Youku Tudou Announces Third Quarter 2015 Unaudited Financial Results

19 Nov, 2015, 19:00 ET from Youku Tudou Inc.

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

Third Quarter 2015 Highlights1

  • Net revenues were RMB1.85 billion (US$291.8 million), a 62% increase from the corresponding period in 20142. Non-GAAP3 net revenues were RMB1.70 billion (US$267.6 million) in the third quarter of 2015, a 54% increase from the corresponding period in 2014.
  • Gross profit was RMB311.5 million (US$49.0 million), a 36% increase from the corresponding period in 2014. Non-GAAP gross profit was RMB299.1 million (US$47.1 million) in the third quarter of 2015, a 19% increase from the corresponding period in 2014.
  • Net loss was RMB435.6 million (US$68.5 million), as compared to RMB197.6 million (US$31.1 million) from the corresponding period in 2014. Non-GAAP net loss was RMB316.5 million (US$49.8 million) in the third quarter of 2015, as compared to RMB111.2 million (US$17.5 million) from the corresponding period in 2014.
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares of the Company, for the third quarter of 2015 amounted to RMB2.23 (US$0.35) and RMB2.23 (US$0.35), respectively. Non-GAAP basic and diluted loss per ADS for the third quarter of 2015 amounted to RMB1.62 (US$0.25) and RMB1.62 (US$0.25), respectively.
  • Cash, cash equivalents, restricted cash and short-term investments totaled RMB7.48 billion (US$1.18 billion) as of September 30, 2015.
  • Acquisition of property and equipment for the third quarter of 2015 was RMB93.9 million (US$14.8 million).
  • Acquisition of licensed copyright for the third quarter of 2015 was RMB516.0 million (US$81.2 million).

Third Quarter 2015 Results

Net revenues were RMB1.85 billion (US$291.8 million) in the third quarter of 2015, a 62% increase from the corresponding period in 2014. Non-GAAP net revenues were RMB1.70 billion (US$267.6 million) in the third quarter of 2015, a 54% increase from the corresponding period in 2014, meeting the non-GAAP net revenues guidance previously announced by the Company.

Advertising net revenues were RMB1.35 billion (US$212.2 million) in the third quarter of 2015, a 37% increase from the corresponding period in 2014, meeting the advertising net revenues guidance previously announced by the Company. The growth was primarily attributable to the increased use by brand advertisers of our advertising services as evidenced by an increase in the number of advertisers and the rising average spend per advertiser.

Consumer revenues, which are derived from our subscription-based service, interactive live entertainment and mobile game joint operation, were RMB256.2 million (US$40.3 million) in the third quarter of 2015, a 514% increase from the corresponding period in 2014. The growth was primarily attributable to the increasing user adoption of our consumer services as evidenced by expansion of subscriber base of our subscription-based service, and growing number of paying users and average spend per user of our interactive live entertainment service.

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 RMB6.3556 to US$1.00, the effective noon buying rate as of September 30, 2015 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

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

3 All non-GAAP measures exclude, as applicable, barter sublicensing revenues, amortization of licensed copyrights from nonmonetary content exchanges, share-based compensation expenses and amortization of intangible assets from business combination. For further details on non-GAAP measures, please refer to the reconciliation table and a detailed discussion of the Company's use of non-GAAP information set forth elsewhere in this press release.

Bandwidth costs as a component of cost of revenues were RMB331.4 million (US$52.1 million) in the third quarter of 2015, representing 18% of net revenues, as compared to 20% of  net revenues for the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB896.1 million (US$141.0 million) in the third quarter of 2015, representing 48% of net revenues as compared to 48% of net revenues for the corresponding period in 2014. Non-GAAP content costs were RMB754.6 million (US$118.7 million) in the third quarter of 2015, representing 44% of non-GAAP net revenues, as compared to 44% of non-GAAP net revenues for the corresponding period in 2014. This increase was primarily due to expansion of our video content portfolio to support our new business growth initiatives.

Gross profit was RMB311.5 million (US$49.0 million)in the third quarter of 2015, a 36% increase from the corresponding period in 2014. Non-GAAP gross profit was RMB299.1 million (US$47.1 million) in the third quarter of 2015, a 19% increase from the corresponding period in 2014.

Operating expenses were RMB766.5 million (US$120.6 million) in the third quarter of 2015, as compared to RMB450.3 million (US$70.9 million) for the corresponding period in 2014. Non-GAAP operating expenses were RMB635.0 million (US$99.9 million) in the third quarter of 2015, as compared to RMB386.3 million (US$60.8 million) for the corresponding period in 2014. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB438.5 million (US$69.0 million) in the third quarter of 2015, as compared to RMB286.2 million (US$45.0 million) for the corresponding period in 2014. Non-GAAP sales and marketing expenses were RMB388.1 million (US$61.1 million) in the third quarter of 2015, as compared to RMB262.6 million (US$41.3 million) for the corresponding period in 2014. This increase was primarily due to increases in marketing expenses and commission paid to our sales force in line with our revenue growth.

Product development expenses were RMB205.4 million (US$32.3 million) in the third quarter of 2015, as compared to RMB111.9 million (US$17.6 million) for the corresponding period in 2014. Non-GAAP product development expenses were RMB163.3 million (US$25.7 million) in the third quarter of 2015, as compared to RMB93.3 million (US$14.7 million) for the corresponding period in 2014. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social, subscription and interactive live entertainment services.

General and administrative expenses were RMB122.6 million (US$19.3 million) in the third quarter of 2015, as compared to RMB52.2 million (US$8.2 million) from the corresponding period in 2014. Non-GAAP general and administrative expenses were RMB83.6 million (US$13.2 million) in the third quarter of 2015, as compared to RMB30.3 million (US$4.8 million) from the corresponding period in 2014.

Net loss was RMB435.6 million (US$68.5 million)in the third quarter of 2015, as compared to RMB197.6 million (US$31.1 million) for the corresponding period in 2014. Non-GAAP net loss was RMB316.5 million (US$49.8 million) in the third quarter of 2015, as compared to RMB111.2 million (US$17.5 million) from the corresponding period in 2014.

About Youku Tudou Inc.

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

Safe Harbor Statement

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

About Non-GAAP Financial Measures

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

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

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

For more information, please contact:

Chang You Youku Tudou Inc. Tel: (+8610) 5890-6883 x 8056 Email: changyou@youku.com

 

 YOUKU TUDOU INC. 

 CONSOLIDATED BALANCE SHEETS 

(Amounts in thousands, except for number of shares)

As of

December 31, 2014

September 30, 2015

September 30, 2015

RMB

RMB

US$

ASSETS

(Audited)

(Unaudited)

(Unaudited)

Current assets:

 Cash and cash equivalents 

3,820,742

2,523,301

397,020

 Restricted cash 

617,586

829,691

130,545

 Short-term investments 

4,021,199

4,130,942

649,969

 Accounts receivable   

1,719,760

2,315,902

364,387

 Licensed copyrights, net 

220,152

292,582

46,035

 Amounts due from related parties 

125,204

45,441

7,150

 Deferred tax assets, net 

2,283

2,283

359

 Prepayments and other assets 

117,716

362,933

57,104

Total current assets

10,644,642

10,503,075

1,652,569

Non-current assets:

 Property and equipment, net 

293,027

365,442

57,499

 Long-term investments 

67,293

203,939

32,088

 Available-for-sale financial assets 

-

21,233

3,341

 Licensed copyrights, net 

505,173

671,033

105,581

 Intangible assets, net 

875,502

866,600

136,352

 Capitalized content production costs 

1,678

10,456

1,645

 Film assets 

-

91,843

14,451

 Prepayments and other assets 

431,377

453,054

71,284

 Goodwill 

4,262,569

4,262,569

670,679

 Total non-current assets 

6,436,619

6,946,169

1,092,920

TOTAL ASSETS

17,081,261

17,449,244

2,745,489

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable 

563,009

638,734

100,499

 Advances from customers and deferred revenue  

36,232

154,645

24,332

 Amounts due to related parties 

4

2,345

369

 Accrued expenses and other liabilities 

1,668,122

2,126,698

334,618

 Short-term bank loans 

500,000

819,637

128,963

Total current liabilities

2,767,367

3,742,059

588,781

Non-current liabilities:

 Deferred tax liabilities 

213,608

213,608

33,609

 Other liabilities 

6,570

43,403

6,829

Total non-current liabilities

220,178

257,011

40,438

Total liabilities

2,987,545

3,999,070

629,219

Commitments and contingencies

Shareholders' equity:

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 3,123,742,699 and 3,165,590,881 issued as of December 31, 2014 and September 30, 2015, respectively, 2,834,270,299 and 2,876,118,481 outstanding as of December 31, 2014 and September 30, 2015, respectively)

201

204

32

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

48

48

8

Additional paid-in capital

18,878,497

19,293,943

3,035,739

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

(1,845,892)

(1,845,892)

(290,436)

Statutory reserves

13,146

13,146

2,068

Accumulated deficit

(2,681,658)

(3,976,699)

(625,700)

Accumulated other comprehensive loss

(270,626)

(35,532)

(5,591)

Total shareholders' equity

14,093,716

13,449,218

2,116,120

Non-controlling interest

-

956

150

Total  equity

14,093,716

13,450,174

2,116,270

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

17,081,261

17,449,244

2,745,489

 

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 

 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, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

(Unaudited-As revised)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited-As revised)

(Unaudited)

(Unaudited)

Net revenues (including advertising net revenues from related parties amounting to RMB47,339 and RMB56,147 for the three months ended June 30, 2015 and September 30, 2015, respectively, and RMB151,496 for the nine months ended September 30, 2015)

1,143,000

1,609,687

1,854,841

291,844

2,941,025

4,603,986

724,398

Cost of revenues (Note 1)

(914,630)

(1,355,570)

(1,543,339)

(242,831)

(2,351,961)

(4,036,896)

(635,172)

Gross profit

228,370

254,117

311,502

49,013

589,064

567,090

89,226

Operating expenses:

       Product development

(111,862)

(181,856)

(205,446)

(32,325)

(290,551)

(526,875)

(82,899)

       Sales and marketing

(286,186)

(354,259)

(438,475)

(68,990)

(683,861)

(1,113,167)

(175,147)

       General and administrative

(52,206)

(109,830)

(122,626)

(19,294)

(172,005)

(316,514)

(49,801)

Total operating expenses

(450,254)

(645,945)

(766,547)

(120,609)

(1,146,417)

(1,956,556)

(307,847)

Government grant income

1,110

11,075

379

60

1,990

11,577

1,822

Loss from operations

(220,774)

(380,753)

(454,666)

(71,536)

(555,363)

(1,377,889)

(216,799)

Interest income

22,694

34,265

28,678

4,512

38,670

92,754

14,594

Interest expenses

-

(17,126)

(14,580)

(2,294)

-

(42,449)

(6,679)

Share of net loss of equity investee

-

(1,459)

(1,978)

(311)

-

(4,684)

(737)

Other income, net

431

1,781

27,281

4,292

734

36,414

5,730

Loss before income taxes

(197,649)

(363,292)

(415,265)

(65,337)

(515,959)

(1,295,854)

(203,891)

Income tax expense

-

21,273

(20,316)

(3,197)

(12)

813

128

Net loss

(197,649)

(342,019)

(435,581)

(68,534)

(515,971)

(1,295,041)

(203,763)

Net loss attributable to non-controlling interest

-

-

-

-

-

-

-

Net loss attributable to ordinary shareholders

(197,649)

(342,019)

(435,581)

(68,534)

(515,971)

(1,295,041)

(203,763)

Other comprehensive income (loss), before tax

            Foreign currency translation adjustments

214

(27,165)

225,672

35,508

7,528

235,094

36,990

Other comprehensive income (loss), net of tax

214

(27,165)

225,672

35,508

7,528

235,094

36,990

Comprehensive loss attributable to ordinary shareholders

(197,435)

(369,184)

(209,909)

(33,026)

(508,443)

(1,059,947)

(166,773)

0

0

Net loss per share, basic and diluted

(0.05)

(0.10)

(0.12)

(0.02)

(0.15)

(0.37)

(0.06)

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

(0.96)

(1.76)

(2.23)

(0.35)

(2.76)

(6.66)

(1.05)

Shares used in computation, basic and diluted

3,724,534,275

3,500,437,718

3,518,532,468

3,518,532,468

3,369,848,757

3,501,670,935

3,501,670,935

ADSs used in computation, basic and diluted

206,918,571

194,468,762

195,474,026

195,474,026

187,213,819

194,537,274

194,537,274

 

 

Note 1. Cost of Revenues

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

(Amounts in thousands)

(Unaudited-As revised)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited-As revised)

(Unaudited)

(Unaudited)

 Cost of revenues: 

 Value added, business taxes and surcharges 

97,760

138,329

143,998

22,657

250,268

380,715

59,903

 Bandwidth costs 

229,714

330,258

331,358

52,136

645,141

968,451

152,378

 Depreciation of servers and other equipment 

25,888

38,479

41,948

6,600

70,505

114,776

18,059

 Interactive live entertainment revenue sharing fees 

10,170

70,017

105,838

16,653

14,509

199,942

31,459

 Cost of goods sold 

-

34,073

24,122

3,795

-

63,532

9,997

 Content costs 

551,098

744,414

896,075

140,990

1,371,538

2,309,480

363,376

 Total Cost of Revenues 

914,630

1,355,570

1,543,339

242,831

2,351,961

4,036,896

635,172

 

 

 YOUKU TUDOU INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

For the Three Months Ended

For the Nine Months Ended

(Amounts in thousands)

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

 RMB 

 US$ 

 RMB 

 RMB 

 US$ 

(Unaudited-As revised)

(Unaudited)

 (Unaudited) 

 (Unaudited) 

(Unaudited-As revised)

 (Unaudited) 

 (Unaudited) 

Cash flows from operating activities:

Net loss

(197,649)

(342,019)

(435,581)

(68,534)

(515,971)

(1,295,041)

(203,763)

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

Depreciation of fixed assets

32,081

45,212

51,207

8,057

89,286

137,095

21,571

Bad debt expense

(12,546)

1,862

22,133

3,482

(13,772)

38,795

6,104

Amortization of licensed copyrights

334,857

478,480

575,590

90,564

812,048

1,504,935

236,789

Amortization and impairment of intangible assets and capitalized content production costs

16,571

17,493

14,148

2,226

29,838

45,571

7,170

Barter sublicensing revenues

(36,359)

(94,891)

(153,921)

(24,218)

(175,291)

(332,051)

(52,245)

Loss (Gain) on disposal of  property and equipment

10

135

830

131

228

918

144

Foreign exchange loss (gain)

(58)

21,755

(25,715)

(4,045)

2,952

(24,030)

(3,780)

Share-based compensation

72,372

144,364

154,350

24,286

224,723

378,486

59,551

Deferred government grant income

-

(167)

(83)

(13)

-

(250)

(39)

Share of net loss of equity investee

-

1,459

1,979

311

-

4,685

737

Changes in operating assets and liabilities, net of acquisition:

         Restricted cash

(555,636)

6,044

(542)

(85)

(555,639)

(5)

(1)

        Accounts receivable

(171,241)

(330,939)

(202,671)

(31,889)

(236,144)

(634,936)

(99,902)

        Amounts due from related parties

(9,420)

93,213

39,966

6,288

(72,040)

79,762

12,550

        Prepayments and other assets

21,958

(49,712)

7,149

1,125

(9,777)

(145,666)

(22,919)

        Capitalized content production costs

(17,511)

(51,805)

(58,140)

(9,148)

(26,854)

(131,919)

(20,756)

        Accounts payable

17,079

(10,033)

(679)

(107)

30,284

61,124

9,617

        Advances from customers and deferred revenue

1,783

(3,788)

5,122

806

370

38,267

6,021

        Accrued expenses and other liabilities

249,911

246,747

94,849

14,923

263,236

430,020

67,660

        Amount due to related parties

48

(4)

2,344

369

118

2,341

368

Net cash provided (used in) by operating activities

(253,750)

173,406

92,335

14,529

(152,405)

158,101

24,877

Cash flows from investing activities:

Acquisition of property and equipment

(41,295)

(71,508)

(93,883)

(14,772)

(154,454)

(238,381)

(37,507)

Purchase of available-for-sale financial assets

-

-

-

-

-

(21,267)

(3,346)

Proceeds received from maturity of short-term investments

1,363,276

20,000

3,143,969

494,677

2,561,772

3,163,969

497,824

Short-term investments placed with financial institutions

(2,859,798)

-

(2,906,449)

(457,305)

(4,255,735)

(3,186,757)

(501,409)

Proceeds from disposal of property and equipment

88

15

6

1

278

68

11

Collection of loans to third parties

-

3,000

-

-

-

3,000

472

Loans to third parties

-

-

-

-

-

(3,000)

(472)

Acquisition of shares of investees

(50,000)

(77,250)

(19,697)

(3,099)

(50,000)

(96,947)

(15,254)

Acquisition of licensed copyrights

(343,886)

(366,228)

(515,959)

(81,182)

(755,167)

(1,377,434)

(216,728)

Acquisition of intangible assets

(256)

-

(188)

(30)

(1,186)

(188)

(30)

Net cash used in investing activities

(1,931,871)

(491,971)

(392,201)

(61,710)

(2,654,492)

(1,756,937)

(276,439)

Cash flows from financing activities:

Exercise of employee stock options

6,086

29,754

2,681

422

25,250

36,964

5,816

Increase in restricted cash 

-

(154,000)

611,900

96,277

-

(212,100)

(33,372)

Proceeds from short-term bank loans

(1,293,644)

148,247

-

-

(1,293,644)

818,500

128,784

Principal repayments on short-term loan

-

-

(500,000)

(78,671)

-

(500,000)

(78,671)

Proceeds from non-controlling interests

-

-

956

150

-

956

150

Proceeds from Ali investment, net of issuance costs

(7,504)

-

-

-

7,380,016

-

-

Net cash provided by financing activities

(1,295,062)

24,001

115,537

18,178

6,111,622

144,320

22,707

Effect of exchange rate changes on cash and cash equivalents

272

(30,473)

145,855

22,949

4,576

157,075

24,714

Net (decrease) increase in cash and cash equivalents

(3,480,411)

(325,037)

(38,474)

(6,054)

3,309,301

(1,297,441)

(204,141)

Cash and cash equivalents at the beginning of the period

8,553,933

2,886,812

2,561,775

403,074

1,764,221

3,820,742

601,161

Cash and cash equivalents at the end of the period

5,073,522

2,561,775

2,523,301

397,020

5,073,522

2,523,301

397,020

 

 

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

 1. Non-GAAP Net Revenues

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Net Revenues

1,143,000

1,609,687

1,854,841

291,844

2,941,025

4,603,986

724,398

 Deduct: barter sublicensing revenues 

36,359

94,891

153,921

24,218

175,291

332,051

52,245

Non-GAAP Net Revenues

1,106,641

1,514,796

1,700,920

267,626

2,765,734

4,271,935

672,153

 2. Non-GAAP Content Costs

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Content costs

551,098

744,414

896,075

140,990

1,371,538

2,309,480

363,376

 Deduct: amortization of licensed copyrights from nonmonetary content exchanges 

45,815

69,121

116,175

18,279

107,514

221,741

34,889

 Deduct: share-based compensation  

11,077

25,473

25,314

3,983

35,994

63,194

9,943

 Deduct: amortization of intangible assets from business combination 

1,898

-

-

-

5,728

-

-

Non-GAAP content costs

492,308

649,820

754,586

118,728

1,222,302

2,024,545

318,544

3. Non-GAAP Gross Profit

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Gross profit 

228,370

254,117

311,502

49,013

589,064

567,090

89,226

 Deduct: barter sublicensing revenues

36,359

94,891

153,921

24,218

175,291

332,051

52,245

 Add back: amortization of licensed copyrights from nonmonetary content exchanges 

45,815

69,121

116,175

18,279

107,514

221,741

34,889

 Add back: share-based compensation  

11,077

25,473

25,314

3,983

35,994

63,194

9,943

 Add back: amortization of intangible assets from business combination 

1,898

-

-

-

5,728

-

-

Non-GAAP gross profit (loss)

250,801

253,820

299,070

47,057

563,009

519,974

81,813

4. Non-GAAP Operating Expenses

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Operating expenses

450,254

645,945

766,547

120,609

1,146,417

1,956,556

307,847

 Deduct: share-based compensation  

61,295

118,891

129,036

20,303

188,729

315,292

49,608

 Deduct: amortization of intangible assets from business combination 

2,691

2,689

2,505

394

8,073

7,885

1,241

Non-GAAP  operating expenses

386,268

524,365

635,006

99,912

949,615

1,633,379

256,998

5. Non-GAAP Sales and Marketing Expenses

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Sales and marketing expenses

286,186

354,259

438,475

68,990

683,861

1,113,167

175,147

 Deduct: share-based compensation  

22,256

47,305

49,054

7,718

68,252

128,710

20,251

 Deduct: amortization of intangible assets from business combination 

1,344

1,344

1,344

211

4,032

4,032

634

Non-GAAP  sales and marketing expenses

262,586

305,610

388,077

61,061

611,577

980,425

154,262

6. Non-GAAP Product Development Expenses

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Product development expenses

111,862

181,856

205,446

32,325

290,551

526,875

82,899

 Deduct: share-based compensation  

17,624

39,159

41,207

6,484

53,836

99,074

15,588

 Deduct: amortization of intangible assets from business combination 

905

903

903

142

2,715

2,711

427

Non-GAAP  product development expenses

93,333

141,794

163,336

25,699

234,000

425,090

66,884

 

7. Non-GAAP General and Administrative Expenses

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

General and administrative expenses

52,206

109,830

122,626

19,294

172,005

316,514

49,801

 Deduct: share-based compensation  

21,415

32,427

38,775

6,101

66,641

87,508

13,769

 Deduct: amortization of intangible assets from business combination 

442

442

258

41

1,326

1,142

180

Non-GAAP  general and administrative expenses

30,349

76,961

83,593

13,152

104,038

227,864

35,852

8. Non-GAAP Loss from Operations

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

Loss from operations

(220,774)

(380,753)

(454,666)

(71,536)

(555,363)

(1,377,889)

(216,799)

 Deduct: barter sublicensing revenues

36,359

94,891

153,921

24,218

175,291

332,051

52,245

 Add back: amortization of licensed copyrights from nonmonetary content exchanges 

45,815

69,121

116,175

18,279

107,514

221,741

34,889

 Add back: share-based compensation  

72,372

144,364

154,350

24,286

224,723

378,486

59,551

 Add back: amortization of intangible assets from business combination 

4,589

2,689

2,505

394

13,801

7,885

1,241

Non-GAAP  loss from operations

(134,357)

(259,470)

(335,557)

(52,795)

(384,616)

(1,101,828)

(173,363)

9. Non-GAAP Net Loss

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net loss 

(197,649)

(342,019)

(435,581)

(68,534)

(515,971)

(1,295,041)

(203,763)

 Deduct: barter sublicensing revenues

36,359

94,891

153,921

24,218

175,291

332,051

52,245

 Add back: amortization of licensed copyrights from nonmonetary content exchanges 

45,815

69,121

116,175

18,279

107,514

221,741

34,889

 Add back: share-based compensation  

72,372

144,364

154,350

24,286

224,723

378,486

59,551

 Add back: amortization of intangible assets from business combination 

4,589

2,689

2,505

394

13,801

7,885

1,241

 Non-GAAP net loss 

(111,232)

(220,736)

(316,472)

(49,793)

(345,224)

(1,018,980)

(160,327)

10.  Non-GAAP adjusted EBITDA Loss

 For the Three Months Ended 

For the Nine Months Ended

September 30, 2014

June 30, 2015

September 30, 2015

September 30, 2015

September 30, 2014

September 30, 2015

September 30, 2015

RMB

RMB

RMB

US$

RMB

RMB

US$

 Net loss 

(197,649)

(342,019)

(435,581)

(68,534)

(515,971)

(1,295,041)

(203,763)

 Add back: 

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

32,091

45,223

51,217

8,059

89,316

137,126

21,576

 Interest income 

(22,694)

(34,265)

(28,678)

(4,512)

(38,670)

(92,754)

(14,594)

 Interest expenses 

-

17,126

14,580

2,294

-

42,449

6,679

 Income taxes 

-

(21,273)

20,316

3,197

12

(813)

(128)

 EBITDA loss 

(188,252)

(335,208)

(378,146)

(59,496)

(465,313)

(1,209,033)

(190,230)

 Adjustments: 

 Barter sublicensing revenues

(36,359)

(94,891)

(153,921)

(24,218)

(175,291)

(332,051)

(52,245)

 Amortization of licensed copyrights from nonmonetary content exchanges 

45,815

69,121

116,175

18,279

107,514

221,741

34,889

 Share-based compensation  

72,372

144,364

154,350

24,286

224,723

378,486

59,551

 Amortization of intangible assets from business combination 

4,589

2,689

2,505

394

13,801

7,885

1,241

 Others, net 

(431)

(1,781)

(27,281)

(4,292)

(734)

(36,414)

(5,730)

Non-GAAP adjusted EBITDA loss 

(102,266)

(215,706)

(286,318)

(45,047)

(295,300)

(969,386)

(152,524)

(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.