Youku Tudou Announces Third Quarter 2012 Unaudited Financial Results Net Revenues Increased by 84% Year-over-Year; Youku Standalone Turns Profitable at Operational Level

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)
















 Adjustments: 















 Share-based compensation  


30,175


-


30,175


4,802




79,439


12,640

 Business combination related expenses 


3,622


-


3,622


576




28,627


4,555

 Amortization of intangible assets from business combination 




19,946


19,946


3,174




19,946


3,174

 Investment loss 


82,965


-


-


-




-


-

 Others, net 


(655)


96


(559)


(89)




(8,714)


(1,387)

Non-GAAP EBITDA (loss) profit


33,891


(60,711)


(26,820)


(4,266)




(171,566)


(27,296)































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

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

 

 

SOURCE Youku Tudou Inc.



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