6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2019

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Commission File Number: 001-35729

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YY Inc.

Building B-1 North Block of Wanda Plaza

No. 79 Wanbo Er Road, Nancun Town

Panyu District, Guangzhou 511442

People’s Republic of China
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

EXHIBIT INDEX

Exhibit No.	Description
Exhibit 99.1	Press Release

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

YY INC.
By:	/s/ Bing Jin
	Name:	Bing Jin
	Title:	Chief Financial Officer

Date: November 13, 2019

EX-99.1

Exhibit 99.1

YY Reports Third Quarter 2019 Unaudited Financial Results

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

Third Quarter 2019 Financial Highlights

· Net revenues increased by 67.8% to RMB6,882.2 million (US$962.9 million) from RMB4,100.5 million in the corresponding period of 2018.

· Net income attributable to controlling interest of YY Inc.¹ was RMB109.9 million (US$15.4 million), compared to RMB650.7 million in the corresponding period of 2018.

· Non-GAAP net income attributable to controlling interest of YY Inc.² was RMB574.1 million (US$80.3 million), compared to RMB787.0 million in the corresponding period of 2018, primarily due to the impact of the consolidation of Bigo Inc (“Bigo”).

Third Quarter 2019 Operational Highlights

· Global average mobile MAUs³ reached 470.1 million, among that approximately 77.9% were from markets outside of China.

· Average mobile MAUs of imo reached 212.0 million.

· Average mobile MAUs of global short-form video services increased by 670.6% to 150.4 million from 19.5 million in the corresponding period of 2018, including 100.2 million from Likee (formerly known as Like), which increased by 413.4% year over year, and 50.2 million from imo’s embedded short-form video services.

· Average mobile MAUs of global live streaming services increased by 26.5% to 157.8 million from 124.8 million in the corresponding period of 2018, among that (i) 103.7 million were from China, including 39.9 million from YY, which increased by 3.0% year over year and 63.8 million from Huya, which increased by 29.1% year over year; and (ii) 54.1 million were from outside of China, including 21.9 million from BIGO LIVE, which increased by 9.7% year over year, and 32.3 million from HAGO, which increased by 92.4% year over year.

· Total number of paying users⁴ of YY increased by 14.4% to 4.3 million from 3.8 million in the corresponding period of 2018.

· Total number of paying users of Huya increased by 28.5% to 5.3 million from 4.2 million in the corresponding period of 2018.

¹ Net income attributable to controlling interest of YY Inc., is net income less net (loss) income attributable to the non-controlling interest shareholders and the mezzanine equity classified as non-controlling interest shareholder.

² Non-GAAP net income attributable to controlling interest of YY Inc. is a non-GAAP financial measure, which is defined as net income attributable to controlling interest of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investment, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments (deemed disposal refers to dilution of equity interest in equity-method investments), gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds amortization to face value, income tax effects on non-GAAP adjustment and non-GAAP adjustment for net (loss) income attributable to non-controlling interests shareholders. These adjustments amounted to RMB464.1 million (US$64.9 million) and RMB136.3 million in the third quarters of 2019 and 2018, respectively. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for more details.

³ Refers to mobile average monthly active users. Average mobile MAU for any period is calculated by dividing (i) the sum of the Company’s mobile active users for each month of such period, by (ii) the number of months in such period.

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

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

Third Quarter 2019 Financial Results

NET REVENUES

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

⁴ Refers to a registered user that has purchased virtual items on YY’s platforms at least once during the period presented.

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

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

COST OF REVENUES AND GROSS PROFIT

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

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

OPERATING INCOME

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

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

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

NET INCOME

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

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

NET INCOME PER ADS

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

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

BALANCE SHEET AND CASH FLOWS

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

⁵ Non-GAAP operating income is a non-GAAP financial measure, which is defined as operating income excluding share-based compensation expenses, amortization of intangible assets from business acquisitions, impairment of goodwill and investments and gain on deconsolidation and disposal of a subsidiary. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

⁶ Non-GAAP operating margin is a non-GAAP financial measure, which is defined as non-GAAP operating income as a percentage of net revenues. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

⁷ Non-GAAP net margin is non-GAAP net income attributable to controlling interest of YY Inc. as a percentage of net revenues.

⁸ADS is American Depositary Share. Each ADS represents twenty Class A common shares of the Company. Diluted net income per ADS is net income attributable to common shareholders of YY Inc. divided by weighted average number of diluted ADS.

⁹ Non-GAAP diluted net income per ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to common shareholders of YY Inc. divided by weighted average number of ADS used in the calculation of diluted net income per ADS. Please refer to the section titled “Reconciliation of GAAP and Non-GAAP Results” for details.

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SHARES OUTSTANDING

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

Business Outlook

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

Recent Developments

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

Conference Call Information

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

United States:	+1-845-675-0437
International:	+65-6713-5090
Mainland China:	400-620-8038
Hong Kong, China:	+852-3018-6771
Conference ID:	#1957529

The replay will be accessible through November 20, 2019, by dialing the following numbers:

United States:	+1-646-254-3697
International:	+61-2-8199-0299
Conference ID:	#1957529

¹⁰ The outlook of net revenues for the fourth quarter of 2019 includes the impact from Bigo’s consolidation. However, when calculating the year-over-year growth rate, Bigo’s net revenues in the same period of 2018 was not included as the part of denominator.

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A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.yy.com/.

Exchange Rate

This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars, in this press release, were made at a rate of RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 2019 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

About YY Inc.

YY Inc. (“YY” or the “Company”) is a global social media platform. The Company’s highly engaged users contribute to a vibrant social community by creating, sharing, and enjoying a vast range of entertainment content and activities. YY enables users to interact with each other in real time through online live media and offers users a uniquely engaging and immersive entertainment experience. YY owns YY Live, a leading live streaming social media platform in China and Huya, a leading game live streaming platform in China. In addition, YY completed the acquisition of Bigo in March 2019. Bigo is a fast-growing global tech company. Headquartered in Singapore, Bigo owns Bigo Live, a leading global live streaming platform outside China; Likee, a leading global short-form video social platform; imo, a global video communication app and other social applications. YY has created an online community for global video and live streaming users. YY Inc. was listed on the NASDAQ in November 2012.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as YY’s strategic and operational plans, contain forward-looking statements. YY may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to 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.

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Use of Non-GAAP Financial Measures

The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). YY uses non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributable to controlling interest of YY Inc., non-GAAP net margin attributable to controlling interest of YY Inc., non-GAAP net income attributable to common shareholders of YY Inc., and basic and diluted non-GAAP net income per ADS, which are non-GAAP financial measures. Non-GAAP operating income is operating income excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, and gain on deconsolidation and disposal of subsidiary. Non-GAAP operating margin is non-GAAP operating income as a percentage of net revenues. Non-GAAP net income is net income excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, and income tax effects of above non-GAAP reconciling items. Non-GAAP net income attributable to controlling interest of YY Inc. is net income attributable to controlling interest of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, income tax effects of above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. Non-GAAP net margin is non-GAAP net income attributable to controlling interest of YY Inc. as a percentage of net revenues. Non-GAAP net income attributable to common shareholders of YY Inc. is net income attributable to common shareholders of YY Inc. excluding share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders and income tax effects of above non-GAAP reconciling items and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interests. After the non-GAAP reconciliation, non-GAAP net income attributable to controlling interests of YY Inc. is equal to the non-GAAP net income attributable to common shareholders of YY Inc. Basic and diluted non-GAAP net income per ADS is non-GAAP net income attributable to common shareholders of YY Inc. divided by weighted average number of ADS used in the calculation of basic and diluted net income per ADS. The Company believes that separate analysis and exclusion of the non-cash impact of above reconciling items adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the non-cash effect of (i) share-based compensation expenses and amortization of intangible assets from business acquisitions, fair value change on derivative, interest expenses related to the convertible bonds’ amortization to face value, which have been and will continue to be significant recurring expenses in its business, (ii) impairment of goodwill and investments, gain on deconsolidation and disposal of subsidiary, gain on deemed disposal and disposal of investments, gain on fair value change of investments and equity investees’ investments, and accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders, which may not be recurring in its business, and (iii) income tax expenses and non-GAAP adjustments for net income (loss) attributable to non-controlling interest shareholders, which are affected by above non-GAAP reconciling items. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company’s net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

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The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “YY Inc. Reconciliations of GAAP and Non-GAAP Results” near the end of this release.

Investor Relations Contact

YY Inc.

Matthew Zhao

Maggie Yan

Tel: +86 (20) 8212-0000

Email: IR@YY.com

ICR, Inc.

Jack Wang

Tel: +1 (646) 915-1611

Email: IR@YY.com

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YY INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except share, ADS and per ADS data)

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

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YY INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(All amounts in thousands, except share, ADS and per ADS data)

	December 31, 2018		September 30, 2019		September 30, 2019
	RMB		RMB		US$
Mezzanine equity		418,673		462,261		64,673
Shareholders’ equity
Class A common shares (US$0.00001 par value; 10,000,000,000 and 10,000,000,000 shares authorized, 981,740,848 shares issued and outstanding as of December 31, 2018; 1,300,746,944  shares issued and 1,287,878,395 shares outstanding as of and September 30, 2019, respectively)		59		79		11
Class B common shares (US$0.00001 par value; 1,000,000,000 and 1,000,000,000 shares authorized, 288,182,976 and   326,509,555 shares issued and outstanding as of December 31, 2018 and September 30, 2019, respectively)		21		24		3
Additional paid-in capital		11,168,866		21,560,965		3,016,490
Statutory reserves		101,725		101,725		14,232
Retained earnings		6,913,469		10,157,351		1,421,066
Accumulated other comprehensive income		336,152		1,162,927		162,699
Total YY Inc.’s shareholders’ equity		18,520,292		32,983,071		4,614,501
Non-controlling interests		2,856,839		5,252,171		734,806
Total shareholders’ equity		21,377,131		38,235,242		5,349,307
Total liabilities, mezzanine equity and shareholders’ equity		25,768,045		50,565,922		7,074,435

(1) The Company has adopted ASC842 “Leases” beginning January 1, 2019 using the optional transition method. The only major impact of the standard is that assets and liabilities amounting to RMB145.2 million and RMB141.2 million, respectively, are recognized beginning January 1, 2019 for leased office space with terms of more than 12 months.

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YY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts in thousands, except share, ADS and per ADS data)

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

11

YY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(All amounts in thousands, except share, ADS and per ADS data)

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

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

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

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

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

13

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 30, 2018			June 30, 2019			September 30, 2019			September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2019
	RMB			RMB			RMB			US$			RMB			RMB			US$
Operating income		610,905			71,925			160,288			22,426			1,921,086			705,764			98,739
Share-based compensation expenses		161,404			264,282			247,635			34,645			493,266			693,686			97,050
Impairment of goodwill and investments		1,900			-			10,000			1,399			20,249			10,000			1,399
Amortization of intangible assets from business acquisitions		-			188,740			193,487			27,070			-			444,227			62,150
Non-GAAP operating income		774,209			524,947			611,410			85,540			2,434,601			1,853,677			259,338
Net income		680,817			107,419			177,807			24,877			1,373,247			3,435,208			480,602
Share-based compensation expenses		161,404			264,282			247,635			34,645			493,266			693,686			97,050
Impairment of goodwill and investments		1,900			-			10,000			1,399			20,249			10,000			1,399
Amortization of intangible assets from business acquisitions		-			188,740			193,487			27,070			-			444,227			62,150
Gain on deemed disposal and disposal of investments		-			-			-			-			(13,999	)		-			-
Gain (loss) on fair value change of investments and equity investees’ investments		3,428			(13,332	)		2,031			284			(1,710,420	)		(2,666,639	)		(373,077	)
Fair value change on derivative		-			-			1,753			245			2,285,223			1,753			245
Interest expenses related to the convertible bonds’ amortization to face value		-			4,287			100,885			14,114			-			105,172			14,714
Income tax effects on non-GAAP adjustments		1,014			(31,891	)		(40,166	)		(5,619	)		76,081			(89,053	)		(12,459	)
Non-GAAP net income		848,563			519,505			693,432			97,015			2,523,647			1,934,354			270,624
Net income attributable to common shareholders of YY Inc.		650,690			25,790			93,231			13,044			957,941			3,223,359			450,964
Share-based compensation expenses		161,404			264,282			247,635			34,645			493,266			693,686			97,050
Impairment of goodwill and investments		1,900			-			10,000			1,399			20,249			10,000			1,399
Amortization of intangible assets from business acquisitions		-			188,740			193,487			27,070			-			444,227			62,150
Gain on deemed disposal and disposal  of investments		-			-			-			-			(13,999	)		-			-
Gain (loss) on fair value change of investments and equity investees’ investments		3,428			(13,332	)		2,031			284			(1,710,420	)		(2,666,639	)		(373,077	)
Fair value change on derivative		-			-			1,753			245			2,285,223			1,753			245
Interest expenses related to the convertible bonds’ amortization to face value		-			4,287			100,885			14,114			-			105,172			14,714
Accretion, cumulative dividend and deemed dividend to subsidiaries’ preferred shareholders		-			16,287			16,697			2,336			556,360			49,079			6,866
Income tax effects on non-GAAP adjustments		1,014			(31,891	)		(40,166	)		(5,619	)		76,081			(89,053	)		(12,459	)
Non-GAAP adjustments for net loss attributable to the non-controlling interest shareholders		(31,449	)		(29,941	)		(51,481	)		(7,202	)		(237,513	)		(119,768	)		(16,756	)
Non-GAAP net income attributable to controlling interest and common shareholders of YY Inc.		786,987			424,222			574,072			80,316			2,427,188			1,651,816			231,096
Non-GAAP net income per ADS
—Basic		12.24			5.32			7.17			1.00			37.95			21.65			3.03
—Diluted		12.07			5.14			6.42			0.90			37.04			20.44			2.86
Weighted average number of ADS used in calculating Non-GAAP  net income per ADS
—Basic		64,301,796			79,682,966			80,033,607			80,033,607			63,952,614			76,310,648			76,310,648
—Diluted		64,829,757			81,855,180			91,400,547			91,400,547			64,738,363			81,040,767			81,040,767

14

YY INC.

UNAUDITED SEGMENT REPORT

(All amounts in thousands, except share, ADS and per ADS data)

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

15

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

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

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

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

16

YY INC.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT

(All amounts in thousands, except share, ADS and per ADS data)

	Three Months Ended
	September 30, 2019
	YY			Huya		Bigo			Total			Total
	RMB			RMB		RMB			RMB			US$
Operating income (loss)		671,676			63,865		(575,253	)		160,288			22,426
Share-based compensation expenses		73,575			83,124		90,936			247,635			34,645
Impairment of goodwill and investments		10,000			-		-			10,000			1,399
Amortization of intangible assets from business acquisitions		-			-		193,487			193,487			27,070
Non-GAAP operating income (loss)		755,251			146,989		(290,830	)		611,410			85,540
Net income (loss)		539,195			123,242		(484,630	)		177,807			24,877
Share-based compensation expenses		73,575			83,124		90,936			247,635			34,645
Impairment of goodwill and investments		10,000			-		-			10,000			1,399
Amortization of intangible assets from business acquisitions		-			-		193,487			193,487			27,070
Gain on fair value change of investments and equity investees’ investments		2,031			-		-			2,031			284
Fair value change on derivative		1,753			-		-			1,753			245
Interest expenses related to the convertible bonds’ amortization to face value		100,885			-		-			100,885			14,114
Income tax effects on non-GAAP adjustments		(188	)		-		(39,978	)		(40,166	)		(5,619	)
Non-GAAP net income (loss)		727,251			206,366		(240,185	)		693,432			97,015

17

YY INC.

UNAUDITED SEGMENT REPORT

(All amounts in thousands, except share, ADS and per ADS data)

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

(1) On March 4, 2019, YY completed the acquisition of Bigo. Therefore, Bigo’s financial results from March 4, 2019 to March 31, 2019 were included in YY’s consolidated financial statements.

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

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

18

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

19

YY INC.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT

(All amounts in thousands, except share, ADS and per ADS data)

	Three Months Ended
	June 30, 2019
	YY			Huya		Bigo			Total			Total
	RMB			RMB		RMB			RMB			US$
Operating income (loss)		686,787			67,669		(682,531	)		71,925			10,478
Share-based compensation expenses		73,852			48,609		141,821			264,282			38,497
Amortization of intangible assets from business acquisitions		-			-		188,740			188,740			27,493
Non-GAAP operating income (loss)		760,639			116,278		(351,970	)		524,947			76,468
Net income (loss)		616,259			121,801		(630,641	)		107,419			15,648
Share-based compensation expenses		73,852			48,609		141,821			264,282			38,497
Amortization of intangible assets from business acquisitions		-			-		188,740			188,740			27,493
Gain on fair value change of investments and equity investees’ investments		(13,332	)		-		-			(13,332	)		(1,942	)
Interest expenses related to the convertible bonds’ amortization to face value		4,287			-		-			4,287			624
Income tax effects on non-GAAP adjustments		1,421			-		(33,312	)		(31,891	)		(4,645	)
Non-GAAP net income (loss)		682,487			170,410		(333,392	)		519,505			75,675

20

YY INC.

UNAUDITED SEGMENT REPORT

(All amounts in thousands, except share, ADS and per ADS data)

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

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

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YY INC.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS OF UNAUDITED SEGMENT REPORT

(All amounts in thousands, except share, ADS and per ADS data)

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

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