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

14 Nov, 2013, 17:00 ET from Youku Tudou Inc.

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.