BEIJING, May 27, 2014 /PRNewswire/ -- Qihoo 360
Technology Co. Ltd. ("Qihoo 360" or the "Company") (NYSE:
QIHU), a leading Internet company in China, today reported its
unaudited financial results for the first quarter ended
March 31, 2014.
First Quarter Financial Highlights[1]
- Revenues were $265.1 million, a
141.3% increase from $109.9
million in the first quarter of 2013.
- Net income attributable to Qihoo 360 was $49.1 million, compared to $5.6 million in the first quarter of 2013.
- Non-GAAP net income attributable to Qihoo 360 [1]
was $73.3 million, compared to
$17.5 million in the first quarter of
2013.
- Diluted earnings per ADS[2] ("EPADS")
attributable to Qihoo 360 was $0.37,
compared to $0.04 in the same period
last year.
- Non-GAAP diluted EPADS attributable to Qihoo
360 [1] was $0.54,
compared to $0.14 in the same period
last year.
First Quarter Operating Metrics
- Total monthly active users of Qihoo 360's PC-based products and
services reached a record 479 million in March 2014, compared to 457 million in
March 2013[3].
- User penetration of Qihoo 360's PC-based products was 93.3% in
March 2014, compared to 95.8% in
March 2013[3].
- Total smartphone users of Qihoo 360's primary mobile security
product [4] reached a record 538 million in
March 2014, compared to 275 million
in March 2013[5].
- Monthly active users of Qihoo 360's PC browsers were 339
million in March 2014, compared to
332 million in March
2013[3].
- User penetration of Qihoo 360's PC browsers was 66.1% in
March 2014, compared to 69.6% in
March 2013[3].
- Average daily unique visitors to the 360 Personal Start-up Page
and its sub-pages were 122 million in the first quarter of 2014,
compared to 94 million in the first quarter of
2013[5].
- Average daily clicks on Qihoo 360's Personal Start-up Page and
its sub-pages were approximately 772 million in the first quarter
of 2014, compared to 489 million in the first quarter of
2013[5].
"We are pleased to report another quarter of strong growth and
solid operational metrics," said Mr. Hongyi
Zhou, Chairman and Chief Executive Officer of Qihoo
360. "While we maintained our leadership position in key
PC-related product categories, we continued to make significant
progress in the ever more-important mobile Internet market. The
number of Chinese smartphone users of our key mobile security
product, 360 Mobile Safe, reached 538 million in the first quarter,
making Qihoo 360 the indisputable leader in Internet security in
China. In addition, our
Android-based app store, 360 Mobile Assistant, has already
registered over 400 million users, further reinforcing its
industry-leading position. We intend to continue to allocate
significant resources to the fast-growing mobile Internet market
for the foreseeable future."
"During the quarter, our share of Internet search traffic
reached approximately 25% according to third-party data. Through
continued product improvement and technological innovation, we
believe we are in an excellent position to further grow our share
of China's search market in terms
of both traffic and revenue. Since we began monetizing our search
and mobile products at the beginning of 2013 we have made
significant progress, and we are highly encouraged by the early
results. As we continue to execute our business plan and strategy,
we believe that search and mobile monetization represent a
substantial long-term growth opportunity for our business,"
concluded Mr. Zhou.
Mr. Xiangdong Qi, President of
Qihoo 360, added "We are excited to see continued robust growth in
key areas of our business. Online advertising grew 121%
year-over-year, supported by strong contributions from both search
and mobile monetization and further deepening of our monetization
process for Personal Start-up Pages. Internet value-added services
once again outpaced the market with revenue growth of 172%, driven
by strength in PC games and a strong ramp-up in mobile games. While
search and mobile monetization are still in their early stages,
they are ramping up faster than expected, and are poised to become
key drivers of our future growth. We have made significant
investments over the last few quarters to strengthen our brand and
market position, and to improve our product and technology,
particularly in mobile Internet-related areas. Given the
rapidly-evolving industry landscape, we will maintain the intensity
of our investments in these areas to build a sustainable foundation
for future growth."
First Quarter 2014 Results
Revenues
Revenues were $265.1 million,
representing an increase of 141.3% from $109.9 million in
the first quarter of 2013 and an increase of 19.6% from
$221.6 million in the fourth quarter
of 2013. The robust year-over-year growth was due to strong
performance in both online advertising and Internet value-added
services, driven by solid ramp in search and mobile monetization,
as well as strong user traffic growth and further penetration of
performance based advertising on 360 Personal Startup Page.
Online advertising revenues were $140.0
million, up 120.9% from the same period last year and
relatively flat comparing to the prior quarter. The strong
year-over-year increase was primarily driven by incremental
contribution from search and mobile advertising and increased
monetization of user activities on 360 Personalized Start-up Pages.
The flattish sequential trend reflected the normal effects of
seasonality.
Internet value-added service revenues, which are mainly derived
from game platform operations, were $124.8
million, up 172.2% from the same period last year and 58.2%
from the prior quarter. The robust year-over-year and sequential
growth was driven by the strong ramp-up in game operations.
Cost of Revenues
Cost of revenues were $50.4
million, compared to $13.9
million in the first quarter of 2013 and $30.2 million in the fourth quarter of 2013,
representing increases of 262.4% and 67.0%, respectively.
Operating Expenses
Operating expenses were $175.1
million, compared to $89.2
million in the first quarter of 2013 and $184.9 million in the fourth quarter of 2013.
Non-GAAP operating expenses[1] were $155.2 million, compared to $77.2 million in the first quarter of 2013 and
$109.6 million in the prior
quarter.
The year-over-year and sequential increases in non-GAAP
operating expenses[1] were mainly driven by increased
marketing and promotional expenses, personnel-related costs, and
bandwidth and equipment depreciation expenses, as the Company
continued to strengthen its brand and market position, and enhance
its technology and product development capabilities.
Operating Income
Operating income was $39.6
million, compared to $6.8
million in the first quarter of 2013 and operating income of
$8.9 million in the prior quarter.
Non-GAAP operating income[1] was $59.5 million, compared to $18.8 million in the first quarter of 2013 and
$84.2 million in the prior
quarter.
Operating margin was 14.9%, compared to 6.2% in the first
quarter of 2013 and 4.0% in the prior quarter.
Non-GAAP operating margin[1] was 22.5%, compared to
17.1% in the first quarter of 2013 and 38.0% in the prior
quarter.
The year-over-year increase in non-GAAP operating
margin[1] was mainly due to leverage from
strong revenue growth while the Company continues to invest in new
product and business initiatives. The sequential decline in
non-GAAP operating margin[1] reflected normal
seasonal spending patterns.
Net Income
attributable to Qihoo 360
Net income attributable to Qihoo 360 was $49.1 million,
compared to $5.6 million in the
first quarter of 2013 and $16.7
million in the prior quarter.
Non-GAAP net income[1] attributable to
Qihoo 360 was $73.3 million, compared
to $17.5 million in the first quarter
of 2013 and $96.3 million in the
prior quarter.
Net Margin
Net margin was 18.5%, compared to 5.1% in the same period last
year, and 7.5% in the prior quarter.
Non-GAAP net margin[1] was 27.7%, compared
to 15.9% in the same period last year and 43.5% in the prior
quarter.
Diluted Earnings per ADS
Diluted EPADS for the first quarter of 2014 was $0.37, and non-GAAP diluted
EPADS[1] for the first quarter of 2014 was
$0.54. The GAAP weighted average
ADS[1] used in computing diluted EPADS was 131.5
million.
Cash Flows and Balance Sheet
Net cash generated from operations in the first quarter of 2014
was $100.5 million, compared to net
cash outflow of $27.9 million in the
same period last year and net operating cash inflow of $76.8 million in the prior quarter. Cash capital
expenditures were $69.5
million. As of March 31,
2014, the Company had cash and cash equivalents of
$901.6 million.
Business Outlook
For the second quarter of 2014, the Company expects revenues to
be between $300 million and $305
million, representing a year-over-year increase of 98% to
101% and quarter-over-quarter increase of 13% to 15%. 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 a.m. Eastern Time
on May 28, 2014 (7:30 p.m. Beijing time on May 28,
2014).
The dial-in details for the live conference call are:
US Toll Free Dial
In:
|
+1
866-519-4004
|
International Dial
In:
|
+65 6723
9381
|
Hong Kong Dial
In:
|
+852-2475-0994
|
Passcode:
|
45783630
|
A telephone replay of the call will be available after the
conclusion of the conference call at 10:30
a.m. Eastern Time on May 28,
2014 through 09:30 a.m. Eastern
Time on June 5, 2014. The
dial-in details for the replay are:
International Dial
In:
|
+61 2 8199
0299
|
US Dial
In:
|
+1
646-254-3697
|
Passcode:
|
45783630
|
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. (NYSE: QIHU) is a leading Internet
company in China. The Company is
also the number one provider of Internet and mobile security
products in China as measured by
its user base, according to iResearch. 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 open Internet platforms in China and monetizes its massive user base
primarily through online advertising and through Internet
value-added services on its open platform.
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 annual report on Form 20-F dated
April 25, 2014.
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 and interest expense of Convertible Senior Notes.
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.
In China:
Tel: +86 10-5878-1574
E-mail: ir@360.cn
In the U.S.:
The Piacente Group, Inc.
Don Markley or Glenn Garmont
Tel: (212) 481-2050
E-mail: qihu@tpg-ir.com
Qihoo 360
Technology Co. Ltd.
|
Condensed
Consolidated Balance Sheets
|
(U.S. dollars in
thousands, except for shares and per share data)
|
(Unaudited)
|
|
December 31,
2013
|
March 31,
2014
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
1,013,465
|
901,567
|
Restricted
Cash
|
2,368
|
705
|
Short-term
Investments
|
748
|
779
|
Accounts receivable
(net of allowance for doubtful accounts of $145 and $141
as
of December 31, 2013
and March 31, 2014, respectively)
|
54,598
|
74,489
|
Prepaid expenses and
other current assets
|
83,409
|
138,762
|
Deferred tax assets –
current
|
3,129
|
4,156
|
Total current
assets
|
1,157,717
|
1,120,458
|
Property and
equipment, net
|
163,864
|
178,240
|
Land use rights,
net
|
75,698
|
73,288
|
Acquired intangible
assets, net
|
17,248
|
30,057
|
Goodwill
|
29,509
|
85,750
|
Long-term
investments
|
84,293
|
139,767
|
Other noncurrent
assets
|
39,621
|
131,413
|
Deferred tax assets –
noncurrent
|
946
|
1,004
|
TOTAL
ASSETS
|
1,568,896
|
1,759,977
|
LIABILITIES
|
|
|
|
Current
liabilities:
|
|
|
|
Short-term loan
(including accounts payable of the consolidated
|
|
|
|
VIEs without recourse
to Qihoo Technology Company Limited of
|
|
|
|
$1,322 and $8,571 as
of December 31, 2013 and March 31, 2014, respectively)
|
|
1,322
|
8,571
|
Accounts payable
(including accounts payable of the consolidated
|
|
|
|
VIEs without recourse
to Qihoo 360 Technology Co. Ltd. of
|
|
|
|
$22,856 and
$53,275 as of December 31, 2013 and March 31, 2014,
respectively)
|
25,030
|
59,078
|
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
|
|
|
|
$77,170 and $99,809
as of December 31, 2013 and March 31, 2014,
respectively)
|
120,935
|
177,597
|
Deferred
revenue-current (including deferred revenue-current of
the
|
|
|
|
consolidated VIEs
without recourse to Qihoo 360 Technology Co. Ltd. of
$30,717 and $58,095
as of December 31, 2013 and March 31, 2014,
respectively)
|
|
46,632
|
77,034
|
Income tax payable
(including income tax payable of the consolidated VIEs
without recourse to
Qihoo 360 Technology Co. Ltd. of $5,546 and $7,416 as of
December 31, 2013 and
March 31, 2014, respectively)
|
|
14,679
|
17,480
|
Total current
liabilities
|
208,598
|
339,760
|
Deferred tax
liabilities – noncurrent
|
2,676
|
3,851
|
Deferred
revenue-noncurrent (including deferred revenue-noncurrent of
the
consolidated VIEs
without recourse to Qihoo 360 Technology Co. Ltd. of
$664
and $646 as of
December 31, 2013 and March 31, 2014, respectively)
|
|
3,544
|
3,183
|
Long-term
debt
|
|
600,000
|
600,000
|
|
|
|
|
TOTAL
LIABILITIES
|
814,818
|
946,794
|
EQUITY
|
|
|
|
Total Qihoo 360
Technology Co. Ltd. Shareholders' equity
|
736,893
|
796,407
|
Noncontrolling
interest
|
17,185
|
16,776
|
Total
equity
|
754,078
|
813,183
|
TOTAL LIABILITIES AND
EQUITY
|
1,568,896
|
1,759,977
|
Qihoo 360
Technology Co. Ltd.
|
|
Condensed
Consolidated Statements of operations
|
|
(U.S. dollars in
thousands, except for shares and per share data)
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2013
|
December 31,
2013
|
March 31,
2014
|
Revenues:
|
109,877
|
221,617
|
265,142
|
Cost of
revenues
|
13,906
|
30,180
|
50,390
|
Subsidy
income
|
3
|
2,344
|
-
|
Operating
expenses:
|
|
|
|
Selling and
marketing
|
27,062
|
30,988
|
68,733
|
General and
administrative
|
11,895
|
76,680
|
21,766
|
Product
development
|
50,211
|
76,248
|
84,643
|
Impairment loss on
intangible assets
|
-
|
948
|
-
|
Total operating
expenses
|
89,168
|
184,864
|
175,142
|
|
|
|
|
Income from
operations
|
6,806
|
8,917
|
39,610
|
Interest
income
|
1,437
|
5,028
|
4,920
|
Interest
expenses
|
-
|
(4,386)
|
(4,315)
|
Other
income
|
196
|
879
|
251
|
Exchange
gain(loss)
|
361
|
2,902
|
(12,289)
|
Impairment loss
on long-term investment
|
-
|
(3,703)
|
-
|
Gain on disposal of
long-term investments
|
-
|
14,808
|
27,652
|
Income before income
tax expense and loss from equity method
investments
|
8,800
|
24,445
|
55,829
|
|
|
|
|
Income tax
expense
|
(2,217)
|
(9,130)
|
(5,889)
|
Loss from equity
method investments
|
(1,021)
|
(165)
|
(2,018)
|
|
|
|
|
Net income
|
5,562
|
15,150
|
47,922
|
|
|
|
|
Less: Net (gain) loss
attributable to noncontrolling interest
|
(11)
|
1,498
|
1,199
|
Net income
attributable to
|
|
|
|
Qihoo 360 Technology
Co. Ltd.
|
5,551
|
16,648
|
49,121
|
|
|
|
|
Net income per
ordinary share-basic
|
0.03
|
0.09
|
0.27
|
Net income per
ordinary share-diluted
|
0.03
|
0.08
|
0.25
|
|
|
|
|
Weighted average
shares used in calculating net income per ordinary
share- basic (in
millions)(a)
|
178
|
183
|
184
|
Weighted average
shares used in calculating net income per ordinary
share-diluted (in
millions)(a)
|
189
|
197
|
197
|
|
(a): 3 Ordinary
Shares = 2 ADSs
|
|
|
|
|
|
Qihoo 360
Technology Co. Ltd.
|
Condensed
Consolidated Statements of Cash Flows
|
(U.S. dollars in
thousands)
|
(Unaudited)
|
|
|
Three-months
period ended
|
|
|
March 31,
2013
|
March
31, 2014
|
Cash flows from
operating activities:
|
|
|
Net income
|
5,562
|
47,922
|
Share-based
compensation
|
11,967
|
19,932
|
Depreciation and
amortization
|
8,847
|
17,250
|
Amortization of land
use right
|
420
|
436
|
Loss on disposal of
fixed assets
|
212
|
30
|
Loss on equity method
investments
|
1,021
|
2,018
|
Gain on disposal of
long-term investments
|
-
|
(27,652)
|
Gains resulting from
nonoperating activities
|
(197)
|
(44)
|
Changes in operating
assets and liabilities
|
(55,769)
|
40,567
|
Net cash (used in)
provided by operating activities
|
(27,937)
|
100,459
|
Cash flows from
investing activities:
|
|
|
Purchase of property
and equipment and intangible assets
|
(57,074)
|
(69,547)
|
Consideration paid in
connection with business acquisition
|
(921)
|
(38,941)
|
Payment for
short-term investment and long-term investments
|
(828)
|
(103,350)
|
Decrease in
restricted cash
|
-
|
1,639
|
Proceeds from
disposal of property and equipment and intangible assets
|
1
|
-
|
Net cash used in
investing activities
|
(58,822)
|
(210,199)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
Capital contribution
from noncontrolling interest
|
-
|
7
|
Proceeds from
exercise of share option
|
6,624
|
5,057
|
Payment for short
term loans
|
-
|
(773)
|
|
|
|
Net cash provided
by financing activities
|
6,624
|
4,291
|
|
|
|
|
|
Effect of exchange
rate changes
|
406
|
(6,449)
|
DECREASE IN
CASH
|
(79,729)
|
(111,898)
|
CASH, BEGINNING OF
PERIOD
|
380,664
|
1,013,465
|
CASH, END OF
PERIOD
|
300,935
|
901,567
|
Reconciliations of
Non-GAAP Financial Measures to Comparable GAAP
Measures
|
|
|
Three Months Ended
March 31, 2013
|
|
|
Three Months Ended
December 31, 2013
|
|
Three Months Ended
March 31, 2014
|
|
|
GAAP
|
Adjustment(b)
|
Non-GAAP
|
|
GAAP
|
Adjustment(b)
|
Adjustment(c)
|
Non-GAAP
|
|
GAAP
|
Adjustment(b)
|
Adjustment
(c)
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$89,168
|
($11,967)
|
$77,201
|
|
$184,864
|
($75,284)
|
-
|
$109,580
|
|
$175,142
|
($19,932)
|
|
$155,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from
operations
|
$6,806
|
$11,967
|
$18,773
|
|
$8,917
|
$75,284
|
-
|
$84,201
|
|
$39,610
|
$19,932
|
|
$59,542
|
Operating
margin
|
6.2%
|
|
17.1%
|
|
4.0%
|
|
|
38.0%
|
|
14.9%
|
|
|
22.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
attributable
to
Qihoo
360
Technology
Co.
Ltd.
|
$5,551
|
$11,967
|
$17,518
|
|
$16,648
|
$75,284
|
$4,365
|
$96,297
|
|
$49,121
|
$19,932
|
$4,279
|
$73,332
|
Net margin
|
5.1%
|
|
15.9%
|
|
7.5%
|
|
|
43.5%
|
|
18.5%
|
|
|
27.7%
|
Diluted earnings
per
ADS
|
$0.04
|
|
$0.14
|
|
$0.13
|
|
|
$0.70
|
|
$0.37
|
|
|
$0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b): Adjustment to
exclude the share-based compensation expense of each
period.
(c): Adjustment to
exclude the interest expense of Convertible Senior Notes of each
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[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.
|
[2]
|
American Depositary
Shares, which are traded on the NYSE. Every two ADSs represent
three Class A ordinary shares of the Company.
|
[3]
|
User and market
penetration data is based on data from iResearch as of March
2014.
|
[4]
|
360 Mobile Safe is
the Company's primary mobile security product.
|
[5]
|
Company data as of
March 2014.
|
SOURCE Qihoo 360