Youku Tudou Announces Fourth Quarter and Fiscal Year 2013 Unaudited Financial Results Achieved Quarterly Non-GAAP Profitability; Mobile Monetization Reached 10%

BEIJING, Feb. 27, 2014 /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 2013.

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. Based on Youku's review with Tudou management of Tudou's publicly disclosed summary of significant accounting policies prior to the merger, certain adjustments to the historical statement of operations have been made to conform its accounting policies to those of Youku's. Due to the fact that Tudou's historical statements of operations for certain period of 2012 consist of stand-alone historical financial information without these adjustments, we do not believe that comparison of the Company's fiscal year 2013 financial results with that of the fiscal year 2012 can be provided on a consistent basis.

Fourth Quarter 2013 Highlights[1]

  • Net revenues were RMB901.3 million (US$148.9 million),a 42% increase from the corresponding period in 2012.
  • Gross profit was RMB254.3 million (US$42.0 million), a 119% increase from the corresponding period in 2012. Non-GAAP gross profit is herein defined as gross profit excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content.  Non-GAAP gross profit was RMB268.3 million (US$44.3 million) in the fourth quarter of 2013, an increase of 108% from the corresponding period in 2012.  
  • Net loss was RMB24.6 million (US$4.1 million), a 78% decrease from the corresponding period in 2012. Non-GAAP net profit or loss is herein defined as net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. Non-GAAP net profit was RMB44.2 million (US$7.3 million) in the fourth quarter of 2013, as compared to a non-GAAP net loss of RMB62.3 million (US$10.3 million) for the corresponding period in 2012.
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for the fourth quarter of 2013 amounted to RMB0.15 (US$0.02) and RMB0.15 (US$0.02), respectively.
  • Cash, cash equivalents, restricted cash and short-term investments totaled RMB3.2 billion (US$524.7 million) as of December 31, 2013.
  • Acquisition of property and equipment for the fourth quarter of 2013 was RMB15.0 million (US$2.5 million).
  • Acquisition of intangible assets for the fourth quarter of 2013 was RMB227.5 million (US$37.6 million).

Fiscal Year 2013 Highlights

  • Net revenues were RMB3.0 billion (US$500.3 million).
  • Gross profit was RMB541.1 million (US$89.4 million). Non-GAAP gross profit was RMB601.3 million (US$99.3 million).
  • Net loss was RMB580.7 million (US$95.9 million). Non-GAAP net loss was RMB342.1million (US$56.5million).
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for 2013 amounted to RMB3.50 (US$0.58) and RMB3.50 (US$0.58), respectively.
  • Acquisition of property and equipment in 2013 was RMB144.1 million (US$23.8 million).
  • Acquisition of intangible assets in 2013 was RMB740.6 million (US$122.3 million).

"The strong operational and financial performance recorded in the fourth quarter enabled Youku Tudou to achieve profitability on a combined basis for the first time in the company's history. This milestone was achieved on the back of scale economics, strong operating leverage and solid execution," stated Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "With dynamic rise in mobile traffic throughout 2013, our existing comprehensive content library and the two most recognized online video brands set Youku Tudou apart as China's no. 1 multi-screen video company."  

Dele Liu, President of Youku Tudou, added, "As viewing content from multiple Internet-enabled devices increasingly becomes a social phenomenon in China, a diverse and comprehensive content mix is critical to elevating our media value and further expanding our leadership across China. We believe our most comprehensive content offering provides enlightening entertainment to hundreds of millions of users in China."

Fourth Quarter 2013 Results

Net revenues were RMB901.3 million (US$148.9 million) in the fourth quarter of 2013, a 42% increase from the corresponding period in 2012 and exceeding the high end of the net revenues guidance previously announced by the Company. Advertising net revenues were RMB801.0 million (US$132.3 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 the rising average spend per advertiser.

Bandwidth costs as a component of cost of revenues were RMB178.8 million (US$29.5 million)in the fourth quarter of 2013, representing 20% of net revenues, as compared to 26% of net revenues for the corresponding period in 2012.

Content costs as a component of cost of revenues were RMB353.7 million (US$58.4 million) in the fourth quarter of 2013, representing 39% of net revenues. Non-GAAP content costs, which is herein defined as content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content, were RMB339.7million (US$56.1 million) in the fourth quarter of 2013, representing 38% of net revenues, as compared to 41% of net revenues for the corresponding period in 2012.

Gross profit was RMB254.3 million (US$42.0 million)in the fourth quarter of 2013, an increase of 119% from the corresponding period in 2012. Non-GAAP gross profit was RMB268.3 million (US$44.3 million) in the fourth quarter of 2013, an increase of 108% from the corresponding period in 2012 due to strong operating leverage.

Operating expenses were RMB333.4 million (US$55.1 million) in the fourth quarter of 2013, as compared to RMB245.0 million (US$40.5 million) of the corresponding period in 2012. Non-GAAP operating expenses, which is herein defined 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, were RMB278.5 million (US$46.0 million) in the fourth quarter of 2013, an increase of 35% from the corresponding period in 2012. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB216.4 million (US$35.8 million) in the fourth quarter of 2013, as compared to RMB107.8 million (US$17.8 million) of the corresponding period in 2012. Non-GAAP sales and marketing expenses, which is herein defined as sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship, were RMB195.8 million (US$32.3 million) in the fourth quarter of 2013, an increase of 106% from the corresponding period in 2012. This increase was primarily due to year-end advertising related promotion expenses and marketing expenditures on our mobile products.

Product development expenses were RMB76.5 million (US$12.6 million) in the fourth quarter of 2013, as compared to RMB64.1 million (US$10.6 million) for the corresponding period in 2012. Non-GAAP product development expenses, which is herein defined as product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology, were RMB61.3 million (US$10.1 million) in the fourth quarter of 2013, an increase of 13% from the corresponding period in 2012. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social and paid-services.

General and administrative expenses were RMB40.4 million (US$6.7 million) in the fourth quarter of 2013, as compared to RMB73.1 million (US$12.1 million) for the corresponding period in 2012. Non-GAAP general and administrative expenses, which is herein defined 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, were RMB21.4 million (US$3.5 million) in the fourth quarter of 2013, a decrease of 62% from the corresponding period in 2012.

Net loss was RMB24.6 million (US$4.1 million)in the fourth quarter of 2013, a decrease of 78% compared to RMB113.6 million (US$18.8 million) for the corresponding period in 2012. Non-GAAP net profit was RMB44.2 million (US$7.3 million) in the fourth quarter of 2013, as compared to a non-GAAP net loss of RMB62.3 million (US$10.3 million) for the corresponding period in 2012.

Non-GAAP adjusted EBITDA Profit, 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, amortization of intangible assets from business combination related expenses and other non-operating items, was RMB36.8 million (US$6.1 million) in the fourth quarter of 2013, as compared to a non-GAAP adjusted EBITDA loss of RMB46.1 million (US$7.6 million) for the corresponding period in 2012.

Fiscal Year 2013 Results

Net revenues were RMB3.0 billion (US$500.3 million).

Bandwidth costs as a component of cost of revenues were RMB685.7 million (US$113.3 million), representing 23% of net revenues.

Content costs as a component of cost of revenues were RMB1.4 billion (US$235.0 million), representing 47% of net revenues.

Gross profit was RMB541.1 million (US$89.4 million). Non-GAAP gross profit was RMB601.3 million (US$99.3 million).

Operating expenses were RMB1.2 billion (US$201.7 million). Non-GAAP operating expenses were RMB1.0 billion (US$172.2 million). Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB681.0 million (US$112.5 million). Non-GAAP sales and marketing expenses were RMB619.0 million (US$102.3 million).

Product development expenses were RMB278.0 million (US$45.9 million). Non-GAAP product development expenses were RMB232.0 million (US$38.3 million).

General and administrative expenses were RMB261.8 million (US$43.2 million). Non-GAAP general and administrative expenses were RMB191.5 million (US$31.6 million).

Net loss was RMB580.7 million (US$95.9 million). Non-GAAP net loss was RMB342.1 million (US$56.5 million).

Non-GAAP adjusted EBITDA loss was RMB309.5 million (US$51.1 million).

Business Outlook

For the first quarter of 2014, the Companyexpects net revenues will be between RMB680 million and RMB720 million, with advertising net revenues contributing between RMB600 million and RMB640 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 27, 2014 (9:00 a.m. Beijing/Hong Kong Time on February 28, 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: 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 1592223#. The replay will be available through March 8, 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 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 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 Director
Youku Tudou Inc.
Tel: (+8610) 5885-1881 x6090
Email: ryan.cheung@youku.com


[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
RMB6.0537 to US$1.00, the effective noon buying rate as of December 31, 2013 in the City of New York for cable transfers of
RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at such rate.

 









YOUKU TUDOU INC.








CONSOLIDATED BALANCE SHEETS

















(Amounts in thousands, except for number of shares)



As of December 31,



2012


2013


2013





RMB


RMB


US$

ASSETS





(Unaudited)


(Unaudited)










Current assets:









Cash and cash equivalents



1,655,857


1,764,221


291,429


Restricted cash



9,003


2,679


443


Short-term investments



2,110,073


1,409,439


232,823


Accounts receivable, net



932,796


1,370,031


226,313


Intangible assets, net



19,607


51,942


8,580


Deferred tax assets



10,470


7,843


1,296


Prepayments and other assets



64,909


82,300


13,595

Total current assets



4,802,715


4,688,455


774,479










Non-current assets:









Property and equipment, net



200,681


222,229


36,710


Intangible assets, net



1,304,923


1,197,671


197,841


Capitalized content production costs



-


1,176


194


Prepayments and other assets



229,185


197,856


32,683


Goodwill



4,255,570


4,262,569


704,126

Total non-current assets



5,990,359


5,881,501


971,554










TOTAL ASSETS



10,793,074


10,569,956


1,746,033










LIABILITIES AND SHAREHOLDERS' EQUITY

















Current liabilities:









Accounts payable



181,878


213,825


35,321


Advances from customers



21,603


25,081


4,143


Accrued expenses and other liabilities



981,353


1,124,342


185,729


Current portion of long-term debt



7,441


-


-

Total current liabilities



1,192,275


1,363,248


225,193










Non-current liabilities:









Deferred tax liability



224,374


219,519


36,262


Other liabilities



19,552


4,070


672

Total non-current liabilities



243,926


223,589


36,934










Total liabilities



1,436,201


1,586,837


262,127










Commitments and contingencies

















Shareholders' equity:









Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793

authorized, 2,286,643,502 and 2,356,529,401 issued and outstanding

as of December 31, 2012 and 2013, respectively)



149


154


25


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, 2012 and 2013, respectively)



49


49


8


Additional paid-in capital



10,768,204


11,058,360


1,826,711


Statutory reserves



1,500


2,063


341


Accumulated deficit



(1,297,147)


(1,878,454)


(310,298)


Accumulated other comprehensive loss



(115,882)


(199,053)


(32,881)

Total shareholders' equity



9,356,873


8,983,119


1,483,906










TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY



10,793,074


10,569,956


1,746,033

 

















 YOUKU TUDOU INC. 
















 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 


































 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)












December 31, 2012


September 30, 2013


 

December 31, 2013


 

December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)




(Unaudited)


(Unaudited)

















Net revenues



635,831


857,743


901,287


148,882


1,795,575


3,028,484


500,271

















Cost of revenues (Note 1)



(519,544)


(775,436)


(646,938)


(106,867)


(1,499,536)


(2,487,421)


(410,893)

















Gross profit



116,287


82,307


254,349


42,015


296,039


541,063


89,378

















Operating expenses:
















       Product development



(64,099)


(78,622)


(76,514)


(12,639)


(172,885)


(278,015)


(45,925)

       Sales and marketing



(107,787)


(171,763)


(216,444)


(35,754)


(363,707)


(681,008)


(112,494)

       General and administrative



(73,084)


(62,458)


(40,393)


(6,672)


(238,112)


(261,770)


(43,241)

Total operating expenses



(244,970)


(312,843)


(333,351)


(55,065)


(774,704)


(1,220,793)


(201,660)

















Loss from operations



(128,683)


(230,536)


(79,002)


(13,050)


(478,665)


(679,730)


(112,282)

















Interest income



9,988


7,284


8,419


1,391


45,478


29,972


4,950

Interest expenses



(830)


-


-


-


(3,989)


(545)


(90)

Other, net



1,043


4,694


46,878


7,744


9,757


70,573


11,658

Total other income, net



10,201


11,978


55,297


9,135


51,246


100,000


16,518

















Loss before income taxes



(118,482)


(218,558)


(23,705)


(3,915)


(427,419)


(579,730)


(95,764)

Income taxes



4,912


(80)


(876)


(145)


3,416


(1,014)


(168)

















Net loss



(113,570)


(218,638)


(24,581)


(4,060)


(424,003)


(580,744)


(95,932)

















Other comprehensive loss, before tax
















            Foreign currency translation adjustments



(20,647)


(10,547)


(33,201)


(5,484)


(7,304)


(83,171)


(13,739)

Other comprehensive loss, before tax



(20,647)


(10,547)


(33,201)


(5,484)


(7,304)


(83,171)


(13,739)

Income tax expense related to components of other comprehensive loss


-


-


-


-


-


-


-

















Other comprehensive loss, net of tax



(20,647)


(10,547)


(33,201)


(5,484)


(7,304)


(83,171)


(13,739)










0






0

Net loss per share, basic and diluted



(0.04)


(0.07)


(0.01)


(0.00)


(0.18)


(0.19)


(0.03)

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



(0.69)


(1.31)


(0.15)


(0.02)


(3.20)


(3.50)


(0.58)

Shares used in computation, basic and diluted



2,944,902,156


2,995,701,280


3,010,627,513


3,010,627,513


2,386,474,188


2,986,223,088


2,986,223,088

ADSs used in computation, basic and diluted



163,605,675


166,427,848


167,257,084


167,257,084


132,581,899


165,901,282


165,901,282

 

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
















December 31, 2012


September 30, 2013


 

December 31, 2013


 

December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

(Amounts in thousands)



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)




(Unaudited)


(Unaudited)

 Cost of revenues: 
















 Value added, business taxes and surcharges 



59,337


75,480


77,758


12,845


169,283


276,497


45,674

 Bandwidth costs 



162,959


181,670


178,824


29,540


524,623


685,650


113,261

 Depreciation of servers and other equipment 



26,303


21,827


36,686


6,060


68,569


102,367


16,910

 Content costs 



270,945


496,459


353,670


58,422


737,061


1,422,907


235,048

 Total Cost of Revenues 



519,544


775,436


646,938


106,867


1,499,536


2,487,421


410,893

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 



















 For the Three Months Ended 


 For the Twelve Months Ended  

(Amounts in thousands)













December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013






RMB


RMB


RMB


US$


 RMB 


 RMB 


 US$ 






(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)




 (Unaudited) 


 (Unaudited) 

Cash flows from operating activities:

















Net loss




(113,570)


(218,638)


(24,581)


(4,060)


(424,003)


(580,744)


(95,932)

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


















Depreciation and impairment of fixed assets




31,249


30,342


46,972


7,759


81,609


131,611


21,741


Bad debt expense




(1,828)


19,945


25,547


4,220


9,887


62,603


10,341


Amortisation and impairment of intangible assets and capitalized content production costs




135,508


327,334


225,109


37,185


416,396


867,957


143,376


Amortization of long-term debt discounts




336


-


-


-


1,928


313


52


Gain on disposal of  property and equipment




-


788


(353)


(58)


52


485


80


Foreign exchange loss (gain)




826


2,540


(15,336)


(2,533)


469


(13,318)


(2,200)


Share-based compensation




38,779


48,918


53,061


8,764


118,218


188,358


31,114


Gain form remeasurement of previously held investment in acquired subsidiary




-


-


-


-


(3,344)


-


-


Deferred income tax benefits




(7,675)


-


(4,414)


(729)


(9,953)


(4,414)


(729)


Write-off of prepayment




8,510


-


-


-


-


-


-


Gain from de-recognition of off-market liabilities




-


-


(16,540)


(2,732)


-


(16,540)


(2,732)


Changes in operating assets and liabilities:


















         Restricted cash




-


6,759


(1,129)


(186)


(9,003)


6,324


1,045


        Accounts receivable




73,149


(161,184)


(10,312)


(1,703)


(223,772)


(499,838)


(82,567)


        Prepayments and other assets




(20,831)


37,051


(58,751)


(9,705)


20,182


1,441


238


        Capitalized content production costs




5,761


(3,004)


22,687


3,748


(9,891)


(6,738)


(1,113)


        Accounts payable




(22,506)


702


(15,572)


(2,572)


(39,023)


(13,555)


(2,239)


        Advances from customers




(23,022)


9,918


(40,717)


(6,726)


(7,244)


3,478


576


        Accrued expenses and other liabilities




53,987


20,027


21,519


3,553


214,912


142,060


23,464

Net cash provided by  operating activities




158,673


121,498


207,190


34,225


137,420


269,483


44,515



















Cash flows from investing activities:


















Acquisition of property and equipment




(24,364)


(67,252)


(14,955)


(2,470)


(90,204)


(144,120)


(23,807)


Proceeds received from maturity of short-term investments




1,170,519


1,358,761


1,018,628


168,265


2,826,023


2,989,628


493,851


Short-term investments placed with financial institutions




(2,113,464)


(1,405,173)


-


-


(3,536,711)


(2,283,410)


(377,192)


Proceeds from disposal of property and equipment




1


-


(824)


(136)


9


458


76


Cash acquired, net of cash paid for acquired subsidiaries




-


-


(6,999)


(1,156)


378,666


(6,999)


(1,156)


Acquisition of intangible assets from related party




7,200


-


-


-


-


-


-


Acquisition of intangible assets




(118,256)


(171,620)


(227,540)


(37,587)


(361,976)


(740,581)


(122,335)

Net cash (used in) provided by investing activities




(1,078,364)


(285,284)


768,310


126,916


(784,193)


(185,024)


(30,563)



















Cash flows from financing activities:


















Exercise of employee stock options




3,561


27,676


9,084


1,501


22,485


101,435


16,756


Proceeds from restricted cash




25,364


-


-


-


38,069


-


-


Principal repayments on long-term debt




(23,685)


(1,111)


-


-


(11,145)


(7,677)


(1,268)


Principal repayments on short-term loan




-


-


-


-


(31,544)


-


-

Net cash  provided by financing activities




5,240


26,565


9,084


1,501


17,865


93,758


15,488

Effect of exchange rate changes on cash and cash equivalents




(21,474)


(13,087)


(17,865)


(2,951)


(7,773)


(69,853)


(11,539)

Net (decrease) increase in cash and cash equivalents




(935,925)


(150,308)


966,719


159,691


(636,681)


108,364


17,901

Cash and cash equivalents at the beginning of the period




2,591,782


947,810


797,502


131,738


2,292,538


1,655,857


273,528

Cash and cash equivalents at the end of the period




1,655,857


797,502


1,764,221


291,429


1,655,857


1,764,221


291,429

 

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 Costs



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

Content costs



270,945


496,459


353,670


58,422


737,061


1,422,907


235,048

 Deduct: share-based compensation  



4,536


12,136


7,846


1,296


12,751


32,110


5,304

 Deduct: amortization of intangible assets from business combination 



8,235


5,984


6,100


1,008


26,472


28,156


4,651

Non-GAAP content costs



258,174


478,339


339,724


56,118


697,838


1,362,641


225,093

















2. Non-GAAP Gross Profit



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

Gross profit



116,287


82,307


254,349


42,015


296,039


541,063


89,378

 Add back: share-based compensation  



4,536


12,136


7,846


1,296


12,751


32,110


5,304

 Add back: amortization of intangible assets from business combination 



8,235


5,984


6,100


1,008


26,472


28,156


4,651

Non-GAAP gross profit



129,058


100,427


268,295


44,319


335,262


601,329


99,333

































 3. Non-GAAP Operating Expenses



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

Operating expenses



244,970


312,843


333,351


55,065


774,704


1,220,793


201,660

 Deduct: share-based compensation  



34,243


36,782


45,215


7,468


105,467


156,248


25,810

 Deduct: business combination related expenses 



127


-


-


-


28,754


-


-

 Deduct: amortization of intangible assets from business combination 



4,176


4,155


9,623


1,589


5,885


22,088


3,648

Non-GAAP  operating expenses



206,424


271,906


278,513


46,008


634,598


1,042,457


172,202

































4. Non-GAAP Sales and Marketing Expenses



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

Sales and marketing expenses



107,787


171,763


216,444


35,754


363,707


681,008


112,494

 Deduct: share-based compensation  



10,606


12,366


15,577


2,573


28,741


50,712


8,377

 Deduct: amortization of intangible assets from business combination 



2,087


2,077


5,077


839


2,941


11,308


1,867

Non-GAAP  sales and marketing expenses



95,094


157,320


195,790


32,342


332,025


618,988


102,250

































5. Non-GAAP Product Development Expenses



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

Product development expenses



64,099


78,622


76,514


12,639


172,885


278,015


45,925

 Deduct: share-based compensation  



8,408


9,748


11,795


1,948


26,157


38,400


6,343

 Deduct: amortization of intangible assets from business combination 



1,402


1,395


3,411


563


1,976


7,596


1,255

Non-GAAP  product development expenses



54,289


67,479


61,308


10,128


144,752


232,019


38,327

































6. Non-GAAP General and Administrative Expenses



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

General and administrative expenses



73,084


62,458


40,393


6,672


238,112


261,770


43,241

 Deduct: share-based compensation  



15,229


14,668


17,843


2,947


50,569


67,136


11,090

 Deduct: business combination related expenses 



127


-


-


-


28,754


-


-

 Deduct: amortization of intangible assets from business combination 



687


683


1,135


187


968


3,184


526

Non-GAAP  general and administrative expenses



57,041


47,107


21,415


3,538


157,821


191,450


31,625

































7. Non-GAAP Loss from Operations



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

Loss from operations



(128,683)


(230,536)


(79,002)


(13,050)


(478,665)


(679,730)


(112,282)

 Add back: share-based compensation  



38,779


48,918


53,061


8,764


118,218


188,358


31,114

 Add back: business combination related expenses 



127


-


-


-


28,754


-


-

 Add back: amortization of intangible assets from business combination 



12,411


10,139


15,723

-

2,597


32,357


50,244


8,299

Non-GAAP  loss from operations



(77,366)


(171,479)


(10,218)


(1,689)


(299,336)


(441,128)


(72,869)

































8. Non-GAAP  Net (Loss) Profit 



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

 Net loss 



(113,570)


(218,638)


(24,581)


(4,060)


(424,003)


(580,744)


(95,932)

 Add back: share-based compensation  



38,779


48,918


53,061


8,764


118,218


188,358


31,114

 Add back: business combination related expenses 



127


-


-


-


28,754


-


-

 Add back: amortization of intangible assets from business combination 



12,411


10,139


15,723


2,597


32,357


50,244


8,299

 Non-GAAP net (loss) profit 



(62,253)


(159,581)


44,203


7,301


(244,674)


(342,142)


(56,519)

































9.  Non-GAAP EBITDA (Loss) Profit



 For the Three Months Ended 


For the Twelve Months Ended
















December 31, 2012


September 30, 2013


December 31, 2013


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2013




RMB


RMB


RMB


US$


RMB


RMB


US$

 Net loss 



(113,570)


(218,638)


(24,581)


(4,060)


(424,003)


(580,744)


(95,932)

 Add back: 
















 Depreciation and amortization (excluding amortization 
















      of acquired content )(2)



31,263


30,356


46,986


7,762


81,667


131,668


21,750

 Interest income 



(9,988)


(7,284)


(8,419)


(1,391)


(45,478)


(29,972)


(4,950)

 Interest expenses 



830


-


-


-


3,989


545


90

 Income taxes 



(4,912)


80


876


145


(3,416)


1,014


168

 EBITDA (loss) profit 



(96,377)


(195,486)


14,862


2,456


(387,241)


(477,489)


(78,874)

















 Adjustments: 
















 Share-based compensation  



38,779


48,918


53,061


8,764


118,218


188,358


31,114

 Business combination related expenses 



127


-


-


-


28,754


-


-

 Amortization of intangible assets from business combination 



12,411


10,139


15,723


2,597


32,357


50,244


8,299

 Others, net 



(1,043)


(4,694)


(46,878)


(7,744)


(9,757)


(70,573)


(11,658)

Non-GAAP EBITDA (loss) profit 



(46,103)


(141,123)


36,768


6,073


(217,669)


(309,460)


(51,119)

































(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.



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