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This content is a press release from our partner Globe Newswire. The AP newsroom and editorial departments were not involved in its creation.

YY Reports Fourth Quarter and Full Year 2018 Unaudited Financial Results

March 4, 2019

GUANGZHOU, China, March 05, 2019 (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 fourth quarter and full year of 2018.

Fourth Quarter 2018 Highlights

-- Net revenues increased by 28.0% to RMB4,640.9 million (US$675.0 million) from RMB3,626.5 million in the corresponding period of 2017. -- Net income attributable to YY was RMB684.0 million (US$99.5 million), compared to RMB740.4 million in the corresponding period of 2017. -- Non-GAAP net income attributable to YY1 was RMB836.2 million (US$121.6 million), compared to RMB932.1 million in the corresponding period of 2017.

Full Year 2018 Highlights

-- Net revenues increased by 36.0% to RMB15,763.6 million (US$2,292.7 million) from RMB11,594.8 million in 2017. -- Net income attributable to YY was RMB1,642.0 million (US$238.8 million), compared to RMB2,493.2 million in 2017. -- Non-GAAP net income attributable to YY increased by 18.4% to RMB3,196.4 million (US$464.9 million) from RMB2,699.4 million in 2017.

Mr. David Xueling Li, Chairman and acting Chief Executive Officer of YY, stated, “We are delighted to conclude 2018 with solid fourth quarter performances from both YY Live and Huya. Our strong growth momentum was driven by the healthy expansion of our loyal and highly-engaged live streaming community, evidenced by the number of mobile live streaming monthly active users increasing by 18.1% to 90.4 million and the number of live streaming paying users increasing by 36.6% to 8.9 million year-over-year in the fourth quarter of 2018. In addition, our initial foray into the global market has generated encouraging results in 2018. HAGO, a casual-game-oriented social networking platform that is currently available in 33 countries and regions worldwide with 20.9 million monthly active users in the fourth quarter of 2018. In addition, Hago consistently topped the charts as the most popular application on both App Store and Google Play in its primary markets, namely Indonesia and Vietnam in the fourth quarter of 2018. As we continue to enrich and diversify our live streaming content, we have also consistently upgraded our AI algorithms to more accurately match content to our users. Building on the successful growth of our domestic ecosystem, we will continue to execute our globalization strategy as a potential driver for our long-term growth going forward.”

Mr. Bing Jin, Chief Financial Officer of YY, further commented, “We once again recorded solid financial results in the fourth quarter of 2018. Our total net revenues increased by 28.0% year-over-year to RMB4,640.9 million, exceeding the high end of our previous guidance range. The increase in net revenues was driven by the strong growth of our live streaming revenues, which increased by 30.4% year-over-year to RMB4,391.4 million. We continue to invest in content enrichment, technology enhancements, and global expansion. We are confident that our strategies to upgrade our content offerings and AI technologies, buttressed by our increasing global footprint, will continue to yield sustainable growth and increase our market share in the global live streaming industry.”

Fourth Quarter 2018 Financial Results

NET REVENUES Net revenues increased by 28.0% to RMB4,640.9 million (US$675.0 million) in the fourth quarter of 2018 from RMB3,626.5 million in the corresponding period of 2017, primarily driven by an increase in live streaming revenues. Live streaming revenues increased by 30.4% to RMB4,391.4 million (US$638.7 million) in the fourth quarter of 2018 from RMB3,368.5 million in the corresponding period of 2017.

Other revenues2 decreased by 3.3% to RMB249.5 million (US$36.3 million) in the fourth quarter of 2018 from RMB258.0 million in the corresponding period of 2017.

COST OF REVENUES AND GROSS PROFIT Cost of revenues increased by 37.2% to RMB3,013.1 million (US$438.2 million) in the fourth quarter of 2018 from RMB2,196.6 million in the corresponding period of 2017, primarily attributable to an increase in revenue-sharing fees and content costs to RMB2,556.5 million (US$371.8 million) in the fourth quarter of 2018 from RMB1,828.0 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 RMB246.5 million (US$35.9 million) in the fourth quarter of 2018 from RMB181.2 million in the corresponding period of 2017, primarily reflecting continued user base expansion and live streaming quality improvements.

Gross profit increased by 13.8% to RMB1,627.9 million (US$236.8 million) in the fourth quarter of 2018 from RMB1,429.9 million in the corresponding period of 2017. Gross margin was 35.1% in the fourth quarter of 2018, compared to 39.4% in the corresponding period of 2017, primarily due to the increase in revenue-sharing fees and content costs. The decrease in gross margin was attributable to the impact caused by the relatively low gross margin of the Huya segment as its contribution to net revenues increased significantly year-over-year.

OPERATING INCOMEOperating expenses were RMB931.2 million (US$135.4 million) in the fourth quarter of 2018, compared to RMB652.9 million in the corresponding period of 2017, primarily due to our increased efforts in sales and marketing activities in both China and the overseas market.

Operating income was RMB718.6 million (US$104.5 million) in the fourth quarter of 2018, compared to RMB821.5 million in the corresponding period of 2017. Operating margin was 15.5% in the fourth quarter of 2018, compared to 22.7% in the corresponding period of 2017, primarily due to the increase in sales and marketing expenses and the decrease in gross margin.

Non-GAAP operating income3 was RMB888.5 million (US$129.2 million) in the fourth quarter of 2018, compared to RMB1,034.1 million in the corresponding period of 2017. Non-GAAP operating margin4 was 19.1% in the fourth quarter of 2018, compared to 28.5% in the corresponding period of 2017.

NET INCOMENet income attributable to YY Inc. was RMB684.0 million (US$99.5 million) in the fourth quarter of 2018, compared to RMB740.4 million in the corresponding period of 2017. Net margin was 14.7% in the fourth quarter of 2018, compared to 20.4% in the corresponding period of 2017.

Non-GAAP net income attributable to YY Inc. was RMB836.2 million (US$121.6 million) in the fourth quarter of 2018, compared to RMB932.1 million in the corresponding period of 2017. Non-GAAP net margin5 was 18.0% in the fourth quarter of 2018, compared to 25.7% in the corresponding period of 2017.

NET INCOME PER ADSDiluted net income per ADS6 was RMB10.54 (US$1.53) in the fourth quarter of 2018, compared to RMB11.53 in the corresponding period of 2017.

Non-GAAP diluted net income per ADS7 was RMB12.86 (US$1.87) in the fourth quarter of 2018, compared to RMB14.51 in the corresponding period of 2017.

BALANCE SHEET AND CASH FLOWS As of December 31, 2018, the Company had cash and cash equivalents of RMB6,004.2 million (US$873.3 million) and short-term deposits of RMB7,327.0 million (US$1,065.7 million). For the fourth quarter of 2018, net cash from operating activities was RMB2,123.8 million (US$308.9 million).

SHARES OUTSTANDING As of December 31, 2018, the Company had a total of 1,269.9 million common shares, or the equivalent of 63.5 million ADSs, outstanding.

Full Year 2018 Financial Results

For the full year of 2018, net revenues increased by 36.0% to RMB15,763.6 million (US$2,292.7 million) from RMB11,594.8 million in 2017, primarily driven by a 39.4% year-over-year increase in live streaming revenues.

Net income attributable to YY Inc. for the full year of 2018 was RMB1,642.0 million (US$238.8 million), compared to RMB2,493.2 million in 2017. Net margin for the full year of 2018 was 10.4%, compared to 21.5% in 2017.

Non-GAAP net income attributable to YY Inc. for the full year of 2018 increased by 18.4% to RMB3,196.4 (US$464.9 million) from RMB2,699.4 million in 2017. Non-GAAP net margin for the full year of 2018 was 20.3%, compared to 23.3% in 2017.

Diluted net income per ADS was RMB25.38 (US$3.69) in 2018, compared to RMB41.33 in the corresponding period of 2017. Non-GAAP diluted net income per ADS for the full year of 2018 increased by 9.7% to RMB49.05 (US$7.13) from RMB44.72 in 2017.

For the full year of 2018, net cash from operating activities was RMB4,464.8 million (US$649.4 million).

Business OutlookFor the first quarter of 2019, the Company expects net revenues to be between RMB4.01 billion and RMB4.16 billion, representing a year-over-year growth of 23.4% to 28.0%, without giving effect to the acquisition of Bigo Inc. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Recent DevelopmentsThe Company recently entered into a strategic partnership agreement with Shanghai Chuangsi Enterprise development Co., Ltd.(“Shanghai Chuangsi”). Shanghai Chuangsi owns 9377 Games, one of the leading game platforms in China. Under the agreement, the Company will obtain 30% equity interest of Shanghai Chuangsi by injecting its online game business into Shanghai Chuangsi. As a result, the financial results of YY’s online games business, which contributed to less than 3% of YY segment’s total revenues in the fourth quarter of 2018, will no longer be consolidated upon the completion of the transaction. Currently, the transaction is expected to be completed in the first quarter of 2019.

Conference Call InformationThe Company will hold a conference call on Monday, March 4, 2019, at 9:00 pm Eastern Time (or Tuesday, March 5, 2019, at 10:00 am Beijing Time) to discuss the financial results. Participants may access the call by dialing the following numbers:

United States: +1-845-675-0438 International: +65-6713-5440 China Domestic: 400-1200-654 Hong Kong: +852-3018-6776 Conference ID: #8476342 The replay will be accessible through March 12, 2019, by dialing the following numbers: United States: +1-646-254-3697 International: +61-2-9003-4211 Conference ID: #8476342

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 RMB6.8755 to US$1.00, the noon buying rate in effect on December 31, 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 fourth 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

____________________________

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 RMB152.2 million (US22.1 million) and RMB191.7 million in the fourth 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.

6 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.

7 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 December December 31, 31, 31, 2017 2018 2018 RMB RMB US$ Assets Current assets Cash and cash equivalents 2,617,432 6,004,231 873,279 Short-term deposits 6,000,104 7,326,996 1,065,667 Restricted short-term deposits 1,000,000 - - Short-term investments 124,550 979,053 142,397 Accounts receivable, net 153,944 198,428 28,860 Inventory 315 - - Amounts due from related parties 11,190 193,559 28,152 Financing receivables, net - 768,343 111,751 Prepayments and other current assets 221,939 1,019,019 148,210 ---------- ---------- --------- Total current assets 10,129,474 16,489,629 2,398,316 ---------- ---------- --------- Non-current assets Long-term deposits - 1,000,000 145,444 Deferred tax assets 113,017 70,834 10,302 Investments 1,153,019 4,591,524 667,809 Property and equipment, net 1,016,998 1,296,319 188,542 Land use rights, net 1,832,739 1,784,639 259,565 Intangible assets, net 37,481 74,685 10,862 Goodwill 11,716 11,763 1,711 Amounts due from related parties 20,000 - - Financing receivables, net - 224,793 32,695 Other non-current assets 144,275 223,859 32,559 ---------- ---------- --------- Total non-current assets 4,329,245 9,278,416 1,349,489 ---------- ---------- --------- Total assets 14,458,719 25,768,045 3,747,805 ---------- ---------- --------- Liabilities, mezzanine equity and shareholders’ equity Current liabilities Convertible bonds - 6,863 998 Accounts payable 76,351 114,589 16,666 Deferred revenue 758,044 951,616 138,407 Advances from customers 80,406 101,690 14,790 Income taxes payable 146,298 235,561 34,261 Accrued liabilities and other current liabilities 1,465,963 2,414,371 351,156 Amounts due to related parties 30,502 28,336 4,121 Short-term loans 588,235 - - ---------- ---------- --------- Total current liabilities 3,145,799 3,853,026 560,399 ---------- ---------- --------- Non-current liabilities Convertible bonds 6,536 - - Deferred revenue 57,718 91,710 13,339 Deferred tax liabilities 10,810 27,505 4,000 ---------- ---------- --------- Total non-current liabilities 75,064 119,215 17,339 ---------- ---------- --------- Total liabilities 3,220,863 3,972,241 577,738 ---------- ---------- ---------

YY INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (All amounts in thousands, except share, ADS and per ADS data) December December December 31, 31, 31, 2017 2018 2018 RMB RMB US$ Mezzanine equity 524,997 418,673 60,893 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 981,740,848 shares issued 57 59 9 and outstanding as of December 31, 2017 and December 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 288,182,976 shares issued and outstanding 23 21 3 as of December 31, 2017 and December 31, 2018, respectively) Additional paid-in capital 5,339,844 11,168,866 1,624,444 Statutory reserves 62,718 101,725 14,795 Retained earnings(1) 5,218,110 6,913,469 1,005,522 Accumulated other comprehensive (loss) income(1) (9,597) 336,152 48,891 ---------- ---------- --------- Total YY Inc.’s shareholders’ equity 10,611,155 18,520,292 2,693,664 ---------- ---------- --------- Non-controlling interests 101,704 2,856,839 415,510 ---------- ---------- --------- Total shareholders’ equity 10,712,859 21,377,131 3,109,174 ---------- ---------- --------- Total liabilities, mezzanine equity and shareholders’ equity 14,458,719 25,768,045 3,747,805 ---------- ---------- ---------

(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 Twelve Months Ended ---------------------------------------------------- ----------------------------------------- December September December December December December December 31, 30, 31, 31, 31, 31, 31, 2017 2018 2018 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Net revenues(1) Live streaming 3,368,520 3,894,548 4,391,418 638,705 10,670,954 14,877,667 2,163,867 Others 258,018 205,924 249,506 36,289 923,838 885,890 128,847 Total net 3,626,538 4,100,472 4,640,924 674,994 11,594,792 15,763,557 2,292,714 revenues ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Cost of (2,196,649 ) (2,674,502 ) (3,013,063 ) (438,232 ) (7,026,402 ) (10,017,134 ) (1,456,932 ) revenues(2) ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Gross profit 1,429,889 1,425,970 1,627,861 236,762 4,568,390 5,746,423 835,782 ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Operating expenses(2) Research and development (282,827 ) (314,128 ) (332,513 ) (48,362 ) (781,886 ) (1,192,052 ) (173,377 ) expenses Sales and marketing (148,765 ) (343,839 ) (323,689 ) (47,079 ) (691,281 ) (1,149,316 ) (167,161 ) expenses General and administrative (218,766 ) (206,738 ) (274,979 ) (39,994 ) (544,641 ) (883,225 ) (128,460 ) expenses Goodwill (2,527 ) - - - (2,527 ) - - impairment ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Total operating (652,885 ) (864,705 ) (931,181 ) (135,435 ) (2,020,335 ) (3,224,593 ) (468,998 ) expenses Gain on deconsolidation - - - - 37,989 - - and disposal of subsidiaries Other income 44,534 49,640 21,924 3,189 113,187 117,860 17,142 ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Operating 821,538 610,905 718,604 104,516 2,699,231 2,639,690 383,926 income ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Interest (3,744 ) (4,910 ) (139 ) (20 ) (32,122 ) (8,616 ) (1,253 ) expense Interest income and investment 74,531 141,110 123,401 17,948 180,384 485,552 70,621 income Foreign currency (351 ) (3,072 ) (1,338 ) (195 ) (2,176 ) (514 ) (75 ) exchange losses, net Gain on deemed disposal and - - 2,179 317 45,861 16,178 2,353 disposal of investments Gain on fair value change of - 31,670 26,138 3,802 - 1,689,404 245,714 investments Fair value loss on derivative - - - - - (2,285,223 ) (332,372 ) liabilities Other non-operating - - - - - (2,000 ) (291 ) expenses ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Income before income tax 891,974 775,703 868,845 126,368 2,891,178 2,534,471 368,623 expenses ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Income tax (151,523 ) (74,929 ) (107,114 ) (15,579 ) (415,811 ) (477,707 ) (69,480 ) expenses ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Income before share of income (loss)in equity method 740,451 700,774 761,731 110,789 2,475,367 2,056,764 299,143 investments, net of income taxes ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Share of income (loss) in equity method 17,557 (19,957 ) (19,281 ) (2,804 ) 33,024 58,933 8,571 investments, net of income taxes ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Net Income 758,008 680,817 742,450 107,985 2,508,391 2,115,697 307,714 ---------- - ---------- - ---------- - -------- - ---------- - ----------- - ---------- - Less: Net income (loss) income attributable to the non-controlling interest shareholders 17,602 30,127 53,827 7,829 15,156 -20,151 -2,931 and the mezzanine equity classified non-controlling interest shareholders Cumulative dividend on subsidiary’s - - 4,606 670 - 4,606 670 Series A Preferred Shares Deemed dividend to subsidiary’s Series A - - - - - 489,284 71,163 preferred shareholders Net income attributable to 740,406 650,690 684,017 99,486 2,493,235 1,641,958 238,812 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 Twelve Months Ended ---------------------------------------------- ----------------------------------- December September December December December December December 31, 30, 31, 31, 31, 31, 31, 2017 2018 2018 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Net income per ADS —Basic 11.63 10.12 10.64 1.55 42.03 25.64 3.73 —Diluted 11.53 10.01 10.54 1.53 41.33 25.38 3.69 Weighted average number of ADS used in calculating net income per ADS —Basic 63,686,056 64,301,796 64,307,569 64,307,569 59,323,007 64,042,390 64,042,390 —Diluted 64,224,006 64,829,757 64,609,000 64,609,000 60,831,887 64,704,470 64,704,470

(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 TwelveMonths Ended December September December December December December December 31, 30, 31, 2017 2018 2018 31, 31, 31, 31, 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Cost of revenues 36,549 16,022 14,650 2,131 42,759 74,339 10,812 Research and development expenses 106,501 52,752 50,042 7,278 122,348 225,173 32,750 Sales and marketing expenses 3,679 290 1,158 168 4,417 5,723 832 General and administrative expenses 61,731 92,340 88,909 12,931 88,137 342,790 49,857

YY INC. RECONCILIATION OF GAAP AND NON-GAAP RESULTS (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended Twelve Months Ended ------------------------------------------------------ ----------------------------------------- December September December December December December December 31, 30, 31, 31, 31, 31, 31, 2017 2018 2018 2018 2017 2018 2018 RMB RMB RMB US$ RMB RMB US$ Operating 821,538 610,905 718,604 104,516 2,699,231 2,639,690 383,926 income Share-based compensation 208,460 161,404 154,759 22,508 257,661 648,025 94,251 expenses Impairment of goodwill and 4,113 1,900 15,099 2,196 45,732 35,348 5,141 investments Gain on deconsolidation - - - - (37,989 ) - - and disposal of a subsidiary ---------- - ---------- - ---------- - ---------- - ---------- - ---------- - ---------- - Non-GAAP operating 1,034,111 774,209 888,462 129,220 2,964,635 3,323,063 483,318 income ---------- - ---------- - ---------- ---------- - ---------- - ---------- - ---------- - Net income 758,008 680,817 742,450 107,985 2,508,391 2,115,697 307,714 Share-based compensation 208,460 161,404 154,759 22,508 257,661 648,025 94,251 expenses Impairment of goodwill and 4,113 1,900 15,099 2,196 45,732 35,348 5,141 investments Gain on deconsolidation - - - - (37,989 ) - - and disposal of a subsidiary Gain on deemed disposal and - - (2,179 ) (317 ) (45,861 ) (16,178 ) (2,353 ) disposal of investments (Gain) loss on fair value change of investments and (20,555 ) 3,428 (1,089 ) (158 ) (20,555 ) (1,711,509 ) (248,929 ) equity investees’ investments Fair value loss on derivative - - - - - 2,285,223 332,372 liabilities Income tax effects on - 1,014 21,479 3,124 9,263 97,560 14,190 non-GAAP adjustments ---------- - ---------- - ---------- ---------- - ---------- - ---------- - ---------- - Non-GAAP net 950,026 848,563 930,519 135,338 2,716,642 3,454,166 502,386 income ---------- - ---------- - ---------- ---------- - ---------- - ---------- - ---------- - Net income attributable to 740,406 650,690 684,017 99,486 2,493,235 1,641,958 238,812 YY Inc. Share-based compensation 208,460 161,404 154,759 22,508 257,661 648,025 94,251 expenses Impairment of goodwill and 4,113 1,900 15,099 2,196 45,732 35,348 5,141 investments Gain on deconsolidation - - - - (37,989 ) - - and disposal of a subsidiary Gain on deemed disposal and - - (2,179 ) (317 ) (45,861 ) (16,178 ) (2,353 ) disposal of investments (Gain) loss on fair value change of investments and (20,555 ) 3,428 (1,089 ) (158 ) (20,555 ) (1,711,509 ) (248,929 ) equity investees’ investments Fair value loss on derivative - - - - - 2,285,223 332,372 liabilities Deemed dividend to subsidiary’s Series A - - - - - 489,284 71,163 preferred shareholders Income tax effects on - 1,014 21,479 3,124 9,263 97,560 14,190 non-GAAP adjustments Non-GAAP adjustments for net loss attributable to (367 ) (31,449 ) (35,843 ) (5,213 ) (2,045 ) (273,356 ) (39,758 ) the non-controlling interest shareholders ---------- - ---------- - ---------- - ---------- - ---------- - ---------- - ---------- - Non-GAAP net income 932,057 786,987 836,243 121,626 2,699,441 3,196,355 464,889 attributable to YY Inc. ---------- - ---------- - ---------- - ---------- - ---------- - ---------- - ---------- - Non-GAAP net income per ADS —Basic 14.64 12.24 13 1.89 45.5 49.91 7.26 —Diluted 14.51 12.07 12.86 1.87 44.72 49.05 7.13 Weighted average number of ADS used in calculating Non-GAAP net income per ADS —Basic 63,686,056 64,301,796 64,307,569 64,307,569 59,323,007 64,042,390 64,042,390 —Diluted 64,224,006 64,829,757 64,609,000 64,609,000 60,831,887 64,704,470 64,704,470

YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended ---------------------------------------------------- December 31, 2018 YY Live Huya Total Total RMB RMB RMB US$ Net revenues Live streaming 2,949,636 1,441,782 4,391,418 638,705 Others 186,359 63,147 249,506 36,289 ---------- - ---------- - ---------- - -------- - Total net revenues 3,135,995 1,504,929 4,640,924 674,994 ---------- - ---------- - ---------- - -------- - Cost of revenues(1) (1,746,771 ) (1,266,292 ) (3,013,063 ) (438,232 ) ---------- - ---------- - ---------- - -------- - Gross profit 1,389,224 238,637 1,627,861 236,762 ---------- - ---------- - ---------- - -------- - Operating expenses(1) Research and development expenses (253,408 ) (79,105 ) (332,513 ) (48,362 ) Sales and marketing expenses (263,806 ) (59,883 ) (323,689 ) (47,079 ) General and administrative expenses (182,726 ) (92,253 ) (274,979 ) (39,994 ) ---------- - ---------- - ---------- - -------- - Total operating expenses (699,940 ) (231,241 ) (931,181 ) (135,435 ) Other income 10,800 11,124 21,924 3,189 Operating income 700,084 18,520 718,604 104,516 ---------- - ---------- - ---------- - -------- - Interest expenses (139 ) - (139 ) (20 ) Interest income and investment income 70,698 52,703 123,401 17,948 Gain on disposal of an equity investment 2,179 - 2,179 317 Foreign currency exchange losses, net (1,291 ) (47 ) (1,338 ) (195 ) Gain on fair value change of investments 26,138 - 26,138 3,802 ---------- - ---------- - ---------- - -------- - Income before income tax expenses 797,669 71,176 868,845 126,368 ---------- - ---------- - ---------- - -------- - Income tax (expenses) benefits (138,961 ) 31,847 (107,114 ) (15,579 ) Income before share of loss in equity method investments, 658,708 103,023 761,731 110,789 net of income taxes ---------- - ---------- - ---------- - -------- - Share of loss in equity method investments, net of income (15,837 ) (3,444 ) (19,281 ) (2,804 ) taxes Net income 642,871 99,579 742,450 107,985 ---------- - ---------- - ---------- - -------- - (1) Share-based compensation was allocated in cost of revenues and operating expenses as follows: Three Months Ended ---------------------------------------------------- December 31, 2018 YY Live Huya Total Total RMB RMB RMB US$ Cost of revenues 10,988 3,662 14,650 2,131 Research and development expenses 38,643 11,399 50,042 7,278 Sales and marketing expenses 551 607 1,158 168 General and administrative expenses 40,582 48,327 88,909 12,931

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

Three Months Ended ----------------------------------------- December 31, 2018 YY Live Huya Total Total RMB RMB RMB US$ Operating income 700,084 18,520 718,604 104,516 Share-based compensation expense 90,764 63,995 154,759 22,508 Impairment of goodwill and investments 15,099 - 15,099 2,196 ------- - ------- ------- - ------- - Non-GAAP operating income 805,947 82,515 888,462 129,220 ------- - ------- ------- - ------- - Net income 642,871 99,579 742,450 107,985 Share-based compensation expenses 90,764 63,995 154,759 22,508 Impairment of goodwill and investments 15,099 - 15,099 2,196 (Gain) loss on fair value change of investments and equity (4,422 ) 3,333 (1,089 ) (158 ) investees’ investments Gain on deemed disposal and disposal of investments (2,179 ) - (2,179 ) (317 ) Income tax effects on non-GAAP adjustments 21,479 - 21,479 3,124 ------- - ------- ------- - ------- - Non-GAAP net income 763,612 166,907 930,519 135,338 ------- - ------- ------- - ------- -

YY INC. UNAUDITED SEGMENT REPORT (All amounts in thousands, except share, ADS and per ADS data) Three Months Ended ---------------------------------------------------------------------- September 30, 2018 YY Live 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 ) gain, 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 ) Income before share of (loss) income in equity method investments, net of 644,012 56,762 - 700,774 102,034 income taxes ---------- - ---------- - -------------- - ---------- - -------- - Share of (loss) income in equity method (19,967 ) 10 - (19,957 ) (2,906 ) investments, net of income taxes Net income 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 YY Live Huya Total Total RMB RMB RMB US$ Operating income (loss) 613,621 (2,716 ) 610,905 88,949 Share-based compensation expense 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-GAAP net 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 -------------------------------------------------- December 31, 2017 YY Live 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 expenses (3,744 ) - (3,744 ) (575 ) Interest income and investment 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 735,322 5,129 740,451 113,805 investments, net of income taxes ---------- - -------- - ---------- - -------- - Share of income (loss) in equity method investments, net of 17,708 (151 ) 17,557 2,698 income taxes Net Income(2) 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 YY Live 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

(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 --------------------------------------------- December 31, 2017 YY Live 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 --------- - ------ - --------- - ------- - Net income 753,030 4,978 758,008 116,503 Share-based compensation expenses 184,992 23,468 208,460 32,039 Impairment of goodwill and investments 4,113 - 4,113 632 Gain on fair value change of investments and equity investee’s (20,555 ) - (20,555 ) (3,159 ) investments --------- - ------ - --------- - ------- - Non-GAAP net income 921,580 28,446 950,026 146,015 --------- - ------ - --------- - ------- -