Youku Tudou Announces Fourth Quarter and Fiscal Year 2013 Unaudited Financial Results

Youku Tudou Announces Fourth Quarter and Fiscal Year 2013 Unaudited Financial Results

Achieved Quarterly Non-GAAP Profitability; Mobile Monetization Reached 10%

BEIJING, Feb. 27, 2014 /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 fourth quarter and fiscal year 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 certain period of 2012 consist of stand-alone historical financial information without these adjustments, we do not believe that comparison of the Company's fiscal year 2013 financial results with that of the fiscal year 2012 can be provided on a consistent basis.

Fourth Quarter 2013 Highlights[1]


-- Net revenues were RMB901.3 million (US$148.9 million),a 42% increase
from the corresponding period in 2012.
-- Gross profit was RMB254.3 million (US$42.0 million), a 119% increase
from the corresponding period in 2012. Non-GAAP gross profit 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. Non-GAAP gross profit was RMB268.3 million
(US$44.3 million) in the fourth quarter of 2013, an increase of 108%
from the corresponding period in 2012.
-- Net loss was RMB24.6 million (US$4.1 million), a 78% decrease from the
corresponding period in 2012. Non-GAAP net profit or loss is herein
defined as net loss excluding share-based compensation expenses,
amortization of intangible assets from business combination and business
combination related expenses. Non-GAAP net profit was RMB44.2 million
(US$7.3 million) in the fourth quarter of 2013, as compared to a
non-GAAP net loss of RMB62.3 million (US$10.3 million) for the
corresponding period in 2012.
-- Basic and diluted loss per ADS, each representing 18 Class A ordinary
shares, for the fourth quarter of 2013 amounted to RMB0.15 (US$0.02) and
RMB0.15 (US$0.02), respectively.
-- Cash, cash equivalents, restricted cash and short-term investments
totaled RMB3.2 billion (US$524.7 million) as of December 31, 2013.
-- Acquisition of property and equipment for the fourth quarter of 2013 was
RMB15.0 million (US$2.5 million).
-- Acquisition of intangible assets for the fourth quarter of 2013 was
RMB227.5 million (US$37.6 million).
Fiscal Year 2013 Highlights


-- Net revenues were RMB3.0 billion (US$500.3 million).
-- Gross profit was RMB541.1 million (US$89.4 million). Non-GAAP gross
profit was RMB601.3 million (US$99.3 million).
-- Net loss was RMB580.7 million (US$95.9 million). Non-GAAP net loss was
RMB342.1million (US$56.5million).
-- Basic and diluted loss per ADS, each representing 18 Class A ordinary
shares, for 2013 amounted to RMB3.50 (US$0.58) and RMB3.50 (US$0.58),
respectively.
-- Acquisition of property and equipment in 2013 was RMB144.1 million
(US$23.8 million).
-- Acquisition of intangible assets in 2013 was RMB740.6 million (US$122.3
million).
"The strong operational and financial performance recorded in the fourth quarter enabled Youku Tudou to achieve profitability on a combined basis for the first time in the company's history. This milestone was achieved on the back of scale economics, strong operating leverage and solid execution," stated Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "With dynamic rise in mobile traffic throughout 2013, our existing comprehensive content library and the two most recognized online video brands set Youku Tudou apart as China's no. 1 multi-screen video company."

Dele Liu, President of Youku Tudou, added, "As viewing content from multiple Internet-enabled devices increasingly becomes a social phenomenon in China, a diverse and comprehensive content mix is critical to elevating our media value and further expanding our leadership across China. We believe our most comprehensive content offering provides enlightening entertainment to hundreds of millions of users in China."

Fourth Quarter 2013 Results

Net revenues were RMB901.3 million (US$148.9 million) in the fourth quarter of 2013, a 42% increase from the corresponding period in 2012 and exceeding the high end of the net revenues guidance previously announced by the Company. Advertising net revenues were RMB801.0 million (US$132.3 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 the rising average spend per advertiser.

Bandwidth costs as a component of cost of revenues were RMB178.8 million (US$29.5 million)in the fourth quarter of 2013, representing 20% of net revenues, as compared to 26% of net revenues for the corresponding period in 2012.

Content costs as a component of cost of revenues were RMB353.7 million (US$58.4 million) in the fourth quarter of 2013, representing 39% of net revenues. 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 RMB339.7million (US$56.1 million) in the fourth quarter of 2013, representing 38% of net revenues, as compared to 41% of net revenues for the corresponding period in 2012.

Gross profit was RMB254.3 million (US$42.0 million)in the fourth quarter of 2013, an increase of 119% from the corresponding period in 2012. Non-GAAP gross profit was RMB268.3 million (US$44.3 million) in the fourth quarter of 2013, an increase of 108% from the corresponding period in 2012 due to strong operating leverage.

Operating expenses were RMB333.4 million (US$55.1 million) in the fourth quarter of 2013, as compared to RMB245.0 million (US$40.5 million) of the corresponding period in 2012. 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 RMB278.5 million (US$46.0 million) in the fourth quarter of 2013, an increase of 35% from the corresponding period in 2012. Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB216.4 million (US$35.8 million) in the fourth quarter of 2013, as compared to RMB107.8 million (US$17.8 million) of the corresponding period in 2012. 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 RMB195.8 million (US$32.3 million) in the fourth quarter of 2013, an increase of 106% from the corresponding period in 2012. This increase was primarily due to year-end advertising related promotion expenses and marketing expenditures on our mobile products.

Product development expenses were RMB76.5 million (US$12.6 million) in the fourth quarter of 2013, as compared to RMB64.1 million (US$10.6 million) for the corresponding period in 2012. 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 RMB61.3 million (US$10.1 million) in the fourth quarter of 2013, an increase of 13% from the corresponding period in 2012. This increase was primarily due to an increase in personnel related expenses for our product development in mobile, search, social and paid-services.

General and administrative expenses were RMB40.4 million (US$6.7 million) in the fourth quarter of 2013, as compared to RMB73.1 million (US$12.1 million) for the corresponding period in 2012. 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 RMB21.4 million (US$3.5 million) in the fourth quarter of 2013, a decrease of 62% from the corresponding period in 2012.

Net loss was RMB24.6 million (US$4.1 million)in the fourth quarter of 2013, a decrease of 78% compared to RMB113.6 million (US$18.8 million) for the corresponding period in 2012. Non-GAAP net profit was RMB44.2 million (US$7.3 million) in the fourth quarter of 2013, as compared to a non-GAAP net loss of RMB62.3 million (US$10.3 million) for the corresponding period in 2012.

Non-GAAP adjusted EBITDA Profit, 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 related expenses and other non-operating items, was RMB36.8 million (US$6.1 million) in the fourth quarter of 2013, as compared to a non-GAAP adjusted EBITDA loss of RMB46.1 million (US$7.6 million) for the corresponding period in 2012.

Fiscal Year 2013 Results

Net revenues were RMB3.0 billion (US$500.3 million).

Bandwidth costs as a component of cost of revenues were RMB685.7 million (US$113.3 million), representing 23% of net revenues.

Content costs as a component of cost of revenues were RMB1.4 billion (US$235.0 million), representing 47% of net revenues.

Gross profit was RMB541.1 million (US$89.4 million). Non-GAAP gross profit was RMB601.3 million (US$99.3 million).

Operating expenses were RMB1.2 billion (US$201.7 million). Non-GAAP operating expenses were RMB1.0 billion (US$172.2 million). Detailed discussion of each component of operating expenses is as follows:

Sales and marketing expenses were RMB681.0 million (US$112.5 million). Non-GAAP sales and marketing expenses were RMB619.0 million (US$102.3 million).

Product development expenses were RMB278.0 million (US$45.9 million). Non-GAAP product development expenses were RMB232.0 million (US$38.3 million).

General and administrative expenses were RMB261.8 million (US$43.2 million). Non-GAAP general and administrative expenses were RMB191.5 million (US$31.6 million).

Net loss was RMB580.7 million (US$95.9 million). Non-GAAP net loss was RMB342.1 million (US$56.5 million).

Non-GAAP adjusted EBITDA loss was RMB309.5 million (US$51.1 million).

Business Outlook

For the first quarter of 2014, the Companyexpects net revenues will be between RMB680 million and RMB720 million, with advertising net revenues contributing between RMB600 million and RMB640 million. 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 8:00 p.m. U.S. Eastern Time on February 27, 2014 (9:00 a.m. Beijing/Hong Kong Time on February 28, 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: 1-718-354-1231

Mainland China Toll Free Dial In: 86-4006208038 / 86-8008190121

Hong Kong Dial In: 852-2475-0994

A replay of the call will be available by dialing +61 2 8199 0299 and entering passcode 1592223#. The replay will be available through March 8, 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 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 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, 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
RMB6.0537 to US$1.00, the effective noon buying rate as of December 31, 2013 in the City of New York for cable transfers of
RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at such rate.





YOUKU TUDOU INC.

CONSOLIDATED BALANCE SHEETS


(Amounts in thousands, except for number of shares) As of December 31,
-------------------------------------------------- ------------------

2012 2013 2013
---- ---- ----

RMB RMB US$

ASSETS (Unaudited) (Unaudited)


Current assets:

Cash and cash equivalents 1,655,857 1,764,221 291,429

Restricted cash 9,003 2,679 443

Short-term investments 2,110,073 1,409,439 232,823

Accounts receivable, net 932,796 1,370,031 226,313

Intangible assets, net 19,607 51,942 8,580

Deferred tax assets 10,470 7,843 1,296

Prepayments and other assets 64,909 82,300 13,595


Total current assets 4,802,715 4,688,455 774,479


Non-current assets:

Property and equipment, net 200,681 222,229 36,710

Intangible assets, net 1,304,923 1,197,671 197,841

Capitalized content production costs - 1,176 194

Prepayments and other assets 229,185 197,856 32,683

Goodwill 4,255,570 4,262,569 704,126

Total non-current assets 5,990,359 5,881,501 971,554
--------- --------- -------


TOTAL ASSETS 10,793,074 10,569,956 1,746,033
========== ========== =========


LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:

Accounts payable 181,878 213,825 35,321

Advances from customers 21,603 25,081 4,143

Accrued expenses and other liabilities 981,353 1,124,342 185,729

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


Total current liabilities 1,192,275 1,363,248 225,193


Non-current liabilities?

Deferred tax liability 224,374 219,519 36,262

Other liabilities 19,552 4,070 672

Total non-current liabilities 243,926 223,589 36,934
------- ------- ------


Total liabilities 1,436,201 1,586,837 262,127


Commitments and contingencies


Shareholders' equity?

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 149 154 25

authorized, 2,286,643,502 and 2,356,529,401 issued and outstanding

as of December 31, 2012 and 2013, respectively)

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 49 49 8

authorized, 659,561,893 and 659,561,893 issued and outstanding as

of December 31, 2012 and 2013, respectively)

Additional paid-in capital 10,768,204 11,058,360 1,826,711

Statutory reserves 1,500 2,063 341

Accumulated deficit (1,297,147) (1,878,454) (310,298)

Accumulated other comprehensive loss (115,882) (199,053) (32,881)

Total shareholders' equity 9,356,873 8,983,119 1,483,906
--------- --------- ---------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 10,793,074 10,569,956 1,746,033
========== ========== =========





YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


For the Three Months Ended For the Twelve Months Ended
-------------------------- ---------------------------

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

ADS data)
--------

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

December 31, 2013 December 31, 2013


RMB RMB RMB US$ RMB RMB US$

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


Net revenues 635,831 857,743 901,287 148,882 1,795,575 3,028,484 500,271


Cost of revenues (Note 1) (519,544) (775,436) (646,938) (106,867) (1,499,536) (2,487,421) (410,893)
-------- -------- -------- -------- ---------- ---------- --------


Gross profit 116,287 82,307 254,349 42,015 296,039 541,063 89,378


Operating expenses:

Product development (64,099) (78,622) (76,514) (12,639) (172,885) (278,015) (45,925)

Sales and marketing (107,787) (171,763) (216,444) (35,754) (363,707) (681,008) (112,494)

General and administrative (73,084) (62,458) (40,393) (6,672) (238,112) (261,770) (43,241)

Total operating expenses (244,970) (312,843) (333,351) (55,065) (774,704) (1,220,793) (201,660)
-------- -------- -------- ------- -------- ---------- --------


Loss from operations (128,683) (230,536) (79,002) (13,050) (478,665) (679,730) (112,282)


Interest income 9,988 7,284 8,419 1,391 45,478 29,972 4,950

Interest expenses (830) - - - (3,989) (545) (90)

Other, net 1,043 4,694 46,878 7,744 9,757 70,573 11,658
----- ----- ------ ----- ----- ------ ------

Total other income, net 10,201 11,978 55,297 9,135 51,246 100,000 16,518


Loss before income taxes (118,482) (218,558) (23,705) (3,915) (427,419) (579,730) (95,764)

Income taxes 4,912 (80) (876) (145) 3,416 (1,014) (168)
----- --- ---- ---- ----- ------ ----


Net loss (113,570) (218,638) (24,581) (4,060) (424,003) (580,744) (95,932)
======== ======== ======= ====== ======== ======== =======


Other comprehensive loss, before tax

Foreign currency translation adjustments (20,647) (10,547) (33,201) (5,484) (7,304) (83,171) (13,739)
------- ------- ------- ------ ------ ------- -------

Other comprehensive loss, before tax (20,647) (10,547) (33,201) (5,484) (7,304) (83,171) (13,739)

Income tax expense related to components of other comprehensive loss - - - - - - -
--- --- --- --- --- --- ---


Other comprehensive loss, net of tax (20,647) (10,547) (33,201) (5,484) (7,304) (83,171) (13,739)
======= ======= ======= ====== ====== ======= =======

0 0

Net loss per share, basic and diluted (0.04) (0.07) (0.01) (0.00) (0.18) (0.19) (0.03)

Net loss per ADS (each ADS represents 18 class A ordinary shares), (0.69) (1.31) (0.15) (0.02) (3.20) (3.50) (0.58)
basic and diluted

Shares used in computation, basic and diluted 2,944,902,156 2,995,701,280 3,010,627,513 3,010,627,513 2,386,474,188 2,986,223,088 2,986,223,088

ADSs used in computation, basic and diluted 163,605,675 166,427,848 167,257,084 167,257,084 132,581,899 165,901,282 165,901,282




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




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


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

December 31, 2013 December 31, 2013
----------------- -----------------

RMB RMB RMB US$ RMB RMB US$

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

Cost of revenues:

Value added, business taxes and surcharges 59,337 75,480 77,758 12,845 169,283 276,497 45,674

Bandwidth costs 162,959 181,670 178,824 29,540 524,623 685,650 113,261

Depreciation of servers and other equipment 26,303 21,827 36,686 6,060 68,569 102,367 16,910

Content costs 270,945 496,459 353,670 58,422 737,061 1,422,907 235,048

Total Cost of Revenues 519,544 775,436 646,938 106,867 1,499,536 2,487,421 410,893
======= ======= ======= ======= ========= ========= =======




YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Three Months Ended For the Twelve Months Ended
-------------------------- ---------------------------

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

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

RMB RMB RMB US$ RMB RMB US$

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

Cash flows from operating activities:

Net loss (113,570) (218,638) (24,581) (4,060) (424,003) (580,744) (95,932)

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

Depreciation and impairment of fixed assets 31,249 30,342 46,972 7,759 81,609 131,611 21,741


Bad debt expense (1,828) 19,945 25,547 4,220 9,887 62,603 10,341

Amortisation and impairment of intangible assets and capitalized content production costs 135,508 327,334 225,109 37,185 416,396 867,957 143,376


Amortization of long-term debt discounts 336 - - - 1,928 313 52

Gain on disposal of property and equipment - 788 (353) (58) 52 485 80

Foreign exchange loss (gain) 826 2,540 (15,336) (2,533) 469 (13,318) (2,200)

Share-based compensation 38,779 48,918 53,061 8,764 118,218 188,358 31,114

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

Deferred income tax benefits (7,675) - (4,414) (729) (9,953) (4,414) (729)

Write-off of prepayment 8,510 - - - - - -

Gain from de-recognition of off-market liabilities - - (16,540) (2,732) - (16,540) (2,732)

Changes in operating assets and liabilities:

Restricted cash - 6,759 (1,129) (186) (9,003) 6,324 1,045

Accounts receivable 73,149 (161,184) (10,312) (1,703) (223,772) (499,838) (82,567)

Prepayments and other assets (20,831) 37,051 (58,751) (9,705) 20,182 1,441 238

Capitalized content production costs 5,761 (3,004) 22,687 3,748 (9,891) (6,738) (1,113)

Accounts payable (22,506) 702 (15,572) (2,572) (39,023) (13,555) (2,239)

Advances from customers (23,022) 9,918 (40,717) (6,726) (7,244) 3,478 576

Accrued expenses and other liabilities 53,987 20,027 21,519 3,553 214,912 142,060 23,464

Net cash provided by operating activities 158,673 121,498 207,190 34,225 137,420 269,483 44,515


Cash flows from investing activities:

Acquisition of property and equipment (24,364) (67,252) (14,955) (2,470) (90,204) (144,120) (23,807)

Proceeds received from maturity of short-term investments 1,170,519 1,358,761 1,018,628 168,265 2,826,023 2,989,628 493,851

Short-term investments placed with financial institutions (2,113,464) (1,405,173) - - (3,536,711) (2,283,410) (377,192)

Proceeds from disposal of property and equipment 1 - (824) (136) 9 458 76

Cash acquired, net of cash paid for acquired subsidiaries - - (6,999) (1,156) 378,666 (6,999) (1,156)

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

Acquisition of intangible assets (118,256) (171,620) (227,540) (37,587) (361,976) (740,581) (122,335)


Net cash (used in) provided by investing activities (1,078,364) (285,284) 768,310 126,916 (784,193) (185,024) (30,563)


Cash flows from financing activities:

Exercise of employee stock options 3,561 27,676 9,084 1,501 22,485 101,435 16,756

Proceeds from restricted cash 25,364 - - - 38,069 - -

Principal repayments on long-term debt (23,685) (1,111) - - (11,145) (7,677) (1,268)

Principal repayments on short-term loan - - - - (31,544) - -

Net cash provided by financing activities 5,240 26,565 9,084 1,501 17,865 93,758 15,488

Effect of exchange rate changes on cash and cash equivalents (21,474) (13,087) (17,865) (2,951) (7,773) (69,853) (11,539)
------- ------- ------- ------ ------ ------- -------

Net (decrease) increase in cash and cash equivalents (935,925) (150,308) 966,719 159,691 (636,681) 108,364 17,901

Cash and cash equivalents at the beginning of the period 2,591,782 947,810 797,502 131,738 2,292,538 1,655,857 273,528

Cash and cash equivalents at the end of the period 1,655,857 797,502 1,764,221 291,429 1,655,857 1,764,221 291,429
========= ======= ========= ======= ========= ========= =======




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 Twelve Months Ended
-------------------------- ---------------------------


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

RMB RMB RMB US$ RMB RMB US$

Content costs 270,945 496,459 353,670 58,422 737,061 1,422,907 235,048

Deduct: share-based compensation 4,536 12,136 7,846 1,296 12,751 32,110 5,304

Deduct: amortization of intangible assets from business combination 8,235 5,984 6,100 1,008 26,472 28,156 4,651

Non-GAAP content costs 258,174 478,339 339,724 56,118 697,838 1,362,641 225,093
======= ======= ======= ====== ======= ========= =======


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


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

RMB RMB RMB US$ RMB RMB US$

Gross profit 116,287 82,307 254,349 42,015 296,039 541,063 89,378

Add back: share-based compensation 4,536 12,136 7,846 1,296 12,751 32,110 5,304

Add back: amortization of intangible assets from business combination 8,235 5,984 6,100 1,008 26,472 28,156 4,651

Non-GAAP gross profit 129,058 100,427 268,295 44,319 335,262 601,329 99,333
======= ======= ======= ====== ======= ======= ======



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


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

RMB RMB RMB US$ RMB RMB US$

Operating expenses 244,970 312,843 333,351 55,065 774,704 1,220,793 201,660

Deduct: share-based compensation 34,243 36,782 45,215 7,468 105,467 156,248 25,810

Deduct: business combination related expenses 127 - - - 28,754 - -

Deduct: amortization of intangible assets from business combination 4,176 4,155 9,623 1,589 5,885 22,088 3,648

Non-GAAP operating expenses 206,424 271,906 278,513 46,008 634,598 1,042,457 172,202
======= ======= ======= ====== ======= ========= =======



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


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

RMB RMB RMB US$ RMB RMB US$

Sales and marketing expenses 107,787 171,763 216,444 35,754 363,707 681,008 112,494

Deduct: share-based compensation 10,606 12,366 15,577 2,573 28,741 50,712 8,377

Deduct: amortization of intangible assets from business combination 2,087 2,077 5,077 839 2,941 11,308 1,867

Non-GAAP sales and marketing expenses 95,094 157,320 195,790 32,342 332,025 618,988 102,250
====== ======= ======= ====== ======= ======= =======



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


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

RMB RMB RMB US$ RMB RMB US$

Product development expenses 64,099 78,622 76,514 12,639 172,885 278,015 45,925

Deduct: share-based compensation 8,408 9,748 11,795 1,948 26,157 38,400 6,343

Deduct: amortization of intangible assets from business combination 1,402 1,395 3,411 563 1,976 7,596 1,255

Non-GAAP product development expenses 54,289 67,479 61,308 10,128 144,752 232,019 38,327
====== ====== ====== ====== ======= ======= ======



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


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

RMB RMB RMB US$ RMB RMB US$

General and administrative expenses 73,084 62,458 40,393 6,672 238,112 261,770 43,241

Deduct: share-based compensation 15,229 14,668 17,843 2,947 50,569 67,136 11,090

Deduct: business combination related expenses 127 - - - 28,754 - -

Deduct: amortization of intangible assets from business combination 687 683 1,135 187 968 3,184 526

Non-GAAP general and administrative expenses 57,041 47,107 21,415 3,538 157,821 191,450 31,625
====== ====== ====== ===== ======= ======= ======



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


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

RMB RMB RMB US$ RMB RMB US$

Loss from operations (128,683) (230,536) (79,002) (13,050) (478,665) (679,730) (112,282)

Add back: share-based compensation 38,779 48,918 53,061 8,764 118,218 188,358 31,114

Add back: business combination related expenses 127 - - - 28,754 - -

Add back: amortization of intangible assets from business combination 12,411 10,139 15,723 - 2,597 32,357 50,244 8,299

Non-GAAP loss from operations (77,366) (171,479) (10,218) (1,689) (299,336) (441,128) (72,869)
======= ======== ======= ====== ======== ======== =======



8. Non-GAAP Net (Loss) Profit For the Three Months Ended For the Twelve Months Ended
-------------------------- ---------------------------


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

RMB RMB RMB US$ RMB RMB US$

Net loss (113,570) (218,638) (24,581) (4,060) (424,003) (580,744) (95,932)

Add back: share-based compensation 38,779 48,918 53,061 8,764 118,218 188,358 31,114

Add back: business combination related expenses 127 - - - 28,754 - -

Add back: amortization of intangible assets from business combination 12,411 10,139 15,723 2,597 32,357 50,244 8,299

Non-GAAP net (loss) profit (62,253) (159,581) 44,203 7,301 (244,674) (342,142) (56,519)
======= ======== ====== ===== ======== ======== =======



9. Non-GAAP EBITDA (Loss) Profit For the Three Months Ended For the Twelve Months Ended
-------------------------- ---------------------------


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

RMB RMB RMB US$ RMB RMB US$

Net loss (113,570) (218,638) (24,581) (4,060) (424,003) (580,744) (95,932)

Add back:

Depreciation and amortization (excluding amortization

of acquired content )(2) 31,263 30,356 46,986 7,762 81,667 131,668 21,750

Interest income (9,988) (7,284) (8,419) (1,391) (45,478) (29,972) (4,950)

Interest expenses 830 - - - 3,989 545 90

Income taxes (4,912) 80 876 145 (3,416) 1,014 168
------ --- --- --- ------ ----- ---

EBITDA (loss) profit (96,377) (195,486) 14,862 2,456 (387,241) (477,489) (78,874)


Adjustments:

Share-based compensation 38,779 48,918 53,061 8,764 118,218 188,358 31,114

Business combination related expenses 127 - - - 28,754 - -

Amortization of intangible assets from business combination 12,411 10,139 15,723 2,597 32,357 50,244 8,299

Others, net (1,043) (4,694) (46,878) (7,744) (9,757) (70,573) (11,658)
------ ------ ------- ------ ------ ------- -------

Non-GAAP EBITDA (loss) profit (46,103) (141,123) 36,768 6,073 (217,669) (309,460) (51,119)
======= ======== ====== ===== ======== ======== =======



(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.

Web Site: http://ir.youku.com


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