BEIJING, Nov. 16, 2011 /PRNewswire-Asia/ -- Qihoo 360
Technology Co. Ltd. ("Qihoo 360" or the "Company") (NYSE:
QIHU), the leading Internet company in China as measured by active user base, today
reported its unaudited financial results for the third quarter
ended September 30, 2011.
Third Quarter 2011 Highlights
(1)
- Revenues were a record $47.5
million, an increase of 207% from $15.5 million in the third quarter of 2010.
- Net income attributable to Qihoo 360 was $10.9 million, an increase of 186% from
$3.8 million in the third quarter of
2010.
- Net income attributable to Qihoo 360 excluding share-based
compensation ("non-GAAP")(1) was $19.5
million, an increase of 306% from $4.8 million in the third quarter of 2010.
- Diluted earnings per ADS(2) (EPADS) attributable to Qihoo 360
were $0.09.
- Diluted EPADS attributable to Qihoo 360 excluding share-based
compensation (non-GAAP)(1) were $0.16.
- User penetration of Qihoo 360's browsers reached a record 57%
in September 2011(3).
- Average daily clicks on the Company's 360 Personalized Start-up
Pages were 185 million in September
2011.
(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 September
2011.
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"We are very pleased to report our third consecutive quarter of
robust growth since becoming a public company as we set a number of
new records in financial and operating metrics," commented
Hongyi Zhou, Chairman and Chief
Executive Officer of Qihoo 360. "Our success was driven by our
continued focus on product and technology innovation and customer
satisfaction. Despite continued global economic uncertainty and
capital markets volatility, growth in China's Internet sector remains healthy and we
continue to outgrow the market by a wide margin.
"Our business fundamentals are stronger than ever. We saw
accelerated growth in all major business segments, including online
advertising and Internet value-added services during the quarter.
As we maintain our dominant market position in China's Internet security industry, we
continued to expand our market share in other key product areas.
Our browsers' user penetration hit a record high of 57%,
effectively becoming the market leader in September. 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 remain well positioned for the many opportunities that we
believe lie ahead as we execute our open platform strategy and to
drive long-term growth. Our focus on innovation has been a core
strength and will continue to be vital as we expand our online
platform with new services and applications. Today, more businesses
than ever have come to appreciate the value that our open platform
brings to the market. We intend to capitalize on this untapped
potential as we build scale in the coming quarters and years," Mr.
Zhou concluded.
Xiangdong Qi, President of Qihoo 360, added, "With a healthy
market environment in China and
our history of solid execution, we achieved stronger than expected
revenue growth and profitability in the third quarter. During the
quarter, we significantly expanded our mobile product portfolio by
launching a full range of mobile browsers and app stores for mobile
applications. As we continue to execute our business plan, we are
confident that we can consistently deliver strong operating results
in the near term. 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."
Third Quarter 2011 Operating
Metrics,
As of September 2011:
- Monthly active users of Qihoo 360's products were 370 million;
Qihoo 360's product penetration rate among all Chinese Internet
users was 89%(3).
- Monthly active users of Qihoo 360's browsers were 235
million(3).
- The user penetration rate of Qihoo 360's browsers was
57%(3).
- Average daily unique visitors to the 360 Personalized Start-up
Pages were 55 million.
- Average daily clicks on the 360 Personalized Start-up Pages
were 185 million.
(3) User and market penetration
data is based on data from iResearch as of September
2011.
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Third Quarter 2011 Results
Revenues
Revenues were $47.5 million,
representing an increase of 207% from $15.5
million in the third quarter of 2010 and an increase of 35%
from the second quarter of 2011. The significant year-over-year and
sequential increases in revenues were mainly due to accelerated
growth in both online advertising and Internet value-added
services.
Online advertising revenues were $35.1
million, up 227% from the same period last year and 31% from
the prior quarter. The robust growth was primarily driven by
further market penetration of the Company's key products, such as
the 360 browsers and the 360 Personalized Start-up Pages, robust
growth in user activity, as well as the support of a healthy market
environment. The Company also collected approximately $2.7 million in back payments from a former
search partner through a settlement reached during the quarter.
Internet value-added service revenues, which are mainly derived
from web game operations, were $12.1
million, up 198% from the same period last year and 49% from
the prior quarter. The year-over-year and sequential growth was
mainly driven by the accelerated growth of the games' user
base.
Cost of revenues
Cost of revenues was $5.3 million,
compared with $1.8 million in the
third quarter of 2010 and $3.7
million in the second quarter of 2011, representing
increases of 200% and 45%, respectively.
Operating expenses
Operating expenses were $31.4
million, compared with $10.0
million in the third quarter of 2010 and $18.7 million in the second quarter of 2011.
Operating expenses excluding share-based compensation (non-GAAP)
were $22.7 million, compared with
$9 million in the third quarter of
2010 and $16.6 million in the prior
quarter.
Operating income
Operating income was $10.8
million, compared with $3.7
million in the third quarter of 2010 and $12.8 million in the prior quarter.
Operating income excluding share-based compensation (non-GAAP)
was $19.4 million, compared with
$4.7 million in the third quarter
2010 and $14.8 million in the prior
quarter.
Operating margin was 22.7%, compared with 24.1% in the third
quarter of 2010 and 36.3% in the prior quarter.
Operating margin excluding share-based compensation (non-GAAP)
was 40.9%, compared with 30.6% in the third quarter of 2010 and
42.2% in the prior quarter. The significant year-over-year
improvements in non-GAAP operating margin were primarily driven by
robust revenue growth.
Net income
Net income attributable to Qihoo 360 was $10.9 million, compared with $3.8 million in the third quarter of 2010 and
$11.1 million in the prior
quarter.
Net income attributable to Qihoo 360 excluding share-based
compensation (non-GAAP) was $19.5
million, compared with $4.8
million in the third quarter of 2010 and $13.2 million in the prior quarter, representing
increases of 306% and 48%, respectively.
Net margin
Net margin was 23.0%, compared with 24.7% in the same period
last year, and 31.6% in the prior quarter.
Net margin excluding share-based compensation (non-GAAP) was at
a record high of 41.2%, compared with 31.1% in the same period last
year and 37.6% in the prior quarter. The substantial year-over-year
improvements in non-GAAP net margin were driven by robust revenue
growth, as well as foreign currency exchange gains.
Cash Flows and Balance Sheet
Net cash flow generated from operations in the third quarter of
2011 was $20.2 million. Capital
expenditures were $5.3 million during
the quarter. As of September 30,
2011, the Company had cash and cash equivalents of
$319 million.
Business Outlook
For the fourth quarter of 2011, the Company expects revenues to
be between $55 million and $56
million, representing a year-over-year increase of 178% -
183% and a sequential increase of 16% - 18%. For the full year
2011, the Company expects revenues to be between $160 million and $161 million, representing a
year-over-year increase of 177% - 179%. 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 7:30 p.m. Eastern Standard
Time on November 16, 2011
(8:30 a.m. Beijing time on November 17, 2011).
The dial-in details for the live conference call are:
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US Toll Free Dial In:
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+1 866-519-4004
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US Toll / International Dial
In:
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+1 718-354-1231
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UK Dial In:
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+44 (0)808-234-6646
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Hong Kong Dial In:
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+852-2475-0994
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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 11:30
a.m. Eastern Standard Time on November 17, 2011 through 11:30 p.m. Eastern Standard Time on November 25, 2011. The dial-in details for the
replay are:
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US Toll Free Dial In:
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+1 718-354-1232
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International Dial
In:
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+1 866-214-5335
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Passcode:
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24919216
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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 a leading Internet company in
China as measured by active user
base. The Company is also the No. 1 provider of Internet and mobile
security solutions in China as
measured by active smartphone user base, according to iResearch. In
addition, Qihoo 360 also provides users with secure access points
to the Internet via its market leading web browsers and application
stores. The Company has built one of the largest Internet open
platform in China. Qihoo 360
monetizes its massive user base primarily through online
advertising 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:
Qihoo 360 Technology Co. Ltd.
Tel: +86 10-5878-1574
E-mail: ir@360.cn
Christensen
Mr. Christian Arnell
Tel: +86 10-5826-4939
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)
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(Unaudited)
|
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|
December
31,
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September
30,
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2010
|
2011
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ASSETS
|
|
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Current assets:
|
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Cash and cash
equivalents
|
60,505
|
319,017
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Trading
securities
|
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294
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|
Accounts receivable
(net of allowance for doubtful accounts of $14 and
$67 as of
December 31, 2010 and September 30, 2011,
respectively)
|
8,160
|
15,346
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Prepaid expenses and
other current assets
|
3,143
|
14,406
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Deferred tax assets
- current
|
796
|
788
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|
Total current
assets
|
72,604
|
349,851
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|
Property and equipment,
net
|
3,306
|
11,382
|
|
Acquired intangible
assets, net
|
5,546
|
6,819
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|
Goodwill
|
3,918
|
4,520
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|
Long-term
investments
|
1,981
|
4,285
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|
Other noncurrent
assets
|
200
|
6,014
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|
Deferred tax assets -
noncurrent
|
253
|
491
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TOTAL ASSETS
|
87,808
|
383,362
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LIABILITIES
|
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Current
liabilities:
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Accounts payable
(including accounts payable of the consolidated VIEs without
recourse to Qihoo 360 Technology Co. Ltd. Of $1,383 and
$2,289as of
December 31, 2010 and September 30, 2011,
respectively)
|
1,387
|
2,289
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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 $8,048 and $19,469 as of
December 31, 2010 and September 30, 2011,
respectively)
|
10,885
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24,577
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Amount due to related parties
(including amount due to related parties of the consolidated
VIEs without
recourse to Qihoo 360 Technology Co. Ltd of
nil and $784 as of December 31, 2010
and September 30, 2011, respectively
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-
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784
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Income tax payable
(including income tax payable of the consolidated VIEs without
recourse to Qihoo 360 Technology Co. Ltd. of $92 and $1,878 as of
December 31, 2010 and September 30, 2011,
respectively)
|
127
|
5,845
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Current portion of
long-term payable (including current portion of long-term payable
of the consolidated VIEs without recourse to Qihoo 360 Technology
Co. Ltd. of $1,525 and $915 as of
December 31, 2010 and September 30, 2011,
respectively)
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1,525
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915
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Total current
liabilities
|
13,924
|
34,410
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Deferred tax liabilities -
noncurrent
|
512
|
515
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Long-term payable
(including long-term payable of the consolidated VIEs without
recourse to Qihoo 360 Technology Co. Ltd. of $450 and nil as of
December 31, 2010 and September 30, 2011,
respectively)
|
450
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-
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Deferred income-noncurrent
(including deferred
income-noncurrent of the consolidated VIEs without recourse to
Qihoo Technology Co., Ltd of $nil and nil as of
December 31, 2010 and September 30, 2011, respectively
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-
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1,671
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TOTAL LIABILITIES
|
14,886
|
36,596
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Series A convertible
participating redeemable preferred shares
|
20,107
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-
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Series B convertible
participating redeemable preferred shares
|
29,193
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-
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Series C convertible
participating redeemable preferred shares
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20,900
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-
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EQUITY
|
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Total Qihoo
360 Technology
Co. Ltd.
Shareholders'
equity
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2,215
|
345,456
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Noncontrolling
interest
|
507
|
1,310
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Total equity
|
2,722
|
346,766
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TOTAL LIABILITIES, CONVERTIBLE
PARTICIPATING
|
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REDEEMABLE PREFERRED
SHARES AND EQUITY
|
87,808
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383,362
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Qihoo 360
Technology Co. Ltd.
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Condensed
Consolidated Statements of operations
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(U.S.
dollars in thousands, except for shares and per share
data)
|
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(Unaudited)
|
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|
Three Months
Ended
|
|
Nine
Months Ended
|
|
|
September
30,
2010
|
June 30,
2011
|
September
30, 2011
|
|
September
30,
2010
|
September
30, 2011
|
|
Revenues:
|
|
|
|
|
|
|
|
Internet
services
|
14,881
|
34,897
|
47,289
|
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34,392
|
104,792
|
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Sales
of third party anti-virus
software
|
576
|
214
|
201
|
|
3,455
|
738
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Total revenues
|
15,457
|
35,111
|
47,490
|
|
37,847
|
105,530
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Cost of revenues:
|
|
|
|
|
|
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|
Internet
services
|
1,606
|
3,641
|
5,296
|
|
3,449
|
11,638
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Sales
of third party anti-virus
software
|
176
|
58
|
53
|
|
1056
|
200
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|
Total cost of
revenues
|
1,782
|
3,699
|
5,349
|
|
4,505
|
11,838
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Subsidy income
|
71
|
11
|
9
|
|
177
|
143
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Selling and
marketing
|
2,770
|
3,183
|
8,943
|
|
9,800
|
36,585
|
|
General and
administrative
|
1,186
|
3,533
|
5,551
|
|
2,805
|
12,282
|
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Product development(a)
|
6,058
|
11,954
|
16,888
|
|
16,297
|
41,657
|
|
Total operating
expenses
|
10,014
|
18,670
|
31,382
|
|
28,902
|
90,524
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
3,732
|
12,753
|
10,768
|
|
4,617
|
3,311
|
|
Interest income
|
113
|
370
|
846
|
|
308
|
1,400
|
|
Interest expense
|
(22)
|
(15)
|
(12)
|
|
(76)
|
(44)
|
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Other income
(expense)
|
-
|
61
|
(62)
|
|
(52)
|
(3)
|
|
Exchange gain
(loss)
|
116
|
527
|
2,946
|
|
(160)
|
3,575
|
|
Change on
fair value of trading
securities
|
-
|
61
|
(218)
|
|
-
|
(157)
|
|
Income before
income tax expense
|
|
|
|
|
|
|
|
and
income (loss)
from equity method
investment
|
3,939
|
13,757
|
14,268
|
|
4,637
|
8,082
|
|
Income tax expense
|
(125)
|
(2,925)
|
(3,460)
|
|
(148)
|
(7,846)
|
|
Income (loss)
from equity method
investment
|
-
|
273
|
(271)
|
|
-
|
(45)
|
|
|
|
|
|
|
|
|
|
Net income
|
3,814
|
11,105
|
10,537
|
|
4,489
|
191
|
|
|
|
|
|
|
|
|
|
Less: Net loss
attributable
to noncontrolling
interest
|
-
|
5
|
367
|
|
-
|
378
|
|
|
|
|
|
|
|
|
|
Net income
attributable to
|
|
|
|
|
|
|
|
Qihoo 360 Technology Co.
Ltd.
|
3,814
|
11,110
|
10,904
|
|
4,489
|
569
|
|
|
|
|
|
|
|
|
|
|
|
(a): From Q3 2011, the Company
will change the "Research and development expenses" to "Product
development expenses" in the statements of operations. This is
mainly because the business has been growing rapidly and along with
the development of new products, the Company has devoted more
resources in enhancing its existing products, by which the Company
believes using "Product development expenses" will better reflect
the nature of such expenses.
The Product development expenses
include costs associated with new product development and
enhancement for existing products, such as salaries and benefits,
including share-based compensation expenses, costs of bandwidth and
utilities, license and technical service fees, and depreciation of
equipment and amortization of acquired intangible
assets.
|
|
|
|
|
|
|
|
|
Reconciliations of Non-GAAP
Financial Measures to Comparable GAAP Measures
|
|
|
|
|
Three Months
Ended September 30,
2010
|
|
Three Months
Ended June 30,
2011
|
|
Three Months
Ended September 30,
2011
|
|
|
GAAP
|
Adjustment(b)
|
Non-GAAP
|
|
GAAP
|
Adjustment(b)
|
Non-GAAP
|
|
GAAP
|
Adjustment(b)
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$10,014
|
($999)
|
$9,015
|
|
$18,670
|
($2,077)
|
$16,593
|
|
$31,382
|
($8,641)
|
$22,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
$3,732
|
$999
|
$4,731
|
|
$12,753
|
$2,079
|
$14,832
|
|
$10,768
|
$8,645
|
$19,413
|
|
Operating margin
|
24.1%
|
|
30.6%
|
|
36.3%
|
|
42.2%
|
|
22.7%
|
|
40.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Qihoo 360 Technology Co. Ltd.
|
$3,814
|
$999
|
$4,813
|
|
$11,110
|
$2,079
|
$13,189
|
|
$10,904
|
$8,645
|
$19,549
|
|
Net margin
|
24.7%
|
|
31.1%
|
|
31.6%
|
|
37.6%
|
|
23.0%
|
|
41.2%
|
|
Diluted earnings per
ADS
|
N/A
|
|
N/A
|
|
$0.09
|
|
$0.11
|
|
$0.09
|
|
$0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b): Adjustment to exclude the
share-based compensation expense of each period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September
30, 2010
|
|
Nine
Months Ended September
30, 2011
|
|
|
|
|
GAAP
|
Adjustment(b)
|
Non-GAAP
|
|
GAAP
|
Adjustment(b)
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$28,902
|
($2,818)
|
$26,084
|
|
$90,524
|
($38,754)
|
$51,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
$4,617
|
$2,818
|
$7,435
|
|
$3,311
|
$38,763
|
$42,074
|
|
|
|
|
|
Operating margin
|
12.2%
|
|
19.6%
|
|
3.1%
|
|
39.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Qihoo 360 Technology Co. Ltd.
|
$4,489
|
$2,818
|
$7,307
|
|
$569
|
$38,763
|
$39,332
|
|
|
|
|
|
Net margin
|
11.9%
|
|
19.3%
|
|
0.5%
|
|
37.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b): Adjustment to exclude the
share-based compensation expense of each period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Qihoo 360 Technology Co. Ltd.