CooTek Announces Second Quarter 2019 Unaudited Results

SHANGHAI, Aug. 20, 2019 /PRNewswire/ -- CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"), a fast-growing global mobile internet company, today reported unaudited financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Financial Highlights

• Net revenue was US$37.6 million, an increase of 33% from US$28.4 million during the same period last year.
• Gross profit was US$33.6 million, an increase of 37% from US$24.5 million during the same period last year. Gross profit margin was 89.4%, an increase of 2.9% year-over-year.
• Net loss was US$14.1 million, compared to net income US$2.1 million during the same period last year.
• Adjusted net loss^[1] (Non-GAAP) was US$12.9 million, compared to adjusted net income (Non-GAAP) of US$2.8 million during the same period last year.

Second Quarter 2019 Operational Highlights

• The average daily active users ("DAUs") of the Company's global products^[2] were 171.3 million in June 2019 compared to 132.7 million in June 2018, an increase of 29% year-over-year.
• The average monthly active users ("MAUs") of the Company's global products2 were 255.5 million in June 2019 compared to 193.9 million in June 2018, an increase of 32% year-over-year.
• The average DAUs of the Company's portfolio products^[3] were 27.6 million in June 2019 compared to 7.3 million in June 2018, an increase of 278% year-over-year.
• The average MAUs of the Company's portfolio products³ were 65.1 million in June 2019 compared to 22.2 million in June 2018, an increase of 193% year-over-year.
• The user engagement^[4] of the Company's portfolio products in June 2019 was approximately 42%, compared to approximately 33% in June 2018 and approximately 39% in March 2019.
• The average DAUs of TouchPal Smart Input were 143.7 million in June 2019 compared to 125.4 million in June 2018, an increase of 15% year-over-year.
• The average MAUs of TouchPal Smart Input were 190.4 million in June 2019 compared to 171.7 million in June 2018, an increase of 11% year-over-year.
• The user engagement of TouchPal Smart Input in June 2019 was approximately 76%, compared to approximately 73% in June 2018 and approximately 76% in March 2019.

• Portfolio products continued to be the main driver of revenue growth, contributing nearly 76% to the total revenue.

"We built upon our strong start to the year with net revenue growing 33% year-over-year during the quarter to US$37.6 million and DAUs of our portfolio of products expanding to 27.6 million," commented Mr. Karl Zhang, CooTek's Co-Founder and Chairman. "The engagement rate of our portfolio apps continued to grow, expanding to 42% from 39% last quarter. We believe the impact from Google will be short-term and that our sophisticated capabilities to drive user growth leveraging our in-depth and unique user insights will continue to offer a unique value proposition. We are investing now to firmly establish and continuously evolve our content ecosystem in order to achieve long-term competitiveness and increase user stickiness. We will continue drive growth momentum by launching new and innovative products, retaining our users, and facilitating greater engagement with our products."

Second Quarter 2019 Financial Results

Net Revenues

Net revenues for the second quarter were US$37.6 million, an increase of 33% from US$28.4 million during the second quarter of 2018 and a decrease of 6% from US$40.0 million last quarter. The sequential decrease was primarily due to the decrease in advertising revenues recognized from Google for the last 2 months of the second quarter. 

Mobile advertising revenue for the second quarter was US$36.7 million, an increase of 33% from US$27.6 million during the second quarter of 2018 and a decrease of 7% from US$39.4 million last quarter. The year-over-year increase was primarily due to the rapid growth in the number of DAUs of portfolio products and improvement in user engagement.

Portfolio products accounted for approximately 78%, TouchPal Smart Input accounted for approximately 6% and TouchPal Phonebook accounted for approximately 16% of the mobile advertising revenue for the second quarter of 2019.

Cost and Operating Expenses

Cost of revenues for the second quarter was US$4.0 million, representing a 4% increase from US$3.8 million during the same period last year and a 12% increase from US$3.5 million last quarter. The year-over-year increase was mainly due to an increase in operational and maintenance related expenses as the Company's businesses expanded and partially offset by a decrease in VoIP-related expenses as a result of continuous improvement in telecommunication services utilization efficiency. The sequential increase was primarily due to the expanding data center capacity and network infrastructure.

Gross profit for the second quarter was US$33.6 million, a 37% increase from US$24.5 million during the same period last year and a decrease of 8% from US$36.5 million last quarter. Gross profit margin was 89.4%, compared to 86.5% in the same period last year and 91.2% last quarter.

Sales and marketing expenses for the second quarter were US$32.7 million, an increase of 109% from US$15.7 million during the same period last year and an increase of 19% from US$27.4 million last quarter. As a percentage of total revenue, sales and marketing expenses accounted for 87% compared with 55% during the same period last year, and 68% during last quarter. The year-on-year increase in sales and marketing expenses as a percentage of total net revenue was primarily due to the increased investment in user acquisition.

Research and development expenses for the second quarter were US$7.6 million, an increase of 70% from US$4.5 million during the same period last year and an increase of 16% from US$6.6 million last quarter. The year-on-year and sequential increases were primarily due to the increased cost associated with technology R&D staff. As a percentage of total net revenue, research and development expenses accounted for 20%, as compared to 16% during the same period last year and 17% compared to last quarter.

General and administrative expenses for the second quarter were US$7.8 million, an increase of 241% from US$2.3 million during the same period last year and an increase of 232% from US$2.3 million last quarter. The sequential increase was mainly due to an increase of US$4.7 million in bad debt provision, the majority of which was accrued for certain customers influenced by Google's decision to disable some of the global portfolio apps. As a percentage of total net revenue, general and administrative expenses accounted for 21%, compared to 8% during the same period last year and 6% during last quarter.

Other operating income, net for the second quarter was US$0.1 million, increased from US$0.05 million during the same period last year and US$0.07 million last quarter. It mainly consisted of government subsidies received by the Company.

Net loss for the second quarter was US$14.1 million, as compared with net income of US$2.1 million during the same period last year and net income of US$0.2 million last quarter.

Adjusted net income (loss), a non-GAAP financial measure, represents net income (loss) excluding share-based compensation. Adjusted net loss for the second quarter was US$12.9 million, compared with adjusted net income of US$2.8 million in the same period last year and adjusted net income of US$1.3 million last quarter.

Basic and diluted net loss per ADS were US$0.22 and US$0.22 in the second quarter of 2019, and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.20 and US$0.20 in this period.

Balance Sheets and Cash Flows

As of June 30, 2019, Cash and cash equivalents and restricted cash was US$62.8 million compared to US$77.3 million as of March 31, 2019.

Net cash outflow from operating activities during the second quarter of 2019 was US$8.9 million, compared to inflow from operations of US$2.0 million for the same period in 2018 and outflow of US$3.3 million during the last quarter. The cash outflow from operating activities during the second quarter of 2019 was the result of loss from operations.

Share Repurchase Plan

On November 26, 2018, the Company announced a share repurchase program whereby the Company is authorized to repurchase its own Class A ordinary shares in the form of ADSs with an aggregate value of up to US$15 million during the 12-month period from November 30, 2018. As of June 30, 2019, the Company had used an aggregate of US$10 million to repurchase 1.1 million ADSs. As of June 30, 2019, the Company recorded treasury shares of US$4.3 million for the outstanding repurchased shares and netted the cancellation of treasury stock of US$5.7 million with additional paid in capital.

Business Outlook

For the third quarter of 2019, CooTek expects total revenue to be about US$30 million, representing 18% decrease year-over-year.

For the fiscal year of 2019, CooTek expects total revenue to about US$145 million, representing 8% increase year-over-year.

Conference Call and Webcast

CooTek's management team will host a conference call at 8:00 AM U.S. Eastern Time on Tuesday, August 20, 2019 (8:00 PM Beijing Time on the same day), following the results announcement.

The dial-in details for the live conference call are:

Please dial in 15 minutes before the call is scheduled to begin. When prompted, ask to be connected to the CooTek (Cayman) Inc. call.

A live webcast and archive of the conference call will be available on the Investor Relations section of CooTek's website at https://ir.cootek.com/.

About CooTek (Cayman) Inc.

CooTek is a fast-growing global mobile internet company. The mission of CooTek is to empower everyone to express themselves and enjoy relevant content seamlessly. The Company's user-centric and data-driven approach has enabled it to release appealing products to capture mobile internet users' ever-evolving content needs and helps it rapidly attract targeted users. Focusing on 5 verticals of fitness, lifestyle, healthcare, short videos and entertainment, CooTek has developed multiple rapidly growing content-rich portfolio apps with news feed to deliver relevant content.

Non-GAAP Financial Measure

To supplement the unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), the Company uses non-GAAP financial measure of adjusted net (loss) income that is adjusted from results based on GAAP to exclude the impact of share-based compensation, and Adjusted EBITDA that is net (loss) income excluding interest income and expense, income taxes, depreciation, and share-based compensation. The measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

The Company believes that the non-GAAP measure help identify underlying financial and business trends relating to the Company's results of operations that could otherwise be distorted by the effect of certain expenses that the Company include in (loss) income from operations and net (loss) income. By making the Company's financial results comparable period over period, the Company believes adjusted net (loss) income and Adjusted EBITDA provides useful information to better understand the Company's historical business operations and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision-making. In order to mitigate these limitations, the Company has provided specific information regarding the GAAP amounts excluded from the non-GAAP measure. The table at the bottom of this press release includes details on the reconciliation between GAAP financial measure that is most directly comparable to the non-GAAP financial measure the Company has presented.

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, and 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," "confident" and similar statements. CooTek may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, 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. Any statements that are not historical facts, including statements about CooTek's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: CooTek's mission and strategies; future business development, financial conditions and results of operations; the expected growth of the mobile internet industry and mobile advertising industry; the expected growth of mobile advertising; expectations regarding demand for and market acceptance of our products and services; competition in mobile application and advertising industry; and relevant government policies and regulations relating to the industry. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and CooTek does not undertake any obligation to update such information, except as required under applicable law.

For investor enquiries, please contact:

CooTek (Cayman) Inc.
Jean Zhang
Email: IR@cootek.com  

Christensen
In China 
Mr. Christian Arnell 
+86-10-5900-1548 
carnell@christensenir.com 
In US 
Ms. Linda Bergkamp 
+1-480-614-3004
lbergkamp@christensenir.com

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