CTK - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to CooTek's First Quarter 2021 Unaudited Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Institutional Capital Advisory. ahead. go Please

Claire Yung

Hello, today. operator. thank for you Thank everyone, us joining you, and

Our and Newswire. earlier our distributed earnings was release today at and IR ir.cootek.com is on PR website on available

Mr. answer and On today who by to Technology and be operations questions Zhang Robert the Mr. Mr. and guidance. will the both Q&A Mr. Chairman Chief available Officer. review from are Cui, Officer; Financial call Cui, They will during and will Karl your that CooTek company Chief financials follows. Zhang, discuss business followed highlights, session

government filed written reports statements releases report shareholders, other made statements press or forward-looking results and furnished by involve SEC, third materials or its future oral market Before in in of factors Provisions limited the estimates, development; for Reform relevant risks include, industry; not Any growth those expectations U.S. about under operations; expected business we expect, forward-looking statements. company's written acceptance in are strategies; mobile mobile XXXX financial that mobile within forward-looking advertising and Harbor the CooTek's oral terminologies following: could are and of you the expected of contains the and of services; growth from composition demand industry; industry the not are risks missions regarding to and conditions and and begin, of Such in and the products internet the and advertising officers, its These XXXX. and advertising; identified I'd believes, this the its results materially the statements to of annual statements the and but the mobile and Act directors make or Litigation statements. in uncertainties made employees remind application is will, Exchange CooTek as the like uncertainties the such to differ the with amended. the undertake of any can to to facts, go update date as All of to to Karl CooTek factors, please in information required actual not company's also other forward-looking information, plans, XX-E confident Securities factors Securities that statements intends, pleasure the law. Mr. Karl, historical introduce of expectations, relating Private such this kindly my Act except cause be U.S. and and this statements as call, industry. information parties. to of These anticipates, meaning is It forward-looking similar including forward-looking regarding these statements Zhang. included Section may does risks, of U.S. are call future, with filings by and conference under that now as and on CooTek's and that policies regulations the is current provided SEC. Further Safe to ahead. statements obligation beliefs

Karl Zhang

everyone you, our for quarter Thank call. you. earnings XXXX Thank first joining

our previous quarter consolidating which of committed than have rapid XXXX, business we After a a results, guidance. dollars U.S. first our revenue our fundamentals. $XX.X reported in bit approach in million, have We implementing the was growth balanced XXXX revenue higher to which been

a robust confident result are current the that growth. model, sustainable will of targeting the We strategy profitable focus in a and business

a with revenue towards second the quarter that will around profitability. significantly line improved expect bottom be We $XX million,

online the address our me let specifically of literature recap Firstly, on business.

our from content a original scale the results, user of continued literature platform, continued free the platform market, enrich with on content Novel, products model investment been For the ecosystem. and rate By balancing to and improving have we in focus our with Fengdu strong business ROI. we our in our depth Chinese literature have retention online upgrading the content

authors signed Besides to ancient of platform XXXX, increased context modern and urban As preferred covers male romance, than and major number X,XXX. and popular more female of currently romance content. categories literature Fengdu as emerged of newly category. the XX May the fantasy

Novel partners, Novel expanded and other such cooperation with has Literature, side, and well-known YY Tadu corporate agreements as On Ali others. Fengdu the Literature

For Hu, to a XXXX. literature first officially new Silkworm Novel this also April author XX, book All popular debut book, published online example, literature Li Heavenly was his known the as fantasy Fengdu of King on new online Potato, Xiang. platform

March retention of daily been which of approach that that March user user reading in XXXX, intensifying XXX also new Novel. by value XX And grow further increased to average increased XX rate active have contributed time We daily lifetime XXXX March the community-driven of than rate Fengdu December by XX%, growth for days users steady retention of on per minutes XXXX. average the XXXX The to approximately platform. average December user XXXX. of than day our new of XX% The

As further quarter first a operational the result, the XXXX. strength efficiency of in

of achieving and Fengdu for Novel, solid expectation while user the a keeping see base. sizable to encouraged profitability are We

XXXX. we addition, digital In products gain market share more the books million. improvement MAU to exceeded overall are to The literature recorded dedicated in overseas close continuous X,XXX online of $X With and March inventory user new consistently content online our in market. global retention U.S. rate,

domestic quarter-over-quarter game up from net games game revenue product market incubation operations business through game to and gaming Beauty contributed mobile the process [ph] in Catwalk in market. development and design countries by investment global ramped final in and the creation growth. success and Beauty the and capability its Catwalk both experience Secondly, market, Play development Games we Store whole profits one of maintained pipeline, debut. and other a to longer Google and also U.S. external market overseas mobile in by and internal studio, section. release game invested App We Beauty, number the XX our upgraded from return and type casual the our ROI cycles. of on strong The R&D the portfolio and in regions Catwalk The global partnership. and and in of the our our localized with stems We in the recently reached global on higher focus

is creative the localize the section the outstanding design the UI games gameplay to to addition In performance. crucial

We We in developed loyal and markets. have games game activities their to signifies Catwalk more gaining YouTube. that has market group to development. global of those noticed share internationally. us among this videos Beauty in its fans experience innovation and taking entertainment the users they enhanced a are and brought game share The by popularity attracted friends, share mobile through actively

market. which in production the game Looking through mechanism confident fuels forward rapid a incubation and large and achieving scale exponentially we in global are holistic innovation, iteration growing

further recently cooperated in business, Shanghai. mobile our the investments to by and exposure industry enlarge content and accelerate partners high-quality third-party publishing the growth We the distribution producers our and game mobile cooperated and of with of publishing portfolio, We The business invested producing experienced with more in studios two games. have mobile with veterans industry games. and product our partnership to can mobile expand game further game

during call stable. strategy in mentioned earnings our quarter, the release remains previous As the

will games ecosystem online cultivate content literature, We three continue business content to scenario-based these the global mobile key apps. on and and pan-entertainment sectors, focus

that, steady core I components CFO, you. walk achieving by quarter. Thank the you growth With our as our profitability goals. who our strategic of results optimistic Robert, call and for through will to financial will are hand the the We

Robert Cui

everyone. Thanks, again tonight. for joining us Thanks Karl. Hello,

business. optimizing development the margin with capabilities business, on our resource have been of continued with the deliver the enrichment games strategy, online and competitive the of the our product improvement mobile concentrated allocation of literature portfolio the balanced We monetization to of the

the achievements about optimistic oriented are We profitability models. our of content business user

due steadily $XX.X a XXX the of last brief of of good during from total minutes primarily first the continued million portfolio products the apps million, in March million of company's $XX.X of The XXXX. million constituted $XXX for XX% million, decrease MAUs company's the games content of quarter same our execution of million net products. March were Net categories online during and from going and last products from quarter. for our in generated products quarter of was for accounted million, DAUs of rich to XX% key are an were million plan. million, revenue the of $XX.X decrease $XX.X accounted reading XXXX of approximately daily literature $X.X of portfolio I'm XX%, the of content X% $XX.X portfolio $X.X for business restructuring the XXXX. revenues million, online $XXX.X XX%. apps. the The from overall compared users March The of Online was literature foundation company's $XX.X mobile of to XX% accounted products The time DAUs a product December March million XX% were average XX% a a revenue. Fengdu XXXX. approximately minutes a in XXXX. approximately decrease period three the the from Scenario-based in were decrease approximately year, from first from grow the $XX.X XXXX. decrease mainly of Novel decrease our literature in to XXX with which XXXX. March in XXXX, MAUs company's increase was

XX.X% costs $XX.X of period last XX% a period decrease of last profit XX% were a and gross million, compared same of last year. sequentially, marketing and XX% with expenses quarter. Our and the XX.X% same year, margin last $XX.X the and was decrease quarter. were in XX.X% from million, a from decrease about GAAP a last Sales and XX% decrease of expenses the same from period year,

compared retention in technology year-over-year, revenue, primarily R&D accounted users costs the percentage compensation and As associated as staff, was users. an marketing of net primarily share-based expenses to marketing increased The last by sales optimization the XX% expenses. the by increase and period year-over-year XX% operational the XX% revenue and of during the quarter. in XXX% with of sales last a in with decrease acquisition of for same the and sequentially, percentage and of to year, total new existing sequential total relation due expenses increased and and XX% due to expenses R&D efficiency, a

increases due due staff fee. and increase and R&D X% fee. The for quarter. increased in by associated sequential was increase G&A costs last compensation an G&A staff, G&A year-over-year in to XX% to outsourcing of XX% compared percentage increase As the mainly were expenses third-party revenue, X% associated third-party and total year-over-year mainly and sequentially. with with share-based expenses last a during accounted XX% period same The with costs net year, also outsourcing

with As last during net $XX.X X% and GAAP year, period million. of G&A the revenue, loss last quarter. the during accounted a total X% expenses X% percentage for same net compared was

was and Excluding sales the the expenses period retention same the percentage $XX.X last net of the the net loss compensation, compared the of $XX.X optimization effects adjusted net and loss narrowing of net as of non-GAAP adjusted and acquisition The million million last users. year. in marketing loss million, mainly during stock to non-GAAP adjusted approximately efficiency, was quarter, driven due the loss existing $X.X of with of by adjusted in the decrease operational new total the revenue, a to relation of users sequential

May $XX.X repurchase As improving we million about XX, operating an in equivalents XXXX the at $XX.X Class of the March authorized from value and ADSs restricted XXXX. during cash, million shares delivering time, had On to up end a balanced of of we announced where been XX, XX-month compared by the cash of are XXXX, to we period, our At with XXXX, May committed Program, approach with the the leverage. same XXXX. starting $XX A we to the form cash of program, aggregate overall XX, have a the financial ordinary million repurchase share

to it expect fund balance. We program under existing our this with the repurchases cash

had to under XX, ADSs million March repurchase and as XXXX, we the stock. Program, X.X of recorded the million used of treasury an $X.X As XXXX aggregate

the of expect those revenue of Looking including release, current is of at to of as and we million. press XXXX, quarter preliminary various and This total reflects are date based on COVID-XX the ongoing this which to pandemic. of uncertainties, change $XX information expectations, second related available the subject outlook company's net light the in

focused plan are whole, now we now take executing growth Operator, growth we questions. well-structured, a ready committed revenue As continuously profitability. a and delivering on to steadily achieving to are dedicated

Operator

Please We will Instructions] go Citi. session. with [Operator first now Nelson question question-and-answer ahead. comes The begin the from Cheung

Nelson Cheung

in overall Hi, view mobile this share targets penetrating on market? elaborate competitive DAU marketing app? you taking domestic any And your of have related be do share markets achieved Thank thank on strategies And question. market any please literature second end management Can the updates the you Two uses? my you. on question Novel the or the could have management your to do and Number strategy in acquiring by gaming. in one, year? landscape, to of you landscape, the my is into for and more and can landscape overseas And questions. you app your

Karl Zhang

questions. take traditional for your to global reading the the the the us. one. at Robert I'm industry needs. have tremendous opportunity and companies going We Thank But online users question is second cannot global you take foundation that to believe fundamental evolving And is publishing users. meet content for And the long then first online for I'll literature

to So we to market, so our run, section. Novel in of the it domestic the And have in our improve is at users' we year, changed consumption number content landscape priority users' a to me, believe efforts And in stage couple not [ph] been from reading retention the still user app is key Novel competition and factor much the this this is to rate the to app because Chinese the great ecosystem cultivate of ensure optimize long it is Fengdu one success. months. is our stickiness. long-term free past taking And believe content we Fengdu too

per user retention very the couple be user grow March Novel, which in active XXX rate increased further a that And daily to business So, minutes us lot is makes daily reading the average past to Fengdu better. in going the approximately the for better and months confident XXXX. time

section our the that ecosystem online recently. the retention of strategy long-term top-tier strictly we rates, user operational so ROI literature in strength to business our result, now, and high literature expect quarter by reading rates to and Thank users, reading of DAU first -- user achieved we of online profitable. while a the online for further last keeping content as So business we maintain profitability period efficiency spend, encouraged To the will long-term the increase sustainability, in to And while strategy, cultivate And you. this business same is and will sorry. our literature implement time this keep are see comparing long-term our year. end XXXX, the acquiring year, for retention

Robert Cui

question. the Okay, I on address will second

free a is landscape, For Chinese is know billion or mobile the online gaming gaming as huge all gaming, markets It trend monetization the the content RMBXXX the domestic of market markets. that so value overseas games model have [ph] been value for market, market mobile in-apps to billion There games. an market like entertainment the in $XXX in we of is emerging IA play in the current market. and mobile which advertising

So, find the good of the embedding AI-based a the focused of for our also analytics, platform Tencent higher while position free-to-play segment. the the through market dominated by entry in China, barrier players are independent traditional user games market and combining towards to games we business, leverage NetEase the big in and a for product development growth rapid in is portfolios we internal With studios, opportunity by data third-party the growth partners. our

potential We we confident since in productive and our the of result current are profits products of XXXX, highly have strategy and pipeline. witnessed revenue will and the the huge performing portfolio that a growth

a also the that in we are specific the publishing vibrant popular overseas On other At the the evolving products differentiated markets, markets. games marketing trends been implementing during selecting develop the strategy for studios can hand, initial same a to dedicated time, game meet our have period.

features data pre-test We platform higher with the to satisfactory the revenue and sophisticated of also games key a of achieving ensure ROI. possibility our

you. current been strategy. So, strong Beauty testament our rationale Catwalk a the of to has Thank

Nelson Cheung

you. Thank

Operator

with next Silver Please Argus comes from The Research. question ahead. Steve go

Steve Silver

for thanks question. my Hi, and taking

the I going customer a growth my the guess if have the group success of the the Beauty, of that the is, of success the impacting can and of can affect drive on Catwalk but First bit in terms visibility spend, one in the color of visibility acquisition congratulations entire of of the terms in we title the of also in Beauty. can and costs marketing the how terms game of segment, and how more the group? question Catwalk might particular, general, how on little forward, expansion all, company in leverage

Karl Zhang

this Thank going you. to I'm take one.

a Beauty number Store our region's as mobile Play. the is been gaming Google Catwalk countries App success has indeed one and big for ranked global in internationally So, It and XX strategy.

validated and and in rapidly mechanism, to it fuels So, market. iteration on rapid innovation. high-quality incubation which mechanisms, can our global holistic scale the believe that incubation game we the We production a established based larger with grow achieve content,

can successful you more coming expect and So games the released be more to quarter. in

products growth so to is to are confident our successful makes the develop proven publishing us two high-quality it producer to I have more sophisticated mentioned, to mobile of mobile Our distribute with also content game mobile going publishing business, or third-party producing and game further strong which leveraging of And games. target a is accelerate cooperated industry forward. games. mobile to strategy mobile And every we as and business. gain months in growth publish by two the one extend platform, our This our we partners game

we on will its release only So but success, that potential more is not of performance. capability. Catwalk a strategy our believe financial Beauty growth its success a reputation, The

mentioned I higher types focus ROI we product our and a game that, cycle. longer strong on with maintain As

from download through acquisition are While we user ROI driving Catwalk actually campaigns, very keeping Beauty. high

three the So of is investments actually days cycle so average return less far. than

in and sharing Beauty the and past it more, friends is recommending group. of to more to profits one of most close million it now YouTube. has popular So and videos globally, game the $X are weeks, is product the The the fans revenue casual to What's million. their a taking as that to over than Catwalk is couple $X.X contributing generated of profit

videos search lot trend you this today. Beauty on find will of you YouTube, Catwalk a about If

a which us attract these behaviors So more profitable. even to of organic help lot makes all you. it Thank growth,

Steve Silver

Great. Thank Congratulations. color. Appreciate you it. for additional the

Operator

Equity. The comes from with Please ahead. Diamond next question go Vivian Zhang

Vivian Zhang

is This management. for Equity Vivian you Research. Diamond from Thank evening, Good questions. my taking

first about you my announced one is video. IP-based spending Fengdu, form with So recently short you're

on an growth My Catwalk Beauty question recently other video that TikTok in was position? and app can provide And number you short update one this the second how you is ranked of competitive its stores. Given development? platforms, view project

development in-house Thank provide between the mobile you more And around the the development other you. any to research in acquiring additional and can applications? creating mobile views app investing firms? information company's specifically, how So company approach trade-off versus

Karl Zhang

your Thank you for question.

these to going take two. I'm So

So, first Fengdu IP-based about from is the question shot video.

So the we our literature actively business diversifying on are based IP Fengdu platform. books original from

So the IP meet And a also we we resolve. features the evolving develop Novel Novel content new audiobook, on created short video in and app readers. needs Fengdu a incorporated Fengdu based of series Fengdu to

exciting The first a series literature series content a substantial our with Wanwan storyline. Novel and Chinese produced each. a drama Su on XX with of episodes short piece And name into Proud two for video minutes the is three of running to Fengdu a from based is divided video with time

redistributed opportunities top-tier forth. such so to also, content and short drama short Kuaishou, this commercial believe our We we're Douyin, to so been on major to on sites, and our provide Bilibili ecosystem has fans diversified and the as especially values one. TikTok releasing because IP So critical video committed growth, that is exploring

producer. our App at been TikTok business, is top-tier our the We game and multiple believe and long-term such as we those And to don't Douyin, countries, the on. products And will Store and Play. as is app Kuaishou cooperate strive own us. as number tightly video Catwalk short so regions, Google plan ourselves content for in has that so middle, about have as to ranked this moment, a Beauty goal second release on in video we the question also identify for one this platforms, with a short We and

Catwalk mechanism another validation platform. our our So fuels since of the it and strong is sophisticated rapid sophisticated The growth our innovation. validated which success our competency platform Beauty holistic yet has IPO, been iteration of incubation and growth core

larger each mobile game on success openly, with publishing key the mobile more, it publish partners. not our is in us activate in-house. content also rapidly that, We the the accelerate production business is we should third-party growth believe for be to studios acquiring game factor capability by actually games. producers growing can Based What's experienced game can the by by of our achieving game game in-house business our to mobile we embracing other [ph] game that, of and our scale XP produced with to By high-quality market. mobile studios. mobile opening industry global add a up So game that necessary corporate and consistently more

it open as keeping actually well Thank moment. are at We you. this

Vivian Zhang

That makes sense. Thank you.

Operator

Tigress. next Ken from from The question comes Please go with -- ahead. Gao

Ken Gao

from Ken is my Thank for Financial Tigress taking This Partners. you morning. Good question.

of I answered. questions have think most my been

expense. and one regarding have I So sales more marketing question to

in marketing We have quarter on first Can you sales improvement on any margin seen great Thanks. of guidance provide the on XXXX. XXXX? the margin the trend and

Robert Cui

you. thank will I Okay, take this question.

Our in we as ensuring people implement balanced implementing and operational and highly user always synergetic efficiency. revenue stable a the approach base is to, growth, mentioned,

have seen, XXXX. from more of previous you and decreased the quarter the in sales as marketing the to XX% current quarters than first of in XX% So, revenue as expenses the

We XX% range the of for subsequently the expected as sales stabilize the and in of XX% this below to will year. XX% be further revenue to coming second-half in that expenses quarter, marketing and decreasing of the

on that target marketing growth more the our which model overall also be the sales the around level which is to result and with XX% of this plan. sustainable achieved to and as healthy in achieved we operational to to line expenses XX%, in further and the business achieve back stabilized model stage normalized So can efficiency business during revenue IPO a is XXXX, in and of

Ken Gao

Thank you.

Robert Cui

Thank you.

Operator

like I to remarks. Relations, closing Claire any session. Yung, back for turn Investor question-and-answer over the Ms. ICA, our conference This to concludes would

Claire Yung

management conference you of behalf Thank the team for like to CooTek, of would on thank this joining you, we Operator. In entire tonight. again call closing,

you. free us If to cootek@icaasia.com. you have feel Thank any please IR@cootek.com further future, contact or the inquiries at in

Operator

presentation. for conference now The concluded. today's attending you has Thank

You disconnect. now may

CooTek (Cayman) (CTKYY) 3 Jun 212021 Q1 Earnings call transcript