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YY Reports Second Quarter 2017 Unaudited Financial Results

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

Second Quarter 2017 Highlights

  • Net revenues increased by 31.7% to RMB2,609.0 million (US$384.8 million) from RMB1,980.8 million in the corresponding period of 2016.
  • Net income attributable to YY increased by 67.1% to RMB573.7 million (US$84.6 million) from RMB343.3 million in the corresponding period of 2016.
  • Non-GAAP net income attributable to YY1 increased by 55.2% to RMB597.2 million (US$88.1 million) from RMB384.8 million in the corresponding period of 2016.

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

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We achieved substantial financial growth once again in the second quarter of 2017. Our total net revenues increased by 31.7% year over year to RMB2,609.0 million, exceeding the high end of our previous guidance range. This was primarily driven by the 42.9% year-over-year increase in our live streaming revenues, which reached RMB2,373.4 million in the quarter. Both YY Live and Huya broadcasting contributed to our rapid revenue growth. We have experienced an acceleration in YY Live’s revenue growth after we embedded into YY Live a new functionality called Happy Contest, which enables live streaming hosts to connect and compete with each other across different showrooms. Non-GAAP net income attributable to YY grew by 55.2% year over year to RMB597.2 million in the second quarter of 2017, of which Huya’s Non-GAAP operating losses further shrank year over year from RMB146.6 million to RMB11.1 million. Our Non-GAAP net margin2 expanded from 19.4% in the second quarter of 2016 to 22.9% in the second quarter of 2017, thanks to our increasing operating leverage and product cost and expense control. We remain committed to expanding our market share and sustaining our rapid growth. At the same time, we seek to further grow our revenue and closely monitor our spending to ensure effective return on investments.”

Second Quarter 2017 Financial Results

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

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

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

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

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

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

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

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

Non-GAAP operating income3 increased by 34.8% to RMB622.8 million (US$91.9 million) in the second quarter of 2017 from RMB461.9 million in the corresponding period of 2016. Non-GAAP operating margin4 increased to 23.9% in the second quarter of 2017 from 23.3% in the corresponding period of 2016.

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

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

NET INCOME PER ADS
Diluted net income per ADS5 increased by 67.2% to RMB9.98 (US$1.47) in the second quarter of 2017 from RMB5.97 in the corresponding period of 2016.

Non-GAAP diluted net income per ADS6 increased by 56.2% to RMB10.39 (US$1.53) in the second quarter of 2017 from RMB6.65 in the corresponding period of 2016.

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

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

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

Conference Call Information
The Company will hold a conference call on August 10, 2017 at 8:00 am Eastern Time or 8:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:+1-845-675-0438
International Toll Free: +1-855-500-8701
China Domestic:400-1200-654
Hong Kong: +852-3018-6776
Conference ID: # 60746171

The replay will be accessible through August 18, 2017 by dialing the following numbers:

United States Toll Free:+1-855-452-5696
International: +61-2-9003-4211
Conference ID: # 60746171

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

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

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

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

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

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

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

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

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

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

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


YY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS and per ADS data)
December 31,
2016
June 30,
2017
June 30,
2017
RMB RMB US$
Assets
Current assets
Cash and cash equivalents 1,579,743 1,349,141 199,009
Short-term deposits 3,751,519 1,890,000 278,790
Restricted short-term deposits - 1,000,000 147,508
Short-term investment - 14,070 2,075
Accounts receivable, net 169,571 218,558 32,239
Inventory 2,266 1,223 180
Amount due from related parties 135,245 90,474 13,346
Prepayments and other current assets 224,732 141,504 20,875
Total current assets 5,863,076 4,704,970 694,022
Non-current assets
Deferred tax assets(1) 117,811 111,104 16,389
Investments 918,602 1,105,771 163,110
Property and equipment, net 838,750 921,561 135,937
Land use rights, net 1,872,394 1,848,440 272,659
Intangible assets, net 58,926 35,050 5,170
Goodwill 14,300 14,277 2,106
Other non-current assets 101,933 73,192 10,796
Total non-current assets 3,922,716 4,109,395 606,167
Total assets 9,785,792 8,814,365 1,300,189
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities
Convertible bonds 2,768,469 - -
Accounts payable 137,107 108,700 16,034
Deferred revenue 430,683 506,806 74,758
Advances from customers 56,152 65,149 9,610
Income taxes payable 140,754 121,871 17,977
Accrued liabilities and other current liabilities 1,066,038 1,051,400 155,091
Amounts due to related parties 91,245 41,110 6,063
Short-term loan - 609,756 89,944
Total current liabilities 4,690,448 2,504,792 369,477
Non-current liabilities
Convertible bonds - 6,775 999
Deferred revenue 25,459 28,330 4,179
Deferred tax liabilities 8,058 7,620 1,124
Total non-current liabilities 33,517 42,725 6,302
Total liabilities 4,723,965 2,547,517 375,779


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

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


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


YY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED)
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended Six Months Ended
June 30,
2016
March 31,
2017
June 30,
2017
June 30,
2017
June 30,
2016
June 30,
2017
June 30,
2017
RMB RMBRMBUS$ RMBRMBUS$
Net income attributable to YY Inc. 343,286 543,154 573,708 84,627 551,625
1,116,862 164,747
Other comprehensive income :
Unrealized gain (loss) of available-for-sales securities, net of nil tax 177,152 42,236 (39,818) (5,873) 177,152
2,418 357
Foreign currency translation adjustments, net of nil tax (1,459) 619 (712) (105) (1,109) (93) (14)
Comprehensive income attributable to YY Inc. 518,979 586,009 533,178 78,649 727,668
1,119,187 165,090


Net income per ADS
—Basic 6.10 9.58 10.09 1.49 9.82 19.68 2.90
—Diluted 5.97 9.25 9.98 1.47 9.65 19.21 2.83
Weighted average number of ADS used in calculating net income per ADS
—Basic 56,244,094 56,675,919 56,832,278 56,832,278 56,153,766 56,757,452 56,757,452
—Diluted 60,761,097 60,975,038 57,488,989 57,488,989 57,141,627 59,234,872 59,234,872

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

Three Months Ended Six Months Ended
June 30,
2016
March 31,
2017
June 30,
2017
June 30,
2017
June 30,
2016
June 30,
2017
June 30,
2017
RMBRMBRMBUS$ RMBRMBUS$
Cost of revenues 1413,6233,021446 8,7536,644980
Research and development expenses 26,47311,40410,4921,548 53,77321,8963,230
Sales and marketing expenses 94150930345 1,780812120
General and administrative expenses 13,9347,0579,6491,423 31,11316,7062,464


YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended Six Months Ended
June 30,
2016
March 31,
2017
June 30,
2017
June 30,
2017
June 30,
2016
June 30,
2017
June 30,
2017
RMB RMB RMB US$ RMB RMB US$
Operating income 420,388 616,957 599,374 88,413 677,064 1,216,331 179,418
Share-based compensation expenses 41,489 22,593 23,465 3,462 95,419 46,058 6,794
Non-GAAP operating income 461,877 639,550 622,839 91,875 772,483 1,262,389 186,212
Net income attributable to YY Inc. 343,286 543,154 573,708 84,627 551,625 1,116,862 164,747
Share-based compensation expenses 41,489 22,593 23,465 3,462 95,419 46,058 6,794
Non-GAAP net income attributable to YY Inc. 384,775 565,747 597,173 88,089 647,044 1,162,920 171,541


Non-GAAP net income per ADS
—Basic 6.84 9.98 10.51 1.55 11.52 20.49 3.02
—Diluted 6.65 9.62 10.39 1.53 11.32 19.98 2.95
Weighted average number of ADS used in calculating Non-GAAP net income per ADS
—Basic 56,244,094 56,675,919 56,832,278 56,832,278 56,153,766 56,757,452 56,757,452
—Diluted 60,761,097 60,975,038 57,488,989 57,488,989 57,141,627 59,234,872 59,234,872


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
June 30, 2017
YY Live(2)Huya(2)TotalTotal
RMBRMBRMBUS$
Net revenues
Live streaming 1,931,569 441,828 2,373,397 350,095
Online games 147,010 6,949 153,959 22,710
Membership 50,014 2,190 52,204 7,701
Others 19,034 10,397 29,431 4,341
Total net revenue 2,147,627 461,364 2,608,991 384,847
Cost of revenues(1) (1,159,554) (403,891) (1,563,445) (230,620)
Gross profit 988,073 57,473 1,045,546 154,227
Operating expenses(1)
Research and development expenses (132,223) (35,136) (167,359) (24,687)
Sales and marketing expenses (183,119) (21,315) (204,434) (30,156)
General and administrative expenses (86,678) (17,867) (104,545) (15,421)
Total operating expenses (402,020) (74,318) (476,338) (70,264)
Other income 30,156 10 30,166 4,450
Operating income (loss) 616,209 (16,835) 599,374 88,413

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

Three Months Ended
June 30, 2017
YY LiveHuyaTotalTotal
RMBRMB RMB US$
Cost of revenues 2,3726493,021446
Research and development expenses 8,2292,26310,4921,548
Sales and marketing expenses 2822130345
General and administrative expenses 6,8722,7779,6491,423

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

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

YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
June 30, 2017
YY LiveHuya Total Total
RMBRMB RMB US$
Operating income (loss) 616,209 (16,835) 599,374 88,413
Share-based compensation expenses 17,755 5,710 23,465 3,462
Non-GAAP operating income (loss) 633,964 (11,125) 622,839 91,875


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2017
YY LiveHuyaTotalTotal
RMBRMBRMBUS$
Net revenues
Live streaming 1,674,786 382,641 2,057,427 298,906
Online games 133,731 6,017 139,748 20,303
Membership 43,776 1,645 45,421 6,599
Others 15,766 8,596 24,362 3,539
Total net revenue 1,868,059 398,899 2,266,958 329,347
Cost of revenues(1) (994,233) (382,762) (1,376,995) (200,052)
Gross profit 873,826 16,137 889,963 129,295
Operating expenses(1)
Research and development expenses (123,169) (42,392) (165,561) (24,053)
Sales and marketing expenses (73,371) (15,231) (88,602) (12,872)
General and administrative expenses (66,462) (10,190) (76,652) (11,136)
Total operating expenses (263,002) (67,813) (330,815) (48,061)
Gain on deconsolidation and disposal of subsidiaries 37,989 - 37,989 5,519
Other income 10,299 9,521 19,820 2,879
Operating income (loss) 659,112 (42,155) 616,957 89,632

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

Three Months Ended
March 31, 2017
YY LiveHuya Total Total
RMBRMB RMB US$
Cost of revenues 2,3801,243 3,623 526
Research and development expenses 8,3493,055 11,404 1,657
Sales and marketing expenses 305204 509 74
General and administrative expenses 4,5682,489 7,057 1,025


YY INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2017
YY LiveHuya Total Total
RMBRMB RMB US$
Operating income (loss) 659,112 (42,155) 616,957 89,632
Share-based compensation expenses 15,602 6,991 22,593 3,282
Non-GAAP operating income (loss) 674,714 (35,164) 639,550 92,914


YY INC.
UNAUDITED SEGMENT REPORT
(All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
June 30, 2016
YY LiveHuya 100 Education Total Total
RMBRMB RMB RMB US$
Net revenues
Live streaming 1,517,983 143,077 - 1,661,060 249,938
Online games 188,261 - - 188,261 28,327
Membership 72,070 - - 72,070 10,844
Others 28,749 - 30,637 59,386 8,935
Total net revenue 1,807,063 143,077 30,637 1,980,777 298,044
Cost of revenues(1) (955,655) (226,242) (26,443) (1,208,340) (181,817)
Gross profit (loss) 851,408 (83,165) 4,194 772,437 116,227
Operating expenses(1)
Research and development expenses (114,459) (49,522) (8,247) (172,228) (25,915)
Sales and marketing expenses (60,369) (14,916) (13,414) (88,699) (13,346)
General and administrative expenses (69,843) (17,441) (2,871) (90,155) (13,566)
Total operating expenses (244,671) (81,879) (24,532) (351,082) (52,827)
Gain on deconsolidation and disposal of subsidiaries (23,474) - - (23,474) (3,532)
Other income 22,507 - - 22,507 3,387
Operating income (loss) 605,770 (165,044) (20,338) 420,388 63,255

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

Three Months Ended
June 30, 2016
YY LiveHuya100 Education Total Total
RMBRMB RMB RMB US$
Cost of revenues (1,994)2,003132 141 21
Research and development expenses 15,910 8,5671,996 26,473 3,983
Sales and marketing expenses 714 227- 941 142
General and administrative expenses 6,385 7,649(100) 13,934 2,097


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

Three Months Ended
June 30, 2016
YY LiveHuya100 Education Total Total
RMBRMBRMB RMB US$
Operating income (loss) 605,770 (165,044) (20,338) 420,388 63,255
Share-based compensation expenses 21,015 18,446 2,028 41,489 6,243
Non-GAAP operating income (loss) 626,785 (146,598) (18,310) 461,877 69,498


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

Source:YY Inc.