CooTek Announces Third Quarter 2019 Unaudited Results

SHANGHAI,Nov. 18,2019 --CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"),a fast-growing global mobile internet company,today reported unaudited financial results for the third quarter ended September 30,2019.

Third Quarter 2019 Financial Highlights

Net revenue was US$31.3 million,a decrease of 15% from US$36.8 million during the same period last year.

Gross profit was US$27.4 million,a decrease of 18% from US$33.4 million during the same period last year. Gross profit margin was 87.5%,a decrease of 3.2% year-over-year.

Net loss was US$16.2 million,compared to net income US$2.8 million during the same period last year.

Adjusted net loss[1] (Non-GAAP) was US$15.4 million,compared to adjusted net income (Non-GAAP) of US$3.5 million during the same period last year.

Third Quarter 2019 Operational Highlights

The average daily active users ("DAUs") of the Company's global products[2] were 164.7 million in September 2019 compared to 143.9 million in September 2018,an increase of 14% year-over-year.

The average monthly active users ("MAUs") of the Company's global products2 were 252.6 million in September 2019 compared to 213.7 million in September 2018,an increase of 18% year-over-year.

The average DAUs of the Company's portfolio products[3] were 23.9 million in September 2019 compared to 11.0 million in September 2018,an increase of 117% year-over-year.

The average MAUs of the Company's portfolio products[3] were 67.5 million in September 2019 compared to 33.7 million in September 2018,an increase of 100% year-over-year.

The user engagement[4] of the Company's portfolio products in September 2019 was approximately 35%,compared to approximately 33% in September 2018.

The average DAUs of TouchPal Smart Input were 140.8 million in September 2019 compared to 132.9 million in September 2018,an increase of 6% year-over-year.

The average MAUs of TouchPal Smart Input were 185.1 million in September 2019 compared to 180.0 million in September 2018,an increase of 3% year-over-year.

The user engagement of TouchPal Smart Input in September 2019 was approximately 76%,compared to approximately 74% in September 2018.

[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%

Sep'19

23.9

67.5

35.4%

140.8

185.1

76.1%

Portfolio productscontinued to be the main driver of revenue growth,contributing nearly 80% to the total revenue.

"Our performance this quarter was better than we expected," commented Mr. Karl Zhang,CooTek's Co-Founder and Chairman. "Thanks to our fast-growing in-house ads network,CooTek Ads Platform,and other successful initiatives,we have mitigated the impact on monetization and user growth resulting from Google's decision on July 17th,2019 regardingour access to Google Play and Google Admob.Our business started to bounce back as both our daily revenue and the number of daily active users regained growth momentum. This is testament to our strong execution,core competency and unique value proposition built on our sophisticated capabilities to drive user growth leveraging our in-depth user insights. We are optimistic about the coming quarter and our long-term growth. We will continue to drive growth momentum by launching new and innovative products,retaining our users,and facilitating their greater engagement with our products."

Third Quarter 2019 Financial Results

Net Revenues

(in US$ thousands,except percentage)

3Q 2019

2Q 2019

3Q 2018

QoQ % Change

YoY % Change

Mobile Advertising Revenue

30,548

36,651

36,332

(17%)

(16%)

Other Revenue

722

942

455

(23%)

59%

Total Net Revenues

31,270

37,593

36,787

(17%)

(15%)

Net revenuesfor the third quarter were US$31.3 million,a decrease of 15% from US$36.8 million during the third quarter of 2018 and a decrease of 17% from US$37.6 million last quarter. The sequential decrease was primarily due to Google's decision to disable some of our global portfolio apps.

Mobile advertising revenuefor the third quarter was US$30.5 million,a decrease of 16% from US$36.3 million during the third quarter of 2018 and a decrease of 17% from US$36.7 million last quarter.

Portfolio products accounted for approximately 81%,TouchPal Smart Input accounted for approximately 2% and TouchPal Phonebook accounted for approximately 17% of the mobile advertising revenue for the third quarter of 2019.

Cost and Operating Expenses

3Q 2019

2Q 2019

3Q 2018

QoQ %

Change

YoY %

change

(in US$ thousands,except percentage)

US$

% of revenue

US$

% of revenue

US$

% of revenue

Cost of revenues

3,912

13%

3,982

11%

3,408

9%

(2%)

15%

Sales and marketing

33,463

107%

32,693

87%

22,546

61%

2%

48%

Research and development

6,933

22%

7,649

20%

5,169

14%

(9%)

34%

General and administrative

3,387

11%

7,773

21%

2,962

8%

(56%)

14%

Other operating income,net

(58)

0%

(103)

(0%)

(13)

0%

(44%)

346%

Total Cost and Expenses

47,637

153%

51,994

139%

34,072

93%

(8%)

40%

Share-based compensation expenses by function

Cost of revenues

25

0.1%

23

0.1%

15

0.0%

9%

67%

Sales and marketing

32

0.1%

61

0.2%

33

0.1%

(48%)

(3%)

Research and development

700

2.2%

946

2.5%

501

1.4%

(26%)

40%

General and administrative

129

0.4%

158

0.4%

109

0.3%

(18%)

18%

Total share-based compensation expense

886

2.8%

1,188

3.2%

658

1.8%

(25%)

35%

Cost of revenuesfor the third quarter was US$3.9 million,representing a 15% increase from US$3.4 million during the same period last year and a 2% decrease from US$4.0 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. The sequential decrease was primarily due to the decrease in VoIP-related expenses as a result of continuous improvement in telecommunication services utilization efficiency.

Gross profit for the third quarter was US$27.4 million,a 18% decrease from US$33.4 million during the same period last year and a decrease of 19% from US$33.6 million last quarter. Gross profit margin was 87.5%,compared to 90.7%in the same period last year and 89.4% last quarter.

Sales and marketing expenses for the third quarter were US$33.5 million,an increase of 48% from US$22.5 million during the same period last year and an increase of 2% from US$32.7 million last quarter. As a percentage of total revenue,sales and marketing expenses accounted for 107% compared with 61% during the same period last year,and 87% 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 in line with the business expansion trend.

Research and development expensesfor the third quarter were US$6.9 million,an increase of 34% from US$5.2 million during the same period last year and a decrease of 9% from US$7.6 million last quarter. The year-on-year increase was 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 22%,as compared to 14% during the same period last year and 20% last quarter.

General and administrative expenses for the third quarter were US$3.4 million,an increase of 14% from US$3.0 million during the same period last year and a decrease of 56% from US$7.8 million last quarter. The sequential decrease was mainly due to the accrued provision for bad debt of US$4.7 million in last quarter. As a percentage of total net revenue,general and administrative expenses accounted for 11%,compared to 8% during the same period last year and 21% during last quarter.

Other operating income,netfor the third quarter was US$0.06 million,compared with other operating income,net US$0.01 million during the same period last year and other operating income,net US$0.1 million last quarter. For the third quarter of 2019,the other operating income,net mainly consisted of government subsidies received by the Company and contingent liabilities for intellectual property infringement lawsuit during our business.

Net lossfor the third quarter was US$16.2 million,as compared with net income of US$2.8 million during the same period last year and net loss of US$14.1 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 third quarter was US$15.4 million,compared with adjusted net income of US$3.5 million in the same period last year and adjusted net loss of US$12.9 million last quarter. Thegreater loss compared to last quarter was mainly due to the decrease in revenue while total operation cost remained stable in scale excluding bad debt provision impact.

In US$ thousands,except percentage

3Q 2019

2Q 2019

3Q 2018

QoQ % Change

YoY % change

Net (loss) income

(16,246)

(14,126)

2,798

15%

(681%)

Add: Share-based Compensationrelated to share

options and restricted share units

886

1,188

658

(25%)

35%

Adjusted Net (Loss) Income (Non-GAAP)

(15,360)

(12,938)

3,456

19%

(544%)

Basic and diluted net loss per ADS were US$0.26 and US$0.26 in the third quarter of 2019,and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.24 and US$0.24 in this period.

Balance Sheets and Cash Flows

As of September 30,2019,Cash and cash equivalents and restricted cash was US$56.3 million compared to US$62.8 million as of June 30,2019.

Net cash outflow from operating activities during the third quarter of 2019 was US$6.7 million,compared to inflow from operations of US$5.3 million for the same period in 2018 and outflow of US$8.9 million during the last quarter. The cash outflow from operating activities during the third quarter of 2019 was the result of the loss from operations.

Share Repurchase Plan

On November 26,2018,the Company announced a share repurchase program(the "2018 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 September 30,the Company had used an aggregate of US$12 million to repurchase 1.4 million ADSs and legally cancelled 0.6 million ADSs of the repurchased ADSs. As of September 30,the Company recorded treasury shares of US$6.5 million for the outstanding repurchased shares and netted the cancellation of treasury stock of US$5.7 million with additional paid in capital.

The Company will early terminate the 2018 Program on November 20,and take effect a new share repurchase program on the same day. In the new share repurchase program,the Company is authorized to repurchase its class A ordinary shares in the form of American depository shares with an aggregate value of up to US$6 million during the 6-month period starting from November 20,2019. The Company expects to fund the repurchases under this program with its existing cash balance.

"We announce a new share repurchase program which reflects our confidence in the long-term growth and the value of our business,CooTek co-founder and Chairman.

Business Outlook

For the fourth quarter of 2019,CooTek raisesits revenue expectation by 28% to about US$48 million,representing 2% increase year-over-year.

For the fiscal year of 2019,CooTek raises itsexpected total revenue to about US$157 million from previously forecasted US$145 million,representing a17% 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,November 18,2019 (9:00 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

Nine Months Ended

September 30,

June 30,

September 30,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net revenues

36,787

37,593

31,270

87,065

108,900

Cost of revenues

(3,408)

(3,982)

(3,912)

(11,446)

(11,435)

Gross Profit

33,379

33,611

27,358

75,619

97,465

Operating expenses:

Sales and marketing expenses

(22,546)

(32,693)

(33,463)

(48,892)

(93,534)

Research and development expenses

(5,169)

(7,649)

(6,933)

(13,491)

(21,198)

General and administrative expenses

(2,962)

(7,773)

(3,387)

(7,104)

(13,504)

Other operating income,net

13

103

58

83

229

Total operating expenses

(30,664)

(48,012)

(43,725)

(69,404)

(128,007)

Income (loss) from operations

2,715

(14,401)

(16,367)

6,215

(30,542)

Interest income,net

37

229

118

108

709

Foreign exchange (loss) gain

46

48

3

(13)

(365)

Income (loss) before income taxes

2,798

(14,124)

(16,246)

6,310

(30,198)

Income tax expense

—

(2)

—

—

(2)

Net income (loss)

2,126)

(16,200)

Net income (loss) per ordinary share

Basic

0.001

(0.004)

(0.005)

0.002

(0.01)

Diluted

0.001

(0.004)

(0.005)

0.002

(0.01)

Weighted average shares used in

calculating net income (loss) per

ordinary share

Basic

898,393,690

3,163,372,938

3,148,392,266

898,501,054

Diluted

1,038,101,836

3,266

1,021,309,169

3,054

Non-GAAP Financial Data

Adjusted Net Income (loss)

3,456

(12,938)

(15,360)

7,858

(26,983)

Adjusted EBITDA

3,662

(12,547)

(14,469)

8,558

(25,594)

Unaudited Condensed Consolidated Balance Sheets

(inthousands,exceptforshareandpersharedata)

Asof

June30,

2019

September30,

2019

US$

US$

ASSETS

Current assets:

Cash and cash equivalents

62,774

56,270

Accounts receivable,net of allowance for doubtful accounts of $4,665 as of

June 30,2019 and $3,249 as of September 30,respectively

24,659

19,408

Prepaid expenses and other current assets

5,954

6,481

Total current assets

93,387

82,159

Long-term investments

500

500

Property and equipment,net

6,370

6,170

Other non-current assets

377

282

TOTAL ASSETS

100,634

89,111

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

26,098

28,514

Short-term bank borrowings

1,394

5,100

Accrued salary and benefits

4,410

3,868

Accrued expenses and other current liabilities

2,402

2,797

Deferred revenue

319

584

Total current liabilities

34,623

40,863

Other non-current liabilities

548

592

TOTAL LIABILITIES

35,171

41,455

Unaudited Condensed Consolidated Balance Sheets (continued):

(inthousands,

2019

US$

US$

Shareholders' Equity:

Ordinary shares

32

32

Treasury Stock

(4,288)

(6,503)

Additional paid-in capital

201,474

202,458

Accumulated deficit

(130,707)

(146,952)

Accumulated other comprehensive loss

(1,048)

(1,379)

Total Shareholders' Equity

65,463

47,656

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

100,111

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

5,265

(8,876)

(6,689)

9,805

(18,899)

Net cash used in investing activities

(915)

(2,798)

(775)

(1,863)

(4,097)

Net cash (used in) provided by financing

activities

(2,463)

(2,678)

1,494

(3,565)

(5,233)

Net increase (decrease) in cash and cash

equivalents

1,887

(14,352)

(5,970)

4,377

(28,229)

Cash,cash equivalents,and restricted cash at

beginning ofperiod

27,689

77,283

62,774

27,026

84,860

Effect of exchange rate changes on cash and

cash equivalents

(128)

(157)

(534)

(1,955)

(361)

Cash,and restricted cash at

end ofperiod

29,448

62,270

29,448

56,270

Reconciliations of GAAP and Non-GAAP Results

(inthousands,

September30,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net income (loss)

2,200)

Add:

Share-based compensation related to share options and

restricted share units

658

1,188

886

1,548

3,217

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

3,983)

Add:

Interest income,net

(37)

(229)

(118)

(108)

(709)

Income taxes

—

2

—

—

2

Depreciation

243

618

1,009

808

2,096

Adjusted EBITDA (Non-GAAP)*

3,594)

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

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