Sogou slips to loss in Q1; stock gains on revenue beat, guidance

China-based tech firm Sogou, Inc. (NYSE: SOGO) reported a net loss for the first quarter of 2019, compared to profit last year. However, revenues increased and topped the estimates, driving the company’s shares higher early Monday.

Net loss attributable to common shareholders was $3.9 million or $0.01 per share in the first quarter, compared to a profit of $15.3 million or $0.04 per share a year earlier. The bottom line was broadly in line with estimates.

Revenues of the Tencent-backed search services provider moved up 2% annually to $252.7 million during the three-month period, exceeding both analysts’ forecast and the company’s own guidance. At $234.2 million, search and search-related revenue was up 6%.

Meanwhile, there was a double-digit increase in cost of revenues and traffic acquisition cost, mainly due to price inflation. At the end of the first quarter, the company’s popular voice app Sogou Mobile Keyboard had 443 million daily average users, up 23% from the comparable period of 2018.

There was a sharp increase in costs of revenues and traffic acquisition costs during the quarter, mainly due to price inflation

Xiaochuan Wang, CEO of Sogou, said, “During the quarter, we delivered a more efficient search experience to users by leveraging high-quality content and intelligent Q&A capabilities. Building on increasing synergies with search, we also improved the mobile keyboard’s content and service distribution capabilities.”

Also see: Alphabet Inc Q4 2018 Earnings Conference Call Transcript

For the June quarter, the company expects revenues to be in the range $303 million to $313 million, which represents a 1-4% annual increase. The outlook is based on constant currencies. The management expects to leverage the popularity of the apps Vocational Avatars and AI News Anchor, the latest versions of which were launched in the first quarter.

Baidu, the leading internet search company in China and Sogou’s competitor, is scheduled to report its first-quarter results on May 16 after the closing bell. Analysts forecast earnings of $0.67 per share on revenues of $3.6 billion.

Sogou’s shares moved up around 3% in pre-market trading Monday following the publication of earnings report, after closing the previous session higher. The stock gained 1% since the beginning of the year, after ending a losing streak that started early last year.

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