Technology Stock in the News: YY Inc (ADR) (NASDAQ:YY)

On Tuesday, Shares of YY Inc (ADR) (NASDAQ:YY), lost -1.54% to $48.05. The 52-week range of the share price is from $31.07– $63.98. The beta value for this stock stands at 1.11 points, while its earnings per share (EPS) was $3.21. The company has total market capitalization of $2.77B and a total of 728.23M outstanding shares.

YY Inc. (YY), a live streaming platform, today declared its unaudited financial results for the fourth quarter and full year 2016.

Fourth Quarter 2016 Financial Results:

NET REVENUES

Net revenues raised by 30.8% to RMB2,484.20M (US$357.80M) in the fourth quarter of 2016 from RMB1,899.80M in the corresponding period of 2015, mainly driven by the increase in live streaming revenues. Live streaming revenues raised by 41.7% to RMB2,218.20M (US$319.50M) in the fourth quarter of 2016 from RMB1,565.20M in the corresponding period of 2015. Live streaming revenues from the YY Live segment in the fourth quarter of 2016 was RMB1,883.80M (US$271.30M) and live streaming revenues from the Huya segment in the fourth quarter of 2016 was RMB334.30M (US$48.20M).

Revenues from online games were RMB125.40M (US$18.10M) in the fourth quarter of 2016, as contrast to RMB172.40M in the corresponding period of 2015, which mainly reflected the continued softness in China’s web game market.

Revenues from membership were RMB74.70M (US$10.80M) in the fourth quarter of 2016, as contrast to RMB80.80M in the corresponding period of 2015.

Other revenues, mainly counting revenues from the Company’s online education platform and online advertising revenues, were RMB65.90M (US$9.50M) in the fourth quarter of 2016, contrast with RMB81.40M in the corresponding period of 2015.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues raised by 33.5% to RMB1,559.60M (US$224.60M) in the fourth quarter of 2016 from RMB1,168.20M in the corresponding period of 2015, mainly attributable to a boost in revenue-sharing fees and content costs to RMB1,222.20M (US$176.0M) in the fourth quarter of 2016 from RMB807.30M in the corresponding period of 2015. The increase in revenue-sharing fees and content costs paid to performers, channel owners and content providers was slightly higher than the increase in live streaming revenues because of more diverse content offerings in the fourth quarter. In addition, bandwidth costs slightly rose to RMB168.90M (US$24.30M) in the fourth quarter of 2016 from RMB161.10M in the corresponding period of 2015, mainly reflecting the continued user base expansion and video quality improvements, but partially offset by the Company’s improved efficiency and pricing terms.

Gross profit rose by 26.4% to RMB924.60M (US$133.20M) in the fourth quarter of 2016 from RMB731.60M in the corresponding period of 2015. Gross margin was 37.2% in the fourth quarter of 2016, as contrast to 38.5% in the corresponding period of 2015.

OPERATING INCOME:

Operating expenses for the fourth quarter of 2016 were RMB495.50M (US$71.40M), as contrast to RMB354.60M in the corresponding period of 2015.

Operating income in the fourth quarter of 2016 raised by 51.7% to RMB621.50M (US$89.50M) from RMB409.80M in the corresponding period of 2015. Operating margin in the fourth quarter of 2016 was 25.0%, as compare to 21.6% in the corresponding period of 2015.

Non-GAAP operating income rose by 37.6% to RMB647.90M (US$93.30M) in the fourth quarter of 2016 from RMB471.0M in the corresponding period of 2015. Non-GAAP operating margin was 26.1% in the fourth quarter of 2016, as contrast to 24.8% in the corresponding period of 2015.

NET INCOME

Net income attributable to YY Inc. rose by 59.3% to RMB572.30M (US$82.40M) in the fourth quarter of 2016 from RMB359.20M in the corresponding period of 2015. Net margin in the fourth quarter of 2016 rose to 23.0% from 18.9% in the corresponding period of 2015.

Non-GAAP net income attributable to YY Inc. rose by 42.4% to RMB598.60M (US$86.20M) from RMB420.40M in the corresponding period of 2015. Non-GAAP net margin in the fourth quarter of 2016 rose to 24.1% from 22.1% in the corresponding period of 2015.

NET INCOME PER ADS

Diluted net income per ADS rose by 56.1% to RMB9.74 (US$1.40) in the fourth quarter of 2016 from RMB6.24 in the corresponding period of 2015.

Non-GAAP diluted net income per ADS raised by 40.30% to RMB10.17 (US$1.46) in the fourth quarter of 2016 from RMB7.25 in the corresponding period of 2015.

BALANCE SHEET AND CASH FLOWS

As of December 31, 2016, the Company had cash and cash equivalents of RMB1,579.70M million (US$227.50M) and short-term deposits of RMB3,751.5 million (US$540.30M). For the fourth quarter of 2016, net cash from operating activities was RMB996.50M (US$143.50M).

SHARES OUTSTANDING

As of December 31, 2016, the Company had a total of 1,109.70M common shares outstanding, or the equivalent of 55.50M ADSs outstanding.

FULL YEAR 2016 FINANCIAL RESULTS:

For the full year of 2016, net revenues raised by 39.10% to RMB8,204.10M (US$1,181.60M) from RMB5,897.20M in 2015, mainly driven by a 54.8% year-over-year increase in live streaming revenues.

Net income attributable to YY Inc. for the full year of 2016 raised by 47.50% to RMB1,523.90M (US$219.50M) from RMB1,033.20M in 2015. Net margin for the full year of 2016 rose to 18.6% from 17.50% in 2015.

Non-GAAP net income attributable to YY Inc. for the full year of 2016 raised by 38.0% to RMB1,681.20M (US$242.10M) from RMB1,218.60M in 2015. Non-GAAP net margin was 20.5% for the full year of 2016, as contrast to 20.7% for the full year of 2015.

Diluted net income per ADS for the full year of 2016 rose to RMB26.40 (US$3.80) from RMB17.96 in the prior year. Non-GAAP diluted net income per ADS for the full year of 2016 raised to RMB28.98 (US$4.17) from RMB21.18 in the prior year.

For the full year of 2016, net cash from operating activities was RMB2,421.10M (US$348.70M).

Business Outlook:

For the first quarter of 2017, the Company anticipates its net revenues to be between RMB2.20B and RMB2.30B, representing a year-over-year growth of about 33.4% to 39.5%. These forecasts reflect the Company’s current and preliminary view on the market and operational conditions, which are subject to change.

“We are happy to have delivered another quarter of solid results in the fourth quarter of 2016,” said Mr. Zhou Chen, Chief Executive Officer of YY. “In addition to our strong financial performance in the fourth quarter, our mobile MAU reached 56.0M, representing a 4.8% increase from the previous quarter, and our PC MAU was stable at 96.10M. Our solid financial results and user numbers are because of the continued strengthening of our product and content offerings and our dedication to the development of new and diverse market content. For example, the introduction of new vertical content like YY Live’s outdoor and travel and the expansion of our mobile game live broadcasting content for the Huya broadcasting platform are key components for expanding our content offering. Moreover, in order to further strengthen user stickiness across our platform, we began to encourage more users from both YY Live and Huya broadcasting to share more live broadcasting sessions based on social relationships and locations. Going forward, we will introduce even more content verticals to YY, and in turn, we are confident that we can further expand our market share and maintain our leading position in this massive growth industry.”

Mr. Eric He, Chief Financial Officer of YY, further commented, “In the fourth quarter of 2016, we continued to see strong growth momentum in our revenues, with total net revenues increasing by 30.8% year over year to RMB2.50B, mainly attributable to the healthy growth in our total number of live streaming paying users which grew by 91.90% year over year to 5.20M. Importantly, despite the intense competitive landscape in the live streaming industry, our live streaming revenues for the full year of 2016 witnessed a remarkable 54.8% year over year growth to over seven billion, and our Non-GAAP profit margin for the year exceeded 20%, which is a testament to the solid strength and long-term competitiveness of both of our platforms. As Huya broadcasting’s revenue growth continues to accelerate, its margins continue to improve, which eventually strengthens our long-term profitability.”

Technical Analysis:

The average true range of the stock is recorded at 1.76 and the relative strength index of the stock stands 60.56. The stock price is going above to its 52-week low with 54.10 % and up/down from its 52-week high with -25.14%.

The stock has shown weekly performance of 9.81% and monthly performance stands at 10.26%. The stock price is trading upbeat from its 200 days moving average with 7.02% and down from 50 days moving average with 10.35%.

Analyst recommendation for this stock stands at 2.10.

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