YY Reports First Quarter 2019 Unaudited Financial Results
May 28, 2019: 06:30 PM ET
GUANGZHOU, China, May 29, 2019 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ: 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 MAUs3reached over 400 million, among which over 75% were from outside of China.
Average mobile MAUsof 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. 8 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. 9 Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders of YY Inc. divided by weighted average number of ADS used in the calculation of diluted net income per ADS. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details. 10 The outlook of net revenues for the 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
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)
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
Cost of revenues(4)
(1,548,046
)
(1,358,105
)
(254,174
)
-
(3,160,325
)
(466,283
)
Gross profit
1,205,210
273,373
141,676
-
1,620,259
239,057
Operating expenses(4)
Research and development expenses
(235,502
)
(90,044
)
(79,190
)
-
(404,736
)
(59,716
)
Sales and marketing expenses
(266,317
)
(78,164
)
(189,755
)
-
(534,236
)
(78,823
)
General and administrative expenses
(163,364
)
(85,811
)
(27,249
)
-
(276,424
)
(40,784
)
Total operating expenses
(665,183
)
(254,019
)
(296,194
)
-
(1,215,396
)
(179,323
)
Other income
58,066
8,864
1,758
-
68,688
10,134
Operating income (loss)
598,093
28,218
(152,760
)
-
473,551
69,868
Interest expenses
(6,219
)
-
(1,395
)
1,395
(6,219
)
(918
)
Interest income and investment income
94,745
54,585
354
(1,395
)
148,289
21,879
Foreign currency exchange (losses) gain, net
(965
)
(374
)
2,672
-
1,333
197
Gain on fair value change of investments
2,649,843
-
-
-
2,649,843
390,965
Income (loss) before income tax expenses
3,335,497
82,429
(151,129
)
-
3,266,797
481,991
Income tax (expenses) benefits
(110,380
)
(18,968
)
5,377
-
(123,971
)
(18,291
)
Income before share of (loss) income in equity method investments, net of income taxes
3,225,117
63,461
(145,752
)
-
3,142,826
463,700
Share of income (loss) in equity method investments, net of income taxes
7,157
(1
)
-
-
7,156
1,056
Net income (loss)
3,232,274
63,460
(145,752
)
-
3,149,982
464,756
(1) In 2019 the segment of “YY Live” was renamed as “YY”.
(2) On March 4, 2019, YY completed the acquisition of Bigo. Therefore, Bigo’s financial results from March 4, 2019 to March 31, 2019 were included in YY’s consolidated financial statements.
(3) The elimination mainly consists of interest income and interest expenses generated from the loan among YY and Bigo segments.
(4) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
Three Months Ended
March 31, 2019
YY
Huya
Bigo
Total
Total
RMB
RMB
RMB
RMB
US$
Cost of revenues
7,224
4,020
3,065
14,309
2,111
Research and development expenses
25,992
11,824
32,791
70,607
10,418
Sales and marketing expenses
552
904
520
1,976
292
General and administrative expenses
38,194
51,078
5,605
94,877
13,998
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, 2019
YY
Huya
Bigo
Total
Total
RMB
RMB
RMB
RMB
US$
Operating income (loss)
598,093
28,218
(152,760
)
473,551
69,868
Share-based compensation expense
71,962
67,826
41,981
181,769
26,819
Amortization of intangible assets from business acquisitions
-
-
62,000
62,000
9,148
Non-GAAP operating income (loss)
670,055
96,044
(48,779
)
717,320
105,835
Net income (loss)
3,232,274
63,460
(145,752
)
3,149,982
464,756
Share-based compensation expenses
71,962
67,826
41,981
181,769
26,819
Amortization of intangible assets from business acquisitions
-
-
62,000
62,000
9,148
Gain on fair value change of investments and equity investees’ investments
(2,655,338
)
-
-
(2,655,338
)
(391,776
)
Income tax effects on non-GAAP adjustments
(7,479
)
-
(9,517
)
(16,996
)
(2,508
)
Non-GAAP net income (loss)
641,419
131,286
(51,288
)
721,417
106,439
YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
December 31, 2018
YY
Huya
Total
Total
RMB
RMB
RMB
US$
Net revenues
Live streaming
2,949,636
1,441,782
4,391,418
638,705
Others
186,359
63,147
249,506
36,289
Total net revenues
3,135,995
1,504,929
4,640,924
674,994
Cost of revenues(1)
(1,746,771
)
(1,266,292
)
(3,013,063
)
(438,232
)
Gross profit
1,389,224
238,637
1,627,861
236,762
Operating expenses(1)
Research and development expenses
(253,408
)
(79,105
)
(332,513
)
(48,362
)
Sales and marketing expenses
(263,806
)
(59,883
)
(323,689
)
(47,079
)
General and administrative expenses
(182,726
)
(92,253
)
(274,979
)
(39,994
)
Total operating expenses
(699,940
)
(231,241
)
(931,181
)
(135,435
)
Other income
10,800
11,124
21,924
3,189
Operating income
700,084
18,520
718,604
104,516
Interest expenses
(139
)
-
(139
)
(20
)
Interest income and investment income
70,698
52,703
123,401
17,948
Gain on disposal of an equity investment
2,179
-
2,179
317
Foreign currency exchange losses, net
(1,291
)
(47
)
(1,338
)
(195
)
Gain on fair value change of investments
26,138
-
26,138
3,802
Income before income tax expenses
797,669
71,176
868,845
126,368
Income tax (expenses) benefits
(138,961
)
31,847
(107,114
)
(15,579
)
Income before share of loss in equity method investments, net of income taxes
658,708
103,023
761,731
110,789
Share of loss in equity method investments, net of income taxes
(15,837
)
(3,444
)
(19,281
)
(2,804
)
Net Income
642,871
99,579
742,450
107,985
(1) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
Three Months Ended
December 31, 2018
YY
Huya
Total
Total
RMB
RMB
RMB
US$
Cost of revenues
10,988
3,662
14,650
2,131
Research and development expenses
38,643
11,399
50,042
7,278
Sales and marketing expenses
551
607
1,158
168
General and administrative expenses
40,582
48,327
88,909
12,931
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, 2018
YY
Huya
Total
Total
RMB
RMB
RMB
US$
Operating income
700,084
18,520
718,604
104,516
Share-based compensation expenses
90,764
63,995
154,759
22,508
Impairment of goodwill and investments
15,099
-
15,099
2,196
Non-GAAP operating income
805,947
82,515
888,462
129,220
Net income
642,871
99,579
742,450
107,985
Share-based compensation expenses
90,764
63,995
154,759
22,508
Impairment of goodwill and investments
15,099
-
15,099
2,196
(Gain) loss on fair value change of investments and equity investees' investments
(4,422
)
3,333
(1,089
)
(158
)
Gain on deemed disposal and disposal of investments
(2,179
)
-
(2,179
)
(317
)
Income tax effects on non-GAAP adjustments
21,479
-
21,479
3,124
Non-GAAP net income
763,612
166,907
930,519
135,338
YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data)
Three Months Ended
March 31, 2018
YY
Huya
Elimination
Total
Total
RMB
RMB
RMB
RMB
US$
Net revenues
Live streaming
2,239,251
792,784
-
3,032,035
483,378
Others
168,053
50,798
(1,955
)
216,896
34,578
Total net revenues
2,407,304
843,582
(1,955
)
3,248,931
517,956
Cost of revenues(1)
(1,303,264
)
(712,533
)
-
(2,015,797
)
(321,365
)
Gross profit
1,104,040
131,049
(1,955
)
1,233,134
196,591
Operating expenses(1)
Research and development expenses
(198,007
)
(51,458
)
-
(249,465
)
(39,771
)
Sales and marketing expenses
(211,673
)
(25,940
)
1,955
(235,658
)
(37,569
)
General and administrative expenses
(128,193
)
(35,783
)
-
(163,976
)
(26,142
)
Total operating expenses
(537,873
)
(113,181
)
1,955
(649,099
)
(103,482
)
Other income
2,091
10,283
-
12,374
1,973
Operating income
568,258
28,151
-
596,409
95,082
Interest expenses
(2,019
)
-
-
(2,019
)
(322
)
Interest income and investment income
81,607
10,584
-
92,191
14,697
Foreign currency exchange gain, net
6,719
-
-
6,719
1,071
Gain on fair value change of investments
426,547
-
-
426,547
68,002
Fair value loss on derivative liabilities
-
(11,868
)
-
(11,868
)
(1,892
)
Income before income tax expenses
1,081,112
26,867
-
1,107,979
176,638
Income tax (expenses) benefits
(152,709
)
4,464
-
(148,245
)
(23,634
)
Income before share of income in equity method investments, net of income taxes
928,403
31,331
-
959,734
153,004
Share of income in equity method investments, net of income taxes
9,103
76
-
9,179
1,463
Net income
937,506
31,407
-
968,913
154,467
(1) Share-based compensation was allocated in cost of revenues and operating expenses as follows:
Three Months Ended
31-Mar-18
YY
Huya
Total
Total
RMB
RMB
RMB
US$
Cost of revenues
19,353
255
19,608
3,126
Research and development expenses
52,677
1,790
54,467
8,683
Sales and marketing expenses
1,451
418
1,869
298
General and administrative expenses
14,659
21,904
36,563
5,829
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, 2018
YY
Huya
Total
Total
RMB
RMB
RMB
US$
Operating income
568,258
28,151
596,409
95,082
Share-based compensation expenses
88,140
24,367
112,507
17,936
Impairment of goodwill and investments
18,349
-
18,349
2,925
Non-GAAP operating income
674,747
52,518
727,265
115,943
Net income
937,506
31,407
968,913
154,467
Share-based compensation expenses
88,140
24,367
112,507
17,936
Impairment of goodwill and investments
18,349
-
18,349
2,925
Gain on fair value change of investments and equity investees’ investments