Youku Tudou Announces Second Quarter 2014 Unaudited Financial Results

Reached over 500 million monthly unique visitors across screens; Subscription revenues grew 379% year on year

19 Aug, 2014, 18:00 ET from Youku Tudou Inc.

BEIJING, Aug. 19, 2014 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for second quarter 2014.

Second Quarter 2014 Highlights[1] 

  • Net revenues were RMB958.7 million (US$154.5 million), a 27% increase from the corresponding period in 2013. We derive a part of our revenues from mobile value-added services through partnership agreements with third party mobile network operators and shares the fees collected by the mobile network operators for such services. We were still in the process of renewing the service agreement with one of our major mobile network operators by the end of the second quarter of 2014 and as a result, we deferred recognition of such revenues, about RMB40 million, until the completion of the service agreement renewal process.
  • Gross profit was RMB208.6 million (US$33.6 million), a 10% increase from the corresponding period in 2013. Non-GAAP[2] gross profit was RMB223.9 million (US$36.1 million) in the second quarter of 2014, an increase of 10% from the corresponding period in 2013.  
  • Net loss was RMB164.4 million (US$26.5 million), a 57% increase from the corresponding period in 2013. Non-GAAP net loss was RMB75.9 million (US$12.2 million) in the second quarter of 2014, as compared to RMB44.6 million (US$7.2 million) from the corresponding period in 2013. .
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares of the Company, for the second quarter of 2014 amounted to RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively. Non-GAAP basic and diluted loss per ADS for the second quarter of 2014 amounted to RMB0.41 (US$0.07) and RMB0.41 (US$0.07), respectively.
  • Cash, cash equivalents, restricted cash and short-term investments totaled RMB10.2 billion (US$1.6 billion) as of June 30, 2014.
  • Acquisition of property and equipment for the second quarter of 2014 was RMB85.0 million (US$13.7 million).
  • Acquisition of intangible assets for the second quarter of 2014 was RMB246.3 million (US$39.7 million).

"Multi-screen Internet is increasingly mainstream and the convergence of online and offline entertainment has presented new market opportunities. We are scaling our investment and leveraging our strengthened resources to enhance our business model," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Youku Tudou has helped transform how media and entertainment related content is distributed and marketed since our inception. Going forward, we will work with our online and offline partners to continue to change how content is created and monetized by directly connecting with the ever-growing consumer economy as Youku Tudou is best positioned in developing the leading multi-screen media and entertainment ecosystem in China."

Dele Liu, President and Board Director of Youku Tudou, added, "Our traffic has grown strongly this quarter with our user base reaching over 500 million on a monthly basis. We have made a smooth transition to multi-screen monetization with over 30% of revenues generated from mobile and solid progress on subscription services with 379% growth year on year. By partnering with Alibaba on big data initiatives, we are enhancing our products to create an unique value proposition to advertising partners and consumers. We are confident that our revenue will continue to diversify and grow."

Second Quarter 2014 Results

Net revenues were RMB958.7 million (US$154.5 million) in the second quarter of 2014, a 27% increase from the corresponding period in 2013, meeting net revenues guidance previously announced by the Company. Advertising net revenues were RMB915.5 million (US$147.6 million), meeting the advertising net revenues guidance previously announced by the Company. The growth was primarily attributable to the increased use by brand advertisers of our advertising services as evidenced by an increase in the number of advertisers and the rising average spend per advertiser.

Bandwidth costs as a component of cost of revenues were RMB213.5 million (US$34.4 million)in the second quarter of 2014, representing 22% of net revenues, as compared to 22% of net revenues for the corresponding period in 2013.

Content costs as a component of cost of revenues were RMB418.3 million (US$67.4 million) in the second quarter of 2014, representing 44% of net revenues as compared to 40% of net revenues for the corresponding period in 2013. Non-GAAP content costs were RMB402.9 million (US$65.0 million) in the second quarter of 2014, representing 42% of net revenues, as compared to 38% of net revenues for the corresponding period in 2013.

Gross profit was RMB208.6 million (US$33.6 million)in the second quarter of 2014, an increase of 10% from the corresponding period in 2013. Non-GAAP gross profit was RMB223.9 million (US$36.1 million) in the second quarter of 2014, an increase of 10% from the corresponding period in 2013 due to strong operating leverage.

Operating expenses were RMB386.4 million (US$62.3 million) in the second quarter of 2014, as compared to RMB306.8 million (US$49.5 million) for the corresponding period in 2013. Non-GAAP operating expenses were RMB313.2 million (US$50.5 million) in the second quarter of 2014, as compared to RMB260.6 million (US$42.0 million) for the corresponding period in 2013. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB212.8 million (US$34.3 million) in the second quarter of 2014, as compared to RMB165.2 million (US$26.6 million) for the corresponding period in 2013. Non-GAAP sales and marketing expenses were RMB186.1 million (US$30.0 million) in the second quarter of 2014, as compared to RMB150.4 million (US$24.2 million) for the corresponding period in 2013. This increase was due to higher commission expenses paid to our sales force in line with our revenue growth.

Product development expenses were RMB99.1 million (US$16.0 million) in the second quarter of 2014, as compared to RMB66.1 million (US$10.7 million) for the corresponding period in 2013. Non-GAAP product development expenses were RMB78.9 million (US$12.7 million) in the second quarter of 2014, as compared to RMB54.8 million (US$8.8 million) for the corresponding period in 2013. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social, paid and live broadcasting services.

General and administrative expenses were RMB74.5 million (US$12.0 million) in the second quarter of 2014, as compared to RMB75.6 million (US$12.2 million) for the corresponding period in 2013. Non-GAAP general and administrative expenses were RMB48.2 million (US$7.8 million) in the second quarter of 2014, a decrease of 13% from the corresponding period in 2013.

Net loss was RMB164.4 million (US$26.5 million)in the second quarter of 2014, as compared to RMB105.1 million (US$16.9 million) for the corresponding period in 2013. Non-GAAP net loss was RMB75.9 million (US$12.2 million) in the second quarter of 2014, as compared to RMB44.6 million (US$7.2 million) from the corresponding period in 2013.

Non-GAAP adjusted EBITDA Loss was RMB52.9 million (US$8.5 million) in the second quarter of 2014, as compared to RMB28.7 million (US$4.6 million) from the corresponding period in 2013.

Business Outlook

For the third quarter of 2014, the Companyexpects net revenues will be between RMB1.09 billion and RMB1.13 billion, with advertising net revenues contributing between RMB965 million and RMB1.01 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 August 19, 2014 (9:00 a.m. Beijing/Hong Kong Time on August 20, 2014).

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

US Toll Free Dial In: 1-866-519-4004 International Dial In: +65-6723-9381 Mainland China Toll Free Dial In: +86-400-620-8038 / +86-800-819-0121 Hong Kong Dial In: +852-2475-0994

A replay of the call will be available by dialing +61 2 8199 0299 and entering passcode 87262225#. The replay will be available through August 27, 2014.

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

About Youku Tudou Inc.

Youku Tudou Inc. (NYSE: YOKU) is China's leading Internet television company. Its Youku and Tudou Internet television platforms enable users to search, view and share high-quality video content quickly and easily across multiple devices. Its Youku brand and Tudou brand are the most recognized online video brands in China. Youku Tudou's American depositary shares, each representing 18 of Youku Tudou's Class A ordinary shares, are traded on the NYSE under the symbol "YOKU."  

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Youku Tudou's strategic and operational plans, contain forward-looking statements. Youku Tudou may also make written or oral forward-looking statements in its filings with the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Youku Tudou's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our goals and strategies; our future business development, financial condition and results of operations; the expected growth of the online video market in China; our expectations regarding demand for and market acceptance of our services; our expectations regarding the retention and strengthening of our relationships with key advertisers and customers; our plans to enhance user experience, infrastructure and service offerings; competition in our industry in China; and relevant government policies and regulations relating to our industry. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Youku Tudou does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Youku Tudou's financial results presented in accordance with United States Generally Accepted Accounting Principles (GAAP), Youku Tudou uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business:  non-GAAP content costs, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP sales and marketing expenses, non-GAAP product development expenses, non-GAAP general and administrative expenses, non-GAAP loss from operations, non-GAAP net loss and non-GAAP EBITDA 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 loss from operations as 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 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 loss as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, 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.

[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 RMB6.2036 to US$1.00, the effective noon buying rate as of June 30, 2014 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

[2]

All non-GAAP measures exclude, as applicable, share-based compensation expenses and amortization of intangible assets from business combination. For further details on non-GAAP measures, please refer to the reconciliation table and a detailed discussion of the Company's use of non-GAAP information set forth elsewhere in this press release.

For more information, please contact:

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

 

YOUKU TUDOU INC.

 CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except for number of shares)

As of

December 31, 2013

June 30, 2014

June 30, 2014

RMB

RMB

US$

ASSETS

(Unaudited)

(Unaudited)

Current assets:

 Cash and cash equivalents

1,764,221

8,553,933

1,378,866

 Restricted cash

2,679

2,682

432

 Short-term investments

1,409,439

1,610,026

259,531

 Accounts receivable, net

1,370,031

1,498,779

241,598

 Intangible assets, net

51,942

105,546

17,014

 Deferred tax assets

7,843

7,843

1,264

 Prepayments and other assets

82,300

100,386

16,183

Total current assets

4,688,455

11,879,195

1,914,888

Non-current assets:

 Property and equipment, net

222,229

266,781

43,004

 Intangible assets, net

1,197,671

1,353,780

218,225

 Capitalized content production costs

1,176

9,843

1,587

 Prepayments and other assets

197,856

240,894

38,830

 Goodwill

4,262,569

4,262,569

687,112

 Total non-current assets

5,881,501

6,133,867

988,758

TOTAL ASSETS

10,569,956

18,013,062

2,903,646

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable

213,825

361,253

58,233

 Advances from customers

25,081

23,668

3,815

 Accrued expenses and other liabilities

1,124,342

1,147,253

184,933

Total current liabilities

1,363,248

1,532,174

246,981

Non-current liabilities

 Deferred tax liability

219,519

219,519

35,386

 Other liabilities

4,070

6,380

1,028

Total non-current liabilities

223,589

225,899

36,414

Total liabilities

1,586,837

1,758,073

283,395

Commitments and contingencies

Shareholders' equity

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized,  2,356,529,401 and   3,103,408,891 issued and outstanding as of  December 31, 2013 and June 30, 2014, respectively)

154

200

32

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 659,561,893 and 645,691,903 issued and outstanding as of  December 31, 2013 and June 30, 2014, respectively)

49

48

8

 Additional paid-in capital

11,058,360

18,712,011

3,016,315

 Statutory reserves

2,063

2,063

333

 Accumulated deficit

(1,878,454)

(2,267,594)

(365,529)

 Accumulated other comprehensive loss

(199,053)

(191,739)

(30,908)

Total shareholders' equity

8,983,119

16,254,989

2,620,251

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

10,569,956

18,013,062

2,903,646

 

 

 

YOUKU TUDOU INC.

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 For the Three Months Ended

For the Six Months Ended

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

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

753,457

700,374

958,719

154,542

1,269,454

1,659,093

267,441

Cost of revenues (Note 1)

(563,281)

(614,808)

(750,107)

(120,915)

(1,065,047)

(1,364,915)

(220,020)

Gross profit

190,176

85,566

208,612

33,627

204,407

294,178

47,421

Operating expenses:

       Product development

(66,051)

(80,700)

(99,116)

(15,977)

(122,879)

(179,816)

(28,986)

       Sales and marketing

(165,201)

(186,542)

(212,826)

(34,307)

(292,801)

(399,368)

(64,376)

       General and administrative

(75,569)

(46,823)

(74,457)

(12,002)

(158,919)

(121,280)

(19,550)

Total operating expenses

(306,821)

(314,065)

(386,399)

(62,286)

(574,599)

(700,464)

(112,912)

Loss from operations

(116,645)

(228,499)

(177,787)

(28,659)

(370,192)

(406,286)

(65,491)

Interest income

7,090

6,053

9,923

1,600

14,269

15,976

2,574

Interest expenses

(158)

-

-

-

(545)

-

-

Other, net

4,720

(2,259)

3,441

555

19,001

1,182

191

Total other income, net

11,652

3,794

13,364

2,155

32,725

17,158

2,765

Loss before income taxes

(104,993)

(224,705)

(164,423)

(26,504)

(337,467)

(389,128)

(62,726)

Income taxes

(58)

-

(12)

(2)

(58)

(12)

(2)

Net loss

(105,051)

(224,705)

(164,435)

(26,506)

(337,525)

(389,140)

(62,728)

Other comprehensive (loss) income, before tax

            Foreign currency translation adjustments

(33,457)

20,959

(13,645)

(2,200)

(39,423)

7,314

1,179

Other comprehensive (loss) income, before tax

(33,457)

20,959

(13,645)

(2,200)

(39,423)

7,314

1,179

Income tax expense related to components of other comprehensive (loss) income

-

-

-

-

-

-

-

Other comprehensive (loss) income, net of tax

(33,457)

20,959

(13,645)

(2,200)

(39,423)

7,314

1,179

0

0

Net loss per share, basic and diluted

(0.04)

(0.07)

(0.05)

(0.01)

(0.11)

(0.12)

(0.02)

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

(0.63)

(1.34)

(0.88)

(0.14)

(2.05)

(2.20)

(0.35)

Shares used in computation, basic and diluted

2,980,162,122

3,021,981,224

3,355,310,411

3,355,310,411

2,969,000,985

3,189,566,616

3,189,566,616

ADSs used in computation, basic and diluted

165,564,562

167,887,845

186,406,133

186,406,133

164,944,499

177,198,145

177,198,145

 

 

 

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

Note 1. Cost of Revenues

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

(Amounts in thousands)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 Cost of revenues:

 Value added, business taxes and surcharges

74,334

62,958

89,550

14,435

123,259

152,508

24,584

 Bandwidth costs

164,111

201,889

213,538

34,422

325,156

415,427

66,965

 Depreciation of servers and other equipment

21,384

24,306

28,756

4,636

43,854

53,062

8,553

 Content costs

303,452

325,655

418,263

67,422

572,778

743,918

119,918

 Total Cost of Revenues

563,281

614,808

750,107

120,915

1,065,047

1,364,915

220,020

 

 

 

YOUKU TUDOU INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 For the Three Months Ended

 For the Six Months Ended 

(Amounts in thousands)

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

 RMB

 RMB

 US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 (Unaudited)

 (Unaudited)

 (Unaudited)

Cash flows from operating activities:

Net loss

(105,051)

(224,705)

(164,435)

(26,506)

(337,525)

(389,140)

(62,728)

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

Depreciation and impairment of fixed assets

27,502

31,883

36,328

5,856

54,297

68,211

10,995

Bad debt expense

10,035

(6,473)

5,247

846

17,111

(1,226)

(198)

Amortisation and impairment of intangible assets and capitalized content production costs

176,523

181,777

229,561

37,004

315,514

411,338

66,306

Amortization of long-term debt discounts

92

-

-

-

313

-

-

(Gain) loss on disposal of  property and equipment

(645)

90

128

21

50

218

35

Foreign exchange loss (gain)

(847)

2,164

846

136

(522)

3,010

485

Share-based compensation

48,529

70,220

82,131

13,239

86,379

152,351

24,557

Changes in operating assets and liabilities:

         Restricted cash

704

(2)

(1)

-

694

(3)

-

        Accounts receivable

(294,698)

179,153

(306,676)

(49,435)

(328,342)

(127,523)

(20,556)

        Prepayments and other assets

21,794

(10,615)

(21,120)

(3,404)

23,141

(31,735)

(5,116)

        Capitalized content production costs

(42,382)

(2,972)

(6,371)

(1,027)

(26,421)

(9,343)

(1,506)

        Accounts payable

11,179

4,574

8,631

1,391

1,315

13,205

2,129

        Advances from customers

(4,180)

1,816

(3,229)

(521)

34,277

(1,413)

(227)

        Accrued expenses and other liabilities

88,046

29,591

(16,196)

(2,611)

100,514

13,395

2,159

Net cash (used in) provided by operating activities

(63,399)

256,501

(155,156)

(25,011)

(59,205)

101,345

16,335

Cash flows from investing activities:

Acquisition of property and equipment

(34,549)

(28,191)

(84,968)

(13,697)

(61,913)

(113,159)

(18,241)

Proceeds received from maturity of short-term investments

621,948

1,132,459

66,037

10,645

658,651

1,198,496

193,194

Short-term investments placed with financial institutions

(739,059)

(1,391,239)

(4,698)

(757)

(924,649)

(1,395,937)

(225,020)

Proceeds from disposal of property and equipment

1,282

180

10

2

1,282

190

31

Acquisition of intangible assets

(102,500)

(165,891)

(246,320)

(39,706)

(341,421)

(412,211)

(66,447)

Net cash used in investing activities

(252,878)

(452,682)

(269,939)

(43,513)

(668,050)

(722,621)

(116,483)

Cash flows from financing activities:

Exercise of employee stock options

35,935

11,809

7,355

1,186

64,675

19,164

3,089

Principal repayments on long-term debt

(3,330)

-

-

-

(6,566)

-

-

Proceeds from Ali investment, net of issuance costs

-

-

7,387,520

1,190,844

-

7,387,520

1,190,844

Net cash  provided by financing activities

32,605

11,809

7,394,875

1,192,030

58,109

7,406,684

1,193,933

Effect of exchange rate changes on cash and cash equivalents

(32,608)

18,795

(14,491)

(2,336)

(38,901)

4,304

694

Net (decrease) increase in cash and cash equivalents

(316,280)

(165,577)

6,955,289

1,121,170

(708,047)

6,789,712

1,094,479

Cash and cash equivalents at the beginning of the period

1,264,090

1,764,221

1,598,644

257,696

1,655,857

1,764,221

284,387

Cash and cash equivalents at the end of the period

947,810

1,598,644

8,553,933

1,378,866

947,810

8,553,933

1,378,866

 

 

 

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 Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Content costs

303,452

325,655

418,263

67,422

572,778

743,918

119,918

 Deduct: share-based compensation 

6,465

12,223

12,694

2,046

12,128

24,917

4,016

 Deduct: amortization of intangible assets from business combination

7,741

2,483

2,631

424

16,072

5,114

824

Non-GAAP content costs

289,246

310,949

402,938

64,952

544,578

713,887

115,078

2. Non-GAAP Gross Profit

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Gross profit

190,176

85,566

208,612

33,627

204,407

294,178

47,421

 Add back: share-based compensation 

6,465

12,223

12,694

2,046

12,128

24,917

4,016

 Add back: amortization of intangible assets from business combination

7,741

2,483

2,631

424

16,072

5,114

824

Non-GAAP gross profit

204,382

100,272

223,937

36,097

232,607

324,209

52,261

 3. Non-GAAP Operating Expenses

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Operating expenses

306,821

314,065

386,399

62,286

574,599

700,464

112,912

 Deduct: share-based compensation 

42,064

57,997

69,437

11,193

74,251

127,434

20,541

 Deduct: amortization of intangible assets from business combination

4,155

3,743

3,743

604

8,310

7,486

1,205

Non-GAAP  operating expenses

260,602

252,325

313,219

50,489

492,038

565,544

91,166

4. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Sales and marketing expenses

165,201

186,542

212,826

34,307

292,801

399,368

64,376

 Deduct: share-based compensation 

12,708

21,172

24,824

4,001

22,769

45,996

7,414

 Deduct: amortization of intangible assets from business combination

2,077

1,871

1,871

302

4,154

3,742

602

Non-GAAP  sales and marketing expenses

150,416

163,499

186,131

30,004

265,878

349,630

56,360

5. Non-GAAP Product Development Expenses

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Product development expenses

66,051

80,700

99,116

15,977

122,879

179,816

28,986

 Deduct: share-based compensation 

9,890

17,206

19,006

3,064

16,857

36,212

5,837

 Deduct: amortization of intangible assets from business combination

1,395

1,257

1,257

203

2,790

2,514

405

Non-GAAP  product development expenses

54,766

62,237

78,853

12,710

103,232

141,090

22,744

6. Non-GAAP General and Administrative Expenses

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

General and administrative expenses

75,569

46,823

74,457

12,002

158,919

121,280

19,550

 Deduct: share-based compensation 

19,466

19,619

25,607

4,128

34,625

45,226

7,290

 Deduct: amortization of intangible assets from business combination

683

615

615

99

1,366

1,230

198

Non-GAAP  general and administrative expenses

55,420

26,589

48,235

7,775

122,928

74,824

12,062

7. Non-GAAP Loss from Operations

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Loss from operations

(116,645)

(228,499)

(177,787)

(28,659)

(370,192)

(406,286)

(65,491)

 Add back: share-based compensation 

48,529

70,220

82,131

13,239

86,379

152,351

24,557

 Add back: amortization of intangible assets from business combination

11,896

6,226

6,374

1,028

24,382

12,600

2,029

Non-GAAP  loss from operations

(56,220)

(152,053)

(89,282)

(14,392)

(259,431)

(241,335)

(38,905)

8. Non-GAAP Net Loss

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net loss

(105,051)

(224,705)

(164,435)

(26,506)

(337,525)

(389,140)

(62,728)

 Add back: share-based compensation 

48,529

70,220

82,131

13,239

86,379

152,351

24,557

 Add back: amortization of intangible assets from business combination

11,896

6,226

6,374

1,028

24,382

12,600

2,029

 Non-GAAP net loss

(44,626)

(148,259)

(75,930)

(12,239)

(226,764)

(224,189)

(36,142)

9.  Non-GAAP EBITDA Loss

 For the Three Months Ended

For the Six Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2014

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net loss

(105,051)

(224,705)

(164,435)

(26,506)

(337,525)

(389,140)

(62,728)

 Add back:

 Depreciation and amortization (excluding amortization

      of acquired content ) (2)

27,516

31,897

36,341

5,858

54,326

68,238

11,000

 Interest income

(7,090)

(6,053)

(9,923)

(1,600)

(14,269)

(15,976)

(2,574)

 Interest expenses

158

-

-

-

545

-

-

 Income taxes

58

-

12

2

58

12

2

 EBITDA loss

(84,409)

(198,861)

(138,005)

(22,246)

(296,865)

(336,866)

(54,300)

 Adjustments:

 Share-based compensation 

48,529

70,220

82,131

13,239

86,379

152,351

24,557

 Amortization of intangible assets from business combination

11,896

6,226

6,374

1,028

24,382

12,600

2,029

 Others, net

(4,720)

2,259

(3,441)

(555)

(19,001)

(1,182)

(191)

Non-GAAP EBITDA loss

(28,704)

(120,156)

(52,941)

(8,534)

(205,105)

(173,097)

(27,905)

(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.