BEIJING, March 9, 2020 / PRNewswire / – Sogou Inc. (NYSE: SOGO) (“Sogou” or “the Company”), a research innovator and an Internet industry leader in China, today announced its unaudited financial results for fourth quarter and full year completed December 31, 2019.
Fourth quarter 2019 highlights
- Total revenue[1] were $ 301.0 million, an increase of 1% year-over-year or 3% in terms of RMB.
- The net profit attributable to Sogou Inc. was $ 35.0 million, a 33% year-over-year increase. Non-GAAP[2] the net profit attributable to Sogou inc. $ 39.0 million, a 44% year-over-year increase.
- The Sogou mobile keyboard had 464 million DAU (average daily users), up 9% from one year to the next. As China’s largest voice recognition application, it handled up to 802 million daily voice requests.
Full Highlights of the year 2019
- Total revenues were $ 1.17 billion, a 4% year-over-year increase, or a 9% increase in RMB.
- The net profit attributable to Sogou Inc. was $ 89.1 million, compared to $ 98.8 million in 2018. Non-GAAP net income attributable to Sogou Inc. was $ 105.0 million, compared to $ 113.0 million in 2018.
“Our company has shown resilience in 2019 despite persistent headwinds in the macroeconomic environment and in the online advertising sector in China,” said Xiaochuan Wang, CEO of Sogou. “Search revenues have grown faster than the industry average in 2019 as we intensify our efforts to develop our content and service ecosystem. Revenues from our mobile keyboard recommendation service have increased by almost 90 % year-on-year in 2019. In Smart Hardware, we have maintained a healthy growth dynamic as we increasingly integrate our core AI capabilities into product upgrades. Regarding our language-centric AI technologies, we have been able to provide state-of-the-art solutions, including our professional avatars and AI-based simultaneous interpretation. “
Wang added, “The recent COVID-19 epidemic has increased user demands for reliable information and high efficiency. As a result, our search and mobile keyboard traffic users have reached record levels. We have also quickly mobilized our R&D and technological benefits to address the situation and facilitate the development of AI-related healthcare. Although we anticipate that the epidemic will have a short-term impact on our results in the first quarter of 2020, we we remain confident in our global positioning with a solid implementation of our strategies for the potential of our main user assets. “
Joe Zhou, CFO of Sogou, said: “We are pleased to see steady progress in our fourth quarter results, despite continued pressure from external challenges. In particular, we saw increased margins throughout the quarter and non-GAAP net income increased 44% year-over-year $ 39 million. This is mainly due to our efforts to carefully control the costs of acquiring traffic and to increase operational efficiency, which we will pursue as we move forward, especially in a difficult environment in the short term. We remain confident in our long-term growth prospects. “
Financial results for the fourth quarter of 2019
Total revenue were $ 301.0 million, a 1% year-over-year increase.
- Research and research-related revenues were $ 274.6 million, down 1% year on year. However, auction-based pay-per-click services continued to increase year over year, accounting for 88.2% of search and search-related revenues, compared to 84.8% for the corresponding period of 2018.
- Other income were $ 26.4 million, a 26% year-over-year increase. This increase is mainly due to the increase in revenues from the sale of intelligent hardware products.
Cost of revenue was $ 168.7 million, a decrease of 9% year-on-year. Traffic acquisition cost, the main driver of the cost of income, was $ 129.0 million, down 14% year-on-year, representing 42.8% of total revenue, compared to 50.3% in the corresponding period of 2018.
Gross profit was $ 132.4 million, an increase of 18% year-on-year. NOTgross profit under GAAP was $ 132.6 million, a 19% year-over-year increase.
Total of the exploitation charges were $ 95.0 million, a decrease of 4% year-on-year.
- Research and development costs were $ 48.7 million, up 1% year-on-year, representing 16.2% of total revenue, largely stable compared to the corresponding period of 2018.
- Selling and marketing costs were $ 34.9 million, a decrease of 16% from one year to the next, representing 11.6% of total revenues, compared to 14.0% for the corresponding period of 2018. This decrease is mainly due to a decrease in marketing and promotion.
- General and administrative expenses were $ 11.3 million, an increase of 21% from one year to the next, representing 3.8% of total turnover, compared to 3.1% for the corresponding period of 2018. This increase is mainly due to an increase in professional fees .
Exploitation product was $ 37.4 million, an increase of 202% year-on-year compared to $ 12.4 million during the corresponding period in 2018. Non-GAAP operating profit was $ 41.5 million, an increase of 216% year-over-year compared to $ 13.1 million during the corresponding period in 2018.
Other income, net was $ 0.5 million, compared to $ 9.6 million during the corresponding period of 2018. The decrease is mainly due to $ 9.1 million impairment loss on certain investments in the Company’s shares in 2019.
Income tax fresh was $ 2.0 million, compared to a tax saving $ 3.6 million during the corresponding period of 2018.
Net profit attributable to Sogou Inc. was $ 35.0 million, an increase of 33% year-on-year, compared to the net result of $ 26.4 million during the corresponding period in 2018. Non-GAAP net income attributable to Sogou Inc. was $ 39.0 million, an increase of 44% over twelve months, compared to the net result of $ 27.1 million during the corresponding period in 2018.
Basic and diluted earnings by ADS were $ 0.09. Basic and diluted non-GAAP earnings by ADS were $ 0.10.
At December 31, 2019, the company had cash and cash equivalents and short-term investments of $ 1.1 billion, compared to $ 1.0 billion at December 31, 2018. Net operating cash flow for the fourth quarter of 2019 was $ 52.0 million. Capital expenditure for the fourth quarter of 2019 were $ 9.1 million.
Annual financial results 2019
Total revenue were $ 1.17 billion, an increase of 4% compared to 2018.
- Research and research-related revenues were $ 1.07 billion, an increase of 5% compared to 2018. This increase is mainly due to the auction-based pay-per-click services. Bid-based pay-per-click services represent 88.1% research and research-related revenues, compared to 83.8% in 2018.
- Other income were $ 99.1 million, compared to $ 101.0 million in 2018.
Cost of revenue was $ 738.5 million, an increase of 6% compared to 2018. Traffic acquisition cost, the main driver of the cost of income, was $ 562.2 million, an increase of 6% compared to 2018, representing 48.0% of total turnover, compared to 47.4% in 2018.
Gross profit was $ 433.8 million, an increase of 1% compared to 2018. NOTgross profit under GAAP was $ 434.3 million, an increase of 1% compared to 2018.
Total of the exploitation charges were $ 369.4 million, a decrease of 4% compared to 2018.
- Research and development costs were $ 190.4 million, a decrease of 6% compared to 2018, representing 16.2% of total turnover, compared to 17.9% in 2018.
- Selling and marketing costs were $ 138.3 million, a decrease of 5% compared to 2018, representing 11.8% of total turnover, compared to 13.0% in 2018.
- General and administrative expenses were $ 40.7 million, an increase of 7% compared to 2018, representing 3.5% of total turnover, compared to 3.4% in 2018.
Exploitation product was $ 64.4 million, an increase of 44% compared to 2018. Non-GAAP operating profit was $ 80.3 million, an increase of 36% compared to 2018.
Other income, net was $ 21.1 million, compared to $ 41.5 million in 2018. The decrease is mainly due to a gain of $ 17.8 million from one of the company’s equity investments recorded in the third quarter of 2018.
Income tax fresh was $ 2.7 million, compared to $ 1.2 million in 2018.
Net profit attributable to Sogou Inc. was $ 89.1 million, compared to $ 98.8 million in 2018. Non-GAAP net income attributable to Sogou Inc. was $ 105.0 million, compared to $ 113.0 million in 2018.
Basic and diluted earnings by ADS were $ 0.23. Basic and diluted non-GAAP earnings by ADS were $ 0.27.
[1] At constant exchange rates (non-GAAP), if the exchange rate for the fourth quarter of 2019 had been |
||
[2] Non-GAAP results exclude stock-based compensation expense. Explanation of the company’s non-GAAP |
Business prospects
For the first quarter of 2020, Sogou forecasts that total sales will be in the region of $ 240 million at $ 260 million, which represents a 5% decrease from a 3% year-over-year increase, or a 1% decrease from a 7% year-over-year increase in RMB. In developing these guidelines, the Company has taken into account the potential impact of the COVID-19 epidemic, as well as other challenges in the macroeconomic environment and the online advertising industry. As our research activities have managed the situation relatively well, we expect research to remain resilient in the first quarter. The indications represent the current and preliminary opinion of the company, which is subject to significant uncertainty, in particular with regard to the development and potential impact of COVID. -19 viruses in China and elsewhere.
For the first quarter of 2020 forecasts, the Company adopted an assumed exchange rate of 7.00 RMB = $ 1.00, relative to the real exchange rate of around RMB6.74 = $ 1.00 for the first quarter of 2019, and RMB7.03 = $ 1.00 for the fourth quarter of 2019.
Non-GAAP Disclosure
To supplement unaudited consolidated financial information prepared in accordance with generally accepted accounting principles The United States of America (“GAAP”), Sogou management uses non-GAAP measures of gross profit, gross margin and net profit which are adjusted from GAAP results to exclude the impact of awards based on actions. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered as a substitute for or superior to results of GAAP.
The management of Sogou considers that the exclusion of stock-based compensation expense is useful for the internal functioning of management and for investors. The amount of the stock-based compensation expense cannot be anticipated by management, and is not included in the annual budgets and quarterly forecasts of the Company, which will generally be the basis of the information that Sogou will provide to analysts and investors as a benchmark for future operational performance. As the stock-based compensation expense does not result in any subsequent cash outflows, Sogou does not take this expense into account when assessing and approving expenses or when determining the allocation of its resources to its business activities. Therefore, in general, the Company’s monthly financial results for internal reports and all performance measures for commissions and bonuses are based on these non-GAAP financial measures which exclude stock-based compensation expense. .
Non-GAAP financial measures are provided to allow investors to better understand Sogou’s current financial performance and its future prospects. A limitation on the use of non-GAAP gross profit, gross margin and net income measures that exclude stock-based compensation expense is that the stock-based compensation expense has been and will continue to be ” be a significant recurrent expense in the activities of the Company. In order to mitigate these limitations, the Company has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The attached tables contain details on the reconciliation between GAAP financial measures which are most directly comparable to the non-GAAP financial measures that the company has presented.
Safe Harbor Declaration
This announcement contains forward-looking statements. It is currently expected that the business outlook will not be updated until the next announcement of Sogou’s quarterly results is published. However, Sogou reserves the right to update its business prospects at any time for any reason. Statements that are not historical facts, including statements regarding the beliefs and expectations of Sogou and Sogou management, are forward-looking statements. These statements are based on current plans, estimates and projections, which involve inherent risks and uncertainties. We caution you that a number of important factors could cause the actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, intense competition in the market for research and related services; our need to innovate and adapt continuously to grow our business; our confidence in Tencent platforms for a significant part of our user traffic; uncertainty about the extent and scope of the PRC’s government regulation of sponsored research; and the effects of the COVID-19 virus on the economy of China in general and on our business in particular. More information on these and other risks is included in Sogou’s annual report on form 20-F for the year ended. December 31, 2018 filed with the Securities and Exchange Commission on March 28, 2019and other documents that Sogou files or submits to the Securities and Exchange Commission.
Conference call and webcast
Sogou’s management team will hold a conference call at 7:30 am Eastern United States Time (7:30 p.m. Beijing/Hong Kong It’s time March 9, 2020, following this announcement of quarterly and annual results.
The connection details for the live conference call are as follows:
Freephone number in the United States: + 1-888-317-6003
Continent China toll free: 4001-206115
Hong Kong Toll Free Number: 800-963976
Hong Kong local toll: + 852-580-81995
International: + 1-412-317-6061
Access code: 8746147
Please dial 10 minutes before the call begins. When prompted, request to be connected to the Sogou Inc. call and provide the access code.
A replay of the conference call is available by telephone at the following number until March 16, 2020:
International: + 1-412-317-0088
Access code: 10138239
A live webcast and conference call archives will be available in the Investor Relations section of Sogou’s website at http://ir.sogou.com.
About Sogou
Sogou Inc. (NYSE: SOGO) is a research innovator and a leader in the Chinese Internet industry. With the mission of facilitating communication and obtaining information, Sogou has become the second largest search engine by mobile queries and the fourth largest Internet company by MAU in China. Sogou offers a wide range of innovative products and services, including the Sogou entry method, which is the largest entry software in Chinese for mobile and PC. Sogou is also at the forefront of AI development and has made significant breakthroughs in voice and image technologies, machine translation and questions and answers, which have been successfully integrated into our products and services. .
For investor inquiries, please contact:
Jessie Zheng
Sogou Investor Relations
Phone: +86 10 5689 8068
E-mail: [email protected]
For media inquiries, please contact:
Yadan Ouyang
Brunswick Group
Phone: +86 10 5960-8600
E-mail: [email protected]
SOGOU INC. CONDENSED CONSOLIDATED OPERATING STATEMENTS (UNAUDITED, IN THOUSANDS EXCEPT PER AMOUNT PER SHARE) |
||||||||||
Three months ended |
Twelve months ended |
|||||||||
December 31, 2019 |
Sep 30, 2019 |
December 31, 2018 |
December 31, 2019 |
December 31, 2018 |
||||||
Income: |
||||||||||
Research and research-related advertising |
$ |
274,610 |
$ |
288,234 |
$ |
276,824 |
$ |
1,073,173 |
$ |
1,023,132 |
Other income |
26,413 |
26,657 |
20,967 |
99,079 |
101,026 |
|||||
Total revenue |
301,023 |
314,891 |
297,791 |
1,172,252 |
1124158 |
|||||
Cost of revenue (1) |
168,657 |
189,280 |
186,076 |
738,454 |
693,470 |
|||||
Gross profit |
132,366 |
125,611 |
111,715 |
433,798 |
430,688 |
|||||
Operating Expenses: |
||||||||||
Research and development (1) |
48,725 |
50,031 |
48,284 |
190,402 |
201,739 |
|||||
Sales and Marketing (1) |
34 926 |
37,505 |
41,677 |
138,291 |
146 194 |
|||||
general and administrative (1) |
11,300 |
10,705 |
9.376 |
40,670 |
38,072 |
|||||
Total of the exploitation charges |
94.951 |
98,241 |
99.337 |
369,363 |
386,005 |
|||||
Exploitation product |
37,415 |
27,370 |
12,378 |
64,435 |
44,683 |
|||||
Interest income |
540 |
793 |
1,075 |
4.443 |
8,037 |
|||||
Currency exchange (loss) / gain(2) |
(1,540) |
3.198 |
(266) |
1,849 |
5,725 |
|||||
Other income, net |
527 |
7,648 |
9.627 |
21,126 |
41,489 |
|||||
Income before income tax |
36,942 |
39,009 |
22,814 |
91,853 |
99,934 |
|||||
Income tax charges / (advantage) |
1,953 |
2,365 |
(3,579) |
2,748 |
1,153 |
|||||
Net revenue |
34 989 |
36,644 |
26,393 |
89 105 |
98,781 |
|||||
Net profit attributable to Sogou Inc. |
$ |
34 989 |
$ |
36,644 |
$ |
26,393 |
$ |
89 105 |
$ |
98,781 |
Net income attributable to ordinary activities |
$ |
34 989 |
$ |
36,644 |
$ |
26,393 |
$ |
89 105 |
$ |
98,781 |
Weighted average number of ordinary |
385,586 |
390,788 |
390,065 |
389,797 |
388,731 |
|||||
Weighted average number of ordinary |
391,356 |
396,319 |
395,074 |
395,233 |
395,898 |
|||||
Earnings per common share – basic |
$ |
0.09 |
$ |
0.09 |
$ |
0.07 |
$ |
0.23 |
$ |
0.25 |
Earnings per common share – diluted |
$ |
0.09 |
$ |
0.09 |
$ |
0.07 |
$ |
0.23 |
$ |
0.25 |
ADS Net Income – Basic |
$ |
0.09 |
$ |
0.09 |
$ |
0.07 |
$ |
0.23 |
$ |
0.25 |
Net income by ADS – diluted |
$ |
0.09 |
$ |
0.09 |
$ |
0.07 |
$ |
0.23 |
$ |
0.25 |
(1) Stock-based compensation expense |
||||||||||
Cost of revenue |
$ |
255 |
$ |
64 |
$ |
(47) |
$ |
473 |
$ |
669 |
Research and development |
2.602 |
2,767 |
482 |
10,697 |
10,313 |
|||||
Sales and Marketing |
797 |
1,091 |
174 |
3,726 |
1,327 |
|||||
general and administrative |
383 |
294 |
140 |
1,005 |
1,895 |
|||||
$ |
4.037 |
$ |
4,216 |
$ |
749 |
$ |
15,901 |
$ |
14,204 |
|
(2) Foreign exchange gain / (loss), mainly from our cross-border intra-group loans denominated in RMB, results from |
SOGOU INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS) |
||||
As of December 31, 2019 |
As of December 31, 2018 |
|||
ASSETS |
||||
Current assets: |
||||
Cash and cash equivalents |
$ |
142,464 |
$ |
185 175 |
short term investments |
995,350 |
851,327 |
||
Restricted cash |
5,370 |
– |
||
Accounts receivable and financing, net |
131,813 |
142,886 |
||
Prepaid and other current assets |
26 888 |
40 122 |
||
Due to related parties |
2,837 |
$ |
2.608 |
|
Total current assets |
1,304,722 |
1,222,118 |
||
Long-term investments, net |
63.345 |
$ |
63,305 |
|
Capital assets, net |
110,006 |
147,495 |
||
Good will |
5.534 |
5,625 |
||
Intangible assets, net |
1,514 |
1,349 |
||
Deferred tax assets, net |
16,306 |
13,793 |
||
other assets (1) |
20,975 |
$ |
9,159 |
|
Total assets |
$ |
1,522,402 |
1,462,844 |
|
LIABILITIES |
||||
Current liabilities: |
||||
Accounts payable |
$ |
111,587 |
$ |
108,679 |
Accrued liabilities and other short-term liabilities (1) |
150,275 |
151.399 |
||
Received in advance |
67,902 |
65,324 |
||
Accumulated salary and benefits |
24,167 |
32,079 |
||
Tax payable |
76,688 |
60,433 |
||
Due to related parties (1) |
22,594 |
38,425 |
||
Total current liabilities |
453,213 |
456,339 |
||
Long-term liabilities (1) |
5,686 |
– |
||
Total responsibilities |
$ |
458,899 |
$ |
456,339 |
SHAREHOLDERS ‘EQUITY |
||||
Equity of Sogou Inc. |
1,063,503 |
1,006,505 |
||
Total equity |
1,063,503 |
1,006,505 |
||
Total liabilities and equity |
$ |
1,522,402 |
1,462,844 |
|
(1) The Company adopted ASU No. 2016-02, “Leases”, from January 1, 2019. The only major impact of the |
SOGOU INC. RECONCILIATION OF NON-GAAP RESULTS TO NEAREST OPERATING AND COMPARABLE MEASURES (UNAUDITED, IN THOUSANDS EXCEPT PER AMOUNT PER SHARE) |
||||||||||||||||||
Quarter ended December 31, 2019 |
Quarter ended September 30, 2019 |
Quarter ended December 31, 2018 |
||||||||||||||||
GAAP |
Non-GAAP |
Non-GAAP |
GAAP |
Non-GAAP |
Non-GAAP |
GAAP |
Non-GAAP |
Non-GAAP |
||||||||||
Adjustments(1) |
Adjustments(1) |
Adjustments(1) |
||||||||||||||||
Gross profit |
$ |
132,366 |
$ |
255 |
$ |
132,621 |
$ |
125,611 |
$ |
64 |
$ |
125.675 |
$ |
111,715 |
$ |
(47) |
$ |
111,668 |
Gross margin |
44% |
44% |
40% |
40% |
38% |
37% |
||||||||||||
Operating Expenses |
$ |
94.951 |
$ |
(3.782) |
$ |
91,169 |
$ |
98,241 |
$ |
(4,152) |
$ |
94,089 |
$ |
99.337 |
$ |
(796) |
$ |
98,541 |
Exploitation product |
$ |
37,415 |
$ |
4.037 |
$ |
41,452 |
$ |
27,370 |
$ |
4,216 |
$ |
31,586 |
$ |
12,378 |
$ |
749 |
$ |
13,127 |
Operating margin |
12% |
14% |
9% |
ten% |
4% |
4% |
||||||||||||
Income tax charges / (advantage) |
$ |
1,953 |
$ |
– |
$ |
1,953 |
$ |
2,365 |
$ |
– |
$ |
2,365 |
$ |
(3,579) |
$ |
– |
$ |
(3,579) |
Net revenue |
$ |
34 989 |
$ |
4.037 |
$ |
39,026 |
$ |
36,644 |
$ |
4,216 |
$ |
40,860 |
$ |
26,393 |
$ |
749 |
$ |
27 142 |
Net income attributable to |
$ |
34 989 |
$ |
4.037 |
$ |
39,026 |
$ |
36,644 |
$ |
4,216 |
$ |
40,860 |
$ |
26,393 |
$ |
749 |
$ |
27 142 |
Net margin attributable to |
12% |
13% |
12% |
13% |
9% |
9% |
||||||||||||
(1) Exclude stock-based compensation costs. This non-GAAP adjustment has no impact on the income tax expense. |
SOGOU INC. RECONCILIATION OF NON-GAAP RESULTS TO NEAREST OPERATING AND COMPARABLE MEASURES (UNAUDITED, IN THOUSANDS EXCEPT PER AMOUNT PER SHARE) |
|||||||||||||
Twelve months ended December 31, 2019 |
Twelve months ended December 31, 2018 |
||||||||||||
GAAP |
Non-GAAP |
Non-GAAP |
GAAP |
Non-GAAP |
Non-GAAP |
||||||||
Adjustments (1) |
Adjustments(1) |
||||||||||||
Gross profit |
$ |
433,798 |
$ |
473 |
$ |
434,271 |
$ |
430,688 |
$ |
669 |
$ |
431,357 |
|
Gross margin |
37% |
37% |
38% |
38% |
|||||||||
Operating Expenses |
$ |
369,363 |
$ |
(15,428) |
$ |
353,935 |
$ |
386,005 |
$ |
(13,535) |
$ |
372,470 |
|
Operating profit |
$ |
64,435 |
$ |
15,901 |
$ |
80,336 |
$ |
44,683 |
$ |
14,204 |
$ |
58 887 |
|
Operating margin |
5% |
seven% |
4% |
5% |
|||||||||
Income tax expense |
$ |
2,748 |
$ |
– |
$ |
2,748 |
$ |
1,153 |
$ |
$ |
1,153 |
||
Net revenue |
$ |
89 105 |
$ |
15,901 |
$ |
105,006 |
$ |
98,781 |
$ |
14,204 |
$ |
112,985 |
|
Net income attributable to |
$ |
89 105 |
$ |
15,901 |
$ |
105,006 |
$ |
98,781 |
$ |
14,204 |
$ |
112,985 |
|
Net margin attributable to |
8% |
9% |
9% |
ten% |
|||||||||
(1) Exclude stock-based compensation costs. This non-GAAP adjustment has no impact on the income tax expense. |
-END-
SOURCE Sogou Inc.
Related links
http://www.sogou.com