Youku Tudou Announces Second Quarter 2014 Unaudited Financial Results

Youku Tudou Announces Second Quarter 2014 Unaudited Financial Results

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

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

Second Quarter 2014 Highlights[1]


-- Net revenues were RMB958.7 million (US$154.5 million), a 27% increase
from the corresponding period in 2013. We derive a part of our revenues
from mobile value-added services through partnership agreements with
third party mobile network operators and shares the fees collected by
the mobile network operators for such services. We were still in the
process of renewing the service agreement with one of our major mobile
network operators by the end of the second quarter of 2014 and as a
result, we deferred recognition of such revenues, about RMB40 million,
until the completion of the service agreement renewal process.
-- Gross profit was RMB208.6 million (US$33.6 million), a 10% increase from
the corresponding period in 2013. Non-GAAP[2] gross profit was RMB223.9
million (US$36.1 million) in the second quarter of 2014, an increase of
10% from the corresponding period in 2013.
-- Net loss was RMB164.4 million (US$26.5 million), a 57% increase from the
corresponding period in 2013. Non-GAAP net loss was RMB75.9 million
(US$12.2 million) in the second quarter of 2014, as compared to RMB44.6
million (US$7.2 million) from the corresponding period in 2013. .
-- Basic and diluted loss per ADS, each representing 18 Class A ordinary
shares of the Company, for the second quarter of 2014 amounted to
RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively. Non-GAAP basic
and diluted loss per ADS for the second quarter of 2014 amounted to
RMB0.41 (US$0.07) and RMB0.41 (US$0.07), respectively.
-- Cash, cash equivalents, restricted cash and short-term investments
totaled RMB10.2 billion (US$1.6 billion) as of June 30, 2014.
-- Acquisition of property and equipment for the second quarter of 2014 was
RMB85.0 million (US$13.7 million).
-- Acquisition of intangible assets for the second quarter of 2014 was
RMB246.3 million (US$39.7 million).
"Multi-screen Internet is increasingly mainstream and the convergence of online and offline entertainment has presented new market opportunities. We are scaling our investment and leveraging our strengthened resources to enhance our business model," said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. "Youku Tudou has helped transform how media and entertainment related content is distributed and marketed since our inception. Going forward, we will work with our online and offline partners to continue to change how content is created and monetized by directly connecting with the ever-growing consumer economy as Youku Tudou is best positioned in developing the leading multi-screen media and entertainment ecosystem in China."

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

Second Quarter 2014 Results

Net revenues were RMB958.7 million (US$154.5 million) in the second quarter of 2014, a 27% increase from the corresponding period in 2013, meeting net revenues guidance previously announced by the Company. Advertising net revenues were RMB915.5 million (US$147.6 million), meeting the advertising net revenues guidance previously announced by the Company. The growth was primarily attributable to the increased use by brand advertisers of our advertising services as evidenced by an increase in the number of advertisers and the rising average spend per advertiser.

Bandwidth costs as a component of cost of revenues were RMB213.5 million (US$34.4 million)in the second quarter of 2014, representing 22% of net revenues, as compared to 22% of net revenues for the corresponding period in 2013.

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

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

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

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

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

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

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

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

Business Outlook

For the third quarter of 2014, the Companyexpects net revenues will be between RMB1.09 billion and RMB1.13 billion, with advertising net revenues contributing between RMB965 million and RMB1.01 billion. This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

Youku Tudou's management will host an earnings conference call at 9:00 p.m. U.S. Eastern Time on August 19, 2014 (9:00 a.m. Beijing/Hong Kong Time on August 20, 2014).

Interested parties may participate in the conference call by dialing one of the following numbers below and entering passcode Youku# (i.e., 96858#) starting 10-15 minutes prior to the beginning of the call.

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

International Dial In: +65-6723-9381

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

Hong Kong Dial In: +852-2475-0994

A replay of the call will be available by dialing +61 2 8199 0299 and entering passcode 87262225#. The replay will be available through August 27, 2014.

This call will be webcast live and the replay will be available for 12 months. Both will be available on the Investor Relations section of Youku Tudou's corporate website at http://ir.youku.com.

About Youku Tudou Inc.

Youku Tudou Inc. (NYSE: YOKU) is China's leading Internet television company. Its Youku and Tudou Internet television platforms enable users to search, view and share high-quality video content quickly and easily across multiple devices. Its Youku brand and Tudou brand are the most recognized online video brands in China. Youku Tudou's American depositary shares, each representing 18 of Youku Tudou's Class A ordinary shares, are traded on the NYSE under the symbol "YOKU."

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Youku Tudou's strategic and operational plans, contain forward-looking statements. Youku Tudou may also make written or oral forward-looking statements in its filings with the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Youku Tudou's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our goals and strategies; our future business development, financial condition and results of operations; the expected growth of the online video market in China; our expectations regarding demand for and market acceptance of our services; our expectations regarding the retention and strengthening of our relationships with key advertisers and customers; our plans to enhance user experience, infrastructure and service offerings; competition in our industry in China; and relevant government policies and regulations relating to our industry. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Youku Tudou does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Youku Tudou's financial results presented in accordance with United States Generally Accepted Accounting Principles (GAAP), Youku Tudou uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: non-GAAP content costs, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP sales and marketing expenses, non-GAAP product development expenses, non-GAAP general and administrative expenses, non-GAAP loss from operations, non-GAAP net loss and non-GAAP EBITDA loss. We define non-GAAP content costs as content costs excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content. We define non-GAAP gross profit or loss as the respective nearest comparable GAAP financial measure to exclude share-based compensation expenses and amortization of intangible assets from business combination in relation to user generated content. We define non-GAAP operating expenses as operating expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to customer relationship, technology and non-compete provisions. We define non-GAAP sales and marketing expenses as sales and marketing expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to customer relationship. We define non-GAAP product development expense as product development expenses excluding share-based compensation expenses and amortization of intangible assets from business combination in relation to technology. We define non-GAAP general and administrative expenses as general and administrative expenses excluding share-based compensation expenses, business combination related expenses and amortization of intangible assets from business combination in relation to non-compete provisions. We define non-GAAP loss from operations as loss from operations excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define non-GAAP net loss as net loss excluding share-based compensation expenses, amortization of intangible assets from business combination and business combination related expenses. We define non-GAAP EBITDA loss as net loss before income taxes, interest expenses, interest income, depreciation and amortization (excluding amortization of acquired content), further adjusted for share-based compensation expenses, amortization of intangible assets from business combination, business combination related expenses and other non-operating items.

We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in Youku Tudou's business for the foreseeable future.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP financial measures" at the end of this release.



[1] The reporting currency of the
Company is Renminbi ("RMB"), but
for the convenience of the reader,
the amounts presented throughout
the release are in US dollars
("US$"). Unless otherwise noted,
all conversions from RMB to US$
are made at a rate of RMB6.2036 to
US$1.00, the effective noon buying
rate as of June 30, 2014 in the
City of New York for cable
transfers of RMB as certified for
customs purposes by the Federal
Reserve Bank of New York. No
representation is made that the
RMB amounts could have been, or
could be, converted into US$ at
such rate.


[2] All non-GAAP measures exclude, as
applicable, share-based
compensation expenses and
amortization of intangible assets
from business combination. For
further details on non-GAAP
measures, please refer to the
reconciliation table and a
detailed discussion of the
Company's use of non-GAAP
information set forth elsewhere in
this press release.
For more information, please contact:

Ryan Cheung

Corporate Finance Senior Director

Youku Tudou Inc.

Tel: (+8610) 5885-1881 x6090

Email: ryan.cheung@youku.com









YOUKU TUDOU INC.

CONSOLIDATED BALANCE SHEETS


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

December 31, 2013 June 30, 2014 June 30, 2014
----------------- ------------- -------------

RMB RMB US$

ASSETS (Unaudited) (Unaudited)


Current assets:

Cash and cash equivalents 1,764,221 8,553,933 1,378,866

Restricted cash 2,679 2,682 432

Short-term investments 1,409,439 1,610,026 259,531

Accounts receivable, net 1,370,031 1,498,779 241,598

Intangible assets, net 51,942 105,546 17,014

Deferred tax assets 7,843 7,843 1,264

Prepayments and other assets 82,300 100,386 16,183


Total current assets 4,688,455 11,879,195 1,914,888


Non-current assets:

Property and equipment, net 222,229 266,781 43,004

Intangible assets, net 1,197,671 1,353,780 218,225

Capitalized content production costs 1,176 9,843 1,587

Prepayments and other assets 197,856 240,894 38,830

Goodwill 4,262,569 4,262,569 687,112

Total non-current assets 5,881,501 6,133,867 988,758
--------- --------- -------


TOTAL ASSETS 10,569,956 18,013,062 2,903,646
========== ========== =========


LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:

Accounts payable 213,825 361,253 58,233

Advances from customers 25,081 23,668 3,815

Accrued expenses and other liabilities 1,124,342 1,147,253 184,933

Total current liabilities 1,363,248 1,532,174 246,981


Non-current liabilities?

Deferred tax liability 219,519 219,519 35,386

Other liabilities 4,070 6,380 1,028

Total non-current liabilities 223,589 225,899 36,414
------- ------- ------


Total liabilities 1,586,837 1,758,073 283,395


Commitments and contingencies


Shareholders' equity?

Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 2,356,529,401 and
3,103,408,891 issued and outstanding as of December 31, 2013 and June 30, 2014, respectively) 154 200 32

Class B Ordinary Shares (US$0.00001 par value, 659,761,207 authorized, 659,561,893 and 645,691,903 issued
and outstanding as of December 31, 2013 and June 30, 2014, respectively) 49 48 8

Additional paid-in capital 11,058,360 18,712,011 3,016,315

Statutory reserves 2,063 2,063 333

Accumulated deficit (1,878,454) (2,267,594) (365,529)

Accumulated other comprehensive loss (199,053) (191,739) (30,908)

Total shareholders' equity 8,983,119 16,254,989 2,620,251
--------- ---------- ---------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 10,569,956 18,013,062 2,903,646
========== ========== =========








YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


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

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

June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

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


Net revenues 753,457 700,374 958,719 154,542 1,269,454 1,659,093 267,441


Cost of revenues (Note 1) (563,281) (614,808) (750,107) (120,915) (1,065,047) (1,364,915) (220,020)
-------- -------- -------- -------- ---------- ---------- --------


Gross profit 190,176 85,566 208,612 33,627 204,407 294,178 47,421

Operating expenses:

Product development (66,051) (80,700) (99,116) (15,977) (122,879) (179,816) (28,986)

Sales and marketing (165,201) (186,542) (212,826) (34,307) (292,801) (399,368) (64,376)

General and administrative (75,569) (46,823) (74,457) (12,002) (158,919) (121,280) (19,550)

Total operating expenses (306,821) (314,065) (386,399) (62,286) (574,599) (700,464) (112,912)
-------- -------- -------- ------- -------- -------- --------


Loss from operations (116,645) (228,499) (177,787) (28,659) (370,192) (406,286) (65,491)


Interest income 7,090 6,053 9,923 1,600 14,269 15,976 2,574

Interest expenses (158) - - - (545) - -

Other, net 4,720 (2,259) 3,441 555 19,001 1,182 191
----- ------ ----- --- ------ ----- ---

Total other income, net 11,652 3,794 13,364 2,155 32,725 17,158 2,765


Loss before income taxes (104,993) (224,705) (164,423) (26,504) (337,467) (389,128) (62,726)

Income taxes (58) - (12) (2) (58) (12) (2)
--- --- --- --- --- --- ---


Net loss (105,051) (224,705) (164,435) (26,506) (337,525) (389,140) (62,728)
======== ======== ======== ======= ======== ======== =======


Other comprehensive (loss) income, before tax

Foreign currency translation adjustments (33,457) 20,959 (13,645) (2,200) (39,423) 7,314 1,179
------- ------ ------- ------ ------- ----- -----

Other comprehensive (loss) income, before tax (33,457) 20,959 (13,645) (2,200) (39,423) 7,314 1,179

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


Other comprehensive (loss) income, net of tax (33,457) 20,959 (13,645) (2,200) (39,423) 7,314 1,179
======= ====== ======= ====== ======= ===== =====

0 0

Net loss per share, basic and diluted (0.04) (0.07) (0.05) (0.01) (0.11) (0.12) (0.02)

Net loss per ADS (each ADS represents 18 class A ordinary shares), (0.63) (1.34) (0.88) (0.14) (2.05) (2.20) (0.35)
basic and diluted

Shares used in computation, basic and diluted 2,980,162,122 3,021,981,224 3,355,310,411 3,355,310,411 2,969,000,985 3,189,566,616 3,189,566,616

ADSs used in computation, basic and diluted 165,564,562 167,887,845 186,406,133 186,406,133 164,944,499 177,198,145 177,198,145








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




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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

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

Cost of revenues:

Value added, business taxes and surcharges 74,334 62,958 89,550 14,435 123,259 152,508 24,584

Bandwidth costs 164,111 201,889 213,538 34,422 325,156 415,427 66,965

Depreciation of servers and other equipment 21,384 24,306 28,756 4,636 43,854 53,062 8,553

Content costs 303,452 325,655 418,263 67,422 572,778 743,918 119,918

Total Cost of Revenues 563,281 614,808 750,107 120,915 1,065,047 1,364,915 220,020
======= ======= ======= ======= ========= ========= =======








YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


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

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

June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

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

Cash flows from operating activities:

Net loss (105,051) (224,705) (164,435) (26,506) (337,525) (389,140) (62,728)

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

Depreciation and impairment of fixed assets 27,502 31,883 36,328 5,856 54,297 68,211 10,995

Bad debt expense 10,035 (6,473) 5,247 846 17,111 (1,226) (198)

Amortisation and impairment of intangible assets and capitalized content production costs 176,523 181,777 229,561 37,004 315,514 411,338 66,306

Amortization of long-term debt discounts 92 - - - 313 - -

(Gain) loss on disposal of property and equipment (645) 90 128 21 50 218 35

Foreign exchange loss (gain) (847) 2,164 846 136 (522) 3,010 485

Share-based compensation 48,529 70,220 82,131 13,239 86,379 152,351 24,557

Changes in operating assets and liabilities:

Restricted cash 704 (2) (1) - 694 (3) -

Accounts receivable (294,698) 179,153 (306,676) (49,435) (328,342) (127,523) (20,556)

Prepayments and other assets 21,794 (10,615) (21,120) (3,404) 23,141 (31,735) (5,116)

Capitalized content production costs (42,382) (2,972) (6,371) (1,027) (26,421) (9,343) (1,506)

Accounts payable 11,179 4,574 8,631 1,391 1,315 13,205 2,129

Advances from customers (4,180) 1,816 (3,229) (521) 34,277 (1,413) (227)

Accrued expenses and other liabilities 88,046 29,591 (16,196) (2,611) 100,514 13,395 2,159

Net cash (used in) provided by operating activities (63,399) 256,501 (155,156) (25,011) (59,205) 101,345 16,335


Cash flows from investing activities:

Acquisition of property and equipment (34,549) (28,191) (84,968) (13,697) (61,913) (113,159) (18,241)

Proceeds received from maturity of short-term investments 621,948 1,132,459 66,037 10,645 658,651 1,198,496 193,194

Short-term investments placed with financial institutions (739,059) (1,391,239) (4,698) (757) (924,649) (1,395,937) (225,020)

Proceeds from disposal of property and equipment 1,282 180 10 2 1,282 190 31

Acquisition of intangible assets (102,500) (165,891) (246,320) (39,706) (341,421) (412,211) (66,447)


Net cash used in investing activities (252,878) (452,682) (269,939) (43,513) (668,050) (722,621) (116,483)


Cash flows from financing activities:

Exercise of employee stock options 35,935 11,809 7,355 1,186 64,675 19,164 3,089

Principal repayments on long-term debt (3,330) - - - (6,566) - -

Proceeds from Ali investment, net of issuance costs - - 7,387,520 1,190,844 - 7,387,520 1,190,844

Net cash provided by financing activities 32,605 11,809 7,394,875 1,192,030 58,109 7,406,684 1,193,933

Effect of exchange rate changes on cash and cash equivalents (32,608) 18,795 (14,491) (2,336) (38,901) 4,304 694
------- ------ ------- ------ ------- ----- ---

Net (decrease) increase in cash and cash equivalents (316,280) (165,577) 6,955,289 1,121,170 (708,047) 6,789,712 1,094,479

Cash and cash equivalents at the beginning of the period 1,264,090 1,764,221 1,598,644 257,696 1,655,857 1,764,221 284,387

Cash and cash equivalents at the end of the period 947,810 1,598,644 8,553,933 1,378,866 947,810 8,553,933 1,378,866
======= ========= ========= ========= ======= ========= =========








Reconciliations of Non-GAAP results of operations measures to the nearest comparable GAAP financial measures (1) (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), unaudited)


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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Content costs 303,452 325,655 418,263 67,422 572,778 743,918 119,918

Deduct: share-based compensation 6,465 12,223 12,694 2,046 12,128 24,917 4,016

Deduct: amortization of intangible assets from business combination 7,741 2,483 2,631 424 16,072 5,114 824

Non-GAAP content costs 289,246 310,949 402,938 64,952 544,578 713,887 115,078
======= ======= ======= ====== ======= ======= =======


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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Gross profit 190,176 85,566 208,612 33,627 204,407 294,178 47,421

Add back: share-based compensation 6,465 12,223 12,694 2,046 12,128 24,917 4,016

Add back: amortization of intangible assets from business combination 7,741 2,483 2,631 424 16,072 5,114 824

Non-GAAP gross profit 204,382 100,272 223,937 36,097 232,607 324,209 52,261
======= ======= ======= ====== ======= ======= ======



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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Operating expenses 306,821 314,065 386,399 62,286 574,599 700,464 112,912

Deduct: share-based compensation 42,064 57,997 69,437 11,193 74,251 127,434 20,541

Deduct: amortization of intangible assets from business combination 4,155 3,743 3,743 604 8,310 7,486 1,205

Non-GAAP operating expenses 260,602 252,325 313,219 50,489 492,038 565,544 91,166
======= ======= ======= ====== ======= ======= ======



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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Sales and marketing expenses 165,201 186,542 212,826 34,307 292,801 399,368 64,376

Deduct: share-based compensation 12,708 21,172 24,824 4,001 22,769 45,996 7,414

Deduct: amortization of intangible assets from business combination 2,077 1,871 1,871 302 4,154 3,742 602

Non-GAAP sales and marketing expenses 150,416 163,499 186,131 30,004 265,878 349,630 56,360
======= ======= ======= ====== ======= ======= ======



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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Product development expenses 66,051 80,700 99,116 15,977 122,879 179,816 28,986

Deduct: share-based compensation 9,890 17,206 19,006 3,064 16,857 36,212 5,837

Deduct: amortization of intangible assets from business combination 1,395 1,257 1,257 203 2,790 2,514 405

Non-GAAP product development expenses 54,766 62,237 78,853 12,710 103,232 141,090 22,744
====== ====== ====== ====== ======= ======= ======





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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

General and administrative expenses 75,569 46,823 74,457 12,002 158,919 121,280 19,550

Deduct: share-based compensation 19,466 19,619 25,607 4,128 34,625 45,226 7,290

Deduct: amortization of intangible assets from business combination 683 615 615 99 1,366 1,230 198

Non-GAAP general and administrative expenses 55,420 26,589 48,235 7,775 122,928 74,824 12,062
====== ====== ====== ===== ======= ====== ======



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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Loss from operations (116,645) (228,499) (177,787) (28,659) (370,192) (406,286) (65,491)

Add back: share-based compensation 48,529 70,220 82,131 13,239 86,379 152,351 24,557

Add back: amortization of intangible assets from business combination 11,896 6,226 6,374 1,028 24,382 12,600 2,029

Non-GAAP loss from operations (56,220) (152,053) (89,282) (14,392) (259,431) (241,335) (38,905)
======= ======== ======= ======= ======== ======== =======



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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Net loss (105,051) (224,705) (164,435) (26,506) (337,525) (389,140) (62,728)

Add back: share-based compensation 48,529 70,220 82,131 13,239 86,379 152,351 24,557

Add back: amortization of intangible assets from business combination 11,896 6,226 6,374 1,028 24,382 12,600 2,029

Non-GAAP net loss (44,626) (148,259) (75,930) (12,239) (226,764) (224,189) (36,142)
======= ======== ======= ======= ======== ======== =======



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


June 30, 2013 March 31, 2014 June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2014
------------- -------------- ------------- ------------- ------------- ------------- -------------

RMB RMB RMB US$ RMB RMB US$

Net loss (105,051) (224,705) (164,435) (26,506) (337,525) (389,140) (62,728)

Add back:

Depreciation and amortization (excluding amortization

of acquired content ) (2) 27,516 31,897 36,341 5,858 54,326 68,238 11,000

Interest income (7,090) (6,053) (9,923) (1,600) (14,269) (15,976) (2,574)

Interest expenses 158 - - - 545 - -

Income taxes 58 - 12 2 58 12 2
--- --- --- --- --- --- ---

EBITDA loss (84,409) (198,861) (138,005) (22,246) (296,865) (336,866) (54,300)


Adjustments:

Share-based compensation 48,529 70,220 82,131 13,239 86,379 152,351 24,557

Amortization of intangible assets from business combination 11,896 6,226 6,374 1,028 24,382 12,600 2,029

Others, net (4,720) 2,259 (3,441) (555) (19,001) (1,182) (191)
------ ----- ------ ---- ------- ------ ----

Non-GAAP EBITDA loss (28,704) (120,156) (52,941) (8,534) (205,105) (173,097) (27,905)
======= ======== ======= ====== ======== ======== =======



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

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


SOURCE Youku Tudou Inc.

Youku Tudou Inc.


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