Tudou Reports Second Quarter 2012 Financial Results

SHANGHAI, Aug. 5, 2012 /PRNewswire-Asia/ -- Tudou Holdings Limited (NASDAQ: TUDO) ("Tudou" or the "Company"), a leading Internet video company in China, today announced its unaudited financial results for the second quarter ended June 30, 2012. 

Second Quarter 2012 Revenue Highlights

• Net revenues increased to RMB171.9 million (US$27.1 million), up 47.3% year-over-year.
• Online advertising service revenues increased to RMB150.7 million (US$23.7 million), up 47.4% year-over-year.
• Mobile video service revenues increased to RMB16.7 million (US$2.6 million), up 50.6% year-over-year.
• Other (sub-licensing) revenues increased to RMB4.5 million (US$0.7 million), up 34.2% year-over-year.

Second Quarter 2012 Financial Results

Revenues:  Net revenues for the second quarter 2012 increased by 47.3% to RMB171.9 million (US$27.1 million) from RMB116.7 million in the corresponding period in 2011, driven by increases in online advertising service revenues, mobile video service revenues and other (sub-licensing) revenues.[1]  Online advertising service revenues for the second quarter 2012 increased by 47.4% to RMB150.7 million (US$23.7 million) from RMB102.2 million in the corresponding period in 2011. Mobile video service revenues for the second quarter 2012 increased by 50.6% to RMB16.7 million (US$2.6 million) from RMB11.1 million in the corresponding period in 2011. Other (sub-licensing) revenues increased by 34.2% to RMB4.5 million (US$0.7 million) from RMB3.4 million in the corresponding period in 2011.

Cost of Revenues:  Cost of revenues for the second quarter 2012 increased by 123.2% to RMB191.0 million (US$30.1 million) from RMB85.6 million in the corresponding period in 2011, partially offset by a RMB12.7 million decrease in share-based compensation expenses. The increase in cost of revenues was primarily attributable to increased Internet bandwidth costs, content costs and mobile video services costs.  Internet bandwidth costs for the second quarter 2012 totaled RMB65.1 million (US$10.2 million), compared to RMB34.5 million in the corresponding period in 2011. The increase in Internet bandwidth costs was primarily due to increased traffic on the Company's website and its continued focus on enhancing users' experience.  Content costs for the second quarter 2012 totaled RMB100.5 million (US$15.8 million), compared to RMB35.7 million in the corresponding period in 2011.  Content costs consist of amortization of premium licensed content, salaries and benefits for staff and production costs for content produced in-house. The increase in content costs was primarily due to the increase in amortization of premium licensed content and content produced in-house as a result of an increase in the amount of content purchased and produced. Mobile video service costs for the second quarter 2012 totaled RMB12.3 million (US$1.9 million), compared to RMB5.8 million, in the corresponding period in 2011. The increase in mobile video services costs was primarily attributable to the increase in mobile video services revenues.

Gross Loss:  For the second quarter 2012, gross loss totaled RMB19.2 million (US$3.0 million), compared to gross profit of RMB31.1 million in the corresponding period in 2011.

Operating Expenses: Operating expenses for the second quarter 2012 were RMB135.8 million (US$21.4 million), compared to RMB86.7 million in the corresponding period in 2011.  The increase was primarily due to merger related expenses of RMB23.7 million (US $3.7 million) resulting from the Company's pending transaction with Youku, Inc. (NYSE: YOKU) ("Youku") and an increase in sales and marketing expenses, mainly as a result of the Company's hiring of additional sales professionals and enhanced promotion and marketing efforts.

Net Loss: Net loss for the second quarter 2012 increased to RMB154.7 million (US$24.4 million) from a net loss of RMB78.9 million in the corresponding period in 2011.

Adjusted Net Loss: Adjusted net loss for the second quarter 2012, which excluded share-based compensation expenses, was RMB144.8 million (US$22.8 million), compared to an adjusted net loss of RMB37.2 million in the corresponding period in 2011, which excluded share-based compensation expenses and fair value changes in warrant liabilities. See "Non-GAAP Financial Measures" and "Adjusted Net Loss – Non-GAAP Reconciliation" below.

Recent Developments

In July 2012, Tudou announced it will hold its 2012 annual general meeting of shareholders on the 18th Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong on Monday, August 20, 2012 at 10:00 a.m. (Hong Kong time), to consider and vote on, among other things, the proposal to approve the pending merger with Youku announced on March 11, 2012.  The notice of the annual general meeting of shareholders and joint proxy statement can be obtained from the Company's investor relations website (http://ir.tudou.com) and the Company's filings with the Securities and Exchange Commission (http://www.sec.gov).

In July 2012, Tudou announced that Ms. Evelyn Wang tendered resignation from her position as Chief Operating Officer due to personal reasons. Ms. Wang will continue to assist the Company throughout the ongoing merger process with Youku, which remains on track to close during the third quarter of 2012, subject to closing conditions including approvals by Youku's and Tudou's shareholders.

In June 2012, Tudou held the awards ceremony for the 2012 Tudou Video Festival in Chengde, China. This was Tudou's 5th annual video festival and was co-hosted with the China Film Group Corporation, the largest film enterprise in China.  With the slogan Be Creative and Live, this year's festival attracted over 15,000 video submissions, including submissions from a talented group of 200 video finalists that competed for 15 grand prizes.  Over 1,500 producers, directors, writers, studio representatives and advertisers attended the event in anticipation of the opportunity to work with the creators of the winning submissions. 

Conference Call

Due to the pending merger with Youku, Tudou will not hold a conference call to discuss its financial results.

About Tudou

Tudou Holdings Limited (NASDAQ: TUDO) is a leading Internet video company in China providing premium licensed content, user generated content ("UGC") and original in-house produced content.  Founded in 2005, Tudou was the first UGC video sharing website launched in China.  The "Tudou" brand is one of the most recognized Internet brands in China, and the annual Tudou Video Festival has become a signature event in the online video industry.  For more information, please visit http://ir.tudou.com.

SOURCE: Tudou

 Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as "may," "will," "expects," "anticipates," "future," "intends," "plans," "believes," "aims," "estimates," "confident," "likely to" and similar 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: the Company's ability to execute its business strategies, plans and initiatives; the Company's future business development, results of operations and financial condition; changes in the Company's revenues and certain cost or expense items; the Company's expectations with respect to increased revenue growth and its ability to sustain profitability; the Company's ability to develop new services; the Company's ability to attract users and advertisers and enhance its brand recognition; the ability of the online video and advertising  industry in China to grow at rates projected by market data; and ability of the Company to timely close its pending merger with Youku.  Any of the foregoing risks may have a material adverse effect on the Company's business and the market price of its ADSs.  Further information regarding these and other risks is included in the Company's 20-F filed with the Securities and Exchange Commission on March 30, 2012. All information provided in this press release is current as of the date of the press release, and the Company undertakes no duty to update such information, except as required under applicable law.

Non-GAAP Financial Measures

The Company defines adjusted net income (loss), a non-GAAP financial measure, as net income (loss) excluding share-based compensation expenses and fair value changes in warrant liabilities. The Company reviews adjusted net income (loss) together with net income (loss) to obtain a better understanding of its operating performance. The Company believes it is useful supplemental information for investors and other interested persons to assess the Company's operating performance without the effect of non-cash fair value changes in warrant liabilities, which would not likely be a recurring factor in its business in the future, and share-based compensation expenses, which have been and continue to be a significant recurring factor in our business.

The Company presents its non-GAAP financial measure because management uses it to evaluate the Company's operating performance. The Company believes that non-GAAP financial measure provides useful information to investors and other interested persons because by having access to such information they will have the same data the Company uses to assess its operating performance.  In addition, this information allows investors and other interested persons to understand and evaluate the Company's consolidated results of operations in the same manner as management and to make period-over-period comparisons of its financial results. However, the use of adjusted net income (loss) has material limitations as an analytical tool. One of the limitations of using non-GAAP adjusted net income (loss) is that it does not include all items that impact the Company's net income (loss) for the period. In addition, because companies may not calculate adjusted net income (loss) in the same manner, it may not be comparable to similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider adjusted net income (loss) in isolation from or as an alternative to net income (loss) prepared in accordance with U.S. GAAP. The Company encourages investors and other interested persons to review the Company's financial information in its entirety and not rely on a single financial measure.

Exchange Rate

This press release contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars for the quarter ended June 30, 2012 were made at a rate of RMB6.3530 to US$1.00, the noon buying rate in effect on June 29, 2012 as set forth in the weekly H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at such rate.

[1] The Company records revenues on a net basis and presents net revenues net of third party advertising agency fees and sales tax as a reduction of revenues.  For the second quarter 2012, third party advertising agency fees were RMB32.3 million (US$5.1 million) and sales tax was RMB7.4 million (US$1.2 million), compared to third party advertising agency fees of RMB23.6 million and sales tax of RMB14.6 million in the corresponding period in 2011.

SOURCE Tudou Holdings Limited