Business News
Ku6 Media Reports Third Quarter 2010 Results
Monday 15. November 2010 - Ku6 Media Co., Ltd. ("Ku6 Media" or the "Company", Nasdaq: KUTV) a leader in online video portal operations in China, today announced unaudited financial results for its third quarter ended September 30, 2010.
Background
On August 17, 2010, Ku6 Media (formerly named as Hurray! Holding Co., Ltd.), sold its wireless value-added services (“WVAS”) and recorded music businesses to Shanda Interactive Entertainment Limited (“Shanda”) in exchange for an aggregate of US$37,243,904 in cash and acquired 100% equity interest of Shanghai Yisheng Network Technology Co., Ltd. (“Yisheng”), an online radio business, from Shanda in exchange for 415,384,615 newly issued ordinary shares and a minority shareholder in exchange for 138,461,539 newly issued ordinary shares, respectively. Accordingly this release covers the third quarter and nine months ended September 30, 2010, as well as the comparable periods of 2009, and present the results of Yisheng and WVAS and recorded music businesses prior to the disposal to Shanda.
The above transactions were considered as transactions between entities under common control. Therefore the transaction is recorded at carryover basis and any difference between the carrying value and the amount received or paid are recorded in shareholders’ equity. The consolidated financial statements have been prepared as if Yisheng had been in existence in the current corporate structure upon the time Hurray! Holding Co., Ltd. was acquired by Shanda in August 2009 and the operating results of WVAS and recorded music were presented as “Operating Results of Discontinued Operations” in the income statements.
Highlights for the Third Quarter of 2010
— Total revenues from continuing operations, representing advertising
revenues contributed by online video portal and online radio operations,
grew to $4.0 million in the third quarter of 2010, up 35.1% from $2.9
million in the second quarter of 2010.
— Net loss from continuing operations narrowed to $12.7 million in the
third quarter of 2010, a decrease of 18.0% from a loss of $15.5 million
in the second quarter of 2010.
Business Results
Because Ku6 was acquired in January 2010 and Yisheng was assumed to be transferred from Shanda from August 2009, the results of operations for the three and nine months ended September 30, 2010 including Ku6’s online video business and Yisheng’s online radio business as well as the WVAS and recorded music business presented in discontinued operations before disposal may not be comparable to those ended September 30, 2009, which only included Yisheng’s operating results from August 2009 and the WVAS and recorded music business in discontinued operations.
Continuing Operations – Advertising
Total revenues from continuing operations, representing the advertising revenue from online video portal and online radio operation were $4.0 million in the third quarter of 2010, up 35.1% from $2.9 million in the second quarter of 2010. The substantial increase in advertising revenues was mainly driven by the expansion of video advertisement demand, and marketing and promotion efforts. Continuous investment in content in prior quarters also made Ku6 Media more attractive to both users and advertisers. In the third quarter of 2010, the top five companies that had placed advertisements on Ku6’s website were Lenovo, Dell, P&G, Master Kong and Wang Laoji (soft drink name).
Gross loss of continuing operations was $5.6 million in the third quarter of 2010 compared with a gross loss of $8.7 million in the second quarter of 2010. The decrease in gross loss was mainly because of the increase in revenue and reduction in cost.
Operating expenses of continuing operations were $7.1 million in the third quarter of 2010 and compared with $6.8 million in the second quarter of 2010.
Net loss from continuing operations was $12.7 million in the third quarter of 2010, a decrease of 18.0 % from a loss of $15.5 million in the second quarter of 2010.
Discontinued Operations – WVAS and Recorded Music Businesses
Net loss from discontinued operations was $0.4 million in the third quarter of 2010. The net income of discontinued operations in the second quarter of 2010 amounted to $2.9 million, which included a gain of $4.5 million from the disposal of Beijing Huayi Brothers Music Co., Ltd (“Huayi Music”) in May 2010. Net loss of discontinued operations in the third quarter of 2009 was $3.0 million. Excluding the gain from disposal of Huayi Music, the sequential decrease of net loss from discontinued operations was mainly due to the restructure of certain WVAS businesses and resources.
Overall
Net loss attributable to Ku6 Media was $12.8 million in the third quarter of 2010, $12.4 million in the second quarter of 2010, and $5.2 million in the third quarter of 2009.
Net loss attributable to Ku6 Media per basic and diluted ADS was $0.40 in the third quarter of 2010, $0.42 in the second quarter of 2010, and $0.24 in the third quarter of 2009. Weighted average basic and diluted ADS used to calculate diluted ADS per share was 31.9 million ADS in the third quarter of 2010, 29.2 million ADS in the second quarter of 2010, and 22.0 million ADS in the third quarter of 2009.
Loss before interest expense and interest income, income taxes, depreciation, and amortization (“EBITDA”, a non-GAAP measure) was $11.4 million in the third quarter of 2010, $11.1 million in the second quarter of 2010, and $4.1 million in the third quarter of 2009. A reconciliation between net loss attributable to Ku6 Media under U.S. generally accepted accounting principles (GAAP) and EBITDA is shown at the end of this news release.
As of September 30, 2010, the Company had $40.1 million in cash and cash equivalents, compared to $13.8 million as of June 30, 2010, and $49.7 million as of December 31, 2009.
In the third quarter of 2010, Ku6 Media has further grown into a central source of news and entertainment for China’s online video viewers. Ku6 Media’s reports covered most of the significant domestic and international events such as the South African World Cup in July, Zhouqu mudslide in August, and Shanghai World Expo etc. Through the new channel “Warner Zone” in www.juchang.com, Ku6 Media started to offer latest TV series and library title movies produced by Warner Brothers. The number of Ku6 Media’s self-produced contents was increasing stably, included the 24-hour live-broadcast internet reality shows Crazy Soccer Fans, Modern Girls, and other hit programs.
Mr. Shanyou (Kevin) Li, the Chief Executive Officer of Ku6 Media, commented, “We are encouraged to see our advertising revenues increasing and net loss kept narrowing continuously, after the completion of the massive business realignments. In the quarter, we started to cooperate with two major Hollywood studios to offer more international contents to our users. We also believe the success of our self-produced programs will further differentiate Ku6 Media from our industry peers and sharpen our competitive edge in China’s online video advertising market.”
Note to the Financial Information
The unaudited financial information disclosed above is preliminary. The results for the nine months ended September 30, 2010 are not necessarily indicative of the results expected for the full year or for any future period. Adjustments to the financial statements may be made when audit work is completed, which could result in significant differences between the audited financial statements and the preliminary unaudited financial information contained in this press release.