Ku6 Media Reports Unaudited Financial Results for Second Quarter of Fiscal Year 2011

Aug 23, 2011, 02:30 ET from Ku6 Media Co., Ltd.

BEIJING, Aug. 23, 2011 /PRNewswire-Asia/ -- Ku6 Media Co., Ltd., ("Ku6 Media" or the "Company", Nasdaq: KUTV) a leading internet television company in China, today announced its unaudited financial results for the second quarter ended June 30 of fiscal year 2011.

Background

In 2010, Ku6 Media (formerly known as Hurray!) completed a series of transaction including acquisition of Ku6 in January 2010 and disposal of its WVAS and music businesses to Shanda Interactive Entertainment Limited ("Shanda") as well as acquisition of online audio business from Shanda in August 2010, and became a company focusing on online advertising business on its online video platform of www.Ku6.com. As a result, the operating results of WVAS and recorded music were presented as "Operating Results of Discontinued Operations" in the income statements.

Second Quarter 2011 Highlights

  • Total revenues from continuing operations were $4.0 million, up 25.0% from $3.2 million in the second quarter of 2010, and down 39.4% from $6.6 million in the first quarter of 2011.
  • Net loss from continuing operations was $21.6 million, an increase of 39.4% from a loss of $15.5 million in the second quarter of 2010, and an increase of 98.2% from a loss of $10.9 million in the first quarter of 2011.

Business results

Total revenues from continuing operations, representing advertising revenue from online video portal and online radio operation, were $4.0 million in the second quarter of 2011, representing a decrease of 39.4% from $6.6 million in the first quarter of 2011 and an increase of 25.0% from $3.2 million in the second quarter of 2010. In the second quarter of 2011, the company started to generate revenue from performance advertising using a system called Application Advertisement ("AA"). The AA revenue was realized through an agent which is a related party within Shanda. 19.9% of total revenue in the second quarter was from this source.

Gross loss from continuing operations was $8.2 million in the second quarter of 2011, up 241.7% from $2.4 million in the first quarter of 2011 and down 3.5% from $8.5 million in the second quarter of 2010. Related to the Company's strategic decision to phase out long-form video content, $5.6 million of content cost was recorded in the second quarter of 2011.

Operating expenses from continuing operations were $13.2 million in the second quarter of 2011, including provisions for accounts receivable of $2.3 million and an impairment for intangible assets of $1.4 million, both due to changes in business strategies, and severance payments of $0.9 million from the restructuring of the Sales Department. This represents an increase of 45.1% from $9.1 million in the first quarter of 2011 and an increase of 88.6% from $7.0 million in the second quarter of 2010.

Operating loss from continuing operations was $21.4 million in the second quarter of 2011, an increase of 87.7% from $11.4 million in the first quarter of 2011 and an increase of 38.1% from $15.5 million in the second quarter of 2010.

Net loss from continuing operations was $21.6 million in the second quarter of 2011, an increase of 98.2% from the loss of $10.9 million in the first quarter of 2011 and an increase of 39.4% from the loss of $15.5 million in the second quarter of 2010.

Net loss from discontinued operations (WVAS and recorded music businesses) was nil in the first and second quarter of 2011 since the WVAS and recorded music businesses were sold in August 2010, as compared to $2.9 million of net gain in the second quarter of 2010.

Net loss attributable to Ku6 Media was $21.6 million in the second quarter of 2011, as compared to $10.8 million in the first quarter of 2011 and $12.4 million in the second quarter of 2010.

Net loss attributable to Ku6 Media per basic and diluted ADS was $0.61 in the second quarter of 2011, compared to $0.31 in the first quarter of 2011 and $0.42 in the second quarter of 2010. Weighted average ADS used to calculate diluted net loss per ADS was 35.2 million ADS in the second quarter of 2011, 34.8 million ADS in the first quarter of 2011 and 29.2 million ADS in the second quarter of 2010.

Loss before interest expense and interest income, income taxes, depreciation, and amortization ("EBITDA", a non-GAAP measure) was $19.9 million in the second quarter of 2011, compared to $9.4 million in the first quarter of 2011 and $11.1 million in the second quarter of 2010. Reconciliation between net loss attributable to Ku6 Media under U.S. Generally Accepted Accounting Principles (GAAP) and EBITDA is presented at the end of this news release.

As of June 30, 2011, the Company had $111.4 million in cash and cash equivalents, compared to $27.3 million as of December 31, 2010. The significant increase in cash and cash equivalents was attributed to the issuance to Shanda ordinary shares and convertible bonds in an aggregate amount of $100 million. The date of Closing was June 29, 2011.

Mr. Jeff Shi, Chief Executive Officer of Ku6 Media, commented, "Ku6 Media has continued to take various measures to solidify our leading positions in technology and content, to further improve user experience and to improve operation efficiency. After the successful efforts in strategic transition and improvement in business and cost structure, Ku6 Media has built a solid foundation for further execution and continuous improvement of operating results."

Note to the financial information

The unaudited financial information disclosed above is preliminary. The results for the six months ended June 30, 2011 are not necessarily indicative of the results expected for the full year or for any future period. Adjustments to the financial statements may be made when audit work is completed, which could result in significant differences between the audited financial statements and the preliminary unaudited financial information contained in this press release.

Conference call

Ku6 Media's management team will host a conference call on Tuesday, August 23, 2011 at 7:30 a.m. EDT, which is Tuesday, August 23, 2011 at 7:30 p.m. in Beijing and Hong Kong, to present an overview of the company's financial performance and business operations.

Dial-in numbers:


U.S.A.:

+1- 866-800-8652

International:

+1- 617-614-2705

Password:

39460668



A replay will be available from August 23, 2011 for 7 days.

U.S.A.:

+1- 888-286-8010

International:

+1- 617-801-6888

Password:

54349009



A live and archived webcast of the conference call will also be available at

http://phx.corporate-ir.net/playerlink.zhtml?c=187793&s=wm&e=4179474

About Ku6 Media Co., Ltd.

Ku6 Media Co., Ltd. (Nasdaq: KUTV) is a leading internet television company in China. Through its two premier online brands and online video websites, www.ku6.com and www.juchang.com, Ku6 Media provides video information services and entertainment in China.

As a leading online video portal, www.ku6.com provides a video platform for sharing and watching user-generated content. It also provides online video reports and other interactive entertainment programs for its users. For more information about Ku6 Media, please visit http://ir.ku6.com.

Forward-looking Statements

This news release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "believes," "could," "expects," "may," "might," "should," "will," or "would," and by similar statements. Forward-looking statements are not historical facts, but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of its control. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Some of the risks and important factors that could affect the Company's future results and financial condition include: continued competitive pressures in China's internet video and audio portal market; changes in technology and consumer demand in this market; the risk that Ku6 Media may not be able to control its expenses in future periods; changes in the policies in China or the laws governing the operations and content of internet video and audio portal websites; the success of Ku6 Media's ability to sell advertising and other services on its websites; and other risks outlined in the Company's filings with the Securities and Exchange Commission, including the Company's (filed under the name of Hurray! Holding Co., Ltd.) annual report on Form 20-F. Ku6 Media does not undertake any obligation to update this forward-looking information, except as required under law.

CONTACT:

Ms. Cheng Yu,

Associate Finance Director and Acting Investor Relations Manager,

Tel: +86 10 5758 6802 in Beijing

Email: ir@ku6.com



Ku6 Media Co., Ltd.

Unaudited Condensed Consolidated Balance Sheets


As of

June 30,

2011

As of

December

31, 2010

U.S. dollars in thousands





Assets



Current assets:



Cash and cash equivalents

$111,444

$27,295

Accounts receivable, net of allowance for doubtful accounts

5,515

8,135

Accounts receivable due from related party

1,365

326

Prepaid expenses and other current assets

1,167

3,487

Other receivable due from related parties

10,492

5,532

Inventories

-

31

Total current assets

129,983

44,806




Deposits

322

-

Property and equipment, net

7,042

8,004

Acquired intangible assets, net

24,891

27,264

Goodwill

6,896

6,896

Total assets

$169,134

$86,970




Liabilities and shareholders' equity



Current liabilities:



Accounts payable

$17,678

$15,503

Accounts payable due to related party

1,710

1,665

Accrued expenses and other current liabilities

11,209

11,462

Other payable due to related parties

19,370

7,777

Total current liabilities

49,967

36,407




Bond payable

50,000

-

Non-current deferred tax liabilities

4,826

4,925

Total liabilities

104,793

41,332




Shareholders' equity:



Ordinary shares

251

174

Additional paid-in capital

181,320

130,100

Accumulated deficit

(115,535)

(83,105)

Accumulated other comprehensive income (loss)

(1,542)

(1,423)

Total Ku6 Media Co., Ltd. shareholders' equity

64,494

45,746

Non-controlling interests

(153)

(108)

Total shareholders' equity

64,341

45,638

Total liabilities and shareholders' equity

$169,134

$86,970



Ku6 Media Co., Ltd.

Unaudited Condensed Consolidated Statements of Operations


For the three months ended

For the six months ended


June 30,

June 30,

June 30,

June 30,

2011

2010

2011

2010


(in thousands of U.S. dollars, except share and per share data)

Revenues:





Advertising





Third parties

2,906

3,014

9,069

5,162

Related parties

1,105

148

1,503

355

Total revenues

4,011

3,162

10,572

5,517






Cost of revenues:





Advertising





Third parties

12,150

11,593

20,786

18,272

Related parties

86

88

380

176

Total cost of revenues

12,236

11,681

21,166

18,448






Gross loss

(8,225)

(8,519)

(10,594)

(12,931)






Operating expenses:





Product development

767

-

1,244

-

Selling and marketing

4,486

3,728

9,794

5,920

General and administrative

7,937

3,268

11,224

6,575

Total operating expenses

13,190

6,996

22,262

12,495






Operating loss from continuing operations

(21,415)

(15,515)

(32,856)

(25,426)






Interest income

20

18

40

27

Other income

90

-

698

-

Interest expense

(384)

(12)

(456)

(12)

Loss before income tax expense

(21,689)

(15,509)

(32,574)

(25,411)






Income tax benefit

89

10

99

21






Net loss from continuing operations

(21,600)

(15,499)

(32,475)

(25,390)






Discontinued operations:





Net loss from discontinued operations, net of tax

-

(1,548)

-

(2,732)

Gain from disposal of discontinued operations, net of tax

-

4,487

-

4,487

Net income (loss) from discontinued operations, net of tax

-

2,939

-

1,755

Net loss

(21,600)

(12,560)

(32,475)

(23,635)

Less: Net loss attributable to the non-controlling interest

20

203

45

387

Net loss attributable to Ku6 Media Co., Ltd.

(21,580)

(12,357)

(32,430)

(23,248)






Loss per share-basic and diluted





Loss from continuing operations attributable to Ku6 Media Co., Ltd. ordinary shareholders

($0.01)

($0.01)

($0.01)

($0.01)

Income (loss) from discontinued operations attributable to Ku6 Media Co., Ltd. ordinary shareholders

$0.00

$0.00

$0.00

$0.00

Net loss attributable to Ku6 Media Co., Ltd. ordinary shareholders

($0.01)

($0.01)

($0.01)

($0.01)






Loss per ADS-basic and diluted





Loss from continuing operations attributable to Ku6 Media Co., Ltd. ordinary shareholders

($0.61)

($0.52)

($0.93)

($0.88)

Income (loss) from discontinued operations attributable to Ku6 Media Co., Ltd. ordinary shareholders

($0.00)

$0.10

$0.00

$0.06

Net loss attributable to Ku6 Media Co., Ltd. ordinary shareholders

($0.61)

($0.42)

($0.93)

($0.82)











Weighted average shares used in per share calculation-basic and diluted

3,515,136,839

2,923,878,244


3,498,263,576

2,851,909,649

Weighted average ADSs used in per ADS calculation-basic and diluted

35,151,368

29,238,782

34,982,636

28,519,096




The use of non-GAAP financial measures:

To supplement its consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP") in the United States, Ku6 Media uses a non-GAAP measure EBITDA, which is adjusted based on results prepared in accordance with GAAP excluding certain expenses. Ku6 Media's management believes the use of this non-GAAP financial measure provides useful information to both management and investors by excluding certain expenses. This non-GAAP financial measure also facilitates management's internal comparisons to the Company's historical performance and our competitors' operating results. Ku6 Media believes this non-GAAP financial measure is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Please see below financial table for a reconciliation of EBITDA.

Reconciliation of Net loss attributable to Ku6 Media under GAAP to EBITDA for the following periods:



For the three months ended

For the six months ended


June 30,

June 30,

June 30,

June 30,


2011

2010

2011

2010


(in thousands of U.S. dollars, except share and per share data)

Net loss attributable to Ku6 Media Co., Ltd.

(21,580)

(12,357)

(32,430)

(23,248)

Add (deduct):





Interest expense

384

12

456

12

Income tax expense (benefit)

(89)

(10)

(99)

(21)

Depreciation and amortization

1,422

1,278

2,865

2,236

Interest income

(20)

(18)

(40)

(27)

EBITDA

(19,883)

(11,095)

(29,248)

(21,048)




SOURCE Ku6 Media Co., Ltd.



RELATED LINKS

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