GUANGZHOU, China, Aug. 10, 2017 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ:YY) ("YY" or the "Company"), a leading live streaming social media platform in China, today announced its unaudited financial results for the second quarter of 2017.

Second Quarter 2017 Highlights
  • Net revenues increased by 31.7% to RMB2,609.0 million (US$384.8 million) from RMB1,980.8 million in the corresponding period of 2016.
  • Net income attributable to YY increased by 67.1% to RMB573.7 million (US$84.6 million) from RMB343.3 million in the corresponding period of 2016.
  • Non-GAAP net income attributable to YY 1 increased by 55.2% to RMB597.2 million (US$88.1 million) from RMB384.8 million in the corresponding period of 2016.

"I am excited to return as the acting CEO of the Company," stated Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY. "We are delighted to report another quarter of robust financial and operating performances. During the second quarter of 2017, our live streaming business, including YY Live and Huya broadcasting, maintained rapid growth. Our mobile live streaming monthly active users (MAU) increased by 27.1% year over year to over 66.1 million, and our total live streaming paying users increased by 46.1% year over year to over 5.7 million. In particular, on YY Live, our new strategic initiatives have generated good results. In April 2017, we launched Happy Werewolf Kill, a small-room online social game. Since inception, it has gained exceptional popularity and quickly become a leading social game on mobile devices. In the second quarter, we also introduced the short-form video services in YY Live with more diverse content and social features, which further enhanced user engagement and stickiness on our platform. In addition to YY Live, Huya continued to deliver impressive results in both user growth and revenue generation. All the aforementioned achievements have fortified our leading position in China's live streaming social media industry. Going forward, we will continue to expand product offerings on our live streaming social media platform, seek new and innovative ways to attract and engage users, and maintain our commitment to generate meaningful shareholder value."

Mr. Bing Jin, Chief Financial Officer of YY, further commented, "We achieved substantial financial growth once again in the second quarter of 2017. Our total net revenues increased by 31.7% year over year to RMB2,609.0 million, exceeding the high end of our previous guidance range. This was primarily driven by the 42.9% year-over-year increase in our live streaming revenues, which reached RMB2,373.4 million in the quarter. Both YY Live and Huya broadcasting contributed to our rapid revenue growth. We have experienced an acceleration in YY Live's revenue growth after we embedded into YY Live a new functionality called Happy Contest, which enables live streaming hosts to connect and compete with each other across different showrooms. Non-GAAP net income attributable to YY grew by 55.2% year over year to RMB597.2 million in the second quarter of 2017, of which Huya's Non-GAAP operating losses further shrank year over year from RMB146.6 million to RMB11.1 million. Our Non-GAAP net margin 2 expanded from 19.4% in the second quarter of 2016 to 22.9% in the second quarter of 2017, thanks to our increasing operating leverage and product cost and expense control. We remain committed to expanding our market share and sustaining our rapid growth. At the same time, we seek to further grow our revenue and closely monitor our spending to ensure effective return on investments."

Second Quarter 2017 Financial Results

NET REVENUES Net revenues increased by 31.7% to RMB2,609.0 million (US$384.8 million) in the second quarter of 2017 from RMB1,980.8 million in the corresponding period of 2016, primarily driven by the increase in live streaming revenues. Live streaming revenues increased by 42.9% to RMB2,373.4 million (US$350.1 million) in the second quarter of 2017 from RMB1,661.1 million in the corresponding period of 2016. Live streaming revenues from the YY Live segment were RMB1,931.6 million (US$284.9 million) and from the Huya segment were RMB441.8 million (US$65.2 million) in the second quarter of 2017. 

Revenues from online games were RMB154.0 million (US$22.7 million) in the second quarter of 2017, as compared to RMB188.3 million in the corresponding period of 2016.

Revenues from membership were RMB52.2 million (US$7.7 million) in the second quarter of 2017, as compared to RMB72.1 million in the corresponding period of 2016.

Other revenues, mainly representing revenues from the Company's online advertising revenues, were RMB29.4 million (US$4.3 million) in the second quarter of 2017, compared with RMB59.4 million in the corresponding period of 2016. The declines in online gaming, membership, and other revenues mainly reflected the Company's continued strategic shift towards its mobile live streaming business.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 29.4% to RMB1,563.4 million (US$230.6 million) in the second quarter of 2017 from RMB1,208.3 million in the corresponding period of 2016, primarily attributable to an increase in revenue-sharing fees and content costs to RMB1,259.0 million (US$185.7 million) in the second quarter of 2017 from RMB893.3 million in the corresponding period of 2016. The increase in revenue-sharing fees and content costs paid to performers, guilds and content providers was in line with the increase in revenues and was primarily due to the higher level of user engagement and spending driven by promotional activities. In addition, bandwidth costs slightly increased to RMB165.3 million (US$24.4 million) in the second quarter of 2017 from RMB150.7 million in the corresponding period of 2016, primarily reflecting the continued user base expansion and video quality improvements, but largely offset by the Company's improved efficiency and pricing terms.

Gross profit increased by 35.4% to RMB1,045.5 million (US$154.2 million) in the second quarter of 2017 from RMB772.4 million in the corresponding period of 2016. Gross margin improved to 40.1% in the second quarter of 2017 from 39.0% in the corresponding period of 2016.

OPERATING INCOME Operating expenses for the second quarter of 2017 were RMB476.3 million (US$70.3 million), as compared to RMB351.1 million in the corresponding period of 2016.

Operating income in the second quarter of 2017 increased by 42.6% to RMB599.4 million (US$88.4 million) from RMB420.4 million in the corresponding period of 2016. Operating margin in the second quarter of 2017 expanded to 23.0%, as compare to 21.2% in the corresponding period of 2016.

Non-GAAP operating income 3 increased by 34.8% to RMB622.8 million (US$91.9 million) in the second quarter of 2017 from RMB461.9 million in the corresponding period of 2016. Non-GAAP operating margin 4 increased to 23.9% in the second quarter of 2017 from 23.3% in the corresponding period of 2016.

NET INCOME Net income attributable to YY Inc. increased by 67.1% to RMB573.7 million (US$84.6 million) in the second quarter of 2017 from RMB343.3 million in the corresponding period of 2016. Net margin in the second quarter of 2017 increased to 22.0% from 17.3% in the corresponding period of 2016.

Non-GAAP net income attributable to YY Inc. increased by 55.2% to RMB597.2 million (US$88.1 million) from RMB384.8 million in the corresponding period of 2016. Non-GAAP net margin in the second quarter of 2017 increased to 22.9% from 19.4% in the corresponding period of 2016.

NET INCOME PER ADS Diluted net income per ADS 5 increased by 67.2% to RMB9.98 (US$1.47) in the second quarter of 2017 from RMB5.97 in the corresponding period of 2016.

Non-GAAP diluted net income per ADS 6 increased by 56.2% to RMB10.39 (US$1.53) in the second quarter of 2017 from RMB6.65 in the corresponding period of 2016.

BALANCE SHEET AND CASH FLOWS As of June 30, 2017, the Company had cash and cash equivalents of RMB1,349.1 million (US$199.0 million), short-term deposits of RMB1,890.0 million (US$278.8 million) and restricted short-term deposits of RMB1,000.0 million (US$147.5 million). For the second quarter of 2017, net cash from operating activities was RMB885.6 million (US$130.6 million).

SHARES OUTSTANDING As of June 30, 2017, the Company had a total of 1,121.1 million common shares, or the equivalent of 56.1 million ADSs outstanding.

Business OutlookFor the third quarter of 2017, the Company expects its net revenues to be between RMB2.75 billion and RMB2.85 billion, representing a year-over-year growth of approximately 31.6% to 36.4%. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Conference Call InformationThe Company will hold a conference call on August 10, 2017 at 8:00 am Eastern Time or 8:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:
United States: +1-845-675-0438
International Toll Free:  +1-855-500-8701
China Domestic: 400-1200-654
Hong Kong:  +852-3018-6776
Conference ID:  # 60746171

The replay will be accessible through August 18, 2017 by dialing the following numbers:
United States Toll Free: +1-855-452-5696
International:  +61-2-9003-4211
Conference ID:  # 60746171

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

Exchange 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 RMB6.7793 to US$1.00, the noon buying rate in effect on June 30, 2017 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

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

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

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

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

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

3Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses. Please refer to the section titled "Reconciliation of GAAP and Non-GAAP Results" for details.  

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.

5ADS is American Depositary Share. Each ADS represents twenty Class A common shares of the Company. Diluted net income per ADS is net income attributable to common shareholders divided by weighted average number of diluted ADS.

6Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders divided by weighted average number of ADS used in the calculation of diluted net income per ADS. Please refer to the section titled "Reconciliation of GAAP and Non-GAAP Results" for details).

YY INC.
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)
 
    December 31, 201 6   June 30, 201 7   June 30, 201 7
    RMB   RMB   US$
Assets            
Current assets            
Cash and cash equivalents   1,579,743   1,349,141   199,009
Short-term deposits   3,751,519   1,890,000   278,790
Restricted short-term deposits   -   1,000,000   147,508
Short-term investment   -   14,070   2,075
Accounts receivable, net   169,571   218,558   32,239
Inventory   2,266   1,223   180
Amount due from related parties   135,245   90,474   13,346
Prepayments and other current assets   224,732   141,504   20,875
             
Total current assets   5,863,076   4,704,970   694,022
             
Non-current assets            
Deferred tax assets (1)   117,811   111,104   16,389
Investments   918,602   1,105,771   163,110
Property and equipment, net   838,750   921,561   135,937
Land use rights, net   1,872,394   1,848,440   272,659
Intangible assets, net   58,926   35,050   5,170
Goodwill   14,300   14,277   2,106
Other non-current assets   101,933   73,192   10,796
             
Total non-current assets   3,922,716   4,109,395   606,167
             
Total assets   9,785,792   8,814,365   1,300,189
             
Liabilities, mezzanine equity and shareholders' equity            
Current liabilities            
Convertible bonds   2,768,469   -   -
Accounts payable   137,107   108,700   16,034
Deferred revenue   430,683   506,806   74,758
Advances from customers   56,152   65,149   9,610
Income taxes payable   140,754   121,871   17,977
Accrued liabilities and other current liabilities   1,066,038   1,051,400   155,091
Amounts due to related parties   91,245   41,110   6,063
Short-term loan   -   609,756   89,944
             
Total current liabilities   4,690,448   2,504,792   369,477
             
Non-current liabilities            
Convertible bonds   -   6,775   999
Deferred revenue   25,459   28,330   4,179
Deferred tax liabilities   8,058   7,620   1,124
             
Total non-current liabilities   33,517   42,725   6,302
             
Total liabilities   4,723,965   2,547,517   375,779
             

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
    December 31, 201 6   June 30, 201 7   June 30, 201 7
    RMB   RMB   US$
             
Mezzanine equity   9,272   12,687   1,871
             
Shareholders' equity            
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 750,115,028 and  773,115,328 shares issued and outstanding as of December 31, 2016 and June 30, 2017, respectively)   44   46   7
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 359,557,976 and 347,982,976 shares issued and outstanding as of December 31, 2016 and June 30, 2017, respectively)   26   25   4
Additional paid-in capital   2,165,766   2,210,331   326,041
Statutory reserves   58,857   58,857   8,682
Retained earnings   2,728,736   3,845,598   567,256
Accumulated other comprehensive income   93,066   95,391   14,071
             
Total YY Inc.'s shareholders' equity   5,046,495   6,210,248   916,061
             
Non-controlling interests   6,060   43,913   6,478
             
Total shareholders' equity   5,052,555   6,254,161   922,539
             
Total liabilities, mezzanine equity and shareholders' equity   9,785,792   8,814,365   1,300,189
             
             

(1)  Effectively January 2017, ASU 2015-17 issued by FASB requires entities to reclassify deferred tax assets and liabilities as non-current in the balance sheet. Accordingly, the Company retrospectively reclassified RMB107.3 million of deferred tax assets from current assets into non-current assets as of December 31, 2016.

YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended   Six Months Ended
    June 30 , 201 6 March 31, 201 7 June 30 , 201 7 June 30 , 201 7   June 30, 2016 June 30, 2017 June 30, 2017
    RMB RMB RMB US$   RMB RMB US$
                   
Net revenues                  
Live streaming   1,661,060     2,057,427     2,373,397     350,095     3,018,664     4,430,824     653,581  
Online games   188,261     139,748     153,959     22,710     359,371     293,707     43,324  
Membership   72,070     45,421     52,204     7,701     141,442     97,625     14,400  
Others   59,386     24,362     29,431     4,341     110,618     53,793     7,935  
                   
Total net revenue   1,980,777     2,266,958     2,608,991     384,847     3,630,095     4,875,949     719,240  
                               
Cost of revenues (1)   (1,208,340 )   (1,376,995 )   (1,563,445 )   (230,620 )   (2,268,871 )   (2,940,440 )   (433,738 )
                                     
Gross profit   772,437     889,963     1,045,546     154,227     1,361,224     1,935,509     285,502  
                               
Operating expenses (1)                  
Research and development expenses   (172,228 )   (165,561 )   (167,359 )   (24,687 )   (351,876 )   (332,920 )   (49,108 )
Sales and marketing expenses   (88,699 )   (88,602 )   (204,434 )   (30,156 )   (166,660 )   (293,036 )   (43,225 )
General and administrative expenses   (90,155 )   (76,652 )   (104,545 )   (15,421 )   (173,562 )   (181,197 )   (26,728 )
                                     
Total operating expenses   (351,082 )   (330,815 )   (476,338 )   (70,264 )   (692,098 )   (807,153 )   (119,061 )
                   
Gain on deconsolidation and disposal of subsidiaries   (23,474 )   37,989     -     -     (23,474 )   37,989     5,604  
Other income   22,507     19,820     30,166     4,450     31,412     49,986     7,373  
                               
Operating income   420,388     616,957     599,374     88,413     677,064     1,216,331     179,418  
                               
Gain on partial disposal of investments   -     -     45,861     6,765     -     45,861     6,765  
Interest expense   (19,576 )   (21,268 )   (3,459 )   (510 )   (39,970 )   (24,727 )   (3,647 )
Interest income   9,902     31,031     27,317     4,029     23,551     58,348     8,607  
Foreign currency exchange gains (losses), net   552     (1,293 )   (281 )   (41 )   789     (1,574 )   (232 )
                               
Income before income tax expenses   411,266     625,427     668,812     98,656     661,434     1,294,239     190,911  
                               
Income tax expenses   (75,179 )   (89,073 )   (100,531 )   (14,829 )   (124,801 )   (189,604 )   (27,968 )
                                       
Income before share of (loss) income in equity method investments, net of income taxes   336,087     536,354     568,281     83,827     536,633     1,104,635     162,943  
                                     
Share of (loss) income in equity method investments, net of income taxes   (28 )   3,935     4,726     697     5,746     8,661     1,278  
                                     
Net Income   336,059     540,289     573,007     84,524     542,379     1,113,296     164,221  
                   
Less: Net loss attributable to the non-controlling interest shareholders and the mezzanine classified non-controlling interest shareholders   (7,227 )   (2,865 )   (701 )   (103 )   (9,246 )   (3,566 )   (526 )
                   
Net income attributable to YY Inc.   343,286     543,154     573,708     84,627     551,625     1,116,862     164,747  

 
YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended   Six Months Ended
    June 30 , 201 6   March 31, 201 7 June 30 , 201 7 June 30 , 201 7   June 30, 2016 June 30, 2017 June 30, 2017
    RMB   RMB RMB US$   RMB RMB US$
                     
Net income attributable to YY Inc.   343,286     543,154   573,708   84,627       551,625     1,116,862   164,747
                     
Other comprehensive income :                    
Unrealized gain (loss) of available-for-sales securities, net of nil tax   177,152     42,236   (39,818)   (5,873 )     177,152     2,418   357
Foreign currency translation adjustments, net of nil tax   (1,459 )   619   (712 )   (105 )     (1,109)     (93)   (14)
                     
Comprehensive income attributable to YY Inc.   518,979     586,009   533,178   78,649       727,668     1,119,187   165,090
                     
  Net income per ADS                    
—Basic   6.10     9.58   10.09     1.49       9.82       19.68     2.90  
—Diluted   5.97     9.25   9.98     1.47       9.65       19.21     2.83  
Weighted average number of ADS used in calculating net income per ADS                    
—Basic   56,244,094     56,675,919   56,832,278     56,832,278       56,153,766       56,757,452     56,757,452  
—Diluted   60,761,097     60,975,038   57,488,989     57,488,989       57,141,627       59,234,872     59,234,872  
                                             

(1)     Share-based compensation was allocated in cost of revenues and operating expenses as follows:
    Three Months Ended   Six Months Ended
    June 30 , 201 6 March 31, 201 7 June 30 , 201 7 June 30 , 201 7   June 30, 2016 June 30, 2017 June 30, 2017
    RMB RMB RMB US$   RMB RMB US$
                   
Cost of revenues   141 3,623 3,021 446   8,753 6,644 980
Research and development expenses   26,473 11,404 10,492 1,548   53,773 21,896 3,230
Sales and marketing expenses   941 509 303 45   1,780 812 120
General and administrative expenses   13,934 7,057 9,649 1,423   31,113 16,706 2,464

 
YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended   Six Months Ended
    June 30 , 201 6   March 31, 201 7   June 30 , 201 7   June 30 , 201 7     June 30, 2016   June 30, 2017   June 30, 2017
    RMB   RMB   RMB   US$     RMB   RMB   US$
                               
Operating income   420,388   616,957   599,374   88,413     677,064   1,216,331   179,418
Share-based compensation expenses   41,489   22,593   23,465   3,462     95,419   46,058   6,794
                               
Non-GAAP operating income   461,877   639,550   622,839   91,875     772,483   1,262,389   186,212
                               
Net income attributable to YY Inc.   343,286   543,154   573,708   84,627     551,625   1,116,862   164,747
Share-based compensation expenses   41,489   22,593   23,465   3,462     95,419   46,058   6,794
                               
Non-GAAP net income attributable to YY Inc.   384,775   565,747   597,173   88,089     647,044   1,162,920   171,541
                               
  Non-GAAP net income per ADS                              
—Basic   6.84   9.98   10.51   1.55     11.52   20.49   3.02
—Diluted   6.65   9.62   10.39   1.53     11.32   19.98   2.95
Weighted average number of ADS used in calculating Non-GAAP net income per ADS                              
—Basic   56,244,094   56,675,919   56,832,278   56,832,278     56,153,766   56,757,452   56,757,452
—Diluted   60,761,097   60,975,038   57,488,989   57,488,989     57,141,627   59,234,872   59,234,872
                               

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    June 30 , 201 7
           
    YY Live (2) Huya (2) Total Total
    RMB RMB RMB US$
           
Net revenues          
Live streaming   1,931,569     441,828     2,373,397     350,095  
Online games   147,010     6,949     153,959     22,710  
Membership   50,014     2,190     52,204     7,701  
Others   19,034     10,397     29,431     4,341  
           
Total net revenue   2,147,627     461,364     2,608,991     384,847  
           
Cost of revenues (1)   (1,159,554 )   (403,891 )   (1,563,445 )   (230,620 )
           
Gross profit   988,073     57,473     1,045,546     154,227  
           
Operating expenses (1)          
Research and development expenses   (132,223 )   (35,136 )   (167,359 )   (24,687 )
Sales and marketing expenses   (183,119 )   (21,315 )   (204,434 )   (30,156 )
General and administrative expenses   (86,678 )   (17,867 )   (104,545 )   (15,421 )
           
Total operating expenses   (402,020 )   (74,318 )   (476,338 )   (70,264 )
Other income   30,156     10     30,166     4,450  
           
Operating income (loss)   616,209     (16,835 )   599,374     88,413  
           

(1) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
    Three Months Ended
    June 30 , 201 7
           
    YY Live Huya Total Total
    RMB RMB   RMB   US$
           
Cost of revenues   2,372 649 3,021 446
Research and development expenses   8,229 2,263 10,492 1,548
Sales and marketing expenses   282 21 303 45
General and administrative expenses   6,872 2,777 9,649 1,423

(2) The Company revamped its internal organization and one sub-business stream previously presented and reviewed under YY Live was changed to be presented and reviewed under Huya from the first quarter of 2017. Segment information for the 3 months ended 30 June 2016 has been restated accordingly.

(3) As the Company has disposed of a great majority of its online education business before the end of 2016 and disposed of the remaining portion of its online education business in the beginning of 2017, 100 Education ceased to be an operating segment starting from the first quarter of 2017.

 
YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    June 30 , 201 7
               
    YY Live Huya   Total   Total
    RMB RMB   RMB   US$
               
Operating income (loss)   616,209   (16,835 )   599,374   88,413
Share-based compensation expenses   17,755   5,710     23,465   3,462
               
Non-GAAP operating income (loss)   633,964   (11,125 )   622,839   91,875
               

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    March 31 , 201 7
           
    YY Live Huya Total Total
    RMB RMB RMB US$
           
Net revenues          
Live streaming   1,674,786     382,641     2,057,427     298,906  
Online games   133,731     6,017     139,748     20,303  
Membership   43,776     1,645     45,421     6,599  
Others   15,766     8,596     24,362     3,539  
           
Total net revenue   1,868,059     398,899     2,266,958     329,347  
           
Cost of revenues (1)   (994,233 )   (382,762 )   (1,376,995 )   (200,052 )
           
Gross profit   873,826     16,137     889,963     129,295  
           
Operating expenses (1)          
Research and development expenses   (123,169 )   (42,392 )   (165,561 )   (24,053 )
Sales and marketing expenses   (73,371 )   (15,231 )   (88,602 )   (12,872 )
General and administrative expenses   (66,462 )   (10,190 )   (76,652 )   (11,136 )
           
Total operating expenses   (263,002 )   (67,813 )   (330,815 )   (48,061 )
Gain on deconsolidation and disposal of subsidiaries   37,989     -     37,989     5,519  
Other income   10,299     9,521     19,820     2,879  
           
Operating income (loss)   659,112     (42,155 )   616,957     89,632  
           

(4) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
    Three Months Ended
    March 31 , 201 7
               
    YY Live Huya   Total   Total
    RMB RMB   RMB   US$
               
Cost of revenues   2,380 1,243   3,623   526
Research and development expenses   8,349 3,055   11,404   1,657
Sales and marketing expenses   305 204   509   74
General and administrative expenses   4,568 2,489   7,057   1,025
               

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
    March 31 , 201 7
               
    YY Live Huya   Total   Total
    RMB RMB   RMB   US$
               
Operating income (loss)   659,112   (42,155 )   616,957   89,632
Share-based compensation expenses   15,602   6,991     22,593   3,282
               
Non-GAAP operating income (loss)   674,714   (35,164 )   639,550   92,914
               

YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended  
    June 30 , 201 6  
       
    YY Live Huya   100 Education     Total             Total  
    RMB RMB   RMB     RMB             US$  
                                 
Net revenues                                
Live streaming   1,517,983     143,077     -     1,661,060     249,938  
Online games   188,261     -     -     188,261     28,327  
Membership   72,070     -     -     72,070     10,844  
Others   28,749     -     30,637     59,386     8,935  
             
Total net revenue   1,807,063     143,077     30,637     1,980,777     298,044  
             
Cost of revenues (1)   (955,655 )   (226,242 )   (26,443 )   (1,208,340 )   (181,817 )
             
Gross profit (loss)   851,408     (83,165 )   4,194     772,437     116,227  
             
Operating expenses (1)            
Research and development expenses   (114,459 )   (49,522 )   (8,247 )   (172,228 )   (25,915 )
Sales and marketing expenses   (60,369 )   (14,916 )   (13,414 )   (88,699 )   (13,346 )
General and administrative expenses   (69,843 )   (17,441 )   (2,871 )   (90,155 )   (13,566 )
             
Total operating expenses   (244,671 )   (81,879 )   (24,532 )   (351,082 )   (52,827 )
Gain on deconsolidation and disposal of subsidiaries   (23,474 )   -     -     (23,474 )   (3,532 )
Other income   22,507     -     -     22,507     3,387  
             
Operating income (loss)   605,770     (165,044 )   (20,338 )   420,388     63,255  
             

(1) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
    Three Months Ended
    June 30 , 201 6
                 
    YY Live Huya 100 Education    Total   Total
    RMB RMB   RMB       RMB     US$
                   
Cost of revenues   (1,994 ) 2,003 132     141   21
Research and development expenses   15,910   8,567 1,996     26,473   3,983
Sales and marketing expenses   714   227 -     941   142
General and administrative expenses   6,385   7,649 (100 )   13,934   2,097
                     

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
 (All amounts in thousands, except share, ADS and per ADS data)
 
    Three Months Ended
    June 30 , 201 6
                 
    YY Live Huya 100 Education   Total   Total
    RMB RMB RMB   RMB   US$
                   
Operating income (loss)   605,770   (165,044)   (20,338)   420,388   63,255
Share-based compensation expenses   21,015   18,446   2,028   41,489   6,243
                 
Non-GAAP operating income (loss)   626,785   (146,598)   (18,310)   461,877   69,498
                 

Investor Relations ContactYY Inc.Yuffie FuTel: +86 (20) 8212-0000Email: IR@YY.comICR, Inc. Xueli SongTel: +1 (646) 915-1611Email: IR@YY.com