 in the corresponding period of 2017.

BALANCE SHEET AND CASH FLOWS As of December 31, 2018, the Company had cash and cash equivalents of RMB6,004.2 million (US$873.3 million) and short-term deposits of RMB7,327.0 million (US$1,065.7 million). For the fourth quarter of 2018, net cash from operating activities was RMB2,123.8 million (US$308.9 million).

SHARES OUTSTANDING As of December 31, 2018, the Company had a total of 1,269.9 million common shares, or the equivalent of 63.5 million ADSs, outstanding.

Full Year 2018 Financial Results

For the full year of 2018, net revenues increased by 36.0% to RMB15,763.6 million (US$2,292.7 million) from RMB11,594.8 million in 2017, primarily driven by a 39.4% year-over-year increase in live streaming revenues.

Net income attributable to YY Inc. for the full year of 2018 was RMB1,642.0 million (US$238.8 million), compared to RMB2,493.2 million in 2017. Net margin for the full year of 2018 was 10.4%, compared to 21.5% in 2017.

Non-GAAP net income attributable to YY Inc. for the full year of 2018 increased by 18.4% to RMB3,196.4 (US$464.9 million) from RMB2,699.4 million in 2017. Non-GAAP net margin for the full year of 2018 was 20.3%, compared to 23.3% in 2017.

Diluted net income per ADS was RMB25.38 (US$3.69) in 2018, compared to RMB41.33 in the corresponding period of 2017. Non-GAAP diluted net income per ADS for the full year of 2018 increased by 9.7% to RMB49.05 (US$7.13) from RMB44.72 in 2017.

For the full year of 2018, net cash from operating activities was RMB4,464.8 million (US$649.4 million).

Business OutlookFor the first quarter of 2019, the Company expects net revenues to be between RMB4.01 billion and RMB4.16 billion, representing a year-over-year growth of 23.4% to 28.0%, without giving effect to the acquisition of Bigo Inc. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentsThe Company recently entered into a strategic partnership agreement with Shanghai Chuangsi Enterprise development Co., Ltd.(“Shanghai Chuangsi”). Shanghai Chuangsi owns 9377 Games, one of the leading game platforms in China. Under the agreement, the Company will obtain 30% equity interest of Shanghai Chuangsi by injecting its online game business into Shanghai Chuangsi. As a result, the financial results of YY’s online games business, which contributed to less than 3% of YY segment’s total revenues in the fourth quarter of 2018, will no longer be consolidated upon the completion of the transaction. Currently, the transaction is expected to be completed in the first quarter of 2019.

Conference Call InformationThe Company will hold a conference call on Monday, March 4, 2019, at 9:00 pm Eastern Time (or Tuesday, March 5, 2019, at 10:00 am Beijing Time) to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:	+1-845-675-0438
International:	+65-6713-5440
China Domestic:	400-1200-654
Hong Kong:	+852-3018-6776
Conference ID:	#8476342
The replay will be accessible through March 12, 2019, by dialing the following numbers:
United States:	+1-646-254-3697
International:	+61-2-9003-4211
Conference ID:	#8476342

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 RMB6.8755 to US$1.00, the noon buying rate in effect on December 31, 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 fourth 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 RMB152.2 million (US22.1 million) and RMB191.7 million in the fourth 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.

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

7 Non-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		December		December
	31,		31,		31,
	2017		2018		2018
	RMB		RMB		US$
Assets
Current assets
Cash and cash equivalents	2,617,432		6,004,231		873,279
Short-term deposits	6,000,104		7,326,996		1,065,667
Restricted short-term deposits	1,000,000		-		-
Short-term investments	124,550		979,053		142,397
Accounts receivable, net	153,944		198,428		28,860
Inventory	315		-		-
Amounts due from related parties	11,190		193,559		28,152
Financing receivables, net	-		768,343		111,751
Prepayments and other current assets	221,939		1,019,019		148,210
Total current assets	10,129,474		16,489,629		2,398,316
Non-current assets
Long-term deposits	-		1,000,000		145,444
Deferred tax assets	113,017		70,834		10,302
Investments	1,153,019		4,591,524		667,809
Property and equipment, net	1,016,998		1,296,319		188,542
Land use rights, net	1,832,739		1,784,639		259,565
Intangible assets, net	37,481		74,685		10,862
Goodwill	11,716		11,763		1,711
Amounts due from related parties	20,000		-		-
Financing receivables, net	-		224,793		32,695
Other non-current assets	144,275		223,859		32,559
Total non-current assets	4,329,245		9,278,416		1,349,489
Total assets	14,458,719		25,768,045		3,747,805
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities
Convertible bonds	-		6,863		998
Accounts payable	76,351		114,589		16,666
Deferred revenue	758,044		951,616		138,407
Advances from customers	80,406		101,690		14,790
Income taxes payable	146,298		235,561		34,261
Accrued liabilities and other current liabilities	1,465,963		2,414,371		351,156
Amounts due to related parties	30,502		28,336		4,121
Short-term loans	588,235		-		-
Total current liabilities	3,145,799		3,853,026		560,399
Non-current liabilities
Convertible bonds	6,536		-		-
Deferred revenue	57,718		91,710		13,339
Deferred tax liabilities	10,810		27,505		4,000
Total non-current liabilities	75,064		119,215		17,339
Total liabilities	3,220,863		3,972,241		577,738

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
	December		December		December
	31,		31,		31,
	2017		2018		2018
	RMB		RMB		US$
Mezzanine equity	524,997		418,673		60,893
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 981,740,848 shares issued and outstanding as of December 31, 2017 and December 31, 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 December 31, 2018, respectively)	23		21		3
Additional paid-in capital	5,339,844		11,168,866		1,624,444
Statutory reserves	62,718		101,725		14,795
Retained earnings(1)	5,218,110		6,913,469		1,005,522
Accumulated other comprehensive (loss) income(1)	(9,597)		336,152		48,891
Total YY Inc.’s shareholders’ equity	10,611,155		18,520,292		2,693,664
Non-controlling interests	101,704		2,856,839		415,510
Total shareholders’ equity	10,712,859		21,377,131		3,109,174
Total liabilities, mezzanine equity and
shareholders’ equity	14,458,719		25,768,045		3,747,805

(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												Twelve Months Ended
	December			September			December			December			December			December			December
	31,			30,			31,			31,			31,			31,			31,
	2017			2018			2018			2018			2017			2018			2018
	RMB			RMB			RMB			US$			RMB			RMB			US$
Net revenues(1)
Live streaming	3,368,520			3,894,548			4,391,418			638,705			10,670,954			14,877,667			2,163,867
Others	258,018			205,924			249,506			36,289			923,838			885,890			128,847
Total net revenues	3,626,538			4,100,472			4,640,924			674,994			11,594,792			15,763,557			2,292,714
Cost of revenues(2)	(2,196,649	)		(2,674,502	)		(3,013,063	)		(438,232	)		(7,026,402	)		(10,017,134	)		(1,456,932	)
Gross profit	1,429,889			1,425,970			1,627,861			236,762			4,568,390			5,746,423			835,782
Operating expenses(2)
Research and development expenses	(282,827	)		(314,128	)		(332,513	)		(48,362	)		(781,886	)		(1,192,052	)		(173,377	)
Sales and marketing expenses	(148,765	)		(343,839	)		(323,689	)		(47,079	)		(691,281	)		(1,149,316	)		(167,161	)
General and administrative expenses	(218,766	)		(206,738	)		(274,979	)		(39,994	)		(544,641	)		(883,225	)		(128,460	)
Goodwill impairment	(2,527	)		-			-			-			(2,527	)		-			-
Total operating expenses	(652,885	)		(864,705	)		(931,181	)		(135,435	)		(2,020,335	)		(3,224,593	)		(468,998	)
Gain on deconsolidation and disposal of subsidiaries	-			-			-			-			37,989			-			-
Other income	44,534			49,640			21,924			3,189			113,187			117,860			17,142
Operating income	821,538			610,905			718,604			104,516			2,699,231			2,639,690			383,926
Interest expense	(3,744	)		(4,910	)		(139	)		(20	)		(32,122	)		(8,616	)		(1,253	)
Interest income and investment income	74,531			141,110			123,401			17,948			180,384			485,552			70,621
Foreign currency exchange losses, net	(351	)		(3,072	)		(1,338	)		(195	)		(2,176	)		(514	)		(75	)
Gain on deemed disposal and disposal of investments	-			-			2,179			317			45,861			16,178			2,353
Gain on fair value change of investments	-			31,670			26,138			3,802			-			1,689,404			245,714
Fair value loss on derivative liabilities	-			-			-			-			-			(2,285,223	)		(332,372	)
Other non-operating expenses	-			-			-			-			-			(2,000	)		(291	)
Income before income tax expenses	891,974			775,703			868,845			126,368			2,891,178			2,534,471			368,623
Income tax expenses	(151,523	)		(74,929	)		(107,114	)		(15,579	)		(415,811	)		(477,707	)		(69,480	)
Income before share of income (loss) in equity method investments, net of income taxes	740,451			700,774			761,731			110,789			2,475,367			2,056,764			299,143
Share of income (loss) in equity method investments, net of income taxes	17,557			(19,957	)		(19,281	)		(2,804	)		33,024			58,933			8,571
Net Income	758,008			680,817			742,450			107,985			2,508,391			2,115,697			307,714
Less: Net income (loss) income attributable to the non-controlling interest shareholders and the mezzanine equity classified non-controlling interest shareholders	17,602			30,127			53,827			7,829			15,156			-20,151			-2,931
Cumulative dividend on subsidiary’s Series A Preferred Shares	-			-			4,606			670			-			4,606			670
Deemed dividend to subsidiary’s Series A preferred shareholders	-			-			-			-			-			489,284			71,163
Net income attributable to YY Inc.	740,406			650,690			684,017			99,486			2,493,235			1,641,958			238,812

YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
	Three Months Ended								Twelve Months Ended
	December 31,		September30,		December 31,		December31,		December31,		December31,		December31,
	2017		2018		2018		2018		2017		2018		2018
	RMB		RMB		RMB		US$		RMB		RMB		US$
Net income per ADS
—Basic	11.63		10.12		10.64		1.55		42.03		25.64		3.73
—Diluted	11.53		10.01		10.54		1.53		41.33		25.38		3.69
Weighted average number of ADS used in calculating net income per ADS
—Basic	63,686,056		64,301,796		64,307,569		64,307,569		59,323,007		64,042,390		64,042,390
—Diluted	64,224,006		64,829,757		64,609,000		64,609,000		60,831,887		64,704,470		64,704,470

(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								Twelve Months Ended
	December 31,2017		September 30,2018		December 31,2018		December 31,2018		December 31,2017		December 31,2018		December 31,2018
	RMB		RMB		RMB		US$		RMB		RMB		US$
Cost of revenues	36,549		16,022		14,650		2,131		42,759		74,339		10,812
Research and development expenses	106,501		52,752		50,042		7,278		122,348		225,173		32,750
Sales and marketing expenses	3,679		290		1,158		168		4,417		5,723		832
General and administrative expenses	61,731		92,340		88,909		12,931		88,137		342,790		49,857

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except share, ADS and per ADS data)
	Three Months Ended												Twelve Months Ended
	December			September			December			December			December				December			December
	31,			30,			31,			31,			31,				31,			31,
	2017			2018			2018			2018			2017				2018			2018
	RMB			RMB			RMB			US$			RMB				RMB			US$
Operating income	821,538			610,905			718,604			104,516			2,699,231				2,639,690			383,926
Share-based compensation expenses	208,460			161,404			154,759			22,508			257,661				648,025			94,251
Impairment of goodwill and investments	4,113			1,900			15,099			2,196			45,732				35,348			5,141
Gain on deconsolidation and disposal of a subsidiary	-			-			-			-			(37,989	)			-			-
Non-GAAP operating income	1,034,111			774,209			888,462			129,220			2,964,635				3,323,063			483,318
Net income	758,008			680,817			742,450			107,985			2,508,391				2,115,697			307,714
Share-based compensation expenses	208,460			161,404			154,759			22,508			257,661				648,025			94,251
Impairment of goodwill and investments	4,113			1,900			15,099			2,196			45,732				35,348			5,141
Gain on deconsolidation and disposal of a subsidiary	-			-			-			-			(37,989	)			-			-
Gain on deemed disposal and disposal of investments	-			-			(2,179	)		(317	)		(45,861	)			(16,178	)		(2,353	)
(Gain) loss on fair value change of investments and equity investees’ investments	(20,555	)		3,428			(1,089	)		(158	)		(20,555	)			(1,711,509	)		(248,929	)
Fair value loss on derivative liabilities	-			-			-			-			-				2,285,223			332,372
Income tax effects on non-GAAP adjustments	-			1,014			21,479			3,124			9,263				97,560			14,190
Non-GAAP net income	950,026			848,563			930,519			135,338			2,716,642				3,454,166			502,386
Net income attributable to YY Inc.	740,406			650,690			684,017			99,486			2,493,235				1,641,958			238,812
Share-based compensation expenses	208,460			161,404			154,759			22,508			257,661				648,025			94,251
Impairment of goodwill and investments	4,113			1,900			15,099			2,196			45,732				35,348			5,141
Gain on deconsolidation and disposal of a subsidiary	-			-			-			-			(37,989	)			-			-
Gain on deemed disposal and disposal of investments	-			-			(2,179	)		(317	)		(45,861	)			(16,178	)		(2,353	)
(Gain) loss on fair value change of investments and equity investees’ investments	(20,555	)		3,428			(1,089	)		(158	)		(20,555	)			(1,711,509	)		(248,929	)
Fair value loss on derivative liabilities	-			-			-			-			-				2,285,223			332,372
Deemed dividend to subsidiary's Series A preferred shareholders	-			-			-			-			-				489,284			71,163
Income tax effects on non-GAAP adjustments	-			1,014			21,479			3,124			9,263				97,560			14,190
Non-GAAP adjustments for net loss attributable to the non-controlling interest shareholders	(367	)		(31,449	)		(35,843	)		(5,213	)		(2,045	)			(273,356	)		(39,758	)
Non-GAAP net income attributable to YY Inc.	932,057			786,987			836,243			121,626			2,699,441				3,196,355			464,889
Non-GAAP net income per ADS
—Basic	14.64			12.24			13			1.89			45.5				49.91			7.26
—Diluted	14.51			12.07			12.86			1.87			44.72				49.05			7.13
Weighted average number of ADS used in calculating Non-GAAP net income per ADS
—Basic	63,686,056			64,301,796			64,307,569			64,307,569			59,323,007				64,042,390			64,042,390
—Diluted	64,224,006			64,829,757			64,609,000			64,609,000			60,831,887				64,704,470			64,704,470

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
	Three Months Ended
	December 31, 2018
	YY Live			Huya			Total			Total
	RMB			RMB			RMB			US$
Net revenues
Live streaming	2,949,636			1,441,782			4,391,418			638,705
Others	186,359			63,147			249,506			36,289
Total net revenues	3,135,995			1,504,929			4,640,924			674,994
Cost of revenues(1)	(1,746,771	)		(1,266,292	)		(3,013,063	)		(438,232	)
Gross profit	1,389,224			238,637			1,627,861			236,762
Operating expenses(1)
Research and development expenses	(253,408	)		(79,105	)		(332,513	)		(48,362	)
Sales and marketing expenses	(263,806	)		(59,883	)		(323,689	)		(47,079	)
General and administrative expenses	(182,726	)		(92,253	)		(274,979	)		(39,994	)
Total operating expenses	(699,940	)		(231,241	)		(931,181	)		(135,435	)
Other income	10,800			11,124			21,924			3,189
Operating income	700,084			18,520			718,604			104,516
Interest expenses	(139	)		-			(139	)		(20	)
Interest income and investment income	70,698			52,703			123,401			17,948
Gain on disposal of an equity investment	2,179			-			2,179			317
Foreign currency exchange losses, net	(1,291	)		(47	)		(1,338	)		(195	)
Gain on fair value change of investments	26,138			-			26,138			3,802
Income before income tax expenses	797,669			71,176			868,845			126,368
Income tax (expenses) benefits	(138,961	)		31,847			(107,114	)		(15,579	)
Income before share of loss in equity method investments, net of income taxes	658,708			103,023			761,731			110,789
Share of loss in equity method investments, net of income taxes	(15,837	)		(3,444	)		(19,281	)		(2,804	)
Net income	642,871			99,579			742,450			107,985
(1) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
	Three Months Ended
	December 31, 2018
	YY Live			Huya			Total			Total
	RMB			RMB			RMB			US$
Cost of revenues	10,988			3,662			14,650			2,131
Research and development expenses	38,643			11,399			50,042			7,278
Sales and marketing expenses	551			607			1,158			168
General and administrative expenses	40,582			48,327			88,909			12,931

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
		December 31, 2018
		YY Live			Huya			Total			Total
		RMB			RMB			RMB			US$
Operating income		700,084			18,520			718,604			104,516
Share-based compensation expense		90,764			63,995			154,759			22,508
Impairment of goodwill and investments		15,099			-			15,099			2,196
Non-GAAP operating income		805,947			82,515			888,462			129,220
Net income		642,871			99,579			742,450			107,985
Share-based compensation expenses		90,764			63,995			154,759			22,508
Impairment of goodwill and investments		15,099			-			15,099			2,196
(Gain) loss on fair value change of investments and equity investees' investments		(4,422	)		3,333			(1,089	)		(158	)
Gain on deemed disposal and disposal of investments		(2,179	)		-			(2,179	)		(317	)
Income tax effects on non-GAAP adjustments		21,479			-			21,479			3,124
Non-GAAP net income		763,612			166,907			930,519			135,338

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) 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 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 expense	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
	December 31, 2017
	YY Live			Huya			Total			Total
	RMB			RMB			RMB			US$
Net revenues
Live streaming	2,675,812			692,708			3,368,520			517,732
Others	209,707			48,311			258,018			39,657
Total net revenues	2,885,519			741,019			3,626,538			557,389
Cost of revenues(1)	(1,563,735	)		(632,914	)		(2,196,649	)		(337,619	)
Gross profit	1,321,784			108,105			1,429,889			219,770
Operating expenses(1)
Research and development expenses	(239,103	)		(43,724	)		(282,827	)		(43,470	)
Sales and marketing expenses	(119,181	)		(29,584	)		(148,765	)		(22,865	)
General and administrative expenses	(182,164	)		(36,602	)		(218,766	)		(33,624	)
Goodwill impairment	(2,527	)		-			(2,527	)		(388	)
Total operating expenses	(542,975	)		(109,910	)		(652,885	)		(100,347	)
Other income	44,534			-			44,534			6,845
Operating income (loss)	823,343			(1,805	)		821,538			126,268
Interest expenses	(3,744	)		-			(3,744	)		(575	)
Interest income and investment income	67,597			6,934			74,531			11,455
Foreign currency exchange losses, net	(351	)		-			(351	)		(54	)
Income before income tax expenses	886,845			5,129			891,974			137,094
Income tax expenses	(151,523	)		-			(151,523	)		(23,289	)
Income before share of income (loss) in equity method investments, net of income taxes	735,322			5,129			740,451			113,805
Share of income (loss) in equity method investments, net of income taxes	17,708			(151	)		17,557			2,698
Net Income(2)	753,030			4,978			758,008			116,503

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

	Three Months Ended
	December 31, 2017
	YY Live	Huya	Total	Total
	RMB	RMB	RMB	US$
Cost of revenues	36,320	229	36,549	5,617
Research and development expenses	104,569	1,932	106,501	16,369
Sales and marketing expenses	3,145	534	3,679	565
General and administrative expenses	40,958	20,773	61,731	9,488

(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
	December 31, 2017
	YY Live			Huya			Total			Total
	RMB			RMB			RMB			US$
Operating income (loss)	823,343			(1,805	)		821,538			126,268
Share-based compensation expenses	184,992			23,468			208,460			32,039
Impairment of goodwill and investments	4,113			-			4,113			632
Non-GAAP operating income	1,012,448			21,663			1,034,111			158,939
Net income	753,030			4,978			758,008			116,503
Share-based compensation expenses	184,992			23,468			208,460			32,039
Impairment of goodwill and investments	4,113			-			4,113			632
Gain on fair value change of investments and equity investee's investments	(20,555	)		-			(20,555	)		(3,159	)
Non-GAAP net income	921,580			28,446			950,026			146,015

Source: YY Inc.

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YY, Inc. (YY) Tops Q4 EPS by 1cMarch 4, 2019 5:32 PM