Eric He
Thank you, Charles. Hello, everyone. Welcome to our earnings call. In the fourth quarter, we continue to see strong top line growth with our net revenue increasing by 62% year-over-year to RMB1.6 billion, primarily reflecting the growth momentum across our core business line, namely online music and entertainment, online dating, and Huya broadcasting. Furthermore, we were able to increase our quarterly paying user by 30% year-over-year to 3.2 million in the fourth quarter of 2015. As expected, revenue growth was partially offset by the lackluster performance of our online games segments, due to continued industry-wide softness. In our core online music and entertainment segments, top line growth continued with revenue increasing by 69% to RMB1.14 billion. At the same time, paying user further increased by 45% year-over-year to 2.2 million and ARPU increased 17% year-over-year to RMB531. Furthermore on mobile front, revenue in our – in this segment increased 4.5 times year-over-year to RMB527 million, which represents 45% of total revenue, up from only 14% a year ago. Mobile ARPU in the segment increased by 139% year-over-year to RMB388 and mobile paying users increased 131% year-over-year to 1.4 million. We view the buildup of our mobile offerings as a crucial long-term investments. One that may bring down our overall ARPU in a short-term, but will eventually rebound and contribute ARPU growth, as mobile user continue to grow strongly. Turning to our online dating business, we witnessed revenue growth by an impressive 102% year-over-year to RMB189 million. The online – the ongoing strong growth was primarily fueled by a 109% year-over-year increase in ARPU to RMB837 in the fourth quarter of 2015, partially driven by contribution from the 2015 YY Online Dating Annual Event Competition, which was held for the first time in December 2015. We expect the growth of our online dating business to continue in 2016 on an absolute basis. But after a strong performance in 2015, it’s relative growth momentum is expected to moderate as the lot of large numbers dictates. Now moving onto our online games broadcasting business. In the fourth quarter, revenue from Huya broadcasting grew by a strong 154% year-over-year to RMB139 million, primarily reflecting the growth of paying user in ARPU, which increased by 70% and 48% year-over-year, respectively. Going forward, we’re broadcasting and will remain a focus of our business and we will further enrich our content and event offerings in order to expand its user base, accelerate its development on a mobile-end, and optimize its position within our ecosystems. As we expected, our overall revenue growth was partially offset by a soft performance of online games, which was mainly due to the continued industry softness across China’s web-based game markets. In order to strengthen our revenue stream and expand our user community in this sector, we will launch more client-based games in the periods to come. Going forward, we will continue to ramp up our mobile platform and expand our offering of both user generated and professional generated content, as we strive to meet users evolving demands in a dynamic Internet markets. One example of our mobile expansion was the launch of our ME apps [ph], which enable users to broadcast live interact with other users anytime, anywhere. The content on our ME app is relevant for users daily lives. And by that tokens, it has strong potentials to attract more users and accelerate our mobile growth. Furthermore, in the fourth quarter of 2015, we launched a new online financing and broadcasting services called Xunhuan finance in corporation with multiple financial services institutions, including YY Securities and Capital securities to provide our users with investment consulting, brokerage, and other financial related services. We will continue to invest in this business and capitalize emerging opportunities in the Internet finance market. Overall, despite continuing to face certain challenges, we’re confident in our ability to strengthen our position, as leading real-time interactive platform in China. Looking ahead in 2016, we will focus on leveraging our cutting-edge technology to continue to augment and adapt the services across our diverse business lines. Now, I will turn to our quarterly financial details. Before I get started, I would like to clarify that all financial numbers we are presenting today are in RMB amounts and percentage changes are year-over-year comparisons unless otherwise noted. Net revenue for the fourth quarter 2015 increased by 62% to RMB1.6 billion. This increase was primarily driven by the increase in IVAS revenue. IVAS revenues increased by 61% to RMB1.83 billion, which was mainly driven by the 30% year-over-year growth in number of paying user and 24% year-over-year growth in ARPU. Now, let’s look at each of our IVAS business lines. Revenue from online, music and entertainment increased by 69% to RMB1.15 billion in the fourth quarter of 2015. This increase was driven by an increase of 45% in the numbers of paying users to 2.2 million and the increase of 17% in average revenue per user ARPU to RMB531. More importantly, mobile ARPU grew by a impressive 139% to RMB388 in fourth quarter 2015 from RMB162 in a corresponding period of 2014. Revenue from online games was RMB172 million in the fourth quarter of 2015, compared to RMB229 million in a period – in a prior year period. The decline was primarily caused by a 33% year-over-year decrease in paying users to 340,000, reflecting a continuous softness in China’s web game market, but was partially offset by a 11% year-over-year increase in ARPU of online games. Revenue from online dating increased by 102% to RMB189 million. This increase reflected a 109% year-over-year increase in ARPU to RMB837 in the fourth quarter of 2015, which was partially driven by contribution of the 2015 YY Online Dating Annual Event Competition, which was held for the first time in December 2015. Other IVAS revenues increased by 131% to RMB325 million in the fourth quarter of 2015. This mainly include – includes revenue from Huya broadcasting, which increased by 154% to RMB139 million – RMB135 million and revenue from membership subscription fees, which increased by 36% to RMB81 million. Other revenues, mainly including revenue from our online education platform, 100 Education, online advertising revenue from Duowan.com, and e-commerce, increased by a 123% to RMB68 million in the fourth quarter of 2015. Cost of revenues increased by 87% to RMB1.17 billion, which was primarily attributable to increase in revenue-sharing fees in content costs to RMB807 million in the fourth quarter of 2015. This increase in the revenue-sharing fees and content costs paid to performers, channel owners and content providers was in line with the increase in revenues and was primarily due to higher level of user engagement and spending driven by promotional activities, as well as the company’s investments in expanding in a – in expanding the amount of new and innovative content it provides to users. In addition, bandwidth costs increased to RMB161 million in the fourth quarter of 2015, primarily reflecting the continued user base expansion and the video quality improvements. Gross profit increased by 34% to RMB732 million in the fourth quarter of 2015. Gross margin was 38.5% compared to 46.7% in the prior year period. The decrease in gross margin was mainly attributable to a – to the change in our business mix to include new business lines involving user-generated content, and higher revenue-sharing fees and content costs. Our non-GAAP operating income increased by 29% to RMB471 million in the fourth quarter of 2015. The non-GAAP operating margin fell to 24.8% from 31.1% in the prior year period. GAAP net income attributable to YY was RMB359 million in the fourth quarter of 2015, compared to RMB373 million in the prior year period. Net margin in the fourth quarter of 2015 was 18.9%, compared to 31.8% in the corresponding period of 2014. Non-GAAP net income attributable to YY Inc. increased by 2% to RMB420 million from RMB411 million in the prior year period. Non-GAAP net margin decreased to 22.1% in the fourth quarter of 2015 from 35.1% in the prior year period. Diluted net income per ADS in the fourth quarter of 2015 increased by 2% to RMB6.24 compared to RMB6.15 in the prior year period. Non-GAAP diluted net income per ADS increased by 8% to RMB7.25 from RMB6.74 in the prior year period. Now, let me move onto the annual results of 2015. For the full-year 2015, net revenue increased by 60% to RMB5.9 billion, primarily driven by a 60% increase in IVAS revenues. Net income attributable to YY Inc. was RMB1.03 billion compared with RMB1.6 billion in 2015. Net margin was 17.5% in 2015 compared to 28.9% in a year ago. Non-GAAP net income attributable to YY Inc. increased by 2% to RMB1.22 billion. Non-GAAP net margin was 22.7% compared to 32.6% for the full-year 2014. Diluted net income per ADS increased to RMB17.96 from RMB17.76 in the prior year. Non-GAAP diluted net income per ADS increased to RMB21.18 from RMB20.01 in the prior year. This conclude our prepared remarks. Thank you for joining our conference call. We would like to conclude the call now.
