CooTek Announces Second Quarter 2019 Unaudited Results

SHANGHAI,Aug. 20,2019 -- CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"),a fast-growing global mobile internet company,today reported unaudited financial results for the second quarter ended June 30,2019.

Second Quarter 2019 Financial Highlights

Net revenue was US$37.6 million,an increase of 33% from US$28.4 million during the same period last year.

Gross profit was US$33.6 million,an increase of 37% from US$24.5 million during the same period last year. Gross profit margin was 89.4%,an increase of 2.9% year-over-year.

Net loss was US$14.1 million,compared to net income US$2.1 million during the same period last year.

Adjusted net loss[1] (Non-GAAP) was US$12.9 million,compared to adjusted net income (Non-GAAP) of US$2.8 million during the same period last year.

Second Quarter 2019 Operational Highlights

The average daily active users ("DAUs") of the Company's global products[2] were 171.3 million in June 2019 compared to 132.7 million in June 2018,an increase of 29% year-over-year.

The average monthly active users ("MAUs") of the Company's global products2 were 255.5 million in June 2019 compared to 193.9 million in June 2018,an increase of 32% year-over-year.

The average DAUs of the Company's portfolio products[3] were 27.6 million in June 2019 compared to 7.3 million in June 2018,an increase of 278% year-over-year.

The average MAUs of the Company's portfolio products3 were 65.1 million in June 2019 compared to 22.2 million in June 2018,an increase of 193% year-over-year.

The user engagement[4] of the Company's portfolio products in June 2019 was approximately 42%,compared to approximately 33% in June 2018 and approximately 39% in March 2019.

The average DAUs of TouchPal Smart Input were 143.7 million in June 2019 compared to 125.4 million in June 2018,an increase of 15% year-over-year.

The average MAUs of TouchPal Smart Input were 190.4 million in June 2019 compared to 171.7 million in June 2018,an increase of 11% year-over-year.

The user engagement of TouchPal Smart Input in June 2019 was approximately 76%,compared to approximately 73% in June 2018 and approximately 76% in March 2019.

[1]"Adjusted net income (loss)" (Non-GAAP) is a non-GAAP measure,which is defined as net income (loss) excluding share-based compensation. 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.

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%

Jun'19

27.6

65.1

42.4%

143.7

190.4

75.5%

Portfolio products continued to be the main driver of revenue growth,contributing nearly 76% to the total revenue.

"We built upon our strong start to the year with net revenue growing 33% year-over-year during the quarter to US$37.6 million and DAUs of our portfolio of products expanding to 27.6 million," commented Mr. Karl Zhang,CooTek's Co-Founder and Chairman. "The engagement rate of our portfolio apps continued to grow,expanding to 42% from 39% last quarter. We believe the impact from Google will be short-term and that our sophisticated capabilities to drive user growth leveraging our in-depth and unique user insights will continue to offer a unique value proposition. We are investing now to firmly establish and continuously evolve our content ecosystem in order to achieve long-term competitiveness and increase user stickiness. We will continue drive growth momentum by launching new and innovative products,retaining our users,and facilitating greater engagement with our products."

Second Quarter 2019 Financial Results

Net Revenues

(in US$ thousands,except percentage)

2Q 2019

1Q 2019

2Q 2018

QoQ % Change

YoY % Change

Mobile Advertising Revenue

36,651

39,377

27,643

(7%)

33%

Other Revenue

942

660

716

43%

32%

Total Net Revenues

37,593

40,037

28,359

(6%)

33%

Net revenuesfor the second quarter were US$37.6 million,an increase of 33% from US$28.4 million during the second quarter of 2018 and a decrease of 6% from US$40.0 million last quarter. The sequential decrease was primarily due to the decrease in advertising revenues recognized from Google for the last 2 months of the second quarter.

Mobile advertising revenuefor the second quarter was US$36.7 million,an increase of 33% from US$27.6 million during the second quarter of 2018 and a decrease of 7% from US$39.4 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 in user engagement.

Portfolio products accounted for approximately 78%,TouchPal Smart Input accounted for approximately 6% and TouchPal Phonebook accounted for approximately 16% of the mobile advertising revenue for the second quarter of 2019.

Cost and Operating Expenses

2Q 2019

1Q 2019

2Q 2018

QoQ %

Change

YoY %

change

(in US$ thousands,except percentage)

US$

% of revenue

US$

% of revenue

US$

% of revenue

Cost of revenues

3,982

11%

3,541

8%

3,828

13%

12%

4%

Sales and marketing

32,693

87%

27,378

68%

15,655

55%

19%

109%

Research and development

7,649

20%

6,616

17%

4,494

16%

16%

70%

General and administrative

7,773

21%

2,344

6%

2,279

8%

232%

241%

Other operating income,net

(103)

(0%)

(68)

(0%)

(48)

(0%)

51%

115%

Total Cost and Expenses

51,994

139%

39,811

99%

26,208

92%

31%

98%

Share-based compensation expenses by function

Cost of revenues

23

0.1%

18

0.0%

15

0.1%

28%

53%

Sales and marketing

61

0.2%

59

0.1%

33

0.1%

3%

85%

Research and development

946

2.5%

918

2.3%

470

1.7%

3%

101%

General and administrative

158

0.4%

148

0.4%

95

0.3%

7%

66%

Total share-based compensation expense

1,188

3.2%

1,143

2.9%

613

2.2%

4%

94%

Cost of revenuesfor the second quarter was US$4.0 million,representing a 4% increase from US$3.8 million during the same period last year and a 12% increase from US$3.5 million last quarter. The year-over-year increase was mainly due to an increase in operational and maintenance related expenses as the Company's businesses expanded and partially offset by a decrease in VoIP-related expenses as a result of continuous improvement in telecommunication services utilization efficiency. The sequential increase was primarily due to the expanding data center capacity and network infrastructure.

Gross profit for the second quarter was US$33.6 million,a 37% increase from US$24.5 million during the same period last year and a decrease of 8% from US$36.5 million last quarter. Gross profit margin was 89.4%,compared to 86.5% in the same period last year and 91.2% last quarter.

Sales and marketing expenses for the second quarter were US$32.7 million,an increase of 109% from US$15.7 million during the same period last year and an increase of 19% from US$27.4 million last quarter. As a percentage of total revenue,sales and marketing expenses accounted for 87% compared with 55% during the same period last year,and 68% during 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 second quarter were US$7.6 million,an increase of 70% from US$4.5 million during the same period last year and an increase of 16% from US$6.6 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 20%,as compared to 16% during the same period last year and 17% compared to last quarter.

General and administrative expenses for the second quarter were US$7.8 million,an increase of 241% from US$2.3 million during the same period last year and an increase of 232% from US$2.3 million last quarter. The sequential increase was mainly due to an increase of US$4.7 million in bad debt provision,the majority of which was accrued for certain customers influenced by Google's decision to disable some of the global portfolio apps. As a percentage of total net revenue,general and administrative expenses accounted for 21%,compared to 8% during the same period last year and 6% during last quarter.

Other operating income,netfor the second quarter was US$0.1 million,increased from US$0.05 million during the same period last year and US$0.07 million last quarter. It mainly consisted of government subsidies received by the Company.

Net lossfor the second quarter was US$14.1 million,as compared with net income of US$2.1 million during the same period last year and net income of US$0.2 million last quarter.

Adjusted net income(loss),a non-GAAP financial measure,represents net income (loss) excluding share-based compensation. Adjusted net loss for the second quarter was US$12.9 million,compared with adjusted net income of US$2.8 million in the same period last year and adjusted net income of US$1.3 million last quarter.

In US$ thousands,except percentage

2Q 2019

1Q 2019

2Q 2018

QoQ % Change

YoY % change

Net(loss)income

(14,126)

172

2,139

(8313%)

(760%)

Add: Share-based Compensationrelated to share

options and restricted share units

1,188

1,143

613

4%

94%

Adjusted Net (Loss) Income (Non-GAAP)

(12,938)

1,315

2,752

(1084%)

(570%)

Basic and diluted net loss per ADS were US$0.22 and US$0.22 in the second quarter of 2019,and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.20 and US$0.20 in this period.

Balance Sheets and Cash Flows

As of June 30,2019,Cash and cash equivalents and restricted cash was US$62.8 million compared to US$77.3 million as of March 31,2019.

Net cash outflow from operating activities during the second quarter of 2019 was US$8.9 million,compared to inflow from operations of US$2.0 million for the same period in 2018 and outflow of US$3.3 million during the last quarter. The cash outflow from operating activities during the second quarter of 2019 was the result of loss from operations.

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 June 30,the Company had used an aggregate of US$10 million to repurchase 1.1 million ADSs. As of June 30,the Company recorded treasury shares of US$4.3 million for the outstanding repurchased shares and netted the cancellation of treasury stock of US$5.7 million with additional paid in capital.

Business Outlook

For the third quarter of 2019,CooTek expects total revenue to be about US$30 million,representing 18% decrease year-over-year.

For the fiscal year of 2019,CooTek expects total revenue to about US$145 million,representing 8% 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 Tuesday,August 20,2019 (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 (loss) income 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

Six Months Ended

June 30,

March 31,

June 30,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net revenues

28,359

40,037

37,593

50,278

77,630

Cost of revenues

(3,828)

(3,541)

(3,982)

(8,038)

(7,523)

Gross Profit

24,531

36,496

33,611

42,240

70,107

Operating expenses:

Sales and marketing expenses

(15,655)

(27,378)

(32,693)

(26,346)

(60,071)

Research and development expenses

(4,494)

(6,616)

(7,649)

(8,323)

(14,265)

General and administrative expenses

(2,279)

(2,344)

(7,773)

(4,141)

(10,117)

Other operating income,net

48

68

103

70

171

Total operating expenses

(22,380)

(36,270)

(48,012)

(38,740)

(84,282)

Income (loss) from operations

2,151

226

(14,401)

3,500

(14,175)

Interest income,net

9

362

229

71

591

Foreign exchange (loss) gain

(21)

(416)

48

(59)

(368)

Income (loss) before income taxes

2,139

172

(14,124)

3,512

(13,952)

Income tax expense

-

-

(2)

-

(2)

Net income (loss)

2,126)

3,954)

Net income (loss) per ordinary share

Basic

0.001

0.00005

(0.004)

0.001

(0.004)

Diluted

0.001

0.00005

(0.004)

0.001

(0.004)

Weighted average shares used in

calculating net income (loss) per

ordinary share

Basic

898,393,690

3,181,144,897

3,163,372,938

898,171,199,334

Diluted

1,047,952,460

3,310,299,485

3,938

1,045,398,678

3,334

Non-GAAP Financial Data

Adjusted Net Income (loss)

2,752

1,315

(12,938)

4,403

(11,623)

Adjusted EBITDA

3,029

1,422

(12,547)

4,897

(11,125)

Unaudited Condensed Consolidated Balance Sheets

(inthousands,exceptforshareandpersharedata)

Asof

March31,

2019

June30,

2019

US$

US$

ASSETS

Current assets:

Cash and cash equivalents

77,203

62,774

Restricted cash

80

-

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

March 31,2019 and $4,665 as of June 30,respectively

27,295

24,659

Prepaid expenses and other current assets

5,812

5,954

Total current assets

110,390

93,387

Long-term investments

500

500

Property and equipment,net

4,315

6,370

Other non-current assets

478

377

TOTAL ASSETS

115,683

100,634

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

26,272

26,098

Short-term bank borrowings

-

1,394

Accrued salary and benefits

3,003

4,410

Accrued expenses and other current liabilities

2,664

2,402

Deferred revenue

329

319

Total current liabilities

32,268

34,623

Other non-current liabilities

577

548

TOTAL LIABILITIES

32,845

35,171

Unaudited Condensed Consolidated Balance Sheets (continued):

(inthousands,

2019

US$

US$

Shareholders' Equity:

Ordinary shares

32

32

Treasury Stock

(5,738)

(4,288)

Additional paid-in capital

205,844

201,474

Accumulated deficit

(116,580)

(130,707)

Accumulated other comprehensive loss

(720)

(1,048)

Total Shareholders' Equity

82,838

65,463

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

115,634

Unaudited Condensed Consolidated Statement of Cash Flows

(inthousands,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net cash provided by (used in) operating

activities

1,961

(3,334)

(8,876)

4,540

(12,210)

Net cash used in investing activities

(333)

(524)

(2,798)

(948)

(3,322)

Net cash used in by financing activities

(544)

(4,049)

(2,678)

(1,102)

(6,727)

Net increase (decrease) in cash and cash

equivalents

1,084

(7,907)

(14,352)

2,490

(22,259)

Cash,cash equivalents,and restricted cash at

beginning ofperiod

29,018

84,860

77,283

27,026

84,860

Effect of exchange rate changes on cash and

cash equivalents

(2,413)

330

(157)

(1,827)

173

Cash,and restricted cash at

end ofperiod

27,689

77,283

62,774

27,689

62,774

Reconciliations of GAAP and Non-GAAP Results

(inthousands,exceptforshareandpersharedata)

Three Months Ended

Six Months Ended

June30,

June30,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net income (loss)

2,954)

Add:

Share-based compensation related to share options and

restricted share units

613

1,143

1,188

891

2,331

Adjusted Net Income (Loss) (Non-GAAP)*

2,623)

Add:

Interest income,net

(9)

(362)

(229)

(71)

(591)

Income taxes

-

-

2

-

2

Depreciation

286

469

618

565

1,087

Adjusted EBITDA (Non-GAAP)*

3,125)

* The tax impact to the non-GAAP adjustments is zero.

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