CooTek Announces Fourth Quarter and Full Year 2020 Unaudited Results

SHANGHAI, March 25, 2021 /PRNewswire/ -- CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"), a fast-growing global mobile internet company, today reported unaudited financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

• Net revenue was US$102.4 million, an increase of 48% from US$69.0 million during the same period last year.
• Gross profit was US$95.4 million, an increase of 46% from US$65.1 million during the same period last year.
• Gross profit margin was 93.1%, compared with 94.4% during the same period last year.
• Net loss was US$18.8 million, compared with net loss US$6.6 million during the same period last year.
• Adjusted net loss[1] (Non-GAAP) was US$17.3 million, compared with adjusted net loss (Non-GAAP) of US$6.2 million during the same period last year.
• The Company's Portfolio Products[2] contributed approximately 99% of total revenues, with a focus on three main categories: online literature, scenario-based content apps, and casual games.

Full Year 2020 Highlights

• Net revenue was US$441.5 million, an increase of 148% from US$177.9 million in 2019.
• Gross profit was US$417.4 million, an increase of 157% from US$162.6 million in 2019.
• Gross profit margin was 94.5%, compared with 91.4% in 2019.
• Net loss was US$47.4 million, compared with net loss of US$36.8 million last year.
• Adjusted net loss (Non-GAAP) was US$42.0 million, compared with adjusted net loss (Non-GAAP) of US$33.2 million in 2019.

December 2020 Operational Highlights

• Average daily active users ("DAUs") of the Company's portfolio products were 27.8 million, an increase of 13% from 24.7 million in December 2019. Monthly active users ("MAUs") of the Company's portfolio products were 85.8 million, an increase of 15% from 74.6 million in December 2019.
• Average DAUs of the Company's online literature products were 10.2 million, increased significantly from 4.8 million in December 2019. MAUs of the Company's online literature products were 29.5 million, increased significantly from 19.3 million in December 2019. The average daily reading time[3] of the key product Fengdu Novel's users was approximately 130 minutes in December 2020, which was stable compared with 130 minutes in September 2020.
• Average DAUs of the Company's TouchPal Smart Input were 125.3 million. MAUs of the Company's TouchPal Smart Input were 162.8 million.

"We are pleased to conclude the year of 2020 with our revenue reaching US$442 million representing the growth of 148% compared to 2019," commented Mr. Karl Zhang, CooTek's Chairman. "Through a full year's dedicated execution and driven by our long-term vision of building a global pan-entertainment content ecosystem, we have continued our strategic upgrade to a content-rich product portfolio. While keeping the scale of our scenario-based content apps since our IPO, we have successfully developed our online literature and casual games business which respectively contributed 38% and 37% to the total revenue in 2020."

"In particular for Fengdu Novel which emerged rapidly and consistently ranked the 3rd in terms of MAUs in the free online literature market in China[4] in 2020, we have been enriching our content resources by efficiently increasing the number of the signed authors and the third-party content partners targeting at further improving user stickiness. At the same time, we have also advanced our monetization capabilities to create additional growth momentum for the group. As a result, the average DAUs of Fengdu Novel in December 2020 recorded a year-over-year growth of around 106% and revenues of Fengdu Novel in 2020 increased significantly by approximately 360% compared with 2019. In addition, we achieved a significant milestone in the development of our overseas online literature business."

"Moving forward in 2021, our key strategic initiatives include: 1. Growing Fengdu Novel by improving interactive and quality user experience and cultivating a more engaging and attractive community. 2. Optimizing our casual games products by strengthening internal development and third-party investments and partnerships. 3. Expediting overseas market expansion with our core strength built in the online literature segment. 4. Upgrading our monetization capabilities by exploring paid content, e-commerce and IP asset adaptation. For the fiscal year of 2021, total revenue is expected to continuously grow, with important enhancement of profitability."

Mr. Robert Cui, CooTek's CFO further commented, "Our steady growth strategy of the pan-entertainment content ecosystem has been demonstrated by our robust growth in our user base and revenue in 2020. As our business scale reached a new high on a yearly basis, we are confident that our commitment will further contribute to the continuous enhancement of our product portfolio. We are encouraged to see that our Fengdu Novel delivered solid business growth in the fourth quarter of 2020 with the sequential Average Revenue Per User ("ARPU") growth of 22% and revenue growth of 28% reflecting the upgraded monetization strategy. At the same time, we have been committed to deliver a balanced financial approach by improving the overall operating leverage. Looking at 2021, we are committed to executing our well-structured dedicated growth plan focused on continuously delivering revenue growth and steadily achieving profitability."

Fourth Quarter 2020 Financial Results

Net Revenues

Net revenues were US$102.4 million, an increase of 48% from US$69.0 million during the fourth quarter of 2019 and a decrease of 3% from US$105.7 million last quarter. The increase was primarily due to an increase in mobile advertising revenue.

Mobile advertising revenue was US$101.3 million, an increase of 48% from US$68.5 million during the fourth quarter of 2019 and a decrease of 3% from US$104.8 million last quarter.

Our portfolio products focus on three categories: online literature, scenario-based content apps and casual games. Online literature accounted for approximately 47%, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 28% of total net revenue.

Cost and Operating Expenses

Cost of revenues was US$7.1 million, an 83% increase from US$3.9 million during the same period last year, and a 4% increase from US$6.8 million last quarter. The year-over-year increase was mainly due to an increase in operational and maintenance-related expenses associated with the Company's expanding business. The slightly sequential increase was primarily due to an increase in content costs paid to freelancers and third-party content distributors, and was partially offset by decline in depreciation and amortization expense.

Gross profit was US$95.4 million, a 46% increase from US$65.1 million during the same period last year, and a decrease of 4% from US$98.9 million last quarter. Gross profit margin was 93.1%, compared with 94.4% in the same period last year and 93.6% last quarter.

Sales and marketing expenses were US$102.0 million, an increase of 61% from US$63.5 million during the same period last year, and a decrease of 5% from US$107.8 million last quarter. As a percentage of total revenue, sales and marketing expenses accounted for 100%, compared with 92% during the same period last year, and 102% last quarter. The year-over-year increase in sales and marketing expenses as a percentage of total net revenue was primarily due to increased investment in user acquisition that was in line with the Company's expanding business. The slightly decrease compared with last quarter was primarily due to decreased investment in user acquisition that was in line with the net revenues.

Research and development expenses were US$6.5 million, an increase of 14% from US$5.7 million during the same period last year and a decrease of 21% from US$8.2 million last quarter. The year-over-year increase was primarily due to an increase in costs associated with technology R&D staff and share-based compensation expenses. As a percentage of total net revenue, research and development expenses accounted for 6%, compared with 8% during the same period last year and 8% last quarter.

General and administrative expenses were US$3.9 million, an increase of 41% from US$2.8 million during the same period last year and an increase of 4% from US$3.7 million last quarter. The sequential and year-over-year increases were mainly due to an increase in costs associated with G&A staff and share-based compensation. As a percentage of total net revenue, general and administrative expenses accounted for 4%, compared with 4% during the same period last year and 4% during last quarter.

Other operating loss, net was US$2.0 million, compared with other operating income, net US$0.6 million during the same period last year and other operating loss, net US$1.1 million last quarter. The other operating loss during this quarter mainly includes accrued liabilities of US$2.0 million to an ongoing investigation related in an alleged misconduct of certain customers.

Net loss was US$18.8 million, compared with net loss of US$6.6 million during the same period last year and a net loss of US$22.0 million last quarter.

Adjusted net loss was US$17.3 million, compared with adjusted net loss of US$6.2 million in the same period last year and adjusted net loss of US$20.5 million last quarter. The sequential narrowing of the adjusted net loss was mainly due to sales and marketing expenses as a percentage of total revenue decreased.

Basic and diluted net loss per ADS were US$0.31 and US$0.31, and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.28 and US$0.28.

Balance Sheet and Cash Flows

As of December 31, 2020, cash, cash equivalents and restricted cash were US$49.6 million, compared with US$61 million as of September 30, 2020. As of December 31, 2020, restricted cash were US$25.0 million, mainly consisting of amount of US$3.1 million held in Group's bank account as guarantee deposit for loan facility provided by the bank and long term restricted cash of US$21.7 million held in Group's bank accounts which were frozen by a local authority in connection with an ongoing investigation related to an alleged illegal act of certain customers. The Company is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation, the timing of which is out of the Company's control.

Net cash outflow from operating activities during the fourth quarter of 2020 was US$6.8 million, compared with net cash inflow from operating activities of US$3.2 million for the same period in 2019 and net cash outflow from operating activities of US$14.4 million during the last quarter. Cash outflow from operating activities during the fourth quarter of 2020 was mainly due to loss from operations.

Full Year 2020 Financial Results

Net Revenue       

Net revenue was US$441.5 million, an increase of 148% from US$177.9 million in 2019, primarily due to an increase in mobile advertising revenue.

Mobile advertising revenue was US$438.4 million, an increase of 150% from US$175.0 million in 2019, primarily due to the growth in the number of DAUs of the Company's portfolio products.

Our portfolio products focus on three categories: online literature, scenario-based content apps and casual games. Online literature accounted for approximately 38%, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 37% of total net revenue.

Cost and Operating Expenses

Cost of revenue was US$24.1 million, an increase of 58% from US$15.3 million in 2019, mainly due to an increase in content costs paid to freelancers and third-party content distributors, the investment in operational workforce and maintenance-related costs, and was partially offset by a decrease in VoIP-related expenses.

Gross profit was US$417.4 million, an increase of 157% from US$162.6 million in 2019. Gross profit margin was 94.5%, compared with 91.4% in 2019.

Sales and marketing expenses were US$418.3 million, an increase of 166% from US$157.0 million in 2019. As a percentage of total net revenue, sales and marketing expenses accounted for 95%, an increase from 88% in 2019, primarily due to increased investment in user acquisition.

Research and development expenses were US$29.7 million, an increase of 10% from US$26.9 million in 2019, mainly due to an increase in costs associated with technology R&D staff. As a percentage of total net revenue, research and development expenses accounted for 7%, decreasing from 15% in 2019.

General and administrative expenses were US$15.0 million, a decrease of 8% from US$16.3 million in 2019, primarily due to accrued bad debt provision of US$0.4 million in 2020, a decrease by 3.7 million from US$4.1 million in 2019, and was partially offset by an increase in professional expenses and an increase in costs associated with G&A staff and share-based compensation expenses. As a percentage of total net revenue, general and administrative expenses accounted for 3%, decreasing from 9% in 2019.

Other operating loss, net was US$2.3 million, compared with other operating income, net of US$0.9 million in 2019. Other operating income (loss), net primarily consisted of government subsidies received by the Company, losses arise from investigations on certain third-party advertisers related to alleged misconducts, and contingent liabilities for intellectual property infringement lawsuit during operations.

Net loss was US$47.4 million, compared with net loss of US$36.8 million in 2019.

Adjusted net loss was US$42.0 million in 2020, compared with adjusted net loss of US$33.2 million in 2019.

In 2020, the basic and diluted net loss per ADS were US$0.77 and US$0.77, respectively. Basic and diluted Adjusted Net Loss (Non-GAAP) per ADS were US$0.68 and US$0.68, respectively.

Balance Sheet and Cash Flow

As of December 31, 2020, Cash, cash equivalents and restricted cash were US$49.6 million, compared with US$60.0 million as of December 31, 2019.

Net cash outflow from operating activities in 2020 was US$0.9 million, compared with outflow from operations of US$15.7 million in 2019. Net cash outflow from operating activities was primarily a result of the net loss.

Net cash outflow from investing activities in 2020 was US$2.6 million, which was primarily attributable to the purchase of property and equipment.

Share Repurchase Plan

On May 18, 2020, the Company announced a share repurchase program (the "2020 Program") whereby the Company is authorized to repurchase its class A ordinary shares in the form of ADSs with an aggregate value of up to US$20 million during the 12-month period starting from May 18, 2020. The Company expects to fund the repurchases under this program with its existing cash balance. As of December 31, 2020, the Company had used an aggregate of US$4.7 million to repurchase 0.9 million ADSs under the 2020 Program and recorded as treasury stock.

Business Outlook

For the first quarter of 2021, CooTek expects total revenue to be about US$80 million. This outlook is based on information available as of the date of this press release and reflects the Company's current and preliminary expectations, which are subject to change in light of various uncertainties, including those related to the ongoing COVID-19 pandemic.

Conference Call and Webcast

CooTek's management team will host a conference call at 8:00 AM U.S. Eastern Time on Thursday, March 25, 2021 (8:00 PM Beijing Time on the same day), following the results announcement.

The dial-in details for the live conference call are:

United States: 1-888-346-8982
Hong Kong: 800-905-945
Mainland China: 4001-201-203
International: 1-412-902-4272

Please dial in 15 minutes before the call is scheduled to begin. When prompted, ask to be connected to the CooTek (Cayman) Inc. call.

A live webcast and archive of the conference call will be available on the Investor Relations section of CooTek's website at https://ir.cootek.com/.

About CooTek (Cayman) Inc.

CooTek is a fast-growing mobile internet company with a global vision that offers content-rich mobile applications, focusing on three categories: online literature, scenario-based content apps and casual games. CooTek's mission is to empower everyone to enjoy relevant content seamlessly. CooTek's user-centric and data-driven approach has enabled it to release appealing products to capture mobile internet users' ever-evolving content needs and helps it rapidly attract targeted users.

Non-GAAP Financial Measure

To supplement the unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), the Company uses non-GAAP financial measure of adjusted net (loss) income that is adjusted from results based on GAAP to exclude the impact of share-based compensation, and Adjusted EBITDA that is net (loss) income excluding interest income and expense, income taxes, depreciation and amortization, and share-based compensation. The measure 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.

The Company believes that the non-GAAP measure help identify underlying financial and business trends relating to the Company's results of operations that could otherwise be distorted by the effect of certain expenses that the Company include in (loss) income from operations and net (loss) income. By making the Company's financial results comparable period over period, the Company believes adjusted net (loss) income and Adjusted EBITDA provides useful information to better understand the Company's historical business operations and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision-making. In order to mitigate these limitations, the Company has provided specific information regarding the GAAP amounts excluded from the non-GAAP measure. The table at the bottom of this press release includes details on the reconciliation between GAAP financial measure that is most directly comparable to the non-GAAP financial measure the Company has presented.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. CooTek may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about CooTek's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: CooTek's mission and strategies; future business development, financial conditions and results of operations; the expected growth of the mobile internet industry and mobile advertising industry; the expected growth of mobile advertising; expectations regarding demand for and market acceptance of our products and services; competition in mobile application and advertising industry; relevant government policies and regulations relating to the industry and the development and impacts of COVID-19. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and CooTek does not undertake any obligation to update such information, except as required under applicable law.

For investor enquiries, please contact:

CooTek (Cayman) Inc.
Mr. Robert Yi Cui
Email: [email protected]  

ICA (Institutional Capital Advisory)

Mr. Kevin Yang
Phone: +86-21-8028-6033
E-mail: [email protected]

SOURCE CooTek (Cayman) Inc.