Artificial Intelligence
CooTek Announces Third Quarter 2020 Unaudited Results
CooTek (Cayman) Inc. (NYSE: CTK) (“CooTek” or the “Company”), a fast-growing global mobile internet company, today reported unaudited financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Highlights
- Net revenue was US$105.7 million, an increase of 238% from US$31.3 million during the same period last year.
- Gross profit was US$98.9 million, an increase of 261% from US$27.4 million during the same period last year.
- Gross profit margin was 93.6%, an increase of 6% year-over-year.
- Net loss was US$22.0 million, compared with net loss of US$16.2 million during the same period last year.
- Adjusted net loss[1] (Non-GAAP) was US$20.5 million, compared with adjusted net loss (Non-GAAP) of US$15.4 million during the same period last year.
- The Company’s Portfolio Products[2] contributed approximately 99% of total revenues, with a focus on three main categories: online literature, scenario-based content apps, and casual games.
September 2020 Operational Highlights
- Average daily active users (“DAUs”) of the Company’s Portfolio Products were 27.7 million, an increase of 16% from 23.9 million in September 2019. Monthly active users (“MAUs”) of the Company’s Portfolio Products were 94.8 million, an increase of 40% from 67.5 million in September 2019.
- Average DAUs of the Company’s online literature products were 10.0 million, increased significantly from 2.0 million in September 2019. MAUs of the Company’s online literature products were 29.5 million, increased significantly from 11.0 million in September 2019. The average daily reading time[3] of the key product Fengdu Novel users further increased to 130 minutes in September 2020 from 110 minutes in June 2020.
- Average DAUs of the Company’s TouchPal Smart Input were 130.0 million. MAUs of the Company’s TouchPal Smart Input were 169.4 million.
“I am pleased to report a resilient third quarter with revenue of US$105.7 million compared to US$31.3 million a year ago,” commented Mr. Karl Zhang, CooTek’s Chairman. “Driven by the strategic enhancement of our content ecosystem, we further upgraded and strengthened our core products aiming at delivering the sustainable business growth. We reinforced the market position of Fengdu Novel which ranked 3rd in terms of MAUs in free online literature market in China[4] with continuous growth in our user base. With its DAUs exceeding 10 million during the third quarter of 2020, Fengdu Novel constituted the core component of our content-rich portfolio with a strong emphasis on balancing its user expansion and user retention. We have been rapidly developing its customized content production model which contribute to its competitive user stickiness. Going forward, we will strive to further expand our content ecosystem by leveraging the core strength of Fengdu Novel and the growth synergy that we can achieve among the three main business segments of content-rich mobile apps.”
Mr. Robert Cui, CooTek’s CFO further commented, “Despite the growth pressure in global mobile internet advertising market, we still increased our revenue by 238% during the third quarter of 2020 compared to the same period in 2019. More importantly, we have witnessed solid growth in our online literature business in terms of its user base and revenue since the first quarter of 2019. We will continue to invest in the content and user expansion of Fengdu Novel by maintaining a reasonable return on investment level. We are convinced that our development strategy will result in building up a synergetic and diversified content ecosystem.”
|
(in millions) |
Portfolio Products  |
|||||||||
|
Portfolio Products |
Including: Online literature |
|||||||||
|
DAUs |
MAUs |
DAUs |
MAUs |
|||||||
|
Sep’ 18 |
11.0 |
33.7 |
– |
– |
||||||
|
Dec’ 18 |
16.9 |
46.1 |
– |
– |
||||||
|
Mar’ 19 |
23.1 |
59.8 |
0.3 |
0.9 |
||||||
|
Jun’ 19 |
27.6 |
65.1 |
0.3 |
1.6 |
||||||
|
Sep’ 19 |
23.9 |
67.5 |
2.0 |
11.0 |
||||||
|
Dec’ 19 |
24.7 |
74.6 |
4.8 |
19.3 |
||||||
|
Mar’ 20 |
25.2 |
89.2 |
7.3 |
29.1 |
||||||
|
Jun’ 20 |
23.9 |
83.5 |
8.1 |
28.4 |
||||||
|
Sep’ 20 |
27.7 |
94.8 |
10.0 |
29.5 |
||||||
|
Third Quarter 2020 Financial Results |
|||||||||
|
Net Revenues |
|||||||||
|
(in US$ thousands, except percentage) |
3Q 2020 |
2Q 2020 |
3Q 2019 |
QoQ % Change |
YoY % Change |
||||
|
Mobile Advertising Revenue |
104,842 |
125,774 |
30,548 |
(17)% |
243% |
||||
|
Other Revenue |
815 |
622 |
722 |
31% |
13% |
||||
|
Total Net Revenues |
105,657 |
126,396 |
31,270 |
(16)% |
238% |
||||
Net revenues were US$105.7 million, an increase of 238% from US$31.3 million during the third quarter of 2019 and a decrease of 16% from US$126.4 million in the last quarter. The fluctuation was primarily due to changes in our mobile advertising revenue.
Mobile advertising revenue was US$104.8 million, an increase of 243% from US$30.5 million during the third quarter of 2019 mainly due to increase in our user base and number of portfolio products, and a decrease of 17% from US$125.8 million last quarter mainly due to restructuring of our portfolio products.
Our portfolio products focus on three categories: online literature, scenario-based content apps and casual games. Online literature accounted for approximately 34%, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 41% of total net revenue.
Cost and Operating Expenses
|
3Q 2020 |
2Q 2020 |
3Q 2019 |
QoQ % Change |
YoY % Change |
|||||||||||
|
(in US$ thousands, except percentage) |
US$ |
% of revenue |
US$ |
% of revenue |
US$ |
% of revenue |
|||||||||
|
Cost of revenues |
6,784 |
6% |
5,691 |
5% |
3,912 |
13% |
19% |
73% |
|||||||
|
Sales and marketing |
107,842 |
102% |
105,999 |
84% |
33,463 |
107% |
2% |
222% |
|||||||
|
Research and development |
8,204 |
8% |
8,103 |
6% |
6,933 |
22% |
1% |
18% |
|||||||
|
General and administrative |
3,707 |
4% |
4,136 |
3% |
3,387 |
11% |
(10)% |
9% |
|||||||
|
Other operating loss (income), net |
1,064 |
1% |
(446) |
(0)% |
(58) |
0% |
(339)% |
(1934)% |
|||||||
|
Total Cost and Expenses |
127,601 |
121% |
123,483 |
98% |
47,637 |
153% |
3% |
168% |
|||||||
|
Share-based compensation expenses by function |
|||||||||||||||
|
Cost of revenues |
75 |
0.1% |
71 |
0.1% |
25 |
0.1% |
6% |
200% |
|||||||
|
Sales and marketing |
59 |
0.1% |
61 |
0.0% |
32 |
0.1% |
(3)% |
84% |
|||||||
|
Research and development |
815 |
0.8% |
862 |
0.7% |
700 |
2.2% |
(5)% |
16% |
|||||||
|
General and administrative |
492 |
0.5% |
430 |
0.3% |
129 |
0.4% |
14% |
281% |
|||||||
|
Total share-based compensation expenses |
1,441 |
1.5% |
1,424 |
1.1% |
886 |
2.8% |
1% |
63% |
|||||||
Cost of revenues was US$6.8 million, an increase of 73% from US$3.9 million during the same period last year, and an increase of 19% from US$5.7 million last quarter. The year-over-year increase was mainly due to an increase in content costs paid to freelancers and third-party content distributors. The sequential increase was mainly due to the investment in operational workforce and maintenance-related expenses.
Gross profit was US$98.9 million, an increase of 261% from US$27.4 million during the same period last year, and a decrease of 18% from US$120.7 million last quarter. Gross profit margin was 93.6%, compared with 87.5% in the same period last year and 95.5% last quarter.
Sales and marketing expenses were US$107.8 million, an increase of 222% from US$33.5 million during the same period last year, and an increase of 2% from US$106.0 million last quarter. As a percentage of total revenue, sales and marketing expenses accounted for 102%, compared with 107% during the same period last year, and 84% last quarter. The sequential and year-over-year increases in sales and marketing expenses were primarily due to increased investment in user acquisition.
Research and development expenses were US$8.2 million, an increase of 18% from US$6.9 million during the same period last year and an increase of 1% from US$8.1 million last quarter. The year-over-year increase was primarily due to an increase in costs associated with technology R&D staff. As a percentage of total net revenue, research and development expenses accounted for 8%, compared with 22% during the same period last year and 6% last quarter.
General and administrative expenses were US$3.7 million, an increase of 9% from US$3.4 million during the same period last year and a decrease of 10% from US$4.1 million last quarter. The year-over-year increase was mainly due to an increase in costs associated with G&A staff and share-based compensation expenses. The sequential decrease was mainly due to the reversal of accrued provision for bad debts on the collection of accounts receivables. As a percentage of total net revenue, general and administrative expenses accounted for 4%, compared with 11% during the same period last year and 3% last quarter.
Other operating loss, net was US$1.1 million, compared with other operating income, net US$0.06 million during the same period last year and other operating income, net US$0.4 million last quarter. The other operating loss during this quarter mainly relates to compensation payment to victims of alleged misconducts of certain third-party advertisers perpetrated on the Group’s platform that the Group deposited to an escrow account controlled by a local authority conducting investigation on the advertisers.
Net loss was US$22.0 million, compared with net loss of US$16.2 million during the same period last year and a net income of US$3.1 million last quarter.
Adjusted net loss was US$20.5 million, compared with adjusted net loss of US$15.4 million in the same period last year and adjusted net income of US$4.5 million last quarter.
|
In US$ thousands, except percentage |
3Q 2020 |
2Q 2020 |
3Q 2019 |
QoQ % Change |
YoY % Change |
||||
|
Net income (loss) |
(21,964) |
3,119 |
(16,246) |
(804)% |
35% |
||||
|
Add: Share-based Compensation related to share |
1,441 |
1,424 |
886 |
1% |
63% |
||||
|
Adjusted Net Income (Loss) (Non-GAAP) |
(20,523) |
4,543 |
(15,360) |
(552)% |
34% |
Basic and diluted net loss per ADS were US$0.36 and US$0.36, and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.33 and US$0.33.
Balance Sheet and Cash Flows
As of September 30, 2020, cash, cash equivalents and restricted cash were US$61.0 million, compared with US$64.9 million as of June 30, 2020. As of September 30, 2020, restricted cash were US$2.5 million, representing amounts held in Group’s bank account as guarantee deposit for payments processing services provided by the bank, and amounts held in Group’s bank accounts which were frozen by a local authority in connection with its investigation of alleged misconducts of certain third-party advertisers on the Group’s platform. In October 2020, additional US$18.4 million were deposited into these frozen bank accounts. The Group is still in the process of cooperating with the relevant authority on such investigation to unfreeze these bank accounts and it is uncontrollable when they can be unfrozen. In the interim, the Group cannot dispose of cash and cash equivalents in the frozen bank accounts.
Net cash outflow from operating activities during the third quarter of 2020 was US$14.4 million, compared with net cash outflow from operating activities of US$6.7 million for the same period in 2019 and net cash inflow from operating activities of US$5.4 million during the last quarter. Cash outflow from operating activities during the third quarter of 2020 was mainly due to loss from operations.
Share Repurchase Plan
On May 18, 2020, the Company announced a share repurchase program (the “2020 Program”) whereby the Company is authorized to repurchase its class A ordinary shares in the form of ADSs with an aggregate value of up to US$20 million during the 12-month period starting from May 18, 2020. The Company expects to fund the repurchases under this program with its existing cash balance. As of September 30, 2020, the Company had used an aggregate of US$3.3 million to repurchase 0.5 million ADSs under the 2020 Program and recorded as treasury stock.
Business Outlook
For the fourth quarter of 2020, CooTek expects total revenue to be around US$106 million, representing a year-over-year increase of around 54%. For the fiscal year of 2020, CooTek expects total revenue to be around US$445 million, representing a year-over-year increase of around 150%. This outlook is based on information available as of the date of this press release and reflects the Company’s current and preliminary expectations, which are subject to change in light of various uncertainties, including those related to the ongoing COVID-19 pandemic.
Conference Call and Webcast
CooTek’s management team will host a conference call at 8:00 AM U.S. Eastern Time on December 15, 2020 (9:00 PM Beijing Time on the same day), following the results announcement.
The dial-in details for the live conference call are:
United States: 1-888-346-8982
Hong Kong: 800-905-945
Mainland China: 4001-201-203
International: 1-412-902-4272
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/.