Youku Tudou Announces Third Quarter 2013 Unaudited Financial Results Mobile Daily Video Views Surpassed 300 million; Projected to Reach Non-GAAP Profitability in Q4 2013

BEIJING, Nov. 14, 2013 /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 2013.

Basis of Presentation

On August 23, 2012, the Company and Tudou Holdings Limited ("Tudou") announced the completion of the merger between Youku and Tudou. Following the completion of the merger, Tudou's financial results were consolidated into the Company. Based on Youku's review with Tudou management of Tudou's publicly disclosed summary of significant accounting policies prior to the merger, certain adjustments to the historical statement of operations have been made to conform its accounting policies to those of Youku's. Due to the fact that Tudou's historical statements of operations for the third quarter of 2012 consist of stand-alone historical financial information without these adjustments for the period from July 1, 2012 to August 22, 2012, and consolidated financial information with these adjustment for the period from August 23, 2012 to September 30, 2012, we do not believe that comparison of the Company's financial results with the corresponding period in 2012 can be provided on a consistent basis. For ease of reference only, we present comparison of our financial results for the third quarter of 2013 and those of the second quarter of 2013 in this press release for this quarter. We would like to draw your attention to the seasonal nature of our operations and quarter-to-quarter fluctuations. Please refer to Item 3.D Key Information—Risk Factors and Item 5 Operating and Financial review and Prospects of the Company's 2012 annual report on Form 20-F.

Third Quarter Highlights[1]

  • Net revenues were RMB857.7 million (US$140.2 million), a 14% increase quarter over quarter.
  • Our accumulated traffic data of TV serial dramas and movies reflected a new consumption pattern and we have adjusted our accounting estimates on content costs amortization accordingly.  This resulted in further acceleration of content costs amortization starting from the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, non-GAAP content costs of RMB334.1 million (US$54.6 million), or 39% of net revenues, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) lower than the reported figures.
  • Gross profit was RMB82.3 million (US$13.4 million). Non-GAAP gross profit, which is herein defined as gross profit excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content, was RMB100.4 million (US$16.4 million). If we had not adopted the newly adjusted amortization estimates, a non-GAAP gross profit of RMB244.6 million (US$40.0 million), a 20% increase quarter over quarter, or 29% of net revenues, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) higher than the reported figures.
  • Net loss was RMB218.6 million (US$35.7million). 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 RMB159.6 million (US$26.1 million). If we had not adopted the newly adjusted amortization estimates, a non-GAAP net loss of RMB15.4 million (US$2.5 million), a decrease of 65% quarter over quarter, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) lower than the reported figures.
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares, amounted to RMB1.31 (US$0.21) and RMB1.31 (US$0.21), respectively.
  • Cash, cash equivalents, restricted cash and short-term investments totaled RMB3.2 billion (US$523.5 million) as of September 30, 2013.
  • Acquisition of property and equipment was RMB67.3 million (US$11.0 million).
  • Acquisition of intangible assets was RMB171.6 million (US$28.0 million).

"We are happy that we grew the topline by a strong 14% quarter over quarter and our mobile traffic surged to over 300 million video views per day. We will continue to drive mobile monetization and ramp up revenue from local advertising clients, content marketing solutions and paid services," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "We expect that Youku Tudou will be non-GAAP profitable in the fourth quarter of 2013 after Youku on a stand-alone basis reached the same financial milestone in third quarter of 2012, demonstrating the success of the Youku Tudou merger and solid execution by the team."

Dele Liu, President of Youku Tudou, added, "We achieved further economies-of-scale for the group resulting in a significant narrowing of our loss at the operational level. We were able to control costs as we further leveraged the scale of our platform and in-house production capabilities. Our earlier decision to build an ecosystem for Original and User Generated Content (UGC) has continued to pay off." 

Third Quarter 2013 Results

Net revenues were RMB857.7 million (US$140.2 million) in the third quarter of 2013, a 14% increase quarter over quarter and meeting the net revenues guidance previously announced by the Company. Advertising net revenues were RMB745.0 million (US$121.7 million), a 3% increase quarter over quarter and meeting the advertising net revenues guidance previously announced by the Company. The growth was primarily attributable to the increased use by brand advertisers of our advertising services as evidenced by an increase in the number of advertisers and the rising average spend per advertiser.

Bandwidth costs as a component of cost of revenues were RMB181.7 million (US$29.7 million) in the third quarter of 2013, representing 21% of the net revenues, as compared to RMB164.1 million (US$26.8 million) in the second quarter in 2013, representing 22% of net revenues of that quarter.

Content costs as a component of cost of revenues were RMB496.5 million (US$81.1 million) in the third quarter of 2013. Non-GAAP content costs, which is herein defined as content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content, were RMB478.3 million (US$78.2 million) in the third quarter of 2013, representing 56% of net revenues. Our accumulated traffic data of TV serial dramas and movies reflected a new consumption pattern and we have adjusted our accounting estimates on content costs amortization accordingly.  This resulted in further acceleration of content costs amortization starting from the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, non-GAAP content costs of RMB334.1 million (US$54.6 million), or 39% of net revenues, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) lower than the reported figures.

Gross profit was RMB82.3 million (US$13.4 million) in the third quarter of 2013. Non-GAAP gross profit was RMB100.4 million (US$16.4 million) in the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, a non-GAAP gross profit of RMB244.6 million (US$40.0 million), a 20% increase quarter over quarter, or 29% of net revenues, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) higher than the reported figures.

Operating expenses were RMB312.8 million (US$51.1 million) in the third quarter of 2013, as compared to RMB306.8 million (US$50.1 million) in the second quarter of 2013. Non-GAAP operating expenses, which is herein defined as operating expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to customer relationship, technology and non-compete provisions, were RMB271.9 million (US$44.4 million) in the third quarter of 2013, a 4% increase compared to RMB260.6 million (US$42.6 million) in the second quarter of 2013. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB171.8 million (US$28.1 million) in the third quarter of 2013, as compared to RMB165.2 million (US$27.0 million) in the second quarter of 2013. Non-GAAP sales and marketing expenses, which is herein defined as sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship, were RMB157.3 million (US$25.7 million) in the third quarter of 2013, a 5% increase compared to RMB150.4 million (US$24.6 million) in the second quarter of 2013.

Product development expenses were RMB78.6 million (US$12.8 million) in the third quarter of 2013, as compared to RMB66.1 million (US$10.8 million) in the second quarter of 2013.  Non-GAAP product development expenses, which is herein defined as product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology, were RMB67.5 million (US$11.0 million) in the third quarter of 2013, a 23% increase compared to RMB54.8 million (US$9.0 million) in the second quarter of 2013. This increase was primarily due to higher personnel related expenses for our product development in mobile, search, social and paid-services.

General and administrative expenses were RMB62.5 million (US$10.2 million) in the third quarter of 2013, as compared to RMB75.6 million (US$12.4 million) in the second quarter of 2013. Non-GAAP general and administrative expenses, which is herein defined as general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to non-compete provisions, were RMB47.1 million (US$7.7 million) in the third quarter of 2013, a 15% decrease compared to RMB55.4 million (US$9.1 million) in the second quarter of 2013.

Net loss was RMB218.6 million (US$35.7 million) in the third quarter of 2013. Non-GAAP net loss was RMB159.6 million (US$26.1 million) in the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, a non-GAAP net loss of RMB15.4 million (US$2.5 million), a decrease of 65% quarter over quarter, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) lower than the reported figures.

Non-GAAP EBITDA Loss, which is herein defined as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, amortization of intangible assets from business combination, business combination related expenses and other non-operating items, was RMB141.1 million (US$23.1 million) in the third quarter of 2013, as compared to a non-GAAP EBITDA loss of 28.7 million (US$4.7 million) in the second quarter of 2013. If we had continued using the accounting estimates adopted in the second quarter of 2013 for amortizing content costs, a non-GAAP EBITDA profit of RMB3.1 million (US$0.5 million) would have been recorded in the third quarter of 2013 instead.

Business Outlook

For the fourth quarter of 2013, the Companyexpects net revenues will be between RMB860 million and RMB900 million, which implies a 35% to 42% year over year increase, with advertising net revenues contributing between RMB780 million and RMB820 million, which implies a 36% to 43% year over year increase.

The Company is expected to reach non-GAAP profitability in the fourth quarter of 2013.

These forecasts reflect the Company's current and preliminary view, which is subject to change.

Conference Call Information

Youku Tudou's management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on November 14, 2013 (9:00 a.m. Beijing/Hong Kong Time on November 15, 2013).

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

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

A replay of the call will be available by dialing +1-855-452-5696 and entering passcode 96753162#. The replay will be available through November 22, 2013.

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

About Youku Tudou Inc.

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

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Youku Tudou's strategic and operational plans, contain forward-looking statements. Youku 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 does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

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

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

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

For more information, please contact:

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

[1]

The reporting currency of the Company is Renminbi ("RMB"), but for the convenience of the reader, the amounts presented throughout the release are in US dollars ("US$"). Unless otherwise noted, all conversions from RMB to US$ are made at a rate of RMB6.12 to US$1.00, the effective noon buying rate as of September 30, 2013 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

 

 


YOUKU TUDOU INC.

 CONSOLIDATED BALANCE SHEETS









(Amounts in thousands, except for number of shares)


For the Three Months Ended


December 31, 2012


September 30, 2013


September 30, 2013




RMB


RMB


US$

ASSETS




(Unaudited)


(Unaudited)









Current assets:








 Cash and cash equivalents


1,655,857


797,502


130,311


 Restricted cash


9,003


1,550


253


 Short-term investments


2,110,073


2,404,909


392,959


 Accounts receivable, net


932,796


1,385,267


226,351


 Intangible assets, net


19,607


80,575


13,166


 Deferred tax assets


10,470


10,470


1,711


 Prepayments and other assets


64,909


53,500


8,740

Total current assets


4,802,715


4,733,773


773,491









Non-current assets:








 Property and equipment, net


200,681


237,828


38,861


 Intangible assets, net


1,304,923


1,205,823


197,030


 Capitalized content production costs


-


5,831


953


 Prepayments and other assets


229,185


192,046


31,380


 Goodwill


4,255,570


4,255,570


695,355

 Total non-current assets


5,990,359


5,897,098


963,579









TOTAL ASSETS


10,793,074


10,630,871


1,737,070









LIABILITIES AND SHAREHOLDERS' EQUITY















Current liabilities:








 Accounts payable


181,878


261,649


42,753


 Advances from customers


21,603


65,798


10,751


 Accrued expenses and other liabilities


981,353


1,100,224


179,776


 Current portion of long-term debt


7,441


-


-

Total current liabilities


1,192,275


1,427,671


233,280









Non-current liabilities








 Deferred tax liability


224,374


224,374


36,662


 Other liabilities


19,552


70


11

Total non-current liabilities


243,926


224,444


36,673









Total liabilities


1,436,201


1,652,115


269,953









Commitments and contingencies















Shareholders' equity








Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 2,286,643,502 and 2,348,384,077 issued and outstanding as of December 31, 2012 and September 30, 2013, respectively)


149


153


25


Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 659,561,893 and 659,561,893 issued and outstanding as of December 31, 2012 and September 30, 2013, respectively)


49


49


8


 Additional paid-in capital


10,768,204


10,996,216


1,796,767


 Statutory reserves


1,500


1,500


245


 Accumulated deficit


(1,297,147)


(1,853,310)


(302,828)


 Accumulated other comprehensive loss


(115,882)


(165,852)


(27,100)

Total shareholders' equity


9,356,873


8,978,756


1,467,117









TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


10,793,074


10,630,871


1,737,070

 

 

 



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)










June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)














Net revenues


753,457


857,743


140,154


1,159,744


2,127,197


347,582














Cost of revenues (Note 1)


(563,281)


(775,436)


(126,705)


(979,992)


(1,840,483)


(300,732)














Gross profit


190,176


82,307


13,449


179,752


286,714


46,850














Operating expenses:













       Product development


(66,051)


(78,622)


(12,847)


(108,786)


(201,501)


(32,925)

       Sales and marketing


(165,201)


(171,763)


(28,066)


(255,920)


(464,564)


(75,908)

       General and administrative


(75,569)


(62,458)


(10,206)


(165,028)


(221,377)


(36,173)

Total operating expenses


(306,821)


(312,843)


(51,119)


(529,734)


(887,442)


(145,006)














Loss from operations


(116,645)


(230,536)


(37,670)


(349,982)


(600,728)


(98,156)














Interest income


7,090


7,284


1,190


35,490


21,553


3,521

Interest expenses


(158)


-


-


(3,159)


(545)


(89)

Other, net


4,720


4,694


767


8,714


23,695


3,872

Total other income, net


11,652


11,978


1,957


41,045


44,703


7,304














Loss before income taxes


(104,993)


(218,558)


(35,713)


(308,937)


(556,025)


(90,852)

Income taxes


(58)


(80)


(13)


(1,496)


(138)


(24)














Net loss


(105,051)


(218,638)


(35,726)


(310,433)


(556,163)


(90,876)







0







Net loss per share, basic and diluted


(0.04)


(0.07)


(0.01)


(0.14)


(0.19)


(0.03)

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


(0.63)


(1.31)


(0.21)


(2.54)


(3.36)


(0.55)

Shares used in computation, basic and diluted


2,980,162,122


2,995,701,280


2,995,701,280


2,201,121,902


2,977,998,887


2,977,998,887

ADSs used in computation, basic and diluted


165,564,562


166,427,848


166,427,848


122,284,550


165,444,382


165,444,382

 

 

 

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












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

(Amounts in thousands)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

 Cost of revenues:













 Value added, business taxes and surcharges


74,334


75,480


12,333


109,946


198,739


32,474

 Bandwidth costs


164,111


181,670


29,685


361,664


506,826


82,815

 Depreciation of servers and other equipment


21,384


21,827


3,566


42,266


65,681


10,731

 Content costs


303,452


496,459


81,121


466,116


1,069,237


174,712

 Total Cost of Revenues


563,281


775,436


126,705


979,992


1,840,483


300,732

 

 

 


YOUKU TUDOU INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS














 For the Three Months Ended


 For the Nine Months Ended 

(Amounts in thousands)










June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013




RMB


RMB


US$


 RMB


 RMB


 US$




(Unaudited)


(Unaudited)


(Unaudited)


 (Unaudited)


 (Unaudited)


 (Unaudited)

Cash flows from operating activities:













Net loss


(105,051)


(218,638)


(35,726)


(310,433)


(556,163)


(90,876)

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














Depreciation


27,502


30,342


4,958


50,360


84,639


13,830


Bad debt expense


10,035


19,945


3,259


11,715


37,056


6,055


Amortization of intangible assets and capitalized content production costs


176,523


327,334


53,486


280,888


642,848


105,041


Amortization of long-term debt discounts


92


-


-


1,592


313


51


Gain on disposal of  property and equipment


(645)


788


129


52


838


137


Foreign exchange loss


(847)


2,540


415


(357)


2,018


330


Share-based compensation


48,529


48,918


7,994


79,439


135,297


22,106


Gain form remeasurement of previously held investment in acquired subsidiary


-


-


-


(3,344)


-


-


Deferred income tax benefits


-


-


-


(2,278)


-


-


Change in operating assets and liabilities:














         Restricted cash


704


6,759


1,104


-


7,453


1,218


        Accounts receivable


(294,698)


(161,184)


(26,337)


(296,921)


(489,526)


(79,988)


        Prepayments and other assets


21,794


37,051


6,054


42,609


60,192


9,835


        Capitalized content production costs


(42,382)


(3,004)


(491)


(15,652)


(29,425)


(4,808)


        Accounts payable


11,179


702


115


(16,517)


2,017


330


        Advances from customers


(4,180)


9,918


1,621


3,568


44,195


7,222


        Accrued expenses and other liabilities


88,046


20,027


3,271


154,026


120,541


19,696

Net cash (used in) provided by  operating activities


(63,399)


121,498


19,852


(21,253)


62,293


10,179















Cash flows from investing activities:














Acquisition of property and equipment


(34,549)


(67,252)


(10,989)


(65,840)


(129,165)


(21,105)


Proceeds received from maturity of short-term investments


621,948


1,358,761


222,020


1,655,504


2,017,412


329,642


Short-term investments placed with financial institutions


(739,059)


(1,405,173)


(229,603)


(1,423,247)


(2,329,822)


(380,690)


Proceeds from disposal of property and equipment


1,282


-


-


8


1,282


209


Cash acquired, net of cash paid for acquired subsidiaries


-


-


-


378,666


-


-


Acquisition of intangible assets from related party


-


-


-


(7,200)


-


-


Acquisition of intangible assets


(102,500)


(171,620)


(28,042)


(243,720)


(513,041)


(83,830)

Net cash (used in) provided by investing activities


(252,878)


(285,284)


(46,614)


294,171


(953,334)


(155,774)















Cash flows from financing activities:














Exercise of employee stock options


35,935


27,676


4,522


18,924


92,351


15,090


Proceeds from restricted cash


-


-


-


12,705


-


-


Principal repayments on long-term debt


(3,330)


(1,111)


(182)


(19,004)


(7,677)


(1,254)

Net cash  provided by financing activities


32,605


26,565


4,340


12,625


84,674


13,836

Effect of exchange rate changes on cash and cash equivalents


(32,608)


(13,087)


(2,138)


13,701


(51,988)


(8,495)

Net (decrease) increase in cash and cash equivalents


(316,280)


(150,308)


(24,560)


299,244


(858,355)


(140,254)

Cash and cash equivalents at the beginning of the period


1,264,090


947,810


154,871


2,292,538


1,655,857


270,565

Cash and cash equivalents at the end of the period


947,810


797,502


130,311


2,591,782


797,502


130,311


 

Reconciliations of Non-GAAP results of operations measures to the nearest comparable GAAP financial measures (1) (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), unaudited)














 1. Non-GAAP Content Costs

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

Content costs


303,452


496,459


81,121


466,116


1,069,237


174,712

 Deduct: share-based compensation  


6,465


12,136


1,983


8,215


24,264


3,964

 Deduct: amortization of intangible assets from business combination 


7,741


5,984


978


18,237


22,056


3,604

Non-GAAP content costs


289,246


478,339


78,160


439,664


1,022,917


167,144














2. Non-GAAP Gross Profit

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

Gross profit


190,176


82,307


13,449


179,752


286,714


46,850

 Add back: share-based compensation  


6,465


12,136


1,983


8,215


24,264


3,964

 Add back: amortization of intangible assets from business combination 


7,741


5,984


978


18,237


22,056


3,604

Non-GAAP gross profit


204,382


100,427


16,410


206,204


333,034


54,418



























 3. Non-GAAP Operating Expenses

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

Operating expenses


306,821


312,843


51,119


529,734


887,442


145,006

 Deduct: share-based compensation  


42,064


36,782


6,011


71,224


111,033


18,142

 Deduct: business combination related expenses 


-


-


-


28,627


-


-

 Deduct: amortization of intangible assets from business combination 


4,155


4,155


679


1,709


12,465


2,036

Non-GAAP  operating expenses


260,602


271,906


44,429


428,174


763,944


124,828



























4. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

Sales and marketing expenses


165,201


171,763


28,066


255,920


464,564


75,908

 Deduct: share-based compensation  


12,708


12,366


2,021


18,135


35,135


5,741

 Deduct: amortization of intangible assets from business combination 


2,077


2,077


339


854


6,231


1,017

Non-GAAP  sales and marketing expenses


150,416


157,320


25,706


236,931


423,198


69,150



























5. Non-GAAP Product Development Expenses

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

Product development expenses


66,051


78,622


12,847


108,786


201,501


32,925

 Deduct: share-based compensation  


9,890


9,748


1,593


17,749


26,605


4,347

 Deduct: amortization of intangible assets from business combination 


1,395


1,395


228


574


4,185


684

Non-GAAP  product development expenses


54,766


67,479


11,026


90,463


170,711


27,894



























6. Non-GAAP General and Administrative Expenses

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

General and administrative expenses


75,569


62,458


10,206


165,028


221,377


36,173

 Deduct: share-based compensation  


19,466


14,668


2,397


35,340


49,293


8,054

 Deduct: business combination related expenses 


-


-


-


28,627


-


-

 Deduct: amortization of intangible assets from business combination 


683


683


112


281


2,049


335

Non-GAAP  general and administrative expenses


55,420


47,107


7,697


100,780


170,035


27,784














7. Non-GAAP Loss from Operations

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

Loss from operations


(116,645)


(230,536)


(37,670)


(349,982)


(600,728)


(98,156)

 Add back: share-based compensation  


48,529


48,918


7,994


79,439


135,297


22,106

 Add back: business combination related expenses 


-


-


-


28,627


-


-

 Add back: amortization of intangible assets from business combination 


11,896


10,139


1,657


19,946


34,521


5,640

Non-GAAP  loss from operations


(56,220)


(171,479)


(28,019)


(221,970)


(430,910)


(70,410)



























8. Non-GAAP  Net Loss 

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

 Net loss 


(105,051)


(218,638)


(35,726)


(310,433)


(556,163)


(90,876)

 Add back: share-based compensation  


48,529


48,918


7,994


79,439


135,297


22,106

 Add back: business combination related expenses 


-


-


-


28,627


-


-

 Add back: amortization of intangible assets from business combination 


11,896


10,139


1,657


19,946


34,521


5,640

 Non-GAAP net loss 


(44,626)


(159,581)


(26,075)


(182,421)


(386,345)


(63,130)



























9.  Non-GAAP EBITDA Loss

 For the Three Months Ended 


For the Nine Months Ended












June 30, 2013


September 30, 2013


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2013



RMB


RMB


US$


RMB


RMB


US$

 Net loss 


(105,051)


(218,638)


(35,726)


(310,433)


(556,163)


(90,876)

 Add back: 













 Depreciation and amortization (excluding amortization 













      of acquired content ) (2)


27,516


30,356


4,960


50,404


84,682


13,837

 Interest income 


(7,090)


(7,284)


(1,190)


(35,490)


(21,553)


(3,521)

 Interest expenses 


158


-


-


3,159


545


89

 Income taxes 


58


80


13


1,496


138


24

 EBITDA loss 


(84,409)


(195,486)


(31,943)


(290,864)


(492,351)


(80,447)














 Adjustments: 













 Share-based compensation  


48,529


48,918


7,994


79,439


135,297


22,106

 Business combination related expenses 


-


-


-


28,627


-


-

 Amortization of intangible assets from business combination 


11,896


10,139


1,657


19,946


34,521


5,640

 Others, net 


(4,720)


(4,694)


(767)


(8,714)


(23,695)


(3,872)

Non-GAAP EBITDA loss


(28,704)


(141,123)


(23,059)


(171,566)


(346,228)


(56,573)



























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

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

 

SOURCE Youku Tudou Inc.



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