Youku Tudou Announces Second Quarter 2015 Unaudited Financial Results

Consumer Revenues Grew 596% Year-on-Year; Multi-Screen Monthly User Time Spent Grew 50% Year-on-Year

Aug 19, 2015, 18:00 ET from Youku Tudou Inc.

BEIJING, Aug. 19, 2015 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU), a leading multi-screen entertainment and media company in China ("Youku Tudou" or the "Company"), today announced its unaudited financial results for the second quarter 2015.

Second Quarter 2015 Highlights[1] 

  • Net revenues were RMB1.61 billion (US$259.6 million), a 57% increase from the corresponding period in 2014[2]. Non-GAAP[3] net revenues were RMB1.51 billion (US$244.3 million) in the second quarter of 2015, a 58% increase from the corresponding period in 2014.
  • Gross profit was RMB254.1 million (US$41.0 million), an 11% increase from the corresponding period in 2014. Non-GAAP gross profit was RMB253.8 million (US$40.9 million) in the second quarter of 2015, a 14% increase from the corresponding period in 2014.
  • Net loss was RMB342.0 million (US$55.2 million), as compared to RMB142.3 million (US$23.0 million) from the corresponding period in 2014. Non-GAAP net loss was RMB220.7 million (US$35.6 million) in the second quarter of 2015, as compared to RMB76.9 million (US$12.4 million) from the corresponding period in 2014.
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares of the Company, for the second quarter of 2015 amounted to RMB1.76 (US$0.28) and RMB1.76 (US$0.28), respectively. Non-GAAP basic and diluted loss per ADS for the second quarter of 2015 amounted to RMB1.13 (US$0.18) and RMB1.13 (US$0.18), respectively.
  • Cash, cash equivalents, restricted cash and short-term investments totaled RMB8.33 billion (US$1.34 billion) as of June 30, 2015.
  • Acquisition of property and equipment for the second quarter of 2015 was RMB71.5 million (US$11.5 million).
  • Acquisition of licensed copyright for the second quarter of 2015 was RMB366.2 million (US$59.1 million).

"I am very pleased that once more we delivered accelerated and increasingly diversified topline growth in the second quarter, driven by robust consumer business development and supported by healthy advertising revenues. Our revenue diversification through consumer business is successful and based on progress driven by our business unit reorganizations and management team additions. Meanwhile, with nearly half of advertising revenues coming from mobile, we have achieved broad adoption of mobile advertising by domestic and international advertisers alike," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "We expect these positive trends, reinforced by our clear growth strategy and improving business economics, to continue during the second half of this year."

Dele Liu, President of Youku Tudou, added, "We continued to significantly increase web-native content, which is one of the key growth pillars driving our business development this year, in addition to accelerated topline growth and revenue diversification. More specifically, we are creating cross-domain synergy for high quality IPs taking the forms of web series, online game, and movies, leveraging our large and growing user base and high quality traffic as measured by user time spent and user engagement."

Second Quarter 2015 Results

Net revenues were RMB1.61 billion (US$259.6 million) in the second quarter of 2015, a 57% increase from the corresponding period in 2014. Non-GAAP net revenues were RMB1.51 billion (US$244.3 million) in the second quarter of 2015, a 58% increase from the corresponding period in 2014, meeting the non-GAAP net revenues guidance previously announced by the Company.

Advertising net revenues were RMB1.28 billion (US$206.1 million) in the second quarter of 2015, a 40% increase from the corresponding period in 2014, 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.

Consumer revenues, which are derived from our subscription-based service, interactive live entertainment and mobile game joint operation, were RMB174.5 million (US$28.1 million) in the second quarter of 2015, a 596% increase from the corresponding period in 2014. The growth was primarily attributable to the increasing user adoption of our consumer services as evidenced by expansion of subscriber base of our subscription-based service, and growing number of paying users and average spend per user of our interactive live entertainment service.

Bandwidth costs as a component of cost of revenues were RMB330.3 million (US$53.3 million)in the second quarter of 2015, representing 21% of net revenues, as compared to 21% of net revenues for the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB744.4 million (US$120.1 million) in the second quarter of 2015, representing 46% of net revenues as compared to 45% of net revenues for the corresponding period in 2014. Non-GAAP content costs were RMB649.8 million (US$104.8 million) in the second quarter of 2015, representing 43% of non-GAAP net revenues, as compared to 42% of non-GAAP net revenues for the corresponding period in 2014. This increase was primarily due to expansion of our video content portfolio to support our new business growth initiatives.

Gross profit was RMB254.1 million (US$41.0 million) in the second quarter of 2015, an 11% increase from the corresponding period in 2014. Non-GAAP gross profit was RMB253.8 million (US$40.9 million) in the second quarter of 2015, a 14% increase from the corresponding period in 2014.

Operating expenses were RMB645.9 million (US$104.2 million) in the second quarter of 2015, as compared to RMB384.2 million (US$62.0 million) for the corresponding period in 2014. Non-GAAP operating expenses were RMB524.4 million (US$84.6 million) in the second quarter of 2015, as compared to RMB312.1 million (US$50.3 million) for the corresponding period in 2014. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB354.3 million (US$57.1 million) in the second quarter of 2015, as compared to RMB212.0 million (US$34.2 million) for the corresponding period in 2014. Non-GAAP sales and marketing expenses were RMB305.6 million (US$49.3 million) in the second quarter of 2015, as compared to RMB185.8 million (US$30.0 million) for the corresponding period in 2014. This increase was primarily due to increases in marketing expenses and commission paid to our sales force in line with our revenue growth.

Product development expenses were RMB181.9 million (US$29.3 million) in the second quarter of 2015, as compared to RMB98.6 million (US$15.9 million) for the corresponding period in 2014. Non-GAAP product development expenses were RMB141.8 million (US$22.9 million) in the second quarter of 2015, as compared to RMB78.6 million (US$12.7 million) for the corresponding period in 2014. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social, subscription and interactive live entertainment services.

General and administrative expenses were RMB109.8 million (US$17.7 million) in the second quarter of 2015, as compared to RMB73.7 million (US$11.9 million) from the corresponding period in 2014. Non-GAAP general and administrative expenses were RMB77.0 million (US$12.4 million) in the second quarter of 2015, as compared to RMB47.6 million (US$7.7 million) from the corresponding period in 2014.

Net loss was RMB342.0 million (US$55.2 million) in the second quarter of 2015, as compared to RMB142.3 million (US$23.0 million) for the corresponding period in 2014. Non-GAAP net loss was RMB220.7 million (US$35.6 million) in the second quarter of 2015, as compared to RMB76.9 million (US$12.4 million) from the corresponding period in 2014.

Business Outlook

For the third quarter of 2015, the Company expects non-GAAP net revenues will be between RMB1.69 billion and RMB1.78 billion, with advertising net revenues contributing between RMB1.34 billion and RMB1.40 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, 2015 (9:00 a.m. Beijing/Hong Kong Time on August 20, 2015).

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

US Toll Free Dial In:

+1-866-519-4004

International Dial In:

+65-6713-5090

Mainland China Dial In:

+86-800-819-0121 / +86-400-620-8038

Hong Kong Dial In:

+852-3018-6771

A replay of the call will be available by dialing +61 2 8199 0299 and entering passcode 12334563. The replay will be available through August 26, 2015.

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

About Youku Tudou Inc.

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

Safe Harbor Statement

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

About Non-GAAP Financial Measures

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

We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in Youku Tudou's business for the foreseeable future.

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

For more information, please contact:

Chang You Youku Tudou Inc. Tel: (+8610) 5890-6883 x 8056 Email: changyou@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 RMB6.2000 to US$1.00, the effective noon buying rate as of June 30, 2015 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

[2]

As noted in the Company's annual report for fiscal year 2014 on Form 20-F (the "2014 Annual Report"), certain adjustments were made to the Company's historical consolidated financial statements reflecting certain revisions to its accounting treatment for (i) licensed copyrights and (ii) nonmonetary exchanges of licensed copyrights, as further described in the 2014 Annual Report. Accordingly, unaudited financial information in this release in relation to the second quarter of 2014 has been amended, where applicable, principally as a result of, and to reflect the adjustment caused by, such revisions of the Company's accounting treatment.

[3]

All non-GAAP measures exclude, as applicable, barter sublicensing revenues, amortization of licensed copyrights from nonmonetary content exchanges, 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.

    

 

 YOUKU TUDOU INC. 

 CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except for number of shares)

As of

December 31, 2014

June 30, 2015

June 30, 2015

RMB

RMB

US$

ASSETS

(Audited)

(Unaudited)

(Unaudited)

Current assets:

 Cash and cash equivalents 

3,820,742

2,561,775

413,190

 Restricted cash 

617,586

1,441,049

232,427

 Short-term investments 

4,021,199

4,323,246

697,298

 Accounts receivable   

1,719,760

2,135,363

344,413

 Licensed copyrights, net 

220,152

259,052

41,783

 Amounts due from related parties 

125,204

85,408

13,775

 Deferred tax assets, net 

2,283

2,283

368

 Prepayments and other assets 

117,716

315,511

50,890

Total current assets

10,644,642

11,123,687

1,794,144

Non-current assets:

 Property and equipment, net 

293,027

365,002

58,871

 Long-term investments 

67,293

176,951

28,540

 Available-for-sale financial assets 

-

21,267

3,430

 Licensed copyrights, net 

505,173

657,606

106,065

 Intangible assets, net 

875,502

869,467

140,237

 Capitalized content production costs 

1,678

3,562

575

 Film assets 

-

64,885

10,465

 Prepayments and other assets 

431,377

389,162

62,768

 Goodwill 

4,262,569

4,262,569

687,511

 Total non-current assets 

6,436,619

6,810,471

1,098,462

TOTAL ASSETS

17,081,261

17,934,158

2,892,606

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable 

563,009

690,668

111,399

 Advances from customers and deferred revenue  

36,232

156,660

25,268

 Amounts due to related parties 

4

1

-

 Accrued expenses and other liabilities 

1,668,122

2,017,281

325,368

 Short-term bank loans 

500,000

1,320,386

212,965

Total current liabilities

2,767,367

4,184,996

675,000

Non-current liabilities

 Deferred tax liabilities 

213,608

213,608

34,453

 Other liabilities 

6,570

33,458

5,396

Total non-current liabilities

220,178

247,066

39,849

Total liabilities

2,987,545

4,432,062

714,849

Commitments and contingencies

Shareholders' equity

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 3,123,742,699 and 3,158,011,117 issued as of December 31, 2014 and June 30, 2015, respectively, 2,834,270,299 and  2,868,538,717 outstanding as of  December 31, 2014 and June 30, 2015, respectively)

201

203

33

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 645,691,903 and 645,691,903 issued and outstanding as of  December 31, 2014 and June 30, 2015, respectively)

48

48

8

Additional paid-in capital

18,878,497

19,136,913

3,086,599

Treasury stock (at cost, 289,472,400 and 289,472,400 as of December 31, 2014 and June 30, 2015, respectively)

(1,845,892)

(1,845,892)

(297,725)

Statutory reserves

13,146

13,146

2,120

Accumulated deficit

(2,681,658)

(3,541,118)

(571,148)

Accumulated other comprehensive loss

(270,626)

(261,204)

(42,130)

Total shareholders' equity

14,093,716

13,502,096

2,177,757

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

17,081,261

17,934,158

2,892,606

 

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, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

(Unaudited-As revised)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited-As revised)

(Unaudited)

(Unaudited)

Net revenues(including advertising net revenues from related parties amounting to RMB48,010 and RMB47,339 for the three months ended March 31, 2015 and June 30, 2015, respectively, and RMB95,349 for the six months ended June 30, 2015)

1,023,340

1,139,458

1,609,687

259,627

1,798,025

2,749,145

443,410

Cost of revenues (Note 1)

(794,771)

(1,137,987)

(1,355,570)

(218,640)

(1,437,331)

(2,493,557)

(402,187)

Gross profit

228,569

1,471

254,117

40,987

360,694

255,588

41,223

Operating expenses:

       Product development

(98,551)

(139,573)

(181,856)

(29,332)

(178,689)

(321,429)

(51,843)

       Sales and marketing

(211,979)

(320,433)

(354,259)

(57,139)

(397,675)

(674,692)

(108,821)

       General and administrative

(73,670)

(84,058)

(109,830)

(17,715)

(119,799)

(193,888)

(31,272)

Total operating expenses

(384,200)

(544,064)

(645,945)

(104,186)

(696,163)

(1,190,009)

(191,936)

Government grant income

880

123

11,075

1,786

880

11,198

1,806

Loss from operations

(154,751)

(542,470)

(380,753)

(61,413)

(334,589)

(923,223)

(148,907)

Interest income

9,923

29,811

34,265

5,527

15,976

64,076

10,335

Interest expenses

-

(10,743)

(17,126)

(2,762)

-

(27,869)

(4,495)

Share of net loss of equity investee

-

(1,247)

(1,459)

(235)

-

(2,706)

(436)

Other income, net

2,562

7,352

1,781

287

303

9,133

1,473

Loss before income taxes

(142,266)

(517,297)

(363,292)

(58,596)

(318,310)

(880,589)

(142,030)

Income tax expense

(12)

(144)

21,273

3,431

(12)

21,129

3,408

Net loss

(142,278)

(517,441)

(342,019)

(55,165)

(318,322)

(859,460)

(138,622)

Other comprehensive income (loss), before tax

            Foreign currency translation adjustments

(13,645)

36,587

(27,165)

(4,381)

7,314

9,422

1,520

Other comprehensive income (loss), net of tax

(13,645)

36,587

(27,165)

(4,381)

7,314

9,422

1,520

Comprehensive loss attributable to ordinary shareholders

(155,923)

(480,854)

(369,184)

(59,546)

(311,008)

(850,038)

(137,102)

Net loss per share, basic and diluted

(0.04)

(0.15)

(0.10)

(0.02)

(0.10)

(0.25)

(0.04)

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

(0.76)

(2.67)

(1.76)

(0.28)

(1.80)

(4.43)

(0.71)

Shares used in computation, basic and diluted

3,355,310,411

3,485,681,620

3,500,437,718

3,500,437,718

3,189,566,616

3,493,100,432

3,493,100,432

ADSs used in computation, basic and diluted

186,406,133

193,648,978

194,468,762

194,468,762

177,198,145

194,061,135

194,061,135

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, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

(Amounts in thousands)

(Unaudited-As revised)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited-As revised)

(Unaudited)

(Unaudited)

 Cost of revenues: 

 Value added, business taxes and surcharges 

89,550

98,388

138,329

22,311

152,508

236,717

38,180

 Bandwidth costs 

213,538

306,835

330,258

53,267

415,427

637,093

102,757

 Depreciation of servers and other equipment 

24,452

34,349

38,479

6,206

44,617

72,828

11,746

 Interactive live entertainment revenue sharing fees 

3,351

24,087

70,017

11,293

4,339

94,104

15,178

 Cost of goods sold 

-

5,337

34,073

5,496

-

39,410

6,356

 Content costs 

463,880

668,991

744,414

120,067

820,440

1,413,405

227,970

 Total Cost of Revenues 

794,771

1,137,987

1,355,570

218,640

1,437,331

2,493,557

402,187

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 For the Three Months Ended 

 For the Six Months Ended  

(Amounts in thousands)

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

 RMB 

 US$ 

 RMB 

 RMB 

 US$ 

(Unaudited-As revised)

(Unaudited)

 (Unaudited) 

 (Unaudited) 

(Unaudited-As revised)

 (Unaudited) 

 (Unaudited) 

Cash flows from operating activities:

Net loss

(142,278)

(517,441)

(342,019)

(55,165)

(318,322)

(859,460)

(138,622)

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

Depreciation of fixed assets

30,688

40,676

45,212

7,292

57,205

85,888

13,853

Bad debt expense

5,247

14,800

1,862

300

(1,226)

16,662

2,687

Amortization of licensed copyrights

270,328

450,865

478,480

77,174

477,191

929,345

149,894

Amortization and impairment of intangible assets and      capitalized content production costs

7,337

13,930

17,493

2,821

13,267

31,423

5,068

Barter sublicensing revenues

(64,621)

(83,239)

(94,891)

(15,305)

(138,932)

(178,130)

(28,731)

Loss (Gain) on disposal of  property and equipment

128

(47)

135

22

218

88

14

Foreign exchange loss (gain)

846

(20,070)

21,755

3,509

3,010

1,685

272

Share-based compensation

82,131

79,772

144,364

23,285

152,351

224,136

36,151

Deferred government grant income

-

-

(167)

(27)

-

(167)

(27)

Share of net loss of equity investee

-

1,247

1,459

235

-

2,706

436

Changes in operating assets and liabilities, net of acquisition:

         Restricted cash

(1)

(5,507)

6,044

975

(3)

537

87

        Accounts receivable

(244,056)

(101,326)

(330,939)

(53,377)

(64,903)

(432,265)

(69,720)

        Amounts due from related parties

(62,620)

(53,417)

93,213

15,034

(62,620)

39,796

6,419

        Prepayments and other assets

(21,120)

(103,103)

(49,712)

(8,017)

(31,735)

(152,815)

(24,648)

        Capitalized content production costs

(6,371)

(21,974)

(51,805)

(8,356)

(9,343)

(73,779)

(11,900)

        Accounts payable

8,631

71,836

(10,033)

(1,618)

13,205

61,803

9,968

        Advances from customers and deferred revenue

(3,229)

36,933

(3,788)

(611)

(1,413)

33,145

5,346

        Accrued expenses and other liabilities

(16,266)

88,424

246,747

39,800

13,325

335,171

54,060

        Amount due to related parties

70

1

(4)

(1)

70

(3)

-

Net cash provided (used in) by operating activities

(155,156)

(107,640)

173,406

27,970

101,345

65,766

10,607

Cash flows from investing activities:

Acquisition of property and equipment

(84,968)

(72,990)

(71,508)

(11,534)

(113,159)

(144,498)

(23,306)

Purchase of available-for-sale financial assets

-

(21,267)

-

-

-

(21,267)

(3,430)

Proceeds received from maturity of short-term investments

66,037

-

20,000

3,226

1,198,496

20,000

3,226

Short-term investments placed with financial institutions

(4,698)

(280,308)

-

-

(1,395,937)

(280,308)

(45,211)

Proceeds from disposal of property and equipment

10

47

15

2

190

62

10

Collection of loans to third parties

-

-

3,000

484

-

3,000

484

Loans to third parties

-

(3,000)

-

-

-

(3,000)

(484)

Acquisition of shares of investees

-

-

(77,250)

(12,460)

-

(77,250)

(12,460)

Acquisition of licensed copyrights

(245,390)

(495,247)

(366,228)

(59,069)

(411,281)

(861,475)

(138,948)

Acquisition of intangible assets

(930)

-

-

-

(930)

-

-

Net cash used in investing activities

(269,939)

(872,765)

(491,971)

(79,351)

(722,621)

(1,364,736)

(220,119)

Cash flows from financing activities:

Exercise of employee stock options

7,355

4,529

29,754

4,799

19,164

34,283

5,530

Increase in restricted cash 

-

(670,000)

(154,000)

(24,839)

-

(824,000)

(132,903)

Proceeds from short-term bank loans

-

670,253

148,247

23,911

-

818,500

132,016

Proceeds from Ali investment, net of issuance costs

7,387,520

-

-

-

7,387,520

-

-

Net cash provided by financing activities

7,394,875

4,782

24,001

3,871

7,406,684

28,783

4,643

Effect of exchange rate changes on cash and cash equivalents

(14,491)

41,693

(30,473)

(4,915)

4,304

11,220

1,810

Net (decrease) increase in cash and cash equivalents

6,955,289

(933,930)

(325,037)

(52,425)

6,789,712

(1,258,967)

(203,059)

Cash and cash equivalents at the beginning of the period

1,598,644

3,820,742

2,886,812

465,615

1,764,221

3,820,742

616,249

Cash and cash equivalents at the end of the period

8,553,933

2,886,812

2,561,775

413,190

8,553,933

2,561,775

413,190

 

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 Net Revenues

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Net Revenues

1,023,340

1,139,458

1,609,687

259,627

1,798,025

2,749,145

443,410

 Deduct: barter sublicensing revenues 

64,621

83,239

94,891

15,305

138,932

178,130

28,731

Non-GAAP Net Revenues

958,719

1,056,219

1,514,796

244,322

1,659,093

2,571,015

414,679

 2. Non-GAAP Content Costs

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Content costs

463,880

668,991

744,414

120,067

820,440

1,413,405

227,970

 Deduct: amortization of licensed copyrights from nonmonetary content exchanges 

43,187

36,445

69,121

11,149

61,699

105,566

17,027

 Deduct: share-based compensation  

12,694

12,407

25,473

4,109

24,917

37,880

6,110

 Deduct: amortization of intangible assets from business combination 

1,970

-

-

-

3,830

-

-

Non-GAAP content costs

406,029

620,139

649,820

104,809

729,994

1,269,959

204,833

3. Non-GAAP Gross Profit

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Gross profit 

228,569

1,471

254,117

40,987

360,694

255,588

41,223

 Deduct: barter sublicensing revenues

64,621

83,239

94,891

15,305

138,932

178,130

28,731

 Add back: amortization of licensed copyrights from nonmonetary content exchanges 

43,187

36,445

69,121

11,149

61,699

105,566

17,027

 Add back: share-based compensation  

12,694

12,407

25,473

4,109

24,917

37,880

6,110

 Add back: amortization of intangible assets from business combination 

1,970

-

-

-

3,830

-

-

Non-GAAP gross profit (loss)

221,799

(32,916)

253,820

40,940

312,208

220,904

35,629

4. Non-GAAP Operating Expenses

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Operating expenses

384,200

544,064

645,945

104,186

696,163

1,190,009

191,936

 Deduct: share-based compensation  

69,437

67,365

118,891

19,176

127,434

186,256

30,041

 Deduct: amortization of intangible assets from business combination 

2,691

2,691

2,689

434

5,382

5,380

869

Non-GAAP  operating expenses

312,072

474,008

524,365

84,576

563,347

998,373

161,026

5. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Sales and marketing expenses

211,979

320,433

354,259

57,139

397,675

674,692

108,821

 Deduct: share-based compensation  

24,824

32,351

47,305

7,630

45,996

79,656

12,848

 Deduct: amortization of intangible assets from business combination 

1,344

1,344

1,344

217

2,688

2,688

434

Non-GAAP  sales and marketing expenses

185,811

286,738

305,610

49,292

348,991

592,348

95,539

6. Non-GAAP Product Development Expenses

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Product development expenses

98,551

139,573

181,856

29,332

178,689

321,429

51,843

 Deduct: share-based compensation  

19,006

18,708

39,159

6,316

36,212

57,867

9,333

 Deduct: amortization of intangible assets from business combination 

905

905

903

146

1,810

1,808

292

Non-GAAP  product development expenses

78,640

119,960

141,794

22,870

140,667

261,754

42,218

 

7. Non-GAAP General and Administrative Expenses

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

General and administrative expenses

73,670

84,058

109,830

17,715

119,799

193,888

31,272

 Deduct: share-based compensation  

25,607

16,306

32,427

5,230

45,226

48,733

7,860

 Deduct: amortization of intangible assets from business combination 

442

442

442

71

884

884

143

Non-GAAP  general and administrative expenses

47,621

67,310

76,961

12,414

73,689

144,271

23,269

8. Non-GAAP Loss from Operations

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Loss from operations

(154,751)

(542,470)

(380,753)

(61,413)

(334,589)

(923,223)

(148,907)

 Deduct: barter sublicensing revenues

64,621

83,239

94,891

15,305

138,932

178,130

28,731

 Add back: amortization of licensed copyrights from nonmonetary content exchanges 

43,187

36,445

69,121

11,149

61,699

105,566

17,027

 Add back: share-based compensation  

82,131

79,772

144,364

23,285

152,351

224,136

36,151

 Add back: amortization of intangible assets from business combination 

4,661

2,691

2,689

434

9,212

5,380

869

Non-GAAP  loss from operations

(89,393)

(506,801)

(259,470)

(41,850)

(250,259)

(766,271)

(123,591)

9. Non-GAAP Net Loss

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net loss 

(142,278)

(517,441)

(342,019)

(55,165)

(318,322)

(859,460)

(138,622)

 Deduct: barter sublicensing revenues

64,621

83,239

94,891

15,305

138,932

178,130

28,731

 Add back: amortization of licensed copyrights from nonmonetary content exchanges 

43,187

36,445

69,121

11,149

61,699

105,566

17,027

 Add back: share-based compensation  

82,131

79,772

144,364

23,285

152,351

224,136

36,151

 Add back: amortization of intangible assets from business combination 

4,661

2,691

2,689

434

9,212

5,380

869

 Non-GAAP net loss 

(76,920)

(481,772)

(220,736)

(35,602)

(233,992)

(702,508)

(113,306)

10.  Non-GAAP adjusted EBITDA Loss

 For the Three Months Ended 

For the Six Months Ended

June 30, 2014

March 31, 2015

June 30, 2015

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net loss 

(142,278)

(517,441)

(342,019)

(55,165)

(318,322)

(859,460)

(138,622)

 Add back: 

 Depreciation and amortization (excluding amortization of acquired content) (2)

30,698

40,686

45,223

7,294

57,225

85,909

13,856

 Interest income 

(9,923)

(29,811)

(34,265)

(5,527)

(15,976)

(64,076)

(10,335)

 Interest expenses 

-

10,743

17,126

2,762

-

27,869

4,495

 Income taxes 

12

144

(21,273)

(3,431)

12

(21,129)

(3,408)

 EBITDA loss 

(121,491)

(495,679)

(335,208)

(54,067)

(277,061)

(830,887)

(134,014)

 Adjustments: 

 Barter sublicensing revenues

(64,621)

(83,239)

(94,891)

(15,305)

(138,932)

(178,130)

(28,731)

 Amortization of licensed copyrights from nonmonetary content exchanges 

43,187

36,445

69,121

11,149

61,699

105,566

17,027

 Share-based compensation  

82,131

79,772

144,364

23,285

152,351

224,136

36,151

 Amortization of intangible assets from business combination 

4,661

2,691

2,689

434

9,212

5,380

869

 Others, net 

(2,562)

(7,352)

(1,781)

(287)

(303)

(9,133)

(1,473)

Non-GAAP adjusted EBITDA loss 

(58,695)

(467,362)

(215,706)

(34,791)

(193,034)

(683,068)

(110,171)

(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.