Ku6 Media Reports Unaudited Financial Results for the Second Quarter of Fiscal Year 2013

BEIJING, Aug. 28, 2013 /PRNewswire/ -- Ku6 Media Co., Ltd. ("Ku6 Media" or the "Company,"NASDAQ: KUTV), a leading internet video company focused on User Generated Content ("UGC") in China, today announced unaudited financial results for the second quarter of fiscal year 2013, ended June 30, 2013.

Second Quarter 2013 Highlights ⁽¹⁾

• Total revenues were US$3.42 million (RMB20.98 million) in the second quarter of 2013, representing an increase of 11.4% from US$3.07 million in the first quarter of 2013 and an increase of 12.9% from US$3.03 million in the second quarter of 2012.
• The Company generates substantially all of its revenues from online advertising, primarily through an advertising agency agreement with Shengyue, an affiliate wholly owned by Shanda Interactive, pursuant to which Shengyue acts as the Company's exclusive advertising agency for standard media resources and as its non-exclusive advertising agency for highly interactive advertising resources.
• GAAP net loss was US$2.54 million (RMB15.60 million), as compared to a net loss of US$1.67 million in the first quarter of 2013 and US$1.47 million in the second quarter of 2012. Non-GAAP net loss, which the Company defines as net loss excluding expenses (benefits) associated with share-based compensation, was US$2.38 million (RMB14.60 million) in the second quarter of 2013, as compared to non-GAAP net loss of US$2.32 million in the first quarter of 2013 and US$1.53 million in the second quarter of 2012.
• Basic and diluted loss per ADS was US$0.05 (RMB0.31) in the second quarter of 2013, as compared to US$0.04 in the first quarter of 2013 and US$0.03 in the second quarter of 2012.
• Cash and cash equivalents were US$9.96 million (RMB61.12 million) as of June 30, 2013.
• Net cash used in operating activities was US$0.93 million (RMB5.71 million) in the second quarter of 2013, as compared to US$2.27 million in the first quarter of 2013 and US$1.41 million in the second quarter of 2012.

"I am pleased to announce our second quarter 2013 earnings release." Mr. Fang Du, Chief Executive Officer of Ku6 Media, commented, "The Company did a great job in the second quarter in improving the infrastructure and product design, in hiring top talents to strengthen our R&D team, and in launching marketing campaigns to bring our premium video content to more users.

At the press conference held on August 13, we announced our new slogan "Short is Cool", which represented the Company's commitment to offer more quality short-form videos by leveraging the prosperity of mobile devices and mobile platform as well as through promotion campaigns and marketing events. I believe that, with their unique charms, short-form videos will play a more important role in people's daily life and expect to change their entertainment habit. "

Second Quarter 2013 Financial Results

Total revenues were US$3.42 million (RMB20.98 million) in the second quarter of 2013, representing an increase of 11.4% from US$3.07 million in the first quarter of 2013 and an increase of 12.9% from US$3.03 million in the second quarter of 2012.

In the second quarter of 2011, the Company started to generate advertising revenues primarily from performance advertising services using a system called Application Advertisement ("AA"). The performance advertising revenue was realized through an affiliated advertising agent which is under common control of Shanda Interactive Entertainment Limited, the Company's majority shareholder. The Company generated 89.9% of total revenues in the second quarter of 2013 through this affiliated advertising agent, as compared to 95.8% of total revenues in the first quarter of 2013.

Cost of revenues was US$3.90 million (RMB23.91 million) in the second quarter of 2013, representing an increase of 24.3% from US$3.13 million in the first quarter of 2013 and an increase of 6.4% from US$3.66 million in the second quarter of 2012.

Gross loss was US$0.48 million (RMB2.92 million) in the second quarter of 2013, as compared to a gross loss of US$0.07 million in the first quarter of 2013 and a gross loss of US$0.63 million in the second quarter of 2012. Non-GAAP gross loss, which is herein defined as a gross loss excluding expenses (benefits) associated with share-based compensation, was US$0.44 million (RMB2.68 million) in the second quarter of 2013, as compared to a non-GAAP gross loss of US$0.26 million in the first quarter of 2013 and a non-GAAP gross loss of US$0.66 million in the second quarter of 2012. The increase in non-GAAP gross loss as compared to the first quarter of 2013 was primarily because the Company incurred more costs to improve its platform operation, partially offset by an increase in total revenues.

Operating expenses were US$3.30 million (RMB20.24 million) in the second quarter of 2013, representing an increase of 45.3% from US$2.27 million in the first quarter of 2013 and an increase of 100.5% from US$1.64 million in the second quarter of 2012. Non-GAAP operating expenses, which is herein defined as operating expenses excluding expenses (benefits) associated with share-based compensation, were US$3.17 million (RMB19.48 million) in the second quarter of 2013, as compared to non-GAAP operating expenses of US$2.72 million in the first quarter of 2013 and US$1.67 million in the second quarter of 2012. The increase in non-GAAP operating expenses as compared to the first quarter of 2013 was primarily due to the increase in labor costs as the Company recruited more talents to strengthen the research and development team, partially offset by the proceeds from disposal of network equipment previously written down.

Operating loss was US$3.77 million (RMB23.16 million) in the second quarter of 2013, representing an increase of 61.7% from US$2.33 million in the first quarter of 2013 and an increase of 65.8% from US$2.28 million in the second quarter of 2012. Non-GAAP operating loss, which reflects the exclusion of expenses (benefits) associated with share-based compensation, was US$3.61 million (RMB22.16 million) in the second quarter of 2013, as compared to the non-GAAP operating loss of US$2.98 million in the first quarter of 2013 and US$2.34 million in the second quarter of 2012.

Net loss was US$2.54 million (RMB15.60 million) in the second quarter of 2013, representing an increase of 52.0% from US$1.67 million in the first quarter of 2013 and an increase of 72.7% from US$1.47 million in the second quarter of 2012. Non-GAAP net loss, which reflects the exclusion of expenses (benefits) associated with share-based compensation, was US$2.38 million (RMB14.60 million) in the second quarter of 2013, as compared to US$2.32 million in the first quarter of 2013 and US$1.53 million in the second quarter of 2012. The increase in net loss as compared to the first quarter of 2013 was primarily attributable to (1) an increase in costs incurred for platform operation improvement, (2) an increase in labor costs as the Company recruited more talents to strengthen the research and development team, and (3) a net increase in share-based compensation expenses resulted from the first quarter reversal of those expenses previously recorded, due to the changes in the likelihood of achieving performance targets related to profitability for performance-based stock option awards, partially offset by (1) an increase in total revenues from both third parties and related parties, (2) proceeds from disposal of network equipment previously written down, and (3) receipts of government subsidy benefits in the second quarter of 2013.

Net loss per basic and diluted ADS was US$0.05 (RMB0.31) in the second quarter of 2013, as compared to US$0.04 in the first quarter of 2013 and US$0.03 in the second quarter of 2012. Weighted average ADSs used to calculate basic and diluted net loss per ADS were 47.3 million in the second quarter of 2013, 47.3 million in the first quarter of 2013 and 50.2 million in the second quarter of 2012.

Adjusted EBITDA loss, which is herein defined as net loss before interest income, interest expenses, income taxes, depreciation and amortization (excluding amortization and write-down of licensed video copyrights), further adjusted for share-based compensation expenses (benefits), equity in loss of affiliates and other non-operating items, was US$2.69 million (RMB16.53 million) in the second quarter of 2013, as compared to adjusted EBITDA loss of US$2.04 million in the first quarter of 2013 and US$1.48 million in the second quarter of 2012.

As of June 30, 2013, the Company had US$9.96 million (RMB61.12 million) in cash and cash equivalents, compared to US$10.81 million as of March 31, 2013. The decrease was primarily attributable to US$0.93 million (RMB5.71 million) net cash used in operating activities.  

Recent Business Developments

Ku6 Media Announces the Love-Theme UGC Video Campaign

The Company held a press conference on August 13, the Chinese Valentine's Day, to announce its love-theme UGC video campaign. The Company's new slogan "Short is Cool" was first introduced at the press conference, representing the Company's commitment to offer more quality short-form videos by leveraging the prosperity of mobile devices and mobile platform as well as through promotion campaigns and marketing events.

Ku6 Media Announces Management Change

In June 2013, Mr. Fang Du joined the Company to replace Mr. Jeff Shi as the Chief Executive Officer of Ku6 Media. Mr. Du's bio can be found in the press release on Ku6 Media's website.

Ku6 Media Announces Management Change

In April 2013, Mr. Kelvin Wenbo Liu joined the Company as President and Mr. Jian Lu was appointed as the Company's Chief Technology Officer. Their bios can be found in the press release on Ku6 Media 's website.

Share Repurchase Program of 2011

Pursuant to a share repurchase program announced on December 30, 2011, the Company's Board of Directors have authorized the Company to repurchase up to an aggregate of US$3.2 million of its outstanding ADSs from time to time following the date thereof, based on market conditions. As of June 30, 2013, the Company has repurchased 157,567 ADSs from open market under this program.

Conference Call Information

Ku6's management team will be hosting a corresponding conference call at 8:00am EDT on Wednesday, August 28, 2013 (8:00pm Beijing time on the same day).

Dial-in numbers:      

A replay will be available from 10:00am August 28, 2013 EDT for 7 days.

A live and archived webcast of the conference call will also be available at

http://www.media-server.com/m/p/fqugr3qc

http://www.media-server.com/m/p/z2v9kooi

About Ku6 Media Co., Ltd.

Ku6 Media Co., Ltd. (NASDAQ: KUTV) is a leading internet video company in China focused on User -Generated Content ("UGC"). Through its premier online brand and online video website, www.ku6.com, Ku6 Media provides online video uploading and sharing service, video reports, information and entertainment in China. For more information about Ku6 Media, please visit http://ir.ku6.com.

Forward-looking Statements

This news release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "believes," "could," "expects," "may," "might," "should," "will," or "would," and by similar statements. Forward-looking statements are not historical facts, but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of its control. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Some of the risks and important factors that could affect the Company's future results and financial condition include: continued competitive pressures in China's internet video portal market; changes in technology and consumer demand in this market; the risk that Ku6 Media may not be able to control its expenses in the future; regulatory changes in China with respect to the operations of internet video portal websites; the success of Ku6 Media's ability to sell advertising and other services on its websites; and other risks outlined in the Company's filings with the Securities and Exchange Commission,including the Company's  annual report on Form 20-F. Ku6 Media does not undertake any obligation to update this forward-looking information, except as required under law.

About Non-GAAP Financial Measures

To supplement Ku6 Media's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Ku6 Media uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP product development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP operating loss, non-GAAP net loss and adjusted EBITDA loss.  We define non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP product development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP operating loss and non-GAAP net loss as the respective nearest comparable GAAP financial measure excluding expenses (benefits) associated with share-based compensation. We define adjusted EBITDA loss as net loss before interest income, interest expenses, income taxes, depreciation and amortization (excluding amortization and write-down of licensed video copyrights), further adjusted for share-based compensation expenses (benefits), equity in loss of affiliates 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 consolidated 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 Ku6 Media'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.

SOURCE Ku6 Media Co., Ltd.