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YY Reports Fourth Quarter and Full Year 2016 Unaudited Financial Results

GUANGZHOU, China, March 14, 2017 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ:YY) ("YY" or the "Company"), a live streaming platform, today announced its unaudited financial results for the fourth quarter and full year 2016.

Fourth Quarter 2016 Highlights

  • Net revenues increased by 30.8% to RMB2,484.2 million (US$357.8 million) from RMB1,899.8 million in the corresponding period of 2015.
  • Net income attributable to YY increased by 59.3% to RMB572.3 million (US$82.4 million) from RMB359.2 million in the corresponding period of 2015.
  • Non-GAAP net income attributable to YY increased by 42.4% to RMB598.6 million (US$86.2 million) from RMB420.4 million in the corresponding period of 2015.

Full Year 2016 Highlights

  • Net revenues increased by 39.1% to RMB8,204.1 million (US$1,181.6 million) from RMB5,897.2 million in 2015.
  • Net income attributable to YY increased by 47.5% to RMB1,523.9 million (US$219.5 million) from RMB1,033.2 million in 2015.
  • Non-GAAP net income attributable to YY increased by 38.0% to RMB1,681.2 million (US$242.1 million) from RMB1,218.6 million in 2015.

“We are delighted to have delivered another quarter of solid results in the fourth quarter of 2016,” said Mr. Zhou Chen, Chief Executive Officer of YY. “In addition to our robust financial performance in the fourth quarter, our mobile MAU reached 56.0 million, representing a 4.8% increase from the previous quarter, and our PC MAU was stable at 96.1 million. Our solid financial results and user numbers are due to the continued strengthening of our product and content offerings and our dedication to the development of new and diverse market content. For example, the introduction of new vertical content like YY Live’s outdoor and travel and the expansion of our mobile game live broadcasting content for the Huya broadcasting platform are key components for expanding our content offering. Additionally, in order to further strengthen user stickiness across our platform, we began to encourage more users from both YY Live and Huya broadcasting to share more live broadcasting sessions based on social relationships and locations. Going forward, we will introduce even more content verticals to YY, and in turn, we are confident that we can further expand our market share and maintain our leading position in this massive growth industry.”

Mr. Eric He, Chief Financial Officer of YY, further commented, “In the fourth quarter of 2016, we continued to see strong growth momentum in our revenues, with total net revenues increasing by 30.8% year over year to RMB2.5 billion, primarily attributable to the healthy growth in our total number of live streaming paying users which grew by 91.9% year over year to 5.2 million. Importantly, despite the intense competitive landscape in the live streaming industry, our live streaming revenues for the full year of 2016 witnessed a remarkable 54.8% year over year growth to over seven billion, and our Non-GAAP profit margin for the year exceeded 20%, which is a testament to the solid strength and long-term competitiveness of both of our platforms. As Huya broadcasting’s revenue growth continues to accelerate, its margins continue to improve, which ultimately strengthens our long-term profitability.”

Fourth Quarter 2016 Financial Results

NET REVENUES1
Net revenues increased by 30.8% to RMB2,484.2 million (US$357.8 million) in the fourth quarter of 2016 from RMB1,899.8 million in the corresponding period of 2015, primarily driven by the increase in live streaming revenues. Live streaming revenues increased by 41.7% to RMB2,218.2 million (US$319.5 million) in the fourth quarter of 2016 from RMB1,565.2 million in the corresponding period of 2015. Live streaming revenues from the YY Live segment in the fourth quarter of 2016 was RMB1,883.8 million (US$271.3 million) and live streaming revenues from the Huya segment in the fourth quarter of 2016 was RMB334.3 million (US$48.2 million).

Revenues from online games were RMB125.4 million (US$18.1 million) in the fourth quarter of 2016, as compared to RMB172.4 million in the corresponding period of 2015, which primarily reflected the continued softness in China’s web game market.

Revenues from membership were RMB74.7 million (US$10.8 million) in the fourth quarter of 2016, as compared to RMB80.8 million in the corresponding period of 2015.

Other revenues, mainly including revenues from the Company's online education platform and online advertising revenues, were RMB65.9 million (US$9.5 million) in the fourth quarter of 2016, compared with RMB81.4 million in the corresponding period of 2015.

COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 33.5% to RMB1,559.6 million (US$224.6 million) in the fourth quarter of 2016 from RMB1,168.2 million in the corresponding period of 2015, primarily attributable to an increase in revenue-sharing fees and content costs to RMB1,222.2 million (US$176.0 million) in the fourth quarter of 2016 from RMB807.3 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 slightly higher than the increase in live streaming revenues due to more diverse content offerings in the fourth quarter. In addition, bandwidth costs slightly increased to RMB168.9 million (US$24.3 million) in the fourth quarter of 2016 from RMB161.1 million in the corresponding period of 2015, primarily reflecting the continued user base expansion and video quality improvements, but partially offset by the Company’s improved efficiency and pricing terms.

Gross profit increased by 26.4% to RMB924.6 million (US$133.2 million) in the fourth quarter of 2016 from RMB731.6 million in the corresponding period of 2015. Gross margin was 37.2% in the fourth quarter of 2016, as compared to 38.5% in the corresponding period of 2015.

OPERATING INCOME
Operating expenses for the fourth quarter of 2016 were RMB495.5 million (US$71.4 million), as compared to RMB354.6 million in the corresponding period of 2015.

Operating income in the fourth quarter of 2016 increased by 51.7% to RMB621.5 million (US$89.5 million) from RMB409.8 million in the corresponding period of 2015. Operating margin in the fourth quarter of 2016 was 25.0%, as compare to 21.6% in the corresponding period of 2015.

Non-GAAP operating income2 increased by 37.6% to RMB647.9 million (US$93.3 million) in the fourth quarter of 2016 from RMB471.0 million in the corresponding period of 2015. Non-GAAP operating margin3 was 26.1% in the fourth quarter of 2016, as compared to 24.8% in the corresponding period of 2015.

NET INCOME
Net income attributable to YY Inc. increased by 59.3% to RMB572.3 million (US$82.4 million) in the fourth quarter of 2016 from RMB359.2 million in the corresponding period of 2015. Net margin in the fourth quarter of 2016 increased to 23.0% from 18.9% in the corresponding period of 2015.

Non-GAAP net income attributable to YY Inc.4 increased by 42.4% to RMB598.6 million (US$86.2 million) from RMB420.4 million in the corresponding period of 2015. Non-GAAP net margin5 in the fourth quarter of 2016 increased to 24.1% from 22.1% in the corresponding period of 2015.

NET INCOME PER ADS
Diluted net income per ADS6 increased by 56.1% to RMB9.74 (US$1.40) in the fourth quarter of 2016 from RMB6.24 in the corresponding period of 2015.

Non-GAAP diluted net income per ADS7 increased by 40.3% to RMB10.17 (US$1.46) in the fourth quarter of 2016 from RMB7.25 in the corresponding period of 2015.

BALANCE SHEET AND CASH FLOWS
As of December 31, 2016, the Company had cash and cash equivalents of RMB1,579.7 million (US$227.5 million) and short-term deposits of RMB3,751.5 million (US$540.3 million). For the fourth quarter of 2016, net cash from operating activities was RMB996.5 million (US$143.5 million).

SHARES OUTSTANDING
As of December 31, 2016, the Company had a total of 1,109.7 million common shares outstanding, or the equivalent of 55.5 million ADSs outstanding.

FULL YEAR 2016 FINANCIAL RESULTS
For the full year of 2016, net revenues increased by 39.1% to RMB8,204.1 million (US$1,181.6 million) from RMB5,897.2 million in 2015, primarily driven by a 54.8% year-over-year increase in live streaming revenues.

Net income attributable to YY Inc. for the full year of 2016 increased by 47.5% to RMB1,523.9 million (US$219.5 million) from RMB1,033.2 million in 2015. Net margin for the full year of 2016 increased to 18.6% from 17.5% in 2015.

Non-GAAP net income attributable to YY Inc. for the full year of 2016 increased by 38.0% to RMB1,681.2 million (US$242.1 million) from RMB1,218.6 million in 2015. Non-GAAP net margin was 20.5% for the full year of 2016, as compared to 20.7% for the full year of 2015.

Diluted net income per ADS for the full year of 2016 increased to RMB26.40 (US$3.80) from RMB17.96 in the prior year. Non-GAAP diluted net income per ADS for the full year of 2016 increased to RMB28.98 (US$4.17) from RMB21.18 in the prior year.

For the full year of 2016, net cash from operating activities was RMB2,421.1 million (US$348.7 million).

Business Outlook
For the first quarter of 2017, the Company expects its net revenues to be between RMB2.2 billion and RMB2.3 billion, representing a year-over-year growth of approximately 33.4% to 39.5%. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Conference Call Information
The Company will hold a conference call on March 14, 2017 at 8:00 am Eastern Time or 8:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:+1-845-675-0438
International Toll Free: +1-855-500-8701
China Domestic:400-1200-654
Hong Kong: +852-3018-6776
Conference ID: # 80888723

The replay will be accessible through March 22, 2017 by dialing the following numbers:

United States Toll Free:+1-855-452-5696
International: +61-2-9003-4211
Conference ID: # 80888723

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 RMB6.9430 to US$1.00, the noon buying rate in effect on December 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 live streaming platform that enables users to interact in live 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 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. 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” near the end of this release.

1From the third quarter of 2016, the Company changed revenue segmenting to live streaming, online games, membership and others. The Company believes this new method better captures the way it generates revenues and is more transparent and reliable than breaking down revenues by business lines as previously presented.

2Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses.

3Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues.

4Non-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.

5Non-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.

6ADS 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.

7Non-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
December 31,
2016
December 31,
2016
RMB RMB US$
Assets
Current assets
Cash and cash equivalents 928,934 1,579,743 227,530
Short-term deposits 1,894,946 3,751,519 540,331
Restricted short-term deposits 389,221 - -
Accounts receivable, net 132,353 169,571 24,423
Inventory 14,385 2,266 326
Amount due from related parties 5,297 135,245 19,479
Prepayments and other current assets 147,823 224,732 32,369
Deferred tax assets 116,921 107,309 15,456
Total current assets 3,629,880 5,970,385 859,914
Non-current assets
Deferred tax assets 3,363 10,502 1,513
Investments 567,557 918,602 132,306
Property and equipment, net 843,449 838,750 120,805
Land use rights, net - 1,872,394 269,681
Intangible assets, net 146,437 58,926 8,487
Goodwill 151,638 14,300 2,060
Other non-current assets 1,960,430 101,933 14,681
Total non-current assets 3,672,874 3,815,407 549,533
Total assets 7,302,754 9,785,792 1,409,447
Liabilities ,mezzanine equity and shareholders’ equity
Current liabilities
Convertible bonds(1) - 2,768,469 398,742
Accounts payable 129,819 137,107 19,748
Deferred revenue 385,300 430,683 62,031
Advances from customers 55,086 56,152 8,088
Income taxes payable 107,403 140,754 20,273
Accrued liabilities and other current liabilities 681,889 1,066,038 153,541
Amounts due to related parties 24,917 91,245 13,142
Total current liabilities 1,384,414 4,690,448 675,565
Non-current liabilities
Convertible bonds(2) 2,572,119 - -
Deferred revenue 20,752 25,459 3,667
Deferred tax liabilities 16,817 8,058 1,161
Total non-current liabilities 2,609,688 33,517 4,828
Total liabilities 3,994,102 4,723,965 680,393


YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
December 31,
2015
December 31,
2016
December 31,
2016
RMB RMB US$
Mezzanine equity 61,833 9,272 1,335
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 750,115,028 shares issued and outstanding as of December 31, 2015 and December 31, 2016, respectively) 43 44 6
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 369,557,976 and 359,557,976 shares issued and outstanding as of December 31, 2015 and December 31, 2016, respectively) 27 26 4
Additional paid-in capital 2,011,799 2,165,766 311,935
Statutory reserves 56,507 58,857 8,477
Retained earnings 1,207,168 2,728,736 393,020
Accumulated other comprehensive (loss) income (36,385) 93,066 13,404
Non-controlling interests 7,660 6,060 873
Total shareholders’ equity 3,246,819 5,052,555 727,719
Total liabilities, mezzanine equity and
shareholders’ equity 7,302,754 9,785,792 1,409,447

_______________________________________________

(1) Convertible bonds represent Convertible Senior Notes which may be redeemed within one year.
(2) 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 Twelve Months Ended
December
31
,
2015
September
30,
2016
December
31,
2016
December
31
,
2016
December
31,

2015
December
31,

2016
December
31,

2016
RMBRMBRMBUS$ RMBRMBUS$
Net revenues
Live streaming 1,565,230 1,790,373 2,218,190 319,486 4,539,857 7,027,227 1,012,131
Online games 172,398 149,530 125,424 18,065 771,882 634,325 91,362
Membership 80,828 68,768 74,650 10,752 291,310 284,860 41,028
Others 81,388 81,134 65,886 9,490 294,200 257,638 37,108
Total net revenue 1,899,844 2,089,805 2,484,150 357,793 5,897,249 8,204,050 1,181,629
Cost of revenues(1) (1,168,239) (1,275,002) (1,559,557) (224,623) (3,579,744) (5,103,430) (735,047)
Gross profit 731,605 814,803 924,593 133,170 2,317,505 3,100,620 446,582
Operating expenses(1)
Research and development expenses (152,678) (163,236) (160,118) (23,062) (548,799) (675,230) (97,253)
Sales and marketing expenses (114,174) (109,075) (111,533) (16,064) (312,870) (387,268) (55,778)
General and administrative expenses (87,788) (102,683) (206,192) (29,698) (358,474) (482,437) (69,485)
Goodwill impairment - - (17,665) (2,544) (310,124) (17,665) (2,544)
Fair value change of contingent consideration - - - - 292,471 - -
Total operating expenses (354,640) (374,994) (495,508) (71,368) (1,237,796) (1,562,600) (225,060)
Gain on deconsolidation and disposal of subsidiaries - - 127,434 18,354 - 103,960 14,973
Other income 32,814 33,065 65,027 9,366 82,300 129,504 18,652
Operating income 409,779 472,874 621,546 89,522 1,162,009 1,771,484 255,147
Gain on partial disposal of associates - - 25,061 3,610 - 25,061 3,610
Interest expense (32,016) (20,357) (20,758) (2,990) (97,125) (81,085) (11,679)
Interest income 26,185 17,162 26,480 3,814 137,892 67,193 9,678
Foreign currency exchange gains (losses), net 187 (16) 385 55 (38,099) 1,158 167
Other non-operating expense - - - - (2,165) - -
Income before income tax expenses 404,135 469,663 652,714 94,011 1,162,512 1,783,811 256,923
Income tax expenses (51,561) (69,909) (85,804) (12,358) (178,327) (280,514) (40,402)
Income before share of income (loss) in equity method investments, net of income taxes 352,574 399,754 566,910 81,653 984,185 1,503,297 216,521
Share of income (loss) in equity method investments, net of income taxes 3,233 (1,867) 4,400 634 14,120 8,279 1,192
Net Income 355,807 397,887 571,310 82,287 998,305 1,511,576 217,713
Less: Net loss attributable to the non-controlling interest shareholders and the mezzanine classified non-controlling interest shareholders (3,409) (2,152) (944) (136) (34,938) (12,342) (1,778)
Net income attributable to YY Inc. 359,216 400,039 572,254 82,423 1,033,243 1,523,918 219,491


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 Twelve Months Ended
December
31
,
2015
September
30,
2016
December
31
,
2016
December
31,
2016
December
31,

2015
December
31,

2016
December
31,

2016
RMBRMBRMBUS$ RMBRMBUS$
Net income attributable to YY Inc. 359,216 400,039 572,254 82,423 1,033,243 1,523,918 219,491
Other comprehensive income :
Unrealized gain (loss) of available-for-sales securities - 13,354 (55,738) (8,028) - 134,768 19,411
Foreign currency translation adjustments, net of nil tax (360) (562) (3,646) (525) 4,414 (5,317) (766)
Comprehensive income attributable to YY Inc. 358,856 412,831 512,870 73,870 1,037,657 1,653,369 238,136


Net income per ADS
—Basic 6.42 7.07 10.11 1.46 18.37 27.04 3.89
—Diluted 6.24 6.90 9.74 1.40 17.96 26.40 3.80
Weighted average number of ADS used in calculating net income per ADS
—Basic 55,976,338 56,560,174 56,613,257 56,613,257 56,259,499 56,367,166 56,367,166
—Diluted 60,655,008 60,814,662 60,914,063 60,914,063 57,541,558 60,805,566 60,805,566

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

Three Months Ended Twelve Months Ended
December
31
,
2015
September
30,
2016
December
31
,
2016
December
31
,
2016
December
31,

2015
December
31,

2016
December
31,

2016
RMBRMBRMBUS$ RMBRMBUS$
Cost of revenues 8,8713,7013,440495 23,96315,8942,289
Research and development expenses 29,24011,12013,9232,005 70,95178,81611,352
Sales and marketing expenses 1,089612715103 3,2833,107448
General and administrative expenses 22,00920,0868,2701,191 87,17559,4698,565


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
,
2015
September
30,
2016
December
31
,
2016
December
31
,
2016
December
31,

2015
December
31,

2016
December
31,

2016
RMB RMB RMB US$ RMB RMB US$
Operating income 409,779 472,874 621,546 89,522 1,162,009 1,771,484 255,147
Share-based compensation expenses 61,209 35,519 26,348 3,794 185,372 157,286 22,654
Non-GAAP operating income 470,988 508,393 647,894 93,316 1,347,381 1,928,770 277,801
Net income attributable to YY Inc. 359,216 400,039 572,254 82,423 1,033,243 1,523,918 219,491
Share-based compensation expenses 61,209 35,519 26,348 3,794 185,372 157,286 22,654
Non-GAAP net income attributable to YY Inc. 420,425 435,558 598,602 86,217 1,218,615 1,681,204 242,145


Non-GAAP net income per ADS
—Basic 7.51 7.70 10.57 1.52 21.66 29.83 4.30
—Diluted 7.25 7.48 10.17 1.46 21.18 28.98 4.17
Weighted average number of ADS used in calculating Non-GAAP net income per ADS
—Basic 55,976,338 56,560,174 56,613,257 56,613,257 56,259,499 56,367,166 56,367,166
—Diluted 60,655,008 60,814,662 60,914,063 60,914,063 57,541,558 60,805,566 60,805,566


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
December 31, 2016
YY Live Huya broadcasting 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) (1,160,084) (374,178) (25,295) (1,559,557) (224,623)
Gross profit (loss) 936,783 (34,903) 22,713 924,593 133,170
Operating expenses(1)
Research and development expenses (120,243) (35,831) (4,044) (160,118) (23,062)
Sales and marketing expenses (82,327) (16,281) (12,925) (111,533) (16,064)
General and administrative expenses (186,731) (11,206) (8,255) (206,192) (29,698)
Goodwill impairment (3,861) - (13,804) (17,665) (2,544)
Total operating expenses (393,162) (63,318) (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) 736,082 (98,221) (16,315) 621,546 89,522

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

Three Months Ended
December 31, 2016
YY LiveHuya broadcasting100 EducationTotalTotal
RMBRMBRMBRMBUS$
Cost of revenues 2,2711,105643,440495
Research and development expenses 10,3022,6181,00313,9232,005
Sales and marketing expenses 7087-715103
General and administrative expenses 5,2632,99988,2701,191


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, 2016
YY LiveHuya broadcasting
100 Education
Total Total
RMBRMB
RMB RMB US$
Operating income (loss) 736,082 (98,221) (16,315) 621,546 89,522
Share-based compensation expenses 18,544 6,729 1,075 26,348 3,794
Non-GAAP operating income (loss) 754,626 (91,492) (15,240) 647,894 93,316


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
September 30, 2016

YY Live Huya broadcasting 100 Education Total Total
RMB RMB RMB RMB US$
Net revenues
Live streaming 1,593,495 196,878 - 1,790,373 268,482
Online games 149,530 - - 149,530 22,423
Membership 68,768 - - 68,768 10,312
Others 20,240 - 60,894 81,134 12,167
Total net revenue 1,832,033 196,878 60,894 2,089,805 313,384
Cost of revenues(1) (972,553) (269,407) (33,042) (1,275,002) (191,198)
Gross profit (loss) 859,480 (72,529) 27,852 814,803 122,186
Operating expenses(1)
Research and development expenses (125,637) (31,409) (6,190) (163,236) (24,479)
Sales and marketing expenses (80,373) (10,174) (18,528) (109,075) (16,357)
General and administrative expenses (70,514) (11,557) (20,612) (102,683) (15,398)
Total operating expenses (276,524) (53,140) (45,330) (374,994) (56,234)
Other income 33,065 - - 33,065 4,958
Operating income (loss) 616,021 (125,669) (17,478) 472,874 70,910

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

Three Months Ended
September 30, 2016
YY LiveHuya broadcasting100 EducationTotalTotal
RMBRMB RMB RMB US$
Cost of revenues 2,726 934 41 3,701 555
Research and development expenses 7,985 2,357 778 11,120 1,668
Sales and marketing expenses 586 26 - 612 92
General and administrative expenses 4,383 2,22913,474 20,086 3,012


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, 2016
YY Live Huya broadcasting 100 Education Total Total
RMB RMB RMB RMB US$
Operating income (loss) 616,021 (125,669) (17,478) 472,874 70,910
Share-based compensation expenses 15,680 5,546 14,293 35,519 5,327
Non-GAAP operating income (loss) 631,701 (120,123) (3,185) 508,393 76,237


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
December 31, 2015
YY Live Huya broadcasting 100 Education Total Total
RMB RMB RMB RMB US$
Net revenues
Live streaming 1,431,584 133,646 - 1,565,230 241,630
Online games 172,398 - - 172,398 26,614
Membership 80,828 - - 80,828 12,478
Others 45,034 - 36,354 81,388 12,564
Total net revenue 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 LiveHuya broadcasting100 EducationTotalTotal
RMBRMB RMB RMB US$
Cost of revenues 8,1046391288,8711,369
Research and development expenses 24,3732,2462,62129,2404,514
Sales and marketing expenses 938151- 1,089168
General and administrative expenses 17,4301464,43322,0093,398


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 Live Huya broadcasting 100 Education Total Total
RMB RMB RMB RMB US$
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


Investor Relations Contact YY Inc. Yuffie Fu Tel: +86 (20) 8212-0000 Email: IR@YY.com ICR, Inc. Jessie Fan Tel: +1 (646) 915-1611 Email: IR@YY.com

Source:YY Inc.