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Youku Tudou Announces Second Quarter 2013 Unaudited Financial Results
Aug 08, 2013 (01:08 PM EDT)


BEIJING, Aug. 8, 2013 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU, and formerly Youku Inc. or "Youku"), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for the second quarter 2013.

Basis of Presentation

On August 23, 2012, the Company and Tudou Holdings Limited ("Tudou") announced the completion of the merger between Youku and Tudou. Following the completion of the merger, Tudou's financial results were consolidated into the Company from the date of the completion of the merger.

This press release includes the Company's selected unaudited pro forma combined financial information for the three months ended June 30, 2012 derived from the accompanying unaudited pro forma condensed combined statements of operations (the "Pro Forma Statement of Operations") for the three months ended June 30, 2012. The Pro Forma Statement of Operations combines the historical consolidated statements of operations of Youku and Tudou, giving effect to the merger as if it had been completed on January 1, 2012.

The Pro Forma Statement of Operations has been derived from the unaudited historical consolidated statement of operations of Youku and Tudou. Certain financial statement line items included in Tudou's historical presentation have been disaggregated or condensed to conform to corresponding financial statement line items included in Youku's historical presentation. These include: business taxes, value-added tax, share based compensation expenses, selling and general administrative expenses relating to product development, professional licensed content, and intangible assets related to purchased software.

Additionally, based on Youku's review with Tudou management of Tudou's publicly disclosed summary of significant accounting policies prior to the merger, the adjustments to the historical statement of operations have been made to conform its accounting policies to those of Youku's.

Second Quarter Highlights[1]

  • Consolidated net revenues were RMB753.5 million (US$122.8 million), a 30% increase from the pro forma combined net revenues for the corresponding period in 2012.
  • Consolidated gross profit was RMB190.2 million (US$31.0 million), an 87% increase from the pro forma combined gross profit for the corresponding period in 2012. Consolidated or pro forma combined non-GAAP gross profit is herein defined as consolidated or pro forma combined gross profit excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content.  Consolidated non-GAAP gross profit was RMB204.4 million (US$33.3 million), a 77% increase from the pro forma combined non-GAAP gross profit for the corresponding period in 2012.  
  • Consolidated net loss was RMB105.1 million (US$17.1million), a 40% decrease from the pro forma combined net loss for the corresponding period in 2012. Consolidated or pro forma combined non-GAAP net loss is herein defined as consolidated or pro forma combined net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. Consolidated non-GAAP net loss was RMB44.6 million (US$7.3 million), a 63% decrease from the pro forma combined non-GAAP net loss for the corresponding period in 2012.
  • Consolidated basic and diluted loss per ADS, each representing 18 Class A ordinary shares, amounted to RMB0.63 (US$0.10) and RMB0.63 (US$0.10), respectively.
  • Consolidated cash, cash equivalents, restricted cash and short-term investments totaled RMB3.3 billion (US$543.8 million) as of June 30, 2013.
  • Consolidated acquisition of property and equipment was RMB34.5 million (US$5.6 million).
  • Consolidated acquisition of intangible assets was RMB102.5 million (US$16.7 million).

"Multi-screen video consumption is a game changer for Internet television as it offers video anytime, anywhere on any device. We are leveraging our top-of-mind video brand awareness, comprehensive content library and cross-screen product functionalities to extend our leading presence across different screens. With users watching Internet videos on multiple screens becoming the standard in China, Youku Tudou is at the center of exciting growth opportunities for the long term," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Youku Tudou is moving full speed ahead in multi-screen online video services. Mobile traffic growth is fast gaining traction ahead of our expectations with daily video views growing more than 100% in the last six months. The combination of dynamic growth in mobile traffic and the vast scale of our traffic on PC positions us as the clear leading multi-screen online video company in China."

Dele Liu, President of Youku Tudou, added, "We made solid financial and operational progress across-the-board in the second quarter. Revenue growth reaccelerated due to more effective sales execution while cost synergies further materialized as the integration between Youku and Tudou was completed, resulting in significant margin improvement. We remain committed to building our user-generated content ecosystem and leveraging our original content production capabilities to differentiate Youku Tudou and support our content marketing solutions." 

Second Quarter 2013 Results

Consolidated net revenues were RMB753.5 million (US$122.8 million) in the second quarter of 2013, a 30% increase from the pro forma combined net revenues for the corresponding period in 2012 and meeting the consolidated net revenues guidance previously announced by the Company. Consolidated advertising net revenues were RMB726.6 million (US$118.4 million), meeting the consolidated advertising net revenues guidance previously announced by the Company. The growth was primarily attributable to the increased use by brand advertisers of our advertising services as evidenced by an increase in the number of advertisers and the rising average spend per advertiser.

Consolidated bandwidth costs as a component of consolidated cost of revenues were RMB164.1 million (US$26.7 million) in the second quarter of 2013, representing 22% of the consolidated net revenues, as compared to the pro forma combined bandwidth costs of RMB177.0 million (US$28.8 million), representing 31% of the pro forma combined net revenues for the corresponding period in 2012.

Consolidated content costs as a component of consolidated cost of revenues were RMB303.5 million (US$49.4 million) in the second quarter of 2013, representing 40% of the consolidated net revenues, as compared to the pro forma combined content costs of RMB208.3 million, representing 36% of the pro forma combined net revenues for the corresponding period in 2012. Consolidated non-GAAP content costs, which is herein defined as consolidated content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content, were RMB289.2 million (US$47.1 million) in the second quarter of 2013, representing 38% of consolidated net revenues. Before any pro forma adjustments, the combined non-GAAP content costs were RMB248.6 million (US$40.5 million), representing 43% of the pro forma combined net revenues for the corresponding period in 2012. Including the pro forma adjustments, the pro forma combined non-GAAP content costs were RMB194.6 million (US$31.7 million), representing 34% of the pro forma combined net revenues for the corresponding period in 2012.

Consolidated gross profit was RMB190.2 million (US$31.0 million)in the second quarter of 2013, an 87% increase from the pro forma combined gross profit of RMB101.8 million (US$16.6 million) for the corresponding period in 2012.  Consolidated non-GAAP gross profit was RMB204.4 million (US$33.3 million) in the second quarter of 2013, representing 27% of consolidated net revenues, a 77% increase as compared to the pro forma combined non-GAAP gross profit of RMB115.5 million (US$18.8 million), representing 20% of the pro forma combined net revenues for the corresponding period in 2012.

Consolidated operating expenses were RMB306.8 million (US$50.0 million) in the second quarter of 2013, as compared to RMB296.8 million (US$48.4 million) of the pro forma combined operating expenses for the corresponding period in 2012. Consolidated non-GAAP operating expenses, which is herein defined as consolidated operating expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to customer relationship, technology and non-compete provisions, were RMB260.6 million (US$42.5 million) in the second quarter of 2013, a 2% increase compared to RMB254.4 million (US$41.5 million) of the pro forma combined non-GAAP operating expenses for the corresponding period in 2012. Detailed discussion of each component of consolidated operating expenses is as follows:

Consolidated sales and marketing expenses were RMB165.2 million (US$26.9 million) in the second quarter of 2013, as compared to RMB146.1 million (US$23.8 million) of the pro forma combined sales and marketing expenses for the corresponding period in 2012. Consolidated non-GAAP sales and marketing expenses, which is herein defined as consolidated sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship, were RMB150.4 million (US$24.5 million) in the second quarter of 2013, a 12% increase compared to RMB134.7 million (US$21.9 million) of the pro forma combined non-GAAP sales and marketing expenses for the corresponding period in 2012. This increase was primarily due to higher commission expenses paid to our sales force in line with our revenue growth.

Consolidated product development expenses were RMB66.1 million (US$10.8 million) in the second quarter of 2013, as compared to RMB57.3 million (US$9.3 million) of the pro forma combined product development expenses for the corresponding period in 2012. Consolidated non-GAAP product development expenses, which is herein defined as consolidated product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology, were RMB54.8 million (US$8.9 million) in the second quarter of 2013, a 14% increase compared to RMB48.2 million (US$7.9 million) of the pro forma combined non-GAAP product development expenses for the corresponding period in 2012. This increase was primarily due to higher personnel related expenses for our product development in mobile, search, social and paid-services.

Consolidated general and administrative expenses were RMB75.6 million (US$12.3 million) in the second quarter of 2013, as compared to RMB93.5 million (US$15.2 million) of the pro forma combined general and administrative expenses for the corresponding period in 2012. Consolidated non-GAAP general and administrative expenses, which is herein defined as consolidated general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to non-compete provisions, were RMB55.4 million (US$9.0 million) in the second quarter of 2013, a 22% decrease compared to RMB71.5 million (US$11.6 million) of the pro forma combined non-GAAP general and administrative expenses for the corresponding period in 2012.

Consolidated net loss was RMB105.1 million (US$17.1 million) in the second quarter of 2013, a 40% decrease compared to RMB176.3 million (US$28.7 million) of the pro forma combined net loss for the corresponding period in 2012. Consolidated non-GAAP net loss was RMB44.6 million (US$7.3 million) in the second quarter of 2013, a 63% decrease compared to RMB120.1 million (US$19.6 million) of the pro forma combined non-GAAP net loss for the corresponding period in 2012.

Consolidated non-GAAP adjusted EBITDA loss, which is herein defined as consolidated or pro forma combined net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, amortization of intangible assets from business combination, business combination related expenses and other non-operating items, was RMB28.7 million (US$4.7 million) in the second quarter of 2013, a 75% decrease compared to RMB113.9 million (US$18.6 million) of the pro forma combined non-GAAP adjusted EBITDA loss for the corresponding period in 2012.

Business Outlook

For the third quarter of 2013, the Company expects consolidated net revenues will be between RMB830 million and RMB870 million, with consolidated advertising net revenues contributing between RMB740 million and RMB770 million. This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

Youku Tudou's management will host an earnings conference call at 9:00 p.m. U.S. Eastern Time on August 8, 2013 (9:00 a.m. Beijing/Hong Kong Time on August 9, 2013).

Interested parties may participate in the conference call by dialing one of the following numbers below and entering passcode Youku# (i.e., 96858#) starting 10-15 minutes prior to the beginning of the call.

US Toll Free Dial In: +1-866-519-4004
International Dial In: +65-6723-9381
Mainland China Dial In: +86-400-620-8038 / +86-800-819-0121
Hong Kong Dial In: +852-2475-0994

A replay of the call will be available by dialing +1-855-452-5696 and entering passcode 27037557#. The replay will be available through August 16, 2013.

This call will be webcast live and the replay will be available for 12 months. Both will be available on the Investor Relations section of Youku Tudou's corporate website at http://ir.youku.com.

About Youku Tudou Inc.

Youku Tudou Inc. (NYSE: YOKU) is China's leading Internet television company. Its Youku and Tudou Internet television platforms enable users to search, view and share high-quality video content quickly and easily across multiple devices. Its Youku brand and Tudou brand are among the most recognized online video brands in China. Youku Tudou's American depositary shares, each representing 18 of Youku Tudou's Class A ordinary shares, are traded on the NYSE under the symbol "YOKU."

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Youku Tudou's strategic and operational plans, contain forward-looking statements. Youku may also make written or oral forward-looking statements in its filings with the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Youku Tudou's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our goals and strategies; our future business development, financial condition and results of operations; the expected growth of the online video market in China; our expectations regarding demand for and market acceptance of our services; our expectations regarding the retention and strengthening of our relationships with key advertisers and customers; our plans to enhance user experience, infrastructure and service offerings; competition in our industry in China; and relevant government policies and regulations relating to our industry. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Youku does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Youku Tudou's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Youku Tudou uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: consolidated non-GAAP content costs, consolidated non-GAAP gross profit or loss, consolidated non-GAAP operating expenses, consolidated non-GAAP sales and marketing expense, consolidated non-GAAP product development expenses, consolidated non-GAAP general and administrative expenses, consolidated non- GAAP profit or loss from operations, consolidated non-GAAP net profit or loss and consolidated non-GAAP adjusted EBITDA profit or loss. We define consolidated non-GAAP content costs as consolidated content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content. We define consolidated non-GAAP gross profit or loss as the respective nearest comparable GAAP financial measure to exclude share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content. We define consolidated non-GAAP operating expenses as operating expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to customer relationship, technology and non-compete provisions. We define consolidated non-GAAP sales and marketing expenses as consolidated sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship. We define consolidated non-GAAP product development expense as consolidated product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology. We define consolidated non-GAAP general and administrative expenses as consolidated general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to non-compete provisions. We define consolidated non-GAAP profit or loss from operations as consolidated profit or loss from operations excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define consolidated non-GAAP net profit or loss as consolidated net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define consolidated non-GAAP adjusted EBITDA profit or loss as consolidated net profit or loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, amortization of intangible assets from business combination, business combination related expenses and other non-operating items.

We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in Youku Tudou's business for the foreseeable future. In addition, in this press release we also included unaudited pro forma combined non-GAAP measures for the three months ended June 30, 2012, after giving effect to the merger between Youku and Tudou as if the merger had been completed on January 1, 2012 to provide comparative reference of the corresponding consolidated non-GAAP measures of the Company for the three months ended June 30, 2012. The pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations, or of the results that would have occurred had the merger taken place at the beginning of 2012.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP financial measures" at the end of this release.

For more information, please contact:
Ryan Cheung
Corporate Finance Director
Youku Tudou Inc.
Tel: (+8610) 5885-1881 x6090
Email: ryan.cheung@youku.com

[1]

The reporting currency of the Company is Renminbi ("RMB"), but for the convenience of the reader, the amounts presented throughout the release are in US dollars ("US$"). Unless otherwise noted, all conversions from RMB to US$ are made at a rate of RMB6.1374 to US$1.00, the effective noon buying rate as of June 28, 2013 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.










 YOUKU TUDOU INC. 

 CONSOLIDATED BALANCE SHEETS 










(Amounts in thousands, except for number of shares)



For the Three Months Ended



December 31, 2012


June 30, 2013





RMB


RMB


US$

ASSETS





(Unaudited)


(Unaudited)










Current assets:








            Cash and cash equivalents 



1,655,857


947,810


154,432

            Restricted cash 



9,003


8,309


1,354

            Short-term investments 



2,110,073


2,381,219


387,985

            Accounts receivable, net 



932,796


1,244,028


202,696

            Intangible assets, net 



19,607


101,477


16,534

            Deferred tax assets 



10,470


10,470


1,706

            Prepayments and other assets 



64,909


49,582


8,079

Total current assets



4,802,715


4,742,895


772,786










Non-current assets:








            Property and equipment, net 



200,681


208,143


33,914

            Intangible assets, net 



1,304,923


1,326,080


216,065

            Capitalized content production costs 



-


4,941


805

            Prepayments and other assets 



229,185


239,633


39,045

            Goodwill 



4,255,570


4,255,570


693,383

 Total non-current assets 



5,990,359


6,034,367


983,212










TOTAL ASSETS



10,793,074


10,777,262


1,755,998










LIABILITIES AND SHAREHOLDERS' EQUITY

















Current liabilities:








           Accounts payable 



181,878


284,285


46,320

           Advances from customers 



21,603


55,879


9,105

           Accrued expenses and other liabilities 



981,353


1,080,185


176,001

           Current portion of long-term debt 



7,441


1,122


183

Total current liabilities



1,192,275


1,421,471


231,609










Non-current liabilities








           Deferred tax liability 



224,374


224,374


36,558

           Other liabilities 



19,552


70


11

Total non-current liabilities



243,926


224,444


36,569










Total liabilities



1,436,201


1,645,915


268,178










Commitments and contingencies

















Shareholders' equity








           Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793

           authorized, 2,286,643,502 and 2,325,733,363 issued and outstanding

           as of December 31, 2012 and June 30, 2013, respectively)

149


152


25

           Class B Ordinary Shares (US$0.00001 par value, 659,761,207

           authorized, 659,561,893 and 659,561,893 issued and outstanding as

           of December 31, 2012 and June 30, 2013, respectively)

49


49


8

            Additional paid-in capital



10,768,204


10,919,623


1,779,194

            Statutory reserves



1,500


1,500


244

            Accumulated deficit



(1,297,147)


(1,634,672)


(266,346)

            Accumulated other comprehensive loss



(115,882)


(155,305)


(25,305)

Total shareholders' equity



9,356,873


9,131,347


1,487,820










TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY



10,793,074


10,777,262


1,755,998

 















 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF OPERATIONS  


















 For the Three Months Ended 


For the Six Months Ended

(Amounts in thousands, except for  number of shares and ADS and per share and per

ADS data)


Pro Forma








June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)















Net revenues



578,308


515,997


753,457


122,765


1,269,454


206,840















Cost of revenues (Note 1)



(476,545)


(501,766)


(563,281)


(91,778)


(1,065,047)


(173,534)















Gross profit



101,763


14,231


190,176


30,987


204,407


33,306















Operating expenses:














       Product development



(57,260)


(56,828)


(66,051)


(10,762)


(122,879)


(20,021)

       Sales and marketing



(146,074)


(127,600)


(165,201)


(26,917)


(292,801)


(47,707)

       General and administrative



(93,504)


(83,350)


(75,569)


(12,313)


(158,919)


(25,894)

Total operating expenses



(296,838)


(267,778)


(306,821)


(49,992)


(574,599)


(93,622)















Loss from operations



(195,075)


(253,547)


(116,645)


(19,005)


(370,192)


(60,316)















Interest income



12,938


7,179


7,090


1,155


14,269


2,324

Interest expenses



(1,956)


(387)


(158)


(26)


(545)


(89)

Other, net



5,423


14,281


4,720


769


19,001


3,096

Total other income, net



16,405


21,073


11,652


1,898


32,725


5,331















Loss before income taxes



(178,670)


(232,474)


(104,993)


(17,107)


(337,467)


(54,985)

Income taxes



2,391


-


(58)


(9)


(58)


(10)















Net loss



(176,279)


(232,474)


(105,051)


(17,116)


(337,525)


(54,995)















Net loss per share, basic and diluted



(0.06)


(0.08)


(0.04)


(0.01)


(0.11)


(0.02)

Net loss per ADS (each ADS represents 18 class A ordinary shares),
        basic and diluted



(1.09)


(1.42)


(0.63)


(0.10)


(2.05)


(0.33)

Shares used in computation, basic and diluted



2,918,302,861


2,953,267,696


2,980,162,122


2,980,162,122


2,969,000,985


2,969,000,985

ADSs used in computation, basic and diluted



162,127,936


164,070,427


165,564,562


165,564,562


164,944,499


164,944,499

 

The accompanying notes are an integral part of the press release.























































Note 1. Cost of Revenues



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

(Amounts in thousands)



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

 Cost of revenues: 














 Value added, business taxes and surcharges 



60,891


48,925


74,334


12,112


123,259


20,083

 Bandwidth costs 



176,951


161,045


164,111


26,739


325,156


52,979

 Depreciation of servers and other equipment 



30,424


22,470


21,384


3,484


43,854


7,146

 Content costs 



208,279


269,326


303,452


49,443


572,778


93,326

 Total Cost of Revenues 



476,545


501,766


563,281


91,778


1,065,047


173,534

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 


















 For the Three Months Ended 


 For the Six Months Ended  

(Amounts in thousands)













June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2012


June 30, 2013


June 30, 2013






RMB


RMB


RMB


US$


 RMB 


 RMB 


 US$ 






(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


 (Unaudited) 


 (Unaudited) 


 (Unaudited) 

Cash flows from operating activities:

















Net loss




(62,848)


(232,474)


(105,051)


(17,116)


(218,973)


(337,525)


(54,995)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

















           Depreciation





14,742


26,795


27,502


4,481


28,743


54,297


8,847

           Bad debt expense





1,669


7,076


10,035


1,635


2,327


17,111


2,788

           Amortization of intangible assets and capitalized content production costs





77,338


138,991


176,523


28,762


168,521


315,514


51,408

           Amortization of long-term debt discounts





535


221


92


15


1,151


313


51

           Gain on disposal of  property and equipment





-


695


(645)


(105)


-


50


8

           Foreign exchange loss





(374)


325


(847)


(138)


(185)


(522)


(85)

           Share-based compensation





26,197


37,850


48,529


7,907


49,264


86,379


14,075

           Gain form remeasurement of previously held investment in acquired subsidiary





-


-


-


-


(3,344)


-


-

           Change in operating assets and liabilities:


















                      Restricted cash





-


(10)


704


115


-


694


113

                      Accounts receivable





(232,847)


(33,644)


(294,698)


(48,017)


(234,895)


(328,342)


(53,499)

                      Prepayments and other assets





19,167


1,347


21,794


3,551


30,332


23,141


3,770

                      Capitalized content production costs





(2,872)


15,961


(42,382)


(6,906)


(7,897)


(26,421)


(4,305)

                      Accounts payable





(2,504)


(9,864)


11,179


1,821


(2,491)


1,315


214

                      Advances from customers





(12,392)


38,457


(4,180)


(681)


16,594


34,277


5,585

                      Accrued expenses and other liabilities





83,026


12,468


88,046


14,347


92,375


100,514


16,378

Net cash (used in) provided by  operating activities




(91,163)


4,194


(63,399)


(10,329)


(78,478)


(59,205)


(9,647)



















Cash flows from investing activities:

















          Acquisition of property and equipment





(22,603)


(27,364)


(34,549)


(5,629)


(32,672)


(61,913)


(10,088)

          Proceeds received from maturity of short-term investments





1,145,908


36,703


621,948


101,337


1,399,581


658,651


107,318

          Short-term investments placed with financial institutions





-


(185,590)


(739,059)


(120,419)


(254,474)


(924,649)


(150,658)

          Proceeds from disposal of property and equipment





-


-


1,282


209


-


1,282


209

          Cash acquired, net of cash paid for acquired subsidiaries





-


-


-


-


(25,778)


-


-

          Acquisition of intangible assets





(51,625)


(238,921)


(102,500)


(16,701)


(102,045)


(341,421)


(55,630)

Net cash (used in) provided by investing activities





1,071,680


(415,172)


(252,878)


(41,203)


984,612


(668,050)


(108,849)



















Cash flows from financing activities:


















          Exercise of employee stock options





8,483


28,740


35,935


5,855


14,327


64,675


10,538

          Principal repayments on long-term debt





(2,956)


(3,236)


(3,330)


(543)


(4,943)


(6,566)


(1,070)

Net cash (used in) provided by financing activities





5,527


25,504


32,605


5,312


9,384


58,109


9,468

Effect of exchange rate changes on cash and cash equivalents





9,527


(6,293)


(32,608)


(5,313)


7,050


(38,901)


(6,338)

Net (decrease) increase in cash and cash equivalents





995,571


(391,767)


(316,280)


(51,533)


922,568


(708,047)


(115,366)

Cash and cash equivalents at the beginning of the period





2,219,535


1,655,857


1,264,090


205,965


2,292,538


1,655,857


269,798

Cash and cash equivalents at the end of the period





3,215,106


1,264,090


947,810


154,432


3,215,106


947,810


154,432

 





























Reconciliations of Non-GAAP results of operations measures to the nearest comparable GAAP financial measures (1)(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), unaudited)















 1. Non-GAAP Content Cost



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

Content cost



208,279


269,326


303,452


49,443


572,778


93,326

 Deduct: share-based compensation  



4,806


5,663


6,465


1,053


12,128


1,976

 Deduct: amortization of intangible assets from business combination 


8,897


8,331


7,741


1,261


16,072


2,619

Non-GAAP content cost



194,576


255,332


289,246


47,129


544,578


88,731















2. Non-GAAP Gross Profit



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

Gross profit



101,763


14,231


190,176


30,987


204,407


33,306

 Add back: share-based compensation  



4,806


5,663


6,465


1,053


12,128


1,976

 Add back: amortization of intangible assets from business combination 


8,897


8,331


7,741


1,261


16,072


2,619

Non-GAAP gross profit



115,466


28,225


204,382


33,301


232,607


37,901





























 3. Non-GAAP Operating Expenses



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

Operating expenses



296,838


267,778


306,821


49,992


574,599


93,622

 Deduct: share-based compensation  



30,939


32,187


42,064


6,854


74,251


12,099

 Deduct: business combination related expenses 



7,371


-


-


-


-


-

 Deduct: amortization of intangible assets from business combination 


4,176


4,155


4,155


676


8,310


1,354

Non-GAAP  operating expenses



254,352


231,436


260,602


42,462


492,038


80,169





























4. Non-GAAP Sales and Marketing Expenses



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

Sales and marketing expenses



146,074


127,600


165,201


26,917


292,801


47,707

 Deduct: share-based compensation  



9,331


10,061


12,708


2,071


22,769


3,710

 Deduct: amortization of intangible assets from business combination 


2,087


2,077


2,077


338


4,154


676

Non-GAAP  sales and marketing expenses



134,656


115,462


150,416


24,508


265,878


43,321





























5. Non-GAAP Product Development Expenses



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

Product development expenses



57,260


56,828


66,051


10,762


122,879


20,021

 Deduct: share-based compensation  



7,659


6,967


9,890


1,611


16,857


2,747

 Deduct: amortization of intangible assets from business combination 


1,402


1,395


1,395


227


2,790


455

Non-GAAP  product development expenses



48,199


48,466


54,766


8,924


103,232


16,819





























6. Non-GAAP General and Administrative Expenses



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

General and administrative expenses



93,504


83,350


75,569


12,313


158,919


25,894

 Deduct: share-based compensation  



13,949


15,159


19,466


3,172


34,625


5,642

 Deduct: business combination related expenses 



7,371


-


-


-


-


-

 Deduct: amortization of intangible assets from business combination 


687


683


683


111


1,366


223

Non-GAAP  general and administrative expenses



71,497


67,508


55,420


9,030


122,928


20,029





























7. Non-GAAP Loss from Operations



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

Loss from operations



(195,075)


(253,547)


(116,645)


(19,005)


(370,192)


(60,316)

 Add back: share-based compensation  



35,745


37,850


48,529


7,907


86,379


14,075

 Add back: business combination related expenses 



7,371


-


-


-


-


-

 Add back: amortization of intangible assets from business combination 


13,073


12,486


11,896


1,937


24,382


3,973

Non-GAAP  loss from operations



(138,886)


(203,211)


(56,220)


(9,161)


(259,431)


(42,268)





























8. Non-GAAP  Net Loss 



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

 Net loss 



(176,279)


(232,474)


(105,051)


(17,116)


(337,525)


(54,995)

 Add back: share-based compensation  



35,745


37,850


48,529


7,907


86,379


14,075

 Add back: business combination related expenses 



7,371


-


-


-


-


-

 Add back: amortization of intangible assets from business combination 


13,073


12,486


11,896


1,937


24,382


3,973

 Non-GAAP net loss 



(120,090)


(182,138)


(44,626)


(7,272)


(226,764)


(36,947)





























9.  Non-GAAP EBITDA Loss



 For the Three Months Ended 


For the Six Months Ended




Pro Forma










June 30, 2012


March 31, 2013


June 30, 2013


June 30, 2013


June 30, 2013


June 30, 2013




RMB


RMB


RMB


US$


RMB


US$

 Net loss 



(176,279)


(232,474)


(105,051)


(17,116)


(337,525)


(54,995)

 Add back: 














 Depreciation and amortization (excluding amortization 














      of acquired content ) (2)



25,035


26,810


27,516


4,483


54,326


8,852

 Interest income 



(12,938)


(7,179)


(7,090)


(1,155)


(14,269)


(2,324)

 Interest expenses 



1,956


387


158


26


545


89

 Income taxes 



(2,391)


-


58


9


58


10

 EBITDA loss 



(164,617)


(212,456)


(84,409)


(13,753)


(296,865)


(48,368)















 Adjustments: 














 Share-based compensation  



35,745


37,850


48,529


7,907


86,379


14,075

 Business combination related expenses 



7,371


-


-


-


-


-

 Amortization of intangible assets from business combination 



13,073


12,486


11,896


1,937


24,382


3,973

 Others, net 



(5,423)


(14,281)


(4,720)


(769)


(19,001)


(3,096)

Non-GAAP EBITDA loss



(113,851)


(176,401)


(28,704)


(4,678)


(205,105)


(33,416)





























(1)     For more information on the Non-GAAP financial measures, please see the section captioned "About Non-GAAP Financial Measures" in this earnings release.





(2)    The amortization expense was related to an advertising license acquired in April 2010. The amortization of acquired content was not treated as a Non-GAAP adjustment.




 

SOURCE Youku Tudou Inc.