Segment Reporting

12 Months Ended

Dec. 31, 2018

33.	Segment Reporting

There are three segments in the Group, including YY Live, Huya and 100 Education, for the year ended December 31, 2016. The Company has disposed of a great majority of its online education business before the end of 2016 and disposed of the remaining portion of its online education business in the beginning of 2017, 100 Education Technology ceased to be an operating segment starting from the first quarter of 2017. The Company remained two segments, YY Live and Huya.

In addition, the Company revamped its internal organization and one sub-business stream previously presented and reviewed under YY Live was changed to be presented and reviewed under Huya from the first quarter of 2017. Segment information of comparative periods has been restated accordingly.

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 year ended December 31, 2017.

As the Group’s long-lived assets and revenue are substantially located in and derived from the PRC, no geographical segments are presented.

The Group currently does not allocate assets to all of its segments, as its CODM does not use such information to allocate resources or evaluate the performance of the operating segments.

The following table presents summary information by segment:

For the year ended December 31, 2018:

	YY Live			Huya			Elimination			Total
	RMB			RMB			RMB			RMB

Net revenues
Live streaming		10,434,822			4,442,845			-			14,877,667
Others		667,350			220,595			(2,055	)		885,890

Total net revenues		11,102,172			4,663,440			(2,055	)		15,763,557

Cost of revenues (1)		(6,083,487	)		(3,933,647	)		-			(10,017,134	)

Gross profit		5,018,685			729,793			(2,055	)		5,746,423

Operating expenses (1)
Research and development expenses		(926,900	)		(265,152	)		-			(1,192,052	)
Sales and marketing expenses		(962,164	)		(189,207	)		2,055			(1,149,316	)
General and administrative expenses		(595,515	)		(287,710	)		-			(883,225	)

Total operating expenses		(2,484,579	)		(742,069	)		2,055			(3,224,593	)

Other income		78,922			38,938			-			117,860

Operating income		2,613,028			26,662			-			2,639,690

Interest expense		(8,616	)		-			-			(8,616	)
Interest income and investment income		329,003			156,549			-			485,552
Foreign currency exchange (losses) gains, net		(565	)		51			-			(514	)
Gain on deemed disposal and disposal of investments		16,178			-			-			16,178
Gain on fair value changes of investment		1,487,405			-			201,999			1,689,404
Fair value loss on derivative liabilities		-			(2,285,223	)		-			(2,285,223	)
Other non-operating expenses		(2,000	)		-			-			(2,000	)

Income before income tax expenses		4,434,433			(2,101,961	)		201,999			2,534,471

Income tax (expenses) benefits		(501,683	)		50,943			(26,967	)		(477,707	)

Income before share of loss in equity method investments, net of income taxes		3,932,750			(2,051,018	)		175,032			2,056,764

Share of income in equity method investments, net of income taxes		120,636			113,329			(175,032	)		58,933

Net income		4,053,386			(1,937,689	)		-			2,115,697

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

	YY Live		Huya		Total
	RMB		RMB		RMB

Cost of revenues		63,867		10,472		74,339
Research and development expenses		194,530		30,643		225,173
Sales and marketing expenses		3,891		1,832		5,723
General and administrative expenses		159,042		183,748		342,790

The following table presents summary information by segment:

For the year ended December 31, 2017:

	YY Live			Huya			Total
	RMB			RMB			RMB
Net revenues
Live streaming		8,601,418			2,069,536			10,670,954
Others		808,558			115,280			923,838

Total net revenues		9,409,976			2,184,816			11,594,792

Cost of revenues (1)		(5,096,538	)		(1,929,864	)		(7,026,402	)

Gross profit		4,313,438			254,952			4,568,390

Operating expenses (1)
Research and development expenses		(611,726	)		(170,160	)		(781,886	)
Sales and marketing expenses		(603,989	)		(87,292	)		(691,281	)
General and administrative expenses		(442,646	)		(101,995	)		(544,641	)
Goodwill impairment		(2,527	)		-			(2,527	)

Total operating expenses		(1,660,888	)		(359,447	)		(2,020,335	)

Gain on deconsolidation and disposal of subsidiaries		37,989			-			37,989
Other income		103,558			9,629			113,187

Operating income (loss)		2,794,097			(94,866	)		2,699,231

Interest expense		(32,122	)		-			(32,122	)
Interest income and investment income		166,335			14,049			180,384
Foreign currency exchange losses, net		(2,176	)		-			(2,176	)
Gain on deemed disposal and disposal of investments		45,861			-			45,861

Income (loss) before income tax expenses		2,971,995			(80,817	)		2,891,178

Income tax expenses		(415,811	)		-			(415,811	)

Income (loss) before share of income (loss) in equity method investments, net of income taxes		2,556,184			(80,817	)		2,475,367

Share of income (loss) in equity method investments, net of income taxes		33,175			(151	)		33,024

N et income (loss)		2,589,359			(80,968	)		2,508,391

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

	YY Live		Huya		Total
	RMB		RMB		RMB

Cost of revenues		39,882		2,877		42,759
Research and development expenses		113,174		9,174		122,348
Sales and marketing expenses		3,626		791		4,417
General and administrative expenses		60,871		27,266		88,137

For the year ended December 31, 2016:

	YY Live			Huya			100 Education			Total
	RMB			RMB			RMB			RMB

Net revenues
Live streaming		6,235,249			791,978			-			7,027,227
Others		1,011,170			4,926			160,727			1,176,823

Total net revenues		7,246,419			796,904			160,727			8,204,050

Cost of revenues (1)		(3,900,814	)		(1,094,644	)		(107,972	)		(5,103,430	)

Gross profit (loss)		3,345,605			(297,740	)		52,755			3,100,620

Operating expenses (1)
Research and development expenses		(456,375	)		(188,334	)		(30,521	)		(675,230	)
Sales and marketing expenses		(259,040	)		(68,746	)		(59,482	)		(387,268	)
General and administrative expenses		(375,958	)		(71,325	)		(35,154	)		(482,437	)
Goodwill impairment		(3,861	)		-			(13,804	)		(17,665	)

Total operating expenses		(1,095,234	)		(328,405	)		(138,961	)		(1,562,600	)

Gain on deconsolidation and disposal of subsidiaries		103,960			-			-			103,960
Other income		129,504			-			-			129,504

Operating income (loss)		2,483,835			(626,145	)		(86,206	)		1,771,484

Interest expense		(81,085	)		-			-			(81,085	)
Interest income and investment income		66,631			518			44			67,193
Foreign currency exchange gains, net		1,158			-			-			1,158
Gain on deemed disposal and disposal of investments		25,061			-			-			25,061

Income (loss) before income tax expenses		2,495,600			(625,627	)		(86,162	)		1,783,811

Income tax (expenses) benefits		(294,529	)		-			14,015			(280,514	)

Income (loss) before share of income (loss) in equity method investments, net of income taxes		2,201,071			(625,627	)		(72,147	)		1,503,297

Share of income (loss) in equity method investments, net of income taxes		8,390			-			(111	)		8,279

Net income (loss)		2,209,461			(625,627	)		(72,258	)		1,511,576

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

	YY Live		Huya		100 Education		Total
	RMB		RMB		RMB		RMB

Cost of revenues		9,893		5,677		324		15,894
Research and development expenses		53,085		19,538		6,193		78,816
Sales and marketing expenses		2,781		326		-		3,107
General and administrative expenses		19,523		26,557		13,389		59,469