Youku Tudou Announces First Quarter 2015 Unaudited Financial Results

BEIJING, May 20, 2015 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for the first quarter 2015.

First Quarter 2015 Highlights[1]

• Net revenues were RMB1.14 billion (US$183.8 million), a 47% increase from the corresponding period in 2014[2]. Non-GAAP[3] net revenues were RMB1.06 billion (US$170.4 million) in the first quarter of 2015, a 51% increase from the corresponding period in 2014.
• Gross profit was RMB1.5 million (US$0.2 million), as compared to RMB132.1 million (US$21.3 million) from the corresponding period in 2014. Non-GAAP gross loss was RMB32.9 million (US$5.3 million) in the first quarter of 2015, as compared to non-GAAP gross profit of RMB90.4 million (US$14.6 million) from the corresponding period in 2014.
• Net loss was RMB517.4 million (US$83.5 million), as compared to RMB176.0 million (US$28.4 million) from the corresponding period in 2014. Non-GAAP net loss was RMB481.8 million (US$77.7 million) in the first quarter of 2015, as compared to RMB157.1 million (US$25.3 million) from the corresponding period in 2014.
• Basic and diluted loss per ADS, each representing 18 Class A ordinary shares of the Company, for the first quarter of 2015 amounted to RMB2.67 (US$0.43) and RMB2.67 (US$0.43), respectively. Non-GAAP basic and diluted loss per ADS for the first quarter of 2015 amounted to RMB2.49 (US$0.40) and RMB2.49 (US$0.40), respectively.
• Cash, cash equivalents, restricted cash and short-term investments totaled RMB8.52 billion (US$1.37 billion) as of March 31, 2015.
• Acquisition of property and equipment for the first quarter of 2015 was RMB73.0 million (US$11.8 million).
• Acquisition of licensed copyright for the first quarter of 2015 was RMB495.2 million (US$79.9 million).

"The first quarter was marked by solid progress in the three key growth pillars that drive our business development for this year: accelerated topline growth, revenue diversification, and significant ramp up of web-native content. We believe this clear growth strategy will improve our business economics going forward," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "From a more strategic perspective we note that multi-screen video has converged with neighboring industries, notably the pan-entertainment and media sectors, making us a strategic property and partner and positioning us amidst a much bigger growth opportunity going forward."

Dele Liu, President of Youku Tudou, added, "We have aggressively stepped up our investments in content this year across all categories, especially in original content, PGC and UGC, to enhance our web-based content eco-system. Leveraging synergy among our various business units, we are working towards a more balanced and sustainable content mix in which proprietary web-native content will be the foremost category driving our revenue and traffic growth over time."

First Quarter 2015 Results

Net revenues were RMB1.14 billion (US$183.8 million) in the first quarter of 2015, a 47% increase from the corresponding period in 2014. Non-GAAP net revenues, which is herein defined as net revenues excluding barter sublicensing revenues, were RMB1.06 billion (US$170.4 million) in the first quarter of 2015, a 51% increase from the corresponding period in 2014, exceeded the high end of the non-GAAP net revenues guidance previously announced by the Company.

Advertising net revenues were RMB892.7 million (US$144.0 million) in the first quarter of 2015, a 43% increase from the corresponding period in 2014, exceeded the high end of 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.

Consumer revenues, which are mainly derived from our subscription-based service, mobile game joint operation and interactive live entertainment, were RMB120.8 million (US$19.5 million) in the first quarter of 2015, a 706% increase from the corresponding period in 2014. The growth was primarily attributable to the increasing user adoption of our consumer services as evidenced by expansion of subscriber base, growing paying users and average spend per user of our interactive live entertainment service, and increasing number of mobile game distributions.

Bandwidth costs as a component of cost of revenues were RMB306.8 million (US$49.5 million)in the first quarter of 2015, representing 29% of non-GAAP net revenues, as compared to 29% of non-GAAP net revenues for the corresponding period in 2014. This increase was primarily attributable to the increase in traffic and higher resolution quality of our video content.

Content costs as a component of cost of revenues were RMB669.0 million (US$107.9 million) in the first quarter of 2015, representing 59% of net revenues as compared to 46% of net revenues for the corresponding period in 2014. Non-GAAP content costs were RMB620.1 million (US$100.0 million) in the first quarter of 2015, representing 59% of non-GAAP net revenues, as compared to 46% of non-GAAP net revenues for the corresponding period in 2014. This increase was primarily due to expansion of our video content portfolio to support our new business growth initiatives.

Gross profit was RMB1.5 million (US$0.2 million)in the first quarter of 2015, as compared to RMB132.1 million (US$21.3 million) from the corresponding period in 2014. Non-GAAP gross loss was RMB32.9 million (US$5.3 million) in the first quarter of 2015, as compared to non-GAAP gross profit of RMB90.4 million (US$14.6 million) from the corresponding period in 2014.

Operating expenses were RMB544.1 million (US$87.8 million) in the first quarter of 2015, as compared to RMB312.0 million (US$50.3 million) for the corresponding period in 2014. Non-GAAP operating expenses were RMB474.0 million (US$76.5 million) in the first quarter of 2015, as compared to RMB251.3 million (US$40.5 million) for the corresponding period in 2014. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB320.4 million (US$51.7 million) in the first quarter of 2015, as compared to RMB185.7 million (US$30.0 million) for the corresponding period in 2014. Non-GAAP sales and marketing expenses were RMB286.7 million (US$46.3 million) in the first quarter of 2015, as compared to RMB163.2 million (US$26.3 million) for the corresponding period in 2014. 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 RMB139.6 million (US$22.5 million) in the first quarter of 2015, as compared to RMB80.1 million (US$12.9 million) for the corresponding period in 2014. Non-GAAP product development expenses were RMB120.0 million (US$19.4 million) in the first quarter of 2015, as compared to RMB62.0 million (US$10.0 million) for the corresponding period in 2014. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social, subscription and interactive live entertainment services.

General and administrative expenses were RMB84.1 million (US$13.6 million) in the first quarter of 2015, as compared to RMB46.1 million (US$7.4 million) from the corresponding period in 2014. Non-GAAP general and administrative expenses were RMB67.3 million (US$10.9 million) in the first quarter of 2015, as compared to RMB26.1 million (US$4.2 million) from the corresponding period in 2014. This increase was primarily due to increases in the personnel related expense and professional service fees.

Net loss was RMB517.4 million (US$83.5 million)in the first quarter of 2015, as compared to RMB176.0 million (US$28.4 million) for the corresponding period in 2014. Non-GAAP net loss was RMB481.8 million (US$77.7 million) in the first quarter of 2015, as compared to RMB157.1 million (US$25.3 million) from the corresponding period in 2014.

Business Outlook

For the second quarter of 2015, the Company expects non-GAAP net revenues will be between RMB1.47 billion and RMB1.52 billion, which with advertising net revenues contributing between RMB1.25 billion and RMB1.30 billion. 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 20, 2015 (9:00 a.m. Beijing/Hong Kong Time on May 21, 2015).

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.

A replay of the call will be available by dialing +61 2 8199 0299 and entering passcode 42452065. The replay will be available through May 28, 2015

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 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 net revenues, 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 and non-GAAP net profit or loss and non-GAAP adjusted EBITDA profit or loss. We define non-GAAP net revenues as net revenues excluding barter sublicensing revenues. We define non-GAAP content costs as content costs excluding amortization of licensed copyrights from nonmonetary content exchanges, 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 barter sublicensing revenues, amortization of licensed copyrights from nonmonetary content exchanges, 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 barter sublicensing revenues, amortization of licensed copyrights from nonmonetary content exchanges , 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 barter sublicensing revenues, amortization of licensed copyrights from nonmonetary content exchanges , share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define non-GAAP adjusted 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 barter sublicensing revenues, amortization of licensed copyrights from nonmonetary content exchanges, 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:

Chang You
Youku Tudou Inc.
Tel: (+8610) 5885-1881 x 8066
Email: [email protected]

SOURCE Youku Tudou Inc.