AP NEWS

YY Reports Third Quarter 2018 Unaudited Financial Results

November 12, 2018

GUANGZHOU, China, Nov. 13, 2018 (GLOBE NEWSWIRE) -- YY Inc. (NASDAQ: YY) (“YY” or “the Company”), a leading live streaming social media platform in China, today announced its unaudited financial results for the third quarter of 2018.

Third Quarter 2018 Highlights

-- Net revenues increased by 32.6% to RMB4,100.5 million (US$597.0 million) from RMB3,092.3 million in the corresponding period of 2017. -- Net income attributable to YY was RMB650.7 million (US$94.7 million) compared to RMB636.0 million in the corresponding period of 2017. -- Non-GAAP net income attributable to YY1 increased by 19.7% to RMB787.0 million (US$114.6 million) from RMB657.3 million in the corresponding period of 2017.

Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY, stated, “During the third quarter of 2018 we recorded outstanding operating results, highlighted by a 20.7% year-over-year growth in our mobile live streaming monthly active users (MAU) and a 26.3% year-over-year growth in our total live streaming paying users. Our strong performance in the third quarter was attributable to the continuous market expansion for both YY Live and Huya. For YY Live, we continued to leverage our industry-leading AI technology to increase the accuracy and effectiveness of our content recommendation process. Meanwhile, we have initiated a strategic cooperation with Xiaomi to exclusively operate certain entertainment live streaming services on Xiaomi Live. The cooperation will provide Xiaomi’s users with a better experience in entertainment live streaming services and enable both YY and Xiaomi to explore additional monetization opportunities. Looking ahead, we will remain focused on cementing YY’s leadership in the live streaming industry through product innovation and technology advancements.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We once again achieved solid financial performance in the third quarter of 2018. Our total net revenues increased by 32.6% year over year to RMB4,100.5 million, exceeding the high end of our previous guidance range. The increase in net revenues was driven by the robust growth of our live streaming revenues which increased by 35.6% year over year to RMB3,894.5 million. Our non-GAAP net income attributable to YY also increased by 19.7% year over year to RMB787.0 million in the third quarter of 2018. We are confident that our strategies to enhance our content offerings and AI technologies will continue to yield sustainable growth, and increase our market share in the live streaming industry.”

Third Quarter 2018 Financial Results

NET REVENUES Net revenues increased by 32.6% to RMB4,100.5 million (US$597.0 million) in the third quarter of 2018 from RMB3,092.3 million in the corresponding period of 2017, primarily driven by an increase in live streaming revenues. Live streaming revenues increased by 35.6% to RMB3,894.5 million (US$567.1 million) in the third quarter of 2018 from RMB2,871.6 million in the corresponding period of 2017.

Other revenues2 decreased by 6.7% to RMB205.9 million (US$30.0 million) in the third quarter of 2018 from RMB220.7 million in the corresponding period of 2017.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 41.6% to RMB2,674.5 million (US$389.4 million) in the third quarter of 2018 from RMB1,889.3 million in the corresponding period of 2017, primarily attributable to an increase in revenue-sharing fees and content costs to RMB2,212.6 million (US$322.2 million) in the third quarter of 2018 from RMB1,604.9 million in the corresponding period of 2017. 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 Live and Huya segments, respectively. In addition, bandwidth costs increased to RMB249.5 million (US$36.3 million) in the third quarter of 2018 from RMB160.5 million in the corresponding period of 2017, primarily reflecting continued user base expansion and live streaming quality improvements.

Gross profit increased by 18.5% to RMB1,426.0 million (US$207.6 million) in the third quarter of 2018 from RMB1,203.0 million in the corresponding period of 2017. Gross margin was 34.8% in the third quarter of 2018 compared to 38.9% in the corresponding period of 2017, primarily due to the increase in revenue-sharing fees and content costs. In addition, the relatively low gross margin of the Huya segment had negative impact to the overall gross margin, since the Huya segment’s contribution to net revenues increased significantly year-over-year.

OPERATING INCOMEOperating expenses were RMB864.7 million (US$125.9 million) in the third quarter of 2018 compared to RMB560.3 million in the corresponding period of 2017, primarily due to increased investments in talent recruitment as part of the Company’s efforts to enhance its research and development capabilities.

Operating income was RMB610.9 million (US$88.9 million) in the third quarter of 2018 compared to RMB661.4 million in the corresponding period of 2017. Operating margin was 14.9% in the third quarter of 2018 compared to 21.4% in the corresponding period of 2017, primarily due to the increase in research and development expenses and the decrease in gross margin.

Non-GAAP operating income3 increased by 12.9% to RMB774.2 million (US$112.7 million) in the third quarter of 2018 from RMB685.8 million in the corresponding period of 2017. Non-GAAP operating margin4 was 18.9% in the third quarter of 2018 compared to 22.2% in the corresponding period of 2017.

NET INCOMENet income attributable to YY Inc. increased by 2.3% to RMB650.7 million (US$94.7 million) in the third quarter of 2018 from RMB636.0 million in the corresponding period of 2017.

Non-GAAP net income attributable to YY Inc. increased by 19.7% to RMB787.0 million (US$114.6 million) from RMB657.3 million in the corresponding period of 2017. Non-GAAP net margin5 was 19.2% in the third quarter of 2018 compared to 21.3% in the corresponding period of 2017.

NET INCOME PER ADSDiluted net income per ADS6 was RMB10.01 (US$1.46) in the third quarter of 2018 compared to RMB10.51 in the corresponding period of 2017.

Non-GAAP diluted net income per ADS7 increased by 11.1% to RMB12.07 (US$1.76) in the third quarter of 2018 from RMB10.86 in the corresponding period of 2017.

BALANCE SHEET AND CASH FLOWS As of September 30, 2018, the Company had cash and cash equivalents of RMB4,921.1 million (US$716.5 million) and short-term deposits of RMB8,302.6 million (US$1,208.9 million). For the third quarter of 2018, net cash from operating activities was RMB822.4 million (US$119.7 million).

SHARES OUTSTANDING As of September 30, 2018, the Company had a total of 1,269.6 million common shares, or the equivalent of 63.5 million ADSs, outstanding.

Business OutlookFor the fourth quarter of 2018, the Company expects net revenues to be between RMB4.39 billion and RMB4.54 billion, representing a year-over-year growth of 21.1% to 25.2%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentsIn October 2018, the Company entered into a strategic cooperation agreement with Xiaomi Corporation (“Xiaomi”). Pursuant to the agreement, YY has the exclusive right to operate certain entertainment live streaming services on Xiaomi Zhibo, or Xiaomi Live, the primary platform for Xiaomi’s live streaming services. Through this partnership, YY will enrich Xiaomi’s ecosystem by integrating its high quality streaming content and extensive experience in live streaming operations with Xiaomi Live. The agreement will provide Xiaomi’s users with a superior experience in entertainment live streaming services, while both parties continue to explore additional monetization opportunities.

Conference Call InformationThe Company will hold a conference call on Monday, November 12, 2018, at 9:00 pm Eastern Time or Tuesday, November 13, 2018, at 10:00 am 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 China Domestic: 400-6208-038 Hong Kong: +852-3018-6771 Conference ID: #8227539

The replay will be accessible through November 20, 2018, by dialing the following numbers:

United States: +1-646-254-3697 International: +61-2-8199-0299 Conference ID: #8227539

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 RMB6.8680 to US$1.00, the noon buying rate in effect on September 28, 2018 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

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

Safe Harbor 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 YY Inc., non-GAAP net margin, 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, 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, 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 YY Inc. is net income attributable to YY Inc. excluding share-based compensation expenses, 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, deemed dividend to subsidiary’s Series A 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. Non-GAAP net margin is non-GAAP net income attributable to YY Inc. as a percentage of net revenues. Basic and diluted non-GAAP net income per ADS is non-GAAP net income attributable to 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, 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 deemed dividend to subsidiary’s Series A 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 ZhaoTel: +86 (20) 8212-0000Email: IR@YY.com

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

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1 Non-GAAP net income attributable to YY Inc. is a non-GAAP financial measure, which is defined as net income attributable to YY Inc. excluding share-based compensation expenses, impairment of goodwill and investment, 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, deemed dividend to subsidiary’s Series A preferred shareholders, 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 RMB136.3 million (US19.8 million) and RMB21.3 million in the third quarter of 2018 and 2017, respectively. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

2 Starting from the first quarter of 2018, the Company re-classified its revenues from online games, revenues from memberships, and other revenues (which mainly represent revenues from the Company’s online advertising revenues) to the category “other revenues” in order to better reflect the Company’s continued strategic shift towards its live streaming business.

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

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

5 Non-GAAP net margin is non-GAAP net income attributable to YY Inc. as a percentage of net revenues.

6ADS is American Depositary Share. Each ADS represents twenty Class A common shares of the Company. Diluted net income per ADS is net income attributable to YY Inc. divided by weighted average number of diluted ADS.

7Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to 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.

YY INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share, ADS and per ADS data) December September September 31, 30, 30, 2017 2018 2018 RMB RMB US$ Assets Current assets Cash and cash equivalents 2,617,432 4,921,114 716,528 Short-term deposits 6,000,104 8,302,609 1,208,883 Restricted short-term deposits 1,000,000 - - Short-term investments 124,550 1,249,267 181,897 Accounts receivable, net 153,944 206,060 30,003 Inventory 315 - - Amounts due from related parties 11,190 70,887 10,321 Prepayments and other current assets 221,939 1,030,584 150,055 ---------- ---------- --------- Total current assets 10,129,474 15,780,521 2,297,687 ---------- ---------- --------- Non-current assets Deferred tax assets 113,017 41,432 6,033 Investments 1,153,019 4,565,401 664,735 Property and equipment, net 1,016,998 1,188,341 173,026 Land use rights, net 1,832,739 1,796,663 261,599 Intangible assets, net 37,481 74,671 10,872 Goodwill 11,716 11,765 1,713 Amounts due from related parties 20,000 - - Other non-current assets 144,275 197,061 28,693 ---------- ---------- --------- Total non-current assets 4,329,245 7,875,334 1,146,671 ---------- ---------- --------- Total assets 14,458,719 23,655,855 3,444,358 ---------- ---------- --------- Liabilities, mezzanine equity and shareholders’ equity Current liabilities Convertible bonds - 6,878 1,001 Accounts payable 76,351 109,656 15,966 Deferred revenue 758,044 696,785 101,454 Advances from customers 80,406 97,987 14,267 Income taxes payable 146,298 134,964 19,651 Accrued liabilities and other current liabilities 1,465,963 1,978,000 288,002 Amounts due to related parties 30,502 20,763 3,023 Short-term loans 588,235 - - Total current liabilities 3,145,799 3,045,033 443,364 ---------- ---------- --------- Non-current liabilities Convertible bonds 6,536 - - Deferred revenue 57,718 79,947 11,641 Deferred tax liabilities 10,810 25,166 3,664 ---------- ---------- --------- Total non-current liabilities 75,064 105,113 15,305 ---------- ---------- --------- Total liabilities 3,220,863 3,150,146 458,669 ---------- ---------- ---------

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, 2017 2018 2018 RMB RMB US$ Mezzanine equity 524,997 - - Shareholders’ equity Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 945,245,908 and 981,384,448 shares 57 59 9 issued and outstanding as of December 31, 2017 and September 30, 2018, respectively) Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 317,982,976 and 288,182,976 shares 23 21 3 issued and outstanding as of December 31, 2017 and September 30, 2018, respectively) Additional paid-in capital 5,339,844 11,014,105 1,603,684 Statutory reserves 62,718 62,718 9,132 Retained earnings(1) 5,218,110 6,263,853 912,035 Accumulated other comprehensive (loss) income(1) (9,597 ) 350,054 50,969 ---------- - ---------- --------- Total YY Inc.’s shareholders’ equity 10,611,155 17,690,810 2,575,832 ---------- - ---------- --------- Non-controlling interests 101,704 2,814,899 409,857 ---------- - ---------- --------- Total shareholders’ equity 10,712,859 20,505,709 2,985,689 ---------- - ---------- --------- Total liabilities, mezzanine equity and shareholders’ equity 14,458,719 23,655,855 3,444,358 ---------- - ---------- ---------

(1) On January 1, 2018, the Company adopted ASU 2016-1, “Classification and Measurement of Financial Instruments”. After the adoption of this new guidance, the Company measures long-term investments other than equity method investments at fair value through earnings. For those investments without readily determinable fair values, the Company elects to record these investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. Changes in the basis of these investments are reported in current earnings. Following the adoption of this guidance, accumulated fair value gain, amounting to RMB87.8 million, was reclassified from accumulated other comprehensive loss to retained earnings as of January 1, 2018.

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, 2017 2018 2018 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Net revenues(1) Live streaming 2,871,610 3,559,666 3,894,548 567,057 7,302,434 10,486,249 1,526,827 Others 220,695 213,564 205,924 29,983 665,820 636,384 92,659 ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Total net 3,092,305 3,773,230 4,100,472 597,040 7,968,254 11,122,633 1,619,486 revenues ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Cost of (1,889,313 ) (2,313,772 ) (2,674,502 ) (389,415 ) (4,829,753 ) (7,004,071 ) (1,019,812 ) revenues(2) ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Gross profit 1,202,992 1,459,458 1,425,970 207,625 3,138,501 4,118,562 599,674 ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Operating expenses(2) Research and development (166,139 ) (295,946 ) (314,128 ) (45,738 ) (499,059 ) (859,539 ) (125,151 ) expenses Sales and marketing (249,480 ) (246,130 ) (343,839 ) (50,064 ) (542,516 ) (825,627 ) (120,214 ) expenses General and administrative (144,678 ) (237,532 ) (206,738 ) (30,102 ) (325,875 ) (608,246 ) (88,562 ) expenses ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Total operating (560,297 ) (779,608 ) (864,705 ) (125,904 ) (1,367,450 ) (2,293,412 ) (333,927 ) expenses ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Gain on deconsolidation - - - - 37,989 - - and disposal of subsidiaries Other income 18,667 33,922 49,640 7,228 68,653 95,936 13,969 ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Operating 661,362 713,772 610,905 88,949 1,877,693 1,921,086 279,716 income ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Interest (3,651 ) (1,548 ) (4,910 ) (715 ) (28,378 ) (8,477 ) (1,234 ) expense Interest income and investment 47,505 128,850 141,110 20,546 105,853 362,151 52,730 income Foreign currency exchange (251 ) (2,823 ) (3,072 ) (447 ) (1,825 ) 824 120 (losses) gains, net Gain on deemed disposal and - 13,999 - - 45,861 13,999 2,038 disposal of investments Gain on fair value change of - 1,205,049 31,670 4,611 - 1,663,266 242,176 investments Fair value loss on derivative - (2,273,355 ) - - - (2,285,223 ) (332,735 ) liabilities Other non-operating - (2,000 ) - - - (2,000 ) (291 ) expenses ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Income (loss) before income 704,965 (218,056 ) 775,703 112,944 1,999,204 1,665,626 242,520 tax expenses ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Income tax (74,684 ) (147,419 ) (74,929 ) (10,910 ) (264,288 ) (370,593 ) (53,959 ) expenses ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Income (loss) before share of income in equity method 630,281 (365,475 ) 700,774 102,034 1,734,916 1,295,033 188,561 investments, net of income taxes ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Share of income (loss) in equity method 6,806 88,992 (19,957 ) (2,906 ) 15,467 78,214 11,388 investments, net of income taxes ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Net income 637,087 (276,483 ) 680,817 99,128 1,750,383 1,373,247 199,949 (loss) ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Less: Net income (loss) income attributable to the non-controlling interest shareholders 1,120 (139,596 ) 30,127 4,387 (2,446 ) (73,978 ) (10,771 ) and the mezzanine equity classified non-controlling interest shareholders Deemed dividend to subsidiary’s Series A - - - - - (489,284 ) (71,241 ) preferred shareholders ---------- - ---------- - ---------- - -------- - ---------- - ---------- - ---------- - Net income (loss) 635,967 (136,887 ) 650,690 94,741 1,752,829 957,941 139,479 attributable to 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, 2017 2018 2018 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Net income (loss) perADS —Basic 10.60 (2.14 ) 10.12 1.47 30.30 14.98 2.18 —Diluted 10.51 (2.14 ) 10.01 1.46 29.72 14.80 2.15 Weighted average number of ADS used in calculating net income (loss) per ADS —Basic 60,008,235 63,839,293 64,301,796 64,301,796 57,857,025 63,952,614 63,952,614 —Diluted 60,503,529 63,839,293 64,829,757 64,829,757 59,681,394 64,738,363 64,738,363

(1) On January 1, 2018, the Company adopted ASC 606, “Revenue from Contracts with Customers” using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Based on the Company’s assessment, the adoption of ASC 606 did not have any material impact on the Company’s consolidated financial statements.

(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, 30, 30, 30, 30, 2017 2018 2018 2018 2017 2018 2018 RMB US$ RMB RMB US$ Cost of revenues (434 ) 24,059 16,022 2,333 6,210 59,689 8,691 Research and development expenses (6,049 ) 67,912 52,752 7,681 15,847 175,131 25,500 Sales and marketing expenses (74 ) 2,406 290 42 738 4,565 665 General and administrative 9,700 124,978 92,340 13,445 26,406 253,881 36,966 expenses

YY INC. RECONCILIATION OF GAAP AND NON-GAAP RESULTS (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended Nine Months Ended ---------------------------------------- --------------------------------- September June September September September September September 30, 30, 30, 30, 30, 30, 30, 2017 2018 2018 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Share-based compensation expenses 3,143 219,355 161,404 23,501 49,201 493,266 71,822 Impairment of goodwill and 21,285 - 1,900 277 41,619 20,249 2,948 investments Gain on deconsolidation and - - - - (37,989 ) - - disposal of a subsidiary --------- ------- --------- --------- --------- - --------- --------- Non-GAAP operating income 685,790 933,127 774,209 112,727 1,930,524 2,434,601 354,486 --------- ------- --------- --------- --------- - --------- ---------

Net income (loss) 637,087 (276,483 ) 680,817 99,128 1,750,383 1,373,247 199,949 Share-based compensation 3,143 219,355 161,404 23,501 49,201 493,266 71,822 expenses Impairment of goodwill and 21,285 - 1,900 277 41,619 20,249 2,948 investments Gain on deconsolidation and - - - - (37,989 ) - - disposal of a subsidiary Gain on deemed disposal and - (13,999 ) - - (45,861 ) (13,999 ) (2,038 ) disposal of investments (Gain) loss on fair value change of investments and - (1,287,301 ) 3,428 499 - (1,710,420 ) (249,042 ) equity investees’ investments Fair value loss on derivative - 2,273,355 - - - 2,285,223 332,735 liabilities Income tax effects on (3,000 ) 30,601 1,014 148 9,264 76,081 11,078 non-GAAP adjustments ------- - ---------- - ------- ------- --------- - ---------- - -------- - Non-GAAP net income 658,515 945,528 848,563 123,553 1,766,617 2,523,647 367,452 ------- - ---------- - ------- ------- --------- - ---------- - -------- -

Net income (loss) 635,967 (136,887 ) 650,690 94,741 1,752,829 957,941 139,479 attributable to YY Inc. Share-based compensation 3,143 219,355 161,404 23,501 49,201 493,266 71,822 expenses Impairment of goodwill 21,285 - 1,900 277 41,619 20,249 2,948 and investments Gain on deconsolidation and disposal of a - - - - (37,989 ) - - subsidiary Gain on deemed disposal and disposal of - (13,999 ) - - (45,861 ) (13,999 ) (2,038 ) investments (Gain) loss on fair value change of investments and - (1,287,301 ) 3,428 499 - (1,710,420 ) (249,042 ) equity investees’ investments Fair value loss on - 2,273,355 - - - 2,285,223 332,735 derivative liabilities Deemed dividend to subsidiary’s Series A - - - - - 489,284 71,241 preferred shareholders Income tax effects on (3,000 ) 30,601 1,014 148 9,264 76,081 11,078 non-GAAP adjustments Non-GAAP adjustments for net loss attributable to (84 ) (211,884 ) (31,449 ) (4,579 ) (1,678 ) (237,513 ) (34,583 ) the non-controlling interest shareholders ------- - ---------- - ------- - ------- - --------- - ---------- - -------- - Non-GAAP net income 657,311 873,240 786,987 114,587 1,767,385 2,360,112 343,640 attributable to YY Inc. ------- - ---------- - ------- - ------- - --------- - ---------- - -------- -

Non-GAAP net income per ADS —Basic 10.95 13.68 12.24 1.78 30.55 36.90 5.37 —Diluted 10.86 13.46 12.07 1.76 29.96 36.31 5.29 Weighted average number of ADS used in calculating Non-GAAP net income per ADS —Basic 60,008,235 63,839,293 64,301,796 64,301,796 57,857,025 63,952,614 63,952,614 —Diluted 60,503,529 64,701,643 64,829,757 64,829,757 59,681,394 64,738,363 64,738,363

YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended ---------------------------------------------------------------------- September 30, 2018 YYLive 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) (3,170 ) 98 - (3,072 ) (447 ) gains, net Gain on fair value change of 31,670 - - 31,670 4,611 investments ---------- - ---------- - -------------- - ---------- - -------- - 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 method investments, net of 644,012 56,762 - 700,774 102,034 income taxes ---------- - ---------- - -------------- - ---------- - -------- - Share of (loss) income in equity method investments, net of income (19,967 ) 10 - (19,957 ) (2,906 ) 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 YYLive 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 YYLive 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 Loss on fair value change of investments and equity investees’ 3,428 - 3,428 499 investments Income tax effects on non-GAAP adjustments 1,014 - 1,014 148 ------- ------- - ------- ------- Non-GAAPnet income 727,562 121,001 848,563 123,553 ------- ------- - ------- -------

YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended ---------------------------------------------------------------------- June 30, 2018 YYLive Huya Elimination(1) Total Total RMB RMB RMB RMB US$ Net revenues Live streaming 2,567,854 991,812 - 3,559,666 537,950 Others 167,044 46,520 - 213,564 32,275 ---------- - ---------- - -------------- - ---------- - -------- - Total net revenues 2,734,898 1,038,332 - 3,773,230 570,225 ---------- - ---------- - -------------- - ---------- - -------- - Cost of revenues(2) (1,441,807 ) (871,965 ) - (2,313,772 ) (349,666 ) ---------- - ---------- - -------------- - ---------- - -------- - Gross profit 1,293,091 166,367 - 1,459,458 220,559 ---------- - ---------- - -------------- - ---------- - -------- - Operating expenses(2) Research and development expenses (235,982 ) (59,964 ) - (295,946 ) (44,724 ) Sales and marketing expenses (204,448 ) (41,682 ) - (246,130 ) (37,196 ) General and administrative expenses (149,059 ) (88,473 ) - (237,532 ) (35,897 ) ---------- - ---------- - -------------- - ---------- - -------- - Total operating expenses (589,489 ) (190,119 ) - (779,608 ) (117,817 ) ---------- - ---------- - -------------- - ---------- - -------- - Other income 27,463 6,459 - 33,922 5,126 ---------- - ---------- - -------------- - ---------- - -------- - Operating income (loss) 731,065 (17,293 ) - 713,772 107,868 ---------- - ---------- - -------------- - ---------- - -------- - Interest expenses (1,548 ) - - (1,548 ) (234 ) Interest income and investment income 86,406 42,444 - 128,850 19,472 Foreign currency exchange losses, net (2,823 ) - - (2,823 ) (427 ) Gain on deemed disposal and disposal 13,999 - - 13,999 2,116 of investments Gain on fair value change of 1,003,050 - 201,999 1,205,049 182,111 investments Fair value loss on derivative - (2,273,355 ) - (2,273,355 ) (343,558 ) liabilities Other non-operating expenses (2,000 ) - - (2,000 ) (302 ) ---------- - ---------- - -------------- - ---------- - -------- - Income (loss) before income tax 1,828,149 (2,248,204 ) 201,999 (218,056 ) (32,954 ) expenses ---------- - ---------- - -------------- - ---------- - -------- - Income tax (expenses) benefits (126,522 ) 6,070 (26,967 ) (147,419 ) (22,278 ) ---------- - ---------- - -------------- - ---------- - -------- - Income (loss) before share of income in equity method investments, net of 1,701,627 (2,242,134 ) 175,032 (365,475 ) (55,232 ) income taxes ---------- - ---------- - -------------- - ---------- - -------- - Share of income in equity method 147,337 116,687 (175,032 ) 88,992 13,449 investments, net of income taxes ---------- - ---------- - -------------- - ---------- - -------- - Net income (loss) 1,848,964 (2,125,447 ) - (276,483 ) (41,783 ) ---------- - ---------- - -------------- - ---------- - -------- -

(1) Elimination represents the gain resulting from change in fair value of an investment of one of the Company’s subsidiaries, on which YY Live segment and Huya segment have joint control and accounted for as equity method investment.

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

Three Months Ended ---------------------------- June 30, 2018 YYLive Huya Total Total RMB RMB RMB US$ Cost of revenues 21,406 2,653 24,059 3,636 Research and development expenses 62,071 5,841 67,912 10,263 Sales and marketing expenses 1,674 732 2,406 364 General and administrative expenses 60,100 64,878 124,978 18,887

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, 2018 YYLive Huya Elimination Total Total RMB RMB RMB RMB US$ Operating income (loss) 731,065 (17,293 ) - 713,772 107,868 Share-based compensation expenses 145,251 74,104 - 219,355 33,150 ---------- - ---------- - ----------- - ---------- - -------- - Non-GAAP operating income 876,316 56,811 - 933,127 141,018 ---------- - ---------- - ----------- - ---------- - -------- - Net income (loss) 1,848,964 (2,125,447 ) - (276,483 ) (41,783 ) Share-based compensation expenses 145,251 74,104 - 219,355 33,150 Gain on deemed disposal and disposal of (13,999 ) - - (13,999 ) (2,116 ) investments Gain on fair value change of investments (1,143,680 ) (116,654 ) (26,967 ) (1,287,301 ) (194,541 ) and equity investees’ investments Fair value loss on derivative liabilities - 2,273,355 - 2,273,355 343,558 Income tax effects on non-GAAP 3,634 - 26,967 30,601 4,625 adjustments ---------- - ---------- - ----------- - ---------- - -------- - Non-GAAPnet income 840,170 105,358 - 945,528 142,893 ---------- - ---------- - ----------- - ---------- - -------- -

YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended -------------------------------------------------- September 30, 2017 YYLive Huya Total Total RMB RMB RMB US$ Net revenues Live streaming 2,319,251 552,359 2,871,610 431,607 Others 189,520 31,175 220,695 33,171 ---------- - -------- - ---------- - -------- - Total net revenues 2,508,771 583,534 3,092,305 464,778 ---------- - -------- - ---------- - -------- - Cost of revenues(1) (1,379,016 ) (510,297 ) (1,889,313 ) (283,966 ) ---------- - -------- - ---------- - -------- - Gross profit 1,129,755 73,237 1,202,992 180,812 ---------- - -------- - ---------- - -------- - Operating expenses(1) Research and development expenses (117,231 ) (48,908 ) (166,139 ) (24,971 ) Sales and marketing expenses (228,318 ) (21,162 ) (249,480 ) (37,497 ) General and administrative expenses (107,342 ) (37,336 ) (144,678 ) (21,745 ) ---------- - -------- - ---------- - -------- - Total operating expenses (452,891 ) (107,406 ) (560,297 ) (84,213 ) ---------- - -------- - ---------- - -------- - Other income 18,569 98 18,667 2,806 ---------- - -------- - ---------- - -------- - Operating income (loss) 695,433 (34,071 ) 661,362 99,405 ---------- - -------- - ---------- - -------- - Interest expenses (3,651 ) - (3,651 ) (549 ) Interest income and investment income 42,738 4,767 47,505 7,140 Foreign currency exchange losses, net (251 ) - (251 ) (38 ) ---------- - -------- - ---------- - -------- - Income (loss) before income tax expenses 734,269 (29,304 ) 704,965 105,958 ---------- - -------- - ---------- - -------- - Income tax expenses (74,684 ) - (74,684 ) (11,225 ) ---------- - -------- - ---------- - -------- - Income (loss) before share ofincomein equity method 659,585 (29,304 ) 630,281 94,733 investments, net of income taxes ---------- - -------- - ---------- - -------- - Share of income in equity method investments, net of 6,806 - 6,806 1,023 income taxes ---------- - -------- - ---------- - -------- - Net Income (loss)(2) 666,391 (29,304 ) 637,087 95,756 ---------- - -------- - ---------- - -------- -

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

Three Months Ended -------------------------------- September 30, 2017 YYLive Huya Total Total RMB RMB RMB US$ Cost of revenues (1,190 ) 756 (434 ) (65 ) Research and development expenses (7,973 ) 1,924 (6,049 ) (909 ) Sales and marketing expenses (106 ) 32 (74 ) (11 ) General and administrative expenses 8,473 1,227 9,700 1,458

(2) Starting from the three months ended December 31, 2017, the Company reviews the financial performance of the operating segments up to the net income of each segment. Segment information for comparative periods has been revised to be presented on the same basis as the three months ended December 31, 2017.

YY INC. RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended ------------------------------------------ September 30, 2017 YYLive Huya Total Total RMB RMB RMB US$ Operating income (loss) 695,433 (34,071 ) 661,362 99,405 Share-based compensation expenses (796 ) 3,939 3,143 473 Impairment of goodwill and investments 21,285 - 21,285 3,199 ------- - ------- - ------- - ------- - Non-GAAP operating income (loss) 715,922 (30,132 ) 685,790 103,077 ------- - ------- - ------- - ------- - Net income (loss) 666,391 (29,304 ) 637,087 95,756 Share-based compensation expenses (796 ) 3,939 3,143 473 Impairment of goodwill and investments 21,285 - 21,285 3,199 Income tax effects on non-GAAP adjustments (3,000 ) - (3,000 ) (451 ) ------- - ------- - ------- - ------- - Non-GAAPnet income(loss) 683,880 (25,365 ) 658,515 98,977 ------- - ------- - ------- - ------- -

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