AP NEWS

YY Reports First Quarter 2018 Unaudited Financial Results

June 5, 2018

GUANGZHOU, China, June 06, 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 first quarter of 2018.

First Quarter 2018 Highlights

-- Net revenues increased by 43.3% to RMB3,248.9 million (US$518.0 million) from RMB2,267.0 million in the corresponding period of 2017. -- Net income attributable to YY was RMB444.1 million (US$70.8 million) compared to RMB543.2 million in the corresponding period of 2017. -- Non-GAAP net income attributable to YY1 increased by 31.1% to RMB699.9 million (US$111.6 million) from RMB533.9 million in the corresponding period of 2017.

“We are delighted to start 2018 with robust growth in the first quarter,” stated Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY. “Our mobile live streaming monthly active users (MAU) increased by 23.9% year over year to 77.6 million, and our total live streaming paying users increased by 17.3% year over year to 6.9 million. As we continue to roll out innovative functionalities such as Host Battalion in the latest version of YY Live, we are further enhancing our user acquisition and monetization capabilities. Meanwhile, the successful public listing of our game live streaming subsidiary HUYA Inc. on the New York Stock Exchange in May has ushered in a new era for the group company. Together as a group company, we are confident that YY will maintain and expand its leadership positions in both entertainment live streaming and game live streaming markets in China. In addition, we further invested US$272 million in the series D preferred shares of Bigo Inc, a fast-growing global video-based social media platform. YY is Bigo’s existing shareholder and has become the largest shareholder of Bigo after the series D financing. YY has also obtained a right, exercisable after the first anniversary of the closing date, to purchase additional Bigo shares at the then fair market price to exceed 50.1% of the voting power in Bigo. We believe that the significant synergistic relationship between YY Live and Bigo will further contribute momentum to our expansion into the global market. ”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We are pleased to deliver another quarter with strong financial results. During the quarter, our total net revenues increased by 43.3% year over year to RMB3,248.9 million, exceeding the high end of our previous guidance range. Our revenue growth was mainly driven by the robust growth of our live streaming revenues, which increased by 47.4% year over year to RMB3,032.0 million. In addition, our non-GAAP net income attributable to YY increased by 31.1% year over year to RMB699.9 million in the first quarter of 2018. Going forward, we will continue to innovate and offer more engaging services to users in order to further grow our market share and create more value for all of our stakeholders.”

First Quarter 2018 Financial Results

NET REVENUES Net revenues increased by 43.3% to RMB3,248.9 million (US$518.0 million) in the first quarter of 2018 from RMB2,267.0 million in the corresponding period of 2017, primarily driven by an increase in live streaming revenues. Live streaming revenues increased by 47.4% to RMB3,032.0 million (US$483.4 million) in the first quarter of 2018 from RMB2,057.4 million in the corresponding period of 2017.

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.

Other revenues increased by 3.5% to RMB216.9 million (US$34.6 million) in the first quarter of 2018 from RMB209.5 million in the corresponding period of 2017.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 46.4% to RMB2,015.8 million (US$321.4 million) in the first quarter of 2018 from RMB1,377.0 million in the corresponding period of 2017, primarily attributable to an increase in revenue-sharing fees and content costs to RMB1,621.0 million (US$258.4 million) in the first quarter of 2018 from RMB1,035.3 million in the corresponding period of 2017. Revenue-sharing fees and content costs paid to performers, guilds, and content providers as a percentage of the live streaming revenues increased year over year primarily because of the Company’s efforts to strengthen its relationships with performers and further enrich its live streaming content offerings. In addition, bandwidth costs increased to RMB225.4 million (US$35.9 million) in the first quarter of 2018 from RMB188.9 million in the corresponding period of 2017, primarily reflecting continued user base expansion and live streaming quality improvements. Bandwidth costs as a percentage of total revenues decreased year over year partially because of the Company’s improved efficiency through technological advances and better pricing terms resulting from its economies of scale.

Gross profit increased by 38.6% to RMB1,233.1 million (US$196.6 million) in the first quarter of 2018 from RMB890.0 million in the corresponding period of 2017. Gross margin was 38.0% in the first quarter of 2018 compared to 39.3% in the corresponding period of 2017.

OPERATING INCOMEOperating expenses was RMB649.1 million (US$103.5 million) in the first quarter of 2018 compared to RMB330.8 million in the corresponding period of 2017.

Operating income was RMB596.4 million (US$95.1 million) in the first quarter of 2018 compared to RMB617.0 million in the corresponding period of 2017. Operating margin was 18.4% in the first quarter of 2018 compared to 27.2% in the corresponding period of 2017, primarily due to the increase in sales and marketing expenses, amounting to RMB147.1 million and the increase in share-based compensation, amounting to RMB89.9 million.

Non-GAAP operating income2 increased by 20.6% to RMB727.3 million (US$115.9 million) in the first quarter of 2018 from RMB603.3 million in the corresponding period of 2017. Non-GAAP operating margin3 was 22.4% in the first quarter of 2018 compared to 26.6% in the corresponding period of 2017.

NET INCOMENet income attributable to YY Inc. was RMB444.1 million (US$70.8 million) in the first quarter of 2018 compared to RMB543.2 million in the corresponding period of 2017. Net income attributable to YY Inc. in the first quarter of 2018 includes RMB426.5 million (US$68.0 million) of gain on fair value change of investments and deemed dividend to subsidiary’s series A preferred shareholders related to HUYA Inc.’s series B equity financing, which was a loss of RMB489.3 million (US$78.0 million). Net margin was 13.7% in the first quarter of 2018 compared to 24.0% in the corresponding period of 2017.

Non-GAAP net income attributable to YY Inc. increased by 31.1% to RMB699.9 million (US$111.6 million) from RMB533.9 million in the corresponding period of 2017. Non-GAAP net margin was 21.5% in the first quarter of 2018 compared to 23.5% in the corresponding period of 2017.

NET INCOME PER ADSDiluted net income per ADS4 was RMB6.86 (US$1.09) in the first quarter of 2018 compared to RMB9.25 in the corresponding period of 2017.

Non-GAAP diluted net income per ADS5 increased by 18.5% to RMB10.78 (US$1.72) in the first quarter of 2018 from RMB9.10 in the corresponding period of 2017.

BALANCE SHEET AND CASH FLOWS As of March 31, 2018, the Company had cash and cash equivalents of RMB4,086.5 million (US$651.5 million) and short-term deposits of RMB8,748.9 million (US$1,394.8 million). For the first quarter of 2018, net cash from operating activities was RMB780.3 million (US$124.4 million).

SHARES OUTSTANDING As of March 31, 2018, the Company had a total of 1,263.9 million common shares, or the equivalent of 63.2 million ADSs, outstanding.

Business OutlookFor the second quarter of 2018, the Company expects net revenues to be between RMB3.6 billion and RMB3.7 billion, representing a year-over-year growth of 38.0% to 41.8%. In addition, the Company expects to have a fair value loss on derivative liabilities, which is related to preferred shares of HUYA Inc. amounting to approximately RMB2.3 billion due to an increase in HUYA Inc.’s enterprise value as indicated by the price of its initial public offering, which will cause a negative net income attributable to YY Inc. in the second quarter of 2018. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentsIn May 2018, HUYA Inc., the Company’s majority-controlled subsidiary, successfully completed its initial public offering of 17,250,000 American depositary shares (“ADSs”) at a price of US$12.0 per ADS, including 2,250,000 ADSs offered pursuant to the underwriters’ full exercise of their over-allotment options. Each HUYA Inc. ADS represents one Class A ordinary share of HUYA Inc.

In June 2018, the Company announced that it had invested US$272 million in the series D preferred shares of Bigo Inc. as the lead investor. YY is an existing shareholder of Bigo and had become its largest shareholder after the series D financing. In addition, YY had obtained a right, exercisable after the first anniversary of the closing date, to purchase additional Bigo shares at the then fair market price to exceed 50.1% of the voting power in Bigo.

The Company announced that it has appointed Mr. Pengjun Lu as the Company’s Chief Technology Officer, effective on May 28, 2018. With over 12 years of technology and management experience, Mr. Lu brings to the Company a wealth of knowledge and expertise in search technology, recommendation algorithm, computer vision and speech related AI technologies. Prior to joining YY, Mr. Lu served as the general manager in charge of search advertising and chief architect in infrastructure team at Baidu from 2014 to early 2018. From 2006 to 2014, Mr. Lu worked at Google, most recently as a staff engineer in charge of Shanghai advertising back-end team, and received the Google Founders Award for the QueST project. Mr. Lu received a Master’s degree in computer science and technology from Fudan University, and a Bachelor’s degree in computer science and technology from Wuhan University.

Conference Call InformationThe Company will hold a conference call on June 5, 2018, at 9:00 pm Eastern Time or June 6, 2018, at 9:00 am Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

United States: +1-845-675-0438International: +65-6713-5440China Domestic: 400-1200-654Hong Kong: +852-3018-6776Conference ID: #7090909

The replay will be accessible through June 13, 2018, by dialing the following numbers:

United States Toll Free: +1-855-452-5696International: +61-2-9003-4211 Conference ID: #7090909

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 RMB6.2726 to US$1.00, the noon buying rate in effect on March 30, 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 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, 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, fair value loss on derivative liabilities, and deemed dividend to subsidiary’s Series A preferred shareholders, which may not be recurring in its business, (iii) income tax expenses and 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, fair value loss on derivative liabilities, deemed dividend to subsidiary’s Series A preferred shareholders and income tax effects on above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

2 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.

3 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.

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

5 Non-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. UNAUDITEDCONDENSED CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share, ADS and per ADS data) December March March 31, 31, 31, 2017 2018 2018 RMB RMB US$ Assets Current assets Cash and cash equivalents 2,617,432 4,086,517 651,487 Short-term deposits 6,000,104 8,748,883 1,394,778 Restricted short-term deposits 1,000,000 - - Short-term investment 124,550 119,118 18,990 Accounts receivable, net 153,944 161,339 25,721 Inventory 315 269 43 Amount due from related parties 11,190 13,355 2,129 Prepayments and other current assets 221,939 770,111 122,773 ---------- ---------- --------- Total current assets 10,129,474 13,899,592 2,215,921 ---------- ---------- --------- Non-current assets Deferred tax assets 113,017 117,765 18,775 Investments 1,153,019 1,247,317 198,852 Property and equipment, net 1,016,998 1,086,574 173,225 Land use rights, net 1,832,739 1,820,711 290,264 Intangible assets, net 37,481 34,812 5,550 Goodwill 11,716 11,681 1,862 Amount due from related parties 20,000 - - Other non-current assets 144,275 118,622 18,911 ---------- ---------- --------- Total non-current assets 4,329,245 4,437,482 707,439 ---------- ---------- --------- Total assets 14,458,719 18,337,074 2,923,360 ---------- ---------- --------- Liabilities, mezzanine equity and shareholders’ equity Current liabilities Accounts payable 76,351 68,010 10,842 Deferred revenue 758,044 764,214 121,834 Advances from customers 80,406 86,364 13,768 Income taxes payable 146,298 156,554 24,958 Accrued liabilities and other current liabilities 1,465,963 1,689,490 269,344 Amounts due to related parties 30,502 26,053 4,153 Derivative liabilities - 899,116 143,340 Short-term loan 588,235 - - ---------- ---------- --------- Total current liabilities 3,145,799 3,689,801 588,239 ---------- ---------- --------- Non-current liabilities Convertible bonds 6,536 6,289 1,003 Deferred revenue 57,718 60,571 9,656 Deferred tax liabilities 10,810 62,725 10,000 ---------- ---------- --------- Total non-current liabilities 75,064 129,585 20,659 ---------- ---------- --------- Total liabilities 3,220,863 3,819,386 608,898 ---------- ---------- ---------

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

December March March 31, 31, 31, 2017 2018 2018 RMB RMB US$ Mezzanine equity 524,997 3,029,437 482,964 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 965,928,668 shares issued and outstanding as of December 57 58 9 31, 2017 and March 31, 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 297,982,976 shares issued and outstanding as of December 23 22 4 31, 2017 and March 31, 2018, respectively) Additional paid-in capital 5,339,844 5,828,395 929,183 Statutory reserves 62,718 62,718 9,999 Retained earnings(1) 5,218,110 5,750,050 916,693 Accumulated other comprehensive loss(1) (9,597 ) (217,115 ) (34,613 ) ---------- - ---------- - --------- - Total YY Inc.’s shareholders’ equity 10,611,155 11,424,128 1,821,275 ---------- - ---------- - --------- - Non-controlling interests 101,704 64,123 10,223 Total shareholders’ equity 10,712,859 11,488,251 1,831,498 ---------- - ---------- - --------- - Total liabilities, mezzanine equity and shareholders’ equity 14,458,719 18,337,074 2,923,360 ---------- - ---------- - --------- -

(1) On January 1, 2018, the Group adopted ASU 2016-1, “Classification and Measurement of Financial Instruments”. After the adoption of this new guidance, the Company will measure long-term investments other than equity method investments at fair value through earnings. For those investments without readily determinable fair values, the Group will elect 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 will be 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 AND COMPREHENSIVE INCOME (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended ---------------------------------------------------- March December March March 31, 31, 31, 31, 2017 2017 2018 2018 RMB RMB RMB US$ Net revenues(1) Live streaming 2,057,427 3,368,520 3,032,035 483,378 Others 209,531 258,018 216,896 34,578 Total net revenues 2,266,958 3,626,538 3,248,931 517,956 ---------- - ---------- - ---------- - -------- - Cost of revenues(2) (1,376,995 ) (2,196,649 ) (2,015,797 ) (321,365 ) ---------- - ---------- - ---------- - -------- - Gross profit 889,963 1,429,889 1,233,134 196,591 ---------- - ---------- - ---------- - -------- - Operating expenses(2) Research and development expenses (165,561 ) (282,827 ) (249,465 ) (39,771 ) Sales and marketing expenses (88,602 ) (148,765 ) (235,658 ) (37,569 ) General and administrative expenses (76,652 ) (218,766 ) (163,976 ) (26,142 ) Goodwill impairment - (2,527 ) - - ---------- - ---------- - ---------- - -------- - Total operating expenses (330,815 ) (652,885 ) (649,099 ) (103,482 ) Gain on deconsolidation and disposal of subsidiaries 37,989 - - - Other income 19,820 44,534 12,374 1,973 ---------- - ---------- - ---------- - -------- - Operating income 616,957 821,538 596,409 95,082 ---------- - ---------- - ---------- - -------- - Interest expense (21,268 ) (3,744 ) (2,019 ) (322 ) Interest income 31,031 74,531 92,191 14,697 Foreign currency exchange gains (losses), net (1,293 ) (351 ) 6,719 1,071 Gain on fair value change of investments(3) - - 426,547 68,002 Fair value loss on derivative liabilities - - (11,868 ) (1,892 ) ---------- - ---------- - ---------- - -------- - Income before income tax expenses 625,427 891,974 1,107,979 176,638 ---------- - ---------- - ---------- - -------- - Income tax expenses (89,073 ) (151,523 ) (148,245 ) (23,634 ) ---------- - ---------- - ---------- - -------- - Income before share of income in equity method investments, net of income taxes 536,354 740,451 959,734 153,004 ---------- - ---------- - ---------- - -------- - Share of income in equity method investments, net of 3,935 17,557 9,179 1,463 income taxes ---------- - ---------- - ---------- - -------- - Net Income 540,289 758,008 968,913 154,467 Less: Net (loss) income attributable to the non- controlling interest shareholders and the mezzanine classified non-controlling interest (2,865 ) 17,602 35,491 5,658 shareholders Deemed dividend to subsidiary’s Series A - - 489,284 78,003 preferred shareholders Net income attributable to YY Inc. 543,154 740,406 444,138 70,806 ---------- - ---------- - ---------- - -------- -

YY INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED) (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended March December March March 31, 31, 31, 31, 2017 2017 2018 2018 RMB RMB RMB US$ Net income attributable to YY Inc. 543,154 740,406 444,138 70,806 Unrealized gain (loss) of available-for-sales 42,236 (21,440 ) - - securities, net of nil tax Foreign currency translation adjustments, net of nil tax 619 (48,828 ) (119,187 ) (19,001 ) ---------- ---------- - ---------- - ---------- - Comprehensive income attributable to YY Inc. 586,009 670,138 324,951 51,805 ---------- ---------- - ---------- - ---------- - Net income perADS —Basic 9.58 11.63 6.97 1.11 —Diluted 9.25 11.53 6.86 1.09 Weighted average number of ADS used in calculating net income per ADS —Basic 56,675,919 63,686,056 63,694,535 63,694,535 —Diluted 60,975,038 64,224,006 64,713,421 64,713,421

(1) On January 1, 2018, the Group 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 Group’s consolidated financial statements.

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

Three Months Ended March December March March 31, 31, 31, 31, 2017 2017 2018 2018 RMB RMB RMB US$ Cost of revenues 3,623 36,549 19,608 3,126 Research and development expenses 11,404 106,501 54,467 8,683 Sales and marketing expenses 509 3,679 1,869 298 General and administrative expenses 7,057 61,731 36,563 5,829

(3) On January 1, 2018, the Group adopted ASU 2016-1, “Classification and Measurement of Financial Instruments”. After the adoption of this new guidance, the Company will measure long-term investments other than equity method investments at fair value through earnings. For those investments without readily determinable fair values, the Group will elect 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 will be reported in current earnings.

YY INC. RECONCILIATION OF GAAP AND NON-GAAP RESULTS (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended March December March March 31, 31, 31, 31, 2017 2017 2018 2018 RMB RMB RMB US$ Operating income 616,957 821,538 596,409 95,082 Share-based compensation expenses 22,593 208,460 112,507 17,936 Impairment of goodwill and investments 1,700 4,113 18,349 2,925 Gain on deconsolidation and disposal of a subsidiary (37,989 ) - - - Non-GAAP operating income 603,261 1,034,111 727,265 115,943 ---------- - ---------- - ---------- - ---------- - Net income attributable to YY Inc. 543,154 740,406 444,138 70,806 Share-based compensation expenses 22,593 208,460 112,507 17,936 Impairment of goodwill and investments 1,700 4,113 18,349 2,925 Gain on deconsolidation and disposal of a subsidiary (37,989 ) - - - Gain on fair value change of investments - - (426,547 ) (68,002 ) Fair value loss on derivative liabilities - - 11,868 1,892 Deemed dividend to subsidiary’s Series A preferred - - 489,284 78,003 shareholders Income tax effects on non-GAAP adjustments 5,443 - 44,466 7,089 Net income (loss) attributable to the non-controlling (1,033 ) (367 ) 5,820 928 interest shareholders Non-GAAP net income attributable to YY Inc. 533,868 952,612 699,885 111,577 ---------- - ---------- - ---------- - ---------- - Non-GAAP net income per ADS —Basic 9.42 14.96 10.99 1.75 —Diluted 9.10 14.83 10.78 1.72 Weighted average number of ADS used in calculating Non-GAAP net income per ADS —Basic 56,675,919 63,686,056 63,694,535 63,694,535 —Diluted 60,975,038 64,224,006 64,713,421 64,713,421

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

Three Months Ended -------------------------------------------------------------------- March 31, 2018 YYLive Huya Elimination(1) Total Total RMB RMB RMB RMB US$ Net revenues Live streaming 2,239,251 792,784 - 3,032,035 483,378 Others 168,053 50,798 (1,955 ) 216,896 34,578 ---------- - -------- - -------------- - ---------- - -------- - Total net revenues 2,407,304 843,582 (1,955 ) 3,248,931 517,956 ---------- - -------- - -------------- - ---------- - -------- - Cost of revenues(2) (1,303,264 ) (712,533 ) - (2,015,797 ) (321,365 ) ---------- - -------- - -------------- - ---------- - -------- - Gross profit 1,104,040 131,049 (1,955 ) 1,233,134 196,591 ---------- - -------- - -------------- - ---------- - -------- - Operating expenses(2) Research and development expenses (198,007 ) (51,458 ) - (249,465 ) (39,771 ) Sales and marketing expenses (211,673 ) (25,940 ) 1,955 (235,658 ) (37,569 ) General and administrative expenses (128,193 ) (35,783 ) - (163,976 ) (26,142 ) ---------- - -------- - -------------- - ---------- - -------- - Total operating expenses (537,873 ) (113,181 ) 1,955 (649,099 ) (103,482 ) Other income 2,091 10,283 - 12,374 1,973 ---------- - -------- - -------------- - ---------- - -------- - Operating income 568,258 28,151 - 596,409 95,082 ---------- - -------- - -------------- - ---------- - -------- - Interest expense (2,019 ) - - (2,019 ) (322 ) Interest income 81,607 10,584 - 92,191 14,697 Foreign currency exchange gains, net 6,719 - - 6,719 1,071 Fair value loss on derivative - (11,868 ) - (11,868 ) (1,892 ) liabilities Gain on fair value change of investments 426,547 - - 426,547 68,002 Income before income tax expenses 1,081,112 26,867 - 1,107,979 176,638 ---------- - -------- - -------------- - ---------- - -------- - Income tax (expenses) benefits (152,709 ) 4,464 - (148,245 ) (23,634 ) Income before share ofincomein equity method investments, net of income taxes 928,403 31,331 - 959,734 153,004 ---------- - -------- - -------------- - ---------- - -------- - Share of income in equity method investments, net of income taxes 9,103 76 - 9,179 1,463 Netincome 937,506 31,407 - 968,913 154,467 ---------- - -------- - -------------- - ---------- - -------- -

(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 -------------------------- March 31, 2018 YYLive Huya Total Total RMB RMB RMB US$ Cost of revenues 19,353 255 19,608 3,126 Research and development expenses 52,677 1,790 54,467 8,683 Sales and marketing expenses 1,451 418 1,869 298 General and administrative expenses 14,659 21,904 36,563 5,829

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

Three Months Ended --------------------------------- March 31, 2018 YYLive Huya Total Total RMB RMB RMB US$ Operating income 568,258 28,151 596,409 95,082 Share-based compensation expenses 88,140 24,367 112,507 17,936 Impairment of goodwill and investments 18,349 - 18,349 2,925 ------- ------ ------- ------- Non-GAAP operating income 674,747 52,518 727,265 115,943 ------- ------ ------- -------

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

Three Months Ended -------------------------------------------------- December 31, 2017 YYLive Huya Total Total RMB RMB RMB US$ Net revenues Live streaming 2,675,812 692,708 3,368,520 517,732 Others 209,707 48,311 258,018 39,657 ---------- - -------- - ---------- - -------- - Total net revenues 2,885,519 741,019 3,626,538 557,389 ---------- - -------- - ---------- - -------- - Cost of revenues(1) (1,563,735 ) (632,914 ) (2,196,649 ) (337,619 ) ---------- - -------- - ---------- - -------- - Gross profit 1,321,784 108,105 1,429,889 219,770 ---------- - -------- - ---------- - -------- - Operating expenses(1) Research and development expenses (239,103 ) (43,724 ) (282,827 ) (43,470 ) Sales and marketing expenses (119,181 ) (29,584 ) (148,765 ) (22,865 ) General and administrative expenses (182,164 ) (36,602 ) (218,766 ) (33,624 ) Goodwill impairment (2,527 ) - (2,527 ) (388 ) ---------- - -------- - ---------- - -------- - Total operating expenses (542,975 ) (109,910 ) (652,885 ) (100,347 ) Other income 44,534 - 44,534 6,845 ---------- - -------- - ---------- - -------- - Operating income (loss) 823,343 (1,805 ) 821,538 126,268 ---------- - -------- - ---------- - -------- - Interest expense (3,744 ) - (3,744 ) (575 ) Interest income 67,597 6,934 74,531 11,455 Foreign currency exchange losses, net (351 ) - (351 ) (54 ) ---------- - -------- - ---------- - -------- - Income before income tax expenses 886,845 5,129 891,974 137,094 ---------- - -------- - ---------- - -------- - Income tax expenses (151,523 ) - (151,523 ) (23,289 ) Income before share of income(loss) in equity method investments, net of income taxes 735,322 5,129 740,451 113,805 ---------- - -------- - ---------- - -------- - Share of income (loss) in equity method investments, net of income taxes 17,708 (151 ) 17,557 2,698 Net Income 753,030 4,978 758,008 116,503 ---------- - -------- - ---------- - -------- -

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

Three Months Ended ----------------------------- December 31, 2017 YYLive Huya Total Total RMB RMB RMB US$ Cost of revenues 36,320 229 36,549 5,617 Research and development expenses 104,569 1,932 106,501 16,369 Sales and marketing expenses 3,145 534 3,679 565 General and administrative expenses 40,958 20,773 61,731 9,488

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

Three Months Ended -------------------------------------- December 31, 2017 YYLive Huya Total Total RMB RMB RMB US$ Operating income (loss) 823,343 (1,805) 821,538 126,268 Share-based compensation expenses 184,992 23,468 208,460 32,039 Impairment of goodwill and investments 4,113 - 4,113 632 --------- ------- --------- ------- Non-GAAP operating income 1,012,448 21,663 1,034,111 158,939 --------- ------- --------- -------

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

Three Months Ended ----------------------------------------------- - March 31, 2017 YYLive Huya Total Total RMB RMB RMB US$ Net revenues Live streaming 1,674,786 382,641 2,057,427 298,906 Others 193,273 16,258 209,531 30,441 --------- - -------- - ---------- - -------- - Total net revenues 1,868,059 398,899 2,266,958 329,347 --------- - -------- - ---------- - -------- - Cost of revenues(1) (994,233 ) (382,762 ) (1,376,995 ) (200,052 ) --------- - -------- - ---------- - -------- - Gross profit 873,826 16,137 889,963 129,295 --------- - -------- - ---------- - -------- - Operating expenses(1) Research and development expenses (123,169 ) (42,392 ) (165,561 ) (24,053 ) Sales and marketing expenses (73,371 ) (15,231 ) (88,602 ) (12,872 ) General and administrative expenses (66,462 ) (10,190 ) (76,652 ) (11,136 ) --------- - -------- - ---------- - -------- - Total operating expenses (263,002 ) (67,813 ) (330,815 ) (48,061 ) Gain on deconsolidation and disposal of subsidiaries 37,989 - 37,989 5,519 Other income 10,299 9,521 19,820 2,879 --------- - -------- - ---------- - -------- - Operating income (loss) 659,112 (42,155 ) 616,957 89,632 --------- - -------- - ---------- - -------- - Interest expense (21,268 ) - (21,268 ) (3,090 ) Interest income 30,555 476 31,031 4,508 Foreign currency exchange losses, net (1,293 ) - (1,293 ) (188 ) --------- - -------- - ---------- - -------- - Income(loss)before income tax expenses 667,106 (41,679 ) 625,427 90,862 --------- - -------- - ---------- - -------- - Income tax expenses (89,073 ) - (89,073 ) (12,941 ) Income(loss)before share ofincomein equity method investments, net of income taxes 578,033 (41,679 ) 536,354 77,921 --------- - -------- - ---------- - -------- - Share of income in equity method investments, net of income taxes 3,935 - 3,935 572 Net Income(loss)(2) 581,968 (41,679 ) 540,289 78,493 --------- - -------- - ---------- - -------- -

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

Three Months Ended ------------------------- March 31, 2017 YYLive Huya Total Total RMB RMB RMB US$ Cost of revenues 2,380 1,243 3,623 526 Research and development expenses 8,349 3,055 11,404 1,657 Sales and marketing expenses 305 204 509 74 General and administrative expenses 4,568 2,489 7,057 1,025

(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 ----------------------------------------- March 31, 2017 YYLive Huya Total Total RMB RMB RMB US$ Operating income (loss) 659,112 (42,155 ) 616,957 89,632 Share-based compensation expenses 15,602 6,991 22,593 3,282 Impairment of goodwill and investments 1,700 - 1,700 247 Gain on deconsolidation and disposal of a subsidiary (37,989 ) - (37,989 ) (5,519 ) ------- - ------- - ------- - ------ - Non-GAAP operating income (loss) 638,425 (35,164 ) 603,261 87,642 ------- - ------- - ------- - ------ -

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