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Youku Tudou Announces Second Quarter 2014 Unaudited Financial Results

Reached over 500 million monthly unique visitors across screens; Subscription revenues grew 379% year on year

BEIJING, Aug. 19, 2014 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for second quarter 2014.

Second Quarter 2014 Highlights[1] 

  • Net revenues were RMB958.7 million (US$154.5 million), a 27% increase from the corresponding period in 2013. We derive a part of our revenues from mobile value-added services through partnership agreements with third party mobile network operators and shares the fees collected by the mobile network operators for such services. We were still in the process of renewing the service agreement with one of our major mobile network operators by the end of the second quarter of 2014 and as a result, we deferred recognition of such revenues, about RMB40 million, until the completion of the service agreement renewal process.
  • Gross profit was RMB208.6 million (US$33.6 million), a 10% increase from the corresponding period in 2013. Non-GAAP[2] gross profit was RMB223.9 million (US$36.1 million) in the second quarter of 2014, an increase of 10% from the corresponding period in 2013.  
  • Net loss was RMB164.4 million (US$26.5 million), a 57% increase from the corresponding period in 2013. Non-GAAP net loss was RMB75.9 million (US$12.2 million) in the second quarter of 2014, as compared to RMB44.6 million (US$7.2 million) from the corresponding period in 2013. .
  • Basic and diluted loss per ADS, each representing 18 Class A ordinary shares of the Company, for the second quarter of 2014 amounted to RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively. Non-GAAP basic and diluted loss per ADS for the second quarter of 2014 amounted to RMB0.41 (US$0.07) and RMB0.41 (US$0.07), respectively.
  • Cash, cash equivalents, restricted cash and short-term investments totaled RMB10.2 billion (US$1.6 billion) as of June 30, 2014.
  • Acquisition of property and equipment for the second quarter of 2014 was RMB85.0 million (US$13.7 million).
  • Acquisition of intangible assets for the second quarter of 2014 was RMB246.3 million (US$39.7 million).

"Multi-screen Internet is increasingly mainstream and the convergence of online and offline entertainment has presented new market opportunities. We are scaling our investment and leveraging our strengthened resources to enhance our business model," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Youku Tudou has helped transform how media and entertainment related content is distributed and marketed since our inception. Going forward, we will work with our online and offline partners to continue to change how content is created and monetized by directly connecting with the ever-growing consumer economy as Youku Tudou is best positioned in developing the leading multi-screen media and entertainment ecosystem in China."

Dele Liu, President and Board Director of Youku Tudou, added, "Our traffic has grown strongly this quarter with our user base reaching over 500 million on a monthly basis. We have made a smooth transition to multi-screen monetization with over 30% of revenues generated from mobile and solid progress on subscription services with 379% growth year on year. By partnering with Alibaba on big data initiatives, we are enhancing our products to create an unique value proposition to advertising partners and consumers. We are confident that our revenue will continue to diversify and grow."

Second Quarter 2014 Results

Net revenues were RMB958.7 million (US$154.5 million) in the second quarter of 2014, a 27% increase from the corresponding period in 2013, meeting net revenues guidance previously announced by the Company. Advertising net revenues were RMB915.5 million (US$147.6 million), 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 RMB213.5 million (US$34.4 million)in the second quarter of 2014, representing 22% of net revenues, as compared to 22% of net revenues for the corresponding period in 2013.

Content costs as a component of cost of revenues were RMB418.3 million (US$67.4 million) in the second quarter of 2014, representing 44% of net revenues as compared to 40% of net revenues for the corresponding period in 2013. Non-GAAP content costs were RMB402.9 million (US$65.0 million) in the second quarter of 2014, representing 42% of net revenues, as compared to 38% of net revenues for the corresponding period in 2013.

Gross profit was RMB208.6 million (US$33.6 million)in the second quarter of 2014, an increase of 10% from the corresponding period in 2013. Non-GAAP gross profit was RMB223.9 million (US$36.1 million) in the second quarter of 2014, an increase of 10% from the corresponding period in 2013 due to strong operating leverage.

Operating expenses were RMB386.4 million (US$62.3 million) in the second quarter of 2014, as compared to RMB306.8 million (US$49.5 million) for the corresponding period in 2013. Non-GAAP operating expenses were RMB313.2 million (US$50.5 million) in the second quarter of 2014, as compared to RMB260.6 million (US$42.0 million) for the corresponding period in 2013. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB212.8 million (US$34.3 million) in the second quarter of 2014, as compared to RMB165.2 million (US$26.6 million) for the corresponding period in 2013. Non-GAAP sales and marketing expenses were RMB186.1 million (US$30.0 million) in the second quarter of 2014, as compared to RMB150.4 million (US$24.2 million) for the corresponding period in 2013. This increase was due to higher commission expenses paid to our sales force in line with our revenue growth.

Product development expenses were RMB99.1 million (US$16.0 million) in the second quarter of 2014, as compared to RMB66.1 million (US$10.7 million) for the corresponding period in 2013. Non-GAAP product development expenses were RMB78.9 million (US$12.7 million) in the second quarter of 2014, as compared to RMB54.8 million (US$8.8 million) for the corresponding period in 2013. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social, paid and live broadcasting services.

General and administrative expenses were RMB74.5 million (US$12.0 million) in the second quarter of 2014, as compared to RMB75.6 million (US$12.2 million) for the corresponding period in 2013. Non-GAAP general and administrative expenses were RMB48.2 million (US$7.8 million) in the second quarter of 2014, a decrease of 13% from the corresponding period in 2013.

Net loss was RMB164.4 million (US$26.5 million)in the second quarter of 2014, as compared to RMB105.1 million (US$16.9 million) for the corresponding period in 2013. Non-GAAP net loss was RMB75.9 million (US$12.2 million) in the second quarter of 2014, as compared to RMB44.6 million (US$7.2 million) from the corresponding period in 2013.

Non-GAAP adjusted EBITDA Loss was RMB52.9 million (US$8.5 million) in the second quarter of 2014, as compared to RMB28.7 million (US$4.6 million) from the corresponding period in 2013.

Business Outlook

For the third quarter of 2014, the Companyexpects net revenues will be between RMB1.09 billion and RMB1.13 billion, with advertising net revenues contributing between RMB965 million and RMB1.01 billion. This forecast reflects 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 9:00 p.m. U.S. Eastern Time on August 19, 2014 (9:00 a.m. Beijing/Hong Kong Time on August 20, 2014).

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 Toll Free 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 +61 2 8199 0299 and entering passcode 87262225#. The replay will be available through August 27, 2014.

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 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 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 loss from operations, non-GAAP net loss and non-GAAP EBITDA 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 loss from operations as 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 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 loss 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.

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.

[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 RMB6.2036 to US$1.00, the effective noon buying rate as of June 30, 2014 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.



[2]

All non-GAAP measures exclude, as applicable, 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.

For more information, please contact:

Ryan Cheung
Corporate Finance Senior Director
Youku Tudou Inc.
Tel: (+8610) 5885-1881 x6090
Email: [email protected]

 

YOUKU TUDOU INC.

 CONSOLIDATED BALANCE SHEETS









(Amounts in thousands, except for number of shares)


As of


December 31, 2013


June 30, 2014


June 30, 2014




RMB


RMB


US$

ASSETS




(Unaudited)


(Unaudited)









Current assets:








 Cash and cash equivalents


1,764,221


8,553,933


1,378,866


 Restricted cash


2,679


2,682


432


 Short-term investments


1,409,439


1,610,026


259,531


 Accounts receivable, net


1,370,031


1,498,779


241,598


 Intangible assets, net


51,942


105,546


17,014


 Deferred tax assets


7,843


7,843


1,264


 Prepayments and other assets


82,300


100,386


16,183

Total current assets


4,688,455


11,879,195


1,914,888









Non-current assets:








 Property and equipment, net


222,229


266,781


43,004


 Intangible assets, net


1,197,671


1,353,780


218,225


 Capitalized content production costs


1,176


9,843


1,587


 Prepayments and other assets


197,856


240,894


38,830


 Goodwill


4,262,569


4,262,569


687,112

 Total non-current assets


5,881,501


6,133,867


988,758









TOTAL ASSETS


10,569,956


18,013,062


2,903,646









LIABILITIES AND SHAREHOLDERS' EQUITY















Current liabilities:








 Accounts payable


213,825


361,253


58,233


 Advances from customers


25,081


23,668


3,815


 Accrued expenses and other liabilities


1,124,342


1,147,253


184,933

Total current liabilities


1,363,248


1,532,174


246,981









Non-current liabilities








 Deferred tax liability


219,519


219,519


35,386


 Other liabilities


4,070


6,380


1,028

Total non-current liabilities


223,589


225,899


36,414









Total liabilities


1,586,837


1,758,073


283,395









Commitments and contingencies















Shareholders' equity








Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized,  2,356,529,401 and   3,103,408,891 issued and outstanding as of  December 31, 2013 and June 30, 2014, respectively)


154


200


32


Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 659,561,893 and 645,691,903 issued and outstanding as of  December 31, 2013 and June 30, 2014, respectively)


49


48


8


 Additional paid-in capital


11,058,360


18,712,011


3,016,315


 Statutory reserves


2,063


2,063


333


 Accumulated deficit


(1,878,454)


(2,267,594)


(365,529)


 Accumulated other comprehensive loss


(199,053)


(191,739)


(30,908)

Total shareholders' equity


8,983,119


16,254,989


2,620,251









TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


10,569,956


18,013,062


2,903,646

 

 

 

YOUKU TUDOU INC.

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


















 For the Three Months Ended


For the Six Months Ended

(Amounts in thousands, except for  number of shares and ADS and per share and per ADS data)












June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)
















Net revenues


753,457


700,374


958,719


154,542


1,269,454


1,659,093


267,441
















Cost of revenues (Note 1)


(563,281)


(614,808)


(750,107)


(120,915)


(1,065,047)


(1,364,915)


(220,020)
















Gross profit


190,176


85,566


208,612


33,627


204,407


294,178


47,421

Operating expenses:















       Product development


(66,051)


(80,700)


(99,116)


(15,977)


(122,879)


(179,816)


(28,986)

       Sales and marketing


(165,201)


(186,542)


(212,826)


(34,307)


(292,801)


(399,368)


(64,376)

       General and administrative


(75,569)


(46,823)


(74,457)


(12,002)


(158,919)


(121,280)


(19,550)

Total operating expenses


(306,821)


(314,065)


(386,399)


(62,286)


(574,599)


(700,464)


(112,912)
















Loss from operations


(116,645)


(228,499)


(177,787)


(28,659)


(370,192)


(406,286)


(65,491)
















Interest income


7,090


6,053


9,923


1,600


14,269


15,976


2,574

Interest expenses


(158)


-


-


-


(545)


-


-

Other, net


4,720


(2,259)


3,441


555


19,001


1,182


191

Total other income, net


11,652


3,794


13,364


2,155


32,725


17,158


2,765
















Loss before income taxes


(104,993)


(224,705)


(164,423)


(26,504)


(337,467)


(389,128)


(62,726)

Income taxes


(58)


-


(12)


(2)


(58)


(12)


(2)
















Net loss


(105,051)


(224,705)


(164,435)


(26,506)


(337,525)


(389,140)


(62,728)
















Other comprehensive (loss) income, before tax















            Foreign currency translation adjustments


(33,457)


20,959


(13,645)


(2,200)


(39,423)


7,314


1,179

Other comprehensive (loss) income, before tax


(33,457)


20,959


(13,645)


(2,200)


(39,423)


7,314


1,179

Income tax expense related to components of other comprehensive (loss) income


-


-


-


-


-


-


-
















Other comprehensive (loss) income, net of tax


(33,457)


20,959


(13,645)


(2,200)


(39,423)


7,314


1,179









0






0

Net loss per share, basic and diluted


(0.04)


(0.07)


(0.05)


(0.01)


(0.11)


(0.12)


(0.02)

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


(0.63)


(1.34)


(0.88)


(0.14)


(2.05)


(2.20)


(0.35)

Shares used in computation, basic and diluted


2,980,162,122


3,021,981,224


3,355,310,411


3,355,310,411


2,969,000,985


3,189,566,616


3,189,566,616

ADSs used in computation, basic and diluted


165,564,562


167,887,845


186,406,133


186,406,133


164,944,499


177,198,145


177,198,145

 

 

 

The accompanying notes are an integral part of the press release.














































Note 1. Cost of Revenues


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

(Amounts in thousands)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

 Cost of revenues:















 Value added, business taxes and surcharges


74,334


62,958


89,550


14,435


123,259


152,508


24,584

 Bandwidth costs


164,111


201,889


213,538


34,422


325,156


415,427


66,965

 Depreciation of servers and other equipment


21,384


24,306


28,756


4,636


43,854


53,062


8,553

 Content costs


303,452


325,655


418,263


67,422


572,778


743,918


119,918

 Total Cost of Revenues


563,281


614,808


750,107


120,915


1,065,047


1,364,915


220,020

 

 

 

YOUKU TUDOU INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

















 For the Three Months Ended


 For the Six Months Ended 

(Amounts in thousands)











June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014




RMB


RMB


RMB


US$


 RMB


 RMB


 US$




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


 (Unaudited)


 (Unaudited)


 (Unaudited)

Cash flows from operating activities:















Net loss


(105,051)


(224,705)


(164,435)


(26,506)


(337,525)


(389,140)


(62,728)

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
















Depreciation and impairment of fixed assets


27,502


31,883


36,328


5,856


54,297


68,211


10,995


Bad debt expense


10,035


(6,473)


5,247


846


17,111


(1,226)


(198)


Amortisation and impairment of intangible assets and capitalized content production costs


176,523


181,777


229,561


37,004


315,514


411,338


66,306


Amortization of long-term debt discounts


92


-


-


-


313


-


-


(Gain) loss on disposal of  property and equipment


(645)


90


128


21


50


218


35


Foreign exchange loss (gain)


(847)


2,164


846


136


(522)


3,010


485


Share-based compensation


48,529


70,220


82,131


13,239


86,379


152,351


24,557


Changes in operating assets and liabilities:
















         Restricted cash


704


(2)


(1)


-


694


(3)


-


        Accounts receivable


(294,698)


179,153


(306,676)


(49,435)


(328,342)


(127,523)


(20,556)


        Prepayments and other assets


21,794


(10,615)


(21,120)


(3,404)


23,141


(31,735)


(5,116)


        Capitalized content production costs


(42,382)


(2,972)


(6,371)


(1,027)


(26,421)


(9,343)


(1,506)


        Accounts payable


11,179


4,574


8,631


1,391


1,315


13,205


2,129


        Advances from customers


(4,180)


1,816


(3,229)


(521)


34,277


(1,413)


(227)


        Accrued expenses and other liabilities


88,046


29,591


(16,196)


(2,611)


100,514


13,395


2,159

Net cash (used in) provided by operating activities


(63,399)


256,501


(155,156)


(25,011)


(59,205)


101,345


16,335

















Cash flows from investing activities:
















Acquisition of property and equipment


(34,549)


(28,191)


(84,968)


(13,697)


(61,913)


(113,159)


(18,241)


Proceeds received from maturity of short-term investments


621,948


1,132,459


66,037


10,645


658,651


1,198,496


193,194


Short-term investments placed with financial institutions


(739,059)


(1,391,239)


(4,698)


(757)


(924,649)


(1,395,937)


(225,020)


Proceeds from disposal of property and equipment


1,282


180


10


2


1,282


190


31


Acquisition of intangible assets


(102,500)


(165,891)


(246,320)


(39,706)


(341,421)


(412,211)


(66,447)

Net cash used in investing activities


(252,878)


(452,682)


(269,939)


(43,513)


(668,050)


(722,621)


(116,483)

















Cash flows from financing activities:
















Exercise of employee stock options


35,935


11,809


7,355


1,186


64,675


19,164


3,089


Principal repayments on long-term debt


(3,330)


-


-


-


(6,566)


-


-


Proceeds from Ali investment, net of issuance costs


-


-


7,387,520


1,190,844


-


7,387,520


1,190,844

Net cash  provided by financing activities


32,605


11,809


7,394,875


1,192,030


58,109


7,406,684


1,193,933

Effect of exchange rate changes on cash and cash equivalents


(32,608)


18,795


(14,491)


(2,336)


(38,901)


4,304


694

Net (decrease) increase in cash and cash equivalents


(316,280)


(165,577)


6,955,289


1,121,170


(708,047)


6,789,712


1,094,479

Cash and cash equivalents at the beginning of the period


1,264,090


1,764,221


1,598,644


257,696


1,655,857


1,764,221


284,387

Cash and cash equivalents at the end of the period


947,810


1,598,644


8,553,933


1,378,866


947,810


8,553,933


1,378,866

 

 

 

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 Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

Content costs


303,452


325,655


418,263


67,422


572,778


743,918


119,918

 Deduct: share-based compensation 


6,465


12,223


12,694


2,046


12,128


24,917


4,016

 Deduct: amortization of intangible assets from business combination


7,741


2,483


2,631


424


16,072


5,114


824

Non-GAAP content costs


289,246


310,949


402,938


64,952


544,578


713,887


115,078
















2. Non-GAAP Gross Profit


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

Gross profit


190,176


85,566


208,612


33,627


204,407


294,178


47,421

 Add back: share-based compensation 


6,465


12,223


12,694


2,046


12,128


24,917


4,016

 Add back: amortization of intangible assets from business combination


7,741


2,483


2,631


424


16,072


5,114


824

Non-GAAP gross profit


204,382


100,272


223,937


36,097


232,607


324,209


52,261































 3. Non-GAAP Operating Expenses


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

Operating expenses


306,821


314,065


386,399


62,286


574,599


700,464


112,912

 Deduct: share-based compensation 


42,064


57,997


69,437


11,193


74,251


127,434


20,541

 Deduct: amortization of intangible assets from business combination


4,155


3,743


3,743


604


8,310


7,486


1,205

Non-GAAP  operating expenses


260,602


252,325


313,219


50,489


492,038


565,544


91,166































4. Non-GAAP Sales and Marketing Expenses


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

Sales and marketing expenses


165,201


186,542


212,826


34,307


292,801


399,368


64,376

 Deduct: share-based compensation 


12,708


21,172


24,824


4,001


22,769


45,996


7,414

 Deduct: amortization of intangible assets from business combination


2,077


1,871


1,871


302


4,154


3,742


602

Non-GAAP  sales and marketing expenses


150,416


163,499


186,131


30,004


265,878


349,630


56,360































5. Non-GAAP Product Development Expenses


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

Product development expenses


66,051


80,700


99,116


15,977


122,879


179,816


28,986

 Deduct: share-based compensation 


9,890


17,206


19,006


3,064


16,857


36,212


5,837

 Deduct: amortization of intangible assets from business combination


1,395


1,257


1,257


203


2,790


2,514


405

Non-GAAP  product development expenses


54,766


62,237


78,853


12,710


103,232


141,090


22,744





























































6. Non-GAAP General and Administrative Expenses


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

General and administrative expenses


75,569


46,823


74,457


12,002


158,919


121,280


19,550

 Deduct: share-based compensation 


19,466


19,619


25,607


4,128


34,625


45,226


7,290

 Deduct: amortization of intangible assets from business combination


683


615


615


99


1,366


1,230


198

Non-GAAP  general and administrative expenses


55,420


26,589


48,235


7,775


122,928


74,824


12,062































7. Non-GAAP Loss from Operations


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

Loss from operations


(116,645)


(228,499)


(177,787)


(28,659)


(370,192)


(406,286)


(65,491)

 Add back: share-based compensation 


48,529


70,220


82,131


13,239


86,379


152,351


24,557

 Add back: amortization of intangible assets from business combination


11,896


6,226


6,374


1,028


24,382


12,600


2,029

Non-GAAP  loss from operations


(56,220)


(152,053)


(89,282)


(14,392)


(259,431)


(241,335)


(38,905)































8. Non-GAAP Net Loss


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

 Net loss


(105,051)


(224,705)


(164,435)


(26,506)


(337,525)


(389,140)


(62,728)

 Add back: share-based compensation 


48,529


70,220


82,131


13,239


86,379


152,351


24,557

 Add back: amortization of intangible assets from business combination


11,896


6,226


6,374


1,028


24,382


12,600


2,029

 Non-GAAP net loss


(44,626)


(148,259)


(75,930)


(12,239)


(226,764)


(224,189)


(36,142)































9.  Non-GAAP EBITDA Loss


 For the Three Months Ended


For the Six Months Ended














June 30, 2013


March 31, 2014


June 30, 2014


June 30, 2014


June 30, 2013


June 30, 2014


June 30, 2014



RMB


RMB


RMB


US$


RMB


RMB


US$

 Net loss


(105,051)


(224,705)


(164,435)


(26,506)


(337,525)


(389,140)


(62,728)

 Add back:















 Depreciation and amortization (excluding amortization















      of acquired content ) (2)


27,516


31,897


36,341


5,858


54,326


68,238


11,000

 Interest income


(7,090)


(6,053)


(9,923)


(1,600)


(14,269)


(15,976)


(2,574)

 Interest expenses


158


-


-


-


545


-


-

 Income taxes


58


-


12


2


58


12


2

 EBITDA loss


(84,409)


(198,861)


(138,005)


(22,246)


(296,865)


(336,866)


(54,300)
















 Adjustments:















 Share-based compensation 


48,529


70,220


82,131


13,239


86,379


152,351


24,557

 Amortization of intangible assets from business combination


11,896


6,226


6,374


1,028


24,382


12,600


2,029

 Others, net


(4,720)


2,259


(3,441)


(555)


(19,001)


(1,182)


(191)

Non-GAAP EBITDA loss


(28,704)


(120,156)


(52,941)


(8,534)


(205,105)


(173,097)


(27,905)































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

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

SOURCE Youku Tudou Inc.

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