BEIJING, May 14, 2021 /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
first quarter, ended March 31,
2021.
First Quarter 2021 Financial Results
Total revenues[1] were $137.2 million, a 47% 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
$127.8 million, a 46% decrease
year-over-year. Auction-based pay-for-click services decreased
year-over-year, accounting for 83.8% of search and search-related
revenues, compared to 91.0% in the corresponding period in
2020.
- Other revenues were $9.5
million, a 52% decrease year-over-year, as the Company
scaled back non-core businesses.
Cost of revenues was $107.9
million, a 50% decrease year-over-year. Traffic
acquisition cost, a primary driver of cost of revenues, was
$75.4 million, a 58% decrease
year-over-year, representing 54.9% of total revenues, compared to
70.5% in the corresponding period in 2020. 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 $29.4 million, a
27% decrease year-over-year for both.
Total operating expenses were $78.3 million, a 5% decrease year-over-year.
- Research and development expenses were
$51.8 million, a 10% increase
year-over-year, representing 37.8% of total revenues, compared to
18.3% in the corresponding period in 2020. The increase was
primarily attributable to an increase in personnel-related
expenses.
- Sales and marketing expenses were
$20.8 million, a 27% decrease
year-over-year, representing 15.2% of total revenues, compared to
11.1% in the corresponding period in 2020. The decrease was
primarily due to a decrease in advertising and promotion
expenses.
- General and administrative
expenses were $5.7
million, a 19% decrease year-over-year, representing 4.1% of
total revenues, compared to 2.7% in the corresponding period in
2020. The decrease was primarily due to a reversal of an allowance
for credit losses in relation to non-core businesses.
Operating loss was $48.9
million, compared to a loss of $42.4
million in the corresponding period in 2020. Non-GAAP
operating loss was $47.7 million,
compared to a loss of $41.9 million
in the corresponding period in 2020.
Other income, net was $83.4
million, compared to $7.2
million in the corresponding period in 2020. The increase
was primarily due to a $76.7 million
unrealized gain from a change in the fair value of the Company's
equity investment in Zhihu Inc. (NYSE: ZH), which completed an IPO
in March 2021.
Income tax expense was $0.6
million, compared to an income tax benefit of $1.0
million in the corresponding period in 2020.
Net income attributable to Sogou Inc. was
$35.3 million, compared to a net loss
of $31.6 million in the corresponding
period in 2020. Non-GAAP net income attributable to Sogou
Inc. was $36.5 million, compared
to a net loss of $31.1 million in the
corresponding period in 2020.
GAAP and Non-GAAP basic and diluted
income per ADS were both $0.09.
As of March 31, 2021, the Company
had cash and cash equivalents and short-term investments of
$1.0 billion, compared to
$1.1 billion as of December 31, 2020. Net operating cash
outflow for the first quarter of 2021 was $56.6 million. Capital expenditures
for the first quarter of 2021 were $4.9 million.
[1] On a
constant currency (non-GAAP) basis, if the exchange rate in the
first quarter of 2021 had been the same as it was in the
first quarter of 2020, or RMB 6.98=$1.00, total revenues in
the first quarter of 2021 would have been $127.5 million, or $9.7
million less than GAAP total revenues, and down 50%
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."
|
Merger Agreement with Tencent
As previously announced, 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 Act 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 parties currently expect the Merger to be completed
after the second quarter of 2021, subject to the satisfaction or
waiver of all the conditions to the Merger, including the receipt
of regulatory approvals such as clearance of anti-trust
filings.
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, 2020 filed with the Securities and
Exchange Commission on March 18, 2021, 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
December 1, 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
|
|
|
Mar. 31,
2021
|
|
Dec. 31,
2020
|
|
Mar. 31,
2020
|
Revenues:
|
|
|
|
|
|
|
Search and search‑related
advertising
revenues
|
$
|
127,766
|
$
|
166,733
|
$
|
237,610
|
Other revenues
|
|
9,473
|
|
22,797
|
|
19,674
|
Total
revenues
|
|
137,239
|
|
189,530
|
|
257,284
|
Cost of
revenues(1)
|
|
107,869
|
|
151,216
|
|
217,024
|
Gross
profit
|
|
29,370
|
|
38,314
|
|
40,260
|
Operating
expenses:
|
|
|
|
|
|
|
Research and
development(1)
|
|
51,815
|
|
50,991
|
|
47,023
|
Sales and
marketing(1)
|
|
20,816
|
|
14,058
|
|
28,597
|
General and
administrative(1)
|
|
5,658
|
|
(682)
|
|
6,997
|
Total operating
expenses
|
|
78,289
|
|
64,367
|
|
82,617
|
Operating
loss
|
|
(48,919)
|
|
(26,053)
|
|
(42,357)
|
Interest
income
|
|
511
|
|
506
|
|
744
|
Foreign currency
exchange gain/(loss)(2)
|
|
843
|
|
(5,021)
|
|
1,730
|
Other income,
net
|
|
83,405
|
|
7,255
|
|
7,212
|
Income/(loss)
before income tax expenses
|
|
35,840
|
|
(23,313)
|
|
(32,671)
|
Income tax
expense/(benefit)
|
|
590
|
|
2,936
|
|
(962)
|
Net
income/(loss)
|
|
35,250
|
|
(26,249)
|
|
(31,709)
|
Less:Net loss
attributable to non-controlling
interest shareholders
|
|
-
|
|
(60)
|
|
(93)
|
Net income/(loss)
attributable to Sogou Inc.
|
$
|
35,250
|
$
|
(26,189)
|
$
|
(31,616)
|
Net income/(loss)
per share/ADS
|
|
|
|
|
|
|
Basic
|
$
|
0.09
|
$
|
(0.07)
|
$
|
(0.08)
|
Diluted
|
$
|
0.09
|
$
|
(0.07)
|
$
|
(0.08)
|
Weighted average
number of shares/ADSs
outstanding
|
|
|
|
|
|
|
Basic
|
|
387,451
|
|
386,687
|
|
382,141
|
Diluted
|
|
389,613
|
|
386,687
|
|
382,141
|
(1) Share‑based compensation
expense
included in:
|
|
|
|
|
|
|
Cost of
revenues
|
$
|
43
|
$
|
22
|
$
|
77
|
Research and
development
|
|
594
|
|
521
|
|
613
|
Sales and
marketing
|
|
313
|
|
452
|
|
(379)
|
General and
administrative
|
|
255
|
|
261
|
|
166
|
|
$
|
1,205
|
$
|
1,256
|
$
|
477
|
|
(2)
Foreign currency exchange gain/(loss), mainly arising from our
cross-border RMB-denominated intragroup loans,
is a result of depreciation or appreciation, respectively, of the
RMB.
|
SOGOU
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
|
|
|
|
As of Mar.
31, 2021
|
|
As of Dec.
31, 2020
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
444,635
|
$
|
287,185
|
Short-term
investments
|
|
584,561
|
|
774,618
|
Restricted cash
|
|
3,454
|
|
23,018
|
Account and financing
receivables, net
|
|
30,583
|
|
71,186
|
Prepaid and other current
assets
|
|
29,262
|
|
28,947
|
Due from related
parties
|
|
979
|
|
2,471
|
Total current
assets
|
|
1,093,474
|
|
1,187,425
|
Long‑term
investments, net
|
|
150,459
|
|
74,004
|
Fixed assets,
net
|
|
69,241
|
|
76,851
|
Goodwill
|
|
6,481
|
|
6,527
|
Intangible assets,
net
|
|
1,008
|
|
1,226
|
Deferred tax assets,
net
|
|
13,155
|
|
13,249
|
Other
assets
|
|
32,120
|
|
35,850
|
Total
assets
|
$
|
1,365,938
|
$
|
1,395,132
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
$
|
64,030
|
$
|
106,889
|
Accrued and other short-term
liabilities
|
|
102,410
|
|
118,442
|
Receipts in
advance
|
|
75,259
|
|
64,414
|
Accrued salary and
benefits
|
|
15,819
|
|
25,350
|
Taxes payable
|
|
62,691
|
|
64,082
|
Due to related
parties
|
|
25,019
|
|
27,102
|
Total current
liabilities
|
|
345,228
|
|
406,279
|
Long-term
liabilities
|
|
7,955
|
|
10,721
|
Total
liabilities
|
$
|
353,183
|
$
|
417,000
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Sogou Inc.
shareholders' equity
|
|
1,012,755
|
|
978,132
|
Total
shareholders' equity
|
|
1,012,755
|
|
978,132
|
Total liabilities
and shareholders' equity
|
$
|
1,365,938
|
$
|
1,395,132
|
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
Mar. 31, 2021
|
Three Months Ended
Dec. 31, 2020
|
Three Months Ended
Mar. 31, 2020
|
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
GAAP
|
Non-GAAP
|
Non-GAAP
|
Adjustments(1)
|
Adjustments(1)
|
Adjustments(1)
|
Gross
profit
|
$
|
29,370
|
$
|
43
|
$
|
29,413
|
$
|
38,314
|
$
|
22
|
$
|
38,336
|
$
|
40,260
|
$
|
77
|
$
|
40,337
|
Gross
margin
|
|
21%
|
|
|
|
21%
|
|
20%
|
|
|
|
20%
|
|
16%
|
|
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
78,289
|
$
|
(1,162)
|
$
|
77,127
|
$
|
64,367
|
$
|
(1,234)
|
$
|
63,133
|
$
|
82,617
|
$
|
(400)
|
$
|
82,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
$
|
(48,919)
|
$
|
1,205
|
$
|
(47,714)
|
$
|
(26,053)
|
$
|
1,256
|
$
|
(24,797)
|
$
|
(42,357)
|
$
|
477
|
$
|
(41,880)
|
Operating
margin
|
|
-36%
|
|
|
|
-35%
|
|
-14%
|
|
|
|
-13%
|
|
-16%
|
|
|
|
-16%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense/(benefit)
|
$
|
590
|
$
|
-
|
$
|
590
|
$
|
2,936
|
$
|
-
|
$
|
2,936
|
$
|
(962)
|
$
|
-
|
$
|
(962)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
before non-
controlling interest
|
$
|
35,250
|
$
|
1,205
|
$
|
36,455
|
$
|
(26,249)
|
$
|
1,256
|
$
|
(24,993)
|
$
|
(31,709)
|
$
|
477
|
$
|
(31,232)
|
Net income/(loss)
attributable
to Sogou Inc.
|
$
|
35,250
|
$
|
1,205
|
$
|
36,455
|
$
|
(26,189)
|
$
|
1,256
|
$
|
(24,933)
|
$
|
(31,616)
|
$
|
477
|
$
|
(31,139)
|
Net margin
attributable to
Sogou Inc.
|
|
26%
|
|
|
|
27%
|
|
-14%
|
|
|
|
-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-first-quarter-2021-results-301291464.html
SOURCE Sogou Inc.