Youku Tudou Announces Third Quarter 2013 Unaudited Financial Results

Youku Tudou Announces Third Quarter 2013 Unaudited Financial Results

Mobile Daily Video Views Surpassed 300 million; Projected to Reach Non-GAAP Profitability in Q4 2013

BEIJING, Nov. 14, 2013 /PRNewswire/ -- Youku Tudou Inc. (NYSE: YOKU, and formerly Youku Inc. or "Youku"), China's leading Internet television company ("Youku Tudou" or the "Company"), today announced its unaudited financial results for the third quarter 2013.

Basis of Presentation

On August 23, 2012, the Company and Tudou Holdings Limited ("Tudou") announced the completion of the merger between Youku and Tudou. Following the completion of the merger, Tudou's financial results were consolidated into the Company. Based on Youku's review with Tudou management of Tudou's publicly disclosed summary of significant accounting policies prior to the merger, certain adjustments to the historical statement of operations have been made to conform its accounting policies to those of Youku's. Due to the fact that Tudou's historical statements of operations for the third quarter of 2012 consist of stand-alone historical financial information without these adjustments for the period from July 1, 2012 to August 22, 2012, and consolidated financial information with these adjustment for the period from August 23, 2012 to September 30, 2012, we do not believe that comparison of the Company's financial results with the corresponding period in 2012 can be provided on a consistent basis. For ease of reference only, we present comparison of our financial results for the third quarter of 2013 and those of the second quarter of 2013 in this press release for this quarter. We would like to draw your attention to the seasonal nature of our operations and quarter-to-quarter fluctuations. Please refer to Item 3.D Key Information--Risk Factors and Item 5 Operating and Financial review and Prospects of the Company's 2012 annual report on Form 20-F.

Third Quarter Highlights[1]


-- Net revenues were RMB857.7 million (US$140.2 million), a 14% increase
quarter over quarter.
-- Our accumulated traffic data of TV serial dramas and movies reflected a
new consumption pattern and we have adjusted our accounting estimates on
content costs amortization accordingly. This resulted in further
acceleration of content costs amortization starting from the third
quarter of 2013. If we had not adopted the newly adjusted amortization
estimates, non-GAAP content costs of RMB334.1 million (US$54.6 million),
or 39% of net revenues, would have been recorded in the third quarter of
2013, which is RMB144.2 million (US$23.6 million) lower than the
reported figures.
-- Gross profit was RMB82.3 million (US$13.4 million). Non-GAAP gross
profit, which is herein defined as gross profit excluding share-based
compensation expenses and amortization of intangible assets from
business combination in relation to user generated content, was RMB100.4
million (US$16.4 million). If we had not adopted the newly adjusted
amortization estimates, a non-GAAP gross profit of RMB244.6 million
(US$40.0 million), a 20% increase quarter over quarter, or 29% of net
revenues, would have been recorded in the third quarter of 2013, which
is RMB144.2 million (US$23.6 million) higher than the reported figures.
-- Net loss was RMB218.6 million (US$35.7million). Non-GAAP net loss, which
is herein defined as consolidated net loss excluding share-based
compensation expenses, amortization of intangible assets from business
combination, and business combination related expenses, was RMB159.6
million (US$26.1 million). If we had not adopted the newly adjusted
amortization estimates, a non-GAAP net loss of RMB15.4 million (US$2.5
million), a decrease of 65% quarter over quarter, would have been
recorded in the third quarter of 2013, which is RMB144.2 million
(US$23.6 million) lower than the reported figures.
-- Basic and diluted loss per ADS, each representing 18 Class A ordinary
shares, amounted to RMB1.31 (US$0.21) and RMB1.31 (US$0.21),
respectively.
-- Cash, cash equivalents, restricted cash and short-term investments
totaled RMB3.2 billion (US$523.5 million) as of September 30, 2013.
-- Acquisition of property and equipment was RMB67.3 million (US$11.0
million).
-- Acquisition of intangible assets was RMB171.6 million (US$28.0 million).
"We are happy that we grew the topline by a strong 14% quarter over quarter and our mobile traffic surged to over 300 million video views per day. We will continue to drive mobile monetization and ramp up revenue from local advertising clients, content marketing solutions and paid services," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "We expect that Youku Tudou will be non-GAAP profitable in the fourth quarter of 2013 after Youku on a stand-alone basis reached the same financial milestone in third quarter of 2012, demonstrating the success of the Youku Tudou merger and solid execution by the team."

Dele Liu, President of Youku Tudou, added, "We achieved further economies-of-scale for the group resulting in a significant narrowing of our loss at the operational level. We were able to control costs as we further leveraged the scale of our platform and in-house production capabilities. Our earlier decision to build an ecosystem for Original and User Generated Content (UGC) has continued to pay off."

Third Quarter 2013 Results

Net revenues were RMB857.7 million (US$140.2 million) in the third quarter of 2013, a 14% increase quarter over quarter and meeting the net revenues guidance previously announced by the Company. Advertising net revenues were RMB745.0 million (US$121.7 million), a 3% increase quarter over quarter and 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 RMB181.7 million (US$29.7 million) in the third quarter of 2013, representing 21% of the net revenues, as compared to RMB164.1 million (US$26.8 million) in the second quarter in 2013, representing 22% of net revenues of that quarter.

Content costs as a component of cost of revenues were RMB496.5 million (US$81.1 million) in the third quarter of 2013. Non-GAAP content costs, which is herein defined as content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content, were RMB478.3 million (US$78.2 million) in the third quarter of 2013, representing 56% of net revenues. Our accumulated traffic data of TV serial dramas and movies reflected a new consumption pattern and we have adjusted our accounting estimates on content costs amortization accordingly. This resulted in further acceleration of content costs amortization starting from the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, non-GAAP content costs of RMB334.1 million (US$54.6 million), or 39% of net revenues, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) lower than the reported figures.

Gross profit was RMB82.3 million (US$13.4 million) in the third quarter of 2013. Non-GAAP gross profit was RMB100.4 million (US$16.4 million) in the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, a non-GAAP gross profit of RMB244.6 million (US$40.0 million), a 20% increase quarter over quarter, or 29% of net revenues, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) higher than the reported figures.

Operating expenses were RMB312.8 million (US$51.1 million) in the third quarter of 2013, as compared to RMB306.8 million (US$50.1 million) in the second quarter of 2013. Non-GAAP operating expenses, which is herein defined 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, were RMB271.9 million (US$44.4 million) in the third quarter of 2013, a 4% increase compared to RMB260.6 million (US$42.6 million) in the second quarter of 2013. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB171.8 million (US$28.1 million) in the third quarter of 2013, as compared to RMB165.2 million (US$27.0 million) in the second quarter of 2013. Non-GAAP sales and marketing expenses, which is herein defined as sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship, were RMB157.3 million (US$25.7 million) in the third quarter of 2013, a 5% increase compared to RMB150.4 million (US$24.6 million) in the second quarter of 2013.

Product development expenses were RMB78.6 million (US$12.8 million) in the third quarter of 2013, as compared to RMB66.1 million (US$10.8 million) in the second quarter of 2013. Non-GAAP product development expenses, which is herein defined as product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology, were RMB67.5 million (US$11.0 million) in the third quarter of 2013, a 23% increase compared to RMB54.8 million (US$9.0 million) in the second quarter of 2013. This increase was primarily due to higher personnel related expenses for our product development in mobile, search, social and paid-services.

General and administrative expenses were RMB62.5 million (US$10.2 million) in the third quarter of 2013, as compared to RMB75.6 million (US$12.4 million) in the second quarter of 2013. Non-GAAP general and administrative expenses, which is herein defined 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, were RMB47.1 million (US$7.7 million) in the third quarter of 2013, a 15% decrease compared to RMB55.4 million (US$9.1 million) in the second quarter of 2013.

Net loss was RMB218.6 million (US$35.7 million) in the third quarter of 2013. Non-GAAP net loss was RMB159.6 million (US$26.1 million) in the third quarter of 2013. If we had not adopted the newly adjusted amortization estimates, a non-GAAP net loss of RMB15.4 million (US$2.5 million), a decrease of 65% quarter over quarter, would have been recorded in the third quarter of 2013, which is RMB144.2 million (US$23.6 million) lower than the reported figures.

Non-GAAP EBITDA Loss, which is herein defined 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, was RMB141.1 million (US$23.1 million) in the third quarter of 2013, as compared to a non-GAAP EBITDA loss of 28.7 million (US$4.7 million) in the second quarter of 2013. If we had continued using the accounting estimates adopted in the second quarter of 2013 for amortizing content costs, a non-GAAP EBITDA profit of RMB3.1 million (US$0.5 million) would have been recorded in the third quarter of 2013 instead.

Business Outlook

For the fourth quarter of 2013, the Companyexpects net revenues will be between RMB860 million and RMB900 million, which implies a 35% to 42% year over year increase, with advertising net revenues contributing between RMB780 million and RMB820 million, which implies a 36% to 43% year over year increase.

The Company is expected to reach non-GAAP profitability in the fourth quarter of 2013.

These forecasts reflect 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 8:00 p.m. U.S. Eastern Time on November 14, 2013 (9:00 a.m. Beijing/Hong Kong Time on November 15, 2013).

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 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 +1-855-452-5696 and entering passcode 96753162#. The replay will be available through November 22, 2013.

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 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 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 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 or loss, 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, non-GAAP net profit or loss and non-GAAP EBITDA profit or 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 profit or loss from operations as profit or 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 profit or 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 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 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:

Ryan Cheung

Corporate Finance Director

Youku Tudou Inc.

Tel: (+8610) 5885-1881 x6090

Email: ryan.cheung@youku.com



[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 RMB6.12 to
US$1.00, the effective noon buying
rate as of September 30, 2013 in
the City of New York for cable
transfers of RMB as certified for
customs purposes by the Federal
Reserve Bank of New York. No
representation is made that the
RMB amounts could have been, or
could be, converted into US$ at
such rate.











YOUKU TUDOU INC.

CONSOLIDATED BALANCE SHEETS


(Amounts in thousands, except for number of shares) For the Three Months Ended
-------------------------------------------------- --------------------------

December 31, 2012 September 30, 2013 September 30, 2013
----------------- ------------------ ------------------

RMB RMB US$

ASSETS (Unaudited) (Unaudited)


Current assets:

Cash and cash equivalents 1,655,857 797,502 130,311

Restricted cash 9,003 1,550 253

Short-term investments 2,110,073 2,404,909 392,959

Accounts receivable, net 932,796 1,385,267 226,351

Intangible assets, net 19,607 80,575 13,166

Deferred tax assets 10,470 10,470 1,711

Prepayments and other assets 64,909 53,500 8,740


Total current assets 4,802,715 4,733,773 773,491


Non-current assets:

Property and equipment, net 200,681 237,828 38,861

Intangible assets, net 1,304,923 1,205,823 197,030

Capitalized content production costs - 5,831 953

Prepayments and other assets 229,185 192,046 31,380

Goodwill 4,255,570 4,255,570 695,355

Total non-current assets 5,990,359 5,897,098 963,579
--------- --------- -------


TOTAL ASSETS 10,793,074 10,630,871 1,737,070
========== ========== =========


LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:

Accounts payable 181,878 261,649 42,753

Advances from customers 21,603 65,798 10,751

Accrued expenses and other liabilities 981,353 1,100,224 179,776

Current portion of long-term debt 7,441 - -


Total current liabilities 1,192,275 1,427,671 233,280


Non-current liabilities?

Deferred tax liability 224,374 224,374 36,662

Other liabilities 19,552 70 11

Total non-current liabilities 243,926 224,444 36,673
------- ------- ------


Total liabilities 1,436,201 1,652,115 269,953


Commitments and contingencies


Shareholders' equity?

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 2,286,643,502 and 2,348,384,077
issued and outstanding as of December 31, 2012 and September 30, 2013, respectively) 149 153 25

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 659,561,893 and 659,561,893 issued
and outstanding as of December 31, 2012 and September 30, 2013, respectively) 49 49 8

Additional paid-in capital 10,768,204 10,996,216 1,796,767

Statutory reserves 1,500 1,500 245

Accumulated deficit (1,297,147) (1,853,310) (302,828)

Accumulated other comprehensive loss (115,882) (165,852) (27,100)

Total shareholders' equity 9,356,873 8,978,756 1,467,117
--------- --------- ---------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 10,793,074 10,630,871 1,737,070
========== ========== =========














YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


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)
------------------------------------------------------------------------------------------

June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)


Net revenues 753,457 857,743 140,154 1,159,744 2,127,197 347,582


Cost of revenues (Note 1) (563,281) (775,436) (126,705) (979,992) (1,840,483) (300,732)
-------- -------- -------- -------- ---------- --------


Gross profit 190,176 82,307 13,449 179,752 286,714 46,850


Operating expenses:

Product development (66,051) (78,622) (12,847) (108,786) (201,501) (32,925)

Sales and marketing (165,201) (171,763) (28,066) (255,920) (464,564) (75,908)

General and administrative (75,569) (62,458) (10,206) (165,028) (221,377) (36,173)

Total operating expenses (306,821) (312,843) (51,119) (529,734) (887,442) (145,006)
-------- -------- ------- -------- -------- --------


Loss from operations (116,645) (230,536) (37,670) (349,982) (600,728) (98,156)


Interest income 7,090 7,284 1,190 35,490 21,553 3,521

Interest expenses (158) - - (3,159) (545) (89)

Other, net 4,720 4,694 767 8,714 23,695 3,872
----- ----- --- ----- ------ -----

Total other income, net 11,652 11,978 1,957 41,045 44,703 7,304


Loss before income taxes (104,993) (218,558) (35,713) (308,937) (556,025) (90,852)

Income taxes (58) (80) (13) (1,496) (138) (24)
--- --- --- ------ ---- ---


Net loss (105,051) (218,638) (35,726) (310,433) (556,163) (90,876)
======== ======== ======= ======== ======== =======

0

Net loss per share, basic and diluted (0.04) (0.07) (0.01) (0.14) (0.19) (0.03)

Net loss per ADS (each ADS represents 18 class A ordinary shares), (0.63) (1.31) (0.21) (2.54) (3.36) (0.55)
basic and diluted

Shares used in computation, basic and diluted 2,980,162,122 2,995,701,280 2,995,701,280 2,201,121,902 2,977,998,887 2,977,998,887

ADSs used in computation, basic and diluted 165,564,562 166,427,848 166,427,848 122,284,550 165,444,382 165,444,382








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




Note 1. Cost of Revenues For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

(Amounts in thousands) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Cost of revenues:

Value added, business taxes and surcharges 74,334 75,480 12,333 109,946 198,739 32,474

Bandwidth costs 164,111 181,670 29,685 361,664 506,826 82,815

Depreciation of servers and other equipment 21,384 21,827 3,566 42,266 65,681 10,731

Content costs 303,452 496,459 81,121 466,116 1,069,237 174,712

Total Cost of Revenues 563,281 775,436 126,705 979,992 1,840,483 300,732
======= ======= ======= ======= ========= =======











YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------

(Amounts in thousands)
---------------------

June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Cash flows from operating activities:

Net loss (105,051) (218,638) (35,726) (310,433) (556,163) (90,876)

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

Depreciation 27,502 30,342 4,958 50,360 84,639 13,830

Bad debt expense 10,035 19,945 3,259 11,715 37,056 6,055

Amortization of intangible assets and capitalized content production costs 176,523 327,334 53,486 280,888 642,848 105,041

Amortization of long-term debt discounts 92 - - 1,592 313 51

Gain on disposal of property and equipment (645) 788 129 52 838 137

Foreign exchange loss (847) 2,540 415 (357) 2,018 330

Share-based compensation 48,529 48,918 7,994 79,439 135,297 22,106

Gain form remeasurement of previously held investment in acquired subsidiary - - - (3,344) - -

Deferred income tax benefits - - - (2,278) - -

Change in operating assets and liabilities:

Restricted cash 704 6,759 1,104 - 7,453 1,218

Accounts receivable (294,698) (161,184) (26,337) (296,921) (489,526) (79,988)

Prepayments and other assets 21,794 37,051 6,054 42,609 60,192 9,835

Capitalized content production costs (42,382) (3,004) (491) (15,652) (29,425) (4,808)

Accounts payable 11,179 702 115 (16,517) 2,017 330

Advances from customers (4,180) 9,918 1,621 3,568 44,195 7,222

Accrued expenses and other liabilities 88,046 20,027 3,271 154,026 120,541 19,696

Net cash (used in) provided by operating activities (63,399) 121,498 19,852 (21,253) 62,293 10,179


Cash flows from investing activities:

Acquisition of property and equipment (34,549) (67,252) (10,989) (65,840) (129,165) (21,105)

Proceeds received from maturity of short-term investments 621,948 1,358,761 222,020 1,655,504 2,017,412 329,642

Short-term investments placed with financial institutions (739,059) (1,405,173) (229,603) (1,423,247) (2,329,822) (380,690)

Proceeds from disposal of property and equipment 1,282 - - 8 1,282 209

Cash acquired, net of cash paid for acquired subsidiaries - - - 378,666 - -

Acquisition of intangible assets from related party - - - (7,200) - -

Acquisition of intangible assets (102,500) (171,620) (28,042) (243,720) (513,041) (83,830)


Net cash (used in) provided by investing activities (252,878) (285,284) (46,614) 294,171 (953,334) (155,774)


Cash flows from financing activities:

Exercise of employee stock options 35,935 27,676 4,522 18,924 92,351 15,090

Proceeds from restricted cash - - - 12,705 - -

Principal repayments on long-term debt (3,330) (1,111) (182) (19,004) (7,677) (1,254)

Net cash provided by financing activities 32,605 26,565 4,340 12,625 84,674 13,836

Effect of exchange rate changes on cash and cash equivalents (32,608) (13,087) (2,138) 13,701 (51,988) (8,495)
------- ------- ------ ------ ------- ------

Net (decrease) increase in cash and cash equivalents (316,280) (150,308) (24,560) 299,244 (858,355) (140,254)

Cash and cash equivalents at the beginning of the period 1,264,090 947,810 154,871 2,292,538 1,655,857 270,565

Cash and cash equivalents at the end of the period 947,810 797,502 130,311 2,591,782 797,502 130,311
======= ======= ======= ========= ======= =======





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 Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Content costs 303,452 496,459 81,121 466,116 1,069,237 174,712

Deduct: share-based compensation 6,465 12,136 1,983 8,215 24,264 3,964

Deduct: amortization of intangible assets from business combination 7,741 5,984 978 18,237 22,056 3,604

Non-GAAP content costs 289,246 478,339 78,160 439,664 1,022,917 167,144
======= ======= ====== ======= ========= =======


2. Non-GAAP Gross Profit For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Gross profit 190,176 82,307 13,449 179,752 286,714 46,850

Add back: share-based compensation 6,465 12,136 1,983 8,215 24,264 3,964

Add back: amortization of intangible assets from business combination 7,741 5,984 978 18,237 22,056 3,604

Non-GAAP gross profit 204,382 100,427 16,410 206,204 333,034 54,418
======= ======= ====== ======= ======= ======



3. Non-GAAP Operating Expenses For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Operating expenses 306,821 312,843 51,119 529,734 887,442 145,006

Deduct: share-based compensation 42,064 36,782 6,011 71,224 111,033 18,142

Deduct: business combination related expenses - - - 28,627 - -

Deduct: amortization of intangible assets from business combination 4,155 4,155 679 1,709 12,465 2,036

Non-GAAP operating expenses 260,602 271,906 44,429 428,174 763,944 124,828
======= ======= ====== ======= ======= =======



4. Non-GAAP Sales and Marketing Expenses For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Sales and marketing expenses 165,201 171,763 28,066 255,920 464,564 75,908

Deduct: share-based compensation 12,708 12,366 2,021 18,135 35,135 5,741

Deduct: amortization of intangible assets from business combination 2,077 2,077 339 854 6,231 1,017

Non-GAAP sales and marketing expenses 150,416 157,320 25,706 236,931 423,198 69,150
======= ======= ====== ======= ======= ======



5. Non-GAAP Product Development Expenses For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Product development expenses 66,051 78,622 12,847 108,786 201,501 32,925

Deduct: share-based compensation 9,890 9,748 1,593 17,749 26,605 4,347

Deduct: amortization of intangible assets from business combination 1,395 1,395 228 574 4,185 684

Non-GAAP product development expenses 54,766 67,479 11,026 90,463 170,711 27,894
====== ====== ====== ====== ======= ======



6. Non-GAAP General and Administrative Expenses For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

General and administrative expenses 75,569 62,458 10,206 165,028 221,377 36,173

Deduct: share-based compensation 19,466 14,668 2,397 35,340 49,293 8,054

Deduct: business combination related expenses - - - 28,627 - -

Deduct: amortization of intangible assets from business combination 683 683 112 281 2,049 335

Non-GAAP general and administrative expenses 55,420 47,107 7,697 100,780 170,035 27,784
====== ====== ===== ======= ======= ======


7. Non-GAAP Loss from Operations For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Loss from operations (116,645) (230,536) (37,670) (349,982) (600,728) (98,156)

Add back: share-based compensation 48,529 48,918 7,994 79,439 135,297 22,106

Add back: business combination related expenses - - - 28,627 - -

Add back: amortization of intangible assets from business combination 11,896 10,139 1,657 19,946 34,521 5,640

Non-GAAP loss from operations (56,220) (171,479) (28,019) (221,970) (430,910) (70,410)
======= ======== ======= ======== ======== =======



8. Non-GAAP Net Loss For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Net loss (105,051) (218,638) (35,726) (310,433) (556,163) (90,876)

Add back: share-based compensation 48,529 48,918 7,994 79,439 135,297 22,106

Add back: business combination related expenses - - - 28,627 - -

Add back: amortization of intangible assets from business combination 11,896 10,139 1,657 19,946 34,521 5,640

Non-GAAP net loss (44,626) (159,581) (26,075) (182,421) (386,345) (63,130)
======= ======== ======= ======== ======== =======



9. Non-GAAP EBITDA Loss For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------


June 30, 2013 September 30, 2013 September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2013
------------- ------------------ ------------------ ------------------ ------------------ ------------------

RMB RMB US$ RMB RMB US$

Net loss (105,051) (218,638) (35,726) (310,433) (556,163) (90,876)

Add back:

Depreciation and amortization (excluding amortization

of acquired content ) (2) 27,516 30,356 4,960 50,404 84,682 13,837

Interest income (7,090) (7,284) (1,190) (35,490) (21,553) (3,521)

Interest expenses 158 - - 3,159 545 89

Income taxes 58 80 13 1,496 138 24
--- --- --- ----- --- ---

EBITDA loss (84,409) (195,486) (31,943) (290,864) (492,351) (80,447)


Adjustments:

Share-based compensation 48,529 48,918 7,994 79,439 135,297 22,106

Business combination related expenses - - - 28,627 - -

Amortization of intangible assets from business combination 11,896 10,139 1,657 19,946 34,521 5,640

Others, net (4,720) (4,694) (767) (8,714) (23,695) (3,872)
------ ------ ---- ------ ------- ------

Non-GAAP EBITDA loss (28,704) (141,123) (23,059) (171,566) (346,228) (56,573)
======= ======== ======= ======== ======== =======



(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.

Youku Tudou Inc.


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