GUANGZHOU, China, March 06, 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 fourth quarter and full year of 2017.

Fourth Quarter 2017 Highlights
  • Net revenues increased by 46.0% to RMB3,626.5 million (US$557.4 million) from RMB2,484.2 million in the corresponding period of 2016.
  • Net income attributable to YY increased by 29.4% to RMB740.4 million (US$113.8 million) from RMB572.3 million in the corresponding period of 2016.
  • Non-GAAP net income attributable to YY 1 increased by 58.5% to RMB 948.9 million (US$145.8 million) from RMB598.6 million in the corresponding period of 2016.

Full Year 2017 Highlights
  • Net revenues increased by 41.3% to RMB11,594.8 million (US$1,782.1 million) from RMB8,204.1 million in 2016.
  • Net income attributable to YY increased by 63.6% to RMB2,493.2 million (US$383.2 million) from RMB1,523.9 million in 2016.
  • Non-GAAP net income attributable to YY increased by 63.6% to RMB2,750.9 million (US$422.8 million) from RMB1,681.2 million in 2016.

"We are delighted to conclude 2017 with robust growth momentum in both operating and financial performance," stated Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY, "In the fourth quarter of 2017, driven by both YY Live and Huya, our mobile live streaming monthly active users (MAU) increased by 36.6% year over year to 76.5 million, and our total live streaming paying users increased by 25.0% year over year to 6.5 million. This further demonstrates the effectiveness and efficiency of our operational capabilities in our live streaming business. For YY Live in particular, we continued our efforts in content enrichment and product innovation by incorporating additional live streaming content and continuously launching new features on our platform, such as a series of casual games. Looking ahead, we will continue to further expand our product offerings and solidify our market leading position to capture the opportunities in China's rapid growing live streaming industry."

Mr. Bing Jin, Chief Financial Officer of YY, further commented, "We are pleased to once again deliver strong financial results in the fourth quarter of 2017. Our total net revenues increased by 46.0% year over year to RMB3,626.5 million, exceeding both our previous guidance and street consensus. Our revenue growth was primarily driven by the robust growth of our live streaming revenues, which increased by 51.9% year over year to RMB3,368.5 million with RMB2,675.8 million coming from YY Live. Huya recently submitted a draft registration statement on a confidential basis to the U.S. Securities and Exchange Committee for a possible initial public offering in the U.S. to attain its own group of investors to fund its long-term growth. We remain confident that we have the right strategy in place to drive our financial performance and sustain our rapid growth for the coming quarters and years."

Fourth Quarter 2017 Financial Results

NET REVENUES Net revenues increased by 46.0% to RMB3,626.5 million (US$557.4 million) in the fourth quarter of 2017 from RMB2,484.2 million in the corresponding period of 2016, primarily driven by the increase in live streaming revenues. Live streaming revenues increased by 51.9% to RMB3,368.5 million (US$517.7 million) in the fourth quarter of 2017 from RMB2,218.2 million in the corresponding period of 2016. Live streaming revenues from the YY Live segment were RMB2,675.8 million (US$411.3 million) and from the Huya segment were RMB692.7 million (US$106.4 million) in the fourth quarter of 2017. 

Revenues from online games were RMB128.1 million (US$19.7 million) in the fourth quarter of 2017 as compared to RMB125.4 million in the corresponding period of 2016.

Revenues from memberships were RMB50.5 million (US$7.8 million) in the fourth quarter of 2017 as compared to RMB74.7 million in the corresponding period of 2016.

Other revenues, mainly representing revenues from the Company's online advertising revenues, were RMB79.5 million (US$12.2 million) in the fourth quarter of 2017 as compared to RMB65.9 million in the corresponding period of 2016.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 40.8% to RMB2,196.6 million (US$337.6 million) in the fourth quarter of 2017 from RMB1,559.6 million in the corresponding period of 2016, primarily attributable to an increase in revenue-sharing fees and content costs to RMB 1,828.0 million (US$281.0 million) in the fourth quarter of 2017 from RMB1,222.2 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. In addition, bandwidth costs increased to RMB 181.2 million (US$27.8 million) in the fourth quarter of 2017 from RMB168.9 million in the corresponding period of 2016, primarily reflecting continued user base expansion and live streaming quality improvements but largely offset by the Company's improved efficiency and pricing terms.

Gross profit increased by 54.7% to RMB1,429.9 million (US$219.8 million) in the fourth quarter of 2017 from RMB924.6 million in the corresponding period of 2016. Gross margin increased to 39.4% in the fourth quarter of 2017 from 37.2% in the corresponding period of 2016.

OPERATING INCOME Operating expenses in the fourth quarter of 2017 increased by 31.8% to RMB652.9 million (US$100.3 million) from RMB495.5 million in the corresponding period of 2016.

Operating income in the fourth quarter of 2017 increased by 32.2% to RMB821.5 million (US$126.3 million) from RMB621.5 million in the corresponding period of 2016. Operating margin in the fourth quarter of 2017 was 22.7% as compared to 25.0% in the corresponding period of 2016, primarily due to the increase in newly issued share-based compensation in the fourth quarter of 2017.

Non-GAAP operating income 2 increased by 59.0% to RMB1,030.0 million (US$158.3 million) in the fourth quarter of 2017 from RMB647.9 million in the corresponding period of 2016. Non-GAAP operating margin 3 increased to 28.4% in the fourth quarter of 2017 from 26.1% in the corresponding period of 2016.

NET INCOME Net income attributable to YY Inc. increased by 29.4% to RMB740.4 million (US$113.8 million) in the fourth quarter of 2017 from RMB572.3 million in the corresponding period of 2016. Net margin in the fourth quarter of 2017 was 20.4% as compared to 23.0% in the corresponding period of 2016, primarily due to the increase in newly issued share-based compensation in the fourth quarter of 2017.

Non-GAAP net income attributable to YY Inc. increased by 58.5% to RMB948.9 million (US$145.8 million) from RMB598.6 million in the corresponding period of 2016. Non-GAAP net margin in the fourth quarter of 2017 increased to 26.2% from 24.1% in the corresponding period of 2016.

NET INCOME PER ADS Diluted net income per ADS 4 increased by 18.4% to RMB11.53 (US$1.77) in the fourth quarter of 2017 from RMB9.74 in the corresponding period of 2016.

Non-GAAP diluted net income per ADS 5 increased by 45.2% to RMB14.77 (US$2.27) in the fourth quarter of 2017 from RMB10.17 in the corresponding period of 2016.

BALANCE SHEET AND CASH FLOWS As of December 31, 2017, the Company had cash and cash equivalents of RMB2,617.4 million (US$402.3 million), short-term deposits of RMB6,000.1 million (US$922.2 million), and restricted short-term deposits of RMB1,000.0 million (US$153.7 million). For the fourth quarter of 2017, net cash from operating activities was RMB1,392.0 million (US$213.9 million).

SHARES OUTSTANDING As of December 31, 2017, the Company had a total of 1,263.2 million common shares, or the equivalent of 63.2 million ADSs, outstanding.

Full Year 2017 Financial Results

For the full year of 2017, net revenues increased by 41.3% to RMB11,594.8 million (US$1,782.1 million) from RMB8,204.1 million in 2016, primarily driven by a 51.9% year-over-year increase in live streaming revenues.

Net income attributable to YY Inc. for the full year of 2017 increased by 63.6% to RMB2,493.2million (US$383.2 million) from RMB1,523.9 million in 2016. Net margin for the full year of 2017 increased to 21.5% from 18.6% in 2016.

Non-GAAP net income attributable to YY Inc. for the full year of 2017 increased by 63.6% to RMB2,750.9 (US$422.8 million) from RMB1,681.2 million in 2016. Non-GAAP net margin for the full year of 2017 increased to 23.7% from 20.5% in 2016.

Diluted net income per ADS for the full year of 2017 increased by 56.6% to RMB41.33 (US$6.35) from RMB26.40 in 2016. Non-GAAP diluted net income per ADS for the full year of 2017 increased by 57.2% to RMB45.56 (US$7.00) from RMB28.98 in 2016.

For the full year of 2017, net cash from operating activities was RMB3,718.5 million (US$559.1 million).

Business OutlookFor the first quarter of 2018, the Company expects net revenues to be between RMB3.00 billion and RMB3.15 billion, representing a year-over-year growth of 32.3% to 39.0%. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentHUYA Inc. ("Huya"), a Cayman Islands company, which is controlled by YY and primarily operates game live streaming business, has submitted a draft registration statement on Form F-1 on a confidential basis to the U.S. Securities and Exchange Commission (the "SEC")  for a possible initial public offering (the "Proposed IPO") of American depositary shares ("ADSs") representing ordinary shares of Huya.

The number of ADSs proposed to be offered and sold and the dollar amount proposed to be raised in the Proposed IPO have not yet been determined. The Proposed IPO is expected to commence after the SEC completes its review process, subject to market and other conditions. However, there can be no assurances as to the timing or completion of the Proposed IPO.

This announcement is being made pursuant to and in accordance with Rule 135 under the U.S. Securities Act of 1933, as amended, and does not constitute an offer to sell or a solicitation of an offer to purchase any securities, in the United States or elsewhere, and it is not intended to, and does not, constitute an offer, solicitation or sale of any securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or the selling security holder and that will contain detailed information about the issuer and management, as well as financial statements.

Conference Call InformationThe Company will hold a conference call on Monday, March 5, 2018 at 8:00 pm Eastern Time, or Tuesday, March 6, 2018 at 9:00 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:    # 2199901

The replay will be accessible through March 13, 2018 by dialing the following numbers:
United States Toll Free:    +1-855-452-5696
International:      +61-2-9003-4211 
Conference ID:   # 2199901

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 RMB 6.5063 to US$1.00, the noon buying rate in effect on December 31, 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.

Investor Relations ContactYY Inc.Matthew ZhaoTel: +86 (20) 8212-0000Email: IR@YY.com 

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

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 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.   3 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. 4 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 common shareholders divided by weighted average number of diluted ADS. 5 Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders 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    December  3 1 201 7   December  3 1 201 7
  RMB   RMB   US$
Assets          
Current assets          
Cash and cash equivalents 1,579,743   2,617,432   402,292
Short-term deposits 3,751,519   6,000,104   922,199
Restricted short-term deposits -   1,000,000   153,697
Short-term investment -   124,550   19,143
Accounts receivable, net 169,571   153,944   23,661
Inventory 2,266   315   48
Amount due from related parties 135,245   11,190   1,720
Prepayments and other current assets 224,732   221,939   34,111
           
Total current assets 5,863,076   10,129,474   1,556,871
           
Non-current assets          
Deferred tax assets (1) 117,811   113,017   17,370
Investments 918,602   1,153,019   177,216
Property and equipment, net 838,750   1,016,998   156,310
Land use rights, net 1,872,394   1,832,739   281,687
Intangible assets, net 58,926   37,481   5,761
Goodwill 14,300   11,716   1,801
Amount due from related parties -   20,000   3,074
Other non-current assets 101,933   144,275   22,175
           
Total non-current assets 3,922,716   4,329,245   665,394
           
Total assets 9,785,792   14,458,719   2,222,265
           
Liabilities, mezzanine equity and shareholders' equity          
Current liabilities          
Convertible bonds 2,768,469   -   -
Accounts payable 137,107   76,351   11,735
Deferred revenue 430,683   758,044   116,509
Advances from customers 56,152   80,406   12,358
Income taxes payable 140,754   146,298   22,485
Accrued liabilities and other current liabilities 1,066,038   1,465,963   225,314
Amounts due to related parties 91,245   30,502   4,688
Short-term loan -   588,235   90,410
           
Total current liabilities 4,690,448   3,145,799   483,499
           
Non-current liabilities          
Convertible bonds -   6,536   1,005
Deferred revenue 25,459   57,718   8,871
Deferred tax liabilities 8,058   10,810   1,661
           
Total non-current liabilities 33,517   75,064   11,537
             
Total liabilities 4,723,965   3,220,863   495,036
           

YY INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)(All amounts in thousands, except share, ADS and per ADS data)
  December 31, 201 6   December  3 1 , 201 7     December  3 1 , 201 7  
  RMB   RMB     US$  
               
Mezzanine equity 9,272   524,997     80,691  
         
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      945,245,908 shares issued and outstanding as of       December 31, 2016 and December 31, 2017, respectively) 44   57     9  
Class B common shares (US$0.00001 par value; 1,000,000,000      and 1,000,000,000 shares authorized, 359,557,976 and       317,982,976 shares issued and outstanding as of      December 31, 2016 and December 31, 2017, respectively) 26   23     4  
Additional paid-in capital 2,165,766   5,339,844     820,719  
Statutory reserves 58,857   62,718      9,640  
Retained earnings 2,728,736   5,218,110     802,009  
Accumulated other comprehensive income (loss) 93,066   (9,597)     (1,475)  
               
Total YY Inc.'s shareholders' equity 5,046,495   10,611,155     1,630,906  
               
Non-controlling interests 6,060   101,704     15,632  
         
Total shareholders' equity 5,052,555   10,712,859     1,646,538  
               
Total liabilities, mezzanine equity and        
shareholders' equity 9,785,792   14,458,719     2,222,265  
               
         

(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 COMPREHENSIVE INCOME(All amounts in thousands, except share, ADS and per ADS data)

  Three Months Ended   Twelve Months Ended
  December  31 , 201 6     September  3 0 , 201 7     December  31 , 201 7     December  31 , 201 7     December  31, 2016     December  31, 2017     December  31, 2017  
  RMB     RMB     RMB     US$     RMB     RMB     US$  
                             
Net revenues                            
Live streaming 2,218,190      2,871,610     3,368,520     517,732     7,027,227     10,670,954     1,640,096  
Online games 125,424      122,035     128,113     19,691     634,325     543,855     83,589  
Membership 74,650      49,486     50,450     7,754     284,860     197,561     30,365  
Others 65,886      49,174     79,455     12,212     257,638       182,422     28,038  
                             
Total net revenue 2,484,150     3,092,305     3,626,538     557,389     8,204,050     11,594,792     1,782,088  
                                     
Cost of revenues (1) (1,559,557)     (1,889,313)     (2,196,649)     (337,619)     (5,103,430 )     (7,026,402)     (1,079,938)  
                                     
Gross profit 924,593     1,202,992     1,429,889     219,770     3,100,620     4,568,390     702,150  
                                         
Operating expenses (1)                            
Research and development  expenses (160,118)     (166,139)     (282,827)     (43,470)     (675,230 )     (781,886)     (120,174)  
Sales and marketing expenses (111,533 )     (249,480)     (148,765)     (22,865)     (387,268 )     (691,281)     (106,248)  
General and administrative  expenses (206,192)     (144,678)     (218,766)     (33,624)     (482,437 )     (544,641)     (83,710)  
Goodwill impairment (17,665)     -     (2,527)     (388)     (17,665)     (2,527)     (388)  
                                     
Total operating expenses (495,508)     (560,297)     (652,885)     (100,347)     (1,562,600)     (2,020,335)     (310,520)  
                             
Gain on deconsolidation and  disposal of  subsidiaries 127,434     -     -     -     103,960     37,989     5,839  
Other income 65,027     18,667     44,534     6,845     129,504     113,187     17,397  
                                         
Operating income 621,546     661,362     821,538     126,268     1,771,484     2,699,231     414,866  
                                         
Gain on partial disposal of  investments 25,061     -     -     -     25,061     45,861     7,049  
Interest expense (20,758)     (3,651)     (3,744)     (575)     (81,085 )     (32,122)     (4,937)  
Interest income 26,480     47,505     74,531     11,455     67,193      180,384     27,725  
Foreign currency exchange gains (losses), net 385     (251)     (351)     (54)     1,158     (2,176)     (334)  
                                     
Income before income tax  expenses 652,714     704,965     891,974     137,094     1,783,811     2,891,178     444,369  
                                         
Income tax expenses (85,804)     (74,684)     (151,523)     (23,289)     (280,514)     (415,811)     (63,909)  
                                         
Income before share of income in   equity method investments,  net of income taxes 566,910     630,281     740,451     113,805     1,503,297     2,475,367     380,460  
                                         
Share of income in equity method  investments, net of income  taxes 4,400     6,806     17,557     2,698     8,279     33,024     5,076  
                                     
Net Income 571,310     637,087     758,008     116,503     1,511,576      2,508,391      385,536  
                             
Less: Net (loss)/income attributable  to the non-controlling interest  shareholders and the  mezzanine classified non-  controlling interest  shareholders (944)     1,120     17,602     2,705     (12,342)     15,156     2,329  
                             
Net income attributable to YY Inc. 572,254     635,967     740,406     113,798     1,523,918     2,493,235     383,207  

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

  Three Months Ended   Twelve Months Ended
  December 31 , 201 6     September 30 , 201 7     December 31 , 201 7     December 31 , 201 7     December  31, 2016     December 31, 2017     December 31, 2017  
  RMB     RMB     RMB     US$     RMB     RMB     US$  
                 
Net income attributable to YY Inc. 572,254     635,967     740,406     113,798     1,523,918     2,493,235     383,207  
                 
Other comprehensive income (loss):                
Unrealized (loss)/gain of available-  for-sales securities, net of nil  tax (55,738)     (22,128)     (21,440)     (3,295)     134,768     (41,150)     (6,325)  
Foreign currency translation  adjustments, net of nil tax (3,646)     (12,592)     (48,828)     (7,505)     (5,317)     (61,513)     (9,454)  
                                         
Comprehensive income  attributable to YY Inc. 512,870     601,247     670,138     102,998     1,653,369     2,390,572     367,428  
                                         
  Net income per ADS                
—Basic 10.11     10.60     11.63     1.79     27.04      42.03     6.46  
—Diluted 9.74     10.51     11.53     1.77     26.40      41.33     6.35  
Weighted average number of ADS  used in calculating net income  per ADS                
—Basic 56,613,257     60,008,235     63,686,056     63,686,056     56,367,166     59,323,007     59,323,007  
—Diluted 60,914,063     60,503,529     64,224,006     64,224,006     60,805,566     60,831,887     60,831,887  

(1)     Share-based compensation was allocated in cost of revenues and operating expenses as follows:
  Three Months Ended   Twelve Months Ended
  December 31 , 201 6   September  3 0 , 201 7     December 31 , 201 7   December  31 , 201 7   December  31, 2016   December 31, 2017   December 31, 2017  
  RMB   RMB     RMB   US$   RMB   RMB   US$  
                           
Cost of revenues 3,440   (434)     36,549   5,617   15,894   42,759   6,572  
Research and development expenses 13,923   (6,049)     106,501   16,369   78,816   122,348   18,805  
Sales and marketing expenses 715   (74)     3,679   565   3,107   4,417   679  
General and administrative expenses 8,270    9,700     61,731   9,488   59,469   88,137   13,546  

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 31 , 201 6   September  3 0 , 201 7   December 31 , 201 7   December  31 , 201 7   December  31, 2016   December 31, 2017   December 31, 2017  
  RMB   RMB   RMB   US$   RMB   RMB   US$  
                             
Operating income 621,546   661,362   821,538   126,268   1,771,484   2,699,231   414,866  
Share-based compensation expenses 26,348    3,143   208,460   32,039   157,286   257,661   39,602  
                             
Non-GAAP operating income 647,894   664,505   1,029,998   158,307   1,928,770   2,956,892   454,468  
                             
Net income attributable to YY Inc. 572,254     635,967   740,406   113,798   1,523,918   2,493,235   383,207  
Share-based compensation expenses 26,348    3,143   208,460   32,039   157,286   257,661   39,602  
                             
Non-GAAP net income  attributable to YY Inc. 598,602    639,110   948,866   145,837   1,681,204   2,750,896   422,809  
                             
Non-GAAP net income per ADS                            
—Basic 10.57    10.65   14.90   2.29   29.83   46.37   7.13  
—Diluted 10.17     10.56   14.77   2.27   28.98   45.56   7.00  
Weighted average number of ADS  used in calculating Non-GAAP  net income per ADS                            
—Basic 56,613,257   60,008,235   63,686,056   63,686,056   56,367,166   59,323,007   59,323,007  
—Diluted 60,914,063   60,503,529   64,224,006   64,224,006   60,805,566   60,831,887   60,831,887  
                             

YY INC. UNAUDITED SEGMENT REPORT(All amounts in thousands, except share, ADS and per ADS data)
  Three Months Ended
  December 31 , 201 7
         
  YY Live (2)     Huya (2)     Total     Total  
  RMB     RMB     RMB     US$  
         
Net revenues        
Live streaming 2,675,812     692,708     3,368,520     517,732  
Online games 117,246     10,867     128,113     19,691  
Membership 49,560     890     50,450     7,754  
Others 42,901     36,554     79,455     12,212  
                       
Total net revenue 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 expense (3,744)     -     (3,744)     (575)  
Interest 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 (4)  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 , 201 7
                 
  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)   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 31 December 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.
(4)   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 , 201 7
                 
    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  
                   
Non-GAAP operating income 1,008,335   21,663     1,029,998   158,307  
                   

YY INC. UNAUDITED SEGMENT REPORT(All amounts in thousands, except share, ADS and per ADS data)
  Three Months Ended
  September 30 , 201 7
         
  YY Live     Huya     Total     Total    
  RMB     RMB     RMB     US$    
             
Net revenues            
Live streaming 2,319,251      552,359      2,871,610      431,607    
Online games 113,188      8,847      122,035      18,342    
Membership 46,139      3,347      49,486      7,438    
Others 30,193     18,981     49,174     7,391    
                         
Total net revenue 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 (2) (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 expense (3,651)     -     (3,651)     (549)    
Interest 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)  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 , 201 7
           
  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)   For the three months ended September 30, 2017, the Company reclassified general and administrative expenses of RMB20 million in relation to the loss contingencies recognized against a legal proceeding from YY Live segment to Huya segment.

 

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 , 201 7
                 
      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  
                       
Non-GAAP operating income (loss)   694,637     (30,132)     664,505   99,878  
                       

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

  Three Months Ended 
  December 31 , 201 6
   
  YY Live     Huya     100 Education     Total     Total  
  RMB     RMB     RMB     RMB     US$  
           
Net revenues          
Live streaming 1,883,841     334,349     -     2,218,190     319,486  
Online games 125,424     -     -     125,424     18,065  
Membership 74,650     -     -     74,650     10,752  
Others 12,952     4,926     48,008     65,886     9,490  
                               
Total net revenue 2,096,867     339,275     48,008     2,484,150     357,793  
                           
Cost of revenues (1) (1,147,010)     (387,252)     (25,295)     (1,559,557)     (224,623 )
                           
Gross profit (loss) 949,857     (47,977)     22,713     924,593     133,170  
                           
Operating expenses (1)          
Research and development expenses (102,992)     (53,082)     (4,044)     (160,118)     (23,062 )
Sales and marketing expenses (79,594)     (19,014)     (12,925)     (111,533)     (16,064 )
General and administrative expenses (179,867)     (18,070)     (8,255)     (206,192)     (29,698 )
Goodwill impairment (3,861)     -     (13,804)     (17,665)     (2,544)  
                           
Total operating expenses (366,314)     (90,166)     (39,028)     (495,508)     (71,368)  
           
Gain on deconsolidation and disposal of subsidiaries 127,434     -     -     127,434     18,354  
Other income 65,027     -     -     65,027     9,366  
                           
Operating income (loss) 776,004     (138,143)     (16,315)     621,546     89,522  
                           
Gain on partial disposal of investments 25,061     -     -     25,061     3,610  
Interest expense (20,758)     -     -     (20,758)     (2,990)  
Interest income 25,951     518     11     26,480     3,814  
Foreign currency exchange gains, net 385     -     -     385     55  
                           
Income (loss) before income tax expenses 806,643      (137,625)     (16,304)     652,714     94,011  
                           
Income tax expenses (98,992)     -     13,188     (85,804)     (12,358)  
           
Income (loss) before share of income in equity  method investments, net of income taxes 707,651     (137,625)      (3,116)      566,910      81,653  
                           
Share of income in equity method investments,  net of income taxes 4,400     -     -     4,400     634  
           
  Net income (loss) 712,051     (137,625)      (3,116)     571,310      82,287  

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

  Three Months Ended
  December 31 , 201 6
               
  YY Live   Huya   100 Education   Total   Total  
  RMB   RMB    RMB     RMB     US$  
                     
Cost of revenues  1,977   1,399    64    3,440    495  
Research and development expenses  9,385   3,535   1,003    13,923    2,005  
Sales and marketing expenses  699   16    -     715    103  
General and administrative expenses  2,671   5,591    8    8,270    1,191  

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 , 201 6
                   
    YY Live   Huya     100 Education     Total   Total  
    RMB   RMB     RMB     RMB   US$  
                 
Operating income (loss) 776,004   (138,143)     (16,315)     621,546   89,522  
Share-based compensation expenses 14,732   10,541     1,075     26,348   3,794  
                         
Non-GAAP operating income (loss) 790,736   (127,602)     (15,240)     647,894   93,316