Youku Announces Second Quarter 2012 Unaudited Financial Results Net Revenues Increased by 96% Year-over-Year; Pending Merger with Tudou on Track

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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