Q2 2020 Sogou Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to so Gurus second quarter Twentytwenty earnings Conference call.
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I would now like to turn the conference call over to your host today, Jesse James Investor Relations Oh Sogou. Please go ahead.
Hello, everyone and thank you for Johnny They'll go second quarter tiny tiny earnings conference call I'm, a cool RP always Joe Towell and I'll be at both the Alan Jope they'll give an overview of the business in the financial results.
We saw a practice on the previous earnings conference call children's prepared remarks, well be made in shell trends. What you think personalize the speech [laughter] Dol transferred learning technology, which was developed by the Sogo voice interaction Technology Center. Please note that due to the pending.
<unk> private you transaction, we will not be holding that you an age session at the end of this cool. If you have any question. Please contact us at IR at Sunoco, Inc. Dotcom.
Before management begins their prepared remarks, I would like to remind you of the company how do they pop birthday month in connection with today's conference call except for historical information contained here. The majerus disgusting. This conference call. All forward looking statements. These statements are based on the carbon can estimate.
And projections and therefore, we should not place undue reliance on them forward looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results could differ materially from those containing any forward looking statements.
For more information about potential risks and uncertainty please refer to the company filings with the Securities and Exchange Commission with that I'll now turn the call over Trolls C. O is shown trouble.
Thank you Jesse Hello, everyone. We delivered overall in life result in the second quarter. When you funded with healthy momentum in our core search and mobile keyboard businesses.
You a local search maintain that each year of traffic and reinforce its position as time is definitely largest search engine.
Mobile keyboard.
Ben did you pay to 484 million <unk>.
During the third largest funny mobile.
In terms of E U. According to Iresearch. In addition, our eight I've hardware business recorded always grill in the quarter since the beginning of this year the online advertising industry, particularly search advertising has been facing great challenges.
The pandemic exacerbate the structural changes the industry is undergoing and continued to dampen the overall advertising Benjamin and the business operation have asked them.
We bought the situation could continue for some time and Google you not immune to that.
Mr and favorable environment local has been actively upgrading it development strategy to focus on generating war use their value and building out a business that is oriented or long term value and grill.
We will further boosted eight empowerment and seamlessly across our businesses as we continuously enhance our technological advances in natural interaction and knowledge computing and blackbirds, our men and boys computer vision machine translation.
By law and you when they.
Now, let me walk you through each of our core businesses.
Words, as we move beyond consolidating information to offering valuable knowledge, we yaki balding become a knowledge and thanks to our Brooklyn, and knowledge producing and computing capability.
Oh that knowledge, producing we have focused on building up both general and vertical content.
As for Encyclopaedia and linguistic.
Other me user needs.
This also laid a solid foundation for knowledge computing in the second quarter the click through rate, that's our third content lightbridge in our optimize the knowledge graph increased 19% year over year.
In terms that knowledge computing, we have been able to provide user was more accurate answer and comprehensive knowledge little booked or content offering.
We are happy to see our third quality further improved with the fulfillment of our top direct answer continuing to climb.
In addition, with our health care thirds, that's that's a traffic fades away for eight I felt yeah, we are creating an accessible and reliable health care platform for every user in the second quarter, we established the so-called eight eye health care tender and made it clear.
Our goal is to get below healthcare services that feature our unique vocational epic card, which leverage our natural interaction and knowledge computing technology.
For example, I will work for eight I nutritionists jointly launch with China Nutrition Society has gained much attention in the industry.
In the second half a year, we will launch more vocational epic card <unk> eight high healthier to accelerate our program in the sector.
Turning to mobile keyboard, which is on track to become an eight I communication system.
On top of enriching eight I, mark input function and sending it vertical you pacing.
We continuously built it service model in the quarter.
Hi, Mark input in the second quarter, we launched a new function within Mark one that which is able to automatically building user conversation a reach at and due to you.
But once I penetrated into more than half of our organic user as of June funding funding. We also expanded mobile keyboard vertical use cases from handwriting multi language to Bury a free input.
Our recently launched the battery of fleet, Mark keyboard help visually impaired user improve input efficiency by over 60%.
In addition, we wrote out more eight input services ranging from boy Oh C. R translates into other which help reinforce mobile keyboard position as the largest did voice recognition app in China.
As of the end of two and <unk> average daily boy requires more than doubled year over year with a peak at 1.4 billion request for they all the efforts have resulted in the thing user growth, which lays a solid foundation for our subsequent effort.
To build a membership system to unlock the value of our youth asset.
At the same time, among our men service oriented initiative Oh further optimizing our recommendation survey. We are also boring you opportunity in value added services.
Chad eight <unk> input and in multi calling it a.
Switching user tend to feel most comfortable who's the right to income the mark hardware, we have been bribing eight empowerment of all caught up with the mission <unk> human machine input and output capability and to transform our product into virtual person.
This then BT eight.
Yeah, we have been increasing investment in RMB two further boot our eight I can be in hardware. Our flagship brought that built or am I recorder has covered a full range of high mid and low end market with leading product competitiveness.
Well enjoying strong affinity with eight <unk> input stemming from our mobile keyboard.
We also successfully lunch hour for children agitation product demos fixing a repair with eight in Naples function, such as Mark dialogue and translation.
Both our eight I recorder and dictionary pen half the mainstream E commerce platform in sales during the June 18, suffering basketball in the second half, we will accelerate product upgrade enrich the existing category and further tap into mainstream art.
Aware sector.
Now I'd like to move to an important recent updates and now a short time ago so-called would be a preliminary no biden proposal from Tencent.
Under wage Henson well acquire all of the outstanding ordinary share of local including 80 after.
That are not already owned by Tencent for nine U.S. dollar impacts per ordinary share or 80.
We appreciate Tencent recognition of our value and technology and innovation capability.
We have formed a special committee that consists of independent director to consider this proposal and we will ensure mapping month protection of our shareholder interests.
Finally, I want to welcome beyond Joel as our new CFO, who joined US in early July beyond 14 years his experience in finance and strategic planning will further strengthen the green.
Our management team capability with that I will now transferred to her to go through our financial.
See on please go ahead.
Thank you Chuck.
Now everyone I'm delighted to have join Chicago and be part of the strong team.
I'll now provide an overview of our results in the second quarter of 2020, our total revenues reached $261 million inline with our previous guidance.
Noted earlier search was relatively soft due to the external headwinds as well as already initiatives to reduce low all white traffic acquisition and cutbacks and what heightening inventories the interaction user experience, which is part of our strategic upgrade to phone.
Focus more on user body.
However, we are pleased to see the robust the momentum of smart hardware on the bottom line, our net loss narrowed significantly compared to the prior quarter. Thanks to the gradually normal tax burrows, coupled with the government's tax incentives.
Now I'll walk you through our second quarter financials in greater detail. Please note the unless otherwise noted all monetary amounts that I discussed are in U.S. daughters. Also note that I would refer to some non-GAAP numbers, which exclude share based compensation expense.
And you can find a reconciliation of non gap to GAAP measures in our earning release.
Total revenues in the second quarter were $261 million, a 14% decrease year over year, all constant currency basis total revenues in the second quarter decreased 11% year over year.
Search and search related revenues were $241 million, it's dark in per cent decrease year over year on constant currency basis search and search related revenues decreased 9% year over year did decrease was primarily due to the.
Decreasing auction based painful clique services, which accounted for 87% upsurge in search related revenues compared to 88% in the corresponding showing 29 team.
Revenues were $21 million, a 25% decrease year over year did decrease was primarily due to decreased revenues from non core businesses.
Partially offset by a 20% year or your increase in AI enable where.
Cost of revenues.
For $197 million, a 1% increase year over year traffic acquisition cost a primary driver of cost of revenues was 159 million daughters, and 9% increased year over year representing 61.
Percentof total revenues compared to 48% in the corresponding period in 2019, the increase in pack slowed down significantly from the first water as user traffic gradually normalize with the pandemic stabilizing in the second quarter.
Gross profit and non-GAAP gross profit for both $64 million, both a 40% decrease year over year, both GAAP and non-GAAP gross margin, what talk though for 25% compared to 36% a year ago did you.
Chris primarily resulted from the growth of traffic acquisition costs outpacing that up revenues.
Total operating expenses were $90 million, 86% decrease year over year research and development expenses were $49 million.
A 4% decrease year over year, representing 19% of total revenues compared to 17% in the corresponding pure in 2019.
The decrease was primarily attributable to rate decreases shared based compensation.
Sales and marketing expenses.
$32 million, a certain percentage decrease year over year, representing 12% of total revenues largely flat with the corresponding period in quality 19. The decrease was primarily due to a decrease in personnel related expenses.
R&D expenses were $10 million and 9% increase year over year, representing 4% of total revenues compared to a 3% in the corresponding impurities plenty 19.
Operating loss was $26 million compared to your operating income of $12 million and the corresponding impurity 2019, and non-GAAP operating loss was $23 million compared to operating income of 18 million.
Doctors in the corresponding pure rate of 2019 other income net was $16 million compared to $4 million in the corresponding period in 29 team and the increase was primarily due to a tax refund that was part of the Chinese government you should keep.
He's taken in response to Hawick 19, and all other tax exemptions.
Income tax benefit.
It was $1.1 million compared to 1.4 million dollarss and the corresponding period of plenty 19.
Net loss African bought yourselves, though was $8 million compared to net income of 21 million Dollarss and the corresponding short in 2019 and non-GAAP net loss attributable to self though was $6 million compared to a net income of 20 eights mills.
In dollars into corresponding period end Quanta 19.
GAAP basic and diluted loss per adss was two cents and non-GAAP basic and diluted loss per adss was one cents.
As of June 13th 2020, we had cash and cash equivalents and short term investments of $1.2 billion compared to $1.1 billion as of December 31st to 29 team and net operating cash inflow for their second quarter.
Twice winding was $14 million.
Capital expenditures for the second quarter was $6 million.
Given that they're going private transaction is under review and devaluation, we will now provide guidance this time.
At our current state we cannot comment on any details of the pending transaction well, let's keep the market update at the process moves a law and provide for the information as it becomes available.
With that I'd like to conclude our conference call today and thank you everyone for joining in for your continued support for so though.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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