BEIJING, Aug. 10, 2020 /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
second quarter, ended June 30,
2020.
Second Quarter 2020 Highlights
- Total revenues[1] were $261.2
million, a 14% decrease year-over-year, or an 11% decrease
in RMB terms.
- Net loss attributable to Sogou Inc. was $8.5 million. Non-GAAP[2] net loss
attributable to Sogou Inc. was $5.5
million.
- Sogou Mobile Keyboard had 484 million DAUs (daily average
users), up 6% year-over-year. As China's largest voice recognition app, it
processed up to 1.4 billion daily voice requests.
"We delivered overall in-line results in the second quarter,
with Search maintaining a steady share of traffic and Mobile
Keyboard further expanding its DAU base. Moreover, our AI Hardware
business recorded solid growth in the quarter," said Xiaochuan Wang, CEO of Sogou. "Amidst the
external headwinds from the pandemic, Sogou has been proactively
upgrading its development strategy to focus on generating more user
value and building out a business that is oriented towards
long-term value and growth. We will further boost AI
empowerment and synergies across our businesses while we
continually drive technological advances."
Fion Zhou, CFO of Sogou, said,
"In the second quarter, while our top-line performance came under
pressure due to prolonged impact from the pandemic, we are pleased
that we narrowed the net loss on a sequential basis, partially due
to gradually normalized TAC growth. As we move forward, we will
stringently manage our costs and expenses as we implement our
strategy upgrade."
Second Quarter 2020 Financial Results
Total revenues were $261.2
million, a 14% decrease year-over-year.
- Search and search-related revenues were
$240.6 million, a 13% decrease
year-over-year. Auction-based pay-for-click services decreased
year-over-year, accounting for 86.9% of search and search-related
revenues, compared to 88.2% in the corresponding period in
2019.
- Other revenues were $20.6
million, a 25% decrease year-over-year. The decrease was
primarily due to decreased revenues from non-core businesses,
partially offset by a 20% year-over-year increase in AI-enabled
hardware.
Cost of revenues was $196.9
million, a 1% increase year-over-year. Traffic
acquisition cost, a primary driver of cost of revenues, was
$159.1 million, a 9% increase
year-over-year, representing 60.9% of total revenues, compared to
48.2% in the corresponding period in 2019. The increase was driven
by increased traffic acquisition from third parties as users
confined to their homes spent more time online during the COVID-19
outbreak.
Gross profit was $64.2
million and non-GAAP gross profit was $64.3 million, both a 40% decrease
year-over-year.
Total operating expenses were $90.3 million, a 6% decrease year-over-year.
- Research and development expenses were
$48.7 million, a 4% decrease
year-over-year, representing 18.6% of total revenues, compared to
16.7% in the corresponding period in 2019. The decrease was
primarily attributable to a decrease in share-based compensation
expense.
- Sales and marketing expenses were
$32.0 million, a 13% decrease
year-over-year, representing 12.2% of total revenues, largely flat
with the corresponding period in 2019. The decrease was primarily
due to a decrease in personnel-related expenses.
- General and administrative expenses were
$9.7 million, a 9% increase
year-over-year, representing 3.7% of total revenues, compared to
2.9% in the corresponding period in 2019.
Operating loss was $26.1
million, compared to operating income of $11.6 million in the corresponding period in
2019. Non-GAAP operating loss was $23.2 million, compared to operating income of
$18.1million in the corresponding
period in 2019.
Other income, net was $15.5
million, compared to $4.2
million in the corresponding period in 2019. The increase
was primarily due to a tax refund that was part of the Chinese
government's initiatives taken in response to COVID-19 and
other tax exemptions.
Income tax benefit was $1.1 million, compared to $1.4 million in the corresponding period of
2019.
Net loss attributable to Sogou Inc. was $8.5 million, compared to net income of
$21.3 million in the corresponding
period in 2019. Non-GAAP net loss attributable to Sogou Inc.
was $5.5 million, compared to net
income of $27.8 million in the
corresponding period in 2019.
GAAP basic and diluted loss per ADS
was $0.02. Non-GAAP basic and diluted
loss per ADS was $0.01.
As of June 30, 2020, the Company
had cash and cash equivalents and short-term investments of
$1.2 billion, compared to
$1.1 billion as of December 31, 2019. Net operating cash
inflow for the second quarter of 2020 was $49.2 million. Capital expenditures
for the second quarter of 2020 were $5.8 million.
[1] On a constant currency (non-GAAP)
basis, if the exchange rate in the second quarter of 2020 had been
the same as it was in the second quarter of 2019, or RMB
6.82=$1.00, total revenues in the second quarter of 2020 would have
been 271.4 million, or $10.2 million more than GAAP total revenues,
and down 11% 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."
|
Recent Development
On July 27, 2020, the Company
announced that its board of directors (the "Sogou Board") received
a letter containing a preliminary non-binding proposal (the
"Proposal") from Tencent Holdings
Limited (including its affiliates, "Tencent") for Tencent to acquire all of the outstanding
ordinary shares, including ordinary shares represented by ADSs, of
the Company that are not already owned by Tencent for US$9.00
in cash per ordinary share or ADS (as the same may be amended from
time to time, a "Proposed Transaction"). A Proposed Transaction
based on the Proposal, if completed, would result in the Company
becoming a privately-held, indirect wholly-owned subsidiary of
Tencent, and Sogou ADSs would be
delisted from the New York Stock Exchange.
On July 31, 2020, the Sogou Board
established a special committee (the "Special Committee") of the
Sogou Board, composed solely of independent directors, to consider
the Proposal.
The Company cautions its shareholders and others
considering trading in the Company's securities that neither the
Sogou Board nor the Special Committee has made any
decision with respect to the Company's response to the Proposal.
There can be no assurance that Tencent will make a definitive offer to the
Company, that a definitive agreement relating to the Proposal
will be entered into between the Company and Tencent, or that a Proposed Transaction or
any other similar transaction will be approved or consummated.
The Company does not undertake any obligation to provide any
updates with respect to this or any other transaction, except as
required under applicable law.
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 may contain forward-looking statements.
Statements that are not historical facts, including statements
about Sogou's and Sogou management's beliefs and expectations, are
forward-looking statements. Any such 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; uncertainty regarding the
extent and reach of PRC governmental regulation of sponsored
search; the effects of the COVID-19 virus on the economy in
China generally and on our
business in particular; and the fact that there is no assurance
that Tencent will make a definitive
offer to acquire the Company, that a definitive agreement relating
to the Proposal will be entered into between Tencent and the Company, or that a Proposed
Transaction or any other similar transaction between Tencent and the Company will be approved or
consummated. Further information regarding these and other risks is
included in Sogou's Annual Report on Form 20-F for the year
ended December 31, 2019 filed with
the Securities and Exchange Commission on April 21, 2020, 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
6:30 am U.S. Eastern Time,
(6:30 pm Beijing/Hong
Kong time) on August 10, 2020,
following this quarterly results announcement.
The dial-in details for the live conference call are:
U.S. Toll
Free:
|
+1-888-317-6003
|
Mainland China Toll
Free:
|
4001-206115
|
Hong Kong Toll
Free:
|
800-963976
|
Hong Kong Local
Toll:
|
+852-580-81995
|
International:
|
+1-412-317-6061
|
Passcode:
|
9971291
|
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 August 17,
2020:
International:
|
+1-412-317-0088
|
Passcode:
|
10146698
|
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:
Serena Liu
Sogou Public
Relations
Tel: +86 10 5689 9999 (61958)
Email: press@sogou-inc.com
SOGOU INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
|
|
|
Three Months
Ended
|
|
|
Jun. 30,
2020
|
|
Mar. 31,
2020
|
|
Jun. 30,
2019
|
Revenues:
|
|
|
|
|
|
|
Search and
search–related advertising
revenues
|
$
|
240,602
|
$
|
237,610
|
$
|
276,152
|
Other
revenues
|
|
20,581
|
|
19,674
|
|
27,464
|
Total
revenues
|
|
261,183
|
|
257,284
|
|
303,616
|
Cost of revenues
(1)
|
|
196,939
|
|
217,024
|
|
195,863
|
Gross
profit
|
|
64,244
|
|
40,260
|
|
107,753
|
Operating
expenses:
|
|
|
|
|
|
|
Research and
development (1)
|
|
48,683
|
|
47,023
|
|
50,609
|
Sales and marketing
(1)
|
|
31,981
|
|
28,597
|
|
36,664
|
General and
administrative (1)
|
|
9,682
|
|
6,997
|
|
8,849
|
Total operating
expenses
|
|
90,346
|
|
82,617
|
|
96,122
|
Operating
(loss)/income
|
|
(26,102)
|
|
(42,357)
|
|
11,631
|
Interest
income
|
|
813
|
|
744
|
|
1,739
|
Foreign currency
exchange (loss)/gain (2)
|
|
(89)
|
|
1,730
|
|
2,387
|
Other income,
net
|
|
15,542
|
|
7,212
|
|
4,216
|
(loss)/Income
before income tax
expenses
|
|
(9,836)
|
|
(32,671)
|
|
19,973
|
Income tax
benefit
|
|
(1,143)
|
|
(962)
|
|
(1,357)
|
Net
(loss)/income
|
|
(8,693)
|
|
(31,709)
|
|
21,330
|
Less: Net loss
attributable to
noncontrolling interest shareholders
|
|
(233)
|
|
(93)
|
|
-
|
Net
(loss)/income attributable to
Sogou Inc.
|
$
|
(8,460)
|
$
|
(31,616)
|
$
|
21,330
|
Net (loss)/income per
share/ADS
|
|
|
|
|
|
|
Basic
|
$
|
(0.02)
|
$
|
(0.08)
|
$
|
0.05
|
Diluted
|
$
|
(0.02)
|
$
|
(0.08)
|
$
|
0.05
|
Weighted average
number of
shares/ADSs outstanding
|
|
|
|
|
|
|
Basic
|
|
383,066
|
|
382,141
|
|
391,490
|
Diluted
|
|
383,066
|
|
382,141
|
|
396,632
|
|
|
|
|
|
|
|
(1)
Share–based compensation
expense included in:
|
|
|
|
|
|
|
Cost of
revenues
|
$
|
45
|
$
|
77
|
$
|
127
|
Research and
development
|
|
2,095
|
|
613
|
|
4,470
|
Sales and
marketing
|
|
702
|
|
(379)
|
|
1,670
|
General and
administrative
|
|
72
|
|
166
|
|
187
|
|
$
|
2,914
|
$
|
477
|
$
|
6,454
|
|
(2)
Foreign currency exchange (loss)/gain, mainly arising from our
cross-border RMB-denominated intragroup loans, is
a result of appreciation or depreciation, respectively, of the
RMB.
|
SOGOU INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
As of Jun. 30,
2020
|
|
As of Dec.
31, 2019
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
257,055
|
$
|
142,464
|
Short-term
investments
|
|
920,993
|
|
995,350
|
Restricted
cash
|
|
6,177
|
|
5,370
|
Account and financing
receivables, net
|
|
111,366
|
|
131,813
|
Prepaid and other
current assets
|
|
34,409
|
|
26,888
|
Due from related
parties
|
|
2,495
|
$
|
2,837
|
Total current
assets
|
|
1,332,495
|
|
1,304,722
|
Long–term
investments, net
|
|
71,080
|
$
|
63,345
|
Fixed assets,
net
|
|
88,797
|
|
110,006
|
Goodwill
|
|
6,016
|
|
5,534
|
Intangible assets,
net
|
|
1,346
|
|
1,514
|
Deferred tax assets,
net
|
|
15,095
|
|
16,306
|
Other
assets
|
|
40,967
|
$
|
20,975
|
Total
assets
|
$
|
1,555,796
|
|
1,522,402
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
209,078
|
$
|
111,587
|
Accrued and other
short-term liabilities
|
|
137,932
|
|
150,275
|
Receipts in
advance
|
|
69,041
|
|
67,902
|
Accrued salary and
benefits
|
|
17,525
|
|
24,167
|
Taxes
payable
|
|
63,460
|
|
76,688
|
Due to related
parties
|
|
32,055
|
|
22,594
|
Total current
liabilities
|
|
529,091
|
|
453,213
|
Long-term
liabilities
|
|
15,963
|
|
5,686
|
Total
liabilities
|
$
|
545,054
|
$
|
458,899
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Sogou Inc.
shareholders' equity
|
|
1,010,517
|
|
1,063,503
|
Non-controlling
interest
|
|
225
|
|
-
|
Total
shareholders' equity
|
|
1,010,742
|
|
1,063,503
|
Total liabilities
and shareholders' equity
|
$
|
1,555,796
|
|
1,522,402
|
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
Jun. 30, 2020
|
Three Months Ended
Mar. 31, 2020
|
Three Months Ended
Jun 30, 2019
|
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
Adjustments(1)
|
Adjustments(1)
|
Adjustments(1)
|
Gross
profit
|
$
|
64,244
|
$
|
45
|
$
|
64,289
|
$
|
40,260
|
$
|
77
|
$
|
40,337
|
$
|
107,753
|
$
|
127
|
$
|
107,880
|
Gross
margin
|
|
25%
|
|
|
|
25%
|
|
16%
|
|
|
|
16%
|
|
35%
|
|
|
|
36%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
90,346
|
$
|
(2,869)
|
$
|
87,477
|
$
|
82,617
|
$
|
(400)
|
$
|
82,217
|
$
|
96,122
|
$
|
(6,327)
|
$
|
89,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss)/income
|
$
|
(26,102)
|
$
|
2,914
|
$
|
(23,188)
|
$
|
(42,357)
|
$
|
477
|
$
|
(41,880)
|
$
|
11,631
|
$
|
6,454
|
$
|
18,085
|
Operating
margin
|
|
-10%
|
|
|
|
-9%
|
|
-16%
|
|
|
|
-16%
|
|
4%
|
|
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
$
|
(1,143)
|
$
|
-
|
$
|
(1,143)
|
$
|
(962)
|
$
|
-
|
$
|
(962)
|
$
|
(1,357)
|
$
|
-
|
$
|
(1,357)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
before non-
controlling interest
|
$
|
(8,693)
|
$
|
2,914
|
$
|
(5,779)
|
$
|
(31,709)
|
$
|
477
|
$
|
(31,232)
|
$
|
21,330
|
$
|
6,454
|
$
|
27,784
|
Net (loss)/income
attributable
to Sogou Inc.
|
$
|
(8,460)
|
$
|
2,914
|
$
|
(5,546)
|
$
|
(31,616)
|
$
|
477
|
$
|
(31,139)
|
$
|
21,330
|
$
|
6,454
|
$
|
27,784
|
Net margin
attributable to
Sogou Inc.
|
|
-3%
|
|
|
|
-2%
|
|
-12%
|
|
|
|
-12%
|
|
7%
|
|
|
|
9%
|
|
(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-second-quarter-2020-results-301108866.html
SOURCE Sogou Inc.