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YY Reports First Quarter 2016 Unaudited Financial Results

GUANGZHOU, China, May 31, 2016 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ:YY) ("YY" or the "Company"), a revolutionary real-time interactive social platform, today announced its unaudited financial results for the first quarter of 2016.

First Quarter 2016 Highlights

  • Net revenues increased by 43.4% to RMB1,649.3 million (US$255.8 million) from RMB1,150.3 million in the corresponding period of 2015.

Mr. David Xueling Li, Chief Executive Officer of YY, stated, “We continued to see solid growth momentum in our top line in the first quarter of 2016, primarily driven by our IVAS business. In particular, we saw significant growth in the mobile broadcasting business and have been able to rapidly capitalize on these opportunities through our newly launched mobile broadcasting app ME, which we will further develop this year. By featuring popular stars and hosting various entertainment events, we believe that there is significant potential to further accelerate its growth and enhance its popularity. Additionally, in the online music and entertainment business, our newly-launched Da Pai Wan Chang Hui is an interactive concert broadcasting service that connects celebrities and participants virtually. This new service clearly demonstrates our strategy to continue strengthening our professionally-generated content offerings and expand our user community. Overall, we remain confident in our market opportunities and aim to continue fortifying our position as the leading real time internet platform in China.”

Mr. Eric He, Chief Financial Officer of YY, commented, “In the first quarter of 2016, our total revenue increased by 43.4% year over year to RMB1.6 billion, reflecting the strength of our core business. Meanwhile, we were able to significantly grow the number of our paying users by 57.1% year over year to 3.89 million. Our online game broadcasting business Huya grew significantly, with an increase in revenue by 114.0% year over year and an increase in number of paying users by 131.7% year over year to 899,000. For our online music and entertainment business, our on-going efforts to introduce diverse content resulted in a revenue increase of 55.8% year over year. Additionally, our mobile music and entertainment business continued its robust growth with a 202.8% year-over-year increase in revenue and 137.5% year-over-year increase in number of paying users. Because of the execution of our planned transition to an increasing amount of UGC content revenues across the YY platform, we have continued to experience compression to gross and operating margins. This expected decline in margins results from the decreased concentration of our high-margin gaming revenues year over year, from 20.1% of total revenue to 10.4% in the first quarter of 2016, as revenue growth for our other offerings continues to outpace our gaming revenue. Going forward, we will continue to leverage our ecosystem and expand our innovative content and service offerings in order to meet the evolving demands of our massive user base.”

First Quarter 2016 Financial Results

NET REVENUES
Net revenues increased by 43.4% to RMB1,649.3 million (US$255.8 million) in the first quarter of 2016 from RMB1,150.3 million in the corresponding period of 2015, primarily driven by the increase in IVAS revenues. IVAS revenues, which mainly consisted of revenues from online music and entertainment, online dating, online games, Huya broadcasting and YY's membership program, increased by 45.1% to RMB1,611.8 million (US$250.0 million) in the first quarter of 2016 from RMB1,110.8 million in the corresponding period of 2015. The increase in IVAS revenues was primarily driven by a 57.1% year-over-year increase in the number of paying users.

Revenues from online music and entertainment increased by 55.8% to RMB919.1 million (US$142.5 million) in the first quarter of 2016 from RMB590.1 million in the corresponding period of 2015. This increase was driven by a year-over-year increase of 68.2% in the number of paying users to 2,666,000. Moreover, mobile ARPU continues to grow 27.2% to RMB243 in the first quarter of 2016 from RMB191 in the corresponding period of 2015.

Revenues from online games were RMB171.1 million (US$26.5 million) in the first quarter of 2016, as compared to RMB231.7 million in the corresponding period of 2015. This decline was primarily caused by a 35.8% year-over-year decrease in the number of paying users to 306,000, which reflects the continued softness in China’s web game market, but was partially offset by a 15.0% year-over-year increase in ARPU of online games.

Revenues from online dating increased by 60.2% to RMB211.2 million (US$32.8 million) in the first quarter of 2016 from RMB131.8 million in the corresponding period of 2015. This increase primarily resulted from a 47.4% year-over-year increase in the number of paying users to 283,000 and 8.6% year-over-year increase in ARPU to RMB746 in the first quarter of 2016.

Other IVAS revenues, mainly including Huya broadcasting and membership subscription fees, increased by 97.5% to RMB310.4 million (US$48.1 million) in the first quarter of 2016 from RMB157.2 million in the corresponding period of 2015. Revenues from Huya broadcasting increased by 114.0% to RMB117.7 million (US$18.3 million) in the first quarter of 2016 from RMB55.0 million in the corresponding period of 2015. Revenues from membership subscription fees increased by 12.5% to RMB69.4 million (US$10.8 million) in the first quarter of 2016 from RMB61.7 million in the corresponding period of 2015, which reflected a 2.1% increase in the number of members to 1,084,000 as of March 31, 2016 from 1,062,000 as of March 31, 2015.

Other revenues, mainly including revenues from the Company's online education platform, Huanqiu Education Online, online advertising revenues from Duowan.com, and e-commerce, were RMB37.5 million (US$5.8 million) in the first quarter of 2016, compared with RMB39.4 million in the corresponding period of 2015.

COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 57.6% to RMB1,060.5 million (US$164.5 million) in the first quarter of 2016 from RMB672.7 million in the corresponding period of 2015, primarily attributable to an increase in revenue-sharing fees and content costs to RMB707.7 million (US$109.8 million) in the first quarter of 2016 from RMB411.8 million in the corresponding period of 2015. The increase in revenue-sharing fees and content costs paid to performers, channel owners and content providers was in line with the increase in revenues and was primarily due to the higher level of user engagement and spending driven by promotional activities, as well as the Company’s investments in expanding the amount of new and innovative content it provides to users. In addition, bandwidth costs increased to RMB182.9 million (US$28.4 million) in the first quarter of 2016 from RMB129.6 million in the corresponding period of 2015, primarily reflecting the continued user base expansion and the video quality improvements.

Gross profit increased by 23.3% to RMB588.8 million (US$91.3 million) in the first quarter of 2016 from RMB477.5 million in the corresponding period of 2015. Gross margin was 35.7% in the first quarter of 2016 compared with 41.5% in the corresponding period of 2015. The year-over-year decrease in gross margin was primarily attributable to the change in the Company's business mix to include new business lines involving user-generated content, and higher revenue-sharing fees and content costs.

OPERATING INCOME
Operating expenses for the first quarter of 2016 increased by 45.7% to RMB341.0 million (US$52.9 million) from RMB234.1 million in the corresponding period of 2015. This increase was primarily attributable to an increase in research and development expenses, driven by the Company’s overall business expansion, as well as sales and marketing expenses, particularly those associated with mobile product promotion.

Operating income in the first quarter of 2016 increased by 5.1% to RMB256.7 million (US$39.8 million), as compared to RMB244.2 million in the corresponding period of 2015. Operating margin in the first quarter of 2016 was 15.6%, as compared to 21.2% in the corresponding period of 2015.

Non-GAAP operating income1 increased by 12.5% to RMB310.6 million (US$48.2 million) in the first quarter of 2016 from RMB276.1 million in the corresponding period of 2015. Non-GAAP operating margin2 decreased to 18.8% in the first quarter of 2016 from 24.0% in the corresponding period of 2015.

NET INCOME
Net income attributable to YY Inc. was RMB208.3 million (US$32.3 million) in the first quarter of 2016, as compared to RMB227.0 million in the corresponding period of 2015. Net margin in the first quarter of 2016 was 12.6%, as compared to 19.7% in the corresponding period of 2015. Non-GAAP net income attributable to YY Inc.3 increased by 1.3% to RMB262.3 million (US$40.7 million), as compared to RMB258.8 million in the corresponding period of 2015. Non-GAAP net margin4 was 15.9% in the first quarter of 2016, as compared to 22.5% in the corresponding period of 2015.

NET INCOME PER ADS
Diluted net income per ADS5 was RMB3.65 (US$0.57) in the first quarter of 2016, compared to RMB3.83 in the corresponding period of 2015.

Non-GAAP diluted net income per ADS6 increased by 5.3% to RMB4.59 (US$0.71) in the first quarter of 2016 from RMB4.36 in the corresponding period of 2015.

BALANCE SHEET AND CASH FLOWS
As of March 31, 2016, the Company had cash and cash equivalents of RMB593.0 million (US$92.0 million) and short-term deposits of RMB2,716.8 million (US$421.3 million). For the first quarter of 2016, net cash from operating activities was RMB198.4 million (US$30.8 million).

SHARES OUTSTANDING
As of March 31, 2016, the Company had a total of 1,098.9 million common shares outstanding, or the equivalent of 54.9 million ADSs outstanding.

Conference Call Information
The Company will hold a conference call on Tuesday, May 31, 2016 at 8:00 am Eastern Time or 8:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:+1-845-675-0438
International Toll Free:+1-855-500-8701
China Domestic:400-1200654
Hong Kong: +852-3018-6776
Conference ID: # 15450227

The replay will be accessible through June 7, 2016 by dialing the following numbers:

United States Toll Free: +1-855-452-5696
International: +61-2-9003-4211
Conference ID: # 15450227

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

Exchange 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 RMB6.448 to US$1.00, the noon buying rate in effect on March 31, 2016 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 revolutionary real-time interactive social platform that engages users in real-time online group activities through voice, text and video. Launched in July 2008, YY Client, the Company’s core product, empowers users to create and organize groups of varying sizes to discover and participate in a wide range of online activities, including online music and entertainment, online games, online dating, live game broadcasting and education. YY Inc. was listed on NASDAQ in November 2012 and generated revenues of US$910 million in the fiscal year 2015.

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 registered user accounts, active users, especially paying users; YY’s ability to monetize the user base; YY’s ability to continue attracting advertisers and offering popular online games; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing, as well as uncertainties relating to the proposed “going-private” transaction. 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”), 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” at the end of this release.

1Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses.

2Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues.

3Non-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.

4Non-GAAP net margin is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to YY Inc. as a percentage of net revenues.

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

6Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders divided by weighted average number of ADS used in the calculation of diluted net income per ADS.

YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)
December 31,
2015
March 31,
2016
March 31,
2016
RMB RMB US$
Assets
Current assets
Cash and cash equivalents 928,934 592,980 91,963
Short-term deposits 1,894,946 2,716,751 421,332
Restricted short-term deposits 389,221 - -
Accounts receivable, net 132,353 170,704 26,474
Inventory 14,385 13,484 2,091
Amount due from related parties 5,297 28,699 4,451
Prepayments and other current assets 147,823 136,957 21,240
Deferred tax assets 116,921 105,796 16,408
Total current assets 3,629,880 3,765,371 583,959
Non-current assets
Deferred tax assets 3,363 3,648 566
Investments 567,557 615,482 95,453
Property and equipment, net 843,449 837,405 129,871
Land use rights, net - 1,908,325 295,956
Intangible assets, net 146,437 136,065 21,102
Goodwill 151,638 151,633 23,516
Other non-current assets* 1,960,430 85,550 13,268
Total non-current assets 3,672,874 3,738,108 579,732
Total assets 7,302,754 7,503,479 1,163,691
Liabilities and shareholders’ equity
Current liabilities
Accounts payable 129,819 160,388 24,874
Deferred revenue 385,300 391,107 60,656
Advances from customers 55,086 53,665 8,323
Income taxes payable 107,403 81,839 12,692
Accrued liabilities and other current liabilities 681,889 617,987 95,842
Amounts due to related parties 24,917 20,575 3,191
Total current liabilities 1,384,414 1,325,561 205,578
Non-current liabilities
Convertible bonds* 2,572,119 2,563,815 397,614
Deferred revenue 20,752 26,135 4,053
Deferred tax liabilities 16,817 16,271 2,523
Total non-current liabilities 2,609,688 2,606,221 404,190
Total liabilities 3,994,102 3,931,782 609,768


YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
December 31,
2015
March 31,
2016
March 31,
2016
RMB RMB US$
Mezzanine equity 61,833 59,814 9,276
Shareholders’ equity
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 728,227,848 and 729,301,268 shares issued and outstanding as of December 31, 2015 and March 31, 2016, respectively) 43 43 7
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 369,557,976 and 369,557,976 shares issued and outstanding as of December 31, 2015 and March 31, 2016, respectively) 27 27 4
Additional paid-in capital 2,011,799 2,065,731 320,368
Statutory reserves 56,507 56,507 8,763
Retained earnings 1,207,168 1,415,507 219,527
Accumulated other comprehensive losses (36,385) (36,035) (5,589)
Non-controlling interests 7,660 10,103 1,567
Total shareholders’ equity 3,246,819 3,511,883 544,647
Total liabilities, mezzanine equity and shareholders’ equity 7,302,754 7,503,479 1,163,691

_____________________________________

* Effectively January 2016, ASU 2015-3 issued by FASB requires entities to present the issuance costs of bonds in the balance sheet as a direct deduction from the related bonds rather than assets. Accordingly, the Company retrospectively reclassified RMB25.3 million of issuance cost of bonds from other non-current assets into convertible bonds as of December 31, 2015.

YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31,
2015
December 31,
2015
March 31,
2016
March 31,
2016
RMB RMB RMB US$
Net revenues
Internet value-added service
—Online music and entertainment 590,055 1,144,998 919,084 142,538
—Online games 231,748 172,398 171,110 26,537
—Online dating 131,836 189,194 211,226 32,758
—Other IVAS 157,197 325,427 310,428 48,143
Other revenues 39,426 67,827 37,470 5,811
Total net revenue 1,150,262 1,899,844 1,649,318 255,787
Cost of revenues(1) (672,735) (1,168,239) (1,060,531) (164,474)
Gross profit 477,527 731,605 588,787 91,313
Operating expenses(1)
Research and development expenses (122,988) (152,678) (179,648) (27,861)
Sales and marketing expenses (51,543) (114,174) (77,961) (12,091)
General and administrative expenses (59,531) (87,788) (83,407) (12,935)
Total operating expenses (234,062) (354,640) (341,016) (52,887)
Other income 760 32,814 8,905 1,381
Operating income 244,225 409,779 256,676 39,807
Other non-operating expenses (2,165) - - -
Foreign currency exchange (losses)gains, net (5,084) 187 237 37
Interest expense (18,185) (32,016) (20,394) (3,163)
Interest income 47,268 26,185 13,649 2,117
Income before income tax expenses 266,059 404,135 250,168 38,798
Income tax expenses (44,474) (51,561) (49,622) (7,696)
Income before share of income in equity method investments, net of income taxes 221,585 352,574 200,546 31,102
Share of income in equity method investments, net of income taxes 5,001 3,233 5,774 895
Net income 226,586 355,807 206,320 31,997
Less: Net loss attributable to non-controlling interest (376) (3,409) (2,019) (313)
Net income attributable to YY Inc. 226,962 359,216 208,339 32,310


YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31,
2015
December 31,
2015
March 31,
2016
March 31,
2016
RMBRMB RMB US$
Net income attributable to YY Inc. 226,962 359,216 208,339 32,310
Other comprehensive income (loss)
Foreign currency translation adjustments, net of nil tax 4,071 (360) 350 54
Comprehensive income attributable to YY Inc. 231,033 358,856 208,689 32,364
Net income per ADS
—Basic 3.94 6.42 3.72 0.58
—Diluted 3.83 6.24 3.65 0.57
Weighted average number of ADS used in calculating net income per ADS
—Basic 57,532,882 55,976,338 56,063,449 56,063,449
—Diluted 59,291,664 60,655,008 57,137,915 57,137,915

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

Three Months Ended
March 31,
2015
December 31,
2015
March 31,
2016
March 31,
2016
RMB RMB RMB US$
Cost of revenues 4,432 8,871 8,612 1,336
Research and development expenses 11,940 29,240 27,300 4,234
Sales and marketing expenses 743 1,089 839 130
General and administrative expenses 14,729 22,009 17,179 2,664


YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31,
2015
December 31,
2015
March 31,
2016
March 31,
2016
RMB RMB RMB US$
Operating income 244,225 409,779 256,676 39,807
Share-based compensation expenses 31,844 61,209 53,930 8,364
Non-GAAP operating income 276,069 470,988 310,606 48,171
Net income attributable to YY Inc. 226,962 359,216 208,339 32,310
Share-based compensation expenses 31,844 61,209 53,930 8,364
Non-GAAP net income attributable to YY Inc. 258,806 420,425 262,269 40,674
Non-GAAP net income per ADS
—Basic 4.50 7.51 4.68 0.73
—Diluted 4.36 7.25 4.59 0.71
Weighted average number of ADS used in calculating Non-GAAP net income per ADS
—Basic 57,532,882 55,976,338 56,063,449 56,063,449
—Diluted 59,291,664 60,655,008 57,137,915 57,137,915


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2016
YY IVAS OthersYY IVAS
and others
Huya
broadcasting
100
Education
TotalTotal
RMB RMBRMBRMBRMBRMBUS$
Net revenues
Internet value-added service
—Online music and entertainment 919,084 - 919,084 - - 919,084 142,538
—Online games 171,110 - 171,110 - - 171,110 26,537
—Online dating 211,226 - 211,226 - - 211,226 32,758
—Other IVAS 192,754 - 192,754 117,674 - 310,428 48,143
Other revenues - 16,282 16,282 - 21,188 37,470 5,811
Total net revenue 1,494,174 16,282 1,510,456 117,674 21,188 1,649,318 255,787
Cost of revenues(1) (844,273) (193,066) (23,192) (1,060,531) (164,474)
Gross profit (loss) 666,183 (75,392) (2,004) 588,787 91,313
Operating expenses(1)
Research and development expenses (143,351) (24,257) (12,040) (179,648) (27,861)
Sales and marketing expenses (52,558) (10,788) (14,615) (77,961) (12,091)
General and administrative expenses (68,658) (11,333) (3,416) (83,407) (12,935)
Total operating expenses (264,567) (46,378) (30,071) (341,016) (52,887)
Other income 8,905 - - 8,905 1,381
Operating income (loss) 410,521 (121,770) (32,075) 256,676 39,807

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

Three Months Ended
March 31, 2016
YY IVAS and
others
Huya
broadcasting
100
Education
Total Total
RMB RMB RMB RMB US$
Cost of revenues 7,802 723 87 8,612 1,336
Research and development expenses 22,008 2,876 2,416 27,300 4,234
Sales and marketing expenses 803 36 - 839 130
General and administrative expenses 13,015 4,157 7 17,179 2,664


YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2016
YY IVAS
and others
Huya
broadcasting
100
Education
TotalTotal
RMBRMBRMB RMBUS$
Operating income (loss) 410,521 (121,770) (32,075)256,676 39,807
Share-based compensation expenses 43,628 7,792 2,510 53,930 8,364
Non-GAAP operating income (loss) 454,149 (113,978) (29,565) 310,606 48,171


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
December 31, 2015
YY IVAS OthersYY IVAS
and others
Huya
broadcasting
100
Education
TotalTotal
RMB RMBRMBRMBRMBRMBUS$
Net revenues
Internet value-added service
—Online music and entertainment 1,144,998 - 1,144,998 - - 1,144,998 176,757
—Online games 172,398 - 172,398 - - 172,398 26,614
—Online dating 189,194 - 189,194 - - 189,194 29,207
—Other IVAS 191,781 - 191,781 133,646 - 325,427 50,237
Other revenues - 31,473 31,473 - 36,354 67,827 10,471
Total net revenue 1,698,371 31,473 1,729,844 133,646 36,354 1,899,844 293,286
Cost of revenues(1) (930,954) (203,297) (33,988) (1,168,239) (180,345)
Gross profit (loss) 798,890 (69,651) 2,366 731,605 112,941
Operating expenses(1)
Research and development expenses (124,330) (20,131) (8,217) (152,678) (23,569)
Sales and marketing expenses (94,192) (11,215) (8,767) (114,174) (17,625)
General and administrative expenses (71,847) (6,926) (9,015) (87,788) (13,552)
Total operating expenses (290,369) (38,272) (25,999) (354,640) (54,746)
Other income 32,814 - - 32,814 5,066
Operating income (loss) 541,335 (107,923) (23,633) 409,779 63,261

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

Three Months Ended
December 31, 2015
YY IVAS and
others
Huya
broadcasting
100
Education
Total Total
RMB RMB RMB RMB US$
Cost of revenues 8,104 639 128 8,871 1,369
Research and development expenses 24,373 2,246 2,621 29,240 4,514
Sales and marketing expenses 938 151 - 1,089 168
General and administrative expenses 17,430 146 4,433 22,009 3,398


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, 2015
YY IVAS
and others
Huya
broadcasting
100
Education
TotalTotal
RMBRMBRMB RMBUS$
Operating income (loss) 541,335 (107,923) (23,633) 409,779 63,261
Share-based compensation expenses 50,845 3,182 7,182 61,209 9,449
Non-GAAP operating income (loss) 592,180 (104,741) (16,451) 470,988 72,710


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2015
YY IVAS OthersYY IVAS
and others
Huya
broadcasting
100
Education
TotalTotal
RMB RMBRMBRMBRMBRMBUS$
Net revenues
Internet value-added service
—Online music and entertainment 590,055 - 590,055 - - 590,055 95,186
—Online games 231,748 - 231,748 - - 231,748 37,385
—Online dating 131,836 - 131,836 - - 131,836 21,267
—Other IVAS 102,221 - 102,221 54,976 - 157,197 25,358
Other revenues - 16,844 16,844 - 22,582 39,426 6,360
Total net revenue 1,055,860 16,844 1,072,704 54,976 22,582 1,150,262 185,556
Cost of revenues(1) (525,338) (122,919) (24,478) (672,735) (108,523)
Gross profit (loss) 547,366 (67,943) (1,896) 477,527 77,033
Operating expenses(1)
Research and development expenses (100,402) (13,530) (9,056) (122,988) (19,840)
Sales and marketing expenses (44,560) (2,006) (4,977) (51,543) (8,315)
General and administrative expenses (48,889) (8,550) (2,092) (59,531) (9,603)
Total operating expenses (193,851) (24,086) (16,125) (234,062) (37,758)
Other income 760 - - 760 123
Operating income (loss) 354,275 (92,029) (18,021) 244,225 39,398

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

Three Months Ended
March 31, 2015
YY IVAS and
others
Huya
broadcasting
100
Education
Total Total
RMB RMB RMB RMB US$
Cost of revenues 3,844 513 75 4,432 715
Research and development expenses 9,911 939 1,090 11,940 1,926
Sales and marketing expenses 729 14 - 743 120
General and administrative expenses 11,884 2,831 14 14,729 2,376


YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2015
YY IVAS
and others
Huya
broadcasting
100
Education
TotalTotal
RMBRMBRMBRMBUS$
Operating income (loss) 354,275 (92,029) (18,021) 244,225 39,398
Share-based compensation expenses 26,368 4,297 1,179 31,844 5,137
Non-GAAP operating income (loss) 380,643 (87,732) (16,842) 276,069 44,535


Investor Relations Contact YY Inc. Yuffie Fu Tel: +86 (20) 2916-2000 Email:IR@YY.com ICR, Inc. Vera Tang Tel: +1 (646) 915-1611 Email:IR@YY.com

Source:YY Inc.