BEIJING,Nov. 12,2024 -- Sohu.com Limited (NASDAQ: SOHU) ("Sohu" or the "Company"),a leading Chinese online media,video,and game business group,today reported unaudited financial results for the thirdquarter ended September 30,2024.
ThirdQuarter Highlights[1]
Total revenues were US$152 million,up 5% year-over-year and down 12% quarter-over-quarter.
Brand advertising revenues were US$19million,down 15% year-over-year and 6% quarter-over-quarter.
Online game revenues were US$128million,up 9% year-over-year and down 13% quarter-over-quarter.
GAAP net loss attributable to Sohu.com Limited was US$16 million,compared with a net loss of US$14million in the thirdquarter of 2023and a net loss of US$38 million in the secondquarter of 2024.
Non-GAAP[2] net loss attributable to Sohu.com Limited was US$12 million,compared with a net loss of US$10million in the thirdquarter of 2023and a net loss of US$34 million in the second quarter of 2024.
Dr. Charles Zhang,Chairman and CEO of Sohu.com Limited,commented,"In the third quarter of 2024,our brand advertising revenues met the high end of our previous guidance,while both our online game revenues and our bottom-line performance exceeded expectations. For Sohu Media and Sohu Video,in addition to continual product refinements and user experience improvements,we continued to integrate resources and host various unique events and marketing campaigns. With these efforts we were able to effectively stimulate social interactions among users,strengthen our brand influence,and secure more monetization opportunities. As a result of high-quality content updates and robust game operations,our online games business delivered better-than-expected performance."
[1] The bankruptcy proceedings of Changyou's wholly-owned subsidiary Shanghai Jingmao Culture Communication Co.,Ltd. ("Shanghai Jingmao"),which operated Changyou's cinema advertising business,were concluded by a Chinese mainland bankruptcy court in the third quarter of 2023. The Company recognized a US$35 million disposal gain within discontinued operations in the condensed consolidated statements of operations for the third quarter of 2023. Unless indicated otherwise,results presented in this press release are related to continuing operations only,and exclude the disposal gain related to Shanghai Jingmao.
[2] Non-GAAP results exclude share-basedcompensation expense; changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments; and interest expense recognized in connection with the one-time transition tax (the "Toll Charge") imposed by the U.S. Tax Cuts and Jobs Act signed into law on December 22,2017 (the "U.S. TCJA"). Explanation of the Company's non-GAAP financial measures and related reconciliations to GAAP financial measures are included in the accompanying "Non-GAAP Disclosure" and "Reconciliations of Non-GAAP Results of Operation Measures to the Nearest Comparable GAAP Measures."
Third Quarter Financial Results
Revenues
Total revenues were US$152 million,up 5% year-over-year and down 12% quarter-over-quarter.
Brand advertising revenues were US$19 million,down 15% year-over-year and 6% quarter-over-quarter.
Online game revenues were US$128 million,up 9% year-over-year and down 13% quarter-over-quarter.
Gross Margin
Both GAAP and non-GAAP gross margin were 74%,compared with 76% in the thirdquarter of 2023and 67% in the secondquarter of 2024.
Both GAAP and non-GAAP gross margin for the brand advertising business were 9%,compared with 15%in the thirdquarter of 2023and 20% in the second quarter of 2024.
Both GAAP and non-GAAP gross margin for online games were 84%,compared with 87% in the thirdquarter of 2023 and 76% in the secondquarter of 2024. The quarter-over-quarter increase was mainly due to a lower percentage revenue contribution from mobile games,which require higher revenue-sharing payments.
Operating Expenses
GAAP operating expenses were US$125million,down 5% year-over-year and 22% quarter-over-quarter. Non-GAAP operating expenses were US$125million,down 4% year-over-year and 22% quarter-over-quarter.The quarter-over-quarter decrease was mainly due to a decrease in Changyou's marketing and promotional spending for online games.
Operating Loss
GAAP operating loss was US$13 million,compared with an operating loss of US$21 million in the third quarter of 2023 and an operating loss ofUS$44 million in the second quarter of 2024.
Non-GAAP operating loss wasUS$13million,compared withan operating loss of US$20 millionin the third quarter of 2023 and an operatingloss ofUS$45millioninthe second quarter of 2024.
Income Tax Expense
GAAP income tax expense was US$15million,compared withincome tax expense of US$15 million in the third quarter of 2023 andincome tax expense of US$9million in the second quarter of 2024.
Non-GAAP income tax expense was US$11 million,compared with income tax expense of US$12 million in the third quarter of 2023 andincome tax expense of US$5 million in the secondquarter of 2024.
Net Loss
GAAP net loss attributable to Sohu.com Limited was US$16 million,ora net loss of US$0.52per fully-diluted American depositary share ("ADS," each ADS representing one Sohu ordinary share),compared witha net lossof US$14million in the third quarter of 2023 and a net loss of US$38millionin the secondquarter of 2024.
Non-GAAP net loss attributable to Sohu.com Limited was US$12 million,or a net loss of US$0.39per fully-diluted ADS,compared with a net loss of US$10 million in thethird quarter of 2023 and a net lossof US$34 million in the second quarter of 2024.
Liquidity and Capital Resources
As of September 30,2024,cash and cash equivalents,short-term investmentsand long-term time deposits totaled approximately US$1.3 billion.
Supplementary Information for Changyou Results[3]
Third Quarter 2024 Operating Results
For PC games,total average monthly active user accounts[4](MAU) were 2.2 million,a decrease of 2% year-over-year and 3% quarter-over-quarter. Total quarterly aggregate active paying accounts[5] (APA) were 0.9 million,a decrease of 13% year-over-year and flat quarter-over-quarter. The year-over-year decrease in APA was mainly due to the natural decline of our older games,including TLBB PC.
For mobile games,total average MAU were 3.2 million,an increase of 41% year-over-year and a decrease of 34% quarter-over-quarter. Total quarterly APA were 1.1 million,an increase of 142% year-over-year and a decrease of 3% quarter-over-quarter. The year-over-year increases in MAU and APAwere mainly from New Westward Journey,which was launched during the second quarter of 2024. The quarter-over-quarter decrease in MAU was mainly due to the natural decline of New Westward Journey.
[3] "Changyou Results" consist of the results of Changyou's online game business and its 17173.com Website.
[4]Monthly active user accounts refers to the number of registered accounts that are logged in to these games at least once during the month.
[5]Quarterly aggregate active paying accounts refers to the number of accounts from which game points are utilized at least once during the quarter.
Third Quarter 2024 Unaudited Financial Results
Total revenueswere US$129 million,an increase of 9% year-over-year and a decrease of 13% quarter-over-quarter. Online game revenues were US$128 million,an increase of 9% year-over-year and a decrease of 13% quarter-over-quarter. Online advertising revenues were US$1 million,a decrease of 22% year-over-year and 13% quarter-over-quarter.
Both GAAP and non-GAAP gross profit were US$108 million,compared with US$103 million for the third quarter of 2023 and US$112 million for the second quarter of 2024.
GAAP operating expenseswere US$45 million,a decrease of 12% year-over-year and43% quarter-over-quarter. The year-over-year decrease was mainly due to a decrease in outsourcing and licensing fees related to product development. The quarter-over-quarter decrease was mainly due to a decrease in marketing and promotional spending for online games.
Non-GAAP operating expenseswere US$45 million,a decrease of 11% year-over-year and 43% quarter-over-quarter.
GAAP operating profitwas US$62 million,compared with US$51 million for the third quarter of 2023 and US$32 million for the second quarter of 2024.
Non-GAAP operating profitwas US$62 million,compared with US$52 million for the third quarter of 2023 and US$32 million for the second quarter of 2024.
Recent Development
Sohu today announced that on November 9,2024 its board of directors authorized an additional one year to the period of Sohu's previously-announced share repurchase program,from the previous end date of November 10,2025 to November 10,2026. As previously announced,Sohu may purchase up to US$150 million of the outstanding ADSs of Sohu from time to time under the program at Sohu's management's discretion at prevailing market prices in accordance with Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. Sohu's management will continue to determine the timing and amount of any purchases of ADSs based on their evaluation of market conditions,the trading price of ADSs and other factors. The share repurchase program may be suspended or discontinued at any time. Sohu plans to continue to fund repurchases from its existing cash balance. As of November 7,Sohu had repurchased 3,380,361 ADSs under the share repurchase program for an aggregate cost of approximately US$42 million.
Business Outlook
For the fourthquarter of 2024,Sohu estimates:
Brand advertising revenues to be between US$17 million and US$19 million; this implies an annual decrease of 6% to 16%,and a sequential decrease of 9%to a sequential increase of 2%.
Online game revenues to be between US$97million and US$107million; this implies an annual decrease of 7% to 15%,and a sequential decrease of 16%to24%.
Non-GAAP net loss attributable to Sohu.com Limited to be between US$26millionand US$36million; and GAAP net loss attributable to Sohu.com Limited to be between US$30millionand US$40million.
For the fourthquarter 2024 guidance,the Company has adopted a presumed exchange rate of RMB7.10=US$1.00,as compared with the actual exchange rate of approximately RMB7.15=US$1.00 for the fourthquarter of 2023,and RMB7.12=US$1.00 for the thirdquarter of 2024.
This forecast reflects Sohu's management's current and preliminary view,which is subject to substantial uncertainty.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"),Sohu's management uses non-GAAP measures of gross profit,operating profit,net income,net income attributable to Sohu.com Limited and diluted net income attributable to Sohu.com Limited per ADS,which are adjusted from results based on GAAP to exclude the impact of share-based compensation expense; changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments; and interest expense recognized in connection with the Toll Charge imposed by the U.S. TCJA. These measures 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.
Sohu's management believes excluding share-based compensation expense;changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments; and interest expense recognized in connection with the Toll Charge from its non-GAAP financial measure is useful for itself and investors. Further,the impact of share-based compensation expense;changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments; and interest expense recognized in connection with the Toll Charge cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts that have been the basis for information Sohu provides to analysts and investors as guidance for future operating performance. As share-based compensation expense and changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments do not involve subsequent cash outflow or are reflected in the cash flows at the equity transaction level,Sohu does not factor in their impact when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result,in general,the monthly financial results for internal reporting and any performance measures for commissions and bonuses are based on non-GAAP financial measures that exclude share-based compensation expense,changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments,and interest expense recognized in connection with the Toll Charge.
The non-GAAP financial measures are provided to enhance investors' overall understanding of Sohu's current financial performance and prospects for the future. A limitation of using non-GAAP gross profit,net income attributable to Sohu.com Limited,and diluted net income attributable to Sohu.com Limited per ADS excluding share-based compensation expense and interest expense recognized in connection with the Toll Charge is that share-based compensation expense and interest expense recognized in connection with the Toll Charge have been and can be expected to continue to be significant recurring expenses in Sohu's business. It is also possible that changes in fair value recognized in the Company's consolidated statements of operations with respect to the Company's investments will recur in the future. In order to mitigate these limitations Sohu has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between the GAAP financial measures that are most directly comparable to the non-GAAP financial measures that have been presented.
Notes to Financial Information
Financial information in this press release other than the information indicated as being non-GAAP is derived from Sohu's unaudited financial statements prepared in accordance with GAAP.
Safe Harbor Statement
This announcement contains forward-looking statements. It is currently expected that the Business Outlook will not be updated until release of Sohu's next quarterly earnings announcement; however,Sohu reserves right to update its Business Outlook at any time for any reason. Statements that are not historical facts,including statements about Sohu's beliefs and expectations,are forward-looking statements. These statements are based on current plans,estimates and projections,and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include,but are not limited to,instability in global financial and credit markets and its potential impact on the Chinese economy; exchange rate fluctuations,including their potential impact on the Chinese economy and on Sohu's reported U.S. dollar results; fluctuations in Sohu's quarterly operating results; the possibilities that Sohu will be unable to recoup its investment in video content and will be unable to develop a series of successful games for mobile platforms or successfully monetize mobile games it develops or acquires; Sohu's reliance on online advertising sales and online games for its revenues; and the impact of the U.S. TCJA. Further information regarding these and other risks is included in Sohu's annual report on Form 20-F for the year ended December 31,2023,and other filings with and information furnished to the U.S. Securities and Exchange Commission.
Conference Call and Webcast
Sohu's management team will host a conference call at 7:30 a.m. U.S. Eastern Time,November 12,2024 (8:30p.m. Beijing/Hong Kong time,2024) following the quarterlyresults announcement. Participants can register for the conference call by clicking here,which will lead them to the conference registration website. Upon registration,participants will receive details for the conference call,including the dial-in numbers and a unique access PIN. Please dial in 10 minutes before the call is scheduled to begin.
The live Webcast and archive of the conference call will be available on the Investor Relations section of Sohu's website at https://investors.sohu.com/
About Sohu
Sohu.com Limited (NASDAQ: SOHU) was established by Dr. Charles Zhang,one of China's internet pioneers,in the 1990s. As a mainstream media platform,Sohu is indispensable to the daily life of millions of Chinese,providing a network of web properties and community based products which continually offer a broad array of choices regarding information,entertainment and communication to the vast number of Sohu users. Sohu has built one of the most comprehensive matrices of Chinese language web properties,consisting of the leading online media destinations Sohu News App,Sohu Video App,the mobile news portal m.sohu.com,the PC portal www.sohu.com,and the online video website tv.sohu.com; and the online games platform www.changyou.com/en/.
Sohu provides online brand advertising services as well as multiple news,informationand content services on its matrix of websites and also on its mobile platforms. Sohu's online game business,conducted by its subsidiary Changyou,develops and operates a diverse portfolio of PC and mobile games,such as the well-known Tian Long Ba Bu ("TLBB") PC and Legacy TLBB Mobile.
For investor and media inquiries,please contact:
In China:
Ms. Huang,Pu
Sohu.com Limited
Tel: +86 (10) 6272-6645
E-mail: ir@contact.sohu.com
In the United States:
Ms. Bergkamp,Linda
Christensen
Tel: +1 (480) 614-3004
E-mail: linda.bergkamp@christensencomms.com
SOHU.COM LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED,IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
Sep. 30,2024
Jun. 30,2024
Sep. 30,2023
Revenues:
Brand advertising
$
18,677
$
19,853
$
22,087
Online games
127,721
146,997
117,049
Others
5,594
5,483
6,294
Total revenues
151,992
172,333
145,430
Cost of revenues:
Brand advertising (includes share-based
compensation expense of nil,$1,and $15,
respectively)
17,040
15,904
18,745
Online games (includes share-based compensation
expense of nil,nil,and $18,respectively)
20,292
35,588
15,039
Others
2,283
4,974
687
Total cost of revenues
39,615
56,466
34,471
Gross profit
112,377
115,867
110,959
Operating expenses:
Product development (includes share-based
compensation expense of $6,$10,and $280,
respectively)
62,231
65,209
67,749
Sales and marketing (includes share-based
compensation expense of $9,and $39,
respectively)
48,494
83,936
53,040
General and administrative (includes share-based
compensation expense of $29,$-421,and $358,
respectively)
14,692
11,012
10,801
Total operating expenses
125,417
160,157
131,590
Operating loss
(13,040)
(44,290)
(20,631)
Other income,net
3,635
5,572
10,869
Interest income
9,074
9,561
11,519
Exchange difference
(988)
231
(478)
Income/(loss) before income tax expense
(1,319)
(28,926)
1,279
Income tax expense
15,028
8,731
15,340
Net loss from continuing operations
(16,347)
(37,657)
(14,061)
Net income from discontinued operations,net of tax[6]
-
-
35,426
Net income/(loss)
(16,657)
21,365
Less: Net loss from continuing operations
attributable to the noncontrolling interest
shareholders
-
-
(2)
Net loss from continuing operations attributable to
Sohu.com Limited
(16,059)
Net income from discontinued operations attributable
to Sohu.com Limited
-
-
35,426
Net income/(loss) attributable to Sohu.com Limited
(16,367
Basic net loss from continuing operations per
share/ADS attributable to Sohu.com Limited[7]
$
(0.52)
$
(1.16)
$
(0.41)
Basic net income from discontinued operations per
share/ADS attributable to Sohu.com Limited
$
-
$
-
$
1.04
Basic net income/(loss) per share/ADS attributable to
Sohu.com Limited
$
(0.52)
$
(1.16)
$
0.63
Shares/ADSs used in computing basic net
income/(loss) per share/ADS attributable to Sohu.com
Limited
31,729
32,492
34,190
Diluted net loss from continuing operations per
share/ADS attributable to Sohu.com Limited
$
(0.52)
$
(1.16)
$
(0.41)
Diluted net income from discontinued operations per
share/ADS attributable to Sohu.com Limited
$
-
$
-
$
1.04
Diluted net income/(loss) per share/ADS attributable to
Sohu.com Limited
$
(0.52)
$
(1.16)
$
0.63
Shares/ADSs used in computing diluted net
income/(loss) per share/ADS attributable to Sohu.com
Limited
31,190
[6] See Footnote 1.
[7] Each ADS represents one ordinary share.
SOHU.COM LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED,IN THOUSANDS)
As of Sep. 30,2024
As of Dec. 31,2023
ASSETS
Current assets:
Cash and cash equivalents
$
135,645
$
362,504
Restricted cash
-
3,184
Short-term investments
798,733
597,770
Accounts receivable,net
54,956
71,618
Prepaid and other current assets
84,674
81,971
Total current assets
1,074,008
1,117,047
Fixed assets,net
262,549
269,058
Goodwill
47,322
47,163
Long-term investments,net
45,670
45,198
Intangible assets,net
8,515
2,226
Long-term time deposits
337,689
388,613
Other assets
12,374
12,793
Total assets
$
1,788,127
$
1,882,098
LIABILITIES
Current liabilities:
Accounts payable
$
41,693
$
44,609
Accrued liabilities
102,772
103,779
Receipts in advance and deferred revenue
50,945
50,829
Accrued salary and benefits
38,056
50,330
Taxes payables
13,859
11,363
Other short-term liabilities
77,142
81,482
Total current liabilities
$
324,467
$
342,392
Long-term other payables
2,854
3,924
Long-term tax liabilities
484,909
474,374
Other long-term liabilities
2,022
2,130
Total long-term liabilities
$
489,785
$
480,428
Total liabilities
$
814,252
$
822,820
SHAREHOLDERS' EQUITY:
Sohu.com Limited shareholders' equity
973,553
1,058,956
Noncontrolling interest
322
322
Total shareholders' equity
$
973,875
$
1,059,278
Total liabilities and shareholders' equity
$
1,098
SOHU.COM LIMITED
RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(UNAUDITED,IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Sep. 30,2024
Three Months Ended Jun. 30,2024
Three Months Ended Sep. 30,2023
GAAP
Non-GAAP
Adjustment
Non-GAAP
GAAP
Non-GAAP
Adjustment
Non-GAAP
GAAP
Non-GAAP
Adjustment
Non-GAAP
-
(a)
1
(a)
15
(a)
Brand advertising gross profit
$
1,637
$
-
$
1,637
$
3,949
$
1
$
3,950
$
3,342
$
15
$
3,357
Brand advertising gross margin
9%
9%
20%
20%
15%
15%
-
(a)
-
(a)
18
(a)
Online games gross profit
$
107,429
$
-
$
107,429
$
111,409
$
-
$
111,409
$
102,010
$
18
$
102,028
Online games gross margin
84%
84%
76%
76%
87%
87%
-
(a)
-
(a)
-
(a)
Others gross profit
$
3,311
$
-
$
3,311
$
509
$
-
$
509
$
5,607
$
-
$
5,607
Others gross margin
59%
59%
9%
9%
89%
89%
-
(a)
1
(a)
33
(a)
Gross profit
$
112,377
$
-
$
112,377
$
115,867
$
1
$
115,868
$
110,959
$
33
$
110,992
Gross margin
74%
74%
67%
67%
76%
76%
Operating expenses
$
125,417
$
(44)
(a) $
125,373
$
160,157
$
401
(a) $
160,558
$
131,590
$
(677)
(a) $
130,913
44
(a)
(400)
(a)
710
(a)
Operating loss
$
(13,040)
$
44
$
(12,996)
$
(44,290)
$
(400)
$
(44,690)
$
(20,631)
$
710
$
(19,921)
Operating margin
-9%
-9%
-26%
-26%
-14%
-14%
Income tax expense
$
15,028
$
(3,883)
(c)$
11,145
$
8,731
$
(3,764)
(c)$
4,967
$
15,340
$
(3,149)
(c)$
12,191
44
(a)
(400)
(a)
710
(a)
-
131
(b)
-
3,883
(c)
3,764
(c)
3,149
(c)
Net loss before non-controlling
interest
$
(16,347)
$
3,927
$
(12,420)
$
(37,657)
$
3,495
$
(34,162)
$
(14,061)
3,859
(10,202)
44
(a)
(400)
(a)
710
(a)
-
131
(b)
-
3,149
(c)
Net loss from continuing operations
attributable to Sohu.com Limited for
diluted net loss per ADS
$
(16,059)
3,200)
Net income from discontinued
operations attributable to Sohu.com
Limited for diluted net loss per ADS [8]
$
-
-
-
$
-
-
$
-
$
35,426
-
$
35,426
Net income/(loss) attributable to
Sohu.com Limited for diluted net
income/(loss) per share/ADS
$
(16,347)
3,927
(12,162)
$
21,367
3,859
25,226
Diluted net loss from continuing
operations per ADS attributable to
Sohu.com Limited
$
(0.52)
$
(0.39)
$
(1.16)
(1.05)
$
(0.41)
$
(0.30)
Diluted net income from
discontinued operations per ADS
attributable to Sohu.com Limited
$
-
-
$
-
-
$
1.04
$
1.04
Diluted net income/(loss) per
share/ADS attributable to Sohu.com
Limited
$
(0.52)
(0.39)
$
(1.16)
(1.05)
$
0.63
$
0.74
Shares/ADSs used in computing
diluted net income/(loss) per
share/ADS attributable to Sohu.com
Limited
31,729
31,492
32,190
34,190
Note:
(a)To eliminate the impact of share-based awards.
(b)To adjust for changes in the fair value of the Company's investments.
(c) To adjust for the effect of the Toll Charge.
[8] See Footnote 1.