AP NEWS
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

YY Reports Third Quarter 2019 Unaudited Financial Results

November 12, 2019 GMT

GUANGZHOU, China, Nov. 13, 2019 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ: YY) (“YY” or the “Company”), a global social media platform, today announced its unaudited financial results for the third quarter of 2019.

Third Quarter 2019 Financial Highlights

-- Net revenues increased by 67.8% to RMB6,882.2 million (US$962.9 million) from RMB4,100.5 million in the corresponding period of 2018. -- Net income attributable to controlling interest ofYYInc.1 was RMB109.9 million (US$15.4 million), compared to RMB650.7 million in the corresponding period of 2018. -- Non-GAAP net income attributable to controlling interest of YY Inc.2 was RMB574.1 million (US$80.3 million), compared to RMB787.0 million in the corresponding period of 2018, primarily due to the impact of the consolidation of Bigo Inc (“Bigo”).

Third Quarter 2019 Operational Highlights

-- Global average mobile MAUs3 reached 470.1 million, among that approximately 77.9% were from markets outside of China. -- Average mobile MAUs ofimo reached 212.0 million. -- Average mobile MAUs of global short-form video servicesincreased by 670.6% to 150.4 million from 19.5 million in the corresponding period of 2018, including 100.2 million from Likee (formerly known as Like), which increased by 413.4% year over year, and 50.2 million from imo’s embedded short-form video services. -- Average mobile MAUs of global live streaming servicesincreased by 26.5% to 157.8 million from 124.8 million in the corresponding period of 2018, among that (i) 103.7 million were from China, including 39.9 million from YY, which increased by 3.0% year over year and 63.8 million from Huya, which increased by 29.1% year over year; and (ii) 54.1 million were from outside of China, including 21.9 million from BIGO LIVE, which increased by 9.7% year over year, and 32.3 million from HAGO, which increased by 92.4% year over year. -- Total number of paying users4of YYincreased by 14.4% to 4.3 million from 3.8 million in the corresponding period of 2018. -- Total number of paying users of Huyaincreased by 28.5% to 5.3 million from 4.2 million in the corresponding period of 2018.

Mr. David Xueling Li, Chairman and Chief Executive Officer of YY, commented, “Our solid operating and financial performance demonstrates the effectiveness of our strategies in product globalization, content innovation and technology advancement. During the third quarter of 2019, we extended the global footprints of Likee, imo, BIGO LIVE and HAGO. Through content localization, cross-platform synergy and AI technology enhancement, our global user base grew rapidly to 470.1 million. Notably, Likee, our global leading short-form video platform, hit the milestone of 100 million average mobile MAUs in the third quarter of 2019, sporting a year-over-year growth rate of 413.4%. Meanwhile, HAGO, our casual game-oriented social platform also increased its average mobile MAUs by 92.4% year-over-year to 32.3 million. In addition, our technology advancement in AI enabled us to create personalized user experience at scale, distribute our short-form video and live streaming content with precision and speed, and enhance our operating efficiency while maintaining cost effectiveness. Going forward, we seek to capitalize on the growing market demand for global video-based social media by harnessing the synergy among our various products and markets, expanding our geographic coverage, innovating our content formats and advancing our technology development.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “During the third quarter of 2019, we generated a year-over-year net revenues growth rate of 67.8%, exceeding the high end of our previous guidance range. We also managed to sustain profitability while maintaining investment in our overseas expansion. Because we hold a strong conviction of the vast market potential for our global video-based social media platform, we are willing to be patient and prudent when striking a balance between near-term monetization and long-term market share. We believe that our abundant cash reserve combined with our methodical execution of corporate strategies will not only yield superior shareholder value, but also propel our engine of innovation forward into the next phase of our global growth cycle.”

Third Quarter 2019 Financial Results

NET REVENUES Net revenues increased by 67.8% to RMB6,882.2 million (US$962.9 million) in the third quarter of 2019 from RMB4,100.5 million in the corresponding period of 2018, primarily driven by an increase in live streaming revenues and the contribution from Bigo’s consolidation.

Live streaming revenues increased by 66.2% to RMB6,473.9 million (US$905.7 million) in the third quarter of 2019 from RMB3,894.5 million in the corresponding period of 2018, primarily attributable to (i) the continued live streaming revenues growth in YY and Huya segments, amounting to RMB1,160.6 million (US$162.4 million), driven by user growth; and (ii) the contribution from the consolidation of Bigo segment, amounting to RMB1,418.8 million (US$198.5 million).

Other revenues increased by 98.3% to RMB408.3 million (US$57.1 million) in the third quarter of 2019 from RMB205.9 million in the corresponding period of 2018, primarily driven by the increase in advertising revenues from Huya and Bigo.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 76.2% to RMB4,713.2 million (US$659.4 million) in the third quarter of 2019 from RMB2,674.5 million in the corresponding period of 2018. Revenue-sharing fees and content costs increased to RMB3,460.0 million (US$484.1 million) in the third quarter of 2019 from RMB2,212.6 million in the corresponding period of 2018 as a result of the increase in live streaming revenues of the Company. Bandwidth costs increased to RMB496.8 million (US$69.5 million) in the third quarter of 2019 from RMB249.5 million in the corresponding period of 2018, as the overseas user base and time spent continued to expand following the Bigo consolidation.

Gross profit increased by 52.1% to RMB2,169.0 million (US$303.5 million) in the third quarter of 2019 from RMB1,426.0 million in the corresponding period of 2018. Gross margin was 31.5% in the third quarter of 2019, compared to 34.8% in the corresponding period of 2018. In addition to the increase in revenue-sharing fees and content costs, the gross margin contraction was also caused by the fact that the Huya and Bigo segments had lower gross margins but contributed significantly greater portions of net revenues in the third quarter of 2019 compared to the corresponding period of 2018.

OPERATING INCOMEOperating expenses were RMB2,161.5 million (US$302.4 million) in the third quarter of 2019, compared to RMB864.7 million in the corresponding period of 2018. Among the operating expenses, sales and marketing expenses increased to RMB1,079.6 million (US$151.0 million) in the third quarter of 2019, primarily due to the Company’s increased efforts in sales and marketing activities in overseas markets and the impact of depreciation and amortization related to the Bigo consolidation. Research and development expenses increased to RMB673.1 million (US$94.2 million) in the third quarter of 2019, mostly due to the increase in salaries mainly due to consolidation of Bigo.

Operating income was RMB160.3 million (US$22.4 million) in the third quarter of 2019, compared to RMB610.9 million in the corresponding period of 2018. Operating margin was 2.3% in the third quarter of 2019, compared to 14.9% in the corresponding period of 2018, primarily due to the decrease in gross margin, the impact of depreciation and amortization related to the Bigo consolidation and other overseas expansion initiatives.

Non-GAAP operating income5 was RMB611.4 million (US$85.5 million) in the third quarter of 2019, compared to RMB774.2 million in the corresponding period of 2018. Non-GAAP operating margin6 was 8.9% in the third quarter of 2019, compared to 18.9% in the corresponding period of 2018.

NET INCOMENet income attributable to controlling interest of YY Inc. was RMB109.9 million (US$15.4 million) in the third quarter of 2019, compared to RMB650.7 million in the corresponding period of 2018. Net margin was 1.6% in the third quarter of 2019, compared to 15.9% in the corresponding period of 2018. The high effective tax rate in the third quarter of 2019 was primarily due to the profit (loss) structure and the different effective tax rates of YY, Huya and Bigo segments. Particularly, the Company was not getting as much benefit from losses incurred by Bigo as a majority of Bigo’s business that was subject to a low applicable tax rate in its jurisdiction.

Non-GAAP net income attributable to controlling interest of YY Inc. was RMB574.1 million (US$80.3 million) in the third quarter of 2019, compared to RMB787.0 million in the corresponding period of 2018. Non-GAAP net margin7 was 8.3% in the third quarter of 2019, compared to 19.2% in the corresponding period of 2018.

NET INCOME PER ADSDiluted net income per ADS8 was RMB1.11 (US$0.16) in the third quarter of 2019, compared to RMB10.01 in the corresponding period of 2018.

Non-GAAP diluted net income per ADS9 was RMB6.42 (US$0.90) in the third quarter of 2019, compared to RMB12.07 in the corresponding period of 2018.

BALANCE SHEET AND CASH FLOWSAs of September 30, 2019, the Company had cash and cash equivalents, restricted cash and cash equivalents, short-term deposits, restricted short-term deposits and short-term investments of RMB25,334.3 million (US$3,544.4 million). For the third quarter of 2019, net cash from operating activities was RMB702.1 million (US$98.2 million).

SHARES OUTSTANDING As of September 30, 2019, the Company had a total of 1,614.4 million common shares, or the equivalent of 80.7 million ADSs, outstanding.

Business OutlookFor the fourth quarter of 2019, the Company expects net revenues to be between RMB7.32 billion and RMB7.52 billion10, representing a year-over-year growth of 57.7% to 62.0%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentsThe Company had previously announced a share repurchase program of up to US$300 million, which was approved by the Company’s Board of Directors on August 13, 2019. As of September 30, 2019, the Company had repurchased approximately US$23.7 million of its shares.

Conference Call InformationThe Company will hold a conference call on Tuesday, November 12, 2019, at 9:00 P.M. Eastern Time (or Wednesday, November 13, 2019, at 10:00 A.M. Beijing Time) to discuss the financial results. Participants may access the call by dialing the following numbers:

United States: +1-845-675-0437 International: +65-6713-5090 Mainland China: 400-620-8038 Hong Kong, China: +852-3018-6771 Conference ID: #1957529 The replay will be accessible through November 20, 2019, by dialing the following numbers: United States: +1-646-254-3697 International: +61-2-8199-0299 Conference ID: #1957529

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 RateThis 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 RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 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 China; Likee, 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 StatementThis 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 MeasuresThe 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 change on derivative, interest expenses related to the convertible bonds’ amortization to face value, 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 change on derivative, interest expenses related to the convertible bonds’ amortization to face value, 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 change on derivative, interest expenses related to the convertible bonds’ amortization to face value, 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, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, 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, 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 ContactYY Inc.Matthew ZhaoMaggie YanTel: +86 (20) 8212-0000Email: IR@YY.com

ICR, Inc. Jack WangTel: +1 (646) 915-1611Email: 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 change on derivative, interest expenses related to the convertible bonds amortization to face value, 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 RMB464.1 million (US$64.9 million) and RMB136.3 million in the third quarters 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.

8ADS 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 fourth 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 September September 31, 30, 30, 2018 2019 2019 RMB RMB US$ Assets Current assets Cash and cash equivalents 6,004,231 3,979,081 556,694 Restricted cash and cash equivalents - 71,018 9,936 Short-term deposits 7,326,996 16,576,276 2,319,106 Restricted short-term deposits - 353,076 49,397 Short-term investments 979,053 4,354,839 609,264 Accounts receivable, net 198,428 820,933 114,853 Amounts due from related parties 193,559 18,860 2,639 Financing receivables, net 768,343 217,390 30,414 Prepayments and other current assets 1,019,019 1,183,778 165,619 ---------- ---------- --------- Total current assets 16,489,629 27,575,251 3,857,922 ---------- ---------- --------- Non-current assets Long-term deposits 1,000,000 - - Deferred tax assets 70,834 130,601 18,272 Investments 4,591,524 1,646,836 230,401 Property and equipment, net 1,296,319 2,151,393 300,991 Land use rights, net 1,784,639 1,748,568 244,634 Intangible assets, net 74,685 3,315,171 463,809 Right-of-use assets, net(1) - 275,991 38,613 Goodwill 11,763 13,126,509 1,836,466 Financing receivables, net 224,793 195,864 27,402 Other non-current assets 223,859 399,738 55,925 ---------- ---------- --------- Total non-current assets 9,278,416 22,990,671 3,216,513 ---------- ---------- --------- Total assets 25,768,045 50,565,922 7,074,435 ---------- ---------- --------- Liabilities, mezzanine equity and shareholders’ equity Current liabilities Convertible bonds 6,863 - - Accounts payable 114,589 193,364 27,053 Deferred revenue 951,616 1,251,781 175,131 Advances from customers 101,690 123,595 17,292 Income taxes payable 235,561 410,639 57,451 Accrued liabilities and other current liabilities 2,414,371 3,835,738 536,639 Amounts due to related parties 28,336 45,528 6,370 Lease liabilities due within one year(1) - 111,889 15,654 Short-term loans - 288,574 40,373 Total current liabilities 3,853,026 6,261,108 875,963 ---------- ---------- --------- Non-current liabilities Convertible bonds - 4,974,947 696,021 Lease liabilities(1) - 165,859 23,205 Deferred revenue 91,710 173,547 24,280 Deferred tax liabilities 27,505 291,719 40,813 Other non-current liabilities - 1,239 173 ---------- ---------- --------- Total non-current liabilities 119,215 5,607,311 784,492 ---------- ---------- --------- Total liabilities 3,972,241 11,868,419 1,660,455 ---------- ---------- ---------

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

December September September 31, 30, 30, 2018 2019 2019 RMB RMB US$ Mezzanine equity 418,673 462,261 64,673 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 59 79 11 as of December 31, 2018; 1,300,746,944 shares issued and 1,287,878,395 shares outstanding as of and September 30, 2019, respectively) 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 21 24 3 as of December 31, 2018 and September 30, 2019, respectively) Additional paid-in capital 11,168,866 21,560,965 3,016,490 Statutory reserves 101,725 101,725 14,232 Retained earnings 6,913,469 10,157,351 1,421,066 Accumulated other comprehensive income 336,152 1,162,927 162,699 ---------- ---------- --------- Total YY Inc.’s shareholders’ equity 18,520,292 32,983,071 4,614,501 ---------- ---------- --------- Non-controlling interests 2,856,839 5,252,171 734,806 ---------- ---------- --------- Total shareholders’ equity 21,377,131 38,235,242 5,349,307 ---------- ---------- --------- Total liabilities, mezzanine equity and shareholders’ equity 25,768,045 50,565,922 7,074,435 ---------- ---------- ---------

(1) The Company has adopted ASC842 “Leases” beginning January 1, 2019 using the optional transition method. 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 NineMonths Ended ------------------------------------------------ --------------------------------------- September June September September September September September 30, 30, 30, 30, 30, 30, 30, 2018 2019 2019 2019 2018 2019 2019 RMB RMB RMB US$ RMB RMB US$ Net revenues Live streaming(1) 3,894,548 5,922,761 6,473,946 905,738 10,486,249 16,881,727 2,361,840 Others 205,924 372,486 408,268 57,119 636,384 1,076,318 150,582 Total net revenues 4,100,472 6,295,247 6,882,214 962,857 11,122,633 17,958,045 2,512,422 ----------- ----------- ----------- --------- ----------- ------------ ----------- Cost of revenues(2) (2,674,502) (4,173,841) (4,713,175) (659,397) (7,004,071) (12,047,341) (1,685,485) ----------- ----------- ----------- --------- ----------- ------------ ----------- Gross profit 1,425,970 2,121,406 2,169,039 303,460 4,118,562 5,910,704 826,937 ----------- ----------- ----------- --------- ----------- ------------ ----------- Operating expenses (2) Research and (314,128) (655,421) (673,058) (94,164) (859,539) (1,733,215) (242,486) development expenses Sales and marketing (343,839) (1,099,494) (1,079,577) (151,038) (825,627) (2,713,307) (379,606) expenses General and administrative (206,738) (335,973) (408,834) (57,198) (608,246) (1,021,231) (142,875) expenses ----------- ----------- ----------- --------- ----------- ------------ ----------- Total operating (864,705) (2,090,888) (2,161,469) (302,400) (2,293,412) (5,467,753) (764,967) expenses Other income 49,640 41,407 152,718 21,366 95,936 262,813 36,769 ----------- ----------- ----------- --------- ----------- ------------ ----------- Operating income 610,905 71,925 160,288 22,426 1,921,086 705,764 98,739 ----------- ----------- ----------- --------- ----------- ------------ ----------- Interest expenses (4,910) (12,268) (123,456) (17,272) (8,477) (141,943) (19,859) Interest income and 141,110 156,619 203,137 28,420 362,151 508,045 71,078 investment income Foreign currency exchange (losses) (3,072) 13,801 16,393 2,293 824 31,527 4,411 gains, net Gain on deemed disposal and - - - - 13,999 - - disposal of investments Gain (loss) on fair value change of 31,670 14,291 (11,492) (1,608) 1,663,266 2,652,642 371,118 investments Fair value change on - - (1,753) (245) (2,285,223) (1,753) (245) derivative Other non-operating - - - - (2,000) - - expenses ----------- ----------- ----------- --------- ----------- ------------ ----------- Income before income 775,703 244,368 243,117 34,014 1,665,626 3,754,282 525,242 tax expenses ----------- ----------- ----------- --------- ----------- ------------ ----------- Income tax expenses (74,929) (143,896) (86,571) (12,112) (370,593) (354,438) (49,588) ----------- ----------- ----------- --------- ----------- ------------ ----------- Income before share of (loss) income in equity method 700,774 100,472 156,546 21,902 1,295,033 3,399,844 475,654 investments, net of income taxes ----------- ----------- ----------- --------- ----------- ------------ ----------- Share of (loss) income in equity (19,957) 6,947 21,261 2,975 78,214 35,364 4,948 method investments, net of income taxes ----------- ----------- ----------- --------- ----------- ------------ ----------- Net income 680,817 107,419 177,807 24,877 1,373,247 3,435,208 480,602 ----------- ----------- ----------- --------- ----------- ------------ ----------- Less: Net income (loss) attributable to the non-controlling interest shareholders and the 30,127 65,342 67,879 9,497 (141,054) 162,770 22,772 mezzanine equity classified as non-controlling interest shareholders Net income attributable to 650,690 42,077 109,928 15,380 1,514,301 3,272,438 457,830 controlling interest of YY Inc. ----------- ----------- ----------- --------- ----------- ------------ ----------- Less: Accretion of subsidiaries’ redeemable - 9,476 9,715 1,359 67,076 28,556 3,995 convertible preferred shares to redemption value Cumulative dividend on subsidiary’s - 6,811 6,982 977 - 20,523 2,871 Series A Preferred Shares Deemed dividend to subsidiary’s Series - - - - 489,284 - - A preferred shareholders Net income attributable to 650,690 25,790 93,231 13,044 957,941 3,223,359 450,964 common shareholders of YY Inc.

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

Three Months Ended NineMonths Ended September June September September September September September 30, 30, 30, 30, 30, 30, 30, 2018 2019 2019 2019 2018 2019 2019 RMB RMB RMB US$ RMB RMB US$ Net income perADS —Basic 10.12 0.32 1.16 0.16 14.98 42.24 5.91 —Diluted 10.01 0.27 1.11 0.16 14.80 41.20 5.76 Weighted average number of ADS used in calculating net income per ADS —Basic 64,301,796 79,682,966 80,033,607 80,033,607 63,952,614 76,310,648 76,310,648 —Diluted 64,829,757 81,167,679 80,973,447 80,973,447 64,738,363 81,040,767 81,040,767

(1) Live streaming revenues by geographical areas were as follows:

Three Months Ended NineMonths Ended September June September September September September September 30, 30, 30, 30, 30, 2018 2019 2019 30, 2018 2019 30, 2019 2019 RMB RMB RMB US$ RMB RMB US$ PRC 3,894,240 5,016,587 5,266,815 736,854 10,485,941 14,472,812 2,024,820 Non-PRC 308 906,174 1,207,131 168,884 308 2,408,915 337,020

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

Three Months Ended NineMonths Ended September June September September September September September 30, 30, 30, 2018 2019 2019 30, 30, 30, 30, 2019 2018 2019 2019 RMB RMB RMB US$ RMB RMB US$ Cost of revenues 16,022 15,604 20,608 2,883 59,689 50,521 7,068 Research and development expenses 52,752 160,029 129,174 18,072 175,131 359,810 50,339 Sales and marketing expenses 290 3,452 2,643 370 4,565 8,071 1,129 General and administrative expenses 92,340 85,197 95,210 13,320 253,881 275,284 38,514

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

Three Months Ended NineMonths Ended September June September September September September September 30, 30, 30, 30, 30, 30, 2018 2019 2019 30, 2018 2019 2019 2019 RMB RMB RMB US$ RMB RMB US$ Operating income 610,905 71,925 160,288 22,426 1,921,086 705,764 98,739 Share-based compensation expenses 161,404 264,282 247,635 34,645 493,266 693,686 97,050 Impairment of goodwill and 1,900 - 10,000 1,399 20,249 10,000 1,399 investments Amortization of intangible assets - 188,740 193,487 27,070 - 444,227 62,150 from business acquisitions --------- ------- --------- --------- --------- --------- --------- Non-GAAP operating income 774,209 524,947 611,410 85,540 2,434,601 1,853,677 259,338 --------- ------- --------- --------- --------- --------- ---------

Net income 680,817 107,419 177,807 24,877 1,373,247 3,435,208 480,602 Share-based compensation expenses 161,404 264,282 247,635 34,645 493,266 693,686 97,050 Impairment of goodwill and 1,900 - 10,000 1,399 20,249 10,000 1,399 investments Amortization of intangible assets - 188,740 193,487 27,070 - 444,227 62,150 from business acquisitions Gain on deemed disposal and disposal - - - - (13,999) - - of investments Gain (loss) on fair value change of investments and equity investees’ 3,428 (13,332) 2,031 284 (1,710,420) (2,666,639) (373,077) investments Fair value change on derivative - - 1,753 245 2,285,223 1,753 245 Interest expenses related to the convertible bonds’ amortization to - 4,287 100,885 14,114 - 105,172 14,714 face value Income tax effects on non-GAAP 1,014 (31,891) (40,166) (5,619) 76,081 (89,053) (12,459) adjustments ------- -------- -------- ------- ----------- ----------- --------- Non-GAAP net income 848,563 519,505 693,432 97,015 2,523,647 1,934,354 270,624 ------- -------- -------- ------- ----------- ----------- ---------

Net income attributable to common 650,690 25,790 93,231 13,044 957,941 3,223,359 450,964 shareholders of YY Inc. Share-based compensation expenses 161,404 264,282 247,635 34,645 493,266 693,686 97,050 Impairment of goodwill and 1,900 - 10,000 1,399 20,249 10,000 1,399 investments Amortization of intangible assets - 188,740 193,487 27,070 - 444,227 62,150 from business acquisitions Gain on deemed disposal and - - - - (13,999) - - disposal of investments Gain (loss) on fair value change of investments and equity investees’ 3,428 (13,332) 2,031 284 (1,710,420) (2,666,639) (373,077) investments Fair value change on derivative - - 1,753 245 2,285,223 1,753 245 Interest expenses related to the convertible bonds’ amortization to - 4,287 100,885 14,114 - 105,172 14,714 face value Accretion, cumulative dividend and deemed dividend to subsidiaries’ - 16,287 16,697 2,336 556,360 49,079 6,866 preferred shareholders Income tax effects on non-GAAP 1,014 (31,891) (40,166) (5,619) 76,081 (89,053) (12,459) adjustments Non-GAAP adjustments for net loss attributable to the non-controlling (31,449) (29,941) (51,481) (7,202) (237,513) (119,768) (16,756) interest shareholders -------- -------- -------- ------- ----------- ----------- --------- Non-GAAP net income attributable tocontrolling interest and common 786,987 424,222 574,072 80,316 2,427,188 1,651,816 231,096 shareholders ofYY Inc. -------- -------- -------- ------- ----------- ----------- ---------

Non-GAAP net income per ADS —Basic 12.24 5.32 7.17 1.00 37.95 21.65 3.03 —Diluted 12.07 5.14 6.42 0.90 37.04 20.44 2.86 Weighted average number of ADS used in calculating Non-GAAP net income per ADS —Basic 64,301,796 79,682,966 80,033,607 80,033,607 63,952,614 76,310,648 76,310,648 —Diluted 64,829,757 81,855,180 91,400,547 91,400,547 64,738,363 81,040,767 81,040,767

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

Three Months Ended ----------------------------------------------------------------------------- September 30, 2019 YY(1) Huya Bigo Elimination(2) Total Total RMB RMB RMB RMB RMB US$ Net revenues Live streaming 2,899,044 2,156,106 1,418,796 - 6,473,946 905,738 Others 181,006 108,986 118,419 (143) 408,268 57,119 ----------- ----------- ----------- -------------- ----------- --------- Total net revenues 3,080,050 2,265,092 1,537,215 (143) 6,882,214 962,857 ----------- ----------- ----------- -------------- ----------- --------- Cost of revenues(3) (1,729,389) (1,858,772) (1,125,157) 143 (4,713,175) (659,397) ----------- ----------- ----------- -------------- ----------- --------- Gross profit 1,350,661 406,320 412,058 - 2,169,039 303,460 ----------- ----------- ----------- -------------- ----------- --------- Operating expenses(3) Research and development (249,620) (134,969) (288,469) - (673,058) (94,164) expenses Sales and marketing expenses (340,619) (122,316) (616,642) - (1,079,577) (151,038) General and administrative (225,281) (96,318) (87,235) - (408,834) (57,198) expenses ----------- ----------- ----------- -------------- ----------- --------- Total operating expenses (815,520) (353,603) (992,346) - (2,161,469) (302,400) Other income 136,535 11,148 5,035 - 152,718 21,366 Operating income (loss) 671,676 63,865 (575,253) - 160,288 22,426 ----------- ----------- ----------- -------------- ----------- --------- Interest expenses (123,456) - (11,078) 11,078 (123,456) (17,272) Interest income and investment 127,068 86,539 608 (11,078) 203,137 28,420 income Foreign currency exchange 2,798 645 12,950 - 16,393 2,293 (losses) gains, net Fair value change on derivative (1,753) - - - (1,753) (245) Loss on fair value change of (11,492) - - - (11,492) (1,608) investments ----------- ----------- ----------- -------------- ----------- --------- Income (loss) before income tax 664,841 151,049 (572,773) - 243,117 34,014 expenses ----------- ----------- ----------- -------------- ----------- --------- Income tax (expenses) benefits (146,835) (27,879) 88,143 - (86,571) (12,112) Income (loss) before share of income in equity method 518,006 123,170 (484,630) - 156,546 21,902 investments, net of income taxes ----------- ----------- ----------- -------------- ----------- --------- Share of income in equity method 21,189 72 - - 21,261 2,975 investments, net of income taxes Net income (loss) 539,195 123,242 (484,630) - 177,807 24,877 ----------- ----------- ----------- -------------- ----------- ---------

(1) In 2019 the segment of “YY Live” was renamed as “YY”.

(2) The elimination mainly consists of revenues and expenses generated from services among YY and Huya segments, and interest income and interest expenses generated from the loan between YY and Bigo segments.

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

Three Months Ended ----------------------------------- September 30, 2019 YY Huya Bigo Total Total RMB RMB RMB RMB US$ Cost of revenues 5,043 8,497 7,068 20,608 2,883 Research and development expenses 26,848 24,172 78,154 129,174 18,072 Sales and marketing expenses 419 1,468 756 2,643 370 General and administrative expenses 41,265 48,987 4,958 95,210 13,320

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

Three Months Ended --------------------------------------------- September 30, 2019 YY Huya Bigo Total Total RMB RMB RMB RMB US$ Operating income (loss) 671,676 63,865 (575,253) 160,288 22,426 Share-based compensation expenses 73,575 83,124 90,936 247,635 34,645 Impairment of goodwill and investments 10,000 - - 10,000 1,399 Amortization of intangible assets from business acquisitions - - 193,487 193,487 27,070 ------- ------- --------- ------- ------ Non-GAAP operating income (loss) 755,251 146,989 (290,830) 611,410 85,540 ------- ------- --------- ------- ------

Net income (loss) 539,195 123,242 (484,630) 177,807 24,877 Share-based compensation expenses 73,575 83,124 90,936 247,635 34,645 Impairment of goodwill and investments 10,000 - - 10,000 1,399 Amortization of intangible assets from business acquisitions - - 193,487 193,487 27,070 Gain on fair value change of investments and equity investees’ 2,031 - - 2,031 284 investments Fair value change on derivative 1,753 - - 1,753 245 Interest expenses related to the convertible bonds’ 100,885 - - 100,885 14,114 amortization to face value Income tax effects on non-GAAP adjustments (188) - (39,978) (40,166) (5,619) ------- ------- --------- -------- ------- Non-GAAPnet income(loss) 727,251 206,366 (240,185) 693,432 97,015 ------- ------- --------- -------- -------

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

Three Months Ended ----------------------------------------------------------------------------- June 30, 2019 YY Huya Bigo(1) Elimination(2) Total Total RMB RMB RMB RMB RMB US$ Net revenues Live streaming 2,863,058 1,921,485 1,138,218 - 5,922,761 862,747 Others 190,758 88,976 92,752 - 372,486 54,259 ----------- ----------- ----------- -------------- ----------- --------- Total net revenues 3,053,816 2,010,461 1,230,970 - 6,295,247 917,006 ----------- ----------- ----------- -------------- ----------- --------- Cost of revenues(3) (1,627,744) (1,674,793) (871,304) - (4,173,841) (607,988) ----------- ----------- ----------- -------------- ----------- --------- Gross profit 1,426,072 335,668 359,666 - 2,121,406 309,018 ----------- ----------- ----------- -------------- ----------- --------- Operating expenses(3) Research and development (241,253) (105,411) (308,757) - (655,421) (95,473) expenses Sales and marketing expenses (335,602) (119,592) (644,300) - (1,099,494) (160,159) General and administrative (171,032) (74,328) (90,613) - (335,973) (48,940) expenses ----------- ----------- ----------- -------------- ----------- --------- Total operating expenses (747,887) (299,331) (1,043,670) - (2,090,888) (304,572) Other income 8,602 31,332 1,473 - 41,407 6,032 Operating income (loss) 686,787 67,669 (682,531) - 71,925 10,478 ----------- ----------- ----------- -------------- ----------- --------- Interest expenses (12,268) - (4,201) 4,201 (12,268) (1,787) Interest income and investment 84,791 75,021 1,008 (4,201) 156,619 22,814 income Foreign currency exchange (4,181) 787 17,195 - 13,801 2,010 (losses) gains, net Gain on fair value change of 14,291 - - - 14,291 2,082 investments ----------- ----------- ----------- -------------- ----------- --------- Income (loss) before income tax 769,420 143,477 (668,529) - 244,368 35,597 expenses ----------- ----------- ----------- -------------- ----------- --------- Income tax (expenses) benefits (160,152) (21,632) 37,888 - (143,896) (20,961) Income (loss) before share of income (loss) in equity method 609,268 121,845 (630,641) - 100,472 14,636 investments, net of income taxes ----------- ----------- ----------- -------------- ----------- --------- Share of income (loss) in equity method investments, net of 6,991 (44) - - 6,947 1,012 income taxes Net income (loss) 616,259 121,801 (630,641) - 107,419 15,648 ----------- ----------- ----------- -------------- ----------- ---------

(1) 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.

(2) The elimination mainly consists of interest income and interest expenses generated from the loan between YY and Bigo segments.

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

Three Months Ended ------------------------------------ June 30, 2019 YY Huya Bigo Total Total RMB RMB RMB RMB US$ Cost of revenues 1,955 4,270 9,379 15,604 2,273 Research and development expenses 28,053 13,931 118,045 160,029 23,311 Sales and marketing expenses 655 907 1,890 3,452 503 General and administrative expenses 43,189 29,501 12,507 85,197 12,410

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, 2019 YY Huya Bigo Total Total RMB RMB RMB RMB US$ Operating income (loss) 686,787 67,669 (682,531) 71,925 10,478 Share-based compensation expenses 73,852 48,609 141,821 264,282 38,497 Amortization of intangible assets from business acquisitions - - 188,740 188,740 27,493 -------- ------- --------- -------- ------- Non-GAAP operating income (loss) 760,639 116,278 (351,970) 524,947 76,468 -------- ------- --------- -------- ------- Net income (loss) 616,259 121,801 (630,641) 107,419 15,648 Share-based compensation expenses 73,852 48,609 141,821 264,282 38,497 Amortization of intangible assets from business acquisitions - - 188,740 188,740 27,493 Gain on fair value change of investments and equity investees’ (13,332) - - (13,332) (1,942) investments Interest expenses related to the convertible bonds’ 4,287 - - 4,287 624 amortization to face value Income tax effects on non-GAAP adjustments 1,421 - (33,312) (31,891) (4,645) -------- ------- --------- -------- ------- Non-GAAPnet income(loss) 682,487 170,410 (333,392) 519,505 75,675 -------- ------- --------- -------- -------

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

Three Months Ended ---------------------------------------------------------------- September 30, 2018 YY Huya Elimination(1) Total Total RMB RMB RMB RMB US$ Net revenues Live streaming 2,678,081 1,216,467 - 3,894,548 567,057 Others 145,894 60,130 (100) 205,924 29,983 ----------- ----------- -------------- ----------- --------- Total net revenues 2,823,975 1,276,597 (100) 4,100,472 597,040 ----------- ----------- -------------- ----------- --------- Cost of revenues(2) (1,591,645) (1,082,857) - (2,674,502) (389,415) ----------- ----------- -------------- ----------- --------- Gross profit 1,232,330 193,740 (100) 1,425,970 207,625 ----------- ----------- -------------- ----------- --------- Operating expenses(2) Research and development expenses (239,503) (74,625) - (314,128) (45,738) Sales and marketing expenses (282,237) (61,702) 100 (343,839) (50,064) General and administrative expenses (135,537) (71,201) - (206,738) (30,102) ----------- ----------- -------------- ----------- --------- Total operating expenses (657,277) (207,528) 100 (864,705 ) (125,904) Other income 38,568 11,072 - 49,640 7,228 Operating income (loss) 613,621 (2,716) - 610,905 88,949 ----------- ----------- -------------- ----------- --------- Interest expenses (4,910) - - (4,910) (715) Interest income and investment income 90,292 50,818 - 141,110 20,546 Foreign currency exchange (losses) gain, net (3,170) 98 - (3,072) (447) Gain on fair value change of investments 31,670 - - 31,670 4,611 Income before income tax expenses 727,503 48,200 - 775,703 112,944 ----------- ----------- -------------- ----------- --------- Income tax (expenses) benefits (83,491) 8,562 - (74,929) (10,910) Incomebefore share of(loss) incomein equity 644,012 56,762 - 700,774 102,034 method investments, net of income taxes ----------- ----------- -------------- ----------- --------- Share of (loss) income in equity method (19,967) 10 - (19,957) (2,906) investments, net of income taxes Netincome 624,045 56,772 - 680,817 99,128 ----------- ----------- -------------- ----------- ---------

(1) The elimination mainly consists of revenues and expenses generated from advertising services among YY Live and Huya segments.

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

Three Months Ended --------------------------- September 30, 2018 YY Huya Total Total RMB RMB RMB US$ Cost of revenues 12,120 3,902 16,022 2,333 Research and development expenses 41,139 11,613 52,752 7,681 Sales and marketing expenses 215 75 290 42 General and administrative expenses 43,701 48,639 92,340 13,445

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

Three Months Ended ---------------------------------- September 30, 2018 YY Huya Total Total RMB RMB RMB US$ Operating income (loss) 613,621 (2,716) 610,905 88,949 Share-based compensation expenses 97,175 64,229 161,404 23,501 Impairment of goodwill and investments 1,900 - 1,900 277 ------- ------- ------- ------- Non-GAAP operating income 712,696 61,513 774,209 112,727 ------- ------- ------- ------- Net income 624,045 56,772 680,817 99,128 Share-based compensation expenses 97,175 64,229 161,404 23,501 Impairment of goodwill and investments 1,900 - 1,900 277 Gain on fair value change of investments and equity investee’s investments 3,428 - 3,428 499 Income tax effects on non-GAAP adjustments 1,014 - 1,014 148 ------- ------- ------- ------- Non-GAAPnet income 727,562 121,001 848,563 123,553 ------- ------- ------- -------