Youku Tudou Announces Second Quarter 2015 Unaudited Financial Results

Youku Tudou Announces Second Quarter 2015 Unaudited Financial Results

Consumer Revenues Grew 596% Year-on-Year; Multi-Screen Monthly User Time Spent Grew 50% Year-on-Year

BEIJING, Aug. 19, 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-GAAPnet 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.



US Toll Free Dial In: +1-866-519-4004

International Dial In: +65-6713-5090

Mainland China Dial In: +86-800-819-0121 /
+86-400-620-8038

Hong Kong Dial In: +852-3018-6771
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



[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 RMB6.2000 to
US$1.00, the effective noon buying
rate as of June 30, 2015 in the
City of New York for cable
transfers of RMB as certified for
customs purposes by the Federal
Reserve Bank of New York. No
representation is made that the
RMB amounts could have been, or
could be, converted into US$ at
such rate.


[2] As noted in the Company's annual
report for fiscal year 2014 on
Form 20-F (the "2014 Annual
Report"), certain adjustments were
made to the Company's historical
consolidated financial statements
reflecting certain revisions to
its accounting treatment for (i)
licensed copyrights and (ii)
nonmonetary exchanges of licensed
copyrights, as further described
in the 2014 Annual Report.
Accordingly, unaudited financial
information in this release in
relation to the second quarter of
2014 has been amended, where
applicable, principally as a
result of, and to reflect the
adjustment caused by, such
revisions of the Company's
accounting treatment.


[3] All non-GAAP measures exclude, as
applicable, barter sublicensing
revenues, amortization of licensed
copyrights from nonmonetary
content exchanges, share-based
compensation expenses and
amortization of intangible assets
from business combination. For
further details on non-GAAP
measures, please refer to the
reconciliation table and a
detailed discussion of the
Company's use of non-GAAP
information set forth elsewhere in
this press release.








YOUKU TUDOU INC.

CONSOLIDATED BALANCE SHEETS


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

December 31, 2014 June 30, 2015 June 30, 2015
----------------- ------------- -------------

RMB RMB US$

ASSETS (Audited) (Unaudited) (Unaudited)


Current assets:

Cash and cash equivalents 3,820,742 2,561,775 413,190

Restricted cash 617,586 1,441,049 232,427

Short-term investments 4,021,199 4,323,246 697,298

Accounts receivable 1,719,760 2,135,363 344,413

Licensed copyrights, net 220,152 259,052 41,783

Amounts due from related parties 125,204 85,408 13,775

Deferred tax assets, net 2,283 2,283 368

Prepayments and other assets 117,716 315,511 50,890


Total current assets 10,644,642 11,123,687 1,794,144
---------- ---------- ---------


Non-current assets:

Property and equipment, net 293,027 365,002 58,871

Long-term investments 67,293 176,951 28,540

Available-for-sale financial assets - 21,267 3,430

Licensed copyrights, net 505,173 657,606 106,065

Intangible assets, net 875,502 869,467 140,237

Capitalized content production costs 1,678 3,562 575

Film assets - 64,885 10,465

Prepayments and other assets 431,377 389,162 62,768

Goodwill 4,262,569 4,262,569 687,511

Total non-current assets 6,436,619 6,810,471 1,098,462
--------- --------- ---------


TOTAL ASSETS 17,081,261 17,934,158 2,892,606
========== ========== =========


LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:

Accounts payable 563,009 690,668 111,399

Advances from customers and deferred revenue 36,232 156,660 25,268

Amounts due to related parties 4 1 -

Accrued expenses and other liabilities 1,668,122 2,017,281 325,368

Short-term bank loans 500,000 1,320,386 212,965


Total current liabilities 2,767,367 4,184,996 675,000
--------- --------- -------


Non-current liabilities?

Deferred tax liabilities 213,608 213,608 34,453

Other liabilities 6,570 33,458 5,396

Total non-current liabilities 220,178 247,066 39,849
------- ------- ------


Total liabilities 2,987,545 4,432,062 714,849
========= ========= =======


Commitments and contingencies


Shareholders' equity?

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 201 203 33
authorized, 3,123,742,699 and 3,158,011,117 issued as of December
31, 2014 and June 30, 2015, respectively, 2,834,270,299 and
2,868,538,717 outstanding as of December 31, 2014 and June 30,
2015, respectively)

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 645,691,903 and 645,691,903 issued and outstanding as of December 31,
2014 and June 30, 2015, respectively) 48 48 8

Additional paid-in capital 18,878,497 19,136,913 3,086,599

Treasury stock (at cost, 289,472,400 and 289,472,400 (1,845,892) (1,845,892) (297,725)
as of December 31, 2014 and June 30, 2015, respectively)

Statutory reserves 13,146 13,146 2,120

Accumulated deficit (2,681,658) (3,541,118) (571,148)

Accumulated other comprehensive loss (270,626) (261,204) (42,130)

Total shareholders' equity 14,093,716 13,502,096 2,177,757
---------- ---------- ---------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 17,081,261 17,934,158 2,892,606
========== ========== =========




YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------

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

June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

(Unaudited-As revised) (Unaudited) (Unaudited) (Unaudited) (Unaudited-As revised) (Unaudited) (Unaudited)


Net revenues(including advertising net revenues from related 1,023,340 1,139,458 1,609,687 259,627 1,798,025 2,749,145 443,410
parties amounting to RMB48,010 and RMB47,339 for the three
months ended March 31, 2015 and June 30, 2015, respectively,
and RMB95,349 for the six months ended June 30, 2015)


Cost of revenues (Note 1) (794,771) (1,137,987) (1,355,570) (218,640) (1,437,331) (2,493,557) (402,187)
-------- ---------- ---------- -------- ---------- ---------- --------


Gross profit 228,569 1,471 254,117 40,987 360,694 255,588 41,223
------- ----- ------- ------ ------- ------- ------


Operating expenses:

Product development (98,551) (139,573) (181,856) (29,332) (178,689) (321,429) (51,843)

Sales and marketing (211,979) (320,433) (354,259) (57,139) (397,675) (674,692) (108,821)

General and administrative (73,670) (84,058) (109,830) (17,715) (119,799) (193,888) (31,272)
------- ------- -------- ------- -------- -------- -------


Total operating expenses (384,200) (544,064) (645,945) (104,186) (696,163) (1,190,009) (191,936)

Government grant income 880 123 11,075 1,786 880 11,198 1,806
--- --- ------ ----- --- ------ -----


Loss from operations (154,751) (542,470) (380,753) (61,413) (334,589) (923,223) (148,907)

Interest income 9,923 29,811 34,265 5,527 15,976 64,076 10,335

Interest expenses - (10,743) (17,126) (2,762) - (27,869) (4,495)

Share of net loss of equity investee - (1,247) (1,459) (235) - (2,706) (436)

Other income, net 2,562 7,352 1,781 287 303 9,133 1,473
----- ----- ----- --- --- ----- -----


Loss before income taxes (142,266) (517,297) (363,292) (58,596) (318,310) (880,589) (142,030)

Income tax expense (12) (144) 21,273 3,431 (12) 21,129 3,408
--- ---- ------ ----- --- ------ -----


Net loss (142,278) (517,441) (342,019) (55,165) (318,322) (859,460) (138,622)
======== ======== ======== ======= ======== ======== ========


Other comprehensive income (loss), before tax

Foreign currency translation adjustments (13,645) 36,587 (27,165) (4,381) 7,314 9,422 1,520
------- ------ ------- ------ ----- ----- -----

Other comprehensive income (loss), net of tax (13,645) 36,587 (27,165) (4,381) 7,314 9,422 1,520
------- ------ ------- ------ ----- ----- -----


Comprehensive loss attributable to ordinary shareholders (155,923) (480,854) (369,184) (59,546) (311,008) (850,038) (137,102)
======== ======== ======== ======= ======== ======== ========


Net loss per share, basic and diluted (0.04) (0.15) (0.10) (0.02) (0.10) (0.25) (0.04)

Net loss per ADS (each ADS represents 18 class A ordinary shares), basic and diluted (0.76) (2.67) (1.76) (0.28) (1.80) (4.43) (0.71)

Shares used in computation, basic and diluted 3,355,310,411 3,485,681,620 3,500,437,718 3,500,437,718 3,189,566,616 3,493,100,432 3,493,100,432

ADSs used in computation, basic and diluted 186,406,133 193,648,978 194,468,762 194,468,762 177,198,145 194,061,135 194,061,135


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




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


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

(Amounts in thousands) (Unaudited-As revised) (Unaudited) (Unaudited) (Unaudited) (Unaudited-As revised) (Unaudited) (Unaudited)

Cost of revenues:

Value added, business taxes and surcharges 89,550 98,388 138,329 22,311 152,508 236,717 38,180

Bandwidth costs 213,538 306,835 330,258 53,267 415,427 637,093 102,757

Depreciation of servers and other equipment 24,452 34,349 38,479 6,206 44,617 72,828 11,746

Interactive live entertainment revenue sharing fees 3,351 24,087 70,017 11,293 4,339 94,104 15,178

Cost of goods sold - 5,337 34,073 5,496 - 39,410 6,356

Content costs 463,880 668,991 744,414 120,067 820,440 1,413,405 227,970

Total Cost of Revenues 794,771 1,137,987 1,355,570 218,640 1,437,331 2,493,557 402,187
======= ========= ========= ======= ========= ========= =======




YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------

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

June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

(Unaudited-As revised) (Unaudited) (Unaudited) (Unaudited) (Unaudited-As revised) (Unaudited) (Unaudited)

Cash flows from operating activities:

Net loss (142,278) (517,441) (342,019) (55,165) (318,322) (859,460) (138,622)

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

Depreciation of fixed assets 30,688 40,676 45,212 7,292 57,205 85,888 13,853

Bad debt expense 5,247 14,800 1,862 300 (1,226) 16,662 2,687

Amortization of licensed copyrights 270,328 450,865 478,480 77,174 477,191 929,345 149,894

Amortization and impairment of intangible assets and 7,337 13,930 17,493 2,821 13,267 31,423 5,068
capitalized content production costs

Barter sublicensing revenues (64,621) (83,239) (94,891) (15,305) (138,932) (178,130) (28,731)

Loss (Gain) on disposal of property and equipment 128 (47) 135 22 218 88 14

Foreign exchange loss (gain) 846 (20,070) 21,755 3,509 3,010 1,685 272

Share-based compensation 82,131 79,772 144,364 23,285 152,351 224,136 36,151

Deferred government grant income - - (167) (27) - (167) (27)

Share of net loss of equity investee - 1,247 1,459 235 - 2,706 436

Changes in operating assets and liabilities, net of acquisition:

Restricted cash (1) (5,507) 6,044 975 (3) 537 87

Accounts receivable (244,056) (101,326) (330,939) (53,377) (64,903) (432,265) (69,720)

Amounts due from related parties (62,620) (53,417) 93,213 15,034 (62,620) 39,796 6,419

Prepayments and other assets (21,120) (103,103) (49,712) (8,017) (31,735) (152,815) (24,648)

Capitalized content production costs (6,371) (21,974) (51,805) (8,356) (9,343) (73,779) (11,900)

Accounts payable 8,631 71,836 (10,033) (1,618) 13,205 61,803 9,968

Advances from customers and deferred revenue (3,229) 36,933 (3,788) (611) (1,413) 33,145 5,346

Accrued expenses and other liabilities (16,266) 88,424 246,747 39,800 13,325 335,171 54,060

Amount due to related parties 70 1 (4) (1) 70 (3) -

Net cash provided (used in) by operating activities (155,156) (107,640) 173,406 27,970 101,345 65,766 10,607


Cash flows from investing activities:

Acquisition of property and equipment (84,968) (72,990) (71,508) (11,534) (113,159) (144,498) (23,306)

Purchase of available-for-sale financial assets - (21,267) - - - (21,267) (3,430)

Proceeds received from maturity of short-term investments 66,037 - 20,000 3,226 1,198,496 20,000 3,226

Short-term investments placed with financial institutions (4,698) (280,308) - - (1,395,937) (280,308) (45,211)

Proceeds from disposal of property and equipment 10 47 15 2 190 62 10

Collection of loans to third parties - - 3,000 484 - 3,000 484

Loans to third parties - (3,000) - - - (3,000) (484)

Acquisition of shares of investees - - (77,250) (12,460) - (77,250) (12,460)

Acquisition of licensed copyrights (245,390) (495,247) (366,228) (59,069) (411,281) (861,475) (138,948)

Acquisition of intangible assets (930) - - - (930) - -


Net cash used in investing activities (269,939) (872,765) (491,971) (79,351) (722,621) (1,364,736) (220,119)


Cash flows from financing activities:

Exercise of employee stock options 7,355 4,529 29,754 4,799 19,164 34,283 5,530

Increase in restricted cash - (670,000) (154,000) (24,839) - (824,000) (132,903)

Proceeds from short-term bank loans - 670,253 148,247 23,911 - 818,500 132,016

Proceeds from Ali investment, net of issuance costs 7,387,520 - - - 7,387,520 - -


Net cash provided by financing activities 7,394,875 4,782 24,001 3,871 7,406,684 28,783 4,643

Effect of exchange rate changes on cash and cash equivalents (14,491) 41,693 (30,473) (4,915) 4,304 11,220 1,810
------- ------ ------- ------ ----- ------ -----

Net (decrease) increase in cash and cash equivalents 6,955,289 (933,930) (325,037) (52,425) 6,789,712 (1,258,967) (203,059)

Cash and cash equivalents at the beginning of the period 1,598,644 3,820,742 2,886,812 465,615 1,764,221 3,820,742 616,249

Cash and cash equivalents at the end of the period 8,553,933 2,886,812 2,561,775 413,190 8,553,933 2,561,775 413,190
========= ========= ========= ======= ========= ========= =======






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 Net Revenues For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Net Revenues 1,023,340 1,139,458 1,609,687 259,627 1,798,025 2,749,145 443,410

Deduct: barter sublicensing revenues 64,621 83,239 94,891 15,305 138,932 178,130 28,731

Non-GAAP Net Revenues 958,719 1,056,219 1,514,796 244,322 1,659,093 2,571,015 414,679
======= ========= ========= ======= ========= ========= =======


2. Non-GAAP Content Costs For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Content costs 463,880 668,991 744,414 120,067 820,440 1,413,405 227,970

Deduct: amortization of licensed copyrights from nonmonetary content exchanges 43,187 36,445 69,121 11,149 61,699 105,566 17,027

Deduct: share-based compensation 12,694 12,407 25,473 4,109 24,917 37,880 6,110

Deduct: amortization of intangible assets from business combination 1,970 - - - 3,830 - -

Non-GAAP content costs 406,029 620,139 649,820 104,809 729,994 1,269,959 204,833
======= ======= ======= ======= ======= ========= =======


3. Non-GAAP Gross Profit For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Gross profit 228,569 1,471 254,117 40,987 360,694 255,588 41,223

Deduct: barter sublicensing revenues 64,621 83,239 94,891 15,305 138,932 178,130 28,731

Add back: amortization of licensed copyrights from nonmonetary content exchanges 43,187 36,445 69,121 11,149 61,699 105,566 17,027

Add back: share-based compensation 12,694 12,407 25,473 4,109 24,917 37,880 6,110

Add back: amortization of intangible assets from business combination 1,970 - - - 3,830 - -

Non-GAAP gross profit (loss) 221,799 (32,916) 253,820 40,940 312,208 220,904 35,629
======= ======= ======= ====== ======= ======= ======



4. Non-GAAP Operating Expenses For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Operating expenses 384,200 544,064 645,945 104,186 696,163 1,190,009 191,936

Deduct: share-based compensation 69,437 67,365 118,891 19,176 127,434 186,256 30,041

Deduct: amortization of intangible assets from business combination 2,691 2,691 2,689 434 5,382 5,380 869

Non-GAAP operating expenses 312,072 474,008 524,365 84,576 563,347 998,373 161,026
======= ======= ======= ====== ======= ======= =======



5. Non-GAAP Sales and Marketing Expenses For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Sales and marketing expenses 211,979 320,433 354,259 57,139 397,675 674,692 108,821

Deduct: share-based compensation 24,824 32,351 47,305 7,630 45,996 79,656 12,848

Deduct: amortization of intangible assets from business combination 1,344 1,344 1,344 217 2,688 2,688 434

Non-GAAP sales and marketing expenses 185,811 286,738 305,610 49,292 348,991 592,348 95,539
======= ======= ======= ====== ======= ======= ======



6. Non-GAAP Product Development Expenses For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Product development expenses 98,551 139,573 181,856 29,332 178,689 321,429 51,843

Deduct: share-based compensation 19,006 18,708 39,159 6,316 36,212 57,867 9,333

Deduct: amortization of intangible assets from business combination 905 905 903 146 1,810 1,808 292

Non-GAAP product development expenses 78,640 119,960 141,794 22,870 140,667 261,754 42,218
====== ======= ======= ====== ======= ======= ======







7. Non-GAAP General and Administrative Expenses For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

General and administrative expenses 73,670 84,058 109,830 17,715 119,799 193,888 31,272

Deduct: share-based compensation 25,607 16,306 32,427 5,230 45,226 48,733 7,860

Deduct: amortization of intangible assets from business combination 442 442 442 71 884 884 143

Non-GAAP general and administrative expenses 47,621 67,310 76,961 12,414 73,689 144,271 23,269
====== ====== ====== ====== ====== ======= ======



8. Non-GAAP Loss from Operations For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Loss from operations (154,751) (542,470) (380,753) (61,413) (334,589) (923,223) (148,907)

Deduct: barter sublicensing revenues 64,621 83,239 94,891 15,305 138,932 178,130 28,731

Add back: amortization of licensed copyrights from nonmonetary content exchanges 43,187 36,445 69,121 11,149 61,699 105,566 17,027

Add back: share-based compensation 82,131 79,772 144,364 23,285 152,351 224,136 36,151

Add back: amortization of intangible assets from business combination 4,661 2,691 2,689 434 9,212 5,380 869

Non-GAAP loss from operations (89,393) (506,801) (259,470) (41,850) (250,259) (766,271) (123,591)
======= ======== ======== ======= ======== ======== ========



9. Non-GAAP Net Loss For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Net loss (142,278) (517,441) (342,019) (55,165) (318,322) (859,460) (138,622)

Deduct: barter sublicensing revenues 64,621 83,239 94,891 15,305 138,932 178,130 28,731

Add back: amortization of licensed copyrights from nonmonetary content exchanges 43,187 36,445 69,121 11,149 61,699 105,566 17,027

Add back: share-based compensation 82,131 79,772 144,364 23,285 152,351 224,136 36,151

Add back: amortization of intangible assets from business combination 4,661 2,691 2,689 434 9,212 5,380 869

Non-GAAP net loss (76,920) (481,772) (220,736) (35,602) (233,992) (702,508) (113,306)
======= ======== ======== ======= ======== ======== ========



10. Non-GAAP adjusted EBITDA Loss For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------


June 30, 2014 March 31, 2015 June 30, 2015 June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2015
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Net loss (142,278) (517,441) (342,019) (55,165) (318,322) (859,460) (138,622)

Add back:

Depreciation and amortization (excluding amortization of acquired content) (2) 30,698 40,686 45,223 7,294 57,225 85,909 13,856

Interest income (9,923) (29,811) (34,265) (5,527) (15,976) (64,076) (10,335)

Interest expenses - 10,743 17,126 2,762 - 27,869 4,495

Income taxes 12 144 (21,273) (3,431) 12 (21,129) (3,408)
--- --- ------- ------ --- ------- ------

EBITDA loss (121,491) (495,679) (335,208) (54,067) (277,061) (830,887) (134,014)


Adjustments:

Barter sublicensing revenues (64,621) (83,239) (94,891) (15,305) (138,932) (178,130) (28,731)

Amortization of licensed copyrights from nonmonetary content exchanges 43,187 36,445 69,121 11,149 61,699 105,566 17,027

Share-based compensation 82,131 79,772 144,364 23,285 152,351 224,136 36,151

Amortization of intangible assets from business combination 4,661 2,691 2,689 434 9,212 5,380 869

Others, net (2,562) (7,352) (1,781) (287) (303) (9,133) (1,473)
------ ------ ------ ---- ---- ------ ------

Non-GAAP adjusted EBITDA loss (58,695) (467,362) (215,706) (34,791) (193,034) (683,068) (110,171)
======= ======== ======== ======= ======== ======== ========



(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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