YY Reports First Quarter 2013 Unaudited Financial Results

YY Reports First Quarter 2013 Unaudited Financial Results

                       1Q13 Net Revenues Up 130.5% YOY

                      1Q13 Gross Margin Expands to 53.7%

                      1Q13 Net Income of RMB63.9 Million

                    1Q13 Non-GAAP Net Income Up 164.2% YOY

GUANGZHOU, China, May 2, 2013 (GLOBE NEWSWIRE) -- YY Inc. (Nasdaq:YY) ("YY" or
the "Company"), a revolutionary rich communication social platform, today
announced its unaudited financial results for the first quarter ended March
31, 2013.

First Quarter 2013 Highlights

  *Net revenues increased by 130.5% to RMB315.0 million (US$50.7 million)
    from RMB136.7 million in the corresponding period of 2012 driven by a
    143.8% increase in revenues from internet value-added services, or IVAS
    revenues.
  *Net income attributable to YY Inc. increased significantly to RMB63.9
    million (US$10.3 million) from RMB3.5 million in the corresponding period
    of 2012.
  *Non-GAAP net income attributable to YY Inc.^1 increased by 164.2% to
    RMB82.1 million (US$13.2 million) from RMB31.1 million in the
    corresponding period of 2012.

Mr. David Xueling Li, Chief Executive Officer of YY, stated, "Building upon
our Company's momentum in 2012, we delivered another solid quarter with total
revenues and non-GAAP net income growing over 130% and 164% year-over-year,
respectively. During our seasonally weakest quarter, we saw strength from our
key operating metrics including user growth and user spending, demonstrating
the increasing attractiveness of the YY brand to the 527 million registered
user accounts on our large-scale online communication platform. In particular,
the number of paying users on the YY platform grew by over 35.3%
year-over-year to over 1 million, underscoring the rising consumption of the
affordable interactive entertainment that our platform offers. We will
continue to diversify and strengthen the content on the YY platform by
expanding into new verticals and introducing new products across PC and mobile
devices to address the increasing entertainment and real-time social demands
in China."

Mr. Eric He, Chief Financial Officer of YY, commented, "Our robust growth in
both the top-line and bottom-line continued to validate the network effect
inherent in our large scale, real-time and sticky platform.These strong
results, coupled with our ability to increase operating leverage and control
costs, resulted in expanded margins during this quarter. We remain confident
that our highly engaging products and live events as well as our strong
execution capabilities will lead to continuing long-term growth for our
shareholders."

First Quarter 2013 Financial Results

NET REVENUES

Net revenues increased by 130.5% to RMB315.0 million (US$50.7 million) in the
first quarter of 2013 from RMB136.7 million in the corresponding period of
2012, primarily driven by an increase in IVAS revenues and, to a lesser
extent, an increase in the Company's online advertising revenues.

IVAS revenues, which consisted of revenues from online games, YY Music as well
as other sources including the Company's membership program, increased by
143.8% to RMB282.8 million (US$45.5 million) in the first quarter of 2013 from
RMB116.0 million in the corresponding period of 2012. The overall increase
primarily reflected an increase in average revenue per user ("ARPU") and an
increase in the number of paying users.

Revenues from online games increased by 92.3% to RMB132.3 million (US$21.3
million) in the first quarter of 2013 from RMB68.8 million in the
corresponding period of 2012. This increase primarily reflected an increase in
ARPU of 50.0% to RMB315 from 420,000 total paying users and an increase in the
number of online games^2 to 92 during the first quarter of 2013 from 50 in the
corresponding period of 2012.

Revenues from YY Music, increased by 245.9% to RMB116.8 million (US$18.8
million) in the first quarter of 2013 from RMB33.8 million in the
corresponding period of 2012. This increase primarily reflected a 60.5%
increase in ARPU to RMB236 and a 115.2% increase in the number of paying users
to 495,000 during the first quarter of 2013.

Revenues from others, which primarily consist of the Company's membership
program, increased by 150.8% to RMB33.7 million (US$5.4 million) in the first
quarter of 2013 from RMB13.4 million in the corresponding period of 2012.
Revenues from the membership program increased by 165.4% to RMB28.1 million
(US$4.5 million) in the first quarter of 2013 from RMB10.6 million in the
corresponding period of 2012. This increase primarily reflected a 158.8%
increase in the number of members to 546,000 members as of March 31, 2013 from
211,000 as of March 31, 2012.

Online advertising revenues increased by 55.7% to RMB32.2 million (US$5.2
million) in the first quarter of 2013 from RMB20.7 million in the
corresponding period of 2012. This increase reflected a 84.0% increase in
average revenue per advertiser ("ARPA") to approximately RMB644,000 from 50
advertisers.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues increased to RMB145.7 million (US$23.5 million) in the first
quarter of 2013 from RMB69.0 million in the corresponding period of 2012. This
increase was primarily attributable to an increase in revenue sharing fees to
RMB56.1 million (US$9.0 million) in the first quarter of 2013 from RMB7.9
million in the corresponding period of 2012. This increase in revenue sharing
fees paid to performers, channel owners and content providers was primarily
associated with an increase in promotional activities on the YY platform
resulting in higher levels of user engagement and spending.Bandwidth costs
increased by 47.7% to RMB43.6 million (US$7.0 million) in the first quarter of
2013 from RMB29.5 million in the corresponding period of 2012.

Gross profit increased by 150.0% to RMB169.3 million (US$27.3 million) in the
first quarter of 2013 from RMB67.7 million in the corresponding period of
2012. Gross margin increased to 53.7% in the first quarter of 2013 from 49.5%
in the corresponding period of 2012, mainly attributable to the improved cost
efficiency due to the scale effect of the Company's growth as well as the
Company's ability to control bandwidth costs.

OPERATING INCOME

Operating expenses for the first quarter of 2013 increased by 64.3% to
RMB105.3 million (US$17.0 million) from RMB64.1 million in the corresponding
period of 2012. This increase was primarily attributable to higher research
and development expenses and general and administrative expenses which was in
line with the general growth in the Company's overall business.

Operating income in the first quarter of 2013 increased significantly to
RMB64.5 million (US$10.4 million) from RMB4.3 million in the corresponding
period of 2012. Operating margin increased to 20.5% in the first quarter of
2013 from 3.1% in the corresponding period of 2012. The increase in operating
margin was primarily due to increased operating leverage associated with the
Company's expansion. Non-GAAP operating income^3 increased to 159.9% to
RMB82.6 million (US$ 13.3 million) in the first quarter of 2013 from RMB31.8
million in the corresponding period of 2012. Non-GAAP operating margin^4
increased to 26.2% in the first quarter of 2013 from 23.3% in the
corresponding period of 2012.

NET INCOME

Net income attributable to YY Inc. increased significantly to RMB63.9 million
(US$10.3 million) in the first quarter of 2013, from RMB3.5 million in the
corresponding period of 2012. Net margin in the first quarter of 2013
increased to 20.3% from 2.6% in the corresponding period of 2012. Non-GAAP net
income attributable to YY Inc.^5 increased by 164.2% to RMB82.1 million
(US$13.2 million) from RMB31.1 million in the corresponding period of 2012.
Non-GAAP net margin^6 increased to 26.1% in the first quarter of 2013 from
22.7% in the corresponding period of 2012.

EARNING/LOSS PER ADS

Diluted net income per ADS^7 in the first quarter of 2013 was RMB1.11
(US$0.18), compared to a diluted net loss per ADS of RMB2.22 in the
corresponding period of 2012.

Diluted non-GAAP net income per ADS^8 in the first quarter of 2013 was RMB1.42
(US$0.23), compared to a diluted non-GAAP net loss per ADS of RMB1.19 in the
corresponding period of 2012.

BALANCE SHEET AND CASH FLOWS

As of March 31, 2013, the Company had cash and cash equivalents of RMB294.3
million (US$47.4 million) and short-term deposits of RMB1.2 billion (US$195.0
million). For the first quarter of 2013, net cash from operating activities
was RMB118.4 million (US$19.0 million).

Business Outlook

For the second quarter of 2013, the Company expects its net revenues to be
between RMB335 million and RMB345 million, representing year-over-year growth
of approximately 78% to 84%. These forecasts reflect the Company's current and
preliminary view on the market and operational conditions, which are subject
to change.

Conference Call Information

The Company will hold a conference call on Thursday, May 2, 2013 at 9:00 pm
Eastern Time or Friday, May 3, 2013 at 9:00 am Beijing Time to discuss the
financial results.

To participate in the call, please dial the following numbers:

United States:            +1-646-254-3515
International Toll Free: +1-855-500-8701
China Domestic:           400-1200654
Hong Kong:               +852-3051-2745
Conference ID:           #40325452

The replay will be accessible through May 9, 2013 by dialing the following
numbers:

United States Toll Free: +1-855-452-5696
International:          +61 2 8199 0299
Conference ID:          #40325452

A live and archived webcast of the conference call will also be available at
the Company's investor relations website at http://investors.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 RMB6.2108 to US$1.00, the noon buying rate in
effect on March 29, 2013 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 revolutionary rich communication social
platform that engages users in real-time online group activities through
voice, text and video. Launched in July 2008, YY Client, the Company's core
product, empowers users to create and organize groups of varying sizes to
discover and participate in a wide range of online activities, including
online games, karaoke, music concerts, education, live shows and conference
calls.

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 registered user accounts,
active users, especially paying users; YY's ability to monetize the user base;
YY's ability to continue attracting advertisers and offering popular online
games; 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 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"), except that the consolidated statement of changes in
shareholders' equity (deficits), consolidated statements of cash flows, and
the detailed notes have not been presented. YY uses non-GAAP operating income,
non-GAAP operating margin, non-GAAP net income attributable to YY Inc.,
non-GAAP net margin, non-GAAP net income/(loss) attributable to common
shareholders, and basic and diluted non-GAAP net income/(loss) per ADS, which
are non-GAAP financial measures. Non-GAAP operating income is operating income
excluding share-based compensation expenses. Non-GAAP operating margin is
non-GAAP operating income as a percentage of net revenues. Non-GAAP net
income/(loss) attributable to YY Inc. is net income/(loss) attributable to YY
Inc. excluding share-based compensation expenses. Non-GAAP net margin is
non-GAAP net income attributable to YY Inc. as a percentage of net revenues.
Non-GAAP net income/(loss) attributable to common shareholders is net
income/(loss) attributable to common shareholders excluding share-based
compensation expenses. Basic and diluted non-GAAP net income/(loss) per ADS is
non-GAAP net income/(loss) attributable to common shareholders divided by
weighted average number of basic and diluted ADS. The Company believes that
separate analysis and exclusion of the non-cash impact of share-based
compensation 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-GAAPfinancial 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 effect of non-cash share-based
compensation expenses, which have been and will continue to be significant
recurring expenses in its business. 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/(loss) 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" at the end of
this release.

^1Non-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.

^2Data for online games refers to data regarding the online games available on
the YY platform.

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

^4Non-GAAP operating margin is a non-GAAP financial measure, which is defined
as non-GAAP operating income as a percentage of net revenues.

^5Non-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.

^6Non-GAAP net margin is a non-GAAP financial measure, which is defined as
non-GAAP net income attributable to YY Inc. as a percentage of net revenues.

^7"ADS" is American Depositary Share. Each ADS represents twenty Class A
common shares of the Company. Diluted net income/ (loss) per ADS is net
income/ (loss) attributable to common shareholders divided by weighted average
number of diluted ADS.

^8Diluted non-GAAP net income/(loss) per ADS is a non-GAAP financial measure,
which is defined as non-GAAP net income/(loss) attributable to common
shareholders divided by weighted average number of diluted ADS.

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

                                                                  
                                           December 31, March 31,   March 31,
                                           2012         2013        2013
                                           RMB          RMB         US$
Assets                                                             
Current assets                                                     
Cash and cash equivalents                   504,702      294,287     47,383
Short-term deposits                         897,698      1,210,916   194,969
Accounts receivable, net                    117,616      119,647     19,264
Amount due from a related party             1,073        1,108       178
Prepayments and other current assets        25,149       32,458      5,226
Deferred tax assets                         31,549       35,690      5,746
                                                                  
Total current assets                        1,577,787    1,694,106   272,766
                                                                  
Non-current assets                                                 
Deferred tax assets                         583          740         119
Investments                                 2,950        3,530       568
Property and equipment, net                 90,299       86,983      14,005
Intangible assets, net                      19,481       18,365      2,957
Goodwill                                    1,604        1,601       258
Other non-current assets                    3,485        3,384       545
                                                                  
Total non-current assets                    118,402      114,603     18,452
                                                                  
Total assets                                1,696,189    1,808,709   291,218
                                                                  
Liabilities and shareholders' equity                               
Current liabilities                                                
Accounts payable                            28,149       33,976      5,470
Deferred revenue                            159,859      204,077     32,858
Advances from users                         7,515        6,813       1,097
Income taxes payable                        48,001       51,181      8,241
Accrued liabilities and other current       120,289      101,866     16,401
liabilities
Amounts due to related parties              2,604        1,752       282
                                                                  
Total current liabilities                   366,417      399,665     64,349
                                                                  
Non-current liabilities                                            
Deferred revenue                            6,487        6,271       1,010
                                                                  
Total liabilities                           372,904      405,936     65,359
                                                                  
                                           December 31, March 31,   March 31,
                                           2012         2013        2013
                                           RMB          RMB         US$
Shareholders' equity                                               
Class A common shares (US$0.00001 par
value; 10,000,000,000 shares authorized,
179,400,000 shares issued and outstanding   11           11          2
as of December31, 2012 and March 31, 2013,
respectively)
Class B common shares (US$0.00001 par
value; 1,000,000,000 shares authorized,
907,833,224 shares issued and outstanding   60           60          10
as of December31, 2012 and March 31, 2013,
respectively)
Additional paid-in capital                  2,648,404    2,666,536   429,339
Accumulated deficits                        (1,311,767)  (1,247,840) (200,917)
Accumulated other comprehensive losses      (13,423)     (15,994)    (2,575)
                                                                  
Total shareholders' equity                  1,323,285    1,402,773   225,859
                                                                  
Total liabilities and shareholders' equity  1,696,189    1,808,709   291,218

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

                                                                
                                Three Months Ended
                                March 31,  December 31, March 31,  March 31,
                                2012       2012         2013       2013
                                RMB        RMB          RMB        US$
                                                                
Net revenues                                                     
Internet value-added service                                     
—Online game                     68,806     98,048       132,310    21,303
—YY music                        33,763     106,145      116,801    18,806
—Others                          13,427     28,830       33,669     5,421
Online advertising               20,667     33,803       32,181     5,181
                                                                
Total net revenues               136,663    266,826      314,961    50,711
                                                                
Cost of revenues^(1)             (68,954)   (138,939)    (145,693)  (23,458)
                                                                
Gross profit                     67,709     127,887      169,268    27,253
                                                                
Operating expenses^(1)                                           
Research and development         (36,719)   (54,122)     (54,119)   (8,714)
expenses
Sales and marketing expenses     (2,046)    (5,961)      (5,516)    (888)
General and administrative       (25,330)   (33,741)     (45,651)   (7,350)
expenses
                                                                
                                                                
Total operating expenses         (64,095)   (93,824)     (105,286)  (16,952)
Government grants                642        1,161        506        81
                                                                
Operating income                4,256      35,224       64,488     10,382
                                                                
Gain on disposal of a cost       —         2,351        —         —
investment
Foreign currency exchange gains  472        (1,164)      2,416      389
(losses), net
Interest income                  2,487      5,789        10,530     1,695
                                                                
Income before income tax         7,215      42,200       77,434     12,466
expenses
                                                                
Income tax expenses             (3,429)    (9,107)      (13,986)   (2,252)
                                                                
Income before(loss) gain in
equity method investments, net   3,786      33,093       63,448     10,214
of income taxes
                                                                
(Loss) gain in equity method     (265)      134          479        77
investments, net of income taxes
                                                                
Net income attributable to YY    3,521      33,227       63,927     10,291
Inc.
                                                                
(Accretion) decretion to
convertible redeemable preferred (62,631)   1,408,888    —          —
shares redemption value
Allocation of net income to
participating preferred          —         (294,984)    —          —
shareholders
                                                                
Net (loss) income attributable   (59,110)   1,147,131    63,927     10,291
to common shareholders
                                                                
                                Three Months Ended
                                March 31,  December 31, March 31,  March 31,
                                2012       2012         2013       2013
                                RMB        RMB          RMB        US$
                                                                
Net income                      3,521      33,227       63,927     10,291
Other comprehensive loss:                                        
 Foreign currency translation   (521)      (4,374)      (2,571)    (414)
adjustments, net of nil tax
                                                                
Comprehensive income             3,000      28,853       61,356     9,877
attributable to YY Inc.
                                                                
Net (loss) income per ADS                                        
—basic                           (2.22)     29.04        1.14       0.18
—diluted                         (2.22)     0.63         1.11       0.18
Weighted average number of ADS
used in calculating—basic (loss) 26,641,521 39,500,941   55,843,861 55,843,861
incomeper ADS
Weighted average number of ADS
used in calculating—diluted      26,641,521 52,473,054   57,793,341 57,793,341
(loss) income per ADS
                                                                
(1) Share-based compensation was allocated in cost of revenues and operating
expenses as follows:
                                                                
                                Three Months Ended
                                March 31,  December 31, March 31,  March 31,
                                2012       2012         2013       2013
                                RMB        RMB          RMB        US$
                                                                
Cost of revenues                 2,171      2,092        986        159
Research and development         9,641      9,129        5,318      856
expenses
Sales and marketing expenses     248        216          108        17
General and administrative       15,473     14,165       11,720     1,887
expenses

                                                                
                                                                
YY INC.
Reconciliations of GAAP and Non-GAAP Results
(All amounts in thousands, except share, ADS and per ADS data)
                                                                
                                                                
                                Three Months Ended
                                March 31,  December 31, March 31,  March 31,
                                2012       2012         2013       2013
                                RMB        RMB          RMB        US$
                                                                
Operating income                 4,256      35,224       64,488     10,382
Share-based compensation         27,533     25,602       18,132     2,919
expenses
                                                                
Non-GAAP operating income        31,789     60,826       82,620     13,301
                                                                
Net income attributable to YY    3,521      33,227       63,927     10,291
Inc.
Share-based compensation         27,533     25,602       18,132     2,919
expenses
Non-GAAP net income attributable 31,054     58,829       82,059     13,210
to YY Inc.
                                                                
(Accretion) decretion to
convertible redeemable preferred (62,631)   1,408,888    —         —
shares redemption value
Allocation of Non-GAAP net
income to particiating preferred —         (300,221)    —         —
shareholders
                                                                
Non-GAAP net (loss) income
attributable to common           (31,577)   1,167,496    82,059     13,210
shareholders
                                                                
                                                                
Non-GAAP weighted average
numbers of ADS used in                                           
calculating net (loss) income
per ADS:
—Basic                           26,641,521 39,500,941   55,843,861 55,843,861
—Diluted                         26,641,521 52,473,054   57,793,341 57,793,341
                                                                
Non-GAAP net (loss) incomeper                                   
ADS
—Basic                           (1.19)     29.56        1.47       0.24
—Diluted                         (1.19)     1.12         1.42       0.23

CONTACT: Investor Relations Contact
        
         YY Inc.
         Anna Yu
         Tel: (+86) 20 2916 2000
         Email:IR@YY.com
        
         ICR, Inc.
         Jeremy Peruski
         Tel: +1 (646) 915-1611
         Email:IR@YY.com
 
Press spacebar to pause and continue. Press esc to stop.