CTK - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the CooTek's Second Quarter 2021 Unaudited Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to ICA Investor Relations. Please go ahead.

Venus Hu

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

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

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

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

Karl Zhang

thirty earnings everyone one you, twenty call. our joining second quarter Thank for

three than results, reported higher bit million the with which U.S. was So revenues two we previous guidance. have XXXX point eighty net dollars, our of second quarter our a

roadmap, implementing literature our earnings driven our As overseas call, we online business, both by strategic domestic mentioned and our and been games in have mobile first in quarter markets.

the the profitability. of approach our in in growth positive revenue line between to growth return XXXX, balanced to which while We with our profitability quarter-over-quarter are and keeping was second quarter pleased

market stringent term property related by in global sectors. advertising As a the regulations in education, domestic portfolio and industry long content softness and general confident our comment, of product the to driving a despite basis. remain value on the the the enhancing the We further mobile uncertainties features mobility and innovative in the

platform, optimization With on and development are dedicated segments. continuous mobile focused of we the our to two-wheel content the literature the games online

the in we of consistently for importantly, have given that first good quarter since gross More believe delivering next margin been XXXX. growth we the step improving are the position the sustainable segments for two

Firstly, let me online development elaborate our literature on of business.

Chinese can free diversified we overall providing enhancements our users. are user we the our by quarter and in the enhancing be on to base Novel, literature year qualified daily two year contributed engaging, over has growth content percent The our improving continues to For more second content growth quarter experience that to with active of encouraged of the which our of Fengdu and ARPU forty user retention fifty XXXX. over in been concentrate The percent rate market, it continued a online ecosystem. and product user and quarter of

external content. Suchi of licensing Through licensing has of literature platform content creation iReader growth channels the literature with content. As Himalaya, offers with authors Books, such and et DianZhong over quarter With more and hundred platform June of respectively. seventy of derivative of thousand to companies further strategic such as its each for with cetera, two to the with has the traditional and channels also a Mobile property and quarter rich subsequent with intellectual new diversified as, media original of social Fengdu leading ZhangZhongYun content, DianZhong collaborated external content literature online percent literature as four which and literature platform original the Books actively novels. collaborated increased number Fengdu promote and further increased Fengdu percent revenue the the signed the authorized and Fengdu hundred book more leading platform Soyinke collaboration e-book, platform made twenty opportunity positive maximize to Novel and four such Baidu, XXXX, thousand to five of than than

book on Post Rising Fengdu’s exploration for successfully film. parties, business first core new the Popularity time, product trading. produced of audible place Tencent Novels copyright same literature Gongying of List including At IT platform one. ninety course audio other June variable With twenty has audio this to and aimed with Fengdu output, achieved content developments and in to the content original content Through derivative the practice,

have quarter IT reached ninety one strategic quarter operation, and cooperation Novel producers. We IT recorded in with book of such vigorous major development the audio Fengdu percent hundred revenues four over growth. the from With the business

and we model our In been addition, have products. online literature the of upgrading overseas business expanding

been and the same have U.S. strengthened rate, expansion such With the encouraging to observed the content performance time, improving. retention user the during model. level Southeast market The constantly improving more At we has as expansion have Malaysia. imagery ROI we economic markets Philippines in and our Asia the

We optimistic the of potential product about are in market. overseas growth the the

we is a game to and mobile fast games a and incubation, game Secondly, attain paced our both domestic for our upgrades game mobile all business, internal iterative the and among external in experience growth markets and consuming and expand of With fast development games the popular features. continued have the forming mobile This the people content with same and a portfolio with strength have metric partnerships. investments and optimize pipeline, through we continued light, lifestyle. overseas independently to and developed

to mobile million of users. with stage We have than the global a formed more for market, metric game ten releasing games dozens

studios, portfolio games our which expanding external on our four product at to our business top competitive pipeline. launched Catwalk ride segment we for of the the casual strived one. We to can form thirty our casual ranking enriching first globally At the same strong twenty game product the performance studios, in invested we and time, Beauty Through quarter of investment strengthened in aiming than of the XXXX, a additional upside second new since are have quarter more provide performance.

In stop our party are to services. third downstream with aggregate the addition, enhanced provide which also we started and industry involvement entire game to studios distribution product We cooperate four further of game the in the with in scale the upstream operation publishing to provide We business. increase publishing resources to and dedicated chain one three to operations, developers continue stream and

game and twenty the As games smooth the note, special of our XXXX strong development the than for overseas of fifteen half games with in under the market than in combination we and external mobile pipeline a internal market a domestic more expect second more cooperation.

who a overall Going you. building forward, will on basis, this CFO, user will ecosystem we you will to results content for our our walk on With Thank call through the profitability. targeting strategic and a global oriented I growth hand focus our maintain quarter. a Robert, sustainable financial that, as

Robert Cui

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

the which achievement second marketing resulted have focusing on been optimizing of the level profitability of group upgrading in monetization model, business balance and XXXX. we the in strategies, our quarter between our As

improve and We enhance monetization further product user stickiness of will scale experience our the portfolio, user and expand our our capabilities.

of for four point products products point million, in DAU’s XXXX. the robust and during I'm a mainly from restructuring fifteen decrease XXXX. of period The percent point portfolio million one The of point percent our with the six million twenty eight literature point with average of reading June from last decrease three point thirty U.S. in in generated one to five and company's compared apps. and products the products million, company's XXXX. products. long percent, seventy literature of million net the of steadily due DAU’s five a dollars, were brief June two Fengdu our net revenues million portfolio our minutes forty eighty approximately XXXX, MAU’s percent from revenue product content-rich June stable March two MAU’s sixty XXXX. company's three time million, an are literature the four percent, of hundred online seven were eighty twenty the revenues. six XXXX seven second U.S. revenues XXXX. a three We advertising five twenty year, content primarily categories Net accounted apps, of one term three decrease scenario-based approximately seven a The six online delivering quarter point point three in were for point in one three hundred seventeen company's million key of daily which twenty of was are Novel’s quarter. same accounted percent for U.S. fifty portfolio a users the during a million from approximately decrease nine percent decreased million confident four dollars, last with the June and percent point dollars grow eight mobile of two were games total of growth. were going in decrease million eighteen thirty same compared of continuous from one to in the decrease Mobile from of XXXX. from in June eight continued minutes hundred approximately increase was and online accounted of one eighty quarter to

and decrease fifteen point four decrease with Our point nine about were thirteen fifty percent percent U.S. last same eighty and percent year. last was decrease of and point four period a nine ninety percent eighty the of percent Sales point in a decrease last of from and year quarter. quarter. profit eighty period last forty period and from percent dollars, the Cost last dollars, margin were the million eight expenses four thirty compared point one same a percent million one of from expenses year seven same nine sequentially five marketing

was accounted revenues, for compared last relation a decrease last total as during of of eighty strategy in due salary due acquisition in associated of over two percent expenses decline in same percent payroll period year based partially the transition existing percent and expenses continuous the sequential and the primarily marketing sales to and percentage acquisition of percentage expenses. technology and the staff reduction user. in year R&D expenses the quarter. increase sequentially, the and resulted increased the was of year new of eighty expenses share compensation percent with to seven marketing over offset retention increased by an total primarily in twenty a year with seventy the and costs. year revenues which sales four by R&D users and seven to net and users, As percent The by

professional over eleven year over six was by party compared year As quarter. the a by of decline third in staff, outsourcing offset compensation. due sequential percent eighteen with twelve expenses total third associated decrease for year professional net service percentage fee. fee decrease based by increased expenses R&D to partially increases and and fee during accounted were year G&A last period decrease was party increase with and sequentially. fee of percent due based percent year a last expenses in in a same The twelve percent G&A share revenues. and was compensation an mainly rise to and and outsourcing The partially offset service in payroll share salary mainly and percent

three in point to of net and period dollars was compared revenues one total net last of million net The and marketing quarter. in three million during of loss income the million continuous total and of U.S. eleven U.S. the due revenues with percent four point compared point new with mainly last acquisition U.S. in dollars during users period transition loss of the last of percentage the net decrease retention expenses with point million a last five adjusted U.S. quarter U.S. U.S. quarter. Net year expenses G&A the of million one same of point dollars the relation the the last a loss profitability a quarter. period adjusted users. of dollars dollars achievements in the to of for one by and adjusted strategy twelve income the same Adjusted As zero was sales net and existing with was compared one dollars accounted as year three driven same four last last during percentage seven percent income compared year net income point percent million six

restricted had thirty cash million thirty, March one fifty as thirty about U.S. of and As we point cash of cash, million XXXX. compared equivalents with nine of XXXX, dollars U.S. six June dollars one,

mainly company's the loan as by of three for cash deposits one of June dollars, bank. three provided thirty, account consisting of As the XXXX, bank were restricted in three point point U.S. amount dollars U.S. million million facility guarantee held

were one long authority restricted was act illegal local with accounts, the an As company's connection in related cash of XXXX, March customers. frozen five certain the thirty to bank term alleged dollars which of in one, U.S. twenty point held investigation ongoing by an

relevant month eighteen, period, up U.S. company's we As are On XXXX eighteen May shares we May program of A to XXXX. during the twenty to announced program, form of accounts an ordinary a the share value June been the ADSs the XXXX, have in XXXX, the repurchase from dollars thirty, where Class unfrozen. bank million of with authorized average repurchase twelve starting

under this program expected existing with We these balance. to repurchases cash fund

U.S. As ADSs program of to million terminated an are on ready XXXX. was XXXX treasury of thirty, May XXXX, repurchase The dollars Program June four as we had and used now to point aggregate the XXXX six Operator, point seventeen, questions. we under recorded zero take million restock. one

Operator

from Instructions] [Operator can question you. We Argus Research. Steve now the Silver take Thank first from

Steve Silver

on returning to great And profitability. congratulations everybody. Hi the It’s see.

compared was that online second last literature to the a revenue quarter to the a gaming question. geared the section Just bit quick noticed I percentage little more towards in compared of quarter.

breakdown see based your in the the of whether the games rollout fluctuation thoughts online or of literature Thank a expansion on author terms to the revenue continued accounts two get you long Just program? over for groups, term the between you. of of and time trying lot updated the new

Karl Zhang

Okay.

Let release over to answer me the I’ll Robert plan game talk about distribution. and revenue hand to the

is mission our so relevant to enjoy content to seamlessly. empower everyone And

focus to this on at build ecosystem. entertainment strategy up moment is our to our content So content

overseas first game and quarter the past nineteen. market of in-house developed seven market of have from then quarters. So in on, we Chinese And released twenty games in dozens our released the first we in in

business. game to has short business in success capabilities. systematic our happy execution such validated growth strategy, period. driven a such data and in our the game So, big of our are And we see growth

users. have we for a formed to with releasing million more than metric mobile So, game state market, of games global dozens ten

at which So business our and first quarter product studios, strengthened we of twenty our in one, portfolio, additional expanding since for segment time, investment performance. the enriching same upside external provide ninety the have at aiming can the

games So more than invested second through of four have we launched new XXXX. in studios, quarter our the casual

casual is on of mobile So our global sector. focus game as today,

to base sector And has The globally. casual and So flow. focus potential relatively we casual choose growth casual growing bigger have believe we broader and faster sector this than short globally. game because, has first, sector user expanding higher second, is game which sectors so game cash on ROI, others our term this benefits

So higher we cycle. product on focus maintain longer and our strong with game types ROI

market App on section. causal the games Beauty in number Catwalk and a in for one global Google regions the and reached released U.S. seven Play Store So, other example, designed and fifty and has countries game

months gross our was utilize successful its So capability it overall in ROI And percent. sector. hundred profit scalable of nearly games and fully million three publish three can And contributed growth to exceeded it we released. two first this the since systematic three,

So of this the scale ensures business. our game

focusing pipeline domestic internal continue of also to game combination twenty still you. of to the and with we and distribution on mobile in year, game more developers under results downstream than second external expect And full and half and one-stop the sector in more will this fifteen a we process for development than cooperation. So the with smooth aggregate games services. Thank market provide upstream games industry our overseas casual as strong the market in

Robert Cui

Yes okay.

coming second quarters profitability. optimization and this expect that of XXXX overall positive profitability overall So Yeah, plan. regarding between for We under strategic achieved margin further this it of the we of our half quarter the growth while towards execution the profitability. XXXX. second moving of profitability are believe the the the and for can revenue we balance resources to growth improvement achieve net question over quarter about the encouraging a is keeping that quarter We and broadband actually the in

actively portfolio performance. So, product the games strong firstly, have expanding mobile with upgrading and been we ROI

So the and internal with cooperation, and external over we our operations and chain. positioning entire effectively games so investment development publishing development, are

in second pipeline more launched more our half to sustainable than growth. games demonstrates of We the thirty have enhanced contribute to XXXX, which the

focus our users driven content literature our author online the been efficiently products, Secondly, monetization and and for we content and have our by intensified product at on strengthening the user management the stickiness strategic resource. aiming improving both

audible and advertising film on and pay-to-read licensing, existing cost acquisition with our revenue we book, revenue with We management, operations to stream And from expense short improving diversifying including IP contribution drama revenue thirdly, the concentrated the IP have consolidating are monetization of capabilities to the and from also the user been social user while media efficiency distribution optimized. with and continues model. structure and our IP be

efficiency the further expect expenses sales achievements Thank continuous in for G&A and revenue coming as R&D the will which of the improvement. margin a result percentage you. for and marketing, net quarters, We

Steve Silver

Okay. very Thank much. you

Operator

next now Wei can the question We Zhang from take Research. Equity from Diamond

Wei Zhang

two Good from Fengdu Equity the Zhang better According evening. questions. has This . through social monetized have Research. to Wei been is channels. media I company, Diamond Novel

how you. So, to can the paid them you provide how from and into or developing WeChat consider this content platform? Tiktok company more attract copyright question has colors turn second monetize Thank you the My made paid revenue? attract Does you users your Weibo on company you users efforts us, revenue on stream? monetization. share and is what diversify regarding with copyright Can to

Karl Zhang

you. will I Okay. two address these Thank questions.

first XXXX. the content a with for distribution have question, the first social channels since quarter the we model through So pay-to-read of media initiated exclusive

than thousand further than hundred position contract literature content four five more as in we options. books with to currently, the and of a authors monetization explore and Fengdu XXXX, are thousand two original diversified on signed four more good platform very So June hundred

the channels distribute it model readers a developing social to social It novel reach in amplifying through channels a in for Novel something than standalone target distributing a as business different become popular commercialization interested for immersive users ecology. reading in. growth. a The pay drives Fengdu actually algorithm to is and literature revenue demonstrate is literature of books the emerged has on and new apps. So media provide media to media likely more precise already better way social user success recommendations they experience are to more The are and the

So media apps. novel do who This to through segment use readers difficult the of novel are targets readers the and channels reach social quite to mainly WeChat regular traditional reading not is accustomed a apps.

offer Novel city internal users’ the consumption. through in on Novel distributes of terms WeChat’s WeChat, types media in good romance. the short reading content term agents. and of as, distribution life, Fengdu ecosystem in So fantasy, WeChat With these attained attracting external team reading feedback such has public needs user social currently Fengdu metrics for and accounts, We

this still position on free-to-read developing we social actively While channel on media content, to our complementary content the us concentrated app the main pay-to-read is distribution. are

for question e-books the Novel external we the So second our focus Fengdu licensing on copyright strong had have about As monetization, content at Fengdu very operation for revenue of Novel the to and copyright for with online to collaborated IP these enriching mentioned maximize channels through with literature aimed of films. Fengdu time, audio IP has books the same the And and produce traditional these platforms. Novel contents resource has

practices, business parties, major producers cooperation these reached including also strategic various other the content Fengdu and Novel has co-development producers. books film through with with audio So

companies June successfully terms of top television, film rated Three film Old In the online has in to for Fengdu been and television recommended film called Princess of novel production. and Years Thousand Novel’s the

two approvals and for submitted is filming the year. to now, of expected be are film pieces there As completed have of local content. been to which this assuming government

Novel So a discovered initiatives the ways forms through in Fengdu these monetize entertainment, all various into has innovative to online of the novels variety transforming copyright.

forms IP significantly synergy tactics a will original you. Thank allow these of IP. increase of the So value the to different form to

Wei Zhang

Thanks.

further that one online on I time more the regarding to consent actually, have just under the mobile government Chinese eighteen new games. question impose We of limits amount see games. So restrictions the

the business? percentage teenager you in Thanks. affect game this to So of revenue Like how do comes company’s the expect China? mobile from your what’s

Robert Cui

Yes.

not in of given the advertising monitoring on the impact games the have we mobile a model we regulation now, on are on these obviously portfolio, concentrated specific we games position in-app materialize closely changes commercialization. So our local As are to of

on games. in-app focused current more the regulation While is of purchase model the the mobile

or potential as And a our negative which solutions terms So we minus and make the have market, closely this percentage But of we our always we about we'll in in game definitely the on under overall are growth overseas portfolio. the of of very be yet addition are statistics evolution order have precise are we to obviously, the policy eighteen portfolio in haven't had and portfolio. -- revenue games in the within impact mobile the users, appropriate monitoring the been tend emphasizing, vigorously games which higher potential to expanding mobile games mitigate pipeline.

domestic confident not Thank So the portfolio development global on mobile only pipeline and we further on Chinese our basis remain you. of in the games a and markets.

Wei Zhang

Thanks, for details. on additional quarter. Robert congratulations Again the Okay.

Robert Cui

you. Thank

Operator

We Tigress can Ken Financial from from next Gao now question the take Partners.

go may sir. ahead You

Your line is now open.

Ken Gao

for evening. Good Thank taking you questions. my Okay.

So sales marketing is margin. to my and question regarding

As seventy the reaching of we since track, our know, to approach efficiency marketing know, percent last you started seventy and around on if sales We margin implementing to Thank improvement to quarter. this target sixty overall you. a below percent? the the balanced percent with wanted operational still year improve

Robert Cui

as will I you. Thank Okay. this address question well.

continuous acquisition management of the of the new in with our the to So users. users efficiency, and relation of existing optimization

percent third quarter quarter from down second percent revenue percentage XXXX, percentage of met in So which of the the seventy quarter seen sales two first the expectation. XXXX. the a of since expenses we eighty reduction constant XXXX, have our in The as mentioned seven of marketing a of was and as

and G&A percent. robust that a is we current margin. relation fifty balanced will the in achieving our seventy a expenses net percentage sales at And improvements believe we On of the continuous you. the strategy in double-digit improvements confident marketing in the are a normalized Thank revenue to R&D basis, a of result So, net and efficiency to targeted margin. with percent still expenses, as

Ken Gao

much. very you Thank

Operator

now can the question from Jimmy next Chiang Company. Securities Southwest from take We

Jimmy Chiang

the Thanks Congratulations for taking on strong. my question.

most my of been think answered. questions I have

can I on Whatever question approach? you that about So one strategy market. additional have expanding information on more us overseas for tell your

Karl Zhang

take I’ll expanding question. are the overseas Yes, market Okay. you. actually time. domestic Thank the this at we Chinese market same and

we growth mentioned quarter games as and while approach between our quarter been return are our mobile the quarter markets. line business, keeping earnings And quarter, in both with driven roadmap we the profitability positive implementing call, to strategic was first revenue the have overseas in growth in a which literature pleased our to by profitability. So and over in domestic and our online second balanced

continuous in our So platform, market overseas wheel two-wheel game dedicated literature focused on of Chinese and optimization segments with we the over content market. -- are mobile to online domestic development both this a and

synergies we potential So market. the and overseas big literature saw and games domestic online have mobile both strong Chinese very between market between and and synergy

literature better creation book which to business. game same assists the driven same. system the For AI market authors content performed example, to overseas the data products platform, happens online the are And foundation our from to growth of our driven write the platform the for data based recommendation and the

and industry and mobile protection uncertainties of to we and softness positive. some experience. advertising as the market. strong some And there market remain between in market. confident property see And between the related the overseas stringent we – synergy and the regulations noticed in data market domestic strength in advertising regulating the Chinese the to privacy the So domestic sectors. sector education, domestic Chinese and recently, such internet are mobility But the global we market regulations related

our So business overseas we investing more to mitigate are risk. the on

pipeline overseas including markets. example, Taipei regions, game of our different expand game for couple will studios in recruit and For to new we form

expanding we have addition, overseas been online of business upgrading In our the model and literature products.

strengthened we the user have economic also model. With the content stable inventory retention and expansion rate, the

the -- same encouraging example, consistently So during Malaysia. markets, At been Market for Southeast in the the including and ROI expansion improving. we in level performance we some our have Philippines the has U.S. Asia observed also time,

growth of market. in about optimistic the So global the the we potential are product

that risks our believe strategy short and term you. two-wheel we long mitigates the our So development ensure growth. Thank term

Jimmy Chiang

Thanks great. Okay, Congratulations again. management.

Operator

or closing questions turn call now there over remarks? are like to Hu additional no back at this appears time. to Venus the any It I'd further for

Venus Hu

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

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

Operator

today's your for call. participation. Thank This concludes you

You may now disconnect.

CooTek (Cayman) (CTKYY) 9 Sep 212021 Q2 Earnings call transcript