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YY Reports First Quarter 2019 Unaudited Financial Results

YY Reports First Quarter 2019 Unaudited Financial Results

GUANGZHOU, China, May 29, 2019 (GLOBE NEWSWIRE) -- YY Inc. (YY) (“YY” or the “Company”), a global social media platform, today announced its unaudited financial results for the first quarter of 2019.  The Company completed the acquisition of Bigo Inc. (“Bigo”) in the first quarter of 2019 and has consolidated Bigo’s financials starting from March 4, 2019.

First Quarter 2019 Financial Highlights

  • Net revenues increased by 47.1% to RMB4,780.6 million (US$705.3 million) from RMB3,248.9 million in the corresponding period of 2018.
  • Net income attributable to controlling interest of YY Inc.1 increased by 223.9% to RMB3,120.4 million (US$460.4 million) from RMB963.5 million in the corresponding period of 2018.
  • Non-GAAP net income attributable to controlling interest of YY Inc.2 was RMB653.5 million (US$96.4 million), compared to RMB730.0 million in the corresponding period of 2018.

First Quarter 2019 Operational Highlights

  • Global video and live streaming average mobile MAUs3 reached over 400 million, among which over 75% were from outside of China.
  • Average mobile MAUs of YY (including YY Live and Hago) increased by 65.6% to 59.8 million from 36.1 million in the corresponding period of 2018, primarily driven by the user growth of Hago.
  • Total number of paying users4 of YY increased by 17.1% to 4.1 million from 3.5 million in the corresponding period of 2018.
  • Average mobile MAUs of Huya increased by 29.8% to 53.9 million from 41.5 million in the corresponding period of 2018.
  • Total number of paying users of Huya increased by 57.4% to 5.4 million from 3.4 million in the corresponding period of 2018.
  • Average mobile MAUs of Bigo (including its short form video and live streaming services, such as Like and Bigo Live) increased by 160.6% to 78.7 million from 30.2 million in the corresponding period of 2018, primarily driven by the user growth of Like.
  • Average mobile MAUs of IMO (under Bigo’s operation) reached 211.8 million. IMO is a global video communication application.

“We are very excited to witness that YY has successfully evolved into a global social media platform with over 400 million in global video and live streaming average mobile MAUs in the first quarter of 2019, after the acquisition of Bigo. We carried our strong growth momentum into 2019 with solid first quarter results, driven by enhanced performances from YY, Huya and Bigo,” stated Mr. David Xueling Li, Chairman and Chief Executive Officer of YY. “Importantly, over 75% of such global video and live streaming MAUs were from outside of China, demonstrating that our global expansion strategy has achieved initial success. Our average mobile MAUs for short form video and live streaming services reached 192.4 million, and total number of paying users for YY, Huya and Bigo continued to grow healthily year over year. This strong growth was a result of our commitment to expanding our global operations, upgrading our content offerings, and improving our AI technological capabilities. During the same quarter, IMO had 211.8 million in average mobile MAUs. By offering frictionless video call and other communication tools, IMO has attracted a highly engaged and video-oriented user base in the Middle East, South Asia and other global regions. As we continue to develop synergies among different business lines going forward, we will leverage these synergies to create high-quality video-based content across our platform and best-in-class user experiences for our global user community.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We delivered another quarter of solid financial results, marked by high growth and strong profitability. Our total net revenues in the first quarter increased by 47.1% year over year to RMB4,780.6 million, exceeding the high end of our previous guidance range. The increase in net revenues was primarily driven by an year-over-year 47.9% increase in live streaming revenues to RMB4,485.0 million, and the contribution from the consolidation of Bigo. Going forward, as we continue to invest in video-based content offerings, global user base expansion and AI technological innovation, we believe that we will further enhance our monetization and yield sustainable growth.”

First Quarter 2019 Financial Results

NET REVENUES
Net revenues increased by 47.1% to RMB4,780.6 million (US$705.3 million) in the first quarter of 2019 from RMB3,248.9 million in the corresponding period of 2018, primarily driven by an increase in live streaming revenues, and the contribution from the consolidation of Bigo segment.

Live streaming revenues increased by 47.9% to RMB4,485.0 million (US$661.7 million) in the first quarter of 2019 from RMB3,032.0 million in the corresponding period of 2018, primarily attributable to the continued live streaming revenues growth in YY and Huya segments and, to a lesser extent, the consolidation of the live streaming revenues of Bigo for most of the month of March 2019.

Other revenues increased by 36.3% to RMB295.6 million (US$43.6 million) in the first quarter of 2019 from RMB216.9 million in the corresponding period of 2018, primarily driven by the increase of advertising revenues from Huya and Bigo segments.

COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 56.8% to RMB3,160.3 million (US$466.3 million) in the first quarter of 2019 from RMB2,015.8 million in the corresponding period of 2018, mainly attributable to an increase in revenue-sharing fees and content costs to RMB2,524.7 million (US$372.5 million) in the first quarter of 2019 from RMB1,621.0 million in the corresponding period of 2018. The increase in revenue-sharing fees and content costs paid to performers, guilds and content providers was in line with the increase in live streaming revenues for both YY and Huya segments, respectively. Bandwidth costs increased to RMB297.4 million (US$43.9 million) in the first quarter of 2019 from RMB225.4 million in the corresponding period of 2018, primarily reflecting continued overseas user base expansion.

Gross profit increased by 31.4% to RMB1,620.3 million (US$239.1 million) in the first quarter of 2019 from RMB1,233.1 million in the corresponding period of 2018. Gross margin was 33.9% in the first quarter of 2019, compared to 38.0% in the corresponding period of 2018, primarily due to the increase in revenue-sharing fees and content costs. The decrease in gross margin was also attributable to the impact caused by the relatively low gross margin of the Huya segment as its contribution to net revenues increased significantly year-over-year.

OPERATING INCOME
Operating expenses were RMB1,215.4 million (US$179.3 million) in the first quarter of 2019, compared to RMB649.1 million in the corresponding period of 2018, primarily due to the Company’s increased efforts in sales and marketing activities in overseas markets, as well as the increase in staff related expenses for AI research and development personnel.

Operating income was RMB473.6 million (US$69.9 million) in the first quarter of 2019, compared to RMB596.4 million in the corresponding period of 2018. Operating margin was 9.9% in the first quarter of 2019, compared to 18.4% in the corresponding period of 2018, primarily due to the decrease in gross margin and the increase in sales and marketing expenses, which is partially related to the consolidation of Bigo.

Non-GAAP operating income5 was RMB717.3 million (US$105.8 million) in the first quarter of 2019, compared to RMB727.3 million in the corresponding period of 2018. Non-GAAP operating margin6 was 15.0% in the first quarter of 2019, compared to 22.4% in the corresponding period of 2018.

NET INCOME
Net income attributable to controlling interest of YY Inc. increased by 223.9% to RMB3,120.4 million (US$460.4 million) in the first quarter of 2019 from RMB963.5 million in the corresponding period of 2018, mainly due to the remeasurement gain of YY’s previously held interests in Bigo amounting to RMB2,669.3 million  (US$393.8 million), which was included as part of the “gain on fair value change of investments”. Net margin was 65.3% in the first quarter of 2019, compared to 29.7% in the corresponding period of 2018. The effective tax rate in the first quarter of 2019 was significantly impacted by the gain on fair value change of investment in Bigo, as it was non-taxable for income tax purpose.

Non-GAAP net income attributable to controlling interest of YY Inc. was RMB653.5 million (US$96.4 million) in the first quarter of 2019, compared to RMB730.0 million in the corresponding period of 2018. Non-GAAP net margin7 was 13.7% in the first quarter of 2019, compared to 22.5% in the corresponding period of 2018.

NET INCOME PER ADS
Diluted net income per ADS8 was RMB44.55 (US$6.57) in the first quarter of 2019, compared to RMB6.86 in the corresponding period of 2018.

Non-GAAP diluted net income per ADS9 was RMB9.32 (US$1.38) in the first quarter of 2019, compared to RMB10.96 in the corresponding period of 2018.

BALANCE SHEET AND CASH FLOWS  
As of March 31, 2019, the Company had cash and cash equivalents, restricted cash and cash equivalents, restricted short-term deposits and short-term deposits of RMB14,744.4 million (US$2,175.4 million). For the first quarter of 2019, net cash from operating activities was RMB966.1 million (US$142.5 million).

SHARES OUTSTANDING
As of March 31, 2019, the Company had a total of 1,613.3 million common shares, or the equivalent of 80.7 million ADSs, outstanding.

Business Outlook
For the second quarter of 2019, the Company expects net revenues to be between RMB6.0 billion and RMB6.2 billion10, representing a year-over-year growth of 59.0% to 64.3%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Conference Call Information
The Company will hold a conference call on Tuesday, May 28, 2019, at 9:00 P.M. Eastern Time (or Wednesday, May 29, 2019, at 9:00 A.M.  Beijing Time) to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:                  +1-845-675-0438
International:                    +65-6713-5440
China Domestic:               400-120-0654
Hong Kong:                      +852-3018-6776
Conference ID:                 #5556539

The replay will be accessible through June 5, 2019, by dialing the following numbers:

United States:              +1-646-254-3697
International:                +61-2-9003-4211
Conference ID:             #5556539

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

Exchange Rate
This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars, in this press release, were made at a rate of RMB6.7777 to US$1.00, the noon buying rate in effect on March 31, 2019 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

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

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

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

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

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

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


___________________________________
1
Net income attributable to controlling interest of YY Inc., is net income less net (loss) income attributable to the non-controlling interest shareholders and the mezzanine equity classified as non-controlling interest shareholder.
2 Non-GAAP net income attributable to controlling interest of YY Inc. is a non-GAAP financial measure, which is defined as net income attributable to controlling interest of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investment, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments (deemed disposal refers to dilution of equity interest in equity-method investments), gain on fair value change of investments and equity investees’ investments, fair value loss on derivative liabilities, income tax effects on non-GAAP adjustment and non-GAAP adjustment for net (loss) income attributable to non-controlling interests shareholders. These adjustments amounted to a reversal of net gain of RMB2,466.9 million (US$364.0 million) and RMB233.5 million in the first quarter of 2019 and 2018, respectively. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for more details.
3 Refers to mobile average monthly active users. Average mobile MAU for any period is calculated by dividing (i) the sum of the Company’s mobile active users for each month of such period, by (ii) the number of months in such period.
4 Refers to a registered user that has purchased virtual items on YY’s platforms at least once during the period presented.
5 Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses, amortization of intangible assets from business acquisitions, impairment of goodwill and investments and gain on deconsolidation and disposal of a subsidiary. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.
6 Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.
7 Non-GAAP net margin is non-GAAP net income attributable to controlling interest of YY Inc. as a percentage of net revenues.
ADS is American Depositary Share. Each ADS represents twenty Class A common shares of the Company. Diluted net income per ADS is net income attributable to common shareholders of YY Inc. divided by weighted average number of diluted ADS.
Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders of YY Inc. divided by weighted average number of ADS used in the calculation of diluted net income per ADS. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.
10 The outlook of net revenues for the second quarter of 2019 includes the impact from Bigo’s consolidation. However, when calculating the year-over-year growth rate, Bigo’s net revenues in the same period of 2018 was not included as the part of denominator.

 


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

    December
 31,
2018 
  March
31,
2019
  March
31,
2019
    RMB   RMB   US$
Assets            
Current assets            
Cash and cash equivalents   6,004,231   8,936,229   1,318,475
Restricted cash and cash equivalents   -   263,132   38,823
Short-term deposits   7,326,996   4,907,121   724,010
Restricted short-term deposits   -   637,907   94,119
Short-term investments   979,053   1,402,678   206,955
Accounts receivable, net   198,428   632,357   93,300
Amounts due from related parties   193,559   10,330   1,524
Financing receivables, net   768,343   704,451   103,937
Prepayments and other current assets   1,019,019   639,029   94,286
             
Total current assets   16,489,629   18,133,234   2,675,429
             
Non-current assets            
Long-term deposits   1,000,000   -   -
Deferred tax assets   70,834   113,059   16,681
Investments   4,591,524   1,436,281   211,913
Property and equipment, net   1,296,319   1,697,773   250,494
Land use rights, net   1,784,639   1,772,615   261,536
Intangible assets, net   74,685   3,533,432   521,332
Right-of-use assets, net(1)   -   266,728   39,354
Goodwill   11,763   12,497,140   1,843,861
Financing receivables, net   224,793   224,609   33,139
Other non-current assets   223,859   246,938   36,434
             
Total non-current assets   9,278,416   21,788,575   3,214,744
             
Total assets   25,768,045   39,921,809   5,890,173
             
Liabilities, mezzanine equity and shareholders’ equity            
Current liabilities            
Convertible bonds   6,863   6,734   994
Accounts payable   114,589   235,556   34,755
Deferred revenue   951,616   1,210,396   178,585
Advances from customers   101,690   90,516   13,355
Income taxes payable   235,561    307,124   45,314
Accrued liabilities and other current liabilities   2,414,371   3,324,934   490,570
Amounts due to related parties   28,336   33,745   4,979
Lease liabilities due within one year(1)   -   103,350   15,249
Short-term loans   -   1,282,516   189,226
             
Total current liabilities   3,853,026   6,594,871   973,027
             
Non-current liabilities            
Lease liabilities(1)   -   172,138   25,398
Deferred revenue   91,710    129,876   19,162
Deferred tax liabilities   27,505   350,981   51,785
             
Total non-current liabilities   119,215   652,995   96,345
             
Total liabilities   3,972,241   7,247,866   1,069,372
             



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

    December
31,
2018
  March
 31,
2019
  March
 31,
2019
    RMB   RMB   US$
             
Mezzanine equity   418,673   420,525   62,045
             
Shareholders’ equity            
Class A common shares (US$0.00001 par value;
10,000,000,000 and 10,000,000,000 shares authorized,
981,740,848 shares issued and outstanding as of
December 31, 2018; 1,297,051,264 shares issued and
1,286,804,655 shares outstanding as of and March 31, 2019, respectively)
  59   80   12
Class B common shares (US$0.00001 par value;
1,000,000,000 and 1,000,000,000 shares authorized,
288,182,976 and  326,509,555 shares issued and
outstanding as of December 31, 2018 and March 31, 2019, respectively)
  21   24   4
Additional paid-in capital   11,168,866   19,048,058   2,810,401
Statutory reserves   101,725   101,725   15,009
Retained earnings   6,913,469   10,024,537   1,479,047
Accumulated other comprehensive income   336,152   228,389   33,697
             
Total YY Inc.’s shareholders’ equity   18,520,292   29,402,813   4,338,170
             
Non-controlling interests   2,856,839   2,850,605   420,586
             
Total shareholders’ equity   21,377,131   32,253,418   4,758,756
             
Total liabilities, mezzanine equity and            
shareholders’ equity   25,768,045   39,921,809   5,890,173
             
             

(1)  The Company has adopted ASC842 “Leases” beginning January 1, 2019 using the optional transition method and prior periods were not restated. The only major impact of the standard is that assets and liabilities amounting to RMB145.2 million and RMB141.2 million, respectively, are recognized beginning January 1, 2019 for leased office space with terms of more than 12 months.

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

    Three Months Ended
    March
 31,
2018
    December
31,
2018
    March
 31,
2019
    March
 31,
2019
 
    RMB     RMB     RMB     US$  
           
Net revenues          
Live streaming   3,032,035     4,391,418     4,485,020     661,732  
Others   216,896     249,506     295,564     43,608  
           
Total net revenues   3,248,931     4,640,924     4,780,584     705,340  
           
Cost of revenues(1)   (2,015,797 )   (3,013,063 )   (3,160,325 )   (466,283 )
           
Gross profit   1,233,134     1,627,861     1,620,259     239,057  
           
Operating expenses(1)          
Research and development expenses   (249,465 )   (332,513 )   (404,736 )   (59,716 )
Sales and marketing expenses   (235,658 )   (323,689 )   (534,236 )   (78,823 )
General and administrative expenses   (163,976 )   (274,979 )   (276,424 )   (40,784 )
           
Total operating expenses   (649,099 )   (931,181 )   (1,215,396 )   (179,323 )
           
Other income   12,374     21,924     68,688     10,134  
           
Operating income   596,409     718,604     473,551     69,868  
           
Interest expense   (2,019 )   (139 )   (6,219 )   (918 )
Interest income and investment income   92,191     123,401     148,289     21,879  
Foreign currency exchange gain (losses), net   6,719     (1,338 )   1,333     197  
Gain on deemed disposal and disposal of investments   -     2,179     -     -  
Gain on fair value change of investments   426,547     26,138     2,649,843     390,965  
Fair value loss on derivative liabilities   (11,868 )   -     -     -  
           
Income before income tax expenses   1,107,979     868,845     3,266,797     481,991  
           
Income tax expenses   (148,245 )   (107,114 )   (123,971 )   (18,291 )
           
Income before share of income (loss) in
equity method investments, net of income taxes
  959,734     761,731     3,142,826     463,700  
           
Share of income (loss) in equity method
investments, net of income taxes
  9,179     (19,281 )   7,156     1,056  
           
Net income   968,913     742,450     3,149,982     464,756  
           
Less: Net income attributable to the non-controlling
interest shareholders and the mezzanine equity
classified as non-controlling interest shareholders
  5,384     47,744     29,549     4,360  
           
Net income attributable to controlling interest of YY Inc.   963,529     694,706     3,120,433     460,396  
           
Less: Accretion of subsidiaries’  redeemable convertible
preferred shares to redemption value
  30,107     6,083     9,365     1,382  
Cumulative dividend on subsidiary’s
Series A Preferred Shares
  -     4,606     6,730     993  
Deemed dividend to subsidiary’s
Series A preferred shareholders
  489,284     -     -     -  
           
Net income attributable to common shareholders of YY Inc.   444,138     684,017     3,104,338     458,021  


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

    Three Months Ended
    March
 31,
2018
December
31,
2018
March
 31,
2019
March
 31,
2019
    RMB RMB RMB US$
           
 

Net income per ADS
         
—Basic   6.97 10.64 44.93 6.63
—Diluted   6.86 10.54 44.55 6.57
Weighted average number of ADS used in
calculating net income per ADS
         
—Basic   63,694,535 64,307,569 69,097,090 69,097,090
—Diluted   64,713,421 64,609,000 69,640,885 69,640,885
           
  1. Share-based compensation was allocated in cost of revenues and operating expenses as follows:
     
    Three Months Ended
    March
 31,
2018
December
 31
2018
March
 31,
2019
March
31,
2019
    RMB RMB RMB US$
           
Cost of revenues   19,608  14,650 14,309 2,111
Research and development expenses      54,467  50,042 70,607 10,418
Sales and marketing expenses   1,869  1,158 1,976 292
General and administrative expenses   36,563  88,909 94,877 13,998


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,
2018
  December
31,
2018
  March
 31,
2019
  March
31,
2019
    RMB   RMB   RMB   US$
                 
Operating income   596,409   718,604   473,551   69,868
Share-based compensation expenses   112,507     154,759   181,769   26,819
Impairment of goodwill and investments   18,349    15,099   -   -
Amortization of intangible assets from
business acquisitions
  -   -   62,000   9,148
                 
Non-GAAP operating income   727,265   888,462   717,320   105,835


Net income   968,913   742,450   3,149,982   464,756  
Share-based compensation expenses   112,507     154,759   181,769   26,819  
Impairment of goodwill and investments   18,349   15,099   -   -  
Amortization of intangible assets
from business acquisitions
  -   -   62,000   9,148  
Gain on deemed disposal and disposal
of investments
  -   (2,179 ) -   -  
Gain on fair value change of investments
and equity investees’ investments
  (426,547 ) (1,089 ) (2,655,338 ) (391,776 )
Fair value loss on derivative liabilities   11,868   -   -   -  
Income tax effects on non-GAAP
adjustments
  44,466   21,479   (16,996 ) (2,508 )
           
Non-GAAP net income   729,556   930,519   721,417   106,439  


Net income attributable to common
shareholders of YY Inc.
  444,138   684,017   3,104,338   458,021  
Share-based compensation expenses   112,507   154,759   181,769   26,819  
Impairment of goodwill and investments   18,349   15,099   -   -  
Amortization of intangible assets
from business acquisitions
  -   -   62,000   9,148  
Gain on deemed disposal and
disposal of investments
  -   (2,179 ) -   -  
Gain on fair value change of investments
and equity investees’ investments
  (426,547 )  (1,089 ) (2,655,338 ) (391,776 )
Fair value loss on derivative liabilities   11,868   -   -   -  
Accretion, cumulative dividend and deemed
dividend to subsidiaries’ preferred shareholders
  519,391   10,689   16,095   2,375  
Income tax effects on non-GAAP adjustments   44,466   21,479   (16,996 ) (2,508 )
Non-GAAP adjustments for net loss (gain)
attributable to the non-controlling interest shareholders
  5,820   (35,843 ) (38,346 ) (5,658 )
           
Non-GAAP net income attributable to controlling
interest and common shareholders of YY Inc.
  729,992   846,932   653,522   96,421  


Non-GAAP net income per ADS          
—Basic   11.46 13.17 9.46 1.40
—Diluted   10.96 13.02 9.32 1.38
Weighted average number of ADS used in
calculating Non-GAAP  net income per ADS
         
—Basic   63,694,535 64,307,569 69,097,090 69,097,090
—Diluted   64,713,421 64,609,000 69,640,885 69,640,885


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

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    Three Months Ended
    March 31, 2019
               
    YY(1)   Huya   Bigo(2)   Elimination(3)   Total   Total  
    RMB   RMB   RMB   RMB   RMB   US$  
               
Net revenues              
Live streaming   2,566,523   1,552,482   366,015   -   4,485,020   661,732  
Others   186,733   78,996   29,835   -   295,564   43,608  
               
Total net revenues   2,753,256   1,631,478   395,850   -   4,780,584   705,340