Q3 2019 Earnings Call
Based on all participants in listen only mode. After managements prepared remarks, there will be a question and answer session. Today's conference call is being recorded if you have any objections you may disconnect at this time.
I'd now like turn the conference or what's your hosts for today's conference call Qualms <unk> Investor Relations director of so-called Pease go to heat.
Thank you probably know they could be could talk to all the so called <unk>.
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Hi, My name is cheap because I think all personal health Josh Nichols.
Well I.
No no.
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We'll go see all cell phone line Seattle Joel Joel.
Hey, good luck.
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And then you've got this conference call.
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Well this is off they are doing a lot of element.
Forward looking statements.
[laughter].
We talked to you about well never all important exactly.
Actual results could differ materially some cool okay any forward looking statements.
But more importantly says.
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Moving it mostly <unk> outbound sends me.
With that.
So called itself Hello.
Please proceed.
<unk>. Thank you everyone for joining our call.
Oh for the third quarter Gold mine team to go do you feel much I'm sort of the either Mckool Smith environment.
Both of our total revenue in our bottom line.
Needed our prior guidance.
Lilly Guillain Barre on gaming and kids business.
As well are the continued cost cutting initiatives that we're pushing through our global media video segments.
[laughter] immediate making would come back or the midstream needed platform. We've got an enormous amount of high quality original content on the do that.
Leap premium features further you have the reputation of the when needed.
Brent.
I'm full discusses our overall competitiveness well so we do we continue to deliver unique high quality problem up in the other shows for users. The also <unk> either greedy with Google Functionalities hero products to help you good fuel and find the old unique social community.
Well, just strictly capital budget under control whatnot activity.
Oh, It was born new ways to diversifying our revenue streams, you called machine advisors.
For the third quarter.
Some of your football extremely healthy growth I mean search revenue continued to grow Proctor then even through average.
Sorry, [laughter] still go consistently photos.
Oh integrating language centric <unk> capabilities to fully support innovation in search mobile keyboard and smart hardware businesses.
And lastly, taleo. So overall performance continued to be stable.
[noise] divisions, we are fully resolved the load by PLD you'd see the likes the PRB be mobile PRB order, a new Bobby loans during the quarter also performed well.
Before you are going for more details about our financial results. Please be reminded that since Tony.
A lot of Oh pardon isn't it.
<unk> operations.
Let's maybe it's really too confusing operations only.
Excuse me result from Tony will sit them I don't have a good.
[noise], so probably a potential for the third quarter or total revenue.
$482 million.
Up 9% year over year, 4% quarter over quarter.
Well they are non-GAAP costly.
Cars get basis.
Total revenue would have been Vivian.
$30 million higher than our reported revenues.
Which would be a topic that improvement year over year.
Instead of 9%.
Oh.
That's right.
Rising revenues of $46 million called London become year over year about quite become quarter over quarter.
There's a search we ended up going around me wonder $88 million Oscar can put them year over year corporate up quarter over quarter. Although good revenues were $8 million up 13% year over year on the 6% quarter over quarter [noise].
non-GAAP net loss attributable to some dot com limited.
It was up 17, you had some him do you have dollars.
Decreased by 26 million.
Oh, no big increased by 20% compared with that of the second quarter.
[noise] properties here.
Excluding silgan Tonioli non-GAAP net loss was.
$53 million increased by 31% compared with a year ago and decreased by 22% compared with.
The second quarter of 2019.
So let me go through some of our key businesses.
[laughter] first our media portal business.
In the third quarter 2019, we continue our come back or the pop your immediate problem that generates and distribute premium content in particular, we strengthened our inflows in the number of verticals, including technology finals.
Fashion, and others, which constitute our sub brands.
During the quarter was successfully a hosted it fits try to broaden photography contest, which were attracted more than six month 600 participants hating from over 150 Sioux City nationwide.
This call has not only engaged our content library with a large number of high quality proposal for video them. You log also gained a lot of attention into from both users and the other partners.
The fourth quarter, we will continue for long high profile on the influential events, such as the <unk> summit and Oh.
Oh fashion work.
To further keep advantage our brand and the credibility.
Well continue to coffee.
[laughter] third party right it would be a football hall.
Correct them to contribute you've got content.
Although the number of registered writer.
Our platform to haul has increased steadily.
Oh the problem side.
We are actively focusing on ways to improve our recommendation algorithm is [laughter] ads, we find the silver Peter it's still a bunch of not only help attract more do you live increase you there.
We incurred users for sure common improve threats.
As a result, you get about you know two megawatts we believe.
And can there be more high quality UGC content.
During the quarter as I mentioned before the macroeconomic environment these feel fairly probably being [noise].
Maybe we have been budget strength across industry [noise].
We fall into them they implement that.
<unk> cost and expense controls.
Improves resource utilization.
Focus a mother, probably shouldnt revenue growth potential.
For example through the fifth trying to grow photography comp that we provided with marketing solutions for other pipe dream close that or supported by our in depth and the semi okay. We do effort, we expect the financial losses of global media to further shrink in the coming quarters.
Now moving to the so video during the quarter. We further develop our two engine strategy by viewed out the distribution of long for.
Compounds through our theater model and distribution short form video.
We do quit the generally call that usually come in through our recommendation.
In the Basin club.
Model.
With strict quality controls and continued effort.
Uhhuh monetization, we were able to reduce the operating loss through $20 million, which was solid improvement from north of $27 million because the same quarter last year.
Second continue improving the bottom line, so videos in coming quarters.
Oh the video content.
Joining me is successful broadcast.
Well intended lub Steven.
Well attended low season, what that cobalt the all chew up.
And we started shooting.
The season to this quarter.
Benefiting from our brand advantage it's all.
Idle Roman drama gently.
The second season has these advertisers attention and began to.
Secure advertising dollars.
Well for reality shows we launched its first season all.
Sending 100 goes home.
I believe I would probably though.
Really funny.
Oh God to show featuring what color wouldn't it.
We improved the interaction between you worth and he has a the distribution of showed find the initiating a related copying our product through which you guys can generate and oppose short term content locally we lost format.
Who recently issued the said.
Both been well you see but all that advertisers.
We also kept upgrading or product through a user friendly functions and personalized future Hugo can easily find the comment becoming provider that they are interested in and content providers can generate distribution growth I could follow or more quickly and accurately have resolved the content provider of users are able.
Interact more closer than quickly therefore, budoff there on social networks.
[noise], that's putting to sogo in the third quarter 2019, sogou experienced healthy growth and maintained its position, it's kind of second largest search engine.
This revenue continued to grow faster than the industry average during the quarter mobile keyboard.
464 million.
Use up 14% year over year reinforcing its position as a certain loggers Chinese mobile app in terms the P values according to Iresearch.
[noise] respect with respect to Sogo recommendation service that leverage the mobile keyboard revenue ramp up quickly on track to become the second growth engine for the search.
In terms of a API.
Sogo consolidated language centric AI technologies to fleet support innovation fuel search lowball keyboard and smart hardware business.
Further reinforce the Fred.
Fresh Asian, I'd be a differentiation advantage and leading position in the sector.
Moreover.
Tolbert football we knew there it's a corporation we chat so full service will continue to be the preferred search engine all beach habit for third parties such services.
Access external internet.
Content.
Lastly portfolio for the third quarter 2019, Antonio's overall financial performance continued to be stable and all and gave businesses performed well.
Its revenue and profit at both exceeded prior expectation.
For PC game, Tonio launched a new expansion pack appealed to the PC and Raleigh. This years second the promotional event to suspend player engagement and the stabilized the endgame consumption.
Tony will continue to focus the core strategy.
Got it implementations user engagement and lexmark maximize the longevity of the the legacy PC game such had field.
[noise] for mobile game mobile game.
New from legacy TL, BB mobile increased slightly lisker quarter, mainly thanks to new content that introduced introduced we introduced during the quarter, which help to drive higher player involvement.
Side trying to also launched TRP be honor.
New mm Oh, RPG mobile game due to less extensive game content.
However, since the game called have these not particularly extensive its revenue contribution and the profitability are not comparable with like the PEO BB mobile.
Going forward.
Oh RPP mobile game will continue to be Tonio strategic focus most from casual and the strategy games are also under development for a diversified product portfolio.
So now I'll turn the call over to join our civil who will walk you through other our financial results data.
I will walk you through the key financials of our four major segments, but third quarter of 2009.
Oh, the number that I will mention Oh, I'm a non-GAAP basic.
You can find out when it comes in the Asia, Nat gas to GAAP measure Oh IR website.
[noise] social media portal.
Quarterly revenue, we're kind of you $5 million.
And quarterly loss was $31 million.
First of all video quality be revenues were $22 million.
Quarterly loss was $20 million.
Excluding still go Antonio non-GAAP net loss.
$53 million.
Compared with a backlog of 77 million dollar in the third quarter of twist on the agent.
And then that's logical $68 million in the second quarter of 2019.
So sogo quarterly revenue.
$350 million.
Up 14% year over year and focus on quarter over quarter.
Net income was $41 million compared with net income of 28, meaning dollar.
Same corporate Lucky here.
So Tom Hill property revenue, including 177 311 million dollar.
9% year over year, and down 4% quarter over quarter.
How are your posted net income of $34 million.
Compared with net income $67 million same corporate last year.
For the fourth quarter of 2019.
We expect.
Total revenue.
Oh hundred $35 million.
$470 million.
Brand advertising revenue to be between $40 million and $45 million.
This implies you decreased 21% to 30%.
And the sequential decrease.
3% to 14%.
Well go revenue to be between $290 million and $310 million.
This implies equals 3%. So I know you create a focus that.
The sequential decrease of 2% to 8% [noise].
Hi, Dan rather than to be between $95 million.
And now have you had a $5 million [noise].
The thing because I knew increase of 1%.
[noise] NFC crunches equally as a 3%.
12%.
non-GAAP net loss attributable to so what they'll come to limited.
To be between $12 million Mtwenty $2 million [noise].
And non-GAAP loss per fully diluted EPS to be between 30 cents.
The five cents.
GAAP net loss attributable to somewhat they'll come limited.
$70 million to $70 million and can be $7 million.
GAAP loss per fully diluted EPS to be between 45 cents.
70 cents.
Excluding profit or loss generated by so why the town.
non-GAAP net loss to be between 45 million dollar and $50 million.
GAAP net loss to be between $48 million.
And $53 million.
For the fourth quarter 2019 guidance.
Well, you I presume the exchange rate.
RMB 7.1 to one dollar.
Compared with the actual exchange rate of approximately RMB 6.1 to one dollar.
Of course, our fulfillment.
And R&D is six point.
The one dollar for the <unk> third quarter up was on the Nike.
Lastly, please be reminded that we won't take question regarding trials privatization proposal Mcewen <unk> session.
This concludes our prepared remarks.
Operator, we would all locked called question.
[noise], ladies and gentlemen, if you wish to ask question. Please press star one I checked Palin and they put you never know if at least I can say no request it crashed the powerful has.
The first question comes from them like Oh, Eddie Leung from Bank of America village. Please ask your question.
Hey, good evening.
Two questions.
Oh the media.
He says Oh, the first one is Oh Gee I, just spending how we see any more pressure on our small and medium sized to top end to price is a lot more on how a key accounts and if you could be mind as a fee revenue mix.
Queen.
Ladies and key accounts for media thesis public is great.
And then secondly could you also talked a little pick up how would you all Oh, Hi Tech industries and how are they trending thank you.
[noise] Charles.
Yes, the macroeconomic situation Uh huh.
Larger impact over the key accounts compared with the attorneys.
So the.
Like the other industries and some key Arjun sectors are under pressure well the.
Fast moving consumer goods comp.
Products are more resilient and move the moment I mean.
It's more or less.
Impacted.
In terms of percentage.
I think a isn't let's say 25% over.
Yeah plenty cuts.
So to put it up in Santa Barbara.
Revenue coming from the smaller.
Yeah.
Well some depends about from a threat.
Brett, but even the among the breath did have some key factor like although it really affected by idea about what's happening between good competitive moves are less less effective.
I got your child. Thank you.
[noise]. Thank you see next question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Hi, Friends management Board picking my questions I've a question.
Be on nine deals so.
Comments about.
Oh directly to me.
These days and how we should think about timing.
Profitability should we expect.
But beyond that six yet any kind of would be great. Thank you.
[noise].
The.
Regular in terms of media business.
Well the revolution.
Has the ongoing there's not much you know a major events that have an impact on the on the.
Provision side.
We are looking ahead to the media advertising business.
The.
Loss will continue be.
No less.
So the will shrink.
And.
But its employees.
A good over just the reported the it is 31.
Okay last so skew a far from reaching profitability Oh, you've gone, but combined with the video and also with the contribution from.
Tony one single B the [noise].
Uhhuh.
The the profitability we're actually.
No.
Where we are already achieving.
$17 million a non-GAAP loss.
So a good luck.
A couple of course, we should be able to reach profitability.
Level.
Got it thank his house.
Thank you next question comes from the like Oh, Alicia Yap from CP Cook. Please ask your question.
Hi, I'm good evening, Charles and I had a management thanks for taking my questions.
I have two quick questions number one is a charge related to show.
Yeah.
So can you elaborate.
Besides.
<unk> content.
What I know content.
I also wanted to high quality.
Content that you refer to that Reshapes to a comes back.
Thank you, so, yes, and no debt improving content quality translate.
Hi.
<unk>.
And have you seen.
The higher demand Advertiser improved 10, and then second Ace I'm.
Just one or two or two follow up under Bee deal I guess, a from a lot of different.
They were commenting about because so national day.
HM country Q4, Q somewhat the content Scott.
The Lady saw a stock <unk> I guess tightening congratulations so just curious have been seeing any easing.
After regulations last two weeks you may now be Pos.
On the National day celebration and I'll pass the call Chris eating so any mtc patients off to a relaxing often content coming so any.
Comments about next year, a income south, Florida tightening that would be great. Thank you.
Okay. So first of all the social media not just the and the growing competition that contribute another photographic.
Do we love, but the overall social media first but we have this is so hall lives. The we have actually over 600000 so.
Right her account where.
The only the writers contiguous to no.
Content to to post their content to halt.
And also a mother six centers on the monitor transponders. The other new house, a comp manageable I know you have become a focus on a comp.
Cover so who technologies.
No matter, who financed through fashion and internally. We are basically two you know just managing better and for me if our own authors to run better articles to put more accurately to really true and also due to really become very professional very.
No you pull industry events more with more steps in depth analyses and also and so that's the overall improvement of our common generation.
And also the.
Continue to improve the algorithm. So that's open you up to basically to match the right compound that we could right not the users no individuals. So that's the overall the coffee improvement and also.
Another future is really we consider as a media platform, we consider activities to be come in generation.
Source like so we launched a we'd have this the forum like Fiveg forum or upcoming.
Hi Forum and we have this a full fashion.
For a crashing bad all these events.
And also the recently the.
The the so who.
School go through a beauty contest.
Just kind of those are just not.
Good.
[noise] a ways to generate good content also and also opportunities for a full advertisers brand advertisers to two to sponsor those events.
And.
Together with your.
Routine.
Have you on our platform.
There are more likely to competing for deals because of focus unique events.
So that the the money will probably.
Moving towards always data for computer computing platform.
So these are they are the ways that probably we are under even with.
The the you know view worsening of the macroeconomic situation, we were able to achieve a flattish or even a kind of.
Increased off a brand advertising.
So and army video side.
We've been as we said.
They would have this.
Double engine or 10 engine strategy ones that really the theater long format video, but on that part. We have is we really keep our pace really slow because <unk>. This year we spend.
Neuro to control costs, we really spend less.
New drama.
No equation.
But we have a such a.
Library offload drama that we perceive a purchase the or we produced over the years, but by better or no.
Personalized content to people and so we actually be able to to have the.
A flattish or even some increase of the.
Also certain substitution.
Income of the Super video.
We do delayed our two drama and now up to offer the national They were in Q4, we are.
We look forward to to launch too.
Uhhuh drama.
Yes, it's a it's kind of you know.
Good reason why it's eased a little bit, but it's a has less.
Impact or kind of.
Two so because we are now.
Rely more on a more and more on from the short videos and some social.
So to function so from a macro assumptions of the should we read in federal purely.
Depend on the long.
Form of extensive.
Videos or drama.
Yes, yes requesting it.
Yes, yes.
Thank you so much Josh.
All right.
Thank you once again, if you wish to ask questions. Please press star one entre talison and they <unk> no.
[noise] [noise] more about okay.
[noise] [noise] lending.
So what we're trying to listen to put a little more.
Ladies and gentlemen. This concludes today's conference call. Thank you felt participating you may now disconnect.
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