Youku Tudou Announces Fourth Quarter and Fiscal Year 2012 Unaudited Financial Results

First Full Quarter Merger Integration on Track; Net Loss Narrowing

Feb 28, 2013, 16:30 ET from Youku Tudou Inc.

BEIJING, Feb. 28, 2013 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU, and formerly Youku Inc. or "Youku"), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for fourth quarter and fiscal year 2012.

Basis of Presentation

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

This press release includes the Company's selected unaudited pro forma combined financial information for the three months ended December 31, 2011 derived from the accompanying unaudited pro forma condensed combined statements of operations (the "Pro Forma Statement of Operations") for the three months ended December 31, 2011. The Pro Forma Statements of Operations combine the historical consolidated statements of operations of Youku and Tudou, giving effect to the Merger as if it had been completed on January 1, 2011.

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

Additionally, based on Youku's review of Tudou's publicly disclosed summary of significant accounting policies prior to the merger with Tudou management, the nature and amount of any adjustments to the historical statement of operations to conform its accounting policies to those of Youku are not expected to be material.

Fourth Quarter 2012 Highlights[1]

  • Consolidated net revenues were RMB635.8 million (US$102.1 million),a 30% increase from the pro forma combined net revenues for the corresponding period in 2011.
  • Consolidated gross profit was RMB116.3 million (US$18.7 million), a 62% increase from the pro forma combined gross profit for the corresponding period in 2011. Consolidated or pro forma combined non-GAAP gross profit is herein defined as consolidated or pro forma combined gross profit excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content.  Consolidated non-GAAP gross profit was RMB129.1 million (US$20.7 million) in the fourth quarter of 2012, an increase of 74% from the pro forma combined non-GAAP gross profit for the corresponding period in 2011.  
  • Consolidated net loss was RMB113.6 million (US$18.2 million), a 43% decrease from the pro forma combined net loss for the corresponding period in 2011. Consolidated or pro forma combined non-GAAP net loss is herein defined as consolidated or pro forma combined net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses.  Consolidated non-GAAP net loss was RMB62.3 million (US$10.0 million) in the fourth quarter of 2012, a decrease of 64% from the pro forma combined non-GAAP net loss for the corresponding period in 2011.
  • Consolidated basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for the fourth quarter of 2012 amounted to RMB0.69 (US$0.11) and RMB0.69 (US$0.11), respectively.
  • Consolidated cash, cash equivalents, restricted cash and short-term investments totaled RMB3.8 billion (US$605.9 million) as of December 31, 2012.
  • Consolidated acquisition of property and equipment for the fourth quarter of 2012 was RMB24.4 million (US$3.9 million).
  • Consolidated acquisition of intangible assets for the fourth quarter of 2012 was RMB111.1 million (US$17.8 million).

Fiscal Year 2012 Highlights

  • Consolidated net revenues were RMB1.8 billion (US$288.2 million).
  • Consolidated gross profit was RMB296.0 million (US$47.5million). Consolidated non-GAAP gross profit was RMB335.3 million (US$53.8 million) in 2012.
  • Consolidated net loss was RMB424.0 million (US$68.1 million). Consolidated non-GAAP net loss was RMB244.7 million (US$39.3 million) in 2012.
  • Consolidated basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for 2012 amounted to RMB3.20 (US$0.51) and RMB3.20 (US$0.51), respectively.
  • Consolidated acquisition of property and equipment in 2012 was RMB90.2 million (US$14.5 million).
  • Consolidated acquisition of intangible assets in 2012 was RMB362.0 million (US$58.1 million).

[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 RMB6.2301 to US$1.00, the effective noon buying rate as of December 31, 2012 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

"I am pleased with our financial and operational performance in the fourth quarter, which was the first full quarter for the merged Youku-Tudou company. We managed solid revenue growth and the net loss for the combined company has narrowed materially despite sales disruption brought on by the reorganization of our sales team after the merger," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Even as the integration process is proceeding well, we expect temporary business impact from this large-scale merger but we are optimistic that the second half of 2013 will see more revenue growth momentum and cost synergies.  In 2013, we also plan to start monetizing the significant growth in our mobile traffic as our daily mobile video views exceeded 100 million by the end of 2012."

Dele Liu, President of Youku Tudou, commented, "In terms of cost structure, the fourth quarter results reflect early synergies resulting from the merger, especially in bandwidth and personnel related expenses. We expect this trend to continue into 2013, supported by the overall improvement of our unit economics due to the ongoing growth in traffic, especially the significant growth from mobile devices. In addition, we are strengthening our in-house productions offering to reduce our reliance on professional licensed content as well as generate additional revenues through program sponsorship and product placements." 

Fourth Quarter 2012 Results

Consolidated net revenues were RMB635.8 million (US$102.1 million) in the fourth quarter of 2012, a 30% increase from the pro forma combined net revenues for the corresponding period in 2011 and exceeding the high end of the consolidated net revenues guidance previously announced by the Company. Consolidated advertising net revenues were RMB574.9 million (US$92.3 million), meeting the consolidated advertising net revenues guidance previously announced by the Company. The growth was primarily attributable to the increased use by brand advertisers of our advertising services as evidenced by an increase in the number of advertisers and the rising average spend per advertiser.

Consolidated bandwidth costs as a component of consolidated cost of revenues were RMB163.0 million (US$26.2 million) in the fourth quarter of 2012, representing 26% of consolidated net revenues, as compared to pro forma combined bandwidth costs representing 37% of the pro forma combined net revenues for the corresponding period in 2011.

Consolidated content costs as a component of consolidated cost of revenues were RMB270.9 million (US$43.5 million) in the fourth quarter of 2012, representing 43% of consolidated net revenues. Consolidated non-GAAP content costs, which is herein defined as consolidated content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content, were RMB258.2 million (US$41.4 million) in the fourth quarter of 2012, representing 41% of consolidated net revenues. During the fourth quarter of 2012, there was a one-time reclassification of advertising production expenses amounted to RMB31.5 million (US$5.1 million) from consolidated sales and marketing expenses into consolidated content costs.

If excluding this one-time reclassification, consolidated non-GAAP content costs would have been 36% of consolidated net revenues, as compared to the pro forma combined non-GAAP content costs representing 35% of the pro forma combined net revenues for the corresponding period in 2011. The increase was primarily due to content price increase during 2011, which we amortize using an accelerated method, broadening of our content portfolio and increase in salaries and benefits for our content team. Consolidated in-house content production cost and investment in TV serial dramas production was RMB17.1 million (US$2.7 million) in the fourth quarter of 2012, as compared to RMB6.6 million (US$1.1 million) of the pro forma combined in-house content production cost for the corresponding period in 2011.

Consolidated gross profit was RMB116.3 million (US$18.7 million)in the fourth quarter of 2012, an increase of 62% compared to RMB71.9 million (US$11.5 million) of the pro forma combined gross profit for the corresponding period in 2011. Consolidated non-GAAP gross profit was RMB129.1 million (US$20.7 million) in the fourth quarter of 2012, an increase of 74% compared to RMB74.3 million (US$11.9 million) of the pro forma combined non-GAAP gross profit for the corresponding period in 2011 due to strong operating leverage.

If excluding the one-time reclassification of advertising production expenses from consolidated sales and marketing expenses into consolidated content costs, the consolidated non-GAAP gross profit would have been RMB160.6 million (US$25.8 million) in the fourth quarter of 2012, representing 25% of the consolidated net revenues, an increase of 116% as compared to pro forma combined non-GAAP gross profit which represented 15% of the pro forma combined net revenues for the corresponding period in 2011.

Consolidated operating expenses were RMB245.0 million (US$39.3 million) in the fourth quarter of 2012, a decrease of 10% as compared to RMB273.4 million (US$43.9 million) of the pro forma combined operating expenses for the corresponding period in 2011. Consolidated non-GAAP operating expenses, which is herein defined as consolidated operating expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to customer relationship, technology and non-compete provisions, were RMB206.4 million (US$33.1 million) in the fourth quarter of 2012, a decrease of 18% compared to RMB252.0 million (US$40.4 million) of the pro forma combined non-GAAP operating expenses for the corresponding period in 2011. The decrease was primarily due to the reduction of bad debt related expenses, reduction of traffic acquisition cost incurred by Tudou and the one-time reclassification of advertising production expenses from consolidated sales and marketing expenses to consolidated content costs. Detailed discussion of each component of consolidated operating expenses is as follows:

Consolidated sales and marketing expenses were RMB107.8 million (US$17.3 million) in the fourth quarter of 2012, a decrease of 29% compared to RMB151.4 million (US$24.3 million) of the pro forma combined sales and marketing expenses for the corresponding period in 2011. Consolidated non-GAAP sales and marketing expenses, which is herein defined as consolidated sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship, were RMB95.1 million (US$15.3 million) in the fourth quarter of 2012, a decrease of 35% compared to RMB146.2 million (US$23.5 million) of the pro forma combined non-GAAP sales and marketing expenses for the corresponding period in 2011. This decrease was primarily due to reduction of traffic acquisition cost incurred by Tudou and the one-time reclassification of advertising production expenses from consolidated sales and marketing expenses to consolidated content costs.

Consolidated product development expenses were RMB64.1 million (US$10.3 million) in the fourth quarter of 2012, as compared to RMB44.6 million (US$7.2 million) of the pro forma combined product development expenses for the corresponding period in 2011. Consolidated non-GAAP product development expenses, which is herein defined as consolidated product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology, were RMB54.3 million (US$8.7 million) in the fourth quarter of 2012, an increase of 39% compared to RMB39.0 million (US$6.3 million) of the pro forma combined non-GAAP product development expenses for the corresponding period in 2011. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social and paid-services.

Consolidated general and administrative expenses were RMB73.1 million (US$11.7 million) in the fourth quarter of 2012, a decrease of 6% compared to RMB77.4 million (US$12.4 million) of the pro forma combined general and administrative expenses for the corresponding period in 2011. Consolidated non-GAAP general and administrative expenses, which is herein defined as consolidated general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to non-compete provisions, were RMB57.0 million (US$9.2 million) in the fourth quarter of 2012, a decrease of 15% compared to RMB66.8 million (US$10.7 million) of the pro forma combined non-GAAP general and administrative expenses for the corresponding period in 2011. This decrease was primarily due to reduction of bad debt related expenses.

Consolidated net loss was RMB113.6 million (US$18.2 million) in the fourth quarter of 2012, a decrease of 43% compared to RMB198.5 million (US$31.9 million) of the pro forma combined net loss for the corresponding period in 2011. Consolidated non-GAAP net loss was RMB62.3 million (US$10.0 million) in the fourth quarter of 2012, a decrease of 64% compared to RMB174.6 million (US$28.0 million) of the pro forma combined non-GAAP net loss for the corresponding period in 2011.

Consolidated non-GAAP adjusted EBITDA Loss, which is herein defined as consolidated or pro forma combined net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, amortization of intangible assets from business combination, business combination related expenses and other non-operating items, was RMB46.1 million (US$7.4 million) in the fourth quarter of 2012, a decrease of 70% compared to RMB155.7 million (US$25.0 million) of the pro forma combined non-GAAP adjusted EBITDA loss for the corresponding period in 2011.

Fiscal Year 2012 Results

Consolidated net revenues were RMB1.8 billion (US$288.2 million) in 2012.

Consolidated bandwidth costs as a component of consolidated cost of revenues were RMB524.6 million (US$84.2 million) in 2012, representing 29% of consolidated net revenues.

Consolidated content costs as a component of consolidated cost of revenues were RMB737.1 million (US$118.3 million) in 2012, representing 41% of consolidated net revenues. If excluding the one-time reclassification of advertising production expenses amounted to RMB31.5 million (US$5.1 million) from consolidated sales and marketing expenses into consolidated content costs during the fourth quarter of 2012, consolidated content costs would have been 39% of consolidated net revenues in 2012.

Consolidated gross profit was RMB296.0 million (US$47.5 million). Consolidated non-GAAP gross profit was RMB335.3 million (US$53.8 million) in 2012.

Consolidated operating expenses were RMB774.7 million (US$124.3 million) in 2012. Consolidated non-GAAP operating expenses were RMB634.6 million (US$101.9 million) in 2012. Detailed discussion of each component of consolidated operating expenses is as follows:

Consolidated sales and marketing expenses were RMB363.7 million (US$58.4 million) in 2012. Consolidated non-GAAP sales and marketing expenses were RMB332.0 million (US$53.3 million) in 2012.

Consolidated product development expenses were RMB172.9 million (US$27.8 million) in 2012. Consolidated non-GAAP product development expenses were RMB144.8 million (US$23.2 million) in 2012.

Consolidated general and administrative expenses were RMB238.1 million (US$38.2 million) in 2012. Consolidated non-GAAP general and administrative expenses were RMB157.8 million (US$25.3 million) in 2012.

Consolidated net loss was RMB424.0 million (US$68.1 million) in 2012. Consolidated non-GAAP net loss was RMB244.7 million (US$39.3 million) in 2012.

Consolidated non-GAAP adjusted EBITDA loss was RMB217.7 million (US$34.9 million) in 2012.

Business Outlook

For the first quarter of 2013, the Company expects consolidated net revenues will be between RMB480 million and RMB520 million, with consolidated advertising net revenues contributing between RMB420 million and RMB450 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 8:00 p.m. U.S. Eastern Time on February 28, 2013 (9:00 a.m. Beijing/Hong Kong Time on March 1, 2013).

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

US Toll Free Dial In: 1-866-519-4004 International Dial In: 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 +61 2 8199 0299 and entering passcode 14050024#. The replay will be available through March 8, 2013.

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

About Youku Tudou Inc.

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

We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in Youku Tudou's business for the foreseeable future. In addition, in this press release we also included unaudited pro forma combined non-GAAP measures for the three months ended December 31, 2011, after giving effect to the Merger between Youku and Tudou as if the Merger had been completed on January 1, 2011 to provide comparative reference of the corresponding consolidated non-GAAP measures of the Company for the three months ended December 31, 2012. The pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations, or of the results that would have occurred had the Merger taken place at the beginning of 2011.

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

For more information, please contact:

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

Caroline Straathof IR Inside Tel: +31-6-5462-4301 Email: info@irinside.com  

 

 YOUKU TUDOU INC. 

 CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except for number of shares)

December 31,

2011

2012

RMB

RMB

US$

ASSETS

(Unaudited)

(Unaudited)

Current assets:

 Cash and cash equivalents 

2,292,538

1,655,857

265,783

 Restricted cash 

-

9,003

1,445

 Short-term investments 

1,400,858

2,110,073

338,690

 Accounts receivable, net 

420,706

932,796

149,724

 Intangible assets, net 

16,078

19,607

3,147

 Amounts due from related party 

768

-

-

 Prepayments and other assets 

16,832

75,379

12,099

Total current assets

4,147,780

4,802,715

770,888

Non-current assets:

 Property and equipment, net 

96,567

200,681

32,212

 Long-term investment in related party 

1,707

-

-

 Intangible assets, net 

211,978

1,304,923

209,455

 Capitalized content production costs 

7,782

-

-

 Amounts due from related party 

65,352

-

-

 Prepayments and other assets 

144,392

229,185

36,787

 Goodwill 

-

4,255,570

683,066

 Total non-current assets 

527,778

5,990,359

961,520

TOTAL ASSETS

4,675,558

10,793,074

1,732,408

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable 

57,276

181,878

29,193

 Advances from customers and deferred revenue 

3,140

21,603

3,468

 Amounts due to related party 

2,794

-

-

 Accrued expenses and other liabilities 

390,607

981,353

157,518

 Current portion of long-term debt 

9,182

7,441

1,194

Total current liabilities

462,999

1,192,275

191,373

Non-current liabilities

 Deferred tax liability 

-

224,374

36,015

 Other liabilities 

-

19,552

3,138

 Long-term debt 

7,382

-

-

Total non-current liabilities

7,382

243,926

39,153

Total liabilities

470,381

1,436,201

230,526

Commitments and contingencies

Shareholders' equity

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 1,395,435,339 and 2,291,138,514  issued and outstanding as of December 31, 2011 and 2012, respectively)

93

149

24

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  2012, respectively)

49

49

8

 Additional paid-in capital 

5,185,257

10,768,204

1,728,416

 Accumulated deficit                                                                                 

(871,644)

(1,295,647)

(207,966)

 Accumulated other comprehensive loss 

(108,578)

(115,882)

(18,600)

Total shareholders' equity

4,205,177

9,356,873

1,501,882

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

4,675,558

10,793,074

1,732,408

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF OPERATIONS  

 For the Three Months Ended 

For the Twelve Months Ended

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

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

489,347

502,190

635,831

102,058

1,795,575

288,210

Cost of revenues (Note 1)

(417,427)

(376,793)

(519,544)

(83,393)

(1,499,536)

(240,692)

Gross profit

71,920

125,397

116,287

18,665

296,039

47,518

Operating expenses:

       Product development

(44,625)

(44,907)

(64,099)

(10,289)

(172,885)

(27,750)

       Sales and marketing

(151,351)

(109,259)

(107,787)

(17,301)

(363,707)

(58,378)

       General and administrative

(77,418)

(73,425)

(73,084)

(11,731)

(238,112)

(38,220)

Total operating expenses

(273,394)

(227,591)

(244,970)

(39,321)

(774,704)

(124,348)

Loss from operations

(201,474)

(102,194)

(128,683)

(20,656)

(478,665)

(76,830)

Interest income

10,993

11,512

9,988

1,603

45,478

7,299

Interest expenses

(2,787)

(1,026)

(830)

(133)

(3,989)

(640)

Other, net

(5,203)

559

1,043

167

9,757

1,566

Total other income, net

3,003

11,045

10,201

1,637

51,246

8,225

Loss before income taxes

(198,471)

(91,149)

(118,482)

(19,019)

(427,419)

(68,605)

Income taxes

-

(311)

4,912

788

3,416

548

Net loss

(198,471)

(91,460)

(113,570)

(18,231)

(424,003)

(68,057)

Net loss per share, basic and diluted

(0.07)

(0.04)

(0.04)

(0.01)

(0.18)

(0.03)

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

(1.23)

(0.67)

(0.69)

(0.11)

(3.20)

(0.51)

Shares used in computation, basic and diluted

2,892,903,144

2,454,198,684

2,944,902,156

2,944,902,156

2,388,083,058

2,388,083,058

ADSs used in computation, basic and diluted

160,716,841

136,344,371

163,605,675

163,605,675

132,671,281

132,671,281

 

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

Note 1. Cost of Revenues                                

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

(Amounts in thousands)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 Cost of revenues: 

 Value added, business taxes and surcharges 

45,711

40,274

59,337

9,524

169,283

27,172

 Bandwidth costs 

180,083

136,636

162,959

26,157

524,623

84,208

 Depreciation of servers and other equipment 

18,395

17,846

26,303

4,222

68,569

11,006

 Content costs 

173,238

182,037

270,945

43,490

737,061

118,306

 Total Cost of Revenues 

417,427

376,793

519,544

83,393

1,499,536

240,692

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 For the Three Months Ended 

For the Twelve Months Ended

(Amounts in thousands)                                                                                                                    

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

 RMB 

 US$ 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 (Unaudited) 

 (Unaudited) 

Cash flows from operating activities:

Net loss

(49,614)

(91,460)

(113,570)

(18,231)

(424,003)

(68,057)

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

Depreciation

13,230

21,617

31,249

5,016

81,609

13,099

Bad debt expense

(10)

9,388

(1,828)

(293)

9,887

1,587

Amortization of intangible assets and capitalized content production costs

61,552

112,367

135,508

21,751

416,396

66,836

Amortization of long-term debt discounts

717

441

336

54

1,928

309

Gain on disposal of  property and equipment

(11)

52

-

-

52

8

Foreign exchange loss

2,009

(172)

826

133

469

75

Share-based compensation

15,547

30,175

38,779

6,224

118,218

18,975

Capital gain from step  business combination 

-

-

-

-

(3,344)

(537)

Change in deferred tax expenses

-

(2,278)

(7,675)

(1,232)

(9,953)

(1,598)

Write-off of prepayment

-

-

8,510

1,366

8,510

1,366

Change in operating assets and liabilities:

        Accounts receivable

(9,809)

(62,026)

73,149

11,741

(223,772)

(35,918)

        Amounts due from related party

1,232

-

-

-

-

-

        Prepayments and other assets

(1,223)

12,277

(20,831)

(3,344)

21,779

3,496

        Capitalized content production costs

(4,163)

(7,755)

5,761

925

(9,891)

(1,588)

        Accounts payable

-

(14,026)

(22,506)

(3,612)

(39,023)

(6,264)

        Advances from customers

(2,028)

(13,026)

(23,022)

(3,695)

(19,454)

(3,123)

        Accrued expenses and other liabilities

54,122

61,651

53,987

8,665

208,012

33,392

Net cash (used in) provided by  operating activities

81,551

57,225

158,673

25,468

137,420

22,058

Cash flows from investing activities:

Acquisition of property and equipment

(40,706)

(33,168)

(24,364)

(3,911)

(90,204)

(14,479)

Proceeds from short-term investments

1,134,162

255,923

1,170,519

187,881

2,826,023

453,608

Purchase of short-term investments

(1,133,901)

(1,168,773)

(2,113,464)

(339,234)

(3,536,711)

(567,681)

Proceeds from disposal of property and equipment

16

8

1

-

9

1

Cash acquired, net of cash paid for acquired subsidiaries

-

404,444

-

-

378,666

60,780

Acquisition of intangible assets from related party

(114,511)

(7,200)

7,200

1,156

-

-

Acquisition of intangible assets

(538)

(141,675)

(118,256)

(18,981)

(361,976)

(58,101)

Net cash (used in) provided by investing activities

(155,478)

(690,441)

(1,078,364)

(173,089)

(784,193)

(125,872)

Cash flows from financing activities:

Exercise of employee stock options

1,232

4,597

3,561

572

22,485

3,609

Proceeds from issuance of Series F Preferred Shares

-

-

-

-

Proceeds from restricted cash

-

12,705

25,364

4,071

38,069

6,110

Principal repayments on long-term debt

(4,741)

(14,061)

(23,685)

(3,802)

(42,689)

(6,852)

Debt commitment fee (paid) received

-

-

-

-

Proceeds from IPO and secondary offering, net of issuance costs

(247)

-

-

-

-

-

Net cash (used in) provided by financing activities

(3,756)

3,241

5,240

841

17,865

2,867

Effect of exchange rate changes on cash and cash equivalents

(17,626)

6,651

(21,474)

(3,447)

(7,773)

(1,248)

Net (decrease) increase in cash and cash equivalents

(95,309)

(623,324)

(935,925)

(150,227)

(636,681)

(102,195)

Cash and cash equivalents at the beginning of the period

2,387,847

3,215,106

2,591,782

416,010

2,292,538

367,978

Cash and cash equivalents at the end of the period

2,292,538

2,591,782

1,655,857

265,783

1,655,857

265,783

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

 1. Non-GAAP Content Cost

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

Content cost                                                                                         

173,238

182,037

270,945

43,490

737,061

118,306

 Deduct: share-based compensation  

2,412

3,602

4,536

728

12,751

2,047

 Deduct: amortization of intangible assets from business combination 

-

18,237

8,235

1,322

26,472

4,249

Non-GAAP content cost

170,826

160,198

258,174

41,440

697,838

112,010

2. Non-GAAP Gross Profit

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

Gross profit

71,920

125,397

116,287

18,665

296,039

47,518

 Add back: share-based compensation  

2,412

3,602

4,536

728

12,751

2,047

 Add back: amortization of intangible assets from business combination 

-

18,237

8,235

1,322

26,472

4,249

Non-GAAP gross profit

74,332

147,236

129,058

20,715

335,262

53,814

 3. Non-GAAP Operating Expenses

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

Operating expenses

273,394

227,591

244,970

39,321

774,704

124,348

 Deduct: share-based compensation  

21,424

26,573

34,243

5,496

105,467

16,928

 Deduct: business combination related expenses 

-

3,622

127

20

28,754

4,615

 Deduct: amortization of intangible assets from business combination 

-

1,709

4,176

670

5,885

945

Non-GAAP  operating expenses

251,970

195,687

206,424

33,135

634,598

101,860

4. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

Sales and marketing expenses

151,351

109,259

107,787

17,301

363,707

58,378

 Deduct: share-based compensation  

5,171

7,289

10,606

1,702

28,741

4,613

 Deduct: amortization of intangible assets from business combination 

-

854

2,087

335

2,941

473

Non-GAAP  sales and marketing expenses

146,180

101,116

95,094

15,264

332,025

53,292

5. Non-GAAP Product Development Expenses

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

Product development expenses

44,625

44,907

64,099

10,289

172,885

27,750

 Deduct: share-based compensation  

5,673

6,221

8,408

1,350

26,157

4,198

 Deduct: amortization of intangible assets from business combination 

-

574

1,402

225

1,976

317

Non-GAAP  product development expenses

38,952

38,112

54,289

8,714

144,752

23,235

6. Non-GAAP General and Administrative Expenses

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

General and administrative expenses

77,418

73,425

73,084

11,731

238,112

38,220

 Deduct: share-based compensation  

10,580

13,063

15,229

2,444

50,569

8,117

 Deduct: business combination related expenses 

-

3,622

127

20

28,754

4,615

 Deduct: amortization of intangible assets from business combination 

-

281

687

110

968

155

Non-GAAP  general and administrative expenses

66,838

56,459

57,041

9,157

157,821

25,333

7. Non-GAAP Loss from Operations

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

Loss from operations

(201,474)

(102,194)

(128,683)

(20,656)

(478,665)

(76,830)

 Add back: share-based compensation  

23,836

30,175

38,779

6,224

118,218

18,975

 Add back: business combination related expenses 

-

3,622

127

20

28,754

4,615

 Add back: amortization of intangible assets from business combination 

-

19,946

12,411

1,992

32,357

5,194

Non-GAAP  loss from operations

(177,638)

(48,451)

(77,366)

(12,420)

(299,336)

(48,046)

8. Non-GAAP  Net Loss 

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

 Net loss 

(198,471)

(91,460)

(113,570)

(18,231)

(424,003)

(68,057)

 Add back: share-based compensation  

23,836

30,175

38,779

6,224

118,218

18,975

 Add back: business combination related expenses 

-

3,622

127

20

28,754

4,615

 Add back: amortization of intangible assets from business combination 

-

19,946

12,411

1,992

32,357

5,194

 Add back: investment loss 

-

-

-

-

-

 Non-GAAP net loss 

(174,635)

(37,717)

(62,253)

(9,995)

(244,674)

(39,273)

9.  Non-GAAP EBITDA Loss

 For the Three Months Ended 

For the Twelve Months Ended

Pro Forma

December 31, 2011

September 30, 2012

December 31, 2012

December 31, 2012

December 31, 2012

December 31, 2012

RMB

RMB

RMB

US$

RMB

US$

 Net loss 

(198,471)

(91,460)

(113,570)

(18,231)

(424,003)

(68,057)

 Add back: 

 Depreciation and amortization (excluding amortization 

      of acquired content ) (2)

21,969

21,631

31,263

5,018

81,667

13,108

 Interest income 

(10,993)

(11,512)

(9,988)

(1,603)

(45,478)

(7,299)

 Interest expenses 

2,787

1,026

830

133

3,989

640

 Change in fair value of warrant liability 

 Income taxes 

-

311

(4,912)

(788)

(3,416)

(548)

 EBITDA loss 

(184,708)

(80,004)

(96,377)

(15,471)

(387,241)

(62,156)

 Adjustments: 

 Share-based compensation  

23,836

30,175

38,779

6,224

118,218

18,975

 Business combination related expenses 

-

3,622

127

20

28,754

4,615

 Amortization of intangible assets from business combination 

-

19,946

12,411

1,992

32,357

5,194

 Investment loss 

-

-

-

-

-

 Others, net 

5,203

(559)

(1,043)

(167)

(9,757)

(1,566)

Non-GAAP EBITDA loss

(155,669)

(26,820)

(46,103)

(7,402)

(217,669)

(34,938)

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

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

 

SOURCE Youku Tudou Inc.