China social networking company YY (NASDAQ:YY) said higher revenue-sharing payments for music and entertainment content, beefier investments in its Huya Live online broadcasting service and the delayed launch of several online games contributed to its Q3 earnings miss.
The company — one of several described as "China's Twitter (NYSE:TWTR)" — late Monday posted EPS excluding items of 71 cents, down 18% from the year-earlier quarter and well below the 82 cents analysts polled by Thomson Reuters had expected.
Revenue rose 49% to RMB1.48 million ($234.4 million), led by its online dating and mobile services segments. Analysts had expected $225.6 million.
YY stock was down a fraction in midday trading in the stock market today, near 59, and is down nearly 9% this year.
The company, launched as an online gaming portal in 2005, now calls itself a virtual stadium, where people can interact in real time, visually and through voice, video and text.
Facing more rivals in gaming, YY has diversified into entertainment, business conferencing, online dating and online education.
In the company's earnings conference call with analysts Monday, YY CFO Eric He said "overall growth was offset by softer-than-expected performance of our online game segment."
Intensifying competition and the company's decision to postpone the release of several new games also impacted YY's quarter.
"We are working hard to revitalize growth for online game by introducing several new games over next several quarters," He said. "However, we do not expect these games to contribute to our revenue until 2016, thus (we) anticipate continuing softness in online gaming business for the rest of 2015."
YY's revenue from live game broadcasting, however, jumped 80% to RMB82.4 million ($13.0 million).
Online dating revenue soared 169% to RMB173 million ($27 million). Revenue from YY's online music and entertainment business rose to 35% of total revenue vs. 9% in Q3 2014.
Revenue from online, music and entertainment increased 60% to RMB854 million ($133.5 million) as paying users rose to 1.9 million. That increase was partially offset by a 3% fall in the average revenue per user to RMB439 ($68.63), a decline the company attributed to generally less profitable mobile contributions.
On July 9, after YY had been the subject of go-private speculation for weeks, YY Chairman Jun Lei and CEO David Xueling Li proposed buying all outstanding ordinary shares of the company they don't already own for $68.50 in cash per American Depositary Share. That was a 17.4% premium to YY's closing price of 58.35 on July 8.
The buyer group said it already owns 35.7% of YY shares, representing 75% of the aggregate voting power of the company.