BEIJING, Nov. 16, 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
third quarter, ended September 30,
2020.
Total revenues[1] were
$216.7 million, a 31.2% decrease
year-over-year. The decrease was primarily driven by uncertainties
with respect to Sogou's business policies among certain advertisers
as a result of the previously-announced proposal by Tencent Holdings Limited ("Tencent") to take Sogou private, as well as
reduced traffic acquisition activity.
- Search and search-related revenues were
$192.5 million, a 33.2% decrease
year-over-year. Auction-based pay-for-click services decreased
year-over-year, accounting for 83.9% of search and search-related
revenues, compared to 88.7% in the corresponding period in
2019.
- Other revenues were $24.2
million, a 9.3% decrease year-over-year. The decrease was
primarily due to decreased revenues from non-core businesses,
partially offset by a 66% year-over-year increase in AI-enabled
hardware.
Cost of revenues was $168.9
million, a 10.8% decrease year-over-year. Traffic
acquisition cost, a primary driver of cost of revenues, was
$122.6 million, a 14.7% decrease
year-over-year, representing 56.6% of total revenues, compared to
45.6% in the corresponding period in 2019. The decrease in traffic
acquisition costs was driven by decreased traffic acquisition from
third parties.
Gross profit and
non-GAAP[2] gross profit were both
$47.8 million, a 62.0% decrease
year-over-year for both.
Total operating expenses were $93.4 million, a 4.9% decrease
year-over-year.
- Research and development expenses were
$50.5 million, a 0.9% increase
year-over-year, representing 23.3% of total revenues, compared to
15.9% in the corresponding period in 2019.
- Sales and marketing expenses were $28.5 million, a 24.0% decrease year-over-year,
representing 13.2% of total revenues, compared to 11.9% in the
corresponding period in 2019. The decrease was primarily due to a
decrease in advertising and promotion expenses.
- General and administrative expenses were
$14.4 million, a 34.7% increase
year-over-year, representing 6.7% of total revenues, compared to
3.4% in the corresponding period in 2019. The increase was
primarily due to an increase in professional fees.
Operating loss was $45.6
million, compared to operating income of $27.4 million in the corresponding period in
2019. Non-GAAP operating loss was $41.4 million, compared to operating income of
$31.6 million in the corresponding
period in 2019.
Other income, net was $8.6
million, compared to $7.6
million in the corresponding period in 2019. The increase
was primarily due to certain tax exemptions.
Income tax expense was $1.5
million, compared to $2.4
million in the corresponding period of 2019.
Net loss attributable to Sogou Inc. was $42.0 million, compared to net income of
$36.6 million in the corresponding
period in 2019. Non-GAAP net loss attributable to Sogou Inc.
was $37.7 million, compared to net
income of $40.9 million in the
corresponding period in 2019.
GAAP basic and diluted loss per ADS
was $0.11. Non-GAAP basic and diluted loss
per ADS was $0.10.
As of September 30, 2020, the
Company had cash and cash equivalents and short-term
investments of $1.0 billion,
compared to $1.1 billion as of
December 31, 2019. Net operating
cash outflow for the third quarter of 2020 was $111.2 million. Capital expenditures for
the third quarter of 2020 were $6.3
million.
[1] On a
constant currency (non-GAAP) basis, if the exchange rate in the
third quarter of 2020 had been the same as it was in the third
quarter of 2019, or RMB 6.99=$1.00, total revenues in the third
quarter of 2020 would have been 214.2 million, or $2.5 million less
than GAAP total revenues, and down 32% 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 September 29, 2020, the Company
announced that it had entered into a definitive Agreement and Plan
of Merger (the "Merger Agreement") with THL A21 Limited ("THL"),
TitanSupernova Limited ("Parent"), and Tencent Mobility Limited, each of which is a
direct or indirect wholly-owned subsidiary of Tencent, which contemplates that Parent will be
merged with and into Sogou in an all-cash transaction (the
"Merger"), and Sogou will become a wholly-owned indirect subsidiary
of Tencent.
Upon the effectiveness of the Merger, if it is completed,
outstanding Class A ordinary shares of the Company (each a "Class A
Ordinary Share"), including Class A Ordinary Shares represented by
American depositary shares ("ADSs"), other than Excluded Shares (as
defined in the Merger Agreement) and ADSs representing Excluded
Shares, will be cancelled in exchange for the right of the holders
thereof to receive $9.00 in cash per
share or ADS.
On or about the same time as the Company entered into the Merger
Agreement, Sohu.com Limited ("Sohu") (NASDAQ: SOHU), which is
currently the Company's indirect controlling shareholder through
Sohu's wholly-owned subsidiary Sohu.com (Search) Limited ("Sohu
Search"), and Sohu Search entered into a share purchase agreement
with Parent, pursuant to which Sohu Search agreed to sell all of
the Class A Ordinary Shares and Class B ordinary shares of the
Company (each a "Class B Ordinary Share") owned by it to Parent
(the "Share Purchase"). Also on or about the same time, THL and
Parent entered into a contribution agreement, pursuant to which THL
agreed to contribute all of the Class B Ordinary Shares of the
Company owned by it to Parent (the "Share Contribution").
Each of the closing of the Share Purchase and the closing of the
Share Contribution is expected to take place shortly prior to the
completion of the Merger.
Following the completion of the Share Purchase and the Share
Contribution, Parent will hold not less than 90% of the voting
power represented by all issued and outstanding shares of the
Company. Accordingly, it is intended that the Merger will be in the
form of a short-form merger of Parent with and into the Company in
accordance with section 233(7) of the Companies Law of the
Cayman Islands, and shareholder
approval of the Merger Agreement and the Merger will not be
required.
If completed, the Merger will result in the Company becoming a
privately-held indirect wholly-owned subsidiary of Tencent, the Company's ADSs will no longer be
listed on the New York Stock Exchange, and the ADS program will be
terminated.
The Company does not undertake any obligation to provide any
updates with respect to the Merger, the Share Purchase, 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 contains forward-looking statements.
Statements that are not historical facts, including statements
about Sogou's and Sogou management's beliefs and expectations and
statements about the Merger, 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 worldwide COVID-19 pandemic on the economy in
China generally and on our
business in particular; other risks discussed 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; and the possibility that the
Merger will not occur as planned if events arise that result in the
termination of the Merger Agreement, or if one or more of the
various closing conditions to the Merger are not satisfied or
waived, and other risks and uncertainties regarding the Merger
Agreement and the Merger that are discussed in the transaction
statement on Schedule 13E-3 in connection with the Merger filed
with the SEC on October 28, 2020.
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
|
|
|
Sep. 30,
2020
|
|
Jun. 30,
2020
|
|
Sep. 30,
2019
|
Revenues:
|
|
|
|
|
|
|
Search
and search‑related advertising
revenues
|
$
|
192,487
|
$
|
240,602
|
$
|
288,234
|
Other
revenues
|
|
24,180
|
|
20,581
|
|
26,657
|
Total
revenues
|
|
216,667
|
|
261,183
|
|
314,891
|
Cost of
revenues(1)
|
|
168,896
|
|
196,939
|
|
189,280
|
Gross
profit
|
|
47,771
|
|
64,244
|
|
125,611
|
Operating
expenses:
|
|
|
|
|
|
|
Research
and development(1)
|
|
50,479
|
|
48,683
|
|
50,031
|
Sales
and marketing(1)
|
|
28,518
|
|
31,981
|
|
37,505
|
General
and administrative(1)
|
|
14,421
|
|
9,682
|
|
10,705
|
Total operating
expenses
|
|
93,418
|
|
90,346
|
|
98,241
|
Operating
(loss)/income
|
|
(45,647)
|
|
(26,102)
|
|
27,370
|
Interest
income
|
|
744
|
|
813
|
|
793
|
Foreign currency
exchange (loss)/gain
|
|
(4,387)
|
|
(89)
|
|
3,198
|
Other income,
net
|
|
8,624
|
|
15,542
|
|
7,648
|
(Loss)/income
before income tax
expenses
|
|
(40,666)
|
|
(9,836)
|
|
39,009
|
Income tax
expense/(benefit)
|
|
1,515
|
|
(1,143)
|
|
2,365
|
Net
(loss)/income
|
|
(42,181)
|
|
(8,693)
|
|
36,644
|
Less:
Net loss attributable to non-controlling
interest shareholders
|
|
(225)
|
|
(233)
|
|
-
|
Net (loss)/income
attributable to Sogou Inc.
|
$
|
(41,956)
|
$
|
(8,460)
|
$
|
36,644
|
Net (loss)/income
per share/ADS
|
|
|
|
|
|
|
Basic
|
$
|
(0.11)
|
$
|
(0.02)
|
$
|
0.09
|
Diluted
|
$
|
(0.11)
|
$
|
(0.02)
|
$
|
0.09
|
Weighted average
number of shares/ADSs
outstanding
|
|
|
|
|
|
|
Basic
|
|
383,563
|
|
383,066
|
|
390,788
|
Diluted
|
|
383,563
|
|
383,066
|
|
396,319
|
(1) Share‑based compensation
expense
included in:
|
|
|
|
|
|
|
Cost of
revenues
|
$
|
36
|
$
|
45
|
$
|
64
|
Research
and development
|
|
3,051
|
|
2,095
|
|
2,767
|
Sales
and marketing
|
|
780
|
|
702
|
|
1,091
|
General
and administrative
|
|
421
|
|
72
|
|
294
|
|
$
|
4,288
|
$
|
2,914
|
$
|
4,216
|
|
(2)
Foreign currency exchange gain/(loss), mainly arising from our
cross-border RMB-denominated intragroup loans,
is a result of depreciation or appreciation of the RMB,
respectively.
|
SOGOU
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
|
|
|
|
As of Sep. 30,
2020
|
|
As of Dec. 31,
2019
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and
cash equivalents
|
$
|
161,184
|
$
|
142,464
|
Short-term investments
|
|
885,950
|
|
995,350
|
Restricted cash
|
|
6,750
|
|
5,370
|
Account
and financing receivables, net
|
|
124,238
|
|
131,813
|
Prepaid
and other current assets
|
|
33,448
|
|
26,888
|
Due from
related parties
|
|
2,134
|
|
2,837
|
Total current
assets
|
|
1,213,704
|
|
1,304,722
|
Long‑term
investments, net
|
|
72,441
|
|
63,345
|
Fixed assets,
net
|
|
85,294
|
|
110,006
|
Goodwill
|
|
6,254
|
|
5,534
|
Intangible assets,
net
|
|
1,246
|
|
1,514
|
Deferred tax assets,
net
|
|
15,692
|
|
16,306
|
Other
assets
|
|
38,539
|
|
20,975
|
Total
assets
|
$
|
1,433,170
|
$
|
1,522,402
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
113,308
|
$
|
111,587
|
Accrued and other
short-term liabilities
|
|
134,620
|
|
150,275
|
Receipts in
advance
|
|
69,050
|
|
67,902
|
Accrued salary and
benefits
|
|
19,047
|
|
24,167
|
Taxes
payable
|
|
68,491
|
|
76,688
|
Due to related
parties
|
|
28,267
|
|
22,594
|
Total current
liabilities
|
|
432,783
|
|
453,213
|
Long-term
liabilities
|
|
13,221
|
|
5,686
|
Total
liabilities
|
$
|
446,004
|
$
|
458,899
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Sogou Inc.
shareholders' equity
|
|
987,166
|
|
1,063,503
|
Non-controlling
interest
|
|
-
|
|
-
|
Total
shareholders' equity
|
|
987,166
|
|
1,063,503
|
Total liabilities
and shareholders' equity
|
$
|
1,433,170
|
$
|
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
Sep. 30, 2020
|
Three Months Ended
Jun. 30, 2020
|
Three Months Ended
Sep. 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
|
$
|
47,771
|
$
|
36
|
$
|
47,807
|
$
|
64,244
|
$
|
45
|
$
|
64,289
|
$
|
125,611
|
$
|
64
|
$
|
125,675
|
Gross
margin
|
|
22%
|
|
|
|
22%
|
|
25%
|
|
|
|
25%
|
|
40%
|
|
|
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
93,418
|
$
|
(4,252)
|
$
|
89,166
|
$
|
90,346
|
$
|
(2,869)
|
$
|
87,477
|
$
|
98,241
|
$
|
(4,152)
|
$
|
94,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss)/income
|
$
|
(45,647)
|
$
|
4,288
|
$
|
(41,359)
|
$
|
(26,102)
|
$
|
2,914
|
$
|
(23,188)
|
$
|
27,370
|
$
|
4,216
|
$
|
31,586
|
Operating
margin
|
|
-21%
|
|
|
|
-19%
|
|
-10%
|
|
|
|
-9%
|
|
9%
|
|
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense/(benefit)
|
$
|
1,515
|
$
|
-
|
$
|
1,515
|
$
|
(1,143)
|
$
|
-
|
$
|
(1,143)
|
$
|
2,365
|
$
|
-
|
$
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
before non-
controlling interest
|
$
|
(42,181)
|
$
|
4,288
|
$
|
(37,893)
|
$
|
(8,693)
|
$
|
2,914
|
$
|
(5,779)
|
$
|
36,644
|
$
|
4,216
|
$
|
40,860
|
Net (loss)/income
attributable to
Sogou Inc.
|
$
|
(41,956)
|
$
|
4,288
|
$
|
(37,668)
|
$
|
(8,460)
|
$
|
2,914
|
$
|
(5,546)
|
$
|
36,644
|
$
|
4,216
|
$
|
40,860
|
Net margin
attributable to Sogou Inc.
|
|
-19%
|
|
|
|
-17%
|
|
-3%
|
|
|
|
-2%
|
|
12%
|
|
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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-2020-results-301173365.html
SOURCE Sogou Inc.