Q4 2019 Earnings Call
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Thank you for joining soap <unk> 2019 earnings conference call.
All participants that you, but listen only mode.
Management's prepared remarks, I'll be a question that not sufficient.
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No it to turn the call but to go to your hosts for todays conference cool.
That's a really should start itself so.
Go ahead.
[music].
To date for declines so what's called or.
Not lose out on the call, our chairman Chief Executive Officer, John John Seattle.
Let's start with until the next Gen.
Finally, I can tell me, you'll see odele trend.
Well I'm still go see yourself kind of while on the Seattle Joel Joel.
Well my someone to begin to their prepared remarks.
Back to the money off as a company sleepover ceiling in connection with today's conference call, except for these historical information call trying to gain.
Got you this conference call all forward looking statement, that's amazing misstatements assays I'm, calling the pie isolate just trying to project.
And therefore, you should not place I really like all of them.
These statements involve.
And I certainly do we caution you that a number of important factors could cause actual results could differ materially from both from those content.
I think what will be seen.
For more information about the potential and I said in his first before till the company funny, because I think you tend to commission, including his most recent annual report on form.
With that I will now turn the call.
Yeah. So please proceed.
Huh.
[laughter]. Thank you.
Everyone for joining our call.
I'm going to 19 trying to us economy continue to slow down.
Competition.
That's fine.
Robert you try and.
Did not stop us from exploring new opportunities I mean proving.
Britain efficiency.
As a result.
<unk> operating results further improved due to the solid performance our business I mean trucking cost saving initiatives.
For the fourth quarter 2019.
Excluding a impairment charge recognized and divestments I related to our core businesses.
Non-GAAP net income attributable to so dot Com limited.
Seven.
The U.S. dollar profit.
Well then separately for the old media portal.
With growth in our position as a midstream neither platform with high quality original called an embarrassing.
Oh, so there is events.
First of all video.
The unique in the high quality drama drama and other shows.
It really searched for diversified I mean in high vicious worth it.
[noise] and.
It was a improved monetization capabilities on the street, but to control. So we'll be there was able to further.
These gloss losses in 2019.
And for Sogou search revenue grew faster than the industry average.
And the revenues from still goes recommendations services said leverage mobile exceeds mobile keyboard.
Continue peaks experienced robust growth.
So into something much in probably almost all I gave the from well and took a number of steps. We has these capacity to create new high quality game.
So before I go into a more detailed barkeep a financial results keep in mind is that.
Since.
It was the cinema advertising business is seized operations.
The results that we will discuss today only cover continuing operations and exclude the cinema advertising business.
So let me look at a <unk>, let me go.
Through the force or the fourth quarter 2019 financial results.
Total revenue was 490 $490 million up 5% year over year, and 2% quarter over quarter.
Non-GAAP constant currency basis to the revenues would have been $8 million higher than our reported revenues.
Which would be a instead of 5% it would be 7% improvement.
Yes.
Not Adams brand advertising revenue was $42 million for the quarter down 27.
So year over year, and 10% quarter over quarter.
Sure sure certain related advertising revenues, a $275 million.
On the web percentyear over year, and the 5% quarter over quarter.
On a game revenues rose $32 million up 42.
The second year over year, and 22% quarter over quarter.
[noise], excluding the impairment charge of approximately $23 million.
That we recognized this quarter.
Last month I related to the company's core businesses.
Non-GAAP net income actually good to go to school Dot Com limited.
$7 million.
How's it looks compares with the net loss talking 50, $51 a year ago accrual for 2018.
And also compare with the third quarter 2019, which is a seven shouldn't even lost a lot of $17 million.
So quarter to talk about.
[noise]. So if we don't consider the contribution of probably love contribution from Sogo Antonio.
The.
And also for the group exclude excluding the impairment charges.
Non-GAAP net loss actually grew the build to suit Dot Com limited.
It was a $46 million.
It's too for compare with a net loss of $75 million.
A year ago, your fourth quarter for us on 18.
So a improvement up $29 million.
And also in Q3, the loss was $53 million.
So that is the improvement of.
$71.
Now, let's look at the full year 2019.
Total revenue was a one point.
Eight $5 billion up 2% compared with 2018.
Brand advertising.
I understand they find minute.
Down 20% compared with 2018.
Search on search really the Edelheit revenues, a 1.007 billion 1.7 billion.
Up.
5% compared with 2018.
On a game revenue of 441 million ops, 30% compared with 72.
Non-GAAP net loss costs attributable to so limited.
Was on the loss of.
$93 million that compared with a net loss of.
$207 million interest on the 18.
[noise] to.
By more than half yeah.
Excluding the a probably lost generated by Fogo Antonio the non-GAAP net loss.
It's beautiful to sort out come limited.
$246 million compared with a net loss of $326 million to some 18.
$80 million from it.
So now let me look at go through some of the key businesses.
First of all the media portal and video businesses.
The 2019, our for media portal business, we committed to strengthening our brand influenced.
By generating integrating.
And the distributing news and premium content.
Oh continue attractive.
We continue to trend in the folks I'll hop events. We also proactively for that produced high quality urgent accordance with Sears large events.
For the fourth quarter 2019 was successfully hosted 2019 finance.
And new Congress.
The conference.
Fashion Wars and others.
Oh this event helped to consolidate our competitiveness and he has the credibility of social media virus, reflecting the attitude than value.
Further we constantly upgrading our products optimizing the algorithm.
And improve because the overall quality of the content, which continues to help draw users and to our platform to keep them engaged.
First of all the video will continue to push King and his strategy with long form.
Form content.
Both.
Okay and short form user generated.
On the well how do we over the long long clip long before we actually had some traction strategy was differently the content, especially related to.
Idle romance and criminal seem the troublesome.
And culturally theme reality shows.
On the other has weakened we will improve.
Sure and social interactions around short form video is basically sort of net.
Short video clips and that live broadcasting.
Dan Carter user to post video in the sheer Commons in communities and share their interest.
And so we do is constant consistently upgrading products or completion algorithms.
Basically recommending those.
Recommendation algorithm.
Videos and also the social networks.
Sure.
Video.
[noise] community.
Reloxin led broadcasting.
These issues has successfully increase our user base and overall user.
So based on the two engines King and his strategy, we successfully carve it out the diversified marketing in the mother nature's own those initiatives and provide analyzers those new advertising solutions embedded in various on Oh offline rents for example, the original drama intended.
The love to.
The Boston.
A season too.
Worked with advertisers in the host an offline events further boosted by the efficiency.
And embedded how do you that Uh huh.
Popular drama.
And so.
So overall in 2019 with our consistent.
Effort and street budget control, So video was able to further narrows losses.
Fourth quarter 2019 of the operating loss was $18 million, which is 40% improvement.
Compared with the same quarter 2018.
So if we are operating loss for video was $94 million, the 33% improvement compared with 18.
So now if you look at a the in the quarter current quarter 2020, as we all know that the novel novel Cool Cola kind of ours.
Broke out and he has inevitably influenced the entire country and the world.
Our media portal and video businesses, where no exception.
So that's leading mainstream media platform, we tried to live up to the response by releasing real time, especially events and.
Launching live broadcasts cross our core products, including the so we use and so we do not.
There is more than broadcast.
Distributed the latest news information about the epidemic in real time, it loosely inviting many well known medical experts and express their views and the advice on prevention I'm encouraged our viewers to come the attractively.
Today, we have completed around 200 live broadcasts and press conferences related to the academic.
And.
With that I'll break up Novo prolaris, the overall economic environment and I do what kind of business in particular I experienced extremely difficult time.
At the same time, we noticed some enterprise architecting the addressing your marketing promotion strategies.
So we are closely crossbreeding together with other private goes through these challenging time and minimize.
The next Nielsen basically our user base actually grow and for our news the media News media.
But definitely a their advertising.
Businesses.
[laughter] negatively.
So.
Next next turning to Sogo Sogo maintained the steady progress into something that is driven by the dedication to continuously drive organic traffic growth and unlock the monetization potential.
During 2019 Sogou search, we then kind of large second largest production.
The search revenue continues to grow faster than industry average so consistently improved his colleagues search services trends into their content.
Service ecosystem Sogou mobile keyboard increased its user base two to 400.
Before moving youth.
With 54% more daily voice request average year over year.
Revenue from Socal recommendations service.
That leverage the mobile keyboard continually express robust growth.
During 2019, Google made great advances across their.
Before language extent, VI technologies, and the smart Tupperware business.
Maintained healthy momentum yeah.
The recording wishing him.
Lastly portfolio.
Just on 19 Congo took a number of steps we have these capacity to create new high quality games focusing on its the.
Go up developing complicated.
Prioritized, our research and R&D for mobile game development and continue to work hard.
Scratching their existing good for you.
He gave the new expansion pack for TL BBP CE launch the during the fourth quarter performed well.
Revenue rose slightly on sequential basis, which is better than previously expected.
The first quarter 280 revenue from legacy TLBB mobile increased six significantly on a sequential basis.
This was mainly attributable to newly introduced content and the promotional events during the fourth quarter.
Looking ahead to Tony will continue to execute these course greater building Cockett. That's good you focus will continue to be Oh, RPG mobile game.
There will also seek to make breakthroughs in developing casual and the strategy games.
So now let me turn to join Us.
Books through.
Our financial results dried up.
Thank you Charles.
I will walk you through the keep the nature of our four major segments for the fourth quarter and the full year off coupon the Nike.
All of the number that I would mention Oh on the non-GAAP basis.
You may find a reconciliation of non-GAAP GAAP measures.
IR website.
For social media portal quarterly revenue was 23 meeting dollar.
Well, we love with Fenty by meeting dollar.
But what will be deal quarterly revenues were $22 million.
And of course quoted in love with 18 million dollar.
Excluding program.
Non-GAAP net loss.
46, leading dollar compared with them that.
Let me be by meeting dollar in the fourth quarter.
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And next was $53 million.
Third quarter.
Nice.
For full year 2009.
Global media portal revenues were 95 million dollar.
Your next job $140 million.
Mobile video revenues were $91 million.
Full year net loss was $94 million.
Excluding spoke on.
Non-GAAP net loss.
During the 46 million dollar compared with net loss of $326 million in 2008.
Both logo.
Well to be revenue.
Under the one meeting dollar.
Up 1% yoga here and down 4%.
Net income was 39 meeting dollar.
Compared with net income of 27 million dollar in the same quarter last year.
For full year 2000 lives.
Yes.
1.17 billion dollar.
4% compared with 2018.
Net income was 105 million dollar.
Compared with net income of.
$30 million.
2018.
But can you quoted be revenue.
So do you find meeting dollar.
35% year over year, I, 72% quarter over quarter.
Tony or posted net income of 63 million dollar compared with net income of $23 million in the same quarter last year.
Full year 2009.
Revenues were $455 million.
What's the cents compared with 18.
Can you reported net income of $179 million.
Compared with net income of.
$73 million.
In 2018.
The fourth quarter 2010.
That.
Total revenue to be between 400 million dollar.
$445 million.
Brian advertising revenue to be between 75 million dollar and $13 million.
This implies.
30% to 42%.
The sequential decrease of 28% to 40%.
Well go wrong to be between $240 million.
And 260 million dollar.
This implies.
5%.
Yes.
On a sequential decrease of 14% to 20%.
Oh my game revenue to be between a hindrance tend to meeting dollar.
Thank goodness 30 meeting dollar.
This implies.
Thank you 1%.
If you want.
And the sequential equal one person Tonight.
Non-GAAP that block.
Bill both with local Cellcom limited.
To be between $25 million and 35 million dollar.
GAAP loss per fully diluted.
To be between 65.
And like you said.
GAAP net loss attributable to fill hotel company limited.
To be between 10.8, Canadian dollar and $38 million.
And GAAP loss per fully diluted EPS to be between 70 cents unlikely process.
Excluding slogan Tri annual non-GAAP net loss attributable to fulfil bocom limits.
To be between $43 million.
48 million dollar.
GAAP net loss attributable to fulfil Cellcom limited.
To be between $45 million and $50 million.
For the fourth quarter 2017 guidance.
Well you update.
Right.
On the seven to one dollar.
Which compares with the actual integrate.
Our music.
Both one dollar for the fourth quarter was on a nice.
And on the of 6.031 dollar for the fourth quarter people the Nike.
Okay.
Okay managements current and preliminary deal.
We are at present is subject to substantial I'll sit in.
Particularly in Europe, the potential impact of the called me Nike Vera.
Backstop wage difficult analyze them could Dick.
Lastly, TCV mining.
Well take questions regarding the trials privatization proposal independently session.
This concludes our prepared remarks.
Operator, we would like to open the call for questions such I mean, ladies and gentlemen, we would now became the question then on so session.
If you want to ask questions on the phone. Please press star one and wait for a name to be announced.
If you like to conceal requests please press the pound pull hash key.
Delphia shortsighted and swap questions have been completed.
The first questions.
Come from at the live from Bank of America. Please go ahead.
The evening.
Thanks for taking my questions, but could you talk a little bit followed the top advertising industries.
We always media pieces.
Well go and then not enough first oh, which at the pacing industries hostility any negative impact from the call I know ribas opaque.
Yeah, those and then second the Oh.
Oh pieces.
Yeah, I'm not even close to see that help break down off the balance sheet Optipacket thesis units. So just wondering you the video pieces would need a capital raising and the house to catch to WT LPG is doing Oh, you, especially.
Deepened continue his deep pool.
And.
2020, I think you.
[noise] during Q4.
The top advertising industry still the auto right.
Drawn out right.
Oh, yeah yeah.
All go and.
It's a real estate or what's the ranking drawing on what's.
In Q4.
Before the.
Outbreak.
Internet.
Yes.
Mhm services and I T right here in services.
Hi ecommerce.
Well, it's basically the a the traditional order he would say the but now after the I after the all break up the cornerstone.
I think the.
I think real estate and although our old.
Impacted.
And Oh so.
Oh luxury goods.
Uh huh.
Basically its.
A.
You know basically.
Nearly all the this oh across the board are affected because you're.
Oh.
No.
Consumption and.
And also the.
The delivery logistics LTV, so everything so that's why we see across the board.
Decline advertising.
But the we do see a.
More consumption of video content long form drama.
So are you see us our.
Video screen subscription revenue growth.
And.
Oh, So all I gave me some mix on gaming.
People are spending more time at home and I'm, playing a PC games.
There's a positive contribution to the game consuming M. R. P R.
<unk>.
But for the mobile games.
Because the four hour.
Probably use our say if not staying home so that's kind of.
Delay the hour.
Development work, so that's kind of contributed negatively so it's.
Alan gave me some mix probably for a positive impact <unk>.
<unk> brand advertising is it really bad and a.
For video game.
Online video it's good it's it's a lot of.
Revenue grew nicely.
Yes, Andy.
Oh, no long deal pieces, our use of cash had not called like to cash balance off for 2020. Thanks.
So we've been.
Well I mean.
We are having a this low budget.
Our strategy basically for it sure video it sure drama we spend like.
For Tim stimulate RMB 20 at most 20, many RMB abuse.
No.
Drama.
And the through embedded advertising and also subscription and I know you've got to the marketing on different sort of network preference.
So we.
We tried to make the breakeven so basically that's why I also.
We have.
We have limited number of production it's actually.
2019.
A lot of those revenues I'm from our you know basically.
Previous [laughter] productions, we have a whole library off.
You House produced were.
Produced the video.
Drama.
In our generation continue.
The agenda to revenue.
And we still have we have by the we launched a new.
We launched in Q4.
Actually it's one the the season two offices.
Nickel boss.
And.
We do have another three.
You know two more video to more drama.
Already.
Basically.
[music].
Yeah.
Sure and and added ready to release, but.
For any further.
New drama.
It needs to be to wait for the you know for the current of ours too.
To subside and who you know two people basically you have you can have actress actress were crucial mask.
All right so.
So Kevin.
Yeah.
Thank you Josh.
So because our consumer in the past production libraries that we're not commenting on spending a lot of new money on producing new shows. So that's why you see our subscription.
Business continue to grow and than we actually the cost these Tom.
Thank you.
Thank you for the questions next question. This comes from July of Alicia Yap from Citigroup. Please go ahead.
Hi, good evening child.
Thanks for taking my question Oh questions on the guidance blogger Brad advertising.
So unfortunate beat outbreak has coughing.
A lot off the Mccabe impact so when you all 30% to 40% year, we get decline.
How much of that should we expect for the video to decline and then bar so still portal and that in your view when do you expect the accenture.
Two ready we cover and do you expect a full year twentytwenty too.
The ran connected world Fort Bragg, Robyn Thank you.
I think the.
The boasts the of the portal Adams brand have high on the on the portal and on the video side.
I think.
Equally basically boes are affected on the proportion of the same similarly.
But would be expected if the if the you know equal people get back to work and the economies start you know you know.
Start turning the starting a again then we expect a a you know.
Uptake basically a strong rebound.
Because a lot more advertisers I ready to spend money because they need do you have new products really need to two new market.
So there is to do you already Oh actually.
In 2019, you could you can see that.
We.
Our gloss right by.
The Q4, you compared to four.
With.
2018, Q4, we cut the loss by excluding excluding the Sogo Antonio the media business and video business lost by.
How much.
That was that stood at $29 million right 75 to two.
To a 20.
For the yes 46 right.
So Tony I'm encouraged so actually we.
Bye.
The cost saving initiatives like the spending less money.
On channels Oh.
You know these and also on account hand, but same time, we are improving our you know so how another original content and so actually our user base, a holding steady and we're spending less money on marketing, but where our user base actually grow and but the whole economy slowing down but.
We're holding our advertising in 2019 actually already created some.
Momentum.
Without the cone of ours.
We expect you know we would have you expect that our advertising continue to hold down and even to rebound.
And and then I'll cost continue to go down so you.
So that is.
So we expect that into the.
The later part of Q2 I think the.
We want to regain momentum that we are.
Accumulated in 2019 for the advertising topline and I know so yeah and also to.
To consolidate.
The two tickets the user base grows that we observed in about two months.
During the.
During the.
The current of ours.
No people staying home have more time and people are watching people need to consume not only video game I believe video games and the drama, but people need for getting information and the reliable information that's why the turned to sogou. So the so when he was actually.
It's more trustworthy brand because there's such a historical.
So.
No. It's a long is a brand that.
If you go trust because of the years.
So.
Actually we see the the news consumption.
Higher than industry average comparable so some of other news portals.
Thank you Chuck.
One quick follow up on the Olympic.
Given.
From the Olympics is not far away, how cheap got some discussions or the budget commitment from salons that much high so for the sponsorship.
That will actually help on the media portal business.
All perhaps maybe a bit onto the davita basis. Thank you.
Yes, It was Oh plan the before they are calling a virus because actually as I said, we meant weekend weekend, we have some momentum created for advertising and does that include a lot of events. We did in Q4 and the Q3 and that we plan to all those events for 2000 2020, because oh.
With its events and then people sponsor Adam has sponsor that includes.
Let me take the Tokyo Olympics and also we have this and a news marathon we have this.
Talent show for Us.
As you know this oh this.
Oh.
Hi.
Thank you.
Uh huh.
Steel so we are.
Retains the if you know standing still basically.
We don't know, where we will we don't know when the Olympic will be held the obviously, Japan is and also the out internationally as our different opinions that probably end of the year and.
And our no accordingly, so we don't have any.
We'd ever have Adam has committed to to those events, which was various it's all these events. We had in 2019 was very successful when people were willing to pay up to advertise.
But and they're all these events are a lot of uncertainties, whether we kind of it can do that because if offline that need a lot of people gathering.
Thats create.
Risk exposure to the virus.
No problem. Thank you Charles hooked up, thereby Banco over base.
Thanks.
Many events like the lags the some most companies some real estate companies or or.
You know all the companies the not aggressively.
[noise] exploring.
Live broadcast marketing that's why we are actually still getting some advertising in Q1, because some of the car companies and and you know the reduce the companies use our live broadcast platform to promote their to launch a new products.
Thats the will be plenty plenty you see a lot more things like that happening.
People move all the things online.
Okay, great. Thank you.
Yes.
Thank you for the questions.
Our next question comes from July All Thomas Chong from Jefferies. Please go ahead.
Hi, Good evening Bank management for picking my question.
A question regarding our revenue mix in our portal advertising, what's the contribution.
And on that you've got.
Think about the competition such Formby deal. Thank you.
You mean, the competition from short form video what do you mean.
Oh.
Yes.
Company wrapping my laptop advertising budget.
So just wondering how we should think about.
And advertising trends going forward, you might call a competition bankers house yet.
I think I think maybe sogo had some properties held on to answer your question about the SMB or impact due to like Youre talking about.
Oh, you're right I know those them.
Right.
Oh I for so long.
Oh.
So.
Also.
And the revenue.
Contribution so just wondering.
Brad.
Our reveal.
And you spending.
Yes.
Income represent a small part all her brand I I, rather than revenue or a and also so that part since it's so small and these basically remained steady and or in 2019 and our focus in 2019 was really on on the brand advertising and Brennan housing.
That is a there are 212 Hong for those two to take it away from us.
Because.
The brand Trust and also the.
The unique events and we had.
On an as reported in the original content all these things so we're not.
We are actually consolidated the brand advertising.
Basically the that that territory that we are.
We are consolidated in 2019.
So if you look at that whole picture of 2019, why we can have such a you know cost saving saving because we.
Oh, the channel and the marketing cost.
Same time intend the user base steady steady stabilize the user base and even for the its five or six.
So who is five portal for portal, we actually grow.
And also a focus really folks on the brand advertising and.
Our recent reporting quality content and also these events like Fiveg conference the conference.
All those conference Forum that created the content and also the Socal marathon so.
So who fashion show a fashion all these events those.
And is it's just a is that we're just seeing a different.
Different category.
So the a that locks brand. This is the out of highs.
So we're not affected by by the uprising armies the though.
No.
Got it thank you Todd.
Thank you for the questions. Once again just to remind you if you'd like to off question. Please press star one.
So no I think.
You'll kind of question, but I I want to a unit.
Scripted.
In a talk that it's not I don't think is getting the right. You know these really the elements, it's really about this quarter.
He is that after many many quarters in 2019, we were able to.
Stabilize our advertising revenue and grow our 60 a video substitution.
And is no consolidate stabilize our user base I, even grow in each five category and then dramatically caught the cost.
We achieved together with a sogo and and you know the tell you its contribution we achieved.
You know a profitable quarter non-GAAP, that's the the key off this quarter.
If without if if you know the.
The krona ours outbreak didn't happen, we'll continue that trend to be up continually to be.
You know on non-GAAP so non-GAAP.
For the well into 2020, that's a key obviously know this quarter suppressed.
Oh.
No.
Quarter results.
Because the strategy will continue to execute that strategy basically.
To grow our user base, which is a grow nicely during the last two months and.
And also.
Continue the momentum of brand advertising and same time to develop.
And also the the video screen Orange.
Business and same time, we've developed or something that were product that we hope that who is explode.
So that's the strategy, but without with these you know this grown iris and honest in the first quarter I don't hang definitely especially those.
Brand advertising that need a lot of discussion offline too to design the kind of events for our advertisers that people cannot meet in prison.
So our brand and definitely impacted.
But the people still have phase or other goodwill.
After if this the phase if this kind of our fate or are actually in kind of seems to trying to look up he seems them.
Under control you know its kearney, it's kind of returning mm in a good sign so that in Q2, if the whole business rebounded I think our will regain our momentum in our brand advertising I know so.
No continue this trend of.
Getting profitable.
Yeah, that's a key of this quarter.
Thank you.
Ladies and gentlemen that does conclude the conference for today. Thank you for your participation you may now disconnect your lines.
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