Youku Tudou Announces Third Quarter 2012 Unaudited Financial Results

Net Revenues Increased by 84% Year-over-Year; Youku Standalone Turns Profitable at Operational Level

29 Nov, 2012, 17:00 ET from Youku Tudou Inc.

BEIJING, Nov. 29, 2012 /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 the third quarter 2012.

Basis of Presentation

On August 23, 2012, the Company and Tudou Holdings Limited ("Tudou") announced the completion of the merger between Youku and Tudou. Following the completion of the merger, Youku's name was changed from "Youku Inc." to "Youku Tudou Inc." and Tudou's financial results were consolidated into the Company from the date of the completion of the merger. Due to the fact that the sales activities of Youku and Tudou were separately operated until  the end of the third quarter 2012, the financial results of Youku and Tudou are separately disclosed to reflect the Company's actual operational results and performance. In addition, comparison of Tudou's financial results with previous periods cannot be provided because the cut-off date of previous periods would not reflect a consistent basis of comparison. From the fourth quarter 2012 onwards, consolidated financials of Youku Tudou for the full periods will only be presented on a consolidated basis.

The preliminary allocation of the purchase price for Tudou is based upon estimates and assumptions that are subject to change within the purchase price allocation period,  which may last as long as one year from the date of the completion of the merger, as further information becomes available. As a result, the actual amounts allocated to the identifiable assets acquired and liabilities assumed may vary from the amounts initially recorded.

Third Quarter Highlights[1]

  • Consolidated net revenues were RMB502.2 million (US$79.9 million), of which Youku's net revenues were RMB483.5 million (US$76.9 million), an 84% increase from the corresponding period in 2011, exceeding the high end of the revenue guidance previously announced.
  • Consolidated gross profit was RMB125.4 million (US$20.0 million), of which Youku's gross profit was RMB181.4 million (US$28.9 million), a 168% increase from the corresponding period in 2011. Youku's non-GAAP gross profit, which is herein defined as Youku's gross profit excluding share-based compensation expenses, was RMB185.0 million (US$29.4 million) in the third quarter of 2012, a 167% increase from the corresponding period in 2011.
  • Consolidated net loss was RMB91.5 million (US$14.6 million), of which Youku's net loss was RMB91.5 million (US$14.6 million) as compared to a net loss of RMB47.5 million (US$7.6 million) for the same period in 2011.
  • Youku's non-GAAP net profit, which is herein defined as Youku's net loss excluding share-based compensation expenses, investment loss and business combination related expenses, was RMB25.3 million (US$4.0 million) in the third quarter of 2012, as compared to Youku's non-GAAP net loss of RMB28.2 million (US$4.5 million) in the corresponding period in 2011.
  • Consolidated basic and diluted loss per ADS, each representing 18 Class A ordinary shares, for the third quarter of 2012 amounted to RMB0.67 (US$0.11) and RMB0.67 (US$0.11), respectively.
  • Consolidated cash, cash equivalents, restricted cash and short-term investments totaled RMB3.8 billion (US$603.5 million) as of September 30, 2012.
  • Consolidated acquisition of property and equipment for the third quarter of 2012 was RMB33.2 million (US$5.3 million) of which Youku's  acquisition of property and equipment for the third quarter of 2012 was RMB32.3 million (US$5.1 million), as compared to RMB11.8 million (US$1.9 million) for the corresponding period in 2011.
  • Consolidated acquisition of intangible assets for the third quarter of 2012 was RMB148.9 million (US$23.7 million), of which Youku's acquisition of intangible assets for the third quarter of 2012 was RMB122.6 million (US$19.5 million), as compared to RMB189.9 million (US$30.2 million) for the corresponding period in 2011.

[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 RMB6.2848 to US$1.00, the effective noon buying rate as of September 28, 2012 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

"We are pleased with another solid quarter of revenue growth and continuing improvement in cost structure, particularly in bandwidth and personnel related expenses. Youku standalone has achieved profitability at the operational level in the third quarter. This is an important milestone for the Company," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Youku Tudou owns the #1 and #2 online video websites, in terms of daily and weekly unique visitors according to iResearch, and brands in China. With the merger of Youku Tudou, the Company becomes a unique one-stop solution for advertisers, content partners and users. We are confident to see further synergies to be realized in 2013."

"We are very excited by the progress we made in the mobile Internet sector as we witnessed significant traffic growth from mobile devices since the beginning of the year. Youku Paike, our smartphone cam-recording and uploading service program, is also gaining traction and further contributing to our UGC content. We believe that mobile Internet is quickly becoming an important business unit that contributes significantly to our growth and further improve our overall economics," Dele Liu, President of Youku Tudou, added. "While we are excited by the opportunities ahead of us, we did not underestimate the challenges that may arise from this unprecedented large scale merger in China's Internet industry. We did anticipate short-term fluctuations arising from our decisive moves to improve user experience and advertising environment in order to unlock the intrinsic value of Tudou. However I believe we will cross-over the most difficult terrain soon."

Third Quarter 2012 Results

Consolidated net revenues were RMB502.2 million (US$79.9 million), of which Youku's net revenues were RMB483.5 million (US$76.9 million) in the third quarter of 2012, representing an 84% increase from the corresponding period in 2011. The increase exceeds the high end of the revenue guidance previously announced by Youku Inc. The growth was primarily attributable to the increased average spending per advertiser from RMB 1.0 million to RMB1.7 million and increased number of advertisers from 296 to 316, representing an increase of 70% and 7%, respectively, from the corresponding period in 2011.

Consolidated bandwidth costs as a component of cost of revenues were RMB136.6 million (US$21.7 million), of which Youku's bandwidth costs were RMB112.9 million (US$18.0 million) in the third quarter of 2012, representing 23% of Youku's net revenues, as compared to 35% in the corresponding period in 2011.

Consolidated content costs as a component of cost of revenues were RMB182.0 million (US$29.0 million) in the third quarter of 2012, of which Youku's content costs as a component of cost of revenues were RMB136.4 million (US$21.7 million) in the third quarter of 2012, representing 28% of Youku's net revenues, as compared to 26% in the corresponding period in 2011. The increase was primarily due to content price increase during 2011, which we amortize using accelerated method, broadening of our content portfolio and increase in salaries and benefits for our content team. Consolidated in-house content production cost was RMB 9.5 million (US$1.5 million) in the third quarter of 2012, of which Youku's in-house content production cost was RMB8.0 million (US$1.3 million) in the third quarter of 2012, as compared to RMB8.6 million (US$1.4 million) in the corresponding period in 2011.

Consolidated gross profit was RMB125.4 million (US$20.0 million) of which Youku's gross profit was RMB181.4 million (US$28.9 million), an increase of 168% compared to RMB67.8 million (US$10.8 million) for the same period in 2011. Consolidated non-GAAP gross profit, which is herein defined as consolidated gross profit excluding share-based compensation expenses and amortization of intangible assets from business combination in relations to user generated content, was RMB147.2 million (US$23.4 million). Youku's non-GAAP gross profit, which is herein defined as Youku's gross profit excluding share-based compensation expenses, was RMB185.0 million (US$29.4 million) in the third quarter of 2012, an increase of 167% compared to RMB69.2 million (US$11.0 million) in the corresponding period in 2011 due to strong operating leverage.

Consolidated operating expenses were RMB227.6 million (US$36.2 million) in the third quarter of 2012, of which Youku's operating expenses were RMB198.4 million (US$31.6 million) in the third quarter of 2012 as compared to RMB120.1 million (US$19.1 million) in the corresponding period in 2011. Consolidated non-GAAP operating expenses, which is herein defined as consolidated operating expenses excluding share-based compensation expenses , business combination related expenses and amortization of intangible assets from business combination in relations to customer relationship, technology and non-compete provisions, were RMB195.7 million (US$31.1 million). Youku's non-GAAP operating expenses, which is herein defined as Youku's operating expenses excluding share-based compensation expenses and business combination related expenses, were RMB168.2 million (US$26.8 million) in the third quarter of 2012, an increase of 64% compared to RMB102.3 million (US$16.3 million) in the corresponding period in 2011. The increase was primarily due to increases in sales and marketing expenses, product development expenses and general and administrative expenses as a result of the substantial growth of our business. Detailed discussion of each component of operating expenses is as follows:

Consolidated sales and marketing expenses were RMB109.3 million (US$17.4 million) in the third quarter of 2012, of which Youku's sales and marketing expenses were RMB93.3 million (US$14.9 million) in the third quarter of 2012, as compared to RMB74.2 million (US$11.8 million) in the corresponding period in 2011.  Consolidated non-GAAP sales and marketing expenses, which is herein defined as consolidated sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relations to customer relationship, were RMB101.1 million (US$16.1 million) in the third quarter of 2012. Youku's non-GAAP sales and marketing expenses, which is herein defined as Youku's sales and marketing expenses excluding share-based compensation expenses,  were RMB86.1 million (US$13.7 million) in the third quarter of 2012, an increase of 26% compared to RMB68.2 million (US$10.9 million) in the corresponding period in 2011. This increase was primarily due to increases in marketing expenses and commission expenses paid to our sales force in line with our revenue growth.

Consolidated product development expenses were RMB44.9 million (US$7.1 million) in the third quarter of 2012, of which Youku's product development expenses were RMB37.7 million (US$6.0 million) in the third quarter of 2012 as compared to RMB24.1 million (US$3.8 million) in the corresponding period in 2011. Consolidated non-GAAP product development expenses, which is herein defined as consolidated product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relations to technology, were RMB38.1 million (US$6.1 million) in the third quarter of 2012. Youku's non-GAAP product development expenses, which is herein defined as Youku's product development expenses excluding share-based compensation expenses, were RMB31.5 million (US$5.0 million) in the third quarter of 2012, an increase of 70% compared to RMB18.5 million (US$2.9 million) in the corresponding period in 2011. This increase was primarily due to increases in salaries and benefits for our product development personnel in mobile, search, social and paid services.

Consolidated general and administrative expenses were RMB73.4 million (US$11.7 million) in the third quarter of 2012, of which Youku's general and administrative expenses were RMB67.3 million (US$10.7 million) in the third quarter of 2012, as compared to RMB21.8 million (US$3.5 million) in the corresponding period in 2011. Consolidated non-GAAP general and administrative expenses, which is herein defined as consolidated general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relations to non-compete provisions, were RMB56.5 million (US$9.0 million) in the third quarter of 2012. Youku's non-GAAP general and administrative expenses, which is herein defined as Youku's general and administrative expenses excluding share-based compensation expenses and business combination related expenses, were RMB50.6 million (US$8.1 million) in the third quarter of 2012, representing an increase of 225% compared to RMB15.6 million (US$2.5 million) in the corresponding period in 2011. This increase was primarily due to an increase in personnel related expenses and one-time tax charges.

Consolidated net loss was RMB91.5 million (US$14.6 million) of which Youku's net loss was RMB91.5 million (US$14.6 million), as compared to a net loss of RMB47.5 million (US$7.6 million) for the same period in 2011.This increase was primarily due to Youku as the holding company recorded Tudou's incurred loss after the completion of the merger.

Consolidated non-GAAP net loss, which is herein defined as consolidated net loss excluding share-based compensation expenses, amortization of intangible assets from business combination  and business combination related expenses, was RMB37.7 million (US$6.0 million) in the third quarter of 2012. Youku's non-GAAP net profit was RMB25.3 million (US$4.0 million) in the third quarter of 2012, as compared to the non-GAAP net loss of RMB28.2 million (US$4.5 million) in the corresponding period in 2011. The change to profitability at the operational level was due to strong revenue growth and cost savings from bandwidth and personnel-related expenses.

Consolidated non-GAAP adjusted EBITDA loss, which is herein defined as consolidated net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, amortization of intangible assets from business combination business combination related expenses and other non-operating items, was RMB26.8 million (US$4.3 million) in the third quarter of 2012. Youku's non-GAAP adjusted EBITDA profit, which is herein defined as Youku's net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, business combination related expenses, investment loss and other non-operating items, was RMB33.9 million (US$5.4 million) in the third quarter of 2012, as compared to non-GAAP adjusted EBITDA loss of RMB21.5 million (US$3.4 million) in the corresponding period in 2011.

Business Outlook

For the fourth quarter of 2012, the Company expects net revenues will be between RMB610 million and RMB630 million, with advertising net revenues grow by RMB560 million to RMB585 million. This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

Youku's management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on November 29, 2012 (9:00 a.m. Beijing/Hong Kong Time on November 30, 2012).

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.

U.S. 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 74064968#. The replay will be available through December 7, 2012.

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's corporate website at http://ir.youku.com.

About Youku Tudou Inc.

Youku Tudou Inc. (NYSE: YOKU) is China's leading Internet television company. Its Internet television platform enables users to search, view and share high-quality video content quickly and easily across multiple devices. Youku, which stands for "what's best and what's cool" in Chinese, is the most recognized online video brand in China. Youku 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 consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Youku Tudou uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: consolidated non-GAAP gross profit or loss, consolidated non-GAAP operating expenses, consolidated non-GAAP sales and marketing expense, consolidated non-GAAP product development expenses, consolidated non-GAAP general and administrative expenses, consolidated non-GAAP profit or loss from operations, consolidated  non-GAAP net profit or loss and consolidated non-GAAP adjusted EBITDA profit or loss.  We define consolidated non-GAAP 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 relations to user generated content. We define consolidated non-GAAP operating expenses as operating expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relations to customer relationship, technology and non-compete provisions. We define consolidated non-GAAP sales and marketing expenses as consolidated sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relations to customer relationship. We define consolidated non-GAAP product development expense as consolidated product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relations to technology. We define consolidated non-GAAP general and administrative expenses as consolidated general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relations to non-compete provisions. We define consolidated non-GAAP profit or loss from operations as consolidated profit or loss from operations excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define consolidated non-GAAP net profit or loss as consolidated net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define consolidated non-GAAP adjusted EBITDA profit or loss as consolidated net 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.

Due to the fact that the sales activities of Youku and Tudou were separately operated until the end of the third quarter 2012, the financial results of Youku and Tudou are separately disclosed to reflect the Company's actual operational results and performance. On a standalone basis, Youku uses the following non-GAAP financial measures in evaluating its business: non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP sales and marketing expense, 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 adjusted EBITDA profit or loss.  We define Youku's non-GAAP gross profit or loss, non-GAAP sales and marketing expense and non-GAAP product development expenses as the respective nearest comparable GAAP financial measure to exclude share-based compensation expenses. We define Youku's non-GAAP operating expenses as operating expenses excluding share-based compensation expenses and business combination related expenses. We define Youku's non-GAAP general and administrative expenses as general and administrative expenses excluding share-based compensation expenses and business combination related expenses. We define Youku's non-GAAP profit or loss from operations as profit or loss from operations excluding share-based compensation expenses and business combination related expenses. We define Youku's non-GAAP net profit or loss as net profit or loss excluding share-based compensation expenses, investment loss and business combination related expenses. We define Youku's 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 share-based compensation expenses, investment loss, business combination related expenses and other non-operating items.

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

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


 

 YOUKU TUDOU INC. 

 CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except for number of shares)

December 31, 2011 

        September 30, 2012

Youku

 Consolidated

RMB

RMB

US$

ASSETS

(Unaudited)

(Unaudited)

Current assets:

 Cash and cash equivalents 

2,292,538

2,591,782

412,389

 Restricted cash 

-

25,364

4,036

 Short-term investments 

1,400,858

1,176,037

187,124

 Accounts receivable, net 

420,706

1,028,992

163,727

 Intangible assets, net 

16,078

19,072

3,035

 Amounts due from related party 

768

-

-

 Prepayments and other assets 

16,832

43,067

6,854

Total current assets

4,147,780

4,884,314

777,165

Non-current assets:

 Property and equipment, net 

96,567

210,286

33,459

 Long-term investment in related party 

1,707

-

-

 Intangible assets, net 

211,978

1,277,401

203,252

 Capitalized content production costs 

7,782

3,496

556

 Amounts due from related party 

65,352

-

-

 Prepayments and other assets 

144,392

341,469

54,334

 Goodwill 

-

4,242,750

675,081

 Total non-current assets 

527,778

6,075,402

966,682

TOTAL ASSETS

4,675,558

10,959,716

1,743,847

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable 

57,276

187,768

29,877

 Advances from customers and deferred revenue 

3,140

32,414

5,158

 Amounts due to related party 

2,794

-

-

 Accrued expenses and other liabilities 

390,607

933,177

148,481

 Current portion of long-term debt 

9,182

30,900

4,917

Total current liabilities

462,999

1,184,259

188,433

Non-current liabilities:

 Deferred tax liability 

-

229,356

36,494

 Other liabilities 

-

97,645

15,537

 Long-term debt 

7,382

-

-

Total non-current liabilities

7,382

327,001

52,031

Total liabilities

470,381

1,511,260

240,464

Commitments and contingencies

Shareholders' equity:

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 1,395,435,339 and 2,283,779,288  issued and outstanding as of December 31, 2011 and September 30, 2012, respectively)

93

149

24

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 659,561,893 and 659,561,893 issued and outstanding as of December 31, 2011 and September 30, 2012, respectively)

49

49

8

 Additional paid-in capital 

5,185,257

10,725,570

1,706,589

 Accumulated deficit 

(871,644)

(1,182,077)

(188,085)

 Accumulated other comprehensive loss 

(108,578)

(95,235)

(15,153)

Total shareholders' equity

4,205,177

9,448,456

1,503,383

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

4,675,558

10,959,716

1,743,847

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF OPERATIONS  

 For the Three Months Ended, 

For the Nine Months Ended

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

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

483,510

18,680

502,190

79,906

1,159,744

184,532

Cost of revenues (Note 1)

(302,087)

(74,706)

(376,793)

(59,953)

(979,992)

(155,930)

Gross profit (loss)

181,423

(56,026)

125,397

19,953

179,752

28,602

Operating expenses:

       Product development

(37,723)

(7,184)

(44,907)

(7,145)

(108,786)

(17,309)

       Sales and marketing

(93,348)

(15,911)

(109,259)

(17,385)

(255,920)

(40,720)

       General and administrative

(67,288)

(6,137)

(73,425)

(11,683)

(165,028)

(26,258)

Total operating expenses

(198,359)

(29,232)

(227,591)

(36,213)

(529,734)

(84,287)

(Loss) profit from operations

(16,936)

(85,258)

(102,194)

(16,260)

(349,982)

(55,685)

Interest income

11,177

335

11,512

1,832

35,490

5,646

Interest expenses

(802)

(224)

(1,026)

(163)

(3,159)

(503)

Investment loss(1)

(82,965)

-

-

-

-

-

Other, net

655

(96)

559

89

8,714

1,387

Total other income (expenses), net

(71,935)

15

11,045

1,758

41,045

6,530

(Loss) profit before income taxes

(88,871)

(85,243)

(91,149)

(14,502)

(308,937)

(49,155)

Income taxes

(2,589)

2,278

(311)

(49)

(1,496)

(239)

Net (loss) profit

(91,460)

(82,965)

(91,460)

(14,551)

(310,433)

(49,394)

Net loss per share, basic and diluted

(0.04)

(0.04)

(0.01)

(0.14)

(0.02)

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

(0.67)

(0.67)

(0.11)

(2.54)

(0.40)

Shares used in computation, basic and diluted

2,454,198,684

2,454,198,684

2,454,198,684

2,201,121,902

2,201,121,902

ADSs used in computation, basic and diluted

136,344,371

136,344,371

136,344,371

122,284,550

122,284,550

(1)   Represents picking up investment loss occurred in combination with Tudou 

 

 YOUKU STANDALONE 

 CONSOLIDATED STATEMENTS OF OPERATIONS  

 For the Three Months Ended, 

For the Nine Months Ended, 

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

September 30,

June 30,

September 30,

September 30,

September 30,

September 30,

September 30,

2011

2012

2012

2012

2011

2012

2012

RMB

RMB

RMB

US$

RMB

RMB

US$

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

262,471

387,387

483,510

76,933

588,315

1,141,064

181,559

Cost of revenues (Note 1)

(194,686)

(310,463)

(302,087)

(48,066)

(453,602)

(905,286)

(144,044)

Gross profit (loss)

67,785

76,924

181,423

28,867

134,713

235,778

37,515

Operating expenses:

       Product development

(24,053)

(35,046)

(37,723)

(6,002)

(48,839)

(101,602)

(16,166)

       Sales and marketing

(74,205)

(80,255)

(93,348)

(14,853)

(163,606)

(240,009)

(38,189)

       General and administrative

(21,845)

(43,017)

(67,288)

(10,706)

(48,178)

(158,891)

(25,282)

Total operating expenses

(120,103)

(158,318)

(198,359)

(31,561)

(260,623)

(500,502)

(79,637)

(Loss) profit from operations

(52,318)

(81,394)

(16,936)

(2,694)

(125,910)

(264,724)

(42,122)

Interest income

8,677

12,375

11,177

1,778

12,923

35,155

5,594

Interest expenses

(1,542)

(982)

(802)

(128)

(5,498)

(2,935)

(467)

Investment loss

-

-

(82,965)

(13,201)

-

(82,965)

(13,201)

Other, net

(2,291)

4,762

655

104

(4,005)

8,810

1,402

Total other income (expenses), net

4,844

16,155

(71,935)

(11,447)

3,420

(41,935)

(6,672)

(Loss) profit before income taxes

(47,474)

(65,239)

(88,871)

(14,141)

(122,490)

(306,659)

(48,794)

Income taxes

-

2,391

(2,589)

(410)

-

(3,774)

(600)

Net (loss) profit

(47,474)

(62,848)

(91,460)

(14,551)

(122,490)

(310,433)

(49,394)

Net loss per share, basic and diluted

(0.02)

(0.03)

(0.04)

(0.01)

(0.06)

(0.14)

(0.02)

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

(0.42)

(0.54)

(0.67)

(0.11)

(1.12)

(2.54)

(0.40)

Shares used in computation, basic and diluted

2,051,993,011

2,079,698,573

2,454,198,684

2,454,198,684

1,972,240,249

2,201,121,902

2,201,121,902

ADSs used in computation, basic and diluted

113,999,611

115,538,809

136,344,371

136,344,371

109,568,902

122,284,550

122,284,550

 

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

Note 1. Cost of Revenues

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

(Amounts in thousands)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 Cost of revenues: 

 Value added, business taxes and surcharges 

38,563

1,711

40,274

6,408

109,946

17,494

 Bandwidth costs 

112,937

23,699

136,636

21,741

361,664

57,546

 Depreciation of servers and other equipment 

14,212

3,634

17,846

2,839

42,266

6,724

 Content costs 

136,375

45,662

182,037

28,965

466,116

74,166

 Total Cost of Revenues 

302,087

74,706

376,793

59,953

979,992

155,930

 

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 For the Three Months Ended, 

 For the Nine Months Ended  

(Amounts in thousands)

Youku

 Consolidated 

 Consolidated 

September 30, 2011

June 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

 RMB 

 US$ 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 (Unaudited) 

 (Unaudited) 

Cash flows from operating activities:

Net loss

(47,474)

(62,848)

(91,460)

(14,551)

(310,433)

(49,394)

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

Depreciation

11,557

14,742

21,617

3,440

50,360

8,013

Bad debt expense

1,066

1,669

9,388

1,494

11,715

1,864

Amortization of intangible assets and capitalized content production costs

43,111

77,338

112,367

17,879

280,888

44,693

Amortization of long-term debt discounts

839

535

441

70

1,592

253

Gain on disposal of  property and equipment

-

-

52

8

52

8

Foreign exchange loss

1,971

(374)

(172)

(27)

(357)

(57)

Share-based compensation

19,295

26,197

30,175

4,802

79,439

12,640

Capital gain from step  business combination 

-

-

-

-

(3,344)

(532)

Change in deferred tax expenses

-

-

(2,278)

(362)

(2,278)

(362)

Change in operating assets and liabilities:

        Accounts receivable

(135,309)

(232,847)

(62,026)

(9,870)

(296,921)

(47,244)

        Prepayments and other assets

(6,911)

19,167

12,277

1,953

42,609

6,780

        Capitalized content production costs

(5,384)

(2,872)

(7,755)

(1,234)

(15,652)

(2,491)

        Accounts payable

-

(2,504)

(14,026)

(2,232)

(16,517)

(2,628)

        Advances from customers

4,444

(12,392)

(13,026)

(2,073)

3,568

568

        Accrued expenses and other liabilities

111,676

83,026

61,651

9,809

154,026

24,508

Net cash (used in) provided by  operating activities

(1,119)

(91,163)

57,225

9,106

(21,253)

(3,381)

Cash flows from investing activities:

Acquisition of property and equipment

(11,797)

(22,603)

(33,168)

(5,278)

(65,840)

(10,476)

Proceeds from short-term investments

65,059

1,145,908

255,923

40,721

1,655,504

263,414

Purchase of short-term investments

(233,190)

-

(1,168,773)

(185,968)

(1,423,247)

(226,459)

Proceeds from disposal of property and equipment

-

-

8

1

8

1

Cash acquired, net of cash paid for acquired subsidiaries

-

-

404,444

64,353

378,666

60,251

Acquisition of intangible assets from related party

-

-

(7,200)

(1,146)

(7,200)

(1,146)

Acquisition of intangible assets

(189,884)

(51,625)

(141,675)

(22,542)

(243,720)

(38,779)

Net cash (used in) provided by investing activities

(369,812)

1,071,680

(690,441)

(109,859)

294,171

46,806

Cash flows from financing activities:

Exercise of employee stock options

2,390

8,483

4,597

731

18,924

3,011

Proceeds from restricted cash

-

-

12,705

2,022

12,705

2,022

Principal repayments on long-term debt

(5,594)

(2,956)

(14,061)

(2,237)

(19,004)

(3,024)

Proceeds from IPO and secondary offering, net of issuance costs

(539)

-

-

-

-

-

Net cash (used in) provided by financing activities

(3,743)

5,527

3,241

516

12,625

2,009

Effect of exchange rate changes on cash and cash equivalents

(44,041)

9,527

6,651

1,058

13,701

2,180

Net (decrease) increase in cash and cash equivalents

(418,715)

995,571

(623,324)

(99,179)

299,244

47,614

Cash and cash equivalents at the beginning of the period

2,806,562

2,219,535

3,215,106

511,568

2,292,538

364,775

Cash and cash equivalents at the end of the period

2,387,847

3,215,106

2,591,782

412,389

2,591,782

412,389

 

Reconciliations of Non-GAAP results of operations measures to the nearest comparable GAAP financial measures (2)(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), unaudited)

 1. Non-GAAP Gross Profit (Loss)

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

Gross profit (loss)

181,423

(56,026)

125,397

19,953

179,752

28,602

 Add back: share-based compensation  

3,602

-

3,602

573

8,215

1,307

 Add back: amortization of intangible assets from business combination 

-

18,237

18,237

2,902

18,237

2,902

Non-GAAP gross profit (loss)

185,025

(37,789)

147,236

23,428

206,204

32,811

 2. Non-GAAP Operating Expenses

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

Operating expenses

198,359

29,232

227,591

36,213

529,734

84,287

 Deduct: share-based compensation  

26,573

-

26,573

4,229

71,224

11,333

 Deduct: business combination related expenses 

3,622

-

3,622

576

28,627

4,555

 Deduct: amortization of intangible assets from business combination 

-

1,709

1,709

272

1,709

272

Non-GAAP operating expenses

168,164

27,523

195,687

31,136

428,174

68,127

 3. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

Sales and marketing expenses

93,348

15,911

109,259

17,385

255,920

40,720

 Deduct: share-based compensation  

7,289

-

7,289

1,160

18,135

2,886

 Deduct: amortization of intangible assets from business combination 

-

854

854

136

854

136

Non-GAAP sales and marketing expenses

86,059

15,057

101,116

16,089

236,931

37,698

4. Non-GAAP Product Development Expenses

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

Product development expenses

37,723

7,184

44,907

7,145

108,786

17,309

 Deduct: share-based compensation  

6,221

-

6,221

990

17,749

2,824

 Deduct: amortization of intangible assets from business combination 

-

574

574

91

574

91

Non-GAAP product development expenses

31,502

6,610

38,112

6,064

90,463

14,394

5. Non-GAAP General and Administrative Expenses

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

General and administrative expenses

67,288

6,137

73,425

11,683

165,028

26,258

 Deduct: share-based compensation  

13,063

-

13,063

2,079

35,340

5,623

 Deduct: business combination related expenses 

3,622

-

3,622

576

28,627

4,555

 Deduct: amortization of intangible assets from business combination 

-

281

281

45

281

45

Non-GAAP general and administrative expenses

50,603

5,856

56,459

8,983

100,780

16,035

 6. Non-GAAP (Loss) Profit from Operations

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

(Loss) profit from operations

(16,936)

(85,258)

(102,194)

(16,260)

(349,982)

(55,685)

 Add back: share-based compensation  

30,175

-

30,175

4,802

79,439

12,640

 Add back: business combination related expenses 

3,622

-

3,622

576

28,627

4,555

 Add back: amortization of intangible assets from business combination 

-

19,946

19,946

3,174

19,946

3,174

Non-GAAP (loss) profit from operations

16,861

(65,312)

(48,451)

(7,708)

(221,970)

(35,316)

7. Non-GAAP Net (Loss) Profit

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

 Net (loss) profit 

(91,460)

(82,965)

(91,460)

(14,551)

(310,433)

(49,394)

 Add back: share-based compensation  

30,175

-

30,175

4,802

79,439

12,640

 Add back: amortization of intangible assets from business combination 

-

19,946

19,946

3,174

19,946

3,174

 Add back: investment loss 

82,965

-

-

-

-

-

 Add back: business combination related expenses 

3,622

-

3,622

576

28,627

4,555

 Non-GAAP net (loss) profit 

25,302

(63,019)

(37,717)

(5,999)

(182,421)

(29,025)

8.  Non-GAAP EBITDA (Loss) Profit

 For the Three Months Ended, 

For the Nine Months Ended

Youku

Tudou

Consolidated

Consolidated

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

September 30, 2012

RMB

RMB

RMB

US$

RMB

US$

 Net (loss) profit 

(91,460)

(82,965)

(91,460)

(14,551)

(310,433)

(49,394)

 Add back: 

 Depreciation and amortization (excluding amortization         of acquired content) (3)

17,030

 

4,601

 

21,631

 

3,442

 

50,404

 

8,020

 Interest income 

(11,177)

(335)

(11,512)

(1,832)

(35,490)

(5,646)

 Interest expenses 

802

224

1,026

163

3,159

503

 Income taxes 

2,589

(2,278)

311

49

1,496

239

 EBITDA (loss) profit 

(82,216)

(80,753)

(80,004)

(12,729)

(290,864)

(46,278)