Youku Announces Second Quarter 2012 Unaudited Financial Results

Net Revenues Increased by 96% Year-over-Year; Pending Merger with Tudou on Track

Aug 06, 2012, 06:00 ET from Youku Inc.

BEIJING, Aug. 6, 2012 /PRNewswire-Asia/ -- Youku Inc. (NYSE: YOKU), China's leading Internet television company ("Youku" or the "Company"), today announced its unaudited financial results for the second quarter 2012.

Second Quarter Highlights[1]

  • Net revenues were RMB387.4 million (US$61.0 million), a 96% increase from the corresponding period in 2011.
  • Gross profit was RMB76.9 million (US$12.1 million), a 45% increase from the corresponding period in 2011. Non-GAAP gross profit, which is herein defined as gross profit excluding share-based compensation expenses, was RMB79.5 million (US$12.5 million) in the second quarter of 2012, a 48% increase from the corresponding period in 2011.
  • Net loss was RMB62.8 million (US$9.9 million), as compared to a net loss of RMB28.1 million (US$4.4 million) for the same period in 2011. Non-GAAP net loss, which is herein defined as net loss excluding share-based compensation expenses and business combination related expenses, was RMB29.3 million (US$4.6 million) in the second quarter of 2012, as compared to the non-GAAP net loss of RMB20.8 million (US$3.3 million) in the corresponding period in 2011. This increase was primarily due to content price increase during 2011, which we amortize using accelerated method, broadening of our content portfolio, increase of number of employees as a result to rapid growth of our business and our continuous and expanded investment in product development in mobile, search, social and paid services.
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for the second quarter of 2012 amounted to RMB0.54 (US$0.09) and RMB0.54 (US$0.09), respectively.
  • Cash, cash equivalents and short-term investments totaled RMB3.5 billion (US$546.6 million) as of June 30, 2012.
  • Acquisition of property and equipment for the second quarter of 2012 was RMB22.6 million (US$3.6 million), as compared to RMB18.9 million (US$3.0 million) for the same period in 2011.
  • Acquisition of intangible assets for the second quarter of 2012 was RMB51.6 million (US$8.1 million), as compared to RMB144.2 million (US$22.7 million) for the same period in 2011.

[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 RMB6.353 to US$1.00, the effective noon buying rate as of June 29, 2012 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

"Despite challenging macroeconomic conditions, we recorded another quarter of strong revenue growth." said Victor Koo, Chairman and Chief Executive Officer of Youku. "We are pleased to see the continued rationalization of the online video sector and improving content and bandwidth cost structure. The planned integration with Tudou is proceeding smoothly and we are on track to realize the potential of the combination of No.1 and No.2 online video platforms in China."

Dele Liu, President of Youku, commented, "We are further cementing our leadership positions in video and continue to benefit in the structural budget shift from traditional media to online video by offering high ROI marketing solutions. We will continue to drive our edge in user experience, content management and monetization to achieve sustainable and profitable growth."

Second Quarter 2012 Results

Net revenues were RMB387.4 million (US$61.0 million) in the second quarter of 2012, representing a 96% increase from the corresponding period in 2011 and meeting the revenue guidance previously announced by the Company. The growth was primarily attributable to the increased average spending per advertiser from RMB0.9 million to RMB1.7 million and increased number of advertisers from 260 to 283, representing an increase of 89% and 9%, respectively, from the corresponding period in 2011.

Bandwidth costs as a component of cost of revenues were RMB111.9 million (US$17.6 million) in the second quarter of 2012, representing 29% of net revenues, compared to 33% in the corresponding period in 2011.

Content costs as a component of cost of revenues were RMB144.0 million (US$22.7 million) in the second quarter of 2012, representing 37% of net revenues, compared to 25% in the corresponding period in 2011. The increase was primarily due to content price increase during 2011, which we amortize using accelerated method, and broadening of our content portfolio.

Gross profit was RMB76.9 million (US$12.1 million), an increase of 45% compared to RMB52.9 million (US$8.3 million) for the same period in 2011. Non-GAAP gross profit was RMB79.5 million (US$12.5 million) in the second quarter of 2012, an increase of 48% compared to RMB53.6 million (US$8.4 million) in the corresponding period in 2011 due to operating leverage.

Operating expenses were RMB158.3 million (US$24.9 million) in the second quarter of 2012, as compared to RMB80.7 million (US$12.7 million) in the corresponding period in 2011. Non-GAAP operating expenses, which is herein defined as operating expenses excluding share-based compensation expenses and business combination related expenses, were RMB127.4 million (US$20.1 million) in the second quarter of 2012, an increase of 72% compared to RMB74.1 million (US$11.7 million) in the corresponding period in 2011. The increase was primarily due to increases in sales and marketing expenses, product development expenses and general and administrative expenses as a result of the substantial growth of our business. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB80.3 million (US$12.6 million) in the second quarter of 2012, as compared to RMB52.7 million (US$8.3 million) in the corresponding period in 2011.  Non-GAAP sales and marketing expenses, which is herein defined as sales and marketing expenses excluding share-based compensation expenses, were RMB74.3 million (US$11.7 million) in the second quarter of 2012, an increase of 50% compared to RMB49.7 million (US$7.8 million) in the corresponding period in 2011. This increase was primarily due to increases in marketing expenses and commission expenses paid to our sales force in line with our revenue growth.

Product development expenses were RMB35.0 million (US$5.5 million) in the second quarter of 2012, as compared to RMB14.2 million (US$2.2 million) in the corresponding period in 2011. Non-GAAP product development expenses, which is herein defined as product development expenses excluding share-based compensation expenses, were RMB28.6 million (US$4.5 million) in the second quarter of 2012, an increase of 130% compared to RMB12.5 million (US$2.0 million) in the corresponding period in 2011. This increase was primarily due to an increase in salaries and benefits for our product development personnel in mobile, search, social and paid-services.

General and administrative expenses were RMB43.0 million (US$6.8 million) in the second quarter of 2012, as compared to RMB13.8 million (US$2.2 million) in the corresponding period in 2011. Non-GAAP general and administrative expenses, which is herein defined as general and administrative expenses excluding share-based compensation expenses and business combination related expenses, were RMB24.5 million (US$3.9 million) in the second quarter of 2012, representing an increase of 104% compared to RMB12.0 million (US$1.9 million) in the corresponding period in 2011. This increase was primarily due to an increase in professional fees, personnel-related expenses and tax charges.

Net loss was RMB62.8 million (US$9.9 million), as compared to a net loss of RMB28.1 million (US$4.4 million) for the same period in 2011. Non-GAAP net loss, which is herein defined as net loss excluding share-based compensation expenses and business combination related expenses, was RMB29.3 million (US$4.6 million) in the second quarter of 2012, as compared to the non-GAAP net loss of RMB20.8 million (US$3.3 million) in the corresponding period in 2011. This increase was primarily due to content price increase during 2011, which we amortize using accelerated method, broadening of our content portfolio, increase of number of employees as a result to rapid growth of our business and our continuous and expanded investment in product development in mobile, search, social and paid services.

Non-GAAP EBITDA loss, which is herein defined as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, business combination related expenses and other non-operating items, was RMB33.1 million (US$5.2 million) in the second quarter of 2012, as compared to RMB10.1 million (US$1.6 million) in the corresponding period in 2011. This increase was primarily due to increase in operating expenses.

Business Outlook

For the third quarter of 2012, the Company expects year-on-year growth of 70% to 80% in net revenues. This forecast reflects the Company's current and preliminary view, which is subject to change.

Recent Business Developments

Youku to Hold 2012 Annual General Meeting on August 20, 2012

On July 18, the Company announced that it will hold its 2012 annual general meeting of shareholders at Suite 3206, The Centrium, 60 Wyndham Street, Central, Hong Kong on Monday, August 20, 2012, beginning at 10:00 am (Hong Kong time). Only holders of Youku Class A shares and Youku Class B shares of record on the close of business on August 13, 2012 (Hong Kong time) (the "Youku share record date") or their proxy holders are entitled to vote at the annual general meeting or any adjournment or postponements thereof. Each Youku Class A shareholder has one vote for each Youku Class A share and each Youku Class B shareholder has three votes for each Youku Class B share held as of the close of business on the Youku share record date. Holders of record of the Company's American Depositary Shares ("ADSs") at the close of business on July 20, 2012 (New York City time) who wish to vote the Class A ordinary shares of the Company represented by the ADSs must act through Citibank, N.A., the depositary of the Company's ADS program.

Youku has filed a registration statement on Form F-4 (the "Form F-4") with the Securities and Exchange Commission (the "SEC"), which became effective at 4:30 p.m., July 17, 2012 (New York City Time). The Form F-4 includes a joint proxy statement/prospectus and was filed with the SEC in connection with the previously announced merger agreement (the "Merger Agreement"), dated March 11, 2012, by and among the Company, Tudou Holdings Limited ("Tudou") and Two Merger Sub Inc. ("Merger Sub") and the merger contemplated thereunder (the "Merger").  Pursuant to the Merger Agreement and the plan of merger attached as Annex A to the Merger Agreement, Tudou will merge with and into Merger Sub, with Tudou continuing as the surviving entity and as a wholly owned subsidiary of Youku and the combined entity will be named "Youku Tudou Inc."

The notice of the annual general meeting included in the joint proxy statement/prospectus sets forth the resolutions to be submitted to shareholders of the Company for approval and other relevant information regarding the annual general meeting, the Merger and the Merger Agreement and how to vote ordinary shares or direct Citibank, N.A. to vote the Class A ordinary shares represented by the ADSs at the annual general meeting.

Conference Call Information

Youku's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on August 6, 2012 (8:00 p.m. Beijing/Hong Kong Time on August 6, 2012).

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: 1-718-354-1231 Mainland China Toll Free Dial In: 86-4006208038 / 86-8008190121 Hong Kong Dial In: 852-2475-0994

A replay of the call will be available by dialing  1-866-214-5335 (international 1-718-354-1232) , and entering passcode 16226822#. The replay will be available through August 13, 2012.

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's corporate website at http://ir.youku.com.

About Youku

Youku Inc. is China's leading Internet television company. Our Internet television platform enables users to search, view and share high-quality video content quickly and easily across multiple devices. Youku, which stands for "what's best and what's cool" in Chinese, is the most recognized online video brand in China.  Youku's American depositary shares, each representing 18 of our Class A ordinary shares, are traded on 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'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'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's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Youku uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP sales and marketing expense, non-GAAP product development expenses, non-GAAP general and administrative expenses, non-GAAP loss from operations, non-GAAP net loss and non-GAAP EBITDA loss.  We define non-GAAP gross profit or loss, non-GAAP sales and marketing expense and non-GAAP product development expenses as the respective nearest comparable GAAP financial measure to exclude share-based compensation expenses. We define non-GAAP operating expenses  as operating expenses excluding share-based compensation expenses and business combination related expenses. We define non-GAAP general and administrative expenses as general and administrative expenses excluding share-based compensation expenses and business combination related expenses. We define non-GAAP loss from operations as loss from operations excluding share-based compensation expenses and business combination related expenses. We define non-GAAP net loss as net loss excluding share-based compensation expenses and business combination related expenses. We define non-GAAP EBITDA loss as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, 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's business for the foreseeable future.

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:

Investor Relations:

Ryan Cheung Corporate Finance Director Youku Inc. Tel: (+8610) 5885-1881 x6090 Email: ryan.cheung@youku.com

 

YOUKU  INC. 

CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except for number of shares)

December 31,

June 30,

June 30,

2011

2012

2012

RMB

RMB

US$

ASSETS

(Unaudited)

(Unaudited)

Current assets:

 Cash and cash equivalents 

2,292,538

3,215,106

506,077

 Short-term investments 

1,400,858

257,197

40,484

 Accounts receivable, net 

420,706

677,067

106,574

 Intangible assets, net 

16,078

18,721

2,947

 Amounts due from related party 

768

-

-

 Prepayments and other assets 

16,832

45,075

7,095

Total current assets

4,147,780

4,213,166

663,177

Non-current assets:

 Property and equipment, net 

96,567

116,382

18,319

 Long-term investment in related party 

1,707

-

-

 Intangible assets, net 

211,978

209,041

32,904

 Capitalized content production costs 

7,782

796

125

 Amounts due from related party 

65,352

-

-

 Prepayments and other assets 

144,392

207,749

32,701

 Goodwill 

-

61,824

9,731

 Total non-current assets 

527,778

595,792

93,780

TOTAL ASSETS

4,675,558

4,808,958

756,957

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable 

57,276

109,712

17,269

 Advances from customers 

3,140

45,440

7,153

 Amounts due to related party 

2,794

-

-

 Accrued expenses and other liabilities 

390,607

549,661

86,520

 Current portion of long-term debt 

9,182

11,838

1,863

Total current liabilities

462,999

716,651

112,805

Non-current liabilities:

 Long-term debt 

7,382

1,137

179

Total non-current liabilities

7,382

1,137

179

Total liabilities

470,381

717,788

112,984

Commitments and contingencies

Shareholders' equity:

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 1,395,435,339 and 1,437,039,252  issued and outstanding as of December 31, 2011 and June 30, 2012, respectively)

93

95

15

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, 2011 and June 30, 2012, respectively)

49

49

8

 Additional paid-in capital 

5,185,257

5,283,356

831,632

 Accumulated deficit 

(871,644)

(1,090,617)

(171,671)

 Accumulated other comprehensive loss 

(108,578)

(101,713)

(16,011)

Total shareholders' equity

4,205,177

4,091,170

643,973

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 

4,675,558

4,808,958

756,957

 

YOUKU 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)

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

197,853

270,167

387,387

60,978

325,844

657,554

103,502

Cost of revenues (Note 1)

(144,945)

(292,736)

(310,463)

(48,869)

(258,916)

(603,199)

(94,947)

Gross profit (loss)

52,908

(22,569)

76,924

12,109

66,928

54,355

8,555

Operating expenses:

        Product development

(14,192)

(28,833)

(35,046)

(5,516)

(24,786)

(63,879)

(10,055)

        Sales and marketing

(52,732)

(66,406)

(80,255)

(12,633)

(89,401)

(146,661)

(23,085)

       General and administrative

(13,759)

(48,586)

(43,017)

(6,771)

(26,333)

(91,603)

(14,419)

Total operating expenses

(80,683)

(143,825)

(158,318)

(24,920)

(140,520)

(302,143)

(47,559)

(Loss) profit from operations

(27,775)

(166,394)

(81,394)

(12,811)

(73,592)

(247,788)

(39,004)

Interest income

3,190

11,603

12,375

1,948

4,246

23,978

3,774

Interest expenses

(1,801)

(1,151)

(982)

(155)

(3,956)

(2,133)

(336)

Other, net

(1,714)

3,393

4,762

750

(1,714)

8,155

1,284

Total other income (expenses), net

(325)

13,845

16,155

2,543

(1,424)

30,000

4,722

(Loss) profit before income taxes

(28,100)

(152,549)

(65,239)

(10,268)

(75,016)

(217,788)

(34,282)

Income taxes

-

(3,576)

2,391

376

-

(1,185)

(187)

Net (loss) profit

(28,100)

(156,125)

(62,848)

(9,892)

(75,016)

(218,973)

(34,469)

Net loss per share, basic and diluted

(0.01)

(0.08)

(0.03)

(0.00)

(0.04)

(0.11)

(0.02)

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

(0.26)

(1.36)

(0.54)

(0.09)

(0.70)

(1.90)

(0.30)

Shares used in computation, basic and diluted

1,966,651,063

2,066,687,393

2,079,698,573

2,079,698,573

1,931,702,933

2,073,192,979

2,073,192,979

ADSs used in computation, basic and diluted

109,258,392

114,815,966

115,538,809

115,538,809

107,316,829

115,177,387

115,177,387

 

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, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

(Amounts in thousands)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 Cost of revenues: 

 Business tax and surcharges 

20,241

27,842

41,830

6,584

32,633

69,672

10,967

 Bandwidth costs 

66,251

113,169

111,859

17,607

122,576

225,028

35,421

 Depreciation of servers and other equipment                                       

8,919

11,689

12,731

2,005

18,031

24,420

3,843

 Content costs 

49,534

140,036

144,043

22,673

85,676

284,079

44,716

 Total Cost of Revenues 

144,945

292,736

310,463

48,869

258,916

603,199

94,947

 

YOUKU INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

 For the Three Months Ended, 

 For the Six Months Ended 

(Amounts in thousands)

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net loss

(28,100)

(156,125)

(62,848)

(9,892)

(75,016)

(218,973)

(34,469)

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

Depreciation

10,358

14,001

14,742

2,320

20,883

28,743

4,524

Bad debt expense

(279)

658

1,669

263

453

2,327

366

Amortization of intangible assets and capitalized content production costs

35,390

91,183

77,338

12,173

61,913

168,521

26,527

Amortization of long-term debt discounts

923

616

535

84

1,940

1,151

181

Gain on disposal of  property and equipment

(7)

-

-

-

(7)

-

-

Foreign exchange loss

1,644

189

(374)

(59)

1,644

(185)

(29)

Share-based compensation

7,278

23,067

26,197

4,124

12,652

49,264

7,754

Capital gain from step  business combination 

-

(3,344)

-

-

-

(3,344)

(526)

Change in operating assets and liabilities:

        Accounts receivable

(86,113)

(2,048)

(232,847)

(36,652)

(62,852)

(234,895)

(36,974)

        Prepayments and other assets

(4,776)

11,165

19,167

3,017

(7,741)

30,332

4,775

        Capitalized content production costs (*)

(1,745)

(5,025)

(2,872)

(452)

(1,868)

(7,897)

(1,242)

        Accounts payable

(502)

13

(2,504)

(394)

(252)

(2,491)

(392)

        Advances from customers

(1,455)

28,986

(12,392)

(1,951)

(580)

16,594

2,612

        Accrued expenses and other liabilities

62,204

9,349

83,026

13,069

32,269

92,375

14,541

Net cash (used in) provided by  operating activities

(5,180)

12,685

(91,163)

(14,350)

(16,562)

(78,478)

(12,352)

Cash flows from investing activities:

Acquisition of property and equipment

(18,878)

(10,069)

(22,603)

(3,558)

(32,352)

(32,672)

(5,143)

Proceeds from short-term investments

-

253,673

1,145,908

180,373

-

1,399,581

220,302

Purchase of short-term investments

(1,164,888)

(254,474)

-

-

(1,229,947)

(254,474)

(40,056)

Proceeds from disposal of property and equipment

8

-

-

-

8

-

-

Cash paid for acquired subsidiaries, net of cash received

-

(25,778)

-

-

-

(25,778)

(4,058)

Acquisition of intangible assets

(144,156)

(50,420)

(51,625)

(8,126)

(185,834)

(102,045)

(16,062)

Net cash (used in) provided by investing activities

(1,327,914)

(87,068)

1,071,680

168,689

(1,448,125)

984,612

154,983

Cash flows from financing activities:

Exercise of employee stock options

1,025

5,844

8,483

1,335

1,025

14,327

2,255

Principal repayments on long-term debt

(7,406)

(1,987)

(2,956)

(465)

(16,772)

(4,943)

(778)

Proceeds from IPO and secondary offering, net of issuance costs

2,508,974

-

-

-

2,513,755

-

-

Net cash (used in) provided by financing activities

2,502,593

3,857

5,527

870

2,498,008

9,384

1,477

Effect of exchange rate changes on cash and cash equivalents

(22,802)

(2,477)

9,527

1,500

(38,182)

7,050

1,110

Net (decrease) increase in cash and cash equivalents

1,146,697

(73,003)

995,571

156,709

995,139

922,568

145,218

Cash and cash equivalents at the beginning of the period

1,659,865

2,292,538

2,219,535

349,368

1,811,423

2,292,538

360,859

Cash and cash equivalents at the end of the period

2,806,562

2,219,535

3,215,106

506,077

2,806,562

3,215,106

506,077

* The investments in TV drama production by Tianshi were expensed as incurred since they did not meet the requirements of capitalization according to Accounting Standard Codification Section 926. The investments in TV drama production were RMB6,360 and RMB7,008 in Q1 2012 and Q2 2012, respectively.

 

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

 1. Non-GAAP Gross Profit (Loss)

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

Gross profit (loss)

52,908

(22,569)

76,924

12,109

66,928

54,355

8,555

 Add back: share-based compensation  

701

1,999

2,615

412

1,133

4,614

726

Non-GAAP gross profit (loss)

53,609

(20,570)

79,539

12,521

68,061

58,969

9,281

 2. Non-GAAP Operating Expenses

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

Operating expenses

80,683

143,825

158,318

24,920

140,520

302,143

47,559

 Deduct: share-based compensation  

6,577

21,068

23,582

3,712

11,519

44,650

7,028

 Deduct: business combination related expenses                 

-

17,634

7,371

1,160

-

25,005

3,936

Non-GAAP operating expenses

74,106

105,123

127,365

20,048

129,001

232,488

36,595

 3. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

Sales and marketing expenses

52,732

66,406

80,255

12,633

89,401

146,661

23,085

 Deduct: share-based compensation  

3,045

4,911

5,935

934

5,709

10,846

1,707

Non-GAAP sales and marketing expenses

49,687

61,495

74,320

11,699

83,692

135,815

21,378

4. Non-GAAP Product Development Expenses

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

Product development expenses

14,192

28,833

35,046

5,516

24,786

63,879

10,055

 Deduct: share-based compensation  

1,737

5,070

6,458

1,017

2,827

11,528

1,815

Non-GAAP  product development expenses

12,455

23,763

28,588

4,499

21,959

52,351

8,240

5. Non-GAAP General and Administrative Expenses

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

General and administrative expenses

13,759

48,586

43,017

6,771

26,333

91,603

14,419

 Deduct: share-based compensation  

1,795

11,087

11,189

1,761

2,983

22,276

3,506

 Deduct: business combination related expenses 

-

17,634

7,371

1,160

-

25,005

3,936

Non-GAAP general and administrative expenses

11,964

19,865

24,457

3,850

23,350

44,322

6,977

 

 6. Non-GAAP  (Loss) Profit from Operations

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

(Loss) profit from operations

(27,775)

(166,394)

(81,394)

(12,811)

(73,592)

(247,788)

(39,004)

 Add back: share-based compensation  

7,278

23,067

26,197

4,124

12,652

49,264

7,754

 Add back: business combination related expenses    

-

17,634

7,371

1,160

-

25,005

3,936

Non-GAAP  (loss) profit from operations

(20,497)

(125,693)

(47,826)

(7,527)

(60,940)

(173,519)

(27,314)

7. Non-GAAP  Net (Loss) Profit

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net (loss) profit 

(28,100)

(156,125)

(62,848)

(9,892)

(75,016)

(218,973)

(34,469)

 Add back: share-based compensation  

7,278

23,067

26,197

4,124

12,652

49,264

7,754

 Add back: business combination related expenses 

-

17,634

7,371

1,160

-

25,005

3,936

 Non-GAAP net (loss) profit 

(20,822)

(115,424)

(29,280)

(4,608)

(62,364)

(144,704)

(22,779)

8.  Non-GAAP EBITDA (Loss) Profit

 For the Three Months Ended, 

For the Six Months Ended, 

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net (loss) profit 

(28,100)

(156,125)

(62,848)

(9,892)

(75,016)

(218,973)

(34,469)

 Add back: 

 Depreciation and amortization (excluding amortization 

       of acquired content )*** 

10,373

14,016

14,757

2,323

20,913

28,773

4,529

 Interest income 

(3,190)

(11,603)

(12,375)

(1,948)

(4,246)

(23,978)

(3,774)

 Interest expenses 

1,801

1,151

982

155

3,956

2,133

336

 Income taxes 

-

3,576

(2,391)

(376)

-

1,185

187

 EBITDA (Loss) Profit 

(19,116)

(148,985)

(61,875)

(9,738)

(54,393)

(210,860)

(33,191)

 Adjustments: 

 Share-based compensation  

7,278

23,067

26,197

4,124

12,652

49,264

7,754

 Business combination related expenses 

-

17,634

7,371

1,160

-

25,005

3,936

 Others, net 

1,714

(3,393)

(4,762)

(750)

1,714

(8,155)

(1,284)

Non-GAAP EBITDA (Loss) Profit

(10,124)

(111,677)

(33,069)

(5,204)

(40,027)

(144,746)

(22,785)

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

***   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 Inc.



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