BEIJING, Aug. 10, 2020 /PRNewswire/ -- Sohu.com Limited
(NASDAQ: SOHU), China's leading
online media, video, search and gaming business group, today
reported unaudited financial results for the second quarter ended
June 30, 2020.
Second Quarter Highlights[1]
The privatization of Changyou was completed on April 17, 2020. After the effectiveness of the
transaction, Changyou's net income/loss was wholly attributable to
Sohu.com Limited. For the second quarter of 2020, Changyou
recognized an additional accrual of withholding income tax of
US$88 million, as Changyou changed
its policy for its PRC subsidiaries with respect to distribution of
cash dividends after the completion of the privatization.
- Total revenues were US$421
million[2], down 9% year-over-year and 3%
quarter-over-quarter.
- Brand advertising revenues were US$38
million, down 14% year-over-year and up 48%
quarter-over-quarter.
- Search and search related
advertising revenues[3] were US$241 million, down 13% year-over-year and up 1%
quarter-over-quarter.
- Online game revenues were US$106
million, up 4% year-over-year and down 21%
quarter-over-quarter.
- GAAP net loss attributable to Sohu.com Limited was US$80 million. Excluding the impact of the
additional accrual of withholding income tax described above, GAAP
net income attributable to Sohu.com Limited was US$8 million, compared with a net loss of
US$35 million in the second quarter
of 2019 and a net loss of US$20
million in the first quarter of 2020.
- Excluding the impact of the additional accrual of withholding
income tax described above, non-GAAP net income attributable to
Sohu.com Limited was US$11 million.
Further excluding the loss generated by Sogou, non-GAAP net income
attributable to Sohu.com Limited was US$12
million, compared with a net loss of US$41 million in the second quarter of 2019 and a
net loss of US$8 million in the first
quarter of 2020.
Dr. Charles Zhang, Chairman and
CEO of Sohu.com Limited, commented, "In the second quarter of 2020,
our brand advertising business performed well, the brand
advertising revenue had a decent increase, up 48%
quarter-over-quarter. Both the brand advertising revenue and bottom
line exceeded our prior guidance. During the quarter, we integrated
our Media Portal's brand advantage and influence with Sohu Video's
advanced broadcast technologies. These initiatives allowed us to
more effectively generate and distribute our high-quality original
content, and further enhanced our credibility by reflecting the
attitude and values of Sohu. For Changyou, the privatization was
completed on April 17, 2020, and
after that Changyou's net income/loss was wholly attributable to
Sohu.com Limited. During the second quarter of 2020, online game
revenues met our prior guidance and declined quarter-over-quarter,
mainly due to the resumption of work following the easing of
COVID-19 restrictions. For Sogou, it delivered in-line results in
the second quarter with Search maintaining a steady share of
traffic and Mobile Keyboard further expanding its DAU base."
[1] As Changyou's
cinema advertising business ceased operations during the third
quarter of 2019, its results of operations have been excluded from
the Company's results from continuing operations in the condensed
consolidated statements of operations and are presented in separate
line items as discontinued operations. Retrospective adjustments to
the historical statements have been made in order to provide a
consistent basis of comparison. Unless indicated otherwise, results
presented in this release are related to continuing operations
only, and exclude results from the cinema advertising
business.
|
[2] On a constant
currency (non-GAAP) basis, if the exchange rate in the second
quarter of 2020 had been the same as it was in the second quarter
of 2019, or RMB6.81=US$1.00, US$ total revenues in the second
quarter of 2020 would have been US$438 million, or US$17 million
more than GAAP total revenues, and down 5%
year-over-year.
|
[3] Search and Search
related advertising revenues exclude intra-Group
transactions.
|
Second Quarter Financial Results
Revenues
Total revenues for the second quarter of 2020 were US$421 million, down 9% year-over-year and 3%
quarter-over-quarter.
Total online advertising revenues, which include revenues from
the brand advertising and search and search-related
advertising businesses, for the second quarter of 2020 were
US$279 million, down 13%
year-over-year and up 6% quarter-over-quarter.
Brand advertising revenues for the second quarter of 2020
totaled US$38 million, down 14%
year-over-year and up 48% quarter-over-quarter. The year-over-year
decrease was mainly due to the continuous negative impact on the
brand advertising industry from the outbreak of the COVID-19 in the
first quarter of 2020. The quarter-over-quarter increase was mainly
due to the increased revenues in our portal and video advertising
businesses as a result of our continuing efforts to boost our
revenues and the easing of the impact of COVID-19.
Search and search-related advertising revenues for the second
quarter of 2020 were US$241 million,
down 13% year-over-year and up 1% quarter-over-quarter.
Online game revenues for the second quarter of 2020 were
US$106 million, up 4% year-over-year
and down 21% quarter-over-quarter. The quarter-over-quarter
decrease was mainly due to a decrease in player engagement as a
result of work resumption during the quarter following the easing
of COVID-19 restrictions in China.
Gross Margin
Both GAAP and non-GAAP[4] gross margin was 41%
for the second quarter of 2020, compared with 46% in the
second quarter of 2019 and 37% in the first quarter of 2020.
Both GAAP and non-GAAP gross margin for the online
advertising business for the second quarter of 2020 was 23%,
compared with 33% in the second quarter of 2019 and 10%
in the first quarter of 2020.
Both GAAP and non-GAAP gross margin for the brand advertising
business in the second quarter of 2020 were 40%, compared
with 28% in the second quarter of 2019 and nil in
the first quarter of 2020. The year-over-year margin
improvement was mainly due to decreased video content cost. The
quarter-over-quarter margin improvement was mainly due to increased
revenues in the portal and video advertising businesses.
Both GAAP and non-GAAP gross margin for the search and
search-related advertising business in the second quarter of
2020 were 21%, compared with 34% in the second quarter of 2019 and
11% in the first quarter of 2020. The year-over-year decrease
primarily resulted from an increase in traffic acquisition cost as
a percentage of search and search related advertising revenues. The
quarter-over-quarter increase was due to a decrease in traffic
acquisition cost as a percentage of search and search related
advertising revenues due to normalized user traffic following the
easing of COVID-19 restrictions in China.
GAAP gross margin for online games in the second quarter of 2020
was 77%, compared with 82% in the second quarter of 2019 and 79% in
the first quarter of 2020. Non-GAAP gross margin for online
games in the second quarter of 2020 was 78%, compared with 82% in
the second quarter of 2019 and 79% in the first quarter of 2020.
The year-over-year decrease in gross margin was mainly due to an
increase in revenue-sharing payments related to TLBB Honor, which
was launched during the third quarter of 2019.
[4] Non-GAAP results
exclude share-based compensation expense; non-cash tax benefits
from excess tax deductions related to share-based awards; changes
in fair value recognized in the Company's consolidated statements
of operations with respect to equity investments with readily
determinable fair values; a one-time impairment charge recognized
for an investment unrelated to the Company's core businesses;
income/expense from the adjustment of contingent consideration
previously recorded for acquisitions; dividends and deemed
dividends to non-controlling preferred shareholders of Sogou; a
one-time income tax expense recognized in the fourth quarter of
2017 as a result of 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 "TCJA"); the subsequent re-evaluation for
the fourth quarter of 2018 and adjustment of the tax expense
previously recognized for the Toll Charge; the resulting
recognition of a previously unrecognized tax benefit and recording
of an uncertain tax position related to the balance of the Toll
Charge; and interest accrued in relation to the previously
unrecognized tax benefit. 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."
|
Operating Expenses
For the second quarter of 2020, GAAP operating expenses
totaled US$194 million, down 13%
year-over-year and up 4% quarter-over-quarter. Non-GAAP operating
expenses were US$187 million, down
14% year-over-year and up 3% quarter-over-quarter. The
year-over-year decrease in operating expenses was mainly due to
decreased marketing expenses.
Operating Loss
GAAP operating loss for the second quarter of 2020 was
US$23 million, compared with an
operating loss of US$11 million in the second quarter of 2019
and an operating loss of US$24
million in the first quarter of 2020.
Non-GAAP operating loss for the second quarter of 2020
was US$16 million, compared with an operating loss
of US$7 million in the second quarter of 2019 and an
operating loss of US$20
million in the first quarter of 2020.
Income Tax Expense
GAAP income tax expense was US$85
million for the second quarter of 2020, compared with income
tax expense of US$4 million in the
second quarter of 2019 and income tax expense of US$14 million in the first quarter of 2020.
Non-GAAP income tax expense was US$82
million for the second quarter of 2020, compared with income
tax expense of US$2 million in the
second quarter of 2019 and income tax expense of US$11 million in the first quarter of 2020. For
the second quarter of 2020, Changyou recognized an additional
accrual of withholding income tax of US$88
million, as Changyou changed its policy for its PRC
subsidiaries with respect to distribution of cash dividends after
the completion of the privatization of Changyou.
Net Income/(Loss)
GAAP net loss attributable to Sohu.com Limited for the
second quarter of 2020 was US$80 million, or a net loss of
US$2.04 per fully-diluted
ADS. Non-GAAP net loss attributable to Sohu.com Limited
for the second quarter of 2020 was US$77 million, or
a net loss of US$1.96 per
fully-diluted ADS.
Excluding the impact of the additional accrual of
withholding income tax described above, GAAP
net income attributable to Sohu.com Limited for the
second quarter of 2020 was US$8 million, or a net income of
US$0.20 per fully-diluted ADS;
non-GAAP net income attributable to Sohu.com Limited for
the second quarter of 2020 was US$11 million, or a
net income of US$0.27 per
fully-diluted ADS.
Liquidity
As of June 30, 2020, cash and cash
equivalents and short-term investments held by the Sohu Group,
minus short-term bank loans, were US$1.35
billion, compared with US$1.51
billion as of December 31,
2019.
Supplementary Information for Changyou Results
Second Quarter 2020 Operational Results
- For PC games, total average monthly active
accounts[5] were 1.9 million, a decrease of
5% year-over-year and 10% quarter-over-quarter. Total quarterly
aggregate active paying accounts[6] were 0.9
million, flat year-over-year and a decrease of 10%
quarter-over-quarter. The quarter-over-quarter decreases were
mainly due to a decrease in player engagement as a result of the
resumption of work during the quarter following the easing of
COVID-19 restrictions in China.
- For mobile games, total average monthly active accounts were
3.1 million, an increase of 15% year-over-year and a decrease of 9%
quarter-over-quarter. The year-over-year increase was mainly due to
the contribution of TLBB Honor, which was launched during the third
quarter of 2019. Total quarterly aggregate active paying accounts
were 0.6 million, flat year-over-year and a decrease of 40%
quarter-over-quarter. The quarter-over-quarter decreases were
mainly due to a decrease in player engagement as a result of the
resumption of work during the quarter following the easing of
COVID-19 restrictions in China.
[5] Monthly
active accounts refers to the number of registered accounts that
are logged in to these games at least once during the
month.
|
[6] Quarterly
aggregate active paying accounts refers to the number of accounts
from which game points are utilized at least once during the
quarter.
|
Second Quarter 2020 Unaudited Financial
Results
Total revenues for the second quarter of 2020 were
US$109 million, an increase of 3%
year-over-year and a decrease of 20% quarter-over-quarter. Online
game revenues were US$106 million, an
increase of 4% year-over-year and a decrease of 21%
quarter-over-quarter. Online advertising revenues were US$3 million, a decrease of 16% year-over-year
and an increase of 23% quarter-over-quarter.
GAAP and non-GAAP gross profit for the second quarter of
2020 were both US$85 million, a
decrease of 2% year-over-year and 21% quarter-over-quarter.
GAAP operating expenses for the second quarter were
US$51 million, an increase of 10%
year-over-year and a decrease of 6% quarter-over-quarter. The
year-over-year increase in operating expenses was mainly due
to an increase in share-based compensation expenses as new
share-based awards took effect in the fourth quarter of 2019. The
quarter-over-quarter decrease was mainly due to a decrease in
marketing and promotional spending for TLBB Honor.
Non-GAAP operating expenses for the second quarter
were US$48 million, a decrease of 1%
year-over-year and 6% quarter-over-quarter.
GAAP operating profit for the second quarter of 2020
was US$33 million, compared with an
operating profit of US$40 million in
the second quarter of 2019 and US$52
million in the first quarter of 2020.
Non-GAAP operating profit for the second quarter of
2020 was US$37 million, compared with
a non-GAAP operating profit of US$38
million in the second quarter of 2019 and US$56 million in the first quarter of 2020.
Recent Developments
On July 27, 2020, Sohu's
subsidiary Sogou announced that its board of directors (the "Sogou
Board") received a letter containing a preliminary non-binding
proposal (the "Proposal") from Tencent Holdings Limited (including its
affiliates, "Tencent") for
Tencent to acquire all of the
outstanding ordinary shares, including ordinary shares represented
by ADSs, of Sogou that are not already owned by Tencent for US$9.00
in cash per ordinary share or ADS (as the same may be amended from
time to time, a "Proposed Transaction"). The Proposed Transaction,
if completed, would result in Sogou becoming a privately-held,
indirect wholly-owned subsidiary of Tencent, and Sogou's ADSs would be delisted from
the New York Stock Exchange.
On July 31, 2020, the Sogou Board
established a special committee of the Sogou Board, composed solely
of independent directors, to consider the Proposal.
Sohu's board of directors has not had an opportunity to review
and evaluate the Proposal in detail, or to make a determination as
to how to respond to the Proposal or as to whether or not the
proposed acquisition of Sogou would be in the best interests of
Sohu, in its capacity as Sogou's controlling shareholder, and
Sohu's shareholders for Sohu to approve or reject the Proposal or a
Proposed Transaction.
Business Outlook
For the third quarter of 2020, Sohu estimates:
- Brand advertising revenues to be between US$37 million and
US$42 million; this implies an annual
decrease of 9% to 20% and a sequential decrease of 3% to a
sequential increase of 11%.
- Online game revenues to be between US$85
million and US$95 million;
this implies an annual decrease of 12% to 21% and a sequential
decrease of 10% to 20%.
- Excluding the profit/loss generated by Sogou, non-GAAP net loss
attributable to Sohu.com Limited to be between US$10 million and US$20
million; and GAAP net loss attributable to Sohu.com Limited
to be between US$15 million and
US$25 million.
For the third quarter 2020 guidance, the Company has
adopted a presumed exchange rate of RMB7.00=US$1.00, as
compared with the actual exchange rate of approximately
RMB6.99=US$1.00 for the third quarter of 2019, and
RMB7.08=US$1.00 for the second quarter of
2020.
This forecast reflects Sohu's management's current and
preliminary view, which is subject to substantial uncertainty,
particularly in view of the potential ongoing impact of the
COVID-19 virus, which remains difficult to predict.
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 the share-based
awards, which consist mainly of share-based compensation expenses
and non-cash tax benefits from excess tax deductions related to
share-based awards; changes in fair value recognized in the
Company's consolidated statements of operations with respect to
equity investments with readily determinable fair values; a
one-time impairment charge recognized for an investment unrelated
to the Company's core businesses; income/expense from the
adjustment of contingent consideration previously recorded for
acquisitions; dividend and deemed dividend to non-controlling
preferred shareholders; the one-time income tax expense recognized
in the fourth quarter of 2017 as a result of the Toll Charge
imposed by the TCJA and the subsequent re-evaluation for the fourth
quarter of 2018 and adjustment of the tax expense previously
recognized for the Toll Charge; the resulting recognition of a
previously unrecognized tax benefit and recording of an uncertain
tax position related to the balance of the Toll Charge; and
interest expense recognized in connection with the Toll
Charge. 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 equity
investments with readily determinable fair values; the one-time
impairment charge recognized for an investment unrelated to the
Company's core businesses; non-cash tax benefits from excess tax
deductions related to share-based awards; income/expense from the
adjustment of contingent consideration previously recorded for
acquisitions; dividend and deemed dividend to non-controlling
preferred shareholders; and income tax expense, income tax benefit,
uncertain tax position, and interest recognized in relation to the
Toll Charge from its non-GAAP financial measure is useful for
itself and investors. Further, the impact of share-based
compensation expense and changes in fair value recognized in
the Company's consolidated statements of operations with respect to
equity investments with readily determinable fair values; the
one-time impairment charge recognized for an investment unrelated
to the Company's core businesses; non-cash tax benefits from
excess tax deductions related to share-based awards; income/expense
from the adjustment of contingent consideration previously recorded
for acquisitions; dividend and deemed dividend to non-controlling
preferred shareholders; the one-time income tax expense recognized
in the fourth quarter of 2017 as a result of the Toll Charge
imposed by the TCJA and the subsequent re-evaluation for the fourth
quarter of 2018 and adjustment of the tax expense previously
recognized for the Toll Charge; the resulting recognition of a
previously unrecognized tax benefit and recording of an uncertain
tax position related to the balance of the Toll Charge; 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 the impact of share-based compensation expense and
changes in fair value recognized in the Company's consolidated
statements of operations with respect to equity investments with
readily determinable fair values, the one-time impairment
charge recognized for an investment unrelated to the Company's core
businesses, non-cash tax benefits from excess tax deductions
related to share-based awards, income/expense from the adjustment
of contingent consideration previously recorded for acquisitions,
and dividend and deemed dividend to non-controlling preferred
shareholders does not involve subsequent cash outflow or is
reflected in the cash flows at the equity transaction level, Sohu
does not factor this impact in 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
and changes in fair value recognized in the Company's consolidated
statements of operations with respect to equity investments with
readily determinable fair values, a one-time impairment charge
recognized for an investment unrelated to the Company's core
businesses, non-cash tax benefits from excess tax deductions
related to share-based awards, income/expense from the adjustment
of contingent consideration previously recorded for acquisitions,
and dividend and deemed dividend to non-controlling preferred
shareholders, and also excluded the one-time income tax expense
recognized in the fourth quarter of 2017 as a result of the Toll
Charge imposed by the TCJA and the subsequent re-evaluation for the
fourth quarter of 2018 and adjustment of the tax expense previously
recognized for the Toll Charge, the resulting recognition of a
previously unrecognized tax benefit and recording of an uncertain
tax position related to the balance of the Toll Charge, 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, operating profit, net income, net income
attributable to Sohu.com Limited and diluted net income
attributable to Sohu.com Limited per ADS, excluding share-based
compensation expense, non-cash tax benefits from excess tax
deductions related to share-based awards, income/expense from the
adjustment of contingent consideration previously recorded for
acquisitions, dividend, and deemed dividend to non-controlling
preferred shareholders is that the impact of share-based awards and
non-cash tax benefits from excess tax deductions related to
share-based awards has been and will continue to be a significant
recurring expense in Sohu's business for the foreseeable future,
income/expense from the adjustment of contingent consideration
previously recorded for acquisitions may recur in the future, and
dividend and deemed dividend to non-controlling preferred
shareholders may recur when Sohu and its affiliates enter into
equity transactions. 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 US dollar results; recent slow-downs
in the growth of the Chinese economy; the uncertain regulatory
landscape in the People's Republic of
China; fluctuations in Sohu's quarterly operating results;
the possibilities that Sohu will be unable to recoup its investment
in video content and that Changyou 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, online games and mobile services for its
revenues; the impact of the U.S. TCJA; the effects of the COVID-19
virus on the economy in China in
general and on Sohu's business in particular; and the fact that
there is no assurance that Tencent
will make a definitive offer to acquire Sogou, that a definitive
agreement relating to the Proposal will be entered into between
Tencent and Sogou, or that a Proposed
Transaction or any other similar transaction between Tencent and Sogou will be approved or
consummated. Further information regarding these and other risks is
included in Sohu's annual report on Form 20-F for the year ended
December 31, 2019, and other filings
with the 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,
August 10, 2020 (7:30 p.m. Beijing/Hong
Kong time, August 10, 2020)
following the quarterly results announcement. Participants can
register for the conference call by navigating to
https://apac.directeventreg.com/registration/event/8993497. Once
preregistration has been completed, participants will receive
dial-in numbers, an event passcode, and a unique registrant ID.
To join the conference, please dial the number you receive,
enter the event passcode followed by your unique registrant ID, and
you will be joined to the conference instantly. Please dial in 10
minutes before the call is scheduled to begin.
A telephone replay of the call will be available after the
conclusion of the conference call at 10:30
a.m. Eastern Time August 10 through
August 18, 2020. The dial-in details for the telephone
replay are:
International:
|
+1-646-254-3697
|
Passcode:
|
8993497
|
The live Webcast and archive of the conference call will be
available on the Investor Relations section of Sohu's Website at
http://investors.sohu.com/.
About Sohu.com
Sohu.com Limited (NASDAQ: SOHU) is China's premier online brand and indispensable
to the daily life of millions of Chinese, providing a network of
web properties and community based/web 2.0 products which offer the
vast Sohu user community a broad array of choices regarding
information, entertainment and communication. Sohu has built one of
the most comprehensive matrices of Chinese language web properties
and proprietary search engines, consisting of the mass portal and
leading online media destination www.sohu.com; interactive
search engine www.sogou.com; developer and operator of online
games www.changyou.com/en/ and online video
website tv.sohu.com.
Sohu's corporate services consist of online brand advertising on
Sohu's matrix of websites as well as bid listing and home page on
its in-house developed search directory and engine. Sohu also
provides multiple news and information services on mobile
platforms, including Sohu News App and the mobile news portal
m.sohu.com. Sohu's online game subsidiary Changyou develops and
operates a diverse portfolio of PC and mobile games, such as
Tian Long Ba Bu ("TLBB"), one of the
most popular PC games in China.
Changyou also owns and operates the 17173.com Website, a game
information portal in China.
Sohu's online search subsidiary Sogou (NYSE: SOGO) has grown to
become the second largest search engine by mobile queries in
China. It also owns and operates
Sogou Input Method, the largest Chinese language input software.
Sohu, established by Dr. Charles
Zhang, one of China's
internet pioneers, is in its twenty-fourth year of operation.
For investor and media inquiries, please contact:
In China:
Ms. Pu
Huang
|
Sohu.com
Limited
|
Tel:
|
+86 (10)
6272-6645
|
E-mail:
|
ir@contact.sohu.com
|
In the United
States:
Ms. Linda
Bergkamp
|
Christensen
|
Tel:
|
+1 (480)
614-3004
|
E-mail:
|
lbergkamp@christensenir.com
|
SOHU.COM
LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
|
|
|
Three Months
Ended
|
|
|
Jun. 30,
2020
|
|
Mar. 31,
2020
|
|
Jun. 30,
2019
|
Revenues:
|
|
|
|
|
|
|
Online
advertising
|
|
|
|
|
|
|
Brand
advertising
|
$
|
37,969
|
$
|
25,580
|
$
|
43,958
|
Search and
search-related advertising
|
|
240,579
|
|
237,589
|
|
275,942
|
Subtotal
|
|
278,548
|
|
263,169
|
|
319,900
|
Online
games
|
|
105,937
|
|
133,360
|
|
102,147
|
Others
|
|
36,579
|
|
39,471
|
|
40,199
|
Total revenues
|
|
421,064
|
|
436,000
|
|
462,246
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
Online
advertising
|
|
|
|
|
|
|
Brand
advertising (includes stock-based
compensation expense of $36, $-40, and $-22,
respectively)
|
|
22,790
|
|
25,519
|
|
31,432
|
Search and search-related advertising (includes
stock-based compensation expense of
$45, $77, and
$127, respectively)
|
|
191,150
|
|
212,210
|
|
182,593
|
Subtotal
|
|
213,940
|
|
237,729
|
|
214,025
|
Online games
(includes stock-based compensation
expense of $152, $161, and $-17, respectively)
|
|
23,959
|
|
28,389
|
|
18,163
|
Others
|
|
12,133
|
|
8,568
|
|
19,624
|
Total cost of
revenues
|
|
250,032
|
|
274,686
|
|
251,812
|
|
|
|
|
|
|
|
Gross
profit
|
|
171,032
|
|
161,314
|
|
210,434
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Product development
(includes stock-based
compensation expense of $4,169, $2,429, and $3,587,
respectively)
|
|
105,022
|
|
103,412
|
|
109,048
|
Sales and marketing
(includes stock-based
compensation expense of $795, $-415, and $1,355,
respectively)
|
|
64,579
|
|
62,841
|
|
90,580
|
General and
administrative (includes stock-based
compensation expense of $1,678, $1,561, and $-572,
respectively)
|
|
24,097
|
|
19,296
|
|
21,987
|
Total operating expenses
|
|
193,698
|
|
185,549
|
|
221,615
|
|
|
|
|
|
|
|
Operating
loss
|
|
(22,666)
|
|
(24,235)
|
|
(11,181)
|
|
|
|
|
|
|
|
Other income[7], net
|
|
24,094
|
|
10,645
|
|
5,684
|
Interest
income
|
|
2,196
|
|
2,126
|
|
3,286
|
Interest
expense
|
|
(1,431)
|
|
(2,275)
|
|
(3,737)
|
Exchange
difference
|
|
(259)
|
|
2,225
|
|
3,551
|
Income/(loss) before
income tax expense
|
|
1,934
|
|
(11,514)
|
|
(2,397)
|
Income tax
expense[8]
|
|
85,023
|
|
13,600
|
|
3,941
|
Net loss from
continuing operations
|
|
(83,089)
|
|
(25,114)
|
|
(6,338)
|
Net loss from
discontinued operations, net of tax
|
|
-
|
|
-
|
|
(27,037)
|
Net loss
|
|
(83,089)
|
|
(25,114)
|
|
(33,375)
|
|
|
|
|
|
|
|
Less: Net income/(loss)
from continuing operations
attributable to the noncontrolling interest shareholders
|
|
(3,159)
|
|
(5,008)
|
|
28,467
|
Less: Net loss from
discontinued operations
attributable to the noncontrolling interest shareholders
|
|
-
|
|
-
|
|
(8,949)
|
|
|
|
|
|
|
|
Net loss from
continuing operations attributable to
Sohu.com Limited
|
|
(79,930)
|
|
(20,106)
|
|
(34,805)
|
Net loss from
discontinued operations attributable to
Sohu.com Limited
|
|
-
|
|
-
|
|
(18,088)
|
Net loss attributable
to Sohu.com Limited
|
|
(79,930)
|
|
(20,106)
|
|
(52,893)
|
|
|
|
|
|
|
|
Basic net
loss from continuing operations per ADS
attributable to Sohu.com Limited
|
|
(2.04)
|
|
(0.51)
|
|
(0.89)
|
Basic net loss from
discontinued operations per ADS
attributable to Sohu.com Limited
|
|
-
|
|
-
|
|
(0.46)
|
Basic net loss per
ADS attributable to Sohu.com Limited
|
$
|
(2.04)
|
$
|
(0.51)
|
$
|
(1.35)
|
ADS used in computing
basic net loss per ADS attributable to
Sohu.com Limited
|
|
39,271
|
|
39,270
|
|
39,244
|
|
|
|
|
|
|
|
Diluted
net loss from continuing operations per ADS
attributable to Sohu.com Limited
|
|
(2.04)
|
|
(0.52)
|
|
(0.89)
|
Diluted net loss from
discontinued operations per ADS
attributable to Sohu.com Limited
|
|
-
|
|
-
|
|
(0.46)
|
Diluted net loss per
ADS attributable to Sohu.com Limited
|
$
|
(2.04)
|
$
|
(0.52)
|
$
|
(1.35)
|
ADS used in computing
diluted net loss per ADS
attributable to Sohu.com Limited
|
|
39,271
|
|
39,270
|
|
39,244
|
[7] For the second
quarter of 2020, other income included a tax refund that was
received by Sogou as part of the Chinese government's initiatives
taken in response to COVID-19.
|
[8] Following
completion of the Changyou privatization, Changyou changed its
policy for its PRC subsidiaries with respect to distribution of
cash dividends. As a result, Changyou recognized an additional
accrual of withholding income tax of US$88 million for the second
quarter of 2020.
|
SOHU.COM
LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
As of Jun. 30,
2020
|
|
As of Dec. 31,
2019
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
397,425
|
$
|
305,126
|
Restricted
cash[9]
|
|
112,887
|
|
8,661
|
Short-term
investments
|
|
1,077,572
|
|
1,316,833
|
Account and financing receivables, net
|
|
219,910
|
|
260,716
|
Prepaid and other current assets
|
|
132,673
|
|
124,332
|
Total current assets
|
|
1,940,467
|
|
2,015,668
|
Long-term
investments, net
|
|
107,709
|
|
94,332
|
Fixed assets,
net
|
|
410,105
|
|
447,688
|
Goodwill
|
|
53,185
|
|
52,923
|
Intangible assets,
net
|
|
9,012
|
|
11,437
|
Restricted time
deposits[9]
|
|
25,426
|
|
240
|
Prepaid non-current
assets
|
|
1,391
|
|
1,882
|
Other
assets
|
|
63,279
|
|
65,620
|
Total assets
|
$
|
2,610,574
|
$
|
2,689,790
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
$
|
342,403
|
$
|
253,403
|
Accrued liabilities
|
|
236,849
|
|
249,810
|
Receipts in advance and deferred revenue
|
|
114,494
|
|
118,222
|
Accrued salary and benefits
|
|
101,289
|
|
110,833
|
Taxes payable
|
|
77,236
|
|
102,686
|
Short-term bank loans
|
|
128,251
|
|
114,528
|
Other short-term liabilities
|
|
146,422
|
|
149,311
|
Total current liabilities
|
$
|
1,146,944
|
$
|
1,098,793
|
|
|
|
|
|
Long-term accounts
payable
|
|
755
|
|
767
|
Long-term bank
loans
|
|
92,000
|
|
-
|
Long-term tax
liabilities[10]
|
|
375,714
|
|
277,544
|
Other long-term
liabilities
|
|
3,284
|
|
5,769
|
Total long-term
liabilities
|
$
|
471,753
|
$
|
284,080
|
Total liabilities
|
$
|
1,618,697
|
$
|
1,382,873
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
Sohu.com Limited shareholders' equity
|
|
288,946
|
|
428,454
|
Noncontrolling interest
|
|
702,931
|
|
878,463
|
Total shareholders' equity
|
$
|
991,877
|
$
|
1,306,917
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$
|
2,610,574
|
$
|
2,689,790
|
[9] In the second
quarter of 2020, in connection with the Company's financing of the
Changyou privatization, Changyou pledged deposit certificates in
the amount of US$127 million in the aggregate, of which US$102
million was recorded as restricted cash and US$25 million was
recorded as restricted time deposits.
[10] Following
completion of the Changyou privatization, Changyou changed its
policy for its PRC subsidiaries with respect to distribution of
cash dividends. As a result, Changyou recognized an additional
accrual of withholding income tax of US$88 million for the second
quarter of 2020.
|
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
Jun. 30, 2020
|
|
Three Months Ended
Mar. 31, 2020
|
|
Three Months Ended
Jun. 30, 2019
|
|
|
GAAP
|
|
Non-GAAP
Adjustments
|
|
Non-GAAP
|
|
GAAP
|
|
Non-GAAP
Adjustments
|
|
Non-GAAP
|
|
GAAP
|
|
Non-GAAP
Adjustments
|
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
(a)
|
|
|
|
|
(40)
|
(a)
|
|
|
|
|
(22)
|
(a)
|
|
Brand advertising
gross profit
|
$
|
15,179
|
$
|
36
|
$
|
15,215
|
$
|
61
|
$
|
(40)
|
$
|
21
|
$
|
12,526
|
$
|
(22)
|
$
|
12,504
|
Brand advertising
gross
margin
|
|
40%
|
|
|
|
40%
|
|
0%
|
|
|
|
0%
|
|
28%
|
|
|
|
28%
|
|
|
|
|
45
|
(a)
|
|
|
|
|
77
|
(a)
|
|
|
|
|
127
|
(a)
|
|
Search and
search-related
advertising gross profit
|
$
|
49,429
|
$
|
45
|
$
|
49,474
|
$
|
25,379
|
$
|
77
|
$
|
25,456
|
$
|
93,349
|
$
|
127
|
$
|
93,476
|
Search and
search-related
advertising gross margin
|
|
21%
|
|
|
|
21%
|
|
11%
|
|
|
|
11%
|
|
34%
|
|
|
|
34%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
(a)
|
|
|
|
|
37
|
(a)
|
|
|
|
|
105
|
(a)
|
|
Online advertising
gross profit
|
$
|
64,608
|
$
|
81
|
$
|
64,689
|
$
|
25,440
|
$
|
37
|
$
|
25,477
|
$
|
105,875
|
$
|
105
|
$
|
105,980
|
Online advertising
gross
margin
|
|
23%
|
|
|
|
23%
|
|
10%
|
|
|
|
10%
|
|
33%
|
|
|
|
33%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152
|
(a)
|
|
|
|
|
161
|
(a)
|
|
|
|
|
(17)
|
(a)
|
|
Online games gross
profit
|
$
|
81,978
|
$
|
152
|
$
|
82,130
|
$
|
104,971
|
$
|
161
|
$
|
105,132
|
$
|
83,984
|
$
|
(17)
|
$
|
83,967
|
Online games gross
margin
|
|
77%
|
|
|
|
78%
|
|
79%
|
|
|
|
79%
|
|
82%
|
|
|
|
82%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others gross
profit
|
$
|
24,446
|
$
|
-
|
(a) $
|
24,446
|
$
|
30,903
|
$
|
-
|
(a) $
|
30,903
|
$
|
20,575
|
$
|
-
|
(a) $
|
20,575
|
Others gross
margin
|
|
67%
|
|
|
|
67%
|
|
78%
|
|
|
|
78%
|
|
51%
|
|
|
|
51%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
(a)
|
|
|
|
|
198
|
(a)
|
|
|
|
|
88
|
(a)
|
|
Gross
profit
|
$
|
171,032
|
$
|
233
|
$
|
171,265
|
$
|
161,314
|
$
|
198
|
$
|
161,512
|
$
|
210,434
|
$
|
88
|
$
|
210,522
|
Gross
margin
|
|
41%
|
|
|
|
41%
|
|
37%
|
|
|
|
37%
|
|
46%
|
|
|
|
46%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
193,698
|
$
|
(6,642)
|
(a) $
|
187,056
|
$
|
185,549
|
$
|
(3,575)
|
(a) $
|
181,974
|
$
|
221,615
|
$
|
(4,370)
|
(a) $
|
217,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,875
|
(a)
|
|
|
|
|
3,773
|
(a)
|
|
|
|
|
4,458
|
(a)
|
|
Operating
loss
|
$
|
(22,666)
|
$
|
6,875
|
$
|
(15,791)
|
$
|
(24,235)
|
$
|
3,773
|
$
|
(20,462)
|
$
|
(11,181)
|
$
|
4,458
|
$
|
(6,723)
|
Operating
margin
|
|
-5%
|
|
|
|
-4%
|
|
-6%
|
|
|
|
-5%
|
|
-2%
|
|
|
|
-1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense[11]
|
$
|
(85,023)
|
$
|
3,141
|
(c,d)$
|
(81,882)
|
$
|
(13,600)
|
$
|
2,195
|
(c,d)$
|
(11,405)
|
$
|
(3,941)
|
$
|
1,566
|
(c,d)$
|
(2,375)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,875
|
(a)
|
|
|
|
|
3,773
|
(a)
|
|
|
|
|
4,458
|
(a)
|
|
|
|
|
|
(3,618)
|
(c)
|
|
|
|
|
(855)
|
(c)
|
|
|
|
|
794
|
(c)
|
|
|
|
|
|
1,934
|
(d)
|
|
|
|
|
1,910
|
(d)
|
|
|
|
|
1,831
|
(d)
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Net income/(loss)
before non-
controlling interest
|
$
|
(83,089)
|
|
5,191
|
|
(77,898)
|
$
|
(25,114)
|
|
4,828
|
|
(20,286)
|
$
|
(6,338)
|
|
7,083
|
|
745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,875
|
(a)
|
|
|
|
|
3,773
|
(a)
|
|
|
|
|
4,458
|
(a)
|
|
|
|
|
|
(2,338)
|
(b)
|
|
|
|
|
(2,761)
|
(b)
|
|
|
|
|
(3,733)
|
(b)
|
|
|
|
|
|
(3,618)
|
(c)
|
|
|
|
|
(855)
|
(c)
|
|
|
|
|
794
|
(c)
|
|
|
|
|
|
1,934
|
(d)
|
|
|
|
|
1,910
|
(d)
|
|
|
|
|
1,831
|
(d)
|
|
Net loss from
continuing
operations attributable to
Sohu.com Limited for diluted
net loss per ADS
|
$
|
(79,986)
|
|
2,853
|
|
(77,133)
|
$
|
(20,441)
|
|
2,067
|
|
(18,374)
|
$
|
(34,932)
|
|
3,350
|
|
(31,582)
|
Net loss from
discontinued
operations attributable to
Sohu.com Limited for diluted
net loss per ADS
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(18,062)
|
|
-
|
|
(18,062)
|
Net loss attributable
to
Sohu.com Limited for diluted
net loss per ADS
|
|
(79,986)
|
|
2,853
|
|
(77,133)
|
|
(20,441)
|
|
2,067
|
|
(18,374)
|
|
(52,994)
|
|
3,350
|
|
(49,644)
|
Diluted net loss from
continuing operations per
ADS attributable to Sohu.com
Limited
|
$
|
(2.04)
|
|
|
|
(1.96)
|
$
|
(0.52)
|
|
|
|
(0.47)
|
$
|
(0.89)
|
|
|
|
(0.80)
|
Diluted net
loss from
discontinued operations per
ADS attributable to Sohu.com
Limited
|
|
-
|
|
|
|
-
|
|
-
|
|
|
|
-
|
|
(0.46)
|
|
|
|
(0.46)
|
Diluted net
loss per ADS
attributable to Sohu.com
Limited
|
|
(2.04)
|
|
|
|
(1.96)
|
|
(0.52)
|
|
|
|
(0.47)
|
|
(1.35)
|
|
|
|
(1.27)
|
Shares used in
computing
diluted net loss per ADS
attributable to Sohu.com
Limited
|
|
39,271
|
|
|
|
39,271
|
|
39,270
|
|
|
|
39,270
|
|
39,244
|
|
|
|
39,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[11] Following
completion of the Changyou privatization, Changyou changed its
policy for its PRC subsidiaries with respect to distribution of
cash dividends. As a result, Changyou recognized an additional
accrual of withholding income tax of US$88 million for the second
quarter of 2020.
|
Note:
|
|
(a)
To eliminate the impact of share-based awards as measured using the
fair value method. This adjustment does not have any impact on
income tax expense.
|
|
(b) To
adjust Sohu's economic interests in Changyou and Sogou attributable
to the above non-GAAP adjustments. This adjustment does not have
any impact on income tax expense.
|
|
(c)
To adjust for a change in the fair value of the Company's
investment in Hylink and the income tax effect.
|
|
(d) To
adjust for the effect of the U.S. TCJA.
|
|
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SOURCE Sohu.com Ltd.