CooTek Announces First Quarter 2019 Unaudited Results

SHANGHAI,June 3,2019 --CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"),a fast-growing global mobile internet company,today reported unaudited financial results for the first quarter ended March 31,2019.

First Quarter 2019 Financial Highlights

Net revenue was US$40.0 million,an increase of 83% from US$21.9 million during the same period last year.

Gross profit was US$36.5 million,an increase of 106% from US$17.7 million during the same period last year. Gross profit margin was 91.2%,an increase of 10.4% year-over-year.

Net income was US$0.2 million,compared to US$1.4 million during the same period last year.

Adjusted net income1 (Non-GAAP) was US$1.3 million,compared to adjusted net income (Non-GAAP) of US$1.7 million during the same period last year.

First Quarter 2019 Operational Highlights

The average daily active users ("DAUs") of the Company's global products2 were 169.0 million in March 2019 compared to 120.3 million in March 2018,an increase of 40% year-over-year.

The average monthly active users ("MAUs") of the Company's global products2 were 252.1 million in March 2019 compared to 176.0 million in March 2018,an increase of 43% year-over-year.

The average DAUs of the Company's portfolio products3 were 23.1 million in March 2019 compared to 4.6 million in March 2018,an increase of 402% year-over-year.

The average MAUs of the Company's portfolio products3 were 59.8 million in March 2019 compared to 14.4 million in March 2018,an increase of 315% year-over-year.

The user engagement4 of the Company's portfolio products in March 2019 was approximately 39%,compared to approximately 32% in March 2018 and approximately 37% in December 2018.

The average DAUs of TouchPal Smart Input were 145.9 million in March 2019 compared to 115.7 million in March 2018,an increase of 26% year-over-year.

The average MAUs of TouchPal Smart Input were 192.3 million in March 2019 compared to 161.6 million in March 2018,an increase of 19% year-over-year.

The user engagement of TouchPal Smart Input in March 2019 was approximately 76%,compared to approximately 72% in March 2018 and approximately 74% in December 2018.

Portfolio Products

TouchPal Smart Input

DAUs

MAUs

User Engagement

DAUs

MAUs

User Engagement

(in millions,except for the percentages)

Mar' 17

0.1

0.5

20.0%

61.7

96.6

63.9%

Jun' 17

0.3

0.8

37.5%

75.3

113.8

66.2%

Sep'17

0.7

2.3

30.4%

88.7

131.6

67.4%

Dec'17

2.9

9.4

30.9%

101.9

148.2

68.8%

Mar' 18

4.6

14.4

31.9%

115.7

161.6

71.6%

Jun' 18

7.3

22.2

32.9%

125.4

171.7

73.0%

Sep'18

11.0

33.7

32.6%

132.9

180.0

73.8%

Dec'18

16.9

46.1

36.7%

140.8

190.5

73.9%

Mar' 19

23.1

59.8

38.6%

145.9

192.3

75.9%

Portfolio productscontinued to be the main driver of revenue growth,contributing nearly 74% to the total revenue.

1"Adjusted net income" (Non-GAAP) is a non-GAAP measure,which is defined as net income excluding share-based compensation and compensation expense related to ordinary share repurchase. For further information,please see "Non-GAAP Financial Measures" and "Reconciliations of GAAP and non-GAAP results" at the bottom of this release.

2"global products" is to the mobile applications that we develop and provide to our users and business partners,which excludes TouchPal Phonebook. TouchPal Phonebook targets the Chinese domestic market and is different from TouchPal Smart Input and portfolio products that are designed for the global market (including China).

3"portfolio products" is to the mobile applications that we develop and provide to our users and business partners,which exclude TouchPal Smart Input and TouchPal Phonebook.

4 User engagement is calculated by dividing DAUs by MAUs of certain products for a certain period.

"We had a strong start of the year despite the usual seasonality of our first quarter," commented Mr. Karl Zhang,CooTek's Co-Founder and Chairman. "Revenue reached US$40 million,an increase of 83% year-over-year as our global user base kept growing fast and DAUs of our portfolio products reached 23 million in March,a growth of nearly 37% quarter-over-quarter."

"Our priority at this stage,as we mentioned last quarter,is to invest to further expand our user base rapidly and to build a solid growth platform which can drive our long-term success. User growth during the quarter exceeded our expectations,validating our strategy. During the quarter,we also made progress in building up our own ad ecosystem by launching CooTek Ads Platform,our proprietary ad serving platform." concluded Mr. Zhang.

First Quarter 2019 Financial Results

Net Revenues

(in US$ thousands,except percentage)

1Q 2019

4Q 2018

1Q 2018

QoQ % Change

YoY % Change

Mobile Advertising Revenue

39,377

46,487

20,825

(15%)

89%

Other Revenue

660

558

1,094

18%

(40%)

Total Net Revenues

40,037

47,045

21,919

(15%)

83%

Net revenuesfor the first quarter were US$40.0 million,an increase of 83% from US$21.9 million during the first quarter of 2018 and a decrease of 15% from US$47.0 million last quarter. The sequential decrease was primarily due to the seasonality of our mobile advertising business.

Mobile advertising revenuefor the first quarter was US$39.4 million,an increase of 89% from US$20.8 million during the first quarter of 2018 and a decrease of 15% from US$46.5 million last quarter. The year-over-year increase was primarily due to the rapid growth in the number of DAUs of portfolio products and improvement of the user engagement.

Portfolio products accounted for approximately 75%,TouchPal Smart Input accounted for approximately 18% and TouchPal Phonebook accounted for approximately 7% of the mobile advertising revenue for the first quarter of 2019.

Cost and Operating Expenses

1Q 2019

4Q 2018

1Q 2018

QoQ %

Change

YoY %

change

(in US$ thousands,except percentage)

US$

% of revenue

US$

% of revenue

US$

% of revenue

Cost of revenues

3,541

8%

3,487

7%

4,210

19%

2%

(16%)

Sales and marketing

27,378

68%

31,838

68%

10,691

49%

(14%)

156%

Research and development

6,616

17%

5,833

12%

3,829

17%

13%

73%

General and administrative

2,344

6%

3,625

8%

1,862

8%

(35%)

26%

Other operating income,net

(68)

(0%)

(1,526)

(3%)

(22)

0%

(96%)

209%

Total Cost and Expenses

39,811

99%

43,257

92%

20,570

93%

(8%)

94%

Share-based compensation expenses by function

Cost of revenues

18

0.0%

15

0.0%

8

0.0%

20%

125%

Sales and marketing

59

0.1%

55

0.1%

7

0.0%

7%

743%

Research and development

918

2.3%

621

1.3%

196

0.9%

48%

368%

General and administrative

148

0.4%

120

0.3%

66

0.3%

23%

124%

Total share-based compensation expense

1,143

2.9%

811

1.7%

277

1.3%

41%

313%

Cost of revenuesfor the first quarter was US$3.5 million,a decrease of 16% from US$4.2 million during the same period last year and a slight 2% increase from US$3.5 million last quarter. The year-over-year decrease was mainly due to a decrease in VoIP-related expenses as a result of continuous improvement in telecommunication services utilization efficiency. The sequential increase was primarily due to an increase in operational and maintenance expenses as the Company's businesses expanded.

Gross profit for the first quarter was US$36.5 million,a 106% increase from US$17.7 million during the same period last year and a decrease of 16% from US$43.6 million last quarter. Gross profit margin was 91.2%,compared to 80.8% in the same period last year and 92.6% last quarter.

Sales and marketing expenses for the first quarter were US$27.4 million,an increase of 156% from US$10.7 million during the same period last year and a decrease of 14% from US$31.8 million last quarter. As a percentage of total revenue,sales and marketing expenses accounted for 68% compared with 49% during the same period last year,and was flat compared with last quarter. The year-on-year increase in sales and marketing expenses as a percentage of total net revenue was primarily due to the increased investment in user acquisition.

Research and development expensesfor the first quarter were US$6.6 million,an increase of 73% from US$3.8 million during the same period last year and an increase of 13% from US$5.8 million last quarter. The year-on-year and sequential increases were primarily due to the increased cost associated with technology R&D staff. As a percentage of total net revenue,research and development expenses accounted for 17%,as compared to 17% during the same period last year and 12% compared to last quarter.

General and administrative expenses for the first quarter were US$2.3 million,an increase of 26% from US$1.9 million during the same period last year and a decrease of 35% from US$3.6 million last quarter. The sequential decrease was mainly due to a decrease in general and administrative payroll and professional services and administrative expenses. As a percentage of total net revenue,general and administrative expenses accounted for 6%,compared to 8% during the same period last year and 8% during last quarter.

Other operating income,netfor the first quarter was US$0.07 million,increased from US$0.02 million during the same period last year and decreased from US$1.5 million last quarter. It mainly consisted of government subsidies the Company received.

Net incomefor the first quarter was US$0.2 million,as compared with US$1.4 million during the same period last year and to US$3.8 million last quarter.

Adjusted net income,a non-GAAP financial measure,represents net income (loss) excluding share-based compensation. Adjusted net income for the first quarter was US$1.3 million,a decrease of 20% from US$1.7 million in the same period last year and a decrease of 72% from US$4.6 million last quarter.

In US$ thousands,except percentage

1Q 2019

4Q 2018

1Q 2018

QoQ % Change

YoY % change

Net income

172

3,838

1,373

(96%)

(87%)

Add: Share-based Compensationrelated to share

options and restricted share units

1,143

811

277

41%

313%

Adjusted Net Income (Non-GAAP)

1,315

4,649

1,650

(72%)

(20%)

Basic and diluted net income per ADS were US$0.003 and US$0.003 in the first quarter of 2019,and basic and diluted Adjusted Net Income (Non-GAAP) per ADS were US$0.02 and US$0.02 in this period.

Balance Sheet and Cash Flow

As of March 31,2019,Cash and cash equivalents and restricted cash was US$77.3 million compared to US$84.9 million as of December 31,2018.

Net cash outflow from operating activities during the first quarter of 2019 was US$3.3 million,compared to inflow from operations of US$2.6 million for the same period in 2018 and inflow of US$13.3 million during the last quarter. The cash outflow from operating activities during the first quarter of 2019 was the result of better credit terms extended to customers as part of the Company's initiatives to expand its advertising business,and the payment of staff annual bonuses and other accrued expenses by December 31,2018.

Share Repurchase Plan

On November 26,2018,the Company announced a share repurchase program whereby the Company is authorized to repurchase its own Class A ordinary shares in the form of ADSs with an aggregate value of up to US$15 million during the 12-month period from November 30,2018. As of March 31,the Company has used an aggregate of US$5.7 million to repurchase 645,367 ADSs.

Business Outlook

For the second quarter of 2019,CooTek expects total revenue to be between US$45 million and US$50 million,representing 58% to 76% increase year-over-year.

Conference Call and Webcast

CooTek's management team will host a conference call at 8:00 AM U.S. Eastern Time on Monday,2019 (8:00 PM Beijing Time on the same day),following the results announcement.

The dial-in details for the live conference call are:

United States: 1-888-346-8982

Hong Kong: 800-905-945

Mainland China: 4001-201-203

International: 1-412-902-4272

Please dial in 15 minutes before the call is scheduled to begin. When prompted,ask to be connected to the CooTek (Cayman) Inc. call.

A live webcast and archive of the conference call will be available on the Investor Relations section of CooTek's website at https://ir.cootek.com/.

About CooTek (Cayman) Inc.

CooTek is a fast-growing global mobile internet company. The mission of CooTek is to empower everyone to express themselves and enjoy relevant content seamlessly. The Company's user-centric and data-driven approach has enabled it to release appealing products to capture mobile internet users' ever-evolving content needs and helps it rapidly attract targeted users. Focusing on 5 verticals of fitness,lifestyle,healthcare,short videos and entertainment,CooTek has developed multiple rapidly growing content-rich portfolio apps with news feed to deliver relevant content.

Non-GAAP Financial Measure

To supplement the unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"),the Company uses non-GAAP financial measure of adjusted net income (loss) that is adjusted from results based on GAAP to exclude the impact of share-based compensation,and Adjusted EBITDA that is net (loss) income excluding interest income and expense,income taxes,depreciation,and share-based compensation. The measure should be considered in addition to results prepared in accordance with GAAP,but should not be considered a substitute for,or superior to,GAAP results.

The Company believes that the non-GAAP measure help identify underlying financial and business trends relating to the Company's results of operations that could otherwise be distorted by the effect of certain expenses that the Company include in (loss) income from operations and net (loss) income. By making the Company's financial results comparable period over period,the Company believes adjusted net (loss) income and Adjusted EBITDA provides useful information to better understand the Company's historical business operations and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision-making. In order to mitigate these limitations,the Company has provided specific information regarding the GAAP amounts excluded from the non-GAAP measure. The table at the bottom of this press release includes details on the reconciliation between GAAP financial measure that is most directly comparable to the non-GAAP financial measure the Company has presented.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934,as amended,and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. CooTek may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission,in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Any statements that are not historical facts,including statements about CooTek's beliefs and expectations,are forward-looking statements that involve factors,risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include,but not limited to the following: CooTek's mission and strategies; future business development,financial conditions and results of operations; the expected growth of the mobile internet industry and mobile advertising industry; the expected growth of mobile advertising; expectations regarding demand for and market acceptance of our products and services; competition in mobile application and advertising industry; and relevant government policies and regulations relating to the industry. Further information regarding these and other risks,uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release,and CooTek does not undertake any obligation to update such information,except as required under applicable law.

For investor enquiries,please contact:

CooTek (Cayman) Inc.

Jean Zhang

Email: IR@cootek.com

Christensen

In China

Mr. Christian Arnell

+86-10-5900-1548

carnell@christensenir.com

In US

Ms. Linda Bergkamp

+1-480-614-3004

lbergkamp@christensenir.com

CooTek (Cayman) INC.

Unaudited Condensed Consolidated Statement of Operations

(inthousands,exceptforshareandpersharedata)

Three Months Ended

March 31,

December 31,

March 31,

2018

2018

2019

US$

US$

US$

Net revenues

21,919

47,045

40,037

Cost of revenues

(4,210)

(3,487)

(3,541)

Gross Profit

17,709

43,558

36,496

Operating expenses:

Sales and marketing expenses

(10,691)

(31,838)

(27,378)

Research and development expenses

(3,829)

(5,833)

(6,616)

General and administrative expenses

(1,862)

(3,625)

(2,344)

Other operating income,net

22

1,526

68

Total operating expenses

(16,360)

(39,770)

(36,270)

Income from operations

1,349

3,788

226

Interest income,net

62

107

362

Foreign exchange loss

(38)

(57)

(416)

Income before income taxes

1,373

3,838

172

Income tax expense

-

-

-

Net income

1,838

172

Net income per ordinary share

Basic

0.0005

0.001

0.00005

Diluted

0.0004

0.001

0.00005

Weighted average shares used in calculating net income per ordinary share

Basic

898,393,690

3,143,398,375

3,181,144,897

Diluted

1,037,517,769

3,259,214,404

3,310,299,485

Non-GAAP Financial Data

Adjusted Net Income

1,650

4,315

Adjusted EBITDA

1,867

4,887

1,422

Unaudited Condensed Consolidated Balance Sheets

(inthousands,exceptforshareandpersharedata)

Asof

December31,

2018

March31,

2019

US$

US$

ASSETS

Current assets:

Cash and cash equivalents

84,860

77,203

Restricted cash

-

80

Accounts receivable,net of allowance for doubtful accounts of $1,286 and $1,286 as of

December 31,2018 and March 31,respectively

23,374

27,295

Prepaid expenses and other current assets

4,942

5,812

Total current assets

113,176

110,390

Long-term investments

500

500

Property and equipment,net

4,211

4,315

Other non-current assets

556

478

TOTAL ASSETS

118,443

115,683

LIABILITIES,CONVERTIBLE REDEEMABLE PREFERRED SHARES AND

SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

24,781

26,272

Accrued salary and benefits

4,535

3,003

Accrued expenses and other current liabilities

3,582

2,664

Deferred revenue

344

329

Total current liabilities

33,242

32,268

Other non-current liabilities

878

577

TOTAL LIABILITIES

34,120

32,845

Unaudited Condensed Consolidated Balance Sheets (continued):

(inthousands,

2019

US$

US$

Shareholders' Equity :

Ordinary shares

32

32

Treasury Stock

(2,499)

(5,738)

Additional paid-in capital

204,701

205,844

Accumulated deficit

(116,752)

(116,580)

Accumulated other comprehensive loss

(1,159)

(720)

Total Shareholders' Equity

84,323

82,838

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

118,683

Unaudited Condensed Consolidated Statement of Cash Flows

(inthousands,

2018

2018

2019

US$

US$

US$

Net cash provided by (used in) operating activities

2,579

13,300

(3,334)

Net cash used in investing activities

(615)

(1,791)

(524)

Net cash (used in) provided by financing activities

(558)

43,734

(4,049)

Net increase (decrease) in cash and cash equivalents

1,406

55,243

(7,907)

Cash,cash equivalents,and restricted cash at beginning ofperiod

27,026

29,448

84,860

Effect of exchange rate changes on cash and cash equivalents

586

169

330

Cash,and restricted cash at end ofperiod

29,018

84,283

Reconciliations of GAAP and Non-GAAP Results

(inthousands,exceptforshareandpersharedata)

Three Months Ended

March31,

March31,

2018

2018

2019

US$

US$

US$

Net income

1,838

172

Add:

Share-based compensation related to share options and restricted share units

277

811

1,143

Adjusted Net Income (Non-GAAP)*

1,650

4,649

1,315

Add:

Interest expense (income)

(62)

(107)

(362)

Income taxes

-

-

-

Depreciation

279

345

469

Adjusted EBITDA (Non-GAAP)*

1,422

* The non-GAAP adjustments do not take into consideration the impact of taxes on such adjustments.

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