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 May 2015

 

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Commission File Number: 001-34977

 

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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

 

 

 

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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/ Hugh Wu
		Name	:	Hugh Wu
		Title	:	Chief Financial Officer
Date: May 26, 2015

 

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EXHIBIT INDEX

 

Exhibit 99.1                             Press Release Announcing the First Quarter and Fiscal Year 2015 Unaudited Financial Results

 

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Exhibit 99.1

 

Youku Tudou Announces First Quarter 2015 Unaudited Financial Results

 

Mobile Advertising Revenues Grew over 200% Year-on-Year; Consumer Revenues Grew 706% Year-on-Year

 

BEIJING, China, May 20, 2015 — Youku Tudou Inc. (NYSE: YOKU), China’s leading Internet television company (“Youku Tudou” or the “Company”), today announced its unaudited financial results for the first quarter 2015.

 

First Quarter 2015 Highlights1

 

·             Net revenues were RMB1.14 billion (US$183.8 million), a 47% increase from the corresponding period in 20142. Non-GAAP3 net revenues were RMB1.06 billion (US$170.4 million) in the first quarter of 2015, a 51% increase from the corresponding period in 2014.

 

·             Gross profit was RMB1.5 million (US$0.2 million), as compared to RMB132.1 million (US$21.3 million) from the corresponding period in 2014. Non-GAAP gross loss was RMB32.9 million (US$5.3 million) in the first quarter of 2015, as compared to non-GAAP gross profit of RMB90.4 million (US$14.6 million) from the corresponding period in 2014.

 

·             Net loss was RMB517.4 million (US$83.5 million), as compared to RMB176.0 million (US$28.4 million) from the corresponding period in 2014. Non-GAAP net loss was RMB481.8 million (US$77.7 million) in the first quarter of 2015, as compared to RMB157.1 million (US$25.3 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 first quarter of 2015 amounted to RMB2.67 (US$0.43) and RMB2.67 (US$0.43), respectively. Non-GAAP basic and diluted loss per ADS for the first quarter of 2015 amounted to RMB2.49 (US$0.40) and RMB2.49 (US$0.40), respectively.

 

·             Cash, cash equivalents, restricted cash and short-term investments totaled RMB8.52 billion (US$1.37 billion) as of March 31, 2015.

 

·             Acquisition of property and equipment for the first quarter of 2015 was RMB73.0 million (US$11.8 million).

 

·             Acquisition of licensed copyright for the first quarter of 2015 was RMB495.2 million (US$79.9 million).

 

“The first quarter was marked by solid progress in the three key growth pillars that drive our business development for this year: accelerated topline growth, revenue diversification, and significant ramp up of web-native content. We believe this clear growth strategy will improve our business economics going forward,” said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. “From a more strategic perspective we note that multi-screen video has converged with neighboring industries, notably the pan-entertainment and media sectors, making us a strategic property and partner and positioning us amidst a much bigger growth opportunity going forward.”

 

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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 RMB6.1990 to US$1.00, the effective noon buying rate as of March 31, 2015 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ 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 first and fourth quarters 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. The Company enters into nonmonetary exchanges of licensed copyrights, and generated nonmonetary barter sublicensing revenues from such transactions. As such, the company treats barter sublicensing revenues as non-GAAP net revenues item starting the first quarter of 2015. The business outlook guidance provided in the release of fourth quarter and fiscal year 2014 unaudited financial reports dated March 19, 2015 was also presented on non-GAAP net revenues basis. 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.

 

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Dele Liu, President of Youku Tudou, added, “We have aggressively stepped up our investments in content this year across all categories, especially in original content, PGC and UGC, to enhance our web-based content eco-system. Leveraging synergy among our various business units, we are working towards a more balanced and sustainable content mix in which proprietary web-native content will be the foremost category driving our revenue and traffic growth over time.”

 

First Quarter 2015 Results

 

Net revenues were RMB1.14 billion (US$183.8 million) in the first quarter of 2015, a 47% increase from the corresponding period in 2014. Non-GAAP net revenues, which is herein defined as net revenues excluding barter sublicensing revenues, were RMB1.06 billion (US$170.4 million) in the first quarter of 2015, a 51% increase from the corresponding period in 2014, exceeded the high end of the non-GAAP net revenues guidance previously announced by the Company.

 

Advertising net revenues were RMB892.7 million (US$144.0 million) in the first quarter of 2015, a 43% increase from the corresponding period in 2014, exceeded the high end of 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 service, mobile game joint operation and interactive live entertainment, were RMB120.8 million (US$19.5 million) in the first quarter of 2015, a 706% 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, growing paying users and average spend per user of our interactive live entertainment service, and increasing number of mobile game distributions.

 

Bandwidth costs as a component of cost of revenues were RMB306.8 million (US$49.5 million) in the first quarter of 2015, representing 29% of non-GAAP net revenues, as compared to 29% of non-GAAP net revenues for the corresponding period in 2014. This increase was primarily attributable to the increase in traffic and higher resolution quality of our video content.

 

Content costs as a component of cost of revenues were RMB669.0 million (US$107.9 million) in the first quarter of 2015, representing 59% of net revenues as compared to 46% of net revenues for the corresponding period in 2014. Non-GAAP content costs were RMB620.1 million (US$100.0 million) in the first quarter of 2015, representing 59% of non-GAAP net revenues, as compared to 46% 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 RMB1.5 million (US$0.2 million) in the first quarter of 2015, as compared to RMB132.1 million (US$21.3 million) from the corresponding period in 2014. Non-GAAP gross loss was RMB32.9 million (US$5.3 million) in the first quarter of 2015, as compared to non-GAAP gross profit of RMB90.4 million (US$14.6 million) from the corresponding period in 2014.

 

Operating expenses were RMB544.1 million (US$87.8 million) in the first quarter of 2015, as compared to RMB312.0 million (US$50.3 million) for the corresponding period in 2014. Non-GAAP operating expenses were RMB474.0 million (US$76.5 million) in the first quarter of 2015, as compared to RMB251.3 million (US$40.5 million) for the corresponding period in 2014. Detailed discussion of each component of operating expenses is as follows:

 

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Sales and marketing expenses were RMB320.4 million (US$51.7 million) in the first quarter of 2015, as compared to RMB185.7 million (US$30.0 million) for the corresponding period in 2014. Non-GAAP sales and marketing expenses were RMB286.7 million (US$46.3 million) in the first quarter of 2015, as compared to RMB163.2 million (US$26.3 million) for the corresponding period in 2014. 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 RMB139.6 million (US$22.5 million) in the first quarter of 2015, as compared to RMB80.1 million (US$12.9 million) for the corresponding period in 2014. Non-GAAP product development expenses were RMB120.0 million (US$19.4 million) in the first quarter of 2015, as compared to RMB62.0 million (US$10.0 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 RMB84.1 million (US$13.6 million) in the first quarter of 2015, as compared to RMB46.1 million (US$7.4 million) from the corresponding period in 2014. Non-GAAP general and administrative expenses were RMB67.3 million (US$10.9 million) in the first quarter of 2015, as compared to RMB26.1 million (US$4.2 million) from the corresponding period in 2014. This increase was primarily due to increases in the personnel related expense and professional service fees.

 

Net loss was RMB517.4 million (US$83.5 million) in the first quarter of 2015, as compared to RMB176.0 million (US$28.4 million) for the corresponding period in 2014. Non-GAAP net loss was RMB481.8 million (US$77.7 million) in the first quarter of 2015, as compared to RMB157.1 million (US$25.3 million) from the corresponding period in 2014.

 

Business Outlook

 

For the second quarter of 2015, the Company expects non-GAAP net revenues will be between RMB1.47 billion and RMB1.52 billion, which with advertising net revenues contributing between RMB1.25 billion and RMB1.30 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 May 20, 2015 (9:00 a.m. Beijing/Hong Kong Time on May 21, 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:	[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 42452065. The replay will be available through May 28, 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 China’s leading Internet television company. Its Youku and Tudou Internet television platforms enable users to search, view and share high-quality video content quickly and easily across multiple devices. Its Youku brand and Tudou brand are among the most recognized online video brands in China. Youku Tudou’s American depositary shares, each representing 18 of Youku Tudou’s Class A ordinary shares, are traded on the NYSE under the symbol “YOKU.”

 

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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.

 

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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: [phone] x 8066

Email: [e-mail]

 

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YOUKU TUDOU INC.

CONSOLIDATED BALANCE SHEETS

 

		As of
(Amounts in thousands, except for number of shares)		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		US$
		(Audited)		(Unaudited)		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		3,820,742		2,886,812		465,690
Restricted cash		617,586		1,293,094		208,597
Short-term investments		4,021,199		4,338,524		699,875
Accounts receivable		1,719,760		1,931,492		311,581
Licensed copyrights, net		220,152		241,680		38,987
Amounts due from related parties		125,204		53,417		8,617
Deferred tax assets, net		2,283		2,283		368
Prepayments and other assets		117,716		321,536		51,869
Total current assets		10,644,642		11,068,838		1,785,584
Non-current assets:
Property and equipment, net		293,027		329,961		53,229
Long-term investments		67,293		97,046		15,655
Available-for-sale financial assets		—		21,267		3,431
Licensed copyrights, net		505,173		626,619		101,084
Intangible assets, net		875,502		872,397		140,732
Capitalized content production costs		1,678		1,647		266
Prepayments and other assets		431,377		418,053		67,439
Goodwill		4,262,569		4,262,569		687,622
Total non-current assets		6,436,619		6,629,559		1,069,458
TOTAL ASSETS		17,081,261		17,698,397		2,855,042
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		563,009		735,863		118,707
Advances from customers and deferred revenue		36,232		84,264		13,593
Amounts due to related parties		4		1		—
Accrued expenses and other liabilities		1,668,122		1,782,215		287,502
Short-term bank loans		500,000		1,170,253		188,781
Total current liabilities		2,767,367		3,772,596		608,583
Non-current liabilities:
Deferred tax liabilities		213,608		213,608		34,458
Other liabilities		6,570		15,030		2,425
Total non-current liabilities		220,178		228,638		36,883
Total liabilities		2,987,545		4,001,234		645,466
Commitments and contingencies
Shareholders’ equity:
Class A Ordinary Shares (US$0.00001 par value, 9,340,238,793 authorized, 3,123,742,699 and 3,135,586,285 issued as of December 31, 2014 and March 31, 2015, respectively, 2,834,270,299 and 2,846,113,885 outstanding as of December 31, 2014 and March 31, 2015, respectively)		201		202		33
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 March 31, 2015, respectively)		48		48		8
Additional paid-in capital		18,878,497		18,962,797		3,059,009
Treasury stock (at cost, 289,472,400 and 289,472,400 as of December 31, 2014 and March 31, 2015, respectively)		(1,845,892	)	(1,845,892	)	(297,773	)
Statutory reserves		13,146		13,146		2,121
Accumulated deficit		(2,681,658	)	(3,199,099	)	(516,068	)
Accumulated other comprehensive loss		(270,626	)	(234,039	)	(37,754	)
Total shareholders’ equity		14,093,716		13,697,163		2,209,576
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		17,081,261		17,698,397		2,855,042

 

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YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

(Amounts in thousands, except for number of shares and		For the Three Months Ended
ADS and per share and per ADS data)		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
		(Unaudited- As revised)		(Unaudited- As revised)		(Unaudited)		(Unaudited)
Net revenues (including advertising net revenues from related parties amounting to RMB110,201 and RMB48,010 for the three months ended December 31, 2014 and March 31, 2015, respectively)		774,685		1,282,369		1,139,458		183,814
Cost of revenues (Note 1)		(642,560	)	(1,047,736	)	(1,137,987	)	(183,576	)
Gross profit		132,125		234,633		1,471		238
Operating expenses:
Product development		(80,138	)	(123,271	)	(139,573	)	(22,515	)
Sales and marketing		(185,696	)	(343,647	)	(320,433	)	(51,691	)
General and administrative		(46,129	)	(78,721	)	(84,058	)	(13,560	)
Total operating expenses		(311,963	)	(545,639	)	(544,064	)	(87,766	)
Government grant income		—		20,641		123		20
Loss from operations		(179,838	)	(290,365	)	(542,470	)	(87,508	)
Interest income		6,053		22,660		29,811		4,809
Interest expenses		—		—		(10,743	)	(1,733	)
Share of net loss of equity investee		—		(840	)	(1,247	)	(201	)
Other income (loss), net		(2,259	)	(1,195	)	7,352		1,186
Total other income, net		3,794		20,625		25,173		4,061
Loss before income taxes		(176,044	)	(269,740	)	(517,297	)	(83,447	)
Income tax expense		—		(51,815	)	(144	)	(23	)
Net loss		(176,044	)	(321,555	)	(517,441	)	(83,470	)
Other comprehensive (loss) income, before tax
Foreign currency translation adjustments		20,959		(35,370	)	36,587		5,902
Other comprehensive (loss) income, before tax		20,959		(35,370	)	36,587		5,902
Income tax expense related to components of other comprehensive (loss) income		—		—		—		—
Other comprehensive (loss) income, net of tax		20,959		(35,370	)	36,587		5,902
Net loss per share, basic and diluted		(0.06	)	(0.09	)	(0.15	)	(0.02	)
Net loss per ADS (each ADS represents 18 class A ordinary shares), basic and diluted		(1.05	)	(1.66	)	(2.67	)	(0.43	)
Shares used in computation, basic and diluted		3,021,981,224		3,483,140,763		3,485,681,620		3,485,681,620
ADSs used in computation, basic and diluted		167,887,845		193,507,820		193,648,978		193,648,978

 

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

 

Note 1. Cost of Revenues

 

		For the Three Months Ended
(Amounts in thousands)		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
		(Unaudited-As revised)		(Unaudited-As revised)		(Unaudited)		(Unaudited)
Cost of revenues:
Value added, business taxes and surcharges		62,958		115,494		98,388		15,872
Bandwidth costs		201,889		272,196		306,835		49,497
Depreciation of servers and other equipment		20,165		28,935		34,349		5,542
Interactive broadcasting revenue sharing fees		988		20,101		24,087		3,886
Cost of goods sold		—		—		5,337		862
Content costs		356,560		611,010		668,991		107,917
Total Cost of Revenues		642,560		1,047,736		1,137,987		183,576

 

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YOUKU TUDOU INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the Three Months Ended
(Amounts in thousands)		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
		(Unaudited- As revised)		(Unaudited- As revised)		(Unaudited)		(Unaudited)
Cash flows from operating activities:
Net loss		(176,044	)	(321,555	)	(517,441	)	(83,470	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation of fixed assets		26,517		35,398		40,676		6,562
Bad debt expense		(6,473	)	5,616		14,800		2,387
Amortization of licensed copyrights		206,863		404,461		450,865		72,732
Amortisation and impairment of intangible assets and capitalized content production costs		5,930		16,148		13,930		2,247
Barter sublicensing revenues		(74,311	)	(18,009	)	(83,239	)	(13,428	)
Loss (gain) on disposal of property and equipment		90		146		(47	)	(8	)
Foreign exchange loss (gain)		2,164		4,262		(20,070	)	(3,238	)
Share-based compensation		70,220		85,614		79,772		12,868
Deferred income tax benefits		—		(10	)	—		—
Share of net loss of equity investee		—		840		1,247		201
Changes in operating assets and liabilities, net of acquisition:
Restricted cash		(2	)	552,632		(5,507	)	(888	)
Accounts receivable		179,153		(99,230	)	(101,326	)	(16,346	)
Amounts due from related parties		—		(53,164	)	(53,417	)	(8,617	)
Prepayments and other assets		(10,615	)	(25,241	)	(103,103	)	(16,632	)
Capitalized content production costs		(2,972	)	(22,588	)	(21,974	)	(3,545	)
Accounts payable		4,574		20,564		71,836		11,588
Advances from customers and deferred revenue		1,816		10,644		36,933		5,958
Accrued expenses and other liabilities		29,591		290,176		88,424		14,263
Amount due to related parties		—		(114	)	1		—
Net cash provided by operating activities		256,501		886,590		(107,640	)	(17,366	)
Cash flows from investing activities:
Acquisition of property and equipment		(28,191	)	(52,172	)	(72,990	)	(11,774	)
Purchase of available-for-sale financial assets		—		—		(21,267	)	(3,431	)
Proceeds received from maturity of short-term investments		1,132,459		265,580		—		—
Short-term investments placed with financial institutions		(1,391,239	)	(1,156,085	)	(280,308	)	(45,218	)
Proceeds from disposal of property and equipment		180		7		47		8
Collection of loans to third parties		—		5,600		—		—
Loans to third parties		—		(5,000	)	(3,000	)	(484	)
Acquisition of shares of investees		—		(18,133	)	—		—
Acquisition of licensed copyrights		(165,891	)	(477,310	)	(495,247	)	(79,891	)
Acquisition of intangible assets		—		(981	)	—		—
Net cash used in investing activities		(452,682	)	(1,438,494	)	(872,765	)	(140,790	)
Cash flows from financing activities:
Exercise of employee stock options		11,809		3,176		4,529		731
Increase in restricted cash		—		(611,900	)	(670,000	)	(108,082	)
Proceeds from short-term bank loans		—		500,000		670,253		108,123
Repurchase of ADS		—		(552,248	)	—		—
Proceeds from Ali investment, net of issuance costs		—		(272	)	—		—
Net cash provided by (used in) financing activities		11,809		(661,244	)	4,782		772
Effect of exchange rate changes on cash and cash equivalents		18,795		(39,632	)	41,693		6,726
Net (decrease) increase in cash and cash equivalents		(165,577	)	(1,252,780	)	(933,930	)	(150,658	)
Cash and cash equivalents at the beginning of the period		1,764,221		5,073,522		3,820,742		616,348
Cash and cash equivalents at the end of the period		1,598,644		3,820,742		2,886,812		465,690

 

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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
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Net Revenues		774,685		1,282,369		1,139,458		183,814
Deduct: barter sublicensing revenues		74,311		18,009		83,239		13,428
Non-GAAP Net Revenues		700,374		1,264,360		1,056,219		170,386

 

2. Non-GAAP Content Costs

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Content costs		356,560		611,010		668,991		107,917
Deduct: amortization of licensed copyrights from nonmonetary content exchanges		18,512		31,416		36,445		5,879
Deduct: share-based compensation		12,223		13,297		12,407		2,001
Deduct: amortization of intangible assets from business combination		1,860		—		—		—
Non-GAAP content costs		323,965		566,297		620,139		100,037

 

3. Non-GAAP Gross Profit (Loss)

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Gross profit		132,125		234,633		1,471		238
Deduct: barter sublicensing revenues		74,311		18,009		83,239		13,428
Add back: amortization of licensed copyrights from nonmonetary content exchanges		18,512		31,416		36,445		5,879
Add back: share-based compensation		12,223		13,297		12,407		2,001
Add back: amortization of intangible assets from business combination		1,860		—		—		—
Non-GAAP gross profit (loss)		90,409		261,337		(32,916	)	(5,310	)

 

4. Non-GAAP Operating Expenses

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Operating expenses		311,963		545,639		544,064		87,766
Deduct: share-based compensation		57,997		72,317		67,365		10,867
Deduct: amortization of intangible assets from business combination		2,691		2,691		2,691		434
Non-GAAP operating expenses		251,275		470,631		474,008		76,465

 

5. Non-GAAP Sales and Marketing Expenses

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Sales and marketing expenses		185,696		343,647		320,433		51,691
Deduct: share-based compensation		21,172		31,832		32,351		5,219
Deduct: amortization of intangible assets from business combination		1,344		1,344		1,344		217
Non-GAAP sales and marketing expenses		163,180		310,471		286,738		46,255

 

6. Non-GAAP Product Development Expenses

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Product development expenses		80,138		123,271		139,573		22,515
Deduct: share-based compensation		17,206		17,877		18,708		3,018
Deduct: amortization of intangible assets from business combination		905		905		905		146
Non-GAAP product development expenses		62,027		104,489		119,960		19,351

 

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7. Non-GAAP General and Administrative Expenses

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
General and administrative expenses		46,129		78,721		84,058		13,560
Deduct: share-based compensation		19,619		22,608		16,306		2,630
Deduct: amortization of intangible assets from business combination		442		442		442		71
Non-GAAP general and administrative expenses		26,068		55,671		67,310		10,859

 

8. Non-GAAP Loss from Operations

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Loss from operations		(179,838	)	(290,365	)	(542,470	)	(87,508	)
Deduct: barter sublicensing revenues		74,311		18,009		83,239		13,428
Add back: amortization of licensed copyrights from nonmonetary content exchanges		18,512		31,416		36,445		5,879
Add back: share-based compensation		70,220		85,614		79,772		12,868
Add back: amortization of intangible assets from business combination		4,551		2,691		2,691		434
Non-GAAP loss from operations		(160,866	)	(188,653	)	(506,801	)	(81,755	)

 

9. Non-GAAP Net Loss

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Net loss		(176,044	)	(321,555	)	(517,441	)	(83,470	)
Deduct: barter sublicensing revenues		74,311		18,009		83,239		13,428
Add back: amortization of licensed copyrights from nonmonetary content exchanges		18,512		31,416		36,445		5,879
Add back: share-based compensation		70,220		85,614		79,772		12,868
Add back: amortization of intangible assets from business combination		4,551		2,691		2,691		434
Non-GAAP net loss		(157,072	)	(219,843	)	(481,772	)	(77,717	)

 

10.  Non-GAAP adjusted EBITDA Loss

 

		For the Three Months Ended
		March 31, 2014		December 31, 2014		March 31, 2015		March 31, 2015
		RMB		RMB		RMB		US$
Net loss		(176,044	)	(321,555	)	(517,441	)	(83,470	)
Add back:
Depreciation and amortization (excluding amortization of acquired content) (2)		26,527		35,408		40,686		6,563
Interest income		(6,053	)	(22,660	)	(29,811	)	(4,809	)
Interest expenses		—		—		10,743		1,733
Income taxes		—		51,815		144		23
EBITDA loss		(155,570	)	(256,992	)	(495,679	)	(79,960	)
Adjustments:
Barter sublicensing revenues		(74,311	)	(18,009	)	(83,239	)	(13,428	)
Amortization of licensed copyrights from nonmonetary content exchanges		18,512		31,416		36,445		5,879
Share-based compensation		70,220		85,614		79,772		12,868
Amortization of intangible assets from business combination		4,551		2,691		2,691		434
Others, net		2,259		1,195		(7,352	)	(1,186	)
Non-GAAP adjusted EBITDA loss		(134,339	)	(154,085	)	(467,362	)	(75,393	)

 

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(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.

 

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