Report of Foreign Issuer (6-k)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2014

 

---

 

Commission File Number: 001-34977

 

---

 

YOUKU TUDOU INC.

 

11/F, SinoSteel Plaza, 8 Haidian Street

Beijing 100080, People’s Republic of China

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x     Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes o     No x

 

 

 

---

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	YOUKU TUDOU INC.
	By	:	/s/ Michael Ge Xu
	Name	:	Michael Ge Xu
	Title	:	Chief Financial Officer
Date: November 18, 2014

 

2

---

 

EXHIBIT INDEX

 

Exhibit 99.1                                     Press Release

 

Exhibit 99.2                                     Press Release Announcing Third Quarter 2014 Unaudited Financial Results of Youku Tudou

 

3

---

Exhibit 99.1

 

Youku Tudou Partners with Xiaomi to Accelerate Multi-screen Ecosystem Development

 

BEIJING, China, November 12, 2014 — Youku Tudou Inc. (NYSE: YOKU), China’s leading Internet television company, today announced that it has entered into a strategic partnership with Xiaomi. The partnership aims to accelerate the development of its multi-screen media and entertainment ecosystem. The two companies will jointly develop content and technology, including developing multi-screen online video services. Xiaomi will invest in Youku Tudou by acquiring the latter’s stock on the open market. It will also license content from Youku Tudou, and the two companies will jointly invest in the production and distribution of online video content and movies.

 

As the No. 1 app and web-based video platform in China, Youku Tudou leads the way in producing original content among Internet companies. Top original content like Searching Divas, On the Road, the Tudou Video Festival and UGC channels have attracted fans to Youku Tudou, forming a large community over time. Youku Tudou’s monthly active user base has exceeded 500 million and its daily video views have passed the 800 million mark. Youku App has most recently become the second most popular Chinese mobile app in terms of user time spent, according to iResearch. Youku Tudou’s ability in producing original content will provide strong support to the Xiaomi family of hardware by making the user experience more compelling, and will help to boost average revenue per user.

 

Xiaomi is China’s leading Internet company with over 85 million active MIUI users who are known for their strong brand loyalty to Xiaomi. The sales and market share of Xiaomi’s smartphones and hardware have been growing steadily. In their respective quarterly reports for Q3 2014, renowned research firms including IDC, Strategy Analytics and Canalys ranked Xiaomi the third-largest smartphone vendor in the world after Samsung and Apple. Both the Mi Box - Xiaomi’s set-top box - and the Mi TV are beloved by users. For example, during Alibaba’s Tmall Singles Day sale that took place on November 11, Xiaomi’s Mi TV achieved three milestones in its product category — it was the first in terms of overall sales, the first product for which 10,000 units were sold, and the first to break the RMB 100 million revenue mark.

 

“Both Youku Tudou and Xiaomi have been pioneering multi-screen ecosystem development in the mobile internet era.  With the new partnership, we’ll leverage our respective capabilities to strengthen our ecosystems and to enhance user experience.  Both Youku Tudou and Xiaomi have had initial success in developing intellectual properties and building fan economy for future revenue growth.  We will work closely to unlock further opportunities in this area going forward,” said Victor Koo, Chairman and CEO of Youku Tudou.

 

Xiaomi’s founder and chairman and CEO Lei Jun named this partnership as the inaugural project for Chen Tong, VP of content investment and content operation, who joined Xiaomi last week and previously served as Sina.com’s editor-in-chief and Executive Vice President. Tong is spearheading Xiaomi’s efforts in TV and video content with Wang Chuan, a Xiaomi co-founder and VP of the company. Recently, Lei Jun announced that Xiaomi will increase its investment in content, with an initial pledge of US$1 billion.

 

“Youku Tudou has been a leading force in original content production among Internet companies, and Youku Tudou’s user base and Xiaomi’s fan community are closely associated. The partnership will bring the development of the Internet industry in China to the next level,” added Wang Chuan, VP and co-founder of Xiaomi.

 

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.”

 

For more information, please contact:

 

Jay Chen

Communications Director

Youku Tudou Inc.

Tel: [phone] x 7161

Email: [e-mail]

 

1

---

Exhibit 99.2

 

Youku Tudou Announces Third Quarter 2014 Unaudited Financial Results

 

Consumer Revenues Grew 473% Year-on-Year; Share Repurchase Totaling US$300 Million Completed

 

BEIJING, China, November 14, 2014 — Youku Tudou Inc. (NYSE: YOKU), China’s leading Internet television company (“Youku Tudou” or the “Company”), today announced its unaudited financial results for third quarter 2014.

 

Third Quarter 2014 Highlights1

 

·             Net revenues were RMB1.11 billion (US$180.3 million), a 29% increase from the corresponding period in 2013.

·             Gross profit was RMB246.9 million (US$40.2 million), a 200% increase from the corresponding period in 2013. Non-GAAP gross profit was RMB260.5 million (US$42.4 million) in the third quarter of 2014, an increase of 159% from the corresponding period in 2013.

·             Net loss was RMB181.4 million (US$29.6 million), a 17% decrease from the corresponding period in 2013. Non-GAAP net loss was RMB102.7 million (US$16.7 million) in the third quarter of 2014, as compared to RMB159.6 million (US$26.0 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 third 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 third quarter of 2014 amounted to RMB0.50 (US$0.08) and RMB0.50 (US$0.08), respectively.

·             Cash, cash equivalents, restricted cash and short-term investments totaled RMB8.7 billion (US$1.4 billion) as of September 30, 2014.

·             Acquisition of property and equipment for the third quarter of 2014 was RMB41.3 million (US$6.7 million).

·             Acquisition of intangible assets for the third quarter of 2014 was RMB344.1 million (US$56.1 million).

·             Share repurchases totaling US$300 million completed the share repurchase program authorized by the Board in August 2014.

 

“We made positive progress in the third quarter in improving the effectiveness of multi-screen advertising solutions and growing our new consumer revenue streams, which drove the top line growth momentum of 29% increase year-on-year versus 27% growth in the second quarter. The new marketing solutions we announced with Alibaba through our strategic cooperation on big data places us uniquely at the forefront of new trends in digital advertising. Our new consumer businesses enjoyed rapid growth and may help spur further top line growth in future quarters. Meanwhile, our Youku mobile video app is now ranked the second most popular mobile app in terms of user time spent after WeChat,” said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. “At the same time, we will continue to invest decisively in the future growth of advertising and consumer business, our content eco-system and continued leadership in multi-screen product development. We believe these investments, such as in headcount increase and marketing for new consumer businesses and our original content productions, will help us further capitalize on the opportunities ahead of us in the multi-screen Internet era, and structurally step up the monetization of our mass user base and brand leadership.”

 

Dele Liu, President of Youku Tudou, added, “With regards to our content strategy, we continued to book further success in establishing a comprehensive content production and distribution eco-system. One of the key highlights for the quarter was the establishment of Heyi Pictures, our movie production and investment division, which is

 

---

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 RMB6.1380 to US$1.00, the effective noon buying rate as of September 30, 2014 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

 

1

---

 

China’s first online and offline film company to incubate content IP, scale up content from micro-movies to silver screen movies and to grow fan communities that can support films and new consumer monetization model. Our most recent deals on the production of Internet-based adaptations to television blockbusters Big Brother and The Voice Kids in 2015 are testament to the growing convergence in online and offline media and entertainment.”

 

Third Quarter 2014 Results

 

Net revenues were RMB1.11 billion (US$180.3 million) in the third quarter of 2014, a 29% increase from the corresponding period in 2013, meeting net revenues guidance previously announced by the Company.

 

Advertising net revenues were RMB985.2 million (US$160.5 million) in the third quarter of 2014, a 32% increase from the corresponding period in 2013, 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 mainly derived from our subscription-based and pay-per-view services, were RMB41.8 million (US$6.8 million) in the third quarter of 2014, a 473% increase from the corresponding period in 2013. The growth was primarily attributable to the expansion of our subscriber base and pay-per-view orders.

 

Bandwidth costs as a component of cost of revenues were RMB229.7 million (US$37.4 million) in the third quarter of 2014, representing 21% of net revenues, as compared to 21% of net revenues for the corresponding period in 2013.

 

Content costs as a component of cost of revenues were RMB501.8 million (US$81.8 million) in the third quarter of 2014, representing 45% of net revenues as compared to 58% of net revenues for the corresponding period in 2013. Non-GAAP content costs were RMB488.2 million (US$79.5 million) in the third quarter of 2014, representing 44% of net revenues, as compared to 56% of net revenues for the corresponding period in 2013.

 

Gross profit was RMB246.9 million (US$40.2 million) in the third quarter of 2014, an increase of 200% from the corresponding period in 2013. Non-GAAP gross profit was RMB260.5 million (US$42.4 million) in the third quarter of 2014, an increase of 159% from the corresponding period in 2013 due to strong operating leverage.

 

Operating expenses were RMB452.5 million (US$73.7 million) in the third quarter of 2014, as compared to RMB312.8 million (US$51.0million) for the corresponding period in 2013. Non-GAAP operating expenses were RMB387.4 million (US$63.1 million) in the third quarter of 2014, as compared to RMB271.9 million (US$44.3 million) for the corresponding period in 2013. Detailed discussion of each component of operating expenses is as follows:

 

Sales and marketing expenses were RMB287.0 million (US$46.8 million) in the third quarter of 2014, as compared to RMB171.8 million (US$28.0 million) for the corresponding period in 2013. Non-GAAP sales and marketing expenses were RMB262.9 million (US$42.8 million) in the third quarter of 2014, as compared to RMB157.3 million (US$25.6 million) for the corresponding period in 2013. This increase was primarily due to increases in marketing expenses and commission expenses paid to our sales force in line with our revenue growth.

 

Product development expenses were RMB112.4 million (US$18.3 million) in the third quarter of 2014, as compared to RMB78.6 million (US$12.8 million) for the corresponding period in 2013. Non-GAAP product development expenses were RMB93.6 million (US$15.2 million) in the third quarter of 2014, as compared to RMB67.5 million (US$11.0 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 RMB53.0 million (US$8.6 million) in the third quarter of 2014, as compared to RMB62.5 million (US$10.2 million) for the corresponding period in 2013. Non-GAAP general and administrative expenses were RMB31.0 million (US$5.0 million) in the third quarter of 2014, a decrease of 34% from the corresponding period in 2013.

 

2

---

 

Net loss was RMB181.4 million (US$29.6 million) in the third quarter of 2014, as compared to RMB218.6 million (US$35.6 million) for the corresponding period in 2013. Non-GAAP net loss was RMB102.7 million (US$16.7 million) in the third quarter of 2014, as compared to RMB159.6 million (US$26.0 million) from the corresponding period in 2013.

 

Non-GAAP adjusted EBITDA loss was RMB88.9 million (US$14.5 million) in the third quarter of 2014, as compared to RMB141.1 million (US$23.0 million) from the corresponding period in 2013.

 

Departure of Chief Financial Officer

 

The Company today announced that its Chief Financial Officer, Mr. Ge Xu, is resigning from his position at the Company due to personal reasons, and will be effective when the Company submits its 2014 20-F filing.

 

Mr. Xu joined the Company in October 2011 and has made significant contributions to the Company’s growth and development, including enhancing the Company’s financial systems and internal controls.

 

Mr. Victor Koo, Chairman and Chief Executive Officer of Youku Tudou, said, “I’d like to thank Michael for his significant contributions to the Company. We wish him the best with his future endeavors.”

 

“During these years in Youku Tudou, I had a lot of fun and excitement, which not many people are privileged to experience. For this, I am grateful to all my colleagues,” commented Mr. Xu.

 

The Company noted that there were no disagreements between Mr. Xu and Youku Tudou’s Board of Directors or management and that his departure is not related to the Company’s operations, policies, practices or any issues regarding the integrity of Youku Tudou’s financial statements or accounting policies and practices.

 

Business Outlook

 

For the fourth quarter of 2014, the Company expects net revenues will be between RMB1.15 billion and RMB1.22 billion, with advertising net revenues contributing between RMB1.01 billion and RMB1.07 billion. This forecast reflects the Company’s current and preliminary view, which is subject to change.

 

Recent Development

 

As of November 13, 2014, the Company has purchased approximately 16.1 million ADSs in the open market for a total consideration of approximately US$300.0 million under its share repurchase program approved by the Company’s board of directors in August 2014, which has hereby been completed.

 

Conference Call Information

 

Youku Tudou’s management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on November 13, 2014 (9:00 a.m. Beijing/Hong Kong Time on November 14, 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:		[phone]
International Dial In:		[phone]
Mainland China Dial In:		[phone] / [phone]
Hong Kong Dial In:		[phone]

 

A replay of the call will be available by dialing [phone] and entering passcode 31852718. The replay will be available through November 21, 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.

 

3

---

 

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 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

 

4

---

 

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 Senior Director

Youku Tudou Inc.

Tel: [phone] x6090

Email: [e-mail]

 

5

---

 

YOUKU TUDOU INC.

CONSOLIDATED BALANCE SHEETS

 

		As of
(Amounts in thousands, except for number of shares)		December 31, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		US$
				(Unaudited)		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		1,764,221		5,073,522		826,576
Restricted cash		2,679		558,318		90,961
Short-term investments		1,409,439		3,112,495		507,086
Accounts receivable, net		1,370,031		1,619,947		263,921
Intangible assets, net		51,942		150,475		24,515
Amounts due from related party		—		72,040		11,737
Deferred tax assets		7,843		7,843		1,278
Prepayments and other assets		82,300		109,426		17,828
Total current assets		4,688,455		10,704,066		1,743,902
Non-current assets:
Property and equipment, net		222,229		281,937		45,933
Long-term investment		—		50,000		8,146
Intangible assets, net		1,197,671		1,380,433		224,899
Capitalized content production costs		1,176		9,497		1,547
Prepayments and other assets		197,856		289,739		47,204
Goodwill		4,262,569		4,262,569		694,456
Total non-current assets		5,881,501		6,274,175		1,022,185
TOTAL ASSETS		10,569,956		16,978,241		2,766,087
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		213,825		487,766		79,467
Advances from customers		25,081		25,451		4,146
Amounts due to related party		—		118		19
Accrued expenses and other liabilities		1,124,342		1,378,582		224,598
Total current liabilities		1,363,248		1,891,917		308,230
Non-current liabilities:
Deferred tax liability		219,519		219,519		35,764
Other liabilities		4,070		8,166		1,330
Total non-current liabilities		223,589		227,685		37,094
Total liabilities		1,586,837		2,119,602		345,324
Commitments and contingencies
Shareholders’ equity:
Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 2,356,529,401 and 3,114,197,551 issued as of December 31, 2013 and September 30, 2014, respectively, 2,356,529,401 and 2,917,676,233 outstanding as of December 31, 2013 and September 30, 2014, respectively)		154		201		33
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 September 30, 2014, respectively)		49		48		8
Additional paid-in capital		11,058,360		18,790,468		3,061,334
Treasury stock (at cost, nil and 196,521,318 as of December 31, 2013 and September 30, 2014, respectively)		—		(1,293,644	)	(210,760	)
Statutory reserves		2,063		2,063		336
Accumulated deficit		(1,878,454	)	(2,448,972	)	(398,985	)
Accumulated other comprehensive loss		(199,053	)	(191,525	)	(31,203	)
Total shareholders’ equity		8,983,119		14,858,639		2,420,763
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		10,569,956		16,978,241		2,766,087

 

6

---

 

YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

(Amounts in thousands, except for number of shares and ADS and per share and per ADS		For the Three Months Ended								For the Nine Months Ended
data)		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net revenues (including advertising net revenues from related party amounting to RMB26,738, and RMB69,763 for the three months ended June 30 and September 30, 2014, respectively, and RMB96,501 for the nine months ended September 30, 2014)		857,743		958,719		1,106,641		180,294		2,127,197		2,765,734		450,592
Cost of revenues (Note 1)		(775,436	)	(750,107	)	(859,774	)	(140,074	)	(1,840,483	)	(2,224,689	)	(362,445	)
Gross profit		82,307		208,612		246,867		40,220		286,714		541,045		88,147
Operating expenses:
Product development		(78,622	)	(99,116	)	(112,434	)	(18,318	)	(201,501	)	(292,250	)	(47,613	)
Sales and marketing		(171,763	)	(212,826	)	(287,038	)	(46,764	)	(464,564	)	(686,406	)	(111,828	)
General and administrative		(62,458	)	(74,457	)	(53,009	)	(8,636	)	(221,377	)	(174,289	)	(28,395	)
Total operating expenses		(312,843	)	(386,399	)	(452,481	)	(73,718	)	(887,442	)	(1,152,945	)	(187,836	)
Loss from operations		(230,536	)	(177,787	)	(205,614	)	(33,498	)	(600,728	)	(611,900	)	(99,689	)
Interest income		7,284		9,923		22,694		3,697		21,553		38,670		6,299
Interest expenses		—		—		—		—		(545	)	—		—
Other, net		4,694		3,441		1,542		251		23,695		2,724		444
Total other income, net		11,978		13,364		24,236		3,948		44,703		41,394		6,743
Loss before income taxes		(218,558	)	(164,423	)	(181,378	)	(29,550	)	(556,025	)	(570,506	)	(92,946	)
Income taxes		(80	)	(12	)	—		—		(138	)	(12	)	(2	)
Net loss		(218,638	)	(164,435	)	(181,378	)	(29,550	)	(556,163	)	(570,518	)	(92,948	)
Other comprehensive (loss) income, before tax
Foreign currency translation adjustments		(10,547	)	(13,645	)	214		35		(49,970	)	7,528		1,226
Other comprehensive (loss) income, before tax		(10,547	)	(13,645	)	214		35		(49,970	)	7,528		1,226
Income tax expense related to components of other comprehensive (loss) income		—		—		—		—		—		—		—
Other comprehensive (loss) income, net of tax		(10,547	)	(13,645	)	214		35		(49,970	)	7,528		1,226
Net loss per share, basic and diluted		(0.07	)	(0.05	)	(0.05	)	(0.01	)	(0.19	)	(0.17	)	(0.03	)
Net loss per ADS (each ADS represents 18 class A ordinary shares), basic and diluted		(1.31	)	(0.88	)	(0.88	)	(0.14	)	(3.36	)	(3.05	)	(0.50	)
Shares used in computation, basic and diluted		2,995,701,280		3,355,310,411		3,724,534,275		3,724,534,275		2,977,998,887		3,369,848,757		3,369,848,757
ADSs used in computation, basic and diluted		166,427,848		186,406,133		206,918,571		206,918,571		165,444,382		187,213,819		187,213,819

 

7

---

 

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

 

Note 1. Cost of Revenues

 

		For the Three Months Ended								For the Nine Months Ended
(Amounts in thousands)		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cost of revenues:
Value added, business taxes and surcharges		75,480		89,550		97,760		15,927		198,739		250,268		40,774
Bandwidth costs		181,670		213,538		229,714		37,425		506,826		645,141		105,106
Depreciation of servers and other equipment		21,827		28,756		30,472		4,965		65,681		83,534		13,608
Content costs		496,459		418,263		501,828		81,757		1,069,237		1,245,746		202,957
Total Cost of Revenues		775,436		750,107		859,774		140,074		1,840,483		2,224,689		362,445

 

8

---

 

YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the Three Months Ended								For the Nine Months Ended
(Amounts in thousands)		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cash flows from operating activities:
Net loss		(218,638	)	(164,435	)	(181,378	)	(29,550	)	(556,163	)	(570,518	)	(92,948	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and impairment of fixed assets		30,342		36,328		38,054		6,200		84,639		106,265		17,313
Bad debt expense		19,945		5,247		(12,546	)	(2,044	)	37,056		(13,772	)	(2,244	)
Amortisation and impairment of intangible assets and capitalized content production costs		327,334		229,561		306,460		49,928		642,848		717,798		116,943
Amortization of long-term debt discounts		—		—		—		—		313		—		—
Loss on disposal of property and equipment		788		128		10		2		838		228		37
Foreign exchange loss (gain)		2,540		846		(58	)	(9	)	2,018		2,952		481
Share-based compensation		48,918		82,131		72,372		11,791		135,297		224,723		36,612
Changes in operating assets and liabilities:
Restricted cash		6,759		(1	)	(555,636	)	(90,524	)	7,453		(555,639	)	(90,524	)
Accounts receivable		(161,184	)	(244,056	)	(171,241	)	(27,899	)	(489,526	)	(236,144	)	(38,472	)
Amounts due from related party		—		(62,620	)	(9,420	)	(1,535	)	—		(72,040	)	(11,737	)
Prepayments and other assets		37,051		(21,120	)	21,958		3,577		60,192		(9,777	)	(1,593	)
Capitalized content production costs		(3,004	)	(6,371	)	(17,511	)	(2,854	)	(29,425	)	(26,854	)	(4,375	)
Accounts payable		702		8,631		17,079		2,783		2,017		30,284		4,934
Advances from customers		9,918		(3,229	)	1,783		290		44,195		370		60
Accrued expenses and other liabilities		20,027		(16,266	)	236,276		38,496		120,541		249,601		40,664
Amounts due to related party		—		70		48		8		—		118		19
Net cash provided by (used in) operating activities		121,498		(155,156	)	(253,750	)	(41,340	)	62,293		(152,405	)	(24,830	)
Cash flows from investing activities:
Acquisition of property and equipment		(67,252	)	(84,968	)	(41,295	)	(6,728	)	(129,165	)	(154,454	)	(25,164	)
Proceeds received from maturity of short-term investments		1,358,761		66,037		1,363,276		222,104		2,017,412		2,561,772		417,363
Short-term investments placed with financial institutions		(1,405,173	)	(4,698	)	(2,859,798	)	(465,917	)	(2,329,822	)	(4,255,735	)	(693,342	)
Proceeds from disposal of property and equipment		—		10		88		14		1,282		278		45
Acquisition of shares of an investee		—		—		(50,000	)	(8,146	)	—		(50,000	)	(8,146	)
Acquisition of intangible assets		(171,620	)	(246,320	)	(344,142	)	(56,067	)	(513,041	)	(756,353	)	(123,225	)
Net cash used in investing activities		(285,284	)	(269,939	)	(1,931,871	)	(314,740	)	(953,334	)	(2,654,492	)	(432,469	)
Cash flows from financing activities:
Exercise of employee stock options		27,676		7,355		6,086		992		92,351		25,250		4,114
Principal repayments on long-term debt		(1,111	)	—		—		—		(7,677	)	—		—
Repurchase of ADSs		—		—		(1,293,644	)	(210,760	)	—		(1,293,644	)	(210,760	)
Proceeds from Ali investment, net of issuance costs		—		7,387,520		(7,504	)	(1,223	)	—		7,380,016		1,202,349
Net cash provided by (used in) financing activities		26,565		7,394,875		(1,295,062	)	(210,991	)	84,674		6,111,622		995,703
Effect of exchange rate changes on cash and cash equivalents		(13,087	)	(14,491	)	272		44		(51,988	)	4,576		746
Net (decrease) increase in cash and cash equivalents		(150,308	)	6,955,289		(3,480,411	)	(567,027	)	(858,355	)	3,309,301		539,150
Cash and cash equivalents at the beginning of the period		947,810		1,598,644		8,553,933		1,393,603		1,655,857		1,764,221		287,426
Cash and cash equivalents at the end of the period		797,502		8,553,933		5,073,522		826,576		797,502		5,073,522		826,576

 

9

---

 

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

 

1. Non-GAAP Content Costs

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Content costs		496,459		418,263		501,828		81,757		1,069,237		1,245,746		202,957
Deduct: share-based compensation		12,136		12,694		11,077		1,805		24,264		35,994		5,864
Deduct: amortization of intangible assets from business combination		5,984		2,631		2,557		417		22,056		7,671		1,250
Non-GAAP content costs		478,339		402,938		488,194		79,535		1,022,917		1,202,081		195,843

 

2. Non-GAAP Gross Profit

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Gross profit		82,307		208,612		246,867		40,220		286,714		541,045		88,147
Add back: share-based compensation		12,136		12,694		11,077		1,805		24,264		35,994		5,864
Add back: amortization of intangible assets from business combination		5,984		2,631		2,557		417		22,056		7,671		1,250
Non-GAAP gross profit		100,427		223,937		260,501		42,442		333,034		584,710		95,261

 

3. Non-GAAP Operating Expenses

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Operating expenses		312,843		386,399		452,481		73,718		887,442		1,152,945		187,836
Deduct: share-based compensation		36,782		69,437		61,295		9,986		111,033		188,729		30,748
Deduct: amortization of intangible assets from business combination		4,155		3,743		3,743		610		12,465		11,229		1,828
Non-GAAP operating expenses		271,906		313,219		387,443		63,122		763,944		952,987		155,260

 

4. Non-GAAP Sales and Marketing Expenses

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Sales and marketing expenses		171,763		212,826		287,038		46,764		464,564		686,406		111,828
Deduct: share-based compensation		12,366		24,824		22,256		3,626		35,135		68,252		11,120
Deduct: amortization of intangible assets from business combination		2,077		1,871		1,871		305		6,231		5,613		913
Non-GAAP sales and marketing expenses		157,320		186,131		262,911		42,833		423,198		612,541		99,795

 

5. Non-GAAP Product Development Expenses

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Product development expenses		78,622		99,116		112,434		18,318		201,501		292,250		47,613
Deduct: share-based compensation		9,748		19,006		17,624		2,871		26,605		53,836		8,771
Deduct: amortization of intangible assets from business combination		1,395		1,257		1,257		205		4,185		3,771		614
Non-GAAP product development expenses		67,479		78,853		93,553		15,242		170,711		234,643		38,228

 

10

---

 

6. Non-GAAP General and Administrative Expenses

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
General and administrative expenses		62,458		74,457		53,009		8,636		221,377		174,289		28,395
Deduct: share-based compensation		14,668		25,607		21,415		3,489		49,293		66,641		10,857
Deduct: amortization of intangible assets from business combination		683		615		615		100		2,049		1,845		301
Non-GAAP general and administrative expenses		47,107		48,235		30,979		5,047		170,035		105,803		17,237

 

7. Non-GAAP Loss from Operations

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Loss from operations		(230,536	)	(177,787	)	(205,614	)	(33,498	)	(600,728	)	(611,900	)	(99,689	)
Add back: share-based compensation		48,918		82,131		72,372		11,791		135,297		224,723		36,612
Add back: amortization of intangible assets from business combination		10,139		6,374		6,300		1,027		34,521		18,900		3,078
Non-GAAP loss from operations		(171,479	)	(89,282	)	(126,942	)	(20,680	)	(430,910	)	(368,277	)	(59,999	)

 

8. Non-GAAP Net Loss

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Net loss		(218,638	)	(164,435	)	(181,378	)	(29,550	)	(556,163	)	(570,518	)	(92,948	)
Add back: share-based compensation		48,918		82,131		72,372		11,791		135,297		224,723		36,612
Add back: amortization of intangible assets from business combination		10,139		6,374		6,300		1,027		34,521		18,900		3,078
Non-GAAP net loss		(159,581	)	(75,930	)	(102,706	)	(16,732	)	(386,345	)	(326,895	)	(53,258	)

 

9.  Non-GAAP EBITDA Loss

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2013		June 30, 2014		September 30, 2014		September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2014
		RMB		RMB		RMB		US$		RMB		RMB		US$
Net loss		(218,638	)	(164,435	)	(181,378	)	(29,550	)	(556,163	)	(570,518	)	(92,948	)
Add back:
Depreciation and amortization (excluding amortization of acquired content) (2)		30,356		36,341		38,068		6,202		84,682		106,306		17,319
Interest income		(7,284	)	(9,923	)	(22,694	)	(3,697	)	(21,553	)	(38,670	)	(6,299	)
Interest expenses		—		—		—		—		545		—		—
Income taxes		80		12		—		—		138		12		2
EBITDA loss		(195,486	)	(138,005	)	(166,004	)	(27,045	)	(492,351	)	(502,870	)	(81,926	)
Adjustments:
Share-based compensation		48,918		82,131		72,372		11,791		135,297		224,723		36,612
Amortization of intangible assets from business combination		10,139		6,374		6,300		1,027		34,521		18,900		3,078
Others, net		(4,694	)	(3,441	)	(1,542	)	(251	)	(23,695	)	(2,724	)	(444	)
Non-GAAP EBITDA loss		(141,123	)	(52,941	)	(88,874	)	(14,478	)	(346,228	)	(261,971	)	(42,680	)

 

---

(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.

 

11

---