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CST: 14/12/2019 12:44:35   

YY Reports Third Quarter 2019 Unaudited Financial Results

31 Days ago

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

Third Quarter 2019 Financial Highlights

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

Third Quarter 2019 Operational Highlights

  • Global average mobile MAUs 3 reached 470.1 million, among that approximately 77.9% were from markets outside of China.
  • Average mobile MAUs of imo reached 212.0 million.
  • Average mobile MAUs of global short-form video services increased by 670.6% to 150.4 million from 19.5 million in the corresponding period of 2018, including 100.2 million from Likee (formerly known as Like), which increased by 413.4% year over year, and 50.2 million from imo’s embedded short-form video services.
  • Average mobile MAUs of global live streaming services increased by 26.5% to 157.8 million from 124.8 million in the corresponding period of 2018, among that (i) 103.7 million were from China, including 39.9 million from YY, which increased by 3.0% year over year and 63.8 million from Huya, which increased by 29.1% year over year; and (ii) 54.1 million were from outside of China, including 21.9 million from BIGO LIVE, which increased by 9.7% year over year, and 32.3 million from HAGO, which increased by 92.4% year over year.
  • Total number of paying users 4 of YY increased by 14.4% to 4.3 million from 3.8 million in the corresponding period of 2018.
  • Total number of paying users of Huya increased by 28.5% to 5.3 million from 4.2 million in the corresponding period of 2018.

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

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

Third Quarter 2019 Financial Results

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Exchange Rate
This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars, in this press release, were made at a rate of RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 2019 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

About YY Inc.
YY Inc. (“YY” or the “Company”) is a global social media platform. The Company’s highly engaged users contribute to a vibrant social community by creating, sharing, and enjoying a vast range of entertainment content and activities. YY enables users to interact with each other in real time through online live media and offers users a uniquely engaging and immersive entertainment experience. YY owns YY Live, a leading live streaming social media platform in China and Huya, a leading game live streaming platform in China. In addition, YY completed the acquisition of Bigo in March 2019. Bigo is a fast-growing global tech company. Headquartered in Singapore, Bigo owns Bigo Live, a leading global live streaming platform outside China; Likee, a leading global short-form video social platform; imo, a global video communication app and other social applications. YY has created an online community for global video and live streaming users. YY Inc. was listed on the NASDAQ in November 2012.

Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as YY’s strategic and operational plans, contain forward-looking statements. YY may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about YY’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: YY’s goals and strategies; YY’s future business development, results of operations and financial condition; the expected growth of the online communication social platform market in China; the expectation regarding the rate at which to gain active users, especially paying users; YY’s ability to monetize the user base; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in YY’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and YY does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Use of Non-GAAP Financial Measures
The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). YY uses non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributable to controlling interest of YY Inc., non-GAAP net margin attributable to controlling interest of YY Inc., non-GAAP net income attributable to common shareholders of YY Inc., and basic and diluted non-GAAP net income per ADS, which are non-GAAP financial measures. Non-GAAP operating income is operating income excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, and gain on deconsolidation and disposal of subsidiary. Non-GAAP operating margin is non-GAAP operating income as a percentage of net revenues. Non-GAAP net income is net income excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, and income tax effects of above non-GAAP reconciling items. Non-GAAP net income attributable to controlling interest of YY Inc. is net income attributable to controlling interest of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, income tax effects of above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. Non-GAAP net margin is non-GAAP net income attributable to controlling interest of YY Inc. as a percentage of net revenues. Non-GAAP net income attributable to common shareholders of YY Inc. is net income attributable to common shareholders of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders and income tax effects of above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. After the non-GAAP reconciliation, non-GAAP net income attributable to controlling interests of YY Inc. is equal to the non-GAAP net income attributable to common shareholders of YY Inc. Basic and diluted non-GAAP net income per ADS is non-GAAP net income attributable to common shareholders of YY Inc. divided by weighted average number of ADS used in the calculation of basic and diluted net income per ADS. The Company believes that separate analysis and exclusion of the non-cash impact of above reconciling items adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the non-cash effect of (i) share-based compensation expenses and amortization of intangible assets from business acquisitions, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, which have been and will continue to be significant recurring expenses in its business, (ii) impairment of goodwill and investments, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, and accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders, which may not be recurring in its business, and (iii) income tax expenses and non-GAAP adjustments for net income (loss) attributable to non-controlling interest shareholders, which are affected by above non-GAAP reconciling items. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company’s net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

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

Investor Relations Contact
YY Inc.
Matthew Zhao
Maggie Yan
Tel: +86 (20) 8212-0000
Email: IR@YY.com

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

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

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

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

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

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

6 Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

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

8ADS is American Depositary Share. Each ADS represents twenty Class A common shares of the Company. Diluted net income per ADS is net income attributable to common shareholders of YY Inc. divided by weighted average number of diluted ADS.

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

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

 

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

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

 

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

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

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

 

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

  Three Months Ended   Nine Months Ended
  September
 30 ,
201 8
  June
3 0 ,
201 9
  September
 30 ,
201 9
  September
30
,
201 9
  September
30,
2018
  September
30,
2019
  September
30,
2019
 
  RMB   RMB   RMB   US$   RMB   RMB   US$  
                             
Net revenues                            
Live streaming(1) 3,894,548   5,922,761   6,473,946   905,738   10,486,249   16,881,727   2,361,840  
Others 205,924   372,486   408,268   57,119   636,384   1,076,318   150,582  
                             
Total net revenues 4,100,472   6,295,247   6,882,214   962,857   11,122,633   17,958,045   2,512,422  
                             
Cost of revenues(2) (2,674,502)   (4,173,841)   (4,713,175)   (659,397)   (7,004,071)   (12,047,341)   (1,685,485)  
                             
Gross profit 1,425,970   2,121,406   2,169,039   303,460   4,118,562   5,910,704   826,937  
                             
Operating expenses(2)                            
Research and development expenses (314,128)   (655,421)   (673,058)   (94,164)   (859,539)   (1,733,215)   (242,486)  
Sales and marketing expenses (343,839)   (1,099,494)   (1,079,577)   (151,038)   (825,627)   (2,713,307)   (379,606)  
General and administrative expenses (206,738)   (335,973)   (408,834)   (57,198)   (608,246)   (1,021,231)   (142,875)  
                             
Total operating expenses (864,705)   (2,090,888)   (2,161,469)   (302,400)   (2,293,412)   (5,467,753)   (764,967)  
                             
Other income 49,640   41,407   152,718   21,366   95,936   262,813   36,769  
                             
Operating income 610,905   71,925   160,288   22,426   1,921,086   705,764   98,739  
                             
Interest expenses (4,910)   (12,268)   (123,456)   (17,272)   (8,477)   (141,943)   (19,859)  
Interest income and investment income 141,110   156,619   203,137   28,420   362,151   508,045   71,078  
Foreign currency exchange (losses) gains, net (3,072)   13,801   16,393   2,293   824   31,527   4,411  
Gain on deemed disposal and disposal of investments -   -   -   -   13,999   -   -  
Gain (loss) on fair value change of investments 31,670   14,291   (11,492)   (1,608)   1,663,266   2,652,642   371,118  
Fair value change on derivative -   -   (1,753)   (245)   (2,285,223)   (1,753)   (245)  
Other non-operating expenses -   -   -   -   (2,000)   -   -  
                             
Income before income tax expenses 775,703   244,368   243,117   34,014   1,665,626    3,754,282   525,242  
                             
Income tax expenses (74,929)   (143,896)   (86,571)   (12,112)   (370,593)   (354,438)   (49,588)  
                             
Income before share of (loss) income  in equity method investments, net of income taxes 700,774   100,472   156,546   21,902   1,295,033   3,399,844   475,654  
                             
Share of (loss) income in equity method investments, net of income taxes (19,957)   6,947   21,261   2,975   78,214   35,364   4,948  
                             
Net income 680,817   107,419   177,807   24,877   1,373,247   3,435,208   480,602  
                             
Less: Net income (loss) attributable to the non-controlling interest shareholders and the mezzanine equity classified as non-controlling interest shareholders 30,127   65,342   67,879   9,497   (141,054)   162,770   22,772  
                             
Net income attributable to controlling interest of YY Inc. 650,690   42,077   109,928   15,380   1,514,301   3,272,438   457,830  
                             
Less: Accretion of subsidiaries’  redeemable convertible preferred shares to redemption value -   9,476   9,715   1,359   67,076   28,556   3,995  
Cumulative dividend on subsidiary’s Series A Preferred Shares -   6,811   6,982   977   -   20,523   2,871  
Deemed dividend to subsidiary’s Series A preferred shareholders -   -   -   -   489,284   -   -  
                             
Net income attributable to common shareholders of YY Inc. 650,690   25,790   93,231   13,044   957,941   3,223,359   450,964  
                             

 

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

  Three Months Ended   Nine Months Ended
  September
 30,
2018
June
 30,
2019
September
 30,
2019
September
30,

2019
  September
30,

2018
September
30,

2019
September
30,
2019
  RMB RMB RMB US$   RMB RMB US$
                 
 

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

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

  Three Months Ended   Nine Months Ended
  September
30 ,
201 8
June
 30,
201 9
September
30 ,
201 9
September
30 ,
201 9
  September
 30,
2018
September
30,
2019
September
30,
2019
  RMB RMB RMB US$   RMB RMB US$
                 
PRC 3,894,240 5,016,587 5,266,815 736,854   10,485,941 14,472,812 2,024,820
Non-PRC 308 906,174 1,207,131 168,884   308 2,408,915 337,020
                 

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

  Three Months Ended   Nine Months Ended
  September
30 ,
201 8
June
 30,
201 9
September
30 ,
201 9
September
30 ,
201 9
  September
 30,
2018
September
30,
2019
September
30,
2019
  RMB RMB RMB US$   RMB RMB US$
                 
Cost of revenues 16,022 15,604 20,608 2,883   59,689 50,521 7,068
Research and development expenses 52,752 160,029 129,174 18,072   175,131 359,810 50,339
Sales and marketing expenses 290 3,452 2,643 370   4,565 8,071 1,129
General and administrative expenses 92,340 85,197 95,210 13,320   253,881 275,284 38,514
                 

 

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except share, ADS and per ADS data)

  Three Months Ended   Nine Months Ended
  September
 30 ,
201 8
  June
3 0 ,
201 9
  September
30 ,
201 9
  September
30 ,
2019
  September
30,

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


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


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


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

 

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

  Three Months Ended
  September 30 , 201 9
                       
  YY (1)   Huya   Bigo   Elimination(2)   Total   Total
  RMB   RMB   RMB   RMB   RMB   US$
                       
Net revenues                      
Live streaming 2,899,044   2,156,106   1,418,796   -   6,473,946   905,738
Others 181,006    108,986   118,419   (143)   408,268   57,119
                       
Total net revenues 3,080,050   2,265,092   1,537,215   (143)   6,882,214   962,857
                       
Cost of revenues(3) (1,729,389)   (1,858,772)   (1,125,157)   143   (4,713,175)   (659,397)
                       
Gross profit 1,350,661   406,320   412,058   -   2,169,039   303,460
Operating expenses(3)                      
Research and development expenses (249,620)   (134,969)   (288,469)   -   (673,058)   (94,164)
Sales and marketing expenses (340,619)   (122,316)   (616,642)   -   (1,079,577)   (151,038)
General and administrative expenses (225,281)   (96,318)   (87,235)   -   (408,834)   (57,198)
                       
Total operating expenses (815,520)   (353,603)   (992,346)   -   (2,161,469)   (302,400)
                       
Other income 136,535   11,148   5,035   -   152,718   21,366
                       
Operating income (loss) 671,676   63,865   (575,253)   -   160,288   22,426
                       
Interest expenses (123,456)   -   (11,078)   11,078   (123,456)   (17,272)
Interest income and investment income 127,068   86,539   608   (11,078)   203,137   28,420
Foreign currency exchange (losses) gains, net 2,798   645   12,950   -   16,393   2,293
Fair value change on derivative (1,753)   -   -   -   (1,753)   (245)
Loss on fair value change of investments (11,492)   -   -   -   (11,492)   (1,608)
                       
Income (loss) before income tax expenses 664,841   151,049   (572,773)   -   243,117   34,014
                       
Income tax (expenses) benefits (146,835)   (27,879)   88,143   -   (86,571)   (12,112)
                       
Income (loss) before share of income in equity method investments, net of income taxes 518,006   123,170   (484,630)   -   156,546   21,902
                       
Share of income in equity method investments, net of income taxes 21,189   72   -   -   21,261   2,975
                       
Net income (loss) 539,195   123,242   (484,630)   -   177,807   24,877
                       

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

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

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

  Three Months Ended
  September 30 , 201 9
   
  YY Huya Bigo Total Total
  RMB RMB RMB RMB US$
           
Cost of revenues 5,043 8,497 7,068 20,608 2,883
Research and development expenses 26,848 24,172 78,154 129,174 18,072
Sales and marketing expenses 419 1,468 756 2,643 370
General and administrative expenses 41,265 48,987 4,958 95,210 13,320
           

 

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
 (All amounts in thousands, except share, ADS and per ADS data)

  Three Months Ended
  September 30, 2019
   
  YY   Huya   Bigo     Total   Total
  RMB   RMB   RMB     RMB   US$
                     
Operating income (loss) 671,676   63,865   (575,253)     160,288   22,426
Share-based compensation expenses 73,575   83,124   90,936     247,635   34,645
Impairment of goodwill and investments 10,000   -   -     10,000   1,399
Amortization of intangible assets from business acquisitions -   -   193,487     193,487   27,070
                     
Non-GAAP operating income (loss) 755,251   146,989   (290,830)     611,410   85,540


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

 

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

  Three Months Ended
  June 30 , 201 9
             
  YY   Huya   Bigo (1)   Elimination(2)   Total   Total
  RMB   RMB   RMB   RMB   RMB   US$
                       
Net revenues                      
Live streaming 2,863,058   1,921,485   1,138,218   -   5,922,761   862,747
Others 190,758   88,976   92,752   -   372,486   54,259
                       
Total net revenues 3,053,816   2,010,461   1,230,970   -   6,295,247   917,006
                       
Cost of revenues(3) (1,627,744)   (1,674,793)   (871,304)   -   (4,173,841)   (607,988)
                       
Gross profit 1,426,072   335,668   359,666   -   2,121,406   309,018
Operating expenses(3)                      
Research and development expenses (241,253)   (105,411)   (308,757)   -   (655,421)   (95,473)
Sales and marketing expenses (335,602)   (119,592)   (644,300)   -   (1,099,494)   (160,159)
General and administrative expenses (171,032)   (74,328)   (90,613)   -   (335,973)   (48,940)
                       
Total operating expenses (747,887)   (299,331)   (1,043,670)   -   (2,090,888)   (304,572)
                       
Other income 8,602   31,332   1,473   -   41,407   6,032
                       
Operating income (loss) 686,787   67,669   (682,531)   -   71,925   10,478
                       
Interest expenses (12,268)   -   (4,201)   4,201   (12,268)   (1,787)
Interest income and investment income 84,791   75,021   1,008   (4,201)   156,619   22,814
Foreign currency exchange (losses) gains, net (4,181)   787   17,195   -   13,801   2,010
Gain on fair value change of investments 14,291   -   -   -   14,291   2,082
                       
Income (loss) before income tax expenses 769,420   143,477   (668,529)   -   244,368   35,597
                       
Income tax (expenses) benefits (160,152)   (21,632)   37,888   -   (143,896)   (20,961)
                       
Income (loss) before share of income (loss) in equity method investments, net of income taxes 609,268   121,845   (630,641)   -   100,472   14,636
                       
Share of income (loss) in equity method investments, net of income taxes 6,991   (44)   -   -   6,947   1,012
                       
Net income (loss) 616,259   121,801   (630,641)   -   107,419   15,648
                       

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

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

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

  Three Months Ended
  June 30 , 201 9
   
  YY Huya Bigo Total Total
  RMB RMB RMB RMB US$
           
Cost of revenues 1,955 4,270 9,379 15,604 2,273
Research and development expenses 28,053 13,931 118,045 160,029 23,311
Sales and marketing expenses 655 907 1,890 3,452 503
General and administrative expenses 43,189 29,501 12,507 85,197 12,410
           

 

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
 (All amounts in thousands, except share, ADS and per ADS data)

  Three Months Ended
  June 30, 2019
   
  YY   Huya   Bigo   Total   Total
  RMB   RMB   RMB   RMB   US$
                   
Operating income (loss) 686,787   67,669   (682,531)   71,925   10,478
Share-based compensation expenses 73,852   48,609   141,821   264,282   38,497
Amortization of intangible assets from business acquisitions -   -   188,740   188,740   27,493
                   
Non-GAAP operating income (loss) 760,639   116,278   (351,970)   524,947   76,468
                   
Net income (loss) 616,259   121,801   (630,641)   107,419   15,648
Share-based compensation expenses 73,852   48,609   141,821   264,282   38,497
Amortization of intangible assets from business acquisitions -   -   188,740   188,740   27,493
Gain on fair value change of investments and equity investees’ investments (13,332)   -   -   (13,332)   (1,942)
Interest expenses related to the convertible bonds’ amortization to face value 4,287   -   -   4,287   624
Income tax effects on non-GAAP adjustments 1,421   -   (33,312)   (31,891)   (4,645)
                   
Non-GAAP n et income (loss) 682,487   170,410   (333,392)   519,505   75,675
                   

 

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

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

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

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

  Three Months Ended
  September 30 , 201 8
         
  YY Huya Total Total
  RMB RMB RMB US$
         
Cost of revenues 12,120 3,902 16,022 2,333
Research and development expenses 41,139 11,613 52,752 7,681
Sales and marketing expenses 215 75 290 42
General and administrative expenses 43,701 48,639 92,340 13,445
         

 

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
 (All amounts in thousands, except share, ADS and per ADS data)

  Three Months Ended
  September 30 , 201 8 
               
  YY   Huya   Total   Total
  RMB   RMB   RMB   US$
               
Operating income (loss) 613,621   (2,716)   610,905   88,949
Share-based compensation expenses 97,175   64,229   161,404   23,501
Impairment of goodwill and investments 1,900   -   1,900   277
               
Non-GAAP operating income 712,696   61,513   774,209   112,727
               
Net income 624,045   56,772   680,817   99,128
Share-based compensation expenses 97,175   64,229   161,404   23,501
Impairment of goodwill and investments 1,900   -   1,900   277
Gain on fair value change of investments and equity investee’s investments 3,428   -   3,428   499
Income tax effects on non-GAAP adjustments 1,014   -   1,014   148
               
Non-GAAP n et income 727,562   121,001   848,563   123,553
               

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