Youku.com Announces Fourth Quarter and Fiscal Year 2010 Unaudited Financial Results

Fourth Quarter and Fiscal Year 2010 Net Revenues Increased by 183% and 152% Year-over-Year, respectively

Feb 28, 2011, 18:00 ET from Youku.com Inc.

BEIJING, Feb. 28, 2011 /PRNewswire-Asia/ -- Youku.com Inc. (NYSE: YOKU), China's leading Internet television company ("Youku" or the "Company"), today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter Highlights(1)

  • Net revenues were RMB152.5 million (US$23.1 million), a 183% increase from the corresponding period in 2009.(2)
  • Gross profit was RMB50.4 million (US$7.6 million), compared to a gross loss of RMB5.2 million ($0.8 million) for the corresponding period in 2009.
  • Net loss was RMB37.7 million (US$5.7 million), an 18% decrease from the corresponding period in 2009.
  • Adjusted EBITDA (non-GAAP financial measure) was RMB6.4 million (US$1.0 million), compared to an adjusted EBITDA loss of RMB31.6 million (US$4.8 million) for the corresponding period in 2009.

Fiscal Year 2010 Highlights

  • Net revenues were RMB387.1 million (US$58.7 million), a 152% increase from 2009.
  • Gross profit was RMB36.3 million (US$5.5 million), compared to a gross loss of RMB63.1 million ($9.6 million) in 2009.
  • Net loss was RMB204.7 million (US$31.0 million), a 12% increase from 2009.
  • Adjusted EBITDA loss (non-GAAP financial measure) was RMB99.5 million (US$15.1 million), a 26% decrease from an adjusted EBITDA loss of RMB134.5 million (US$20.4 million) in 2009.

"I am very pleased to report a strong fourth quarter, which is also the first time we report financial results as a publicly listed company. Our strong growth has been driven by a surging digital economy in China and our focus on providing the most comprehensive video content library to Chinese users and the best user experience in watching, searching and sharing videos. We are also happy with the achievements we made in our video search engine Soku, P2P software iKu and our wireless products which are rapidly gaining popularity," said Victor Koo, Chairman and Chief Executive Officer.  

"Our brand continues to strengthen, and building on the publicity gained throughout China from our recent IPO in the New York Stock Exchange, our lead over competitors in brand awareness and popularity has further expanded. Looking forward I am confident that Youku will remain at the center of China's online video market," Mr. Koo continued.

"More and more domestic and international companies appreciate the strength of our video platform as an advertising opportunity, and we believe that the outlook for 2011 is promising," Mr. Koo added.  

Dele Liu, Youku's Senior Vice President and Chief Financial Officer, commented, "Riding on the shifting of video advertising dollars online, we have achieved strong revenue growth momentum and significant margin improvement. These results have further added to our optimism and confidence that the right company strategy is to invest aggressively in future growth through investment in content, technology, product innovation and brand."

Fourth Quarter 2010 Results

Net revenues were RMB152.5 million (US$23.1 million) in the fourth quarter of 2010, representing a 183% increase from the corresponding period in 2009. The significant increase of net revenues was mainly due to the strong performance of brand advertising revenues, which amounted to RMB139.4 million (US$21.1 million) in the fourth quarter of 2010, representing a 189% increase from the corresponding period in 2009. The growth was primarily attributable to the increased use by brand advertisers of our advertising services.

Bandwidth costs as a component of cost of revenues were RMB51.7 million (US$7.8 million) in the fourth quarter of 2010, representing 34% of net revenues, compared to 71% in the corresponding period in 2009.

Content costs as a component of cost of revenues were RMB26.2 million (US$4.0 million), representing 17% of net revenues, compared to 10% in the corresponding period in 2009. The increase in content costs was mainly due to expansion of our online video content library and increase in unit acquisition cost of professionally produced content.

Gross profit was RMB50.4 million (US$7.6 million) in the fourth quarter of 2010, compared to a gross loss of RMB5.2 million (US$0.8 million) for the corresponding period in 2009. The significant increase in gross profit was mainly due to increased revenues from brand advertising services.

Operating expenses were RMB59.0 million (US$8.9 million) in the fourth quarter of 2010, an increase of 57% compared to RMB37.6 million in the corresponding period in 2009. The increase was primarily due to increases in sales and marketing expenses, general and administrative expenses and product development expenses as a result of the substantial growth of our business.

Operating loss was RMB8.6 million (US$1.3 million) in the fourth quarter of 2010, representing an 80% decrease from the corresponding period in 2009. The decrease was mainly due to the significant increase in gross profit as noted above.

Net loss was RMB37.7 million (US$5.7 million) in the fourth quarter of 2010, representing an 18% decrease from the corresponding period in 2009. Basic and diluted loss per ADS(3) for the fourth quarter of 2010 amounted to RMB0.89 (US$0.13) and RMB0.89 (US$0.13), respectively.

Adjusted net loss (non-GAAP financial measure), which is herein defined as net loss excluding share-based compensation expenses and change in fair value of derivative financial liabilities and warrant liability, was RMB6.4 million (US$1.0 million) in the fourth quarter of 2010, or an 85% decrease from the corresponding period in 2009.

Adjusted EBITDA (non-GAAP financial measure), which is herein defined as net income or loss before income taxes, interest expenses, interest income, depreciation and amortization, further adjusted for change in fair value of derivative financial liabilities and warrant liability, share-based compensation expenses and other non-operating items, was RMB6.4 million (US$1.0 million) for the fourth quarter of 2010, compared to a loss of RMB31.6 million (US$4.8 million) from the corresponding period in 2009.

Full-Year 2010 Results

Net revenues were RMB387.1 million (US$58.7 million) in the fiscal year 2010, representing a 152% increase from 2009. The significant increase of net revenues for 2010 was mainly due to the substantial increase in brand advertising revenues, which grew by 161% from 2009 to RMB356.9 million (US$54.1 million) in 2010. The growth was primarily attributable to the increased use by brand advertisers of our advertising services.

Bandwidth costs as a component of cost of revenues were RMB191.7 million (US$29.0 million) in 2010, representing 50% of net revenues, compared to 97% in 2009.

Content costs as a component of cost of revenues were RMB82.7 million (US$12.5 million), representing 21% of net revenues, compared to 11% in 2009. The increase in content costs was mainly due to expansion of our online video content library and increase in unit acquisition cost of professionally produced content.

Gross profit was RMB36.3 million (US$5.5 million) in 2010, compared to gross loss of RMB63.1 million (US$9.6 million) in 2009. The significant increase in gross profit was mainly due to increased revenues from brand advertising services. The gross profit margin improved to 9% from a negative margin of 41% in the prior year, mainly due to operating leverage, as cost of revenues represented 91% of net revenues in 2010 compared to 141% in 2009.  

Operating expenses were RMB190.6 million (US$28.9 million) in 2010, an increase of 70% compared to RMB112.2 million (US$17.0 million) from 2009. The increase was primarily due to increases in sales and marketing expenses, general and administrative expenses and product development expenses as a result of the substantial growth of our business.

Operating loss was RMB154.3 million (US$23.4 million) in 2010, representing a decrease of 12% from 2009. The decrease was mainly due to the significant increase in gross profit as noted above.

Net loss was RMB204.7 million (US$31.0 million) in 2010, representing a 12% increase from 2009.

Basic and diluted loss per ADS for 2010 amounted to RMB7.90 (US$1.2) and RMB7.90 (US$1.2), respectively.

Adjusted net loss (non-GAAP financial measure) was RMB148.4 million (US$22.5 million) in 2010, or a 15% decrease from 2009.

Adjusted EBITDA loss (non-GAAP financial measure) was RMB99.5 million (US$15.1 million) in 2010, or a decrease of 26% from 2009.

Business Outlook

For the first quarter of 2011, the Company expects the year-on-year net revenues growth at a rate of 105% to 115%. This forecast reflects Youku's current and preliminary view, which is subject to change.

Conference Call Information

Youku's management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on February 28, 2011 (9:00 a.m. Beijing/Hong Kong Time on March 1, 2011).

Interested parties may participate in the conference call by dialing one of the following numbers below and entering passcode Youku#, 10-15 minutes before the call starts.

US Toll Free Dial In: 1-866-700-6293

US Toll / International Dial In: 1-617-213-8835

China Toll: 86-4008811629/30

China (Telecom) Toll Free: 108001300399

Hong Kong Toll / International Dial In:  852-3002-1672

Participant Passcode: Youku#

A replay of the call will be available by dialing 1-888-286-8010 (international 1-617-801-6888), and entering passcode 53661444#. The replay will be available through March 15, 2011.

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

About Youku

Youku.com Inc. is China's leading Internet television company. Our Internet television platform enables users to search, view and share high-quality video content quickly and easily across multiple devices. Youku, which stands for "what's best and what's cool" in Chinese, is the most recognized online video brand in China.  Youku's American depositary shares, each representing 18 of our Class A ordinary shares, are traded on 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's strategic and operational plans, contain forward-looking statements. Youku may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC") on Forms 20-F and 6-K 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'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 registration statement on Form F-1, as amended, 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's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Youku uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: adjusted net loss and adjusted EBITDA.  We define adjusted net loss as net loss excluding share-based compensation expenses and change in fair value of derivative financial liabilities and warrant liability. We define adjusted EBITDA as net income or loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of purchased contents), further adjusted for change in fair value of derivative financial liabilities and warrant liability, share-based compensation expenses and other non-operating items. We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation 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.

(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$"). Unless otherwise noted, all transactions from RMB to US$ are made at a rate of RMB6.6000 to US$1.00, the effective noon buying rate as of December 31, 2010 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

(2) The Company's net revenues are presented net of commissions earned by third-party advertising agencies, which amounted to RMB86.6 million (US$13.1 million) in 2010 and RMB37.9 million in 2009.

(3) Each ADS represents eighteen (18) Class A ordinary shares.

Investor Relations:

Ryan Cheung

Corporate Finance Director

Youku.com Inc.

Tel: (+8610) 5885-1881 x6090

Email: ryan.cheung@youku.com

Caroline Straathof

IR Inside

Tel: (+31) 6-54624301

Email: caroline.straathof@irinside.com

Media Relations:

Jean Shao

Director, International Public Relations

Youku.com Inc.

Tel: (+8610) 5885-1881 x7128

Email: shaodan@youku.com

YOUKU.COM INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for  number of shares, ADS, per share and per ADS information)

 

December 31, 2009

 

December 31, 2010

 

December 31, 2010

 

 

 

RMB

 

RMB

 

US$

 

 

(Audited)

 

(Unaudited)

 

(Unaudited)

ASSETS

Current assets:

 

Cash and cash equivalents

 

301,608

 

1,811,423

 

274,458

 

Restricted cash

 

-

 

-

 

-

 

Short-term investment

 

-

 

-

 

-

 

Accounts receivable, net

 

74,960

 

216,245

 

32,764

 

Intangible assets

 

5,036

 

10,230

 

1,550

 

Prepayments and other assets

 

2,718

 

10,006

 

1,517

Total current assets

 

384,322

 

2,047,904

 

310,289

Non-current assets:

 

Property and equipment, net

 

54,651

 

64,177

 

9,724

 

Intangible assets

 

1,460

 

57,550

 

8,720

 

Capitalized content production costs

 

 

 

-

 

-

 

Prepayments and other assets

 

1,308

 

5,356

 

812

Total non-current assets

 

57,419

 

127,083

 

19,256

TOTAL ASSETS

 

441,741

 

2,174,987

 

329,545

LIABIILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 

Current portion of long-term debt

 

24,031

 

22,180

 

3,361

 

Accounts payable

 

6,309

 

35,641

 

5,400

 

Advances from customers

 

3,210

 

1,304

 

198

 

Accrued expenses and other liabilities

 

91,573

 

201,100

 

30,471

 

Warrant liability

 

7,356

 

-

 

-

Total current liabilities

 

132,479

 

260,225

 

39,430

Non-current liabilities

 

Long-term debt

 

14,275

 

18,455

 

2,796

Total non-current liabilities

 

14,275

 

18,455

 

2,796

Total liabilities

 

146,754

 

278,680

 

42,226

Convertible redeemable preferred shares

 

780,599

 

-

 

-

Youku.com Inc. shareholders' equity (deficit)

 

Class A Ordinary shares ($0.0001 par value,4,340,238,793 authorized, 1,236,605,283 issued and outstanding as of December 31, 2010)  

 

-

 

82

 

13

 

Class B Ordinary shares ($0.0001 par value, 659,761,207 authorized, 365,000,000 and 659,761,207 issued and outstanding as of December 31, 2009 and 2010, respectively)

 

30

 

49

 

7

 

Additional paid-in capital

 

12,473

 

2,610,069

 

395,465

 

Accumulated deficit

 

(494,856)

 

(699,540)

 

(105,991)

 

Accumulated other comprehensive loss

 

(3,259)

 

(14,353)

 

(2,175)

Total shareholders' equity (deficit)

 

(485,612)

 

1,896,307

 

287,319

TOTAL LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED  

     SHARES AND SHAREHOLDERS' EQUITY

 

441,741

 

2,174,987

 

329,545

YOUKU.COM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for  number of shares, ADS, per share and per ADS information)

 

For the Three Months Ended,

 

For the Twelve Months Ended,

 

December 31,

September 30,

December 31,

December 31,

December 31,

December 31,

December 31,

 

 

2009

 

2010

 

2010

 

2010

 

2009

 

2010

 

2010

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

(Unaudited)

 

(Unaudited)

Net revenues

 

53,842

 

114,807

 

152,474

 

23,102

 

153,626

 

387,097

 

58,651

Cost of revenues (Note 1)

 

(59,024)

 

(99,054)

 

(102,111)

 

(15,472)

 

(216,708)

 

(350,830)

 

(53,156)

Gross profit (loss)

 

(5,182)

 

15,753

 

50,363

 

7,630

 

(63,082)

 

36,267

 

5,495

Operating expenses:

 Product development

 

(5,905)

 

(8,824)

 

(10,027)

 

(1,519)

 

(20,908)

 

(31,287)

 

(4,740)

 Sales and marketing

 

(26,261)

 

(38,539)

 

(38,711)

 

(5,865)

 

(72,746)

 

(130,238)

 

(19,733)

 General and administrative

 

(5,480)

 

(7,242)

 

(10,241)

 

(1,551)

 

(18,523)

 

(28,957)

 

(4,387)

Total operating expenses

 

(37,646)

 

(54,605)

 

(58,979)

 

(8,935)

 

(112,177)

 

(190,482)

 

(28,860)

Loss from operations

 

(42,828)

 

(38,852)

 

(8,616)

 

(1,305)

 

(175,259)

 

(154,215)

 

(23,365)

Interest income

 

214

 

265

 

102

 

16

 

2,054

 

1,170

 

177

Interest expenses

 

(1,434)

 

(2,517)

 

(2,477)

 

(375)

 

(6,835)

 

(7,440)

 

(1,127)

Change in fair value of derivative financial liabilities and warrant liability

 

(1,956)

 

(11,976)

 

(26,736)

 

(4,051)

 

(2,313)

 

(44,268)

 

(6,707)

Others, net

 

19

 

(42)

 

4

 

1

 

67

 

69

 

10

Loss before income taxes

 

(45,985)

 

(53,122)

 

(37,723)

 

(5,714)

 

(182,286)

 

(204,684)

 

(31,012)

Income taxes

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Net loss

 

(45,985)

 

(53,122)

 

(37,723)

 

(5,714)

 

(182,286)

 

(204,684)

 

(31,012)

Net loss per share, basic and diluted

 

(0.13)

 

(0.15)

 

(0.05)

 

(0.01)

 

(0.50)

 

(0.44)

 

(0.07)

Net loss per ADS, basic and diluted

 

(2.26)

 

(2.61)

 

(0.89)

 

(0.13)

 

(8.98)

 

(7.90)

 

(1.20)

Shares used in computation, basic and diluted

 

365,469,999

365,699,281

765,083,372

765,083,372

365,432,916

466,340,541

466,340,541

ADS used in computation, basic and diluted

 

20,303,889

 

20,316,627

 

42,504,632

 

42,504,632

 

20,301,829

 

25,907,808

 

25,907,808

The accompanying notes are an integral part of the press release

Note 1. Cost of Revenues

 

For the Three Months Ended,

 

For the Twelve Months Ended,

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

2009

 

2010

 

2010

 

2010

 

2009

 

2010

 

2010

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

(Unaudited)

 

(Unaudited)

Cost of revenues:

Business tax and surcharges

 

(6,014)

 

(9,800)

 

(15,231)

 

(2,308)

 

(16,624)

 

(38,472)

 

(5,830)

Bandwidth costs

 

(38,180)

 

(50,211)

 

(51,685)

 

(7,831)

 

(149,479)

 

(191,679)

 

(29,042)

Depreciation of servers and other equipment

 

(9,186)

 

(9,316)

 

(8,950)

 

(1,355)

 

(33,692)

 

(37,958)

 

(5,751)

Content cost

 

(5,644)

 

(29,727)

 

(26,245)

 

(3,977)

 

(16,913)

 

(82,721)

 

(12,533)

Total Cost of Revenues

 

(59,024)

 

(99,054)

 

(102,111)

 

(15,471)

 

(216,708)

 

(350,830)

 

(53,156)

Reconciliations of Non-GAAP results of operations measures to the nearest comparable GAAP measures(*) (in thousands except for share, per share information, unaudited)

1. Adjusted Loss

For the Three Months Ended,

For the Twelve Months Ended,

 

December 31,

September 30,

December 31,

December 31,

December 31,

December 31,

December 31,

 

2009

2010

2010

2010

2009

2010

2010

 

RMB

RMB

RMB

US$

RMB

RMB

US$

Net loss

(45,985)

(53,122)

(37,723)

(5,714)

(182,286)

(204,684)

(31,012)

Add back: share-based compensation  

1,317

3,416

4,615

699

4,565

11,990

1,817

Add back: change in fair value of derivative financial liabilities and warrant liability

1,956

11,976

26,736

4,051

2,313

44,268

6,707

Adjusted net loss

(42,712)

(37,730)

(6,372)

(964)

(175,408)

(148,426)

(22,488)

2. Adjusted EBITDA

For the Three Months Ended,

For the Twelve Months Ended,

December 31,

September 30,

December 31,

December 31,

December 31,

December 31,

December 31,

2009

2010

2010

2010

2009

2010

2010

RMB

RMB

RMB

US$

RMB

RMB

US$

Net loss

(45,985)

(53,122)

(37,723)

(5,714)

(182,286)

(204,684)

(31,012)

Add back:

Depreciation and amortization (excluding amortization of acquired content)

9,872

10,745

10,423

1,579

36,207

42,711

6,471

Interest income

(214)

(265)

(102)

(16)

(2,054)

(1,170)

(177)

Interest expenses

1,434

2,517

2,477

375

6,835

7,440

1,127

EBITDA

(34,893)

(40,125)

(24,925)

(3,776)

(141,298)

(155,703)

(23,591)

Adjustments:

Share-based compensation  

1,317

3,416

4,615

699

4,565

11,990

1,817

Change in fair value of derivative financial liabilities and warrant liability

1,956

11,976

26,736

4,051

2,313

44,268

6,707

Others, net

(19)

42

(4)

(1)

(67)

(69)

(10)

Adjusted EBITDA

(31,639)

(24,691)

6,422

974

(134,487)

(99,514)

(15,077)

** The amortization expense was related to the advertising license acquired in April 2010. The amortization of purchased contents was not included in the Non-GAAP financial measures as we disclosed in our filed F-1 form. For more information on the Non-GAAP financial measures, please see the section captioned "About Non-GAAP Financial Measures" in this earnings release.

SOURCE Youku.com Inc.



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