YY Inc. YY delivered second-quarter 2018 earnings of $2.03 per (RMB 13.46) American depositary shares (ADS), which handily outperformed the Zacks Consensus Estimate of $1.81. The bottom line also surged 34.3% from the year-ago period.
Revenues totaled $570 million, which surpassed the Zacks Consensus Estimate of $538 million (RMB 3.773 billion).
Net revenues surged 44.6% year over year to RMB 3.773 billion. The upside can primarily be attributed to strong live streaming revenues, which jumped 50% year over year to RMB 3.559 billion. Mobile contributed 57.2% of YY's live streaming revenues.
YY has re-classified its revenues from online games, memberships, and other to a new category "other revenues" beginning first-quarter 2018. Other revenues decreased 9.4% to RMB 213.6 million.
Mobile live streaming Monthly Active Users (MAU) increased 21.3% year over year to 80.2 million. Live streaming paying users increased 21.1% to 6.9 million. Mobile paying users constituted 72.7% of the total live streaming paying users in the reported quarter.
The impressive performance of YY Live and HUYA contributed to the impressive top-line performance in the quarter under review.
Furthermore, management is optimistic about the recently launched feature called Host Battalion that combines live streaming and casual games with social features. Two recent games were also rolled out namely Happy Chinese Checkers and Happy Sheep onto the Host Battalion. This is likely to increase user engagement and interaction as well as the monetization of the company's social media platform.
Management is also positive about the artificial intelligence (AI) based content recommendation technology that it has come up with, which is expected to sync user preferences with content.
YY Inc. Price, Consensus and EPS Surprise
YY Inc. Price, Consensus and EPS Surprise | YY Inc. Quote
Gross profit climbed 39.6% from the year-ago quarter to RMB 1.459 billion. However, gross margin contracted 140 basis points (bps) to 40.1% in second quarter primarily due to higher revenue-sharing fees and content costs.
Operating expenses totaled RMB 779.6 million, up 63.7% from the year-ago quarter.
Non-GAAP operating income increased 45.5% year over year to RMB 933.1 million. Non-GAAP operating margin expanded 100 bps on a year-over-year basis to 24.7%.
Moreover, non-GAAP net income increased 51.5% year over year to RMB 873.2 million.
Balance Sheet & Cash Flow
As of Jun 30, 2018, YY had cash and cash equivalents of RMB 3.562 billion and short-term deposits of RMB 9.503 billion.
Net cash from operating activities amounted to RMB 738.3 million.
For the third quarter of 2018, YY expects net revenues to be between RMB 3.89 billion and RMB 4.02 billion, representing year-over-year growth of 25.8-30%.
Zacks Rank & Key Picks
Currently, YY has a Zacks Rank #4 (Sell).
Vishay Intertechnology, Inc., VSH , (Techtarget TTGT and Yelp Inc. YELP , are stocks worth considering in the broader Computer and Technology sector. While Vishay sports a Zacks Rank #1 (Strong Buy), TechTarget and Yelp carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Long-term earnings growth rate for Vishay, Techtarget and Yelp is pegged at 9.2%, 20% and 19.1%, respectively.
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