Youku Tudou Announces Second Quarter 2015 Unaudited Financial Results

BEIJING, August 20, 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 second quarter 2015.

Second Quarter 2015 Highlights[1]

• Net revenues were RMB1.61 billion (US$259.6 million), a 57% increase from the corresponding period in 2014[2]. Non-GAAP[3] net revenues were RMB1.51 billion (US$244.3 million) in the second quarter of 2015, a 58% increase from the corresponding period in 2014.
• Gross profit was RMB254.1 million (US$41.0 million), an 11% increase from the corresponding period in 2014. Non-GAAP gross profit was RMB253.8 million (US$40.9 million) in the second quarter of 2015, a 14% increase from the corresponding period in 2014.
• Net loss was RMB342.0 million (US$55.2 million), as compared to RMB142.3 million (US$23.0 million) from the corresponding period in 2014. Non-GAAP net loss was RMB220.7 million (US$35.6 million) in the second quarter of 2015, as compared to RMB76.9 million (US$12.4 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 second quarter of 2015 amounted to RMB1.76 (US$0.28) and RMB1.76 (US$0.28), respectively. Non-GAAP basic and diluted loss per ADS for the second quarter of 2015 amounted to RMB1.13 (US$0.18) and RMB1.13 (US$0.18), respectively.
• Cash, cash equivalents, restricted cash and short-term investments totaled RMB8.33 billion (US$1.34 billion) as of June 30, 2015.
• Acquisition of property and equipment for the second quarter of 2015 was RMB71.5 million (US$11.5 million).
• Acquisition of licensed copyright for the second quarter of 2015 was RMB366.2 million (US$59.1 million).

"I am very pleased that once more we delivered accelerated and increasingly diversified topline growth in the second quarter, driven by robust consumer business development and supported by healthy advertising revenues. Our revenue diversification through consumer business is successful and based on progress driven by our business unit reorganizations and management team additions. Meanwhile, with nearly half of advertising revenues coming from mobile, we have achieved broad adoption of mobile advertising by domestic and international advertisers alike," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "We expect these positive trends, reinforced by our clear growth strategy and improving business economics, to continue during the second half of this year."

Dele Liu, President of Youku Tudou, added, "We continued to significantly increase web-native content, which is one of the key growth pillars driving our business development this year, in addition to accelerated topline growth and revenue diversification. More specifically, we are creating cross-domain synergy for high quality IPs taking the forms of web series, online game, and movies, leveraging our large and growing user base and high quality traffic as measured by user time spent and user engagement."

Second Quarter 2015 Results

Net revenues were RMB1.61 billion (US$259.6 million) in the second quarter of 2015, a 57% increase from the corresponding period in 2014. Non-GAAP net revenues were RMB1.51 billion (US$244.3 million) in the second quarter of 2015, a 58% increase from the corresponding period in 2014, meeting the non-GAAP net revenues guidance previously announced by the Company.

Advertising net revenues were RMB1.28 billion (US$206.1 million) in the second quarter of 2015, a 40% 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 RMB174.5 million (US$28.1 million) in the second quarter of 2015, a 596% 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.

Bandwidth costs as a component of cost of revenues were RMB330.3 million (US$53.3 million)in the second quarter of 2015, representing 21% of net revenues, as compared to 21% of net revenues for the corresponding period in 2014.

Content costs as a component of cost of revenues were RMB744.4 million (US$120.1 million) in the second quarter of 2015, representing 46% of net revenues as compared to 45% of net revenues for the corresponding period in 2014. Non-GAAP content costs were RMB649.8 million (US$104.8 million) in the second quarter of 2015, representing 43% of non-GAAP net revenues, as compared to 42% 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 RMB254.1 million (US$41.0 million) in the second quarter of 2015, an 11% increase from the corresponding period in 2014. Non-GAAP gross profit was RMB253.8 million (US$40.9 million) in the second quarter of 2015, a 14% increase from the corresponding period in 2014.

Operating expenses were RMB645.9 million (US$104.2 million) in the second quarter of 2015, as compared to RMB384.2 million (US$62.0 million) for the corresponding period in 2014. Non-GAAP operating expenses were RMB524.4 million (US$84.6 million) in the second quarter of 2015, as compared to RMB312.1 million (US$50.3 million) for the corresponding period in 2014. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB354.3 million (US$57.1 million) in the second quarter of 2015, as compared to RMB212.0 million (US$34.2 million) for the corresponding period in 2014. Non-GAAP sales and marketing expenses were RMB305.6 million (US$49.3 million) in the second quarter of 2015, as compared to RMB185.8 million (US$30.0 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 RMB181.9 million (US$29.3 million) in the second quarter of 2015, as compared to RMB98.6 million (US$15.9 million) for the corresponding period in 2014. Non-GAAP product development expenses were RMB141.8 million (US$22.9 million) in the second quarter of 2015, as compared to RMB78.6 million (US$12.7 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 RMB109.8 million (US$17.7 million) in the second quarter of 2015, as compared to RMB73.7 million (US$11.9 million) from the corresponding period in 2014. Non-GAAP general and administrative expenses were RMB77.0 million (US$12.4 million) in the second quarter of 2015, as compared to RMB47.6 million (US$7.7 million) from the corresponding period in 2014.

Net loss was RMB342.0 million (US$55.2 million) in the second quarter of 2015, as compared to RMB142.3 million (US$23.0 million) for the corresponding period in 2014. Non-GAAP net loss was RMB220.7 million (US$35.6 million) in the second quarter of 2015, as compared to RMB76.9 million (US$12.4 million) from the corresponding period in 2014.

Business Outlook

For the third quarter of 2015, the Company expects non-GAAP net revenues will be between RMB1.69 billion and RMB1.78 billion, with advertising net revenues contributing between RMB1.34 billion and RMB1.40 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, 2015 (9:00 a.m. Beijing/Hong Kong Time on August 20, 2015).

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.

A replay of the call will be available by dialing +61 2 8199 0299 and entering passcode 12334563. The replay will be available through August 26, 2015.

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 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