Q3 2019 Earnings Call

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Thank you operator.

Hi, everyone and thank you for joining us today.

Our earnings release will distribute it only up to date and is available on our IR website <unk> dot.

Adult Cutex dot com and PR newswire.

On the whole today from could kick out Mr cows, John Chairman and Chief architect and this gene leaching Chang Chief Financial Officer.

Mr. John way to review Bearish on Southern company highlights followed by Mr., John who will discuss financials and guidance.

There will be available to answer your questions during the Q any assertion that follows.

Before we begin I'd like to read my can you remind you that discount for lunch contains forward looking statements within the meaning of section 21 eat up the Securities Exchange Act of 1934, it's amending [noise].

These forward looking statements I made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

These forward looking statements can be identified by terminology, such as a way to expects anticipates future.

In Canada.

And I.

Beliefs estimates confidant and similar statements.

Good day May also make original or on forward looking statements didn't its reports filed with Oh furnished to the U.S. Securities and Exchange Commission.

Sitting on your report to shareholders in press releases.

Although returned my two euros and all those statement I made by its okay. So direct <unk> employees to talk about things.

[noise] any statements that I'm not historical facts, including statements about cutex belief and expectations are forward looking statements that didn't fall factors risks and uncertainties.

That could cause actual results could differ materially.

From doors into forward looking statements.

Such factors and risks include but not limited to the following.

Cutex mission and strategy.

Future business development.

Financial conditions and results of operations.

The expected grow talk to mobile internet industry and mobile advertising industry.

Do you expected growth talk more about advertising [noise].

Expectations regarding demand for and market acceptance of the company's products and services [noise].

Trump finish on into mobile application in Appetising industry [noise].

Right, if I'm government policies and regulations relating to the industry.

[noise] further information regarding these and other risks and uncertainties in fact us.

It was included in the company's filings with the U.S. Securities and Exchange Commission.

All information provided on the school is currently itself to date after school.

And could take does not undertake any obligation to update such information.

Except as required under a long [noise].

It is now my pleasure to introduce Mr. Cowen <unk> co. Please go ahead.

Thank you everyone for joining our that's quite a penny Nike money [noise].

Obama because I went better than really backing up the Google disabled I like that to Google play school amicable add them all.

Lastly, impacting allocate them the quarter topline and bottom line [noise].

[noise] opposite Bobby bounced back during the quarter.

We are optimistic about this coming quarter and our long term growth.

They sound behind the states, obviously, what happened right our revenue projection by Oh, I Stat book, you fall from inside.

I'm a minute to 48 minutes.

As a sign off our confidence in our long term growth and to the Badeel I'll hop it though.

We also announced a Neal sheorey linkage.

[noise] ended quota, we'd have beating continually I'm independent with Google to clarify the potential misunderstanding the hot action.

However, we cannot guarantee that we will be up all that having such a that'd be a remote petition weapon men I bet about getting the.

Got it well will propel <unk> either outcome.

We have already lousy effective operational Macedon to continue to acquire new user.

In the second quarter.

Hi, often make me, 47% Apollo, California after that well, while there were channel I know that Google play.

Patrick I saw Oh, yeah, I'm pretty low did fall rap download Adam I, sometimes [noise].

This quarter, we actually restocking quicker than our acquisition the acquisition through those channels.

I feel I tell people, what I'm glad you that mainly through Preloading [noise].

Which was not impacted by Google action.

Additionally, well also walking or kind of pad to make a lot.

They handle on Google play in tight with failed to making safe the AP and AR disabled dot com.

[noise] in addition to ask Lollipop growing how <unk> network and other successful and they said okay.

That's that's been meeting more traffic.

Trends network.

We have mitigated the impact on manifestation and you're going to grow.

Our business docket to bounce back during the quarter at both our daily revenue and a number of daily active user regain growth momentum.

This is testament to our strong execution capability [noise] call competency and the unique value proposition build out our and that you're the inside [noise].

[noise] the average you off our company, which bought at what are the 3.9 million.

Yeah.

No problem.

Haven't put money in June .

But the I mean, you I mean, you increased to 57.5 matter in September I can use acquisition recover.

And then you the growth look and momentum.

The engagement laid off volatile pointed out what a study pipeline call center.

Some of them [laughter] actually [noise].

What did we don't give backs, we could not you Google push notification food rich and activate new the.

Opt that we'd be opt out develop dot Com war if at all.

So many impact we have already.

Our on shelf healthy push them.

Oh, well bombed out our shell healthy push.

In the Georgia.

None of that in.

Oh I can definitely ratio remains very high demonstrating that our I'll follow up product.

Based on current unit economics.

Keith product matching and the overall ally.

We have to comprehend sleep than our investments you the acquisition.

[noise] are making his team however, once we enjoy rather than the company imminently.

Well I believe that the global company <unk> Maki the deal even early stages.

And this gave us that massive opportunity in bulk horizontal and vertical area.

Even backing to formally established and to continuously evolve our come to the heat with it.

[noise] Austin [laughter] growth platform, the beauty by leveraging our unique in that you didnt.

As we mentioned Oh, it's definitely caught up on call late last year, we successfully defended our hot offering to China market.

This quarter, we released a couple of new content, the App for China market, such as [laughter] that I show and how does that.

They are growing pretty fast.

We believe our success in China market demonstrate our core competency and open up.

That's a potential Neil opportunity Wawa long completely [noise].

[noise] one off hours because they just go to strengthen how what Adam I think bitten by reducing external dependency.

And this quarter to quarter up it yeah.

We officially launched the could that Adam I think platform how in house AD network.

They said allows hyper Craig and manage the AD campaign manager at pocket.

And put that into our Apple fought it directly.

Well the mall [laughter] outdoor hobby to apply all mobile traffic [noise].

This quarter, we achieved significant the program at the could have had I think platform backing to comfortably that's significant advantage of our total advertising revenues.

It's also boosted our money that they significantly because the average easy T M for the past one to pop or the hockey at 10 gig.

But they all of our competitor which afforded.

That I knew Red Hot recently.

Well continue to strongly in bad in both advertising technology, and our App ecosystem.

With that.

The cost of our CFO Jean to walk you through how if I mentioned without what the portal [noise].

Oh, Thank your car and thanks, everyone for joining us on the call today I'm going to walk you through our so called a financially dot now let's start with your there.

Finally, I couldn't hear the for all of petroleum products like six to 7.5 million September up 100, plus N. funk, yeah deal ever the daily active users for our portfolio products tend bar, we said Balkan travel 4 million.

1.2 times can get locked yeah.

Well the baby I can use the on pets Paulson importing amber well approximately 141 million.

Yes, well not yeah, I mean, really well 185 million compared to $180 million yeah.

Total net revenue was 31 point blame you estimate in U.S. dollar.

Dockets in that philosophy, a mobile advertising revenue was $70.5 million doubled to 16% of on a young.

Total advertising revenues waterflood called on Sunday Night.

Well the folio products contributed approximately 81%.

That's both my input Accountabilities, approximately 2% NFL football the comfort.

Late 17%.

Turning now to expenses, all oculus legal costs and expenses totaling nearly 48.

Dollar a degree of eight cents sequentially and up 40%, 40% of something theory, it's not yeah.

non-GAAP calls in fact, it well at 47 U.S. dollar a decrease of I guess sequentially and an increased 40% of year over year.

Plus ended up revenue non-GAAP cost expenses accounted for 450%.

The operating data to increase is mainly driven by sales and marketing expense it.

Sales in the marketing expenses increased by 48% from Santiago at Lafayette, and the 2% sequentially. The largest components often means that they get new the acquisition costs and disease went down in late July as a result, googles actions as we bought a meal way to exactly.

Nice growth we started since then the mall in late August .

Tandberg, what's kind of always out.

R&D expenses increased by 9% sequentially, an increased by 34% year over year, primarily due to the increased cost associated with acknowledge the IB stuff.

We ended the quarter with 510 to 14 full time employee at 40% Lafayette, and they're down 13% well lots of quota.

Hi, Andy employees, who represented about 63% off telco in calling the thing I'd love to Florida, and if they end up then Peel off yes.

He and I expect that the clearly I think basically events sequentially and the increased by 14% year over year.

Clean it mainly due to the absolutely the provision Oh bad that often $4.7 million you last quarter the increased over last year due to the organic growth of the company operations.

Hello Block marketing Blitz, 80, said I'm, calling to 5% down from 90 point not a 19.7% a building the grand piano lots Ya and a slightly down long that 89.4% last quarter. The lower brought lobbying for third party, let's do the job in revenue.

Well the cost of revenue remained stable with revenue were getting regaining growth momentum, we've got a block logging to recover to previous normal status.

We had a GAAP net loss of about.

16 million U.S. dollar, representing a 40 or 42% off net loss margin.

Accordingly, if that's all stock compensation Oh, adjusted net loss was approximately 15.4 million U.S. dollar representing a 49 present non-GAAP net loss margin.

As of September 30 cents Sunday eight that's any 19 cats any cash equivalents restricted cash was about.

Okay 56 million U.S. dollar compared to 63 million, yes does adults young Li said he 19 under the share purchase program announced on November the Sunday.

And they say.

It's on page 18, the comedy used in aggregate all 12 million U.S. dollar to purchase the 1.4 million 80 at at opposite Samberg study 2019, the company will they terminate did that.

Just on an 18 program on November the tragedy Sunday night team and to take effect.

And your share repurchase program on the same day in new she I would purchase program. The company is authorized to repurchase its class eight ordinary share in the from all 80 at with an aggregate value of up to 6 million U.S. dollar dealing the six month period, starting from November to 22009.

Team the company that's as long as we purchased under this program when it gets existing cash balance.

Turning now to the around your outlook, we expect to you into fourth quarter off to down the 19 could be about 48, immuno U.S. dollar representing a 2% increase yet Olivia.

Physical you're up 2019 correctly that total Rod mill.

Maybe about 157 million guess dollars, representing a 17% increase he has over here.

These estimate will affect company confirmed in the couldn't even though we view, which is subject to change upgrade so we're not ready to take questions.

[noise]. Thank you you will now begin the question and answer session to actually question. You May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before passing the keys. If at any time. Your question has been addressed you would like to withdraw your question. Please press Star then to at this time upon.

Momentarily to assemble our roster.

[noise] and our first question will come from Alicia Yap of Citigroup. Please go ahead.

Hi, Thank you good evening power and Jean Thanks for taking my question. A couple of questions are used to be guiding you know there the reasons behind the fourth quarter guidance range I'm. So if you keep could you elaborate a little bit would be better obsolete.

That you have seen most of the App.

Coming from entry Q, and how should we think about the the act that contribute to the fall Qms guidance range and also maybe look at your Fourq guidance is also suggests that.

That you saw early sign off recovery from the Mccabe impact that a U.S.P. Richards from Google last few months. So are these napanee impact now largely behind.

And how should we think about the next year growth outlook. Thank you.

[noise] think about Asia, so I'm going to answer this question.

Our performance because it was better than we expected and our business that is to bounced back in this quarter based on the latest the operation data. We are very optimistic about the coming quota and our long term growth and that is why we have raised our revenue projections I had 28.

For Q pool from inside a implied a study 37 minutes to 48 million.

Actually both of our baby revenue and or the number of daily active user to regain the growth momentum and this is a testament to our strong execution capability core competency and unique value proposition and the major driver behind this strong recover it yes, that's true.

Though act basketball not any up a individual Ashley so put that platform successfully with like Google Atmel and raised the overall monetization for all thought was appointed.

And I have to admit that we underestimated how what potential to good asking how AD network into what should the kill wouldn't that in Q2.

We knew that are doing asking how after that well get that strategic choice for us to sustain our topic that I reviewed the extent of dependency, but what I'm, asking maybe I would try to value and the possibility how AD network could possibly with our monetization.

Well, we concentrate our resources to focus on developing our own at ecosystem, we found great potential and the opportunities.

You know that most of our pro forma apps I've come to the which App you really the traffic from compass, especially newsbeat.

Hi, a conversion for Adam parts as well.

Well, we sale our traffic directly to add CAPNA such as Atmel.

They don't optimize the I'll ask network, it's specifically for our traffic.

When we build up I was asked network weekend optimized for our traffic.

So we can find the specific type of at the high so based on combustion efficiency for our traffic for example.

With bump that e-commerce , HYSYS, especially those small and medium Adam heighten have higher conversion I don't know what did that.

That would provide a wholesale sales network to focus on that correctly and introduced specific at a price as well what fitness that.

This resulted in a better you'd be P M and even better at a high the kind that section.

Yeah, actually I love them optimizations, we can do to.

To further with our monetization.

And we will continue with its going to him back he both advertising technologies and our App ecosystem.

Income net yeah thinks that we haven't regain the growth momentum and what I'm more our money that they can't even more stable with that no, but believe well be on the fastlane snacks, the not only on revenue with that but also product.

And we are confident to even back to more use acquisition could do I would use it.

I think I won't be able to provide more color what we finished the fourth quarter.

Thank you Alicia.

Okay.

Thank you.

Our next question will come from teen along of Credit Suisse. Please go ahead.

Hi, Good evening management. Thank you for taking my questions. So this is ideal on behalf of Tina I have two questions. Here first one is I understand that protecting house, I'd say somebody's growing really fast and to mitigate some of the impact from the Google incident. So can management give some color in terms of.

The key matrix for base at systems, such as Karl I M CPM and how the revenue growth trend will be like.

Oh for next year for it in House <expletive> and second question is a this management have some guidance on the user growth front for 2020 in terms outside the U.M.D.A. you.

Thank you.

Thank you.

One, though I'll follow up but could you go into its good our advertising business by reducing fixed I don't know dependency.

And the fund caught up this year, we officially launched it would have at platform and this year.

Bought a we achieved the making some progress.

He could have a platform that into contribute does it make sense of our total advertising revenues.

Yes, yes, yes, offset the impact from school bus action and boost our Monday night vision efficiency, because the average easy T. M is higher than other active hedging I can give a I can provide some detailed numbers here.

The average out what do you all fall a potent apps. The October is approximately 40% higher than Q wasn't average I put you at that time, we would not impacted by Google yet.

What do you expect to add backs the revenue generated from our in house at that well well take more revenue percentage in the future.

And we believe it will help to sustain our ARPU growth.

And you know he the D.A.U.N. and they you also we we don't provide guidance what do you and me you gross but I can give you some kinda about it.

A wee hours to physical growth platform. It builds by leveraging our did you make getting back to you the ink that but we are very confident on our growth capability.

Do you have our confidence reach promoted asset backed into bounced back that EMEA, you'll continue to get a growing pace even into Q3. The we are looking forward to a strong user growth into next year. Thank you.

Thank you.

[noise] and our next question will come from Han's Chung of Keybanc capital markets. Please go ahead.

Hi, Good evening current James Thank you for taking my question. So.

I guess I just have one question. So in this quarter, we have the engagement ratio was or do you do buyback I may you came down to like 35% each and Ah that's that's compared to the last quarter, we have over 40%.

And so so can't count can you expand or be more why we have these.

Well, we have lower engagement ratio I know so.

Oh I should we think about these did the trends are going for thinking.

[noise]. Thank you have so be it gets my Ralph I'll put asked was 30 35.4 affecting the quarter down 7% sequentially that tool major reason.

But could not to use Google push notification or the other two rich and activate our users.

After hours developing accounts what disabled.

So push notification email push and they read pocketing, Adam I think I'm major channels.

Connected to our person actually recommendation system to recall and activate our youth.

To mitigate the impact would have already developed our on shelf outfit a push system.

All of our Aswell bundle, our shelf hosted push system.

I'm not really read them for the decline is that some of our app have higher long long time retention rates and good outside but haven't actually lower average engagement rings.

I mean, you percentage Oh gosh I.

Increasing for example, chairing which is a female lifestyle come in cap.

Engagement rates, if the raamses, 95% to 30%.

A little bit below average.

But it's long carbon retention is very good though I mean, you percentage is increasing.

Another case, it's high show, which we released to China.

Despite its engagements ratio is a little bit lower than average. It's the opposite the are you is too high above average. So we don't think it's a problem because the overall I, while those at a actually about outage.

Ah we tend not to just the focus on engagements in the future, but product lifetime value, how I longtime retention rate and the bad there with green to our user.

Thank you.

[noise] again, if you have a question. Please press Star then one.

Your next question will come from Alicia Yap of Citigroup. Please go ahead.

Hi, Thanks.

For taking my follow up questions, a so called Oh fall questions on the sales and marketing spend a you mentioned hdinsight, yes, increasing the budget a intrigue to reach a drill helped to drive the D.A. you and they you grow and then just shows.

Cutting Sunday Chichi high attendant Robin deal for the quarter.

We'll watch these also one off the reason that contribute to the faster Oh fourth quarter revenue grows so well sales and marketing meet to remain high to support the stronger revenue falls into that 2020 .

[noise].

Yes, Oh, so we are even bassi mod shoe apply use up because we're pretty confident how are you the growth and the overall iwai and unit economics, it's pretty good even without Google play. So so that's why we are confident to put more money to to fly below the gross.

And and and yet because the outside the total opposite the entire I'll I Hope I was just thing is very good. So does the that said the batches with Ben to Apollo users and the pop up the budgets will oh, well, let just the.

Chance to the revenue so oh, so so part of the revenue is coming from the this quarter investments to you that position and we that fact, the percentage of the Oh help our sales and marketing cost.

Oh, well were just a degree but feel we will we will continue our investment I'm good acquisition and in the fourth quarter and ER and next year.

Okay. Thank you.

[noise] again, if you have a question. Please press Star then one.

[noise] yeah.

This concludes our question and answer session I want to turn the conference back over to Renee will go staying for any closing remarks. Please go ahead.

Thank you operator [noise].

This concludes our cold. So today. Thank you everyone for joining the call Tonight. If you have any questions or comments. Please don't hesitate to reach out to any of us Goodnight.

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