BEIJING, Aug. 17, 2011 /PRNewswire-Asia/ -- Qihoo 360
Technology Co. Ltd. ("Qihoo 360" or the "Company") (NYSE:
QIHU), the No. 3 internet company in China as measured by
active user base, today reported its unaudited financial results
for the second quarter ended June 30,
2011.
Second Quarter 2011 Highlights(1)
- Revenues hit a record $35.1
million, an increase of 176.6% from $12.7 million in the second quarter of 2010.
- Net income attributable to Qihoo 360 was a record at
$11.1 million, an increase of 411.5%
from $2.2 million in the second
quarter of 2010.
- Net income attributable to Qihoo 360 excluding share-based
compensation ("non-GAAP")(1) was $13.2
million, an increase of 328.4% from $3.1 million in the second quarter of 2010.
- Diluted earnings per ADS(2) (EPADS) attributed to Qihoo 360
were $0.09.
- Diluted EPADS attributed to Qihoo 360 excluding share-based
compensation (non-GAAP)(1) was $0.11.
- Monthly active users of Qihoo 360's products and services
reached 378 million as of June 2011,
an increase of 10% from 345 million at the end of March 2011(3).
- Qihoo 360's products and services' user penetration rate among
all Chinese internet users reached 92% as of June 2011, the highest level in the Company's
history(3).
- 360 Safe Browser's user penetration reached a record 52% as of
June 2011, compared with 48% at the
end of March 2011(3)
(1) Non-GAAP
measures and related reconciliations to GAAP measures are described
in the accompanying sections titled "About Non-GAAP Financial
Measures" and "Reconciliations of Non-GAAP Financial Measures to
Comparable GAAP Measures" at the end of the press
release.
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(2) American Depositary Shares,
which are traded on the NYSE. Every two ADSs represent three Class
A ordinary shares of the Company.
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(3) User and
market penetration data is based on data from iResearch as of June
2011.
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"We are pleased to report another period of strong growth in the
second quarter as we set a number of new records in terms of our
performance," commented Hongyi Zhou,
Chairman and Chief Executive Officer of Qihoo 360. "Our strong
results were driven by our continued focus on product and
technology innovation and customer satisfaction. While global
economic uncertainty and volatility in the capital markets in
recent months appear to have caused some concern around the world,
the growth and development of the Internet sector in China and our business fundamentals remain
strong. As we continued to solidify our dominant market position in
China's Internet security
industry, we also expanded our market penetration in some key
product areas, such as our web browser. Our user base and user
penetration rates both hit record highs during the quarter. This is
particularly encouraging as it shows the level of trust our users
have in us and the strong brand recognition we carry in the
market."
"We will continue to proactively execute our open platform
strategy to drive long-term growth. Our focus on innovation has
been a core strength and will continue to be vital as we expand our
large and prosperous online ecosystem with partners to provide
broader coverage and deeper penetration across many internet
services and applications. We continued to see an increasing number
of business partners who have come to appreciate the value of our
open platforms in the most recent quarter, and we see even greater
potential as we build scale in the coming quarters and years," Mr.
Zhou concluded.
Xiangdong Qi, Qihoo 360's President, added, "With a relatively
healthy market environment in China and our solid execution, we achieved
stronger than expected revenue growth and noticeable margin
improvement in the second quarter. As we continue to execute our
business plan, we are confident that we can consistently deliver
strong operating results in the near term and we believe our
proactive investments in product innovation and technology on both
PC and mobile platforms will support long-term sustainable growth
for our company."
Second Quarter 2011 Operating
Metrics,
As of June 2011:
- Monthly active users of Qihoo 360's products were 378 million,
compared with 345 million as of March
2011 (3)
- Qihoo 360's product penetration rate among all Chinese internet
users was 92%, compared with 88% as of March
2011 (3)
- Monthly active users for 360 Safe Browser were 209 million,
compared with 192 million as of March
2011 (3)
- 360 Safe Browser's user penetration rate was 52%, compared with
48% as of March 2011 (3)
- Average daily unique visitors to the 360 Personal Start-up Page
were 45 million in June 2011,
compared with 38 million in March
2011 and 18 million in the same period of 2010.
- Average daily clicks on the 360 Personal Start-up Page were 138
million in June 2011, compared with
107 million in March 2011 and 45
million in the same period of 2010.
Second Quarter 2011 Results
Revenues
Revenues were $35.1 million,
representing an increase of 176.6% from $12.7 million in
the second quarter of 2010 and an increase of 53.1% from the first
quarter of 2011. The significant year-over-year and sequential
increases in revenues were mainly due to strong growth in online
advertising and internet value-added services.
Online advertising revenues were $26.8
million, up 215.7% from the same period last year and 63.0%
from the prior quarter. The robust growth was primarily driven by
further market penetration of the Company's key products, such as
360 Safe Browser and the 360 Personal Start-up Page, strong growth
in user activity, as well as the relatively healthy market
environment.
Internet value-added service revenues, which are mainly derived
from web games, were $8.1 million, up
158.5% from the same period last year and 31.8% from the prior
quarter. The growth was driven by a larger user base, as well as a
continued increase in the number of web games offered on the
Company's platform.
Cost of revenues
Cost of revenues was $3.7 million,
compared with $1.5 million in
the second quarter of 2010 and $2.8
million in the first quarter of 2011, representing increases
of 148.3% and 32.6%, respectively.
Operating expenses
Operating expenses were $18.7
million, compared with $8.9
million in the second quarter of 2010 and $40.5 million in the first quarter of 2011.
Operating expenses excluding share-based compensation (non-GAAP)
were $16.6 million, compared with
$8.0 million in the second quarter of
2010 and $12.4 million in the prior
quarter.
Operating income
Operating income was $12.8
million, compared with $2.4
million in the second quarter of 2010 and an operating loss
of $20.2 million in the prior
quarter.
Operating income excluding share-based compensation (non-GAAP)
was $14.8 million, compared with
$3.3 million in the second quarter
2010 and $7.8 million in the prior
quarter.
Operating margin was 36.3%, compared with 18.8% in the second
quarter of 2010 and -88.1% in the prior quarter.
Operating margin excluding share-based compensation (non-GAAP)
was 42.2%, compared with 25.9% in the second quarter of 2010 and
34.1% in the prior quarter. The significant year-over-year and
sequential improvements in non-GAAP operating margin were primarily
driven by robust revenue growth and cost efficiency across all
major operating expense lines.
Net income
Net income attributable to Qihoo 360 was $11.1 million,
compared with $2.2 million in
the second quarter of 2010 and a net loss attributable to Qihoo 360
of $21.4 million in the prior
quarter.
Net margin was 31.6%, compared with 17.1% in the same period
last year, and -93.5% in the prior quarter.
Non-GAAP net income
Net income attributable to Qihoo 360 excluding share-based
compensation (non-GAAP) was $13.2
million, compared with $3.1
million in the second quarter of 2010 and $6.6 million in the prior quarter, representing
increases of 328.4% and 100.0%, respectively.
Net margin excluding share-based compensation (non-GAAP) was
37.6%, compared with 24.3% in the same period last year and 28.8%
in the prior quarter. The substantial year-over-year and sequential
improvements in non-GAAP net margin were primarily driven by robust
revenue growth and effective cost management.
Cash Flows and Balance Sheet
Net cash flow generated from operations in the second quarter of
2011 was $16.9 million. As of
June 30, 2011, the Company had cash
and cash equivalents of $308.9
million.
Business Outlook
For the third quarter of 2011, the Company expects revenues to
be between $41 million and $42
million, representing a year-over-year increase of 165% -
172% and a sequential increase of 17% - 20%. These estimates
reflect the Company's current and preliminary view, which is
subject to possible material changes.
Conference Call
Qihoo 360's management will host a conference call to discuss
the results at 8:00 p.m. New York
Time on August 17, 2011 (8:00 a.m. Beijing time on August
18, 2011).
The dial-in details for the live conference call are:
US Toll Free Dial In:
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+1 800-561-2693
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US Toll / International Dial
In:
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+1 617-614-3523
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UK Dial In:
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+44 20-7365-8426
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Hong Kong Dial In:
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+852-3002-1672
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Passcode:
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QIHU
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A telephone replay of the call will be available after the
conclusion of the conference call at 11:00
p.m. Eastern Time on August 17,
2011 through 11:00 p.m. Eastern
Time on August 18, 2011. The
dial-in details for the replay are:
US Toll Free Dial In:
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+1 888-286-8010
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International Dial
In:
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+1 617-801-6888
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Passcode:
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73289321
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A live webcast of the conference call will be available on the
investor relations section of Qihoo 360's website at:
http://corp.360.cn.
About Qihoo 360
Qihoo 360 Technology Co. Ltd. is the No. 3 Internet company in
China as measured by user base. As
of June 2011, the Company had 378
million monthly active Internet users, representing a user
penetration rate of 92% in China,
according to iResearch. The Company is also the No. 1 provider of
Internet and mobile security solutions in China as measured by active user base,
according to iResearch. Recognizing security as a fundamental need
of Internet and mobile users, Qihoo 360 offers comprehensive
high-quality Internet and mobile security solutions free of charge.
In addition, Qihoo 360 also provides users with secure access
points to the Internet via its industry leading Safe Browser and
Application Desktop. Qihoo 360 monetizes its massive user base
primarily through online advertising on its web assets and through
Internet value-added services on its open platforms.
Forward-looking Statements
This press release contains statements of a forward-looking
nature. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of
1995. You can identify these forward- looking statements by
terminology such as "will," "expects," "believes," "anticipates,"
"intends," "estimates" and similar statements. Among other things,
the management's quotations and the Business Outlook section
contain forward-looking statements. These forward-looking
statements involve known and unknown risks and uncertainties and
are based on current expectations, assumptions, estimates and
projections about Qihoo 360 and the industry. Potential risks and
uncertainties include, but are not limited to: the Company's
ability to continue to innovate and provide attractive products and
services to attract and retain users; the Company's ability to keep
up with rapid changes in technologies and Internet-enabled devices;
the Company's ability to leverage its user base to attract
customers for our revenue-generating services; and the Company's
dependence on online advertising for a substantial portion of our
revenues; and the Company's ability to compete effectively. All
information provided in this press release is as of the date of the
press release, and Qihoo 360 undertakes no obligation to update any
forward-looking statements to reflect subsequent occurring events
or circumstances, or changes in its expectations, except as may be
required by law. Although Qihoo 360 believes that the expectations
expressed in these forward-looking statements are reasonable, it
cannot assure you that its expectations will turn out to be
correct, and investors are cautioned that actual results may differ
materially from the anticipated results. Further information
regarding risks and uncertainties faced by Qihoo 360 is included in
Qihoo 360's filings with the U.S. Securities and Exchange
Commission, including its final prospectus dated March 29, 2011.
About Non-GAAP Financial Measures
To supplement our financial results presented in accordance with
U.S. GAAP, we use non-GAAP financial measure, which is adjusted
from results based on U.S. GAAP to exclude share-based compensation
expenses. Reconciliations of our non-GAAP financial measures to our
U.S. GAAP financial measures are set forth in tables at the end of
this earnings release, which provide more details on the non-GAAP
financial measures.
Our non-GAAP financial information is provided as additional
information to help our investors compare business trends among
different reporting periods on a consistent basis and to enhance
investors' overall understanding of the historical and current
financial performance of our continuing operations and our
prospects for the future. Our non-GAAP financial information should
be considered in addition to results prepared in accordance with
U.S. GAAP, but should not be considered a substitute for or
superior to U.S. GAAP results. In addition, our calculation of this
non-GAAP financial information may be different from the
calculation used by other companies, and therefore comparability
may be limited.
For investor and media
inquiries, please contact:
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Qihoo 360 Technology Co.
Ltd.
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Tel: +86 10-5878-1000
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E-mail: ir@360.cn
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Christensen
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Mr. Christian Arnell
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Tel: +86 10-5826-4939
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E-mail: carnell@ChristensenIR.com
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Qihoo 360
Technology Co. Ltd.
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|
Condensed
Consolidated Balance Sheets
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|
(U.S.
dollars in thousands, except for shares and per share
data)
|
|
(Unaudited)
|
|
|
December
31,
|
June 30,
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|
|
2010
|
2011
|
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ASSETS
|
|
|
|
Current assets:
|
|
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Cash and cash
equivalents
|
60,505
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308,922
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|
Trading
securities
|
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512
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|
Accounts receivable
(net of allowance for doubtful accounts of
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|
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$14 and
$66 as of
December 31, 2010 and June 30, 2011,
respectively)
|
8,160
|
9,836
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Prepaid expenses and
other current assets
|
3,140
|
5,889
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|
Inventory
|
3
|
2
|
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Amount
due from related
parties
|
-
|
-
|
|
Deferred tax assets
- current
|
796
|
797
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Total current
assets
|
72,604
|
325,958
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Property and equipment,
net
|
3,306
|
7,495
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|
Acquired intangible
assets, net
|
5,546
|
6,504
|
|
Goodwill
|
3,918
|
4,460
|
|
Long-term
investments
|
1,981
|
1,188
|
|
Other noncurrent
assets
|
200
|
6,620
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|
Deferred tax assets -
noncurrent
|
253
|
35
|
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TOTAL ASSETS
|
87,808
|
352,260
|
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LIABILITIES
|
|
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|
Current
liabilities:
|
|
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Accounts payable
(including accounts payable of the consolidated
|
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|
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VIEs without
recourse to Qihoo 360 Technology Co. Ltd. of
|
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$1,383 and
$1,929 as of
December 31, 2010 and June 30, 2011,
respectively)
|
1,387
|
1,930
|
|
Accrued expenses and
other current liabilities (including accrued
|
|
|
|
expenses and
other current liabilities of the consolidated VIEs
|
|
|
|
without
recourse to Qihoo 360 Technology Co. Ltd. of
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$8,048 and
$12,977 as of
December 31, 2010 and June 30, 2011,
respectively)
|
10,885
|
19,758
|
|
Income tax payable
(including income tax payable of the consolidated VIEs
|
|
|
|
without
recourse to Qihoo 360 Technology Co. Ltd. of $92 and
$2,386
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|
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|
as of
December 31, 2010 and June 30, 2011,
respectively)
|
127
|
3,764
|
|
Current portion of
long-term payable (including current portion of
|
|
|
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long-term
payable of the consolidated VIEs without recourse to
|
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Qihoo 360
Technology Co. Ltd. of $1,525 and $1,278
as
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of December
31, 2010 and June 30, 2011,
respectively)
|
1,525
|
1,278
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Total current
liabilities
|
13,924
|
26,730
|
|
Deferred tax liabilities -
noncurrent
|
512
|
522
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Long-term payable
(including long-term payable of the consolidated
|
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VIEs without
recourse to Qihoo 360 Technology Co. Ltd. of
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$450 and nil as of
December 31, 2010 and June 30, 2011,
respectively)
|
450
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-
|
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TOTAL LIABILITIES
|
14,886
|
27,252
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|
Series A convertible
participating redeemable preferred shares
|
20,107
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-
|
|
Series B convertible
participating redeemable preferred shares
|
29,193
|
-
|
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Series C convertible
participating redeemable preferred shares
|
20,900
|
-
|
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EQUITY
|
|
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Total Qihoo 360 Technology
Co. Ltd. shareholders' equity
|
2,215
|
324,898
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Noncontrolling
interest
|
507
|
110
|
|
Total equity
|
2,722
|
325,008
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|
TOTAL LIABILITIES, CONVERTIBLE
PARTICIPATING
|
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REDEEMABLE PREFERRED
SHARES AND EQUITY
|
87,808
|
352,260
|
|
|
|
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|
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Qihoo 360
Technology Co. Ltd.
|
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Condensed
Consolidated Statements of Income
|
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(U.S.
dollars in thousands, except for shares and per share
data)
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June 30,
2010
|
March 31,
2011
|
June 30,
2011
|
|
June 30,
2010
|
June 30,
2011
|
|
Revenues:
|
|
|
|
|
|
|
|
Internet
services
|
11,652
|
22,606
|
34,897
|
|
19,511
|
57,503
|
|
Sales
of third party anti-virus
software
|
1,043
|
323
|
214
|
|
2,879
|
537
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Total revenues
|
12,695
|
22,929
|
35,111
|
|
22,390
|
58,040
|
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Cost of revenues:
|
|
|
|
|
|
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|
Internet
services
|
1,156
|
2,701
|
3,641
|
|
1,843
|
6,342
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Sales
of third party anti-virus
software
|
334
|
89
|
58
|
|
880
|
147
|
|
Total cost of
revenues
|
1,490
|
2,790
|
3,699
|
|
2,723
|
6,489
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|
Subsidy income
|
57
|
123
|
11
|
|
106
|
134
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Selling and
marketing
|
2,620
|
24,459
|
3,183
|
|
7,030
|
27,642
|
|
General and
administrative
|
893
|
3,198
|
3,533
|
|
1,619
|
6,731
|
|
Research and
development
|
5,366
|
12,815
|
11,954
|
|
10,239
|
24,769
|
|
Total operating
expenses
|
8,879
|
40,472
|
18,670
|
|
18,888
|
59,142
|
|
|
|
|
|
|
|
|
|
Income (loss)
from operations
|
2,383
|
(20,210)
|
12,753
|
|
885
|
(7,457)
|
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Interest income
|
103
|
184
|
370
|
|
195
|
554
|
|
Interest expense
|
(26)
|
(17)
|
(15)
|
|
(54)
|
(32)
|
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Other expense
|
(52)
|
(2)
|
61
|
|
(52)
|
59
|
|
Exchange (loss) gain
|
(164)
|
102
|
527
|
|
(276)
|
629
|
|
Change in
fair value of trading
securities
|
-
|
-
|
61
|
|
-
|
61
|
|
Income (loss)
before income tax (expense)
benefit
|
|
|
|
|
|
|
|
and loss from
equity method investment
|
2,244
|
(19,943)
|
13,757
|
|
698
|
(6,186)
|
|
Income tax (expense) benefit
|
(72)
|
(1,461)
|
(2,925)
|
|
(23)
|
(4,386)
|
|
Loss from equity method
investment
|
-
|
(47)
|
273
|
|
-
|
226
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
2,172
|
(21,451)
|
11,105
|
|
675
|
(10,346)
|
|
|
|
|
|
|
|
|
|
Less: Net loss
attributable
to noncontrolling
interest
|
-
|
6
|
5
|
|
-
|
11
|
|
|
|
|
|
|
|
|
|
Net income
(loss) attributable
to
|
|
|
|
|
|
|
|
Qihoo 360 Technology Co.
Ltd.
|
2,172
|
(21,445)
|
11,110
|
|
675
|
(10,335)
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of Non-GAAP
Financial Measures to Comparable GAAP Measures
|
|
|
Three Months
Ended June 30,
2010
|
|
Three Months
Ended March 31,
2011
|
|
Three Months
Ended June 30,
2011
|
|
|
GAAP
|
Adjustment(a)
|
Non-GAAP
|
|
GAAP
|
Adjustment(a)
|
Non-GAAP
|
|
GAAP
|
Adjustment(a)
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$8,879
|
($907)
|
$7,972
|
|
$40,472
|
($28,036)
|
$12,436
|
|
$18,670
|
($2,077)
|
$16,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from
operations
|
$2,383
|
$907
|
$3,290
|
|
($20,210)
|
$28,039
|
$7,829
|
|
$12,753
|
$2,079
|
$14,832
|
|
Operating margin
|
18.8%
|
|
25.9%
|
|
(88.1%)
|
|
34.1%
|
|
36.3%
|
|
42.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to Qihoo 360 Technology Co. Ltd.
|
$2,172
|
$907
|
$3,079
|
|
($21,445)
|
$28,039
|
$6,594
|
|
$11,110
|
$2,079
|
$13,189
|
|
Net margin
|
17.1%
|
|
24.3%
|
|
(93.5%)
|
|
28.8%
|
|
31.6%
|
|
37.6%
|
|
Diluted earnings per
ADS
|
|
N/A
|
N/A
|
|
N/A
|
|
N/A
|
|
$0.09
|
|
$0.11
|
|
|
|
|
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Six
Months Ended June
30, 2010
|
|
Six
Months Ended June
30, 2011
|
|
|
GAAP
|
Adjustment(a)
|
Non-GAAP
|
|
GAAP
|
Adjustment(a)
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$18,888
|
($1,819)
|
$17,069
|
|
$59,142
|
($30,113)
|
$29,029
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$885
|
$1,819
|
$2.704
|
|
($7,457)
|
$30,118
|
$22,661
|
|
Operating margin
|
4.0%
|
|
12.1%
|
|
(12.8%)
|
|
39.0%
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to Qihoo 360 Technology Co. Ltd.
|
$675
|
$1,819
|
$2,494
|
|
($10,335)
|
$30,118
|
$19,783
|
|
Net margin
|
3.0%
|
|
11.1%
|
|
(17.8%)
|
|
34.1%
|
|
|
|
|
|
|
|
|
|
|
(a): Adjustment
to exclude the share-based compensation expense of each
period.
|
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SOURCE Qihoo 360 Technology Co. Ltd.