Q3 11 Recap: Still The Big Kid On The Block

| About: Youku Tudou (YOKU)

Youku (NYSE:YOKU) 3Q11 Earnings Highlights

  • Net revenue: $41.2 million (+129% year/year and 35% quarter/quarter)
  • Bandwidth cost was $14.5 million (+41% q/q), representing 35% of net revenue compared with 44% last year, while content cost was $10.5 million (+36% q/q) and remained flat at 26% of the revenue compared with a year ago.
  • Gross margin: 26%
  • Operating expense: $18.8 million (+120% y/y)
  • Net loss: $7.4 million
  • Non-GAAP net loss: $4.4 million

What I liked

Strong top-line growth. The 129% y/y revenue growth exceeded the high end of management guidance and continues to take shares from its competitors, specifically Tudou (NASDAQ:TUDO) [+52% y/y]. Online video revenue growth from Sina and Sohu were +125% y/y and +110% y/y, respectively, indicating that Youku continues to maintain its industry standing while Tudou continues to be the industry laggard as the company faces challenges in transitioning itself from a website that focuses on UGC to PPC.

Continue to gain shares. Youku increased its advertiser base by 139% y/y and saw higher revenue per advertiser, compared to (NASDAQ:SOHU), which saw 50% y/y increase in advertiser base. The company also executed well in gaining users’ time as video streamed per month increased 22% q/q to 20.5 billion. The figure is still pale compared with YouTube, which streams 90 billion videos per month (~3 billion per day) but implies that Youku could have significant upside if it continues to execute.

What concerned me

Weaker guidance. Youku guided 90% – 100% y/y growth for next quarter, which is less than the average analyst forecast of 108%. The weaker guidance could indicate increased competition ahead, which has been reflected in the decreasing y/y revenue growth since Youku’s IPO (see chart - click to enlarge).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Tagged: , Internet Information Providers, China, Earnings
Problem with this article? Please tell us. Disagree with this article? .