BEIJING, Nov. 5, 2018 /PRNewswire/ -- Sogou Inc. (NYSE:
SOGO) ("Sogou" or "the Company"), an innovator in search and a
leader in China's internet
industry, today announced its unaudited financial results for the
third quarter 2018, ended September 30,
2018.
Third Quarter 2018 Highlights
- Total revenues1 were $276.6
million, a 7% increase year-over-year.
- Net income attributable to Sogou Inc. was $23.9 million, a 23% decrease year-over-year.
Non-GAAP2 net income attributable to Sogou Inc. was
$28.0 million, a 10% decrease
year-over-year.
- Sogou Mobile Keyboard had 405 million DAUs (daily average
users), up 32% year-over-year. As China's largest voice app, it processed up to
500 million daily voice requests.
"In the third quarter, we recorded healthy growth in our core
businesses," said Xiaochuan Wang,
CEO of Sogou. "As the second largest search engine by mobile
queries in China, we continued to
grow our core search revenues faster than the industry average.
Driven by our commitment to providing users with reliable,
trustworthy information to help them address their key problems, we
further enriched our search platform with high-quality content for
popular verticals such as healthcare. This drove a significant
year-over-year increase in mobile healthcare queries."
"For our mobile keyboard business, we continued to leverage
AI-driven innovation to make it more efficient for users to
communicate. These AI initiatives enabled us to achieve solid
growth in both our user base and market share. In the third
quarter, Sogou Mobile Keyboard continued to cement its position as
both the leading mobile keyboard as well as China's largest and most popular voice app.
According to iResearch, Sogou Mobile Keyboard remained the third
largest mobile app in China."
Mr. Wang added, "During the quarter, we increased our
investments in the development of our industry-leading AI
technologies and continued to integrate them into Sogou Search,
Sogou Mobile Keyboard and our smart hardware products. We are
committed to driving the development of language-centric AI
technology and are confident this will enable us to fuel the
sustainable growth of our platform."
Joe Zhou, CFO of Sogou, said,
"Our third-quarter revenues reached $276.6
million, in line with expectations, with core search
revenues up 13% year-over-year. Going forward, we expect to see
long-term, sustainable growth in our search business as we continue
to deliver on our strategy of differentiation. We are also
confident that, while near term smart hardware sales will be
impacted, our upgraded smart hardware strategy will better position
us to create more competitive products and drive long term growth
in this segment."
Third Quarter 2018 Financial Results
Total revenues were $276.6
million, a 7% increase year-over-year.
- Search and search-related revenues3
were $255.3 million, a 13% increase
year-over-year. The increase was primarily due to growth in
auction-based pay-for-click services, driven by improved
monetization and continued traffic growth in mobile
search. There was a one-time adverse impact from a 10-day
suspension of a portion of the Company's advertising services in
early July that was implemented to ensure compliance with
government regulations. As previously announced, the measures were
taken following a government investigation into certain
non-compliant advertisements displayed on Sogou's platform in
June 2018. Auction-based
pay-for-click services accounted for 82.7% of search and
search-related revenues, compared to 83.8% in the corresponding
period in 2017.
- Other revenues were $21.3
million, a 33% decrease year-over-year. The decrease was
primarily due to lower sales of smart hardware products following a
decision to upgrade the smart hardware strategy to better leverage
Sogou's AI capabilities and improve product competitiveness. During
the quarter, the Company continued to phase out hardware products
that are not AI-enabled and focus resources on developing products
that integrate its leading AI technologies.
Cost of revenues was $173.6
million, a 33% increase year-over-year. Traffic
acquisition cost, a primary driver of cost of revenues, was
$135.2 million, a 58% increase
year-over-year, representing 48.9% of total revenues, compared to
33.3% in the corresponding period in 2017. The increase was driven
by price inflation as a result of increased competition.
Gross profit was $102.9
million, a 19% decrease year-over-year. Non-GAAP gross
profit was $103.2 million, a 19%
decrease year-over-year.
Total operating expenses were $109.7 million, a 20% increase
year-over-year.
- Research and development expenses were
$50.6 million, a 26% increase
year-over-year, representing 18.3% of total revenues, compared to
15.7% in the corresponding period in 2017. The increase was
primarily due to an increase in salary and benefits expenses, and
share based compensation expense, reflecting continued efforts to
strengthen AI capabilities.
- Sales and marketing expenses were
$43.6 million, a 3% decrease
year-over-year, representing 15.8% of total revenues, compared to
17.4% in the corresponding period in 2017. The decrease was
primarily attributable to a decrease in marketing and promotional
spending on some of the Company's mobile products.
- General and administrative expenses were
$15.5 million, a 149% increase
year-over-year, representing 5.6% of total revenues, compared to
2.4% in the corresponding period in 2017. The increase was
primarily due to a provision for loan losses as the Company
extended more consumer loans through its internet finance platform,
as well as an increased inventory impairment loss related to smart
hardware products.
Operating loss was $6.8
million, compared to operating income of $35.7 million in the corresponding period in
2017. Non-GAAP operating loss was $2.7 million, compared to non-GAAP operating
income of $36.0 million in the
corresponding period in 2017.
Other income, net was $24.0
million, compared with zero in the corresponding period in
2017. The increase was primarily due to a $17.8 million gain from one of the Company's
equity investments recognized under a new accounting standard
(ASC321) that became effective on January 1,
2018.
Income tax benefit was $0.4
million, compared to income tax expense of $4.6 million in the corresponding quarter of
2017. The income tax benefit resulted from a new tax incentive to
encourage R&D investments. Under new PRC
regulations issued in September
2018 and applicable retroactively beginning January 1, 2018, more R&D expenses become
eligible for further deduction from taxable income.
Net income attributable to Sogou Inc. was $23.9 million, a 23% decrease year-over-year.
Non-GAAP net income attributable to Sogou Inc. was
$28.0 million, a 10% decrease
year-over-year.
Basic earnings per ADS and diluted earnings per
ADS were $0.06. Non-GAAP basic
and diluted earnings per ADS were $0.07.
As of September 30, 2018, the
Company had cash and cash equivalents and short-term
investments of $1.1 billion,
compared with $1.0 billion as of
December 31, 2017. Net loans
receivable in the amount of $33.9
million represented amounts receivable under small consumer
loans extended through the Company's internet finance platform.
Net operating cash inflow for the third quarter of 2018 was
$85.3 million. Capital
expenditures for the third quarter of 2018 were $22.2 million.
Recent developments
On October 19, 2018, Mr.
Joseph Chen resigned as a member of
the board of directors of the Company (the "Board") and as a member
of the audit committee of the Board (the "Audit Committee") for
personal reasons. Ms. Jinmei He was
appointed by the Company's controlling shareholder Sohu.com Limited
("Sohu") to serve on the Board as a Sohu designee pursuant to the
Company's articles of association, effective October 19, 2018, and was appointed by the Board
to be a member of the Audit Committee, effective November 3, 2018.
Ms. He joined Sohu in 1997 and served as a Vice President in
charge of the online gaming business from 2002 to 2005. She has
been a self-employed investor in the public equity markets and in
real estate in the United States
since 2005. Ms. He received a Bachelor of Civil Engineering from
Southwest Jiaotong University.
Business Outlook
For the fourth quarter of 2018, Sogou expects total revenues to
be in the range $292 million to
$307 million, representing a 5% to
11% increase year-over-year, or an 11% to 17% increase
year-over-year in RMB terms.
For the fourth quarter 2018 guidance, the Company has adopted a
presumed exchange rate of RMB 7.00 =
$1.00, as compared with the actual
exchange rate of approximately RMB6.61 = $1.00 for
the fourth quarter of 2017, and RMB
6.81 = $1.00 for the third
quarter of 2018.
1 On a
constant currency (non-GAAP) basis, if the exchange rate in the
third quarter of 2018 had been
the same as it was in the third quarter of 2017, or RMB 6.66=$1.00,
total revenues in the third quarter
of 2018 would have been $282.6 million, or $6.0 million more than
GAAP total revenues, and up 10%
year-over-year.
|
2 Non-GAAP results exclude
share-based compensation expense. Explanation of the Company's
non-
GAAP financial measures and related reconciliations to GAAP
financial measures are included in the
accompanying "Non-GAAP Disclosure" and "Reconciliations of Non-GAAP
Results of Operation
Measures to the Nearest Comparable GAAP Measures."
|
3 The
Company has adopted ASU No. 2014-09, ''Revenue from Contracts with
Customers" beginning
January 1, 2018. The only major impact of the standard is that
revenues and expenses related to
advertising barter transactions are recognized beginning January 1,
2018. The impact for this quarter
is approximately $5.3 million for both revenues, and cost of
revenues and expenses.
|
Non-GAAP Disclosure
To supplement the unaudited consolidated financial information
prepared in accordance with generally accepted accounting
principles in the United States of
America ("GAAP"), Sogou's management uses non-GAAP measures
of gross profit, gross margin, and net income that are adjusted
from results based on GAAP to exclude the impact of share-based
awards. These measures 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.
Sogou's management believes that excluding share-based
compensation expense is useful for management's internal operating
purposes and for investors. The amount of share-based compensation
expense cannot be anticipated by management, and this is not built
into the Company's annual budgets and quarterly forecasts, which
generally will be the basis for information Sogou provides to
analysts and investors as guidance for future operating
performance. As share-based compensation expense does not involve
subsequent cash outflow, Sogou does not factor in this expense when
evaluating and approving expenditures or when determining the
allocation of its resources to its business operations. As a
result, in general, the Company's monthly financial results for
internal reporting and any performance measures for commissions and
bonuses are based on these non-GAAP financial measures that exclude
share-based compensation expense.
The non-GAAP financial measures are provided to enhance
investors' overall understanding of Sogou's current financial
performance and prospects for the future. A limitation of using
non-GAAP gross profit, gross margin, and net income measures that
exclude share-based compensation expense is that share-based
compensation expense has been and is likely to continue to be a
significant recurring expense in the Company's business. In order
to mitigate these limitations, the Company has provided specific
information regarding the GAAP amounts excluded from each non-GAAP
measure. The accompanying tables include details on the
reconciliation between GAAP financial measures that are most
directly comparable to the non-GAAP financial measures the Company
has presented.
Safe Harbor Statement
This announcement contains forward-looking statements. It is
currently expected that the Business Outlook will not be updated
until release of Sogou's next quarterly earnings announcement.
However, Sogou reserves the right to update its Business Outlook at
any time for any reason. Statements that are not historical facts,
including statements about Sogou's and Sogou management's beliefs
and expectations, 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 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 search and search-related
services; our need to continually innovate and adapt in order to
grow our business; our reliance on Tencent platforms for a significant portion of
our user traffic; and uncertainty regarding the extent and reach of
PRC governmental regulation of sponsored search. Further
information regarding these and other risks is included in
Amendment No. 2 to Sogou's Registration Statement on Form F‑1
(Registration No. 333-220928) filed with the Securities and
Exchange Commission on November 6,
2017, and other documents Sogou files with or submits to the
Securities and Exchange Commission.
Conference Call and Webcast
Sogou's management team will host a conference call at
7:30 am U.S. Eastern Time,
(8:30 pm Beijing/Hong
Kong time) on November 5,
2018, following the quarterly results announcement.
The dial-in details for the live conference call are:
U.S. Toll
Free:
|
+1-888-317-6003
|
Mainland
China:
|
4001-206115 (Toll
Free)
|
Hong Kong:
|
800-963976 (Toll
Free); +852-580-81995 (Local Toll)
|
International:
|
+1-412-317-6061
|
Passcode:
|
7311232
|
Please dial in 10 minutes before the call is scheduled to begin.
When prompted, ask to be connected to the Sogou Inc. call
and provide the passcode.
A replay of the conference call may be accessed by phone at the
following number until November 12,
2018:
International:
|
+1-412-317-0088
|
Passcode:
|
10125635
|
A live webcast and archive of the conference call will be
available on the Investor Relations section of Sogou's website at
http://ir.sogou.com.
About Sogou
Sogou Inc. (NYSE: SOGO) is an innovator in search and a leader
in China's internet industry. With
a mission to make it easy to communicate and get information, Sogou
has grown to become the second largest search engine by mobile
queries and the fourth largest internet company by MAU in
China. Sogou has a wide range of
innovative products and services including the Sogou Input Method,
which is the largest Chinese language input software for both
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 Q&A, which have been successfully
integrated into our products and services.
For investor enquiries, please contact:
Jessie Zheng
Sogou
Investor Relations
Tel: +86 10 5689 8068
Email: ir@sogou-inc.com
For media enquiries, please contact:
Rachael
Layfield
Brunswick Group
Tel: +86 10 5960-8600
Email: sogou@brunswickgroup.com
SOGOU
INC.
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
(UNAUDITED, IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
Sep. 30,
2018
|
|
Jun. 30,
2018
|
|
Sep. 30,
2017
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Search
and search‑related advertising
revenues
|
$
|
255,312
|
$
|
270,622
|
$
|
225,590
|
|
|
|
|
|
|
|
Other
revenues
|
|
21,255
|
|
30,794
|
|
31,755
|
|
|
|
|
|
|
|
Total
revenues
|
|
276,567
|
|
301,416
|
|
257,345
|
|
|
|
|
|
|
|
Cost of revenues
(1)
|
|
173,622
|
|
179,749
|
|
130,299
|
|
|
|
|
|
|
|
Gross
profit
|
|
102,945
|
|
121,667
|
|
127,046
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development (1)
|
|
50,598
|
|
56,223
|
|
40,309
|
|
|
|
|
|
|
|
Sales and
marketing (1)
|
|
43,592
|
|
33,865
|
|
44,798
|
|
|
|
|
|
|
|
General and
administrative (1)
|
|
15,548
|
|
6,748
|
|
6,246
|
|
|
|
|
|
|
|
Total operating
expenses
|
|
109,738
|
|
96,836
|
|
91,353
|
|
|
|
|
|
|
|
Operating
(loss)/income
|
|
(6,793)
|
|
24,831
|
|
35,693
|
|
|
|
|
|
|
|
Interest
income
|
|
1,732
|
|
1,763
|
|
2,390
|
|
|
|
|
|
|
|
Foreign currency
exchange gain/(loss)(2)
|
|
4,521
|
|
6,136
|
|
(2,475)
|
|
|
|
|
|
|
|
Other
income/(expenses), net
|
|
24,049
|
|
3,427
|
|
(42)
|
|
|
|
|
|
|
|
Income before
income tax expenses
|
|
23,509
|
|
36,157
|
|
35,566
|
|
|
|
|
|
|
|
Income tax
(benefit)/expenses
|
|
(409)
|
|
2,997
|
|
4,593
|
|
|
|
|
|
|
|
Net
income
|
|
23,918
|
|
33,160
|
|
30,973
|
|
|
|
|
|
|
|
Net income
attributable to Sogou Inc.
|
$
|
23,918
|
$
|
33,160
|
$
|
30,973
|
|
|
|
|
|
|
|
Less: Dividends
attributable to preferred
shareholders
|
|
-
|
|
-
|
|
7,023
|
|
|
|
|
|
|
|
Net income
attributable to ordinary shareholders
|
$
|
23,918
|
$
|
33,160
|
$
|
23,950
|
|
|
|
|
|
|
|
Weighted average
number of ordinary shares
outstanding—basic
|
|
389,566
|
|
388,409
|
|
238,691
|
|
|
|
|
|
|
|
Weighted average
number of ordinary shares
outstanding—diluted
|
|
396,354
|
|
395,163
|
|
271,540
|
|
|
|
|
|
|
|
Net income per
ordinary share—basic
|
$
|
0.06
|
$
|
0.09
|
$
|
0.10
|
|
|
|
|
|
|
|
Net income per
ordinary share—diluted
|
$
|
0.06
|
$
|
0.08
|
$
|
0.09
|
|
|
|
|
|
|
|
Net income per
ADS—basic
|
$
|
0.06
|
$
|
0.09
|
$
|
0.10
|
|
|
|
|
|
|
|
Net income per
ADS—diluted
|
$
|
0.06
|
$
|
0.08
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Share‑based compensation expense
included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
$
|
234
|
$
|
263
|
$
|
-
|
|
|
|
|
|
|
|
Research
and development
|
|
3,008
|
|
3,637
|
|
309
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
373
|
|
427
|
|
7
|
|
|
|
|
|
|
|
General
and administrative
|
|
514
|
|
720
|
|
-
|
|
|
|
|
|
|
|
|
$
|
4,129
|
$
|
5,047
|
$
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Foreign currency exchange gain/(loss), mainly arising from
our cross-border RMB-denominated intragroup loans, is a result of
depreciation or appreciation of RMB, respectively
|
SOGOU
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
|
|
|
|
As of Sep.
30, 2018
|
|
As of Dec.
31, 2017
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
229,704
|
$
|
694,207
|
Short-term
investments
|
|
846,743
|
|
339,006
|
Accounts
receivable, net
|
|
96,862
|
|
69,967
|
Loans receivables,
net
|
|
33,930
|
|
-
|
Prepaid and
other current assets
|
|
38,106
|
|
15,091
|
Due from
related parties
|
|
2,273
|
|
2,971
|
Total current
assets
|
|
1,247,618
|
|
1,121,242
|
Long‑term
investments
|
|
60,831
|
|
30,152
|
Fixed assets,
net
|
|
139,368
|
|
139,209
|
Goodwill
|
|
5,612
|
|
5,908
|
Intangible assets,
net
|
|
736
|
|
1,328
|
Deferred tax assets,
net
|
|
11,285
|
|
15,006
|
Other
assets
|
|
8,967
|
|
8,191
|
Total
assets
|
$
|
1,474,417
|
$
|
1,321,036
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
116,523
|
$
|
73,018
|
Accrued and other
short term liabilities
|
|
154,362
|
|
164,269
|
Receipts in
advance
|
|
81,161
|
|
66,199
|
Accrued salary and
benefits
|
|
27,387
|
|
29,719
|
Taxes
payable
|
|
52,507
|
|
56,481
|
Due to related
parties
|
|
65,000
|
|
23,109
|
Total current
liabilities
|
|
496,940
|
|
412,795
|
Total
liabilities
|
$
|
496,940
|
$
|
412,795
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Sogou Inc.
shareholders' equity
|
|
977,477
|
|
908,241
|
Total
shareholders' equity
|
|
977,477
|
|
908,241
|
Total liabilities
and shareholders' equity
|
$
|
1,474,417
|
$
|
1,321,036
|
SOGOU
INC.
|
RECONCILIATIONS OF
NON-GAAP RESULTS OF OPERATION MEASURES TO THE NEAREST COMPARABLE
GAAP MEASURES
|
(UNAUDITED, IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
Sep. 30, 2018
|
Three Months Ended
Jun. 30, 2018
|
Three Months Ended
Sep. 30, 2017
|
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
Adjustments
(1)
|
Adjustments
(1)
|
Adjustments
(1)
|
Gross
profit
|
$
|
102,945
|
$
|
234
|
$
|
103,179
|
$
|
121,667
|
$
|
263
|
$
|
121,930
|
$
|
127,046
|
$
|
-
|
$
|
127,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
37%
|
|
|
|
37%
|
|
40%
|
|
|
|
40%
|
|
49%
|
|
|
|
49%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
109,738
|
$
|
(3,895)
|
$
|
105,843
|
$
|
96,836
|
$
|
(4,784)
|
$
|
92,052
|
$
|
91,353
|
$
|
(316)
|
$
|
91,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Profit
|
$
|
(6,793)
|
$
|
4,129
|
$
|
(2,664)
|
$
|
24,831
|
$
|
5,047
|
$
|
29,878
|
$
|
35,693
|
$
|
316
|
$
|
36,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
|
-2%
|
|
|
|
-1%
|
|
8%
|
|
|
|
10%
|
|
14%
|
|
|
|
14%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax (benefit)/expenses
|
$
|
(409)
|
$
|
|
$
|
(409)
|
$
|
2,997
|
$
|
|
$
|
2,997
|
$
|
4,593
|
$
|
|
$
|
4,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
23,918
|
$
|
4,129
|
$
|
28,047
|
$
|
33,160
|
$
|
5,047
|
$
|
38,207
|
$
|
30,973
|
$
|
316
|
$
|
31,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Sogou Inc.
|
$
|
23,918
|
$
|
4,129
|
$
|
28,047
|
$
|
33,160
|
$
|
5,047
|
$
|
38,207
|
$
|
30,973
|
$
|
316
|
$
|
31,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net margin
attributable to Sogou Inc.
|
|
9%
|
|
|
|
10%
|
|
11%
|
|
|
|
13%
|
|
12%
|
|
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) To
exclude share-based compensation expense. This non-GAAP adjustment
does not have an impact on income tax expense.
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/sogou-announces-third-quarter-2018-results-300743688.html
SOURCE Sogou Inc.