CooTek Announces Fourth Quarter and Full Year 2019 Unaudited Results

SHANGHAI,March 12,2020 -- CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"),a fast-growing global mobile internet company,today reported unaudited financial results for the fourth quarter and full year ended December 31,2019.

Fourth Quarter 2019 Highlights

Net revenue was US$69.0 million,an increase of 47% from US$47.0 million during the same period last year.

Gross profit was US$65.1 million,an increase of 49% from US$43.6 million during the same period last year.

Gross profit margin was 94.4%,an increase of 1.8% year-over-year.

Net loss was US$6.6 million,compared with net income US$3.8 million during the same period last year.

Adjusted net loss[1] (Non-GAAP) was US$6.2 million,compared with adjusted net income (Non-GAAP) of US$4.6 million during the same period last year.

Portfolio products continued to be the main driver of revenue growth,contributing nearly 94% of total revenue.

Full Year 2019 Highlights

Net revenue was US$177.9 million,an increase of 33% from US$134.1 million in 2018.

Gross profit was US$162.6 million,an increase of 36% from US$119.2 million in 2018.

Gross profit margin was 91.4%,compared with 88.9% in 2018,an increase of 2.5% year-over-year.

Net loss was US$36.8 million,compared with net income of US$10.1 million last year.

Adjusted net loss (Non-GAAP) was US$33.2 million,compared with adjusted net income (Non-GAAP) of US$12.5 million in 2018.

December 2019 Operational Highlights

The average daily active users ("DAUs") of the Company's portfolio products[2] were 24.7 million,an increase of 46% from 16.9 million in December 2018.

The average monthly active users ("MAUs") of the Company's portfolio products were 74.6 million,an increase of 62% from 46.1 million in December 2018.

The user engagement[3] of the Company's portfolio products was approximately 33%,compared with approximately 37% in December 2018.

The average DAUs of TouchPal Smart Input were 137.6 million,a decrease of 2% from 140.8 million in December 2018.

The average MAUs of TouchPal Smart Input were 182.8 million,a decrease of 4% from 190.5 million in December 2018.

The user engagement of TouchPal Smart Input was approximately 75%,compared with approximately 74% in December 2018.

The average DAUs of the Company's global products[4] were 162.3 million,an increase of 3% from 157.7 million in December 2018.

The average MAUs of the Company's global products were 257.4 million,an increase of 9% from 236.6 million in December 2018.

"Our performance during the quarter far exceeded our expectations as our business bounced back strongly to regain its growth momentum," commented Mr. Karl Zhang,CooTek's Co-Founder and Chairman. "Our ability to derive sophisticated user insights and drive growth remains one of our key core competencies. Our in-house advertisement network grew rapidlyduring the quarter and beyond. During the first week of March 2020,we generated approximately 60% of our revenue from our ads network. Average revenue per user ("ARPU") rose as we reduced our dependency on third-party ad partners. Total DAUs of our content-rich portfolio of apps also regained growth momentum,which makes us optimistic about our future growth potential. Our focus remains on empowering everyone to enjoy relevant content seamlessly and we will continue developing and growing our portfolio of content-rich apps to meet the evolving needs of users."

[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]"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.

[3]User engagement is calculated by dividing DAUs by MAUs of certain products for a certain period.

[4]"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).

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%

Dec' 19

24.7

74.6

33.1%

137.6

182.8

75.3%

Fourth Quarter 2019 Financial Results

Net Revenues

(in US$ thousands,except percentage)

4Q 2019

3Q 2019

4Q 2018

QoQ % Change

YoY % Change

Mobile Advertising Revenue

68,465

30,548

46,487

124%

47%

Other Revenue

519

722

558

(28)%

(7)%

Total Net Revenues

68,984

31,270

47,045

121%

47%

Net revenueswere US$69.0 million,an increase of 47% from US$47.0 million during the fourth quarter of 2018 and an increase of 121% from US$31.3 million last quarter. The increase was primarily due to an increase in mobile advertising revenue.

Mobile advertising revenuewas US$68.5 million,an increase of 47% from US$46.5 million during the fourth quarter of 2018 and an increase of 124% from US$30.5 million last quarter.

Portfolio products accounted for approximately 95%,TouchPal Smart Input accounted for approximately 1% and TouchPal Phonebook accounted for approximately 4% of the mobile advertising revenue.

Cost and Operating Expenses

4Q 2019

3Q 2019

4Q 2018

QoQ %

Change

YoY %

change

(in US$ thousands,except percentage)

US$

% of revenue

US$

% of revenue

US$

% of revenue

Cost of revenues

3,866

6%

3,912

13%

3,487

7%

(1)%

11%

Sales and marketing

63,495

92%

33,463

107%

31,838

68%

90%

99%

Research and development

5,738

8%

6,933

22%

5,833

12%

(17)%

(2)%

General and administrative

2,752

4%

3,387

11%

3,625

8%

(19)%

(24)%

Other operating income,net

(644)

(1)%

(58)

0%

(1,526)

(3)%

1010%

(58)%

Total Cost and Expenses

75,207

109%

47,637

153%

43,257

92%

58%

74%

Share-based compensation expenses by function

Cost of revenues

26

0.0%

25

0.1%

15

0.0%

4%

73%

Sales and marketing

45

0.1%

32

0.1%

55

0.1%

41%

(18)%

Research and development

242

0.4%

700

2.2%

621

1.3%

(65)%

(61)%

General and administrative

133

0.2%

129

0.4%

120

0.3%

3%

11%

Total share-based compensation expenses

446

0.7%

886

2.8%

811

1.7%

(50)%

(45)%

Cost of revenueswas US$3.9 million,an 11% increase from US$3.5 million during the same period last year,and a 1% decrease from US$3.9 million last quarter. The year-over-year increase was mainly due to an increase in operational and maintenance-related expenses associated with the Company's expanding business. The slight sequential decrease was primarily due to a decline in VoIP-related expenses,and was partially offset by an increase in internet data center usage and cloud service expenses.

Gross profit was US$65.1 million,a 49% increase from US$43.6 million during the same period last year,and an increase of 138% from US$27.4 million last quarter. Gross profit margin was 94.4%,compared with 92.6% in the same period last year and 87.5% last quarter.

Sales and marketing expenses were US$63.5 million,an increase of 99% from US$31.8 million during the same period last year,and an increase of 90% from US$33.5 million last quarter. As a percentage of total revenue,sales and marketing expenses accounted for 92%,compared with 68% during the same period last year,and 107% last quarter. The year-over-year increase in sales and marketing expenses as a percentage of total net revenue was primarily due to increased investment in user acquisition that was in line with the Company's expanding business.

Research and development expenseswere US$5.7 million,a decrease of 2% from US$5.8 million during the same period last year and a decrease of 17% from US$6.9 million last quarter. The year-over-year decrease was primarily due to a decline in costs associated with technology R&D staff and share-based compensation expenses. As a percentage of total net revenue,research and development expenses accounted for 8%,compared with 12% during the same period last year and 22% last quarter.

General and administrative expenses were US$2.8 million,a decrease of 24% from US$3.6 million during the same period last year and a decrease of 19% from US$3.4 million last quarter. The sequential and year-over-year decreases were mainly due to a reversal of bad debt provision of US$0.6 million during the fourth quarter of 2019. As a percentage of total net revenue,general and administrative expenses accounted for 4%,compared with 8% during the same period last year and 11% during last quarter.

Other operating income,netwas US$0.6 million,compared with other operating income,net US$1.5 million during the same period last year and other operating income,net US$0.06 million last quarter.

Impairment loss of investmentswas US$0.5 million,compared with nil during the same period last year and last quarter. Considering the deterioration of investee's financial performance and uncertainty of its ability to generate sufficient cash flow to operate,the Company made a full provision of US$0.5 million in the fourth quarter of 2019.

Net losswas US$6.6 million,compared with net income of US$3.8 million during the same period last year and a net loss of US$16.2 million last quarter.

Adjusted net losswas US$6.2 million,compared with adjusted net income of US$4.6 million in the same period last year and adjusted net loss of US$15.4 million last quarter. The sequential narrowing of the adjusted net loss was mainly due to an increase in revenue while sales and marketing expenses as a percentage of total revenue decreased.

In US$ thousands,except percentage

4Q 2019

3Q 2019

4Q 2018

QoQ % Change

YoY % change

Net (loss) income

(6,646)

(16,246)

3,838

(59)%

(273)%

Add: Share-based Compensationrelated to share

options and restricted share units

446

886

811

(50)%

(45)%

Adjusted Net (Loss) Income (Non-GAAP)

(6,200)

(15,360)

4,649

(60)%

(233)%

Basic and diluted net loss per ADS were US$0.11 and US$0.11,and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.10 and US$0.10.

Balance Sheet and Cash Flows

As of December 31,2019,cash,cash equivalents and restricted cash were US$60.0 million,compared with US$56.3 million as of September 30,2019.

Net cash inflow from operating activities during the fourth quarter of 2019 was US$3.2 million,compared with net cash inflow from operating activities of US$13.3 million for the same period in 2018 and net cash outflow from operating activities of US$6.7 million during the last quarter. Cash inflow from operating activities during the fourth quarter of 2019 was mainly due to working capital utilization improvements,and was partially offset by a loss from operations.

Full Year 2019 Financial Results

Net Revenue

(in US$ thousands,except percentage)

2019

2018

YoY % Change

Mobile Advertising Revenue

175,041

131,287

33%

Other Revenue

2,843

2,823

1%

Total Net Revenue

177,884

134,110

33%

Net revenuewas US$177.9 million,an increase of 33% from US$134.1 million in 2018,primarily due to an increase in mobile advertising revenue.

Mobile advertising revenuewas US$175.0 million,an increase of 33% from US$131.3 million in 2018,primarily due to the growth in the number of DAUs of the Company's portfolio products.

Portfolio products accounted for approximately 85%,TouchPal Smart Input accounted for approximately 6%,and TouchPal Phonebook contributed approximately 9% of mobile advertising revenue,compared with 63%,22%,and 15% during full year 2018,respectively.

Cost and Operating Expenses

2019

2018

YoY % change

(in US$ thousands,except percentage)

US$

% of revenue

US$

% of revenue

Cost of revenue

15,301

9%

14,933

11%

2%

Sales and marketing

157,029

88%

80,730

60%

95%

Research and development

26,936

15%

19,325

14%

39%

General and administrative

16,256

9%

10,729

8%

52%

Other operating income,net

(873)

0%

(1,609)

(1)%

(46)%

Total Cost and Expenses

214,649

121%

124,108

92%

73%

Cost of revenuewas US$15.3 million,an increase of 2% from US$14.9 million in 2018,mainly due to an increase in operational and maintenance costs,and was partially offset by a decrease in VoIP-related expenses.

Gross profitwas US$162.6 million,an increase of 36% from US$119.2 million in 2018. Gross profit margin was 91.4%,compared with 88.9% in 2018.

Sales and marketing expenseswere US$157.0 million,an increase of 95% from US$80.7 million in 2018. As a percentage of total net revenue,sales and marketing expenses accounted for 88%,an increase from 60% in 2018,primarily due to increased investment in user acquisition.

Research and development expenseswere US$26.9 million,an increase of 39% from US$19.3 million in 2018,mainly due to an increase in costs associated with technology R&D staff. As a percentage of total net revenue,research and development expenses accounted for 15%,increasing from 14% in 2018.

General and administrative expenseswere US$16.3 million,an increase of 52% from US$10.7 million in 2018,primarily due to an increase of US$4.1 million in bad debt provision. As a percentage of total net revenue,general and administrative expenses accounted for 9%,increasing from 8% in 2018.

Other operating income,netwas US$0.9 million,a decrease from US$1.6 million in 2018. Other operating income primarily consisted of government subsidies received by the Company and contingent liabilities associated with an intellectual property infringement lawsuit.

Net losswas US$36.8 million,compared with net income of US$10.1 million in 2018.

Adjusted net losswas US$33.2 million in 2019,compared with adjusted net income of US$12.5 million in 2018.

In US$ thousands,except percentage

2019

2018

YoY % change

Net (loss) income

(36,846)

10,147

(463)%

Add: Share-based Compensationrelated to share options and restricted

share units

3,662

2,360

55%

Adjusted Net (Loss) Income (Non-GAAP)

(33,184)

12,507

(365)%

In 2019,the basic and diluted net loss per ADS were US$0.58 and US$0.58,respectively. Basic and diluted Adjusted Net Loss (Non-GAAP) per ADS were US$0.53 and US$0.53,respectively.

Balance Sheet and Cash Flow

As of December 31,Cash,compared with US$84.9 million as of December 31,2018.

Net cash outflow from operating activities in 2019 was US$15.7 million,compared with inflow from operations of US$23.1 million in 2018. Net cash outflow from operating activities was primarily a result of the net loss,and was partially offset by working capital utilization improvements.

Net cash outflow from investing activities in 2019 was US$5.3 million,which was primarily attributable to the purchase of property and equipment.

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. The 2018 Program was terminated during the fourth quarter of 2019. The Company repurchased an aggregate of 1.7 million ADSs for a total consideration of US$13.7 million under the 2018 Program. The Company netted the cancellation of treasury stock with additional paid in capital.

On November 20,the Company announced a new share repurchase program (the "2019 Program") whereby the Company is authorized to repurchase its class A ordinary shares in the form of ADSs with an aggregate value of up to US$6 million during the 6-month period starting from November 20,2019. As of December 31,the Company had used an aggregate of US$1.1 million to repurchase 0.2 million ADSs under the 2019 Program and recorded as treasury stock.

Business Outlook

For the first quarter of 2020,CooTek expects total revenue to be above US$85 million,representing above 112% 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 Thursday,2020 (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

Year Ended

December 31,

September 30,

December 31,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net revenues

47,045

31,270

68,984

134,110

177,884

Cost of revenues

(3,487)

(3,912)

(3,866)

(14,933)

(15,301)

Gross Profit

43,558

27,358

65,118

119,177

162,583

Operating expenses:

Sales and marketing expenses

(31,838)

(33,463)

(63,495)

(80,730)

(157,029)

Research and development expenses

(5,833)

(6,933)

(5,738)

(19,325)

(26,936)

General and administrative expenses

(3,625)

(3,387)

(2,752)

(10,729)

(16,256)

Other operating income,net

1,526

58

644

1,609

873

Total operating expenses

(39,770)

(43,725)

(71,341)

(109,175)

(199,348)

Income (loss) from operations

3,788

(16,367)

(6,223)

10,002

(36,765)

Impairment loss of investments

—

—

(500)

—

(500)

Interest income,net

107

118

55

215

764

Foreign exchange (loss) gain

(57)

3

22

(70)

(343)

Income (loss) before income taxes

3,838

(16,246)

(6,646)

10,147

(36,844)

Income tax expense

—

—

—

—

(2)

Net income (loss)

3,846)

Net income (loss) per ordinary share

Basic

0.001

(0.005)

(0.002)

0.003

(0.01)

Diluted

0.001

(0.005)

(0.002)

0.003

(0.01)

Weighted average shares used in

calculating net income (loss) per

ordinary share

Basic

3,143,398,375

3,148,392,266

3,129,987,962

1,464,257,884

3,155,082,983

Diluted

3,259,214,404

3,591,094,630

3,983

Non-GAAP Financial Data

Adjusted Net Income (loss)

4,649

(15,360)

(6,200)

12,507

(33,184)

Adjusted EBITDA

4,887

(14,469)

(5,346)

13,445

(30,940)

Unaudited Condensed Consolidated Balance Sheets

(inthousands,exceptforshareandpersharedata)

Asof

December 31,

2018

December 31,

2019

US$

US$

ASSETS

Current assets:

Cash and cash equivalents

84,860

59,906

Restricted cash

—

60

Short-term investment

—

572

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

December 31,2018 and $1,774 as of December 31,respectively

23,374

27,255

Prepaid expenses and other current assets

4,942

7,848

Total current assets

113,176

95,641

Long-term investments

500

—

Property and equipment,net

4,203

5,669

Intangible assets,net

8

268

Other non-current assets

556

259

TOTAL ASSETS

118,443

101,837

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

24,781

37,878

Short-term bank borrowings

—

9,013

Accrued salary and benefits

4,535

5,598

Accrued expenses and other current liabilities

3,582

5,956

Deferred revenue

344

3,888

Total current liabilities

33,242

62,333

Other non-current liabilities

878

596

TOTAL LIABILITIES

34,120

62,929

Unaudited Condensed Consolidated Balance Sheets (continued):

(inthousands,

2019

US$

US$

Shareholders' Equity:

Ordinary shares

32

31

Treasury Stock

(2,499)

(1,064)

Additional paid-in capital

204,701

194,972

Accumulated deficit

(116,752)

(153,598)

Accumulated other comprehensive loss

(1,159)

(1,433)

Total Shareholders' Equity

84,323

38,908

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

118,837

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

13,300

(6,689)

3,237

23,105

(15,663)

Net cash used in investing activities

(1,791)

(775)

(1,235)

(3,654)

(5,332)

Net cash (used in) provided by financing

activities

43,734

1,494

1,436

40,169

(3,797)

Net increase (decrease) in cash and cash

equivalents

55,243

(5,970)

3,438

59,620

(24,792)

Cash,cash equivalents,and restricted cash at

beginning ofperiod

29,448

62,774

56,270

27,026

84,860

Effect of exchange rate changes on cash and

cash equivalents

169

(534)

258

(1,786)

(102)

Cash,and restricted cash at

end ofperiod

84,860

56,270

59,966

84,966

Reconciliations of GAAP and Non-GAAP Results

(inthousands,

2018

2019

2019

2018

2019

US$

US$

US$

US$

US$

Net income (loss)

3,846)

Add:

Share-based compensation related to share options and

restricted share units

811

886

446

2,360

3,662

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

4,184)

Add:

Interest income,net

(107)

(118)

(55)

(215)

(764)

Income taxes

—

—

—

—

2

Depreciation

345

1,009

909

1,153

3,006

Adjusted EBITDA (Non-GAAP)*

4,940)

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

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