Youku Tudou Announces First Quarter 2014 Unaudited Financial Results

BEIJING, May 22, 2014 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for first quarter 2014.

First Quarter 2014 Highlights[1]

• Net revenues were RMB700.4 million (US$112.7 million),a 36% increase from the corresponding period in 2013.
• Gross profit was RMB85.6 million (US$13.8 million), a 501% increase from the corresponding period in 2013. Non-GAAP[2] gross profit was RMB100.3 million (US$16.1 million) in the first quarter of 2014, an increase of 255% from the corresponding period in 2013.  
• Net loss was RMB224.7 million (US$36.1 million), a 3% decrease from the corresponding period in 2013. Non-GAAP net loss was RMB148.3 million (US$23.8 million) in the first quarter of 2014, a 19% decrease from the corresponding period in 2013.
• Basic and diluted loss per ADS, each representing 18 Class A ordinary shares of the Company, for the first quarter of 2014 amounted to RMB1.34 (US$0.22) and RMB1.34 (US$0.22), respectively. Non-GAAP basic and diluted loss per ADS for the first quarter of 2014 amounted to RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively.
• Cash, cash equivalents, restricted cash and short-term investments totaled RMB3.3 billion (US$525.4 million) as of March 31, 2014.
• Acquisition of property and equipment for the first quarter of 2014 was RMB28.2 million (US$4.5 million).
• Acquisition of intangible assets for the first quarter of 2014 was RMB165.9 million (US$26.7 million).

"Mobile has already become the #1 screen for Youku Tudou. We are the undisputed leader in all of the important mobile video traffic metrics with mobile daily video views reaching 400 million. Our continued investment in product and content development has enabled us to diversify our revenue mix, with mobile monetization surpassing 30% of total revenue to date," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Online video is a key growth area for the Internet industry and we plan on further transforming Youku Tudou's business model. The transformation requires us to make additional investment in the areas of multi-screen development, diversified revenue models and content ecosystem. The strategic investment from Alibaba will boost our balance sheet and enable us to accelerate our expansion in new business opportunities."

Dele Liu, President of Youku Tudou, added, "Our growing content ecosystem represents a tremendous opportunity for Youku Tudou. We will continue to build up our content portfolio by strengthening original, partner generated and user generated content. We will also continue to invest in human resources to improve our content creation capabilities and to build out our consumer businesses. We are well-positioned to realize the full potential of the online video ecosystem and more investment will see us become an immersive culture entertainment platform."

First Quarter 2014 Results

Net revenues were RMB700.4 million (US$112.7 million) in the first quarter of 2014, a 36% increase from the corresponding period in 2013 and meeting net revenues guidance previously announced by the Company. Advertising net revenues were RMB623.3 million (US$100.3 million), meeting the 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.

Bandwidth costs as a component of cost of revenues were RMB201.9 million (US$32.5 million)in the first quarter of 2014, representing 29% of net revenues, as compared to 31% of net revenues for the corresponding period in 2013.

Content costs as a component of cost of revenues were RMB325.7 million (US$52.4 million) in the first quarter of 2014, representing 46% of net revenues. Non-GAAP content costs were RMB310.9 million (US$50.0 million) in the first quarter of 2014, representing 44% of net revenues, as compared to 49% of net revenues for the corresponding period in 2013.

Gross profit was RMB85.6 million (US$13.8 million)in the first quarter of 2014, an increase of 501% from the corresponding period in 2013. Non-GAAP gross profit was RMB100.3 million (US$16.1 million) in the first quarter of 2014, an increase of 255% from the corresponding period in 2013 due to strong operating leverage.

Operating expenses were RMB314.1 million (US$50.5 million) in the first quarter of 2014, as compared to RMB267.8 million (US$43.1 million) for the corresponding period in 2013. Non-GAAP operating expenses were RMB252.3 million (US$40.6 million) in the first quarter of 2014, an increase of 9% from the corresponding period in 2013. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB186.5 million (US$30.0 million) in the first quarter of 2014, as compared to RMB127.6 million (US$20.5 million) for the corresponding period in 2013. Non-GAAP sales and marketing expenses were RMB163.5 million (US$26.3 million) in the first quarter of 2014, an increase of 42% from the corresponding period in 2013. This increase was due to higher commission expenses paid to our sales force in line with our revenue growth and marketing expenditures on our mobile products.

Product development expenses were RMB80.7 million (US$13.0 million) in the first quarter of 2014, as compared to RMB56.8 million (US$9.1 million) for the corresponding period in 2013. Non-GAAP product development expenses were RMB62.2 million (US$10.0 million) in the first quarter of 2014, an increase of 28% from the corresponding period in 2013. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social, paid and live broadcasting services.

General and administrative expenses were RMB46.8 million (US$7.5 million) in the first quarter of 2014, as compared to RMB83.4 million (US$13.4 million) for the corresponding period in 2013. Non-GAAP general and administrative expenses were RMB26.6 million (US$4.3 million) in the first quarter of 2014, a decrease of 61% from the corresponding period in 2013.

Net loss was RMB224.7 million (US$36.1 million)in the first quarter of 2014, a decrease of 3% compared to RMB232.5 million (US$37.4 million) for the corresponding period in 2013. Non-GAAP net loss was RMB148.3 million (US$23.8 million) in the first quarter of 2014, a decrease of 19% from the corresponding period in 2013.

Non-GAAP adjusted EBITDA Loss was RMB120.2 million (US$19.3 million) in the first quarter of 2014, a decrease of 32% from the corresponding period in 2013.

Business Outlook

For the second quarter of 2014, the Company expects net revenues will be between RMB940 million and RMB1 billion, with advertising net revenues contributing between RMB910 million and RMB950 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 May 22, 2014 (9:00 a.m. Beijing/Hong Kong Time on May 23, 2014).

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 Toll Free 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 +61 2 8199 0299 and entering passcode 47256659#. The replay will be available through May 30, 2014.

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 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 Tudou 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 Tudou 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 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:  non-GAAP content costs, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP sales and marketing expenses, non-GAAP product development expenses, non-GAAP general and administrative expenses, non-GAAP profit or loss from operations, non-GAAP net profit or loss and non-GAAP EBITDA profit or loss. We define non-GAAP content costs as content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content. We define 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 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 non-GAAP sales and marketing expenses as sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship. We define non-GAAP product development expense as product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology. We define non-GAAP general and administrative expenses as 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 non-GAAP profit or loss from operations as profit or loss from operations excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define non-GAAP net profit or loss as net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define non-GAAP EBITDA profit or loss as 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 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.

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 Senior Director
Youku Tudou Inc.
Tel: (+8610) 5885-1881 x6090
Email: [email protected]

SOURCE Youku Tudou Inc.