BEIJING, May 18, 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 first quarter ended
March 31, 2020.
First Quarter Highlights[1]
- Total revenues were US$436
million[2], up 6% year-over-year and down 11%
quarter-over-quarter.
- Brand advertising revenues were US$26
million, down 40% year-over-year and 39%
quarter-over-quarter.
- Search and search related
advertising revenues[3] were US$238 million, up 1% year-over-year and down 13%
quarter-over-quarter.
- Online game revenues were US$133
million, up 35% year-over-year and 1%
quarter-over-quarter.
- GAAP net loss attributable to Sohu.com Limited was US$20 million, compared with a net loss of
US$54 million in the first quarter of
2019 and a net loss of US$18 million
in the fourth quarter of 2019.
- Non-GAAP net loss attributable to Sohu.com Limited was
US$18 million, compared with a net
loss of US$52 million in the first
quarter of 2019 and net income of US$7
million in the fourth quarter of 2019.
- Excluding the profit/loss generated by Sogou, non-GAAP net loss
attributable to Sohu.com Limited was US$8
million, compared with a net loss of US$51 million in the first quarter of 2019 and a
net loss of US$6 million in the
fourth quarter of 2019.
Dr. Charles Zhang, Chairman and
CEO of Sohu.com Limited, commented, "During the first quarter
of 2020, the COVID-19 outbreak inevitably impacted the overall
economy and the advertising industry as well. Facing these
challenges, we continued to explore new opportunities and
differentiated development strategies. For Sohu Media Portal, as a
mainstream media platform, we continued to refine the product to
generate and distribute a large amount of timely and accurate
information, especially regarding the pandemic and its prevention.
For Sohu Video, we proactively explored new opportunities in the
live broadcasting of medical and health-related content, and
provided unique content and valuable information to our audiences.
We will continue to explore diversified revenue sources and ways to
further narrow losses. For Changyou, online games performed well
during the first quarter, mainly driven by the solid performance of
both TLBB PC and Legacy TLBB Mobile. The privatization of Changyou
was completed on April 17th, after
which Changyou's profit will be wholly attributable to Sohu.com
Limited. Going forward, we plan to increase the integration of
resources and combine Changyou onto Sohu's platforms. For Sogou,
despite the challenging environment during COVID-19, Sogou's core
Search business continued to outperform the industry. The Search
and Mobile Keyboard recorded new highs in terms of traffic and user
base, respectively."
[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
first quarter of 2020 had been the same as it was in the first
quarter of 2019, or RMB6.74=US$1.00, US$ total revenues in the
first quarter of 2020 would have been US$451 million, or US$15
million more than GAAP total revenues, and up 10%
year-over-year.
|
[3] Search
and Search related advertising revenues exclude intra-Group
transactions.
|
First Quarter Financial Results
Revenues
Total revenues for the first quarter of 2020 were US$436 million, up 6% year-over-year and down 11%
quarter-over-quarter.
Total online advertising revenues, which include revenues from
the brand advertising and search and search-related
advertising businesses, for the first quarter of 2020 were
US$263 million, down 5%
year-over-year and 17% quarter-over-quarter.
Brand advertising revenues for the first quarter of 2020 totaled
US$26 million, down 40%
year-over-year and 39% quarter-over-quarter. The decrease was
mainly due to seasonality and the negative impact on the brand
advertising industry from the outbreak of the COVID-19.
Search and search-related advertising revenues for the first
quarter of 2020 were US$238 million,
up 1% year-over-year and down 13% quarter-over-quarter.
Online game revenues for the first quarter of 2020 were
US$133 million, up 35% year-over-year
and 1% quarter-over-quarter. The year-over-year increase was mainly
due to the contribution of TLBB Honor, as well as improved
performance of some of Changyou's older games, including TLBB PC
and Legacy TLBB Mobile, as a result of content updates and
promotional activities, and higher player engagement during the
quarter.
Gross Margin
Both GAAP and non-GAAP[4] gross margin was 37%
for the first quarter of 2020, compared with 41% in the
first quarter of 2019 and 52% in the fourth quarter of 2019.
Both GAAP and non-GAAP gross margin for the online
advertising business for the first quarter of 2020 was 10%,
compared with 23% in the first quarter of 2019 and 39% in
the fourth quarter of 2019.
Both GAAP and non-GAAP gross margin for the brand advertising
business in the first quarter of 2020 was nil, compared
with 20% in the first quarter of 2019 and 31% in the
fourth quarter of 2019. The margin decrease was mainly
due to decreased revenues as a result of the outbreak of the
COVID-19.
GAAP gross margin for the search and search-related
advertising business in the first quarter of 2020 was 11%,
compared with 24% in the first quarter of 2019 and 40% in the
fourth quarter of 2019. Non-GAAP gross margin for the search
and search-related advertising business in the first quarter
of 2020 was 11%, compared with 24% in the first quarter of 2019 and
41% in the fourth quarter of 2019. The year-over-year and
quarter-over-quarter decreases primarily resulted from increases in
traffic acquisition cost as a percentage of search and
search-related advertising
revenues.
Both GAAP and non-GAAP gross margin for online games in the
first quarter of 2020 was 79%, compared with 86% in the first
quarter of 2019 and 75% in the fourth quarter of 2019. The
year-over-year decrease in gross margin was mainly due to an
increase in revenue-sharing payments related to TLBB Honor.
[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 first quarter of 2020, GAAP operating expenses
totaled US$186 million, down 12% both
year-over-year and quarter-over-quarter. Non-GAAP operating
expenses were US$182 million, down
13% year-over-year and 11% quarter-over-quarter. The year-over-year
decrease in operating expenses was mainly due to decreased
marketing expenses for Sohu ex Sogou and Changyou, partially offset
by promotional spending by Changyou for TLBB Honor. The
quarter-over-quarter decrease was mainly due to decreased marketing
expenses.
Operating Profit/(Loss)
GAAP operating loss for the first quarter of 2020 was
US$24 million, compared with an
operating loss of US$42 million in the first quarter of 2019
and an operating profit of US$42
million in the fourth quarter of 2019.
Non-GAAP operating loss for the first quarter of 2020
was US$20 million, compared with an operating loss
of US$39 million in the first quarter of 2019 and an
operating profit of US$49
million in the fourth quarter of 2019.
Income Tax Expense
GAAP income tax expense was US$14
million for the first quarter of 2020, compared with income
tax expense of US$11 million in the
first quarter of 2019 and income tax benefit of US$1 million in the fourth quarter of 2019.
Non-GAAP income tax expense was US$11
million for the first quarter of 2020, compared with income
tax expense of US$9 million in the
first quarter of 2019 and income tax benefit of US$4 million in the fourth quarter of 2019.
The income tax benefit in the fourth quarter of 2019 included a
one-time tax benefit of US$19 million
that was recognized as a result of some of Changyou's subsidiaries
having been granted preferential tax rates upon their receipt of
2018 Key National Software Enterprise status or 2018 Software
Enterprise status.
Net Income/(Loss)
GAAP net loss attributable to Sohu.com Limited for the
first quarter of 2020 was US$20 million, or US$0.52 loss per fully-diluted ADS,
compared with a net loss of US$54
million in the first quarter of 2019 and a net
loss of US$18 million in the
fourth quarter of 2019. Non-GAAP net loss attributable to
Sohu.com Limited for the first quarter of 2020 was
US$18 million, or a net loss of US$0.47 per fully-diluted ADS, compared with
a net loss of US$52 million in the first quarter of
2019 and a net income of US$7
million in the fourth quarter of 2019.
Liquidity
As of March 31, 2020, cash and
cash equivalents and short-term investments held by the Sohu Group,
minus short-term bank loans, were US$1.53
billion, compared with US$1.51
billion as of December 31,
2019.
Completion of Changyou Privatization
The previously-announced planned privatization of Changyou was
completed on April 17, 2020. After
the effectiveness of the transaction, Changyou's net income/loss
will be wholly attributable to Sohu.com Limited. Following
completion of the privatization, Changyou changed its policy for
its PRC subsidiaries with respect to distribution of cash
dividends. As a result, it is expected that Changyou will recognize
an additional accrual of withholding income tax of US$88 million for the second quarter of 2020.
Supplementary Information for Changyou Results
First Quarter 2020 Operational Results
- For PC games, total average monthly active
accounts[5] were 2.1 million, an increase of 11%
year-over-year and a decrease of 5% quarter-over-quarter. Total
quarterly aggregate active paying accounts[6] were 1.0
million, an increase of 11% year-over-year and flat
quarter-over-quarter. The year-over-year increases were due to
improved performance of some of the older games, including TLBB PC,
as a result of content updates and promotional activities, and
higher player engagement resulting from the COVID-19 lockdown
during the quarter.
- For mobile games, total average monthly active accounts were
3.4 million, an increase of 26% year-over-year and a decrease of 8%
quarter-over-quarter. The year-over-year and quarter-over-quarter
changes were mainly due to TLBB Honor, which was launched during
the third quarter of 2019. Total quarterly aggregate active paying
accounts were 1.0 million, an increase of 67% 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. The
quarter-over-quarter decrease reflected the natural declining life
cycles of the older games, including Legacy TLBB Mobile.
[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.
|
First Quarter 2020 Unaudited Financial Results
Total revenues for the first quarter of 2020 were
US$136 million, an increase of 32%
year-over-year and 1% quarter-over-quarter. Online game revenues
were US$133 million, an increase of
35% year-over-year and 1% quarter-over-quarter. Online advertising
revenues were US$3 million, a
decrease of 19% year-over-year and 21% quarter-over-quarter.
GAAP and non-GAAP gross profit for the first quarter of
2020 were both US$107 million, an
increase of 23% year-over-year and 6% quarter-over-quarter.
GAAP operating expenses for the first quarter were
US$54 million, an increase of 32%
year-over-year and 1% quarter-over-quarter. The year-over-year
increase in operating expenses was mainly due to an increase in
marketing and promotional spending for TLBB Honor, as well as an
increase in share-based compensation expenses as new share-based
awards took effect in the fourth quarter of 2019.
Non-GAAP operating expenses for the first quarter
were US$51 million, an increase of
23% year-over-year and flat quarter-over-quarter.
GAAP operating profit for the first quarter of 2020
was US$52 million, compared with an
operating profit of US$45 million in
the first quarter of 2019 and US$47
million in the fourth quarter of 2019.
Non-GAAP operating profit for the first quarter of
2020 was US$56 million, compared with
a non-GAAP operating profit of US$45
million in the first quarter of 2019 and US$50 million in the fourth quarter of 2019.
Business Outlook
For the second quarter of 2020, Sohu estimates:
- Total revenues to be between US$410 million and
US$445 million.
- Brand advertising revenues to be between US$32 million and
US$37 million; this implies an annual
decrease of 16% to 27% and a sequential increase of 25% to
45%.
- Sogou revenues to be between US$260
million and US$280 million;
this implies an annual decrease of 8% to 14% and a sequential
increase of 1% to 9%.
- Online game revenues to be between US$102 million and US$112
million; this implies an annual increase of nil to 10% and a
sequential decrease of 16% to 24%.
- Excluding the expected accrual during the second quarter of
withholding income tax of approximately US$88 million discussed above, non-GAAP net
income/loss attributable to Sohu.com Limited to be between a net loss of
US$5 million and a net income of
US$5 million, and non-GAAP
income/loss per fully-diluted ADS to be between a net loss of
US$0.13 per fully-diluted ADS and a
net income of US$0.13 per
fully-diluted ADS; excluding the expected accrual of withholding
income tax, GAAP net loss attributable to Sohu.com
Limited to be between nil and US$10 million, and GAAP loss per fully-diluted
ADS to be between nil and US$0.25.
- Excluding the profit/loss generated by Sogou, and further
excluding the expected accrual of withholding income tax,
non-GAAP net income attributable to Sohu.com Limited to be between nil and US$10 million; and GAAP net income/loss
attributable to Sohu.com Limited to be between a net loss of
US$4 million and a net income of
US$6 million.
For the second quarter 2020 guidance, the Company has
adopted a presumed exchange rate of RMB7.07=US$1.00, as
compared with the actual exchange rate of approximately
RMB6.81=US$1.00 for the second quarter of 2019, and
RMB6.97=US$1.00 for the first 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; and the effects of the
COVID-19 virus on the economy in China in general and on Sohu's business in
particular. 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,
May 18, 2020 (7:30 p.m. Beijing/Hong
Kong time, May 18, 2020)
following the quarterly results announcement.
Participants can register for the conference call by navigating
to
https://apac.directeventreg.com/registration/event/5796408. 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 on May 18 through
May 25, 2020. The dial-in details for the telephone replay
are:
International:
|
+1-646-254-3697
|
Passcode:
|
5796408
|
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
|
|
|
Mar. 31,
2020
|
|
Dec. 31,
2019
|
|
Mar. 31,
2019
|
Revenues:
|
|
|
|
|
|
|
Online
advertising
|
|
|
|
|
|
|
Brand
advertising
|
$
|
25,580
|
$
|
41,599
|
$
|
42,981
|
Search and
search-related advertising
|
|
237,589
|
|
274,590
|
|
234,130
|
Subtotal
|
|
263,169
|
|
316,189
|
|
277,111
|
Online
games
|
|
133,360
|
|
131,689
|
|
99,054
|
Others
|
|
39,471
|
|
41,769
|
|
35,106
|
Total revenues
|
|
436,000
|
|
489,647
|
|
411,271
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
Online
advertising
|
|
|
|
|
|
|
Brand
advertising (includes stock-based
compensation expense of $-40, $2, and $38,
respectively)
|
|
25,519
|
|
28,677
|
|
34,305
|
Search and
search-related advertising (includes
stock-based compensation expense of $77, $256, and
$27, respectively)
|
|
212,210
|
|
163,384
|
|
178,824
|
Subtotal
|
|
237,729
|
|
192,061
|
|
213,129
|
Online games (includes
stock-based compensation
expense of $161, $137, and $0, respectively)
|
|
28,389
|
|
33,181
|
|
14,362
|
Others
|
|
8,568
|
|
12,198
|
|
14,051
|
Total cost of
revenues
|
|
274,686
|
|
237,440
|
|
241,542
|
|
|
|
|
|
|
|
Gross
profit
|
|
161,314
|
|
252,207
|
|
169,729
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Product development
(includes stock-based
compensation expense of $2,429, $4,594, and $1,019,
respectively)
|
|
103,412
|
|
105,425
|
|
100,434
|
Sales and marketing
(includes stock-based
compensation expense of $-415, $797, and $120,
respectively)
|
|
62,841
|
|
78,375
|
|
80,550
|
General and
administrative (includes stock-based
compensation expense of $1,561, $1,518, and $911,
respectively)
|
|
19,296
|
|
26,901
|
|
23,088
|
Goodwill impairment
and impairment of intangibles
assets acquired as part of business acquisitions
|
|
-
|
|
-
|
|
7,245
|
Total operating expenses
|
|
185,549
|
|
210,701
|
|
211,317
|
|
|
|
|
|
|
|
Operating
profit/(loss)
|
|
(24,235)
|
|
41,506
|
|
(41,588)
|
|
|
|
|
|
|
|
Other
income/(expense) , net
|
|
10,645
|
|
(13,787)[7]
|
|
14,219
|
Interest
income
|
|
2,126
|
|
1,508
|
|
3,793
|
Interest
expense
|
|
(2,275)
|
|
(2,501)
|
|
(5,501)
|
Exchange
difference
|
|
2,225
|
|
(2,324)
|
|
(2,662)
|
Income/(loss) before
income tax expense/(benefit)
|
|
(11,514)
|
|
24,402
|
|
(31,739)
|
Income tax
expense/(benefit)
|
|
13,600
|
|
(954)
|
|
11,178
|
Net income/(loss)
from continuing operations
|
|
(25,114)
|
|
25,356
|
|
(42,917)
|
Net loss from
discontinued operations, net of tax
|
|
-
|
|
-
|
|
(4,255)
|
Net
income/(loss)
|
|
(25,114)
|
|
25,356
|
|
(47,172)
|
|
|
|
|
|
|
|
Less: Net
income/(loss) from continuing operations
attributable to the noncontrolling interest shareholders
|
|
(5,008)
|
|
42,451
|
|
10,644
|
Less: Net loss from
discontinued operations
attributable to the noncontrolling interest shareholders
|
|
-
|
|
-
|
|
(1,387)
|
|
|
|
|
|
|
|
Net loss from
continuing operations attributable to
Sohu.com Limited
|
|
(20,106)
|
|
(17,095)
|
|
(53,561)
|
Net loss from
discontinued operations attributable to
Sohu.com Limited
|
|
-
|
|
-
|
|
(2,868)
|
Net loss attributable
to Sohu.com Limited
|
|
(20,106)
|
|
(17,095)
|
|
(56,429)
|
|
|
|
|
|
|
|
Basic net
loss from continuing operations per ADS
attributable to Sohu.com Limited
|
|
(0.51)
|
|
(0.44)
|
|
(1.37)
|
Basic net loss from
discontinued operations per ADS
attributable to Sohu.com Limited
|
|
-
|
|
-
|
|
(0.07)
|
Basic net loss per
ADS attributable to Sohu.com Limited
|
$
|
(0.51)
|
$
|
(0.44)
|
$
|
(1.44)
|
ADS used in computing
basic net loss per ADS attributable
to Sohu.com Limited
|
|
39,270
|
|
39,263
|
|
39,236
|
|
|
|
|
|
|
|
Diluted
net loss from continuing operations per ADS
attributable to Sohu.com Limited
|
|
(0.52)
|
|
(0.45)
|
|
(1.37)
|
Diluted net loss from
discontinued operations per ADS
attributable to Sohu.com Limited
|
|
-
|
|
-
|
|
(0.07)
|
Diluted net loss per
ADS attributable to Sohu.com Limited
|
$
|
(0.52)
|
$
|
(0.45)
|
$
|
(1.44)
|
ADS used in computing
diluted net loss per ADS
attributable to Sohu.com Limited
|
|
39,270
|
|
39,263
|
|
39,236
|
|
[7] Other
expenses in the fourth quarter of 2019 mainly included an
impairment charge of approximately US$23 million recognized for the
quarter for an investment unrelated to the Company' core
businesses, and an impairment loss of approximately US$9 million on
certain Sogou equity investments.
|
SOHU.COM
LIMITED
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
As of Mar. 31,
2020
|
|
As of Dec. 31,
2019
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
571,662
|
$
|
305,126
|
Restricted
cash
|
|
8,592
|
|
8,661
|
Short-term
investments
|
|
1,039,818
|
|
1,316,833
|
Account and financing receivables, net
|
|
231,862
|
|
260,716
|
Prepaid and other current assets
|
|
130,210
|
|
124,332
|
Total current assets
|
|
1,982,144
|
|
2,015,668
|
Long-term
investments, net
|
|
103,895
|
|
94,332
|
Fixed assets,
net
|
|
426,632
|
|
447,688
|
Goodwill
|
|
53,168
|
|
52,923
|
Intangible assets,
net
|
|
10,307
|
|
11,437
|
Restricted time
deposits
|
|
-
|
|
240
|
Prepaid non-current
assets
|
|
1,622
|
|
1,882
|
Other
assets
|
|
62,498
|
|
65,620
|
Total assets
|
$
|
2,640,266
|
$
|
2,689,790
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
$
|
321,993
|
$
|
253,403
|
Accrued liabilities
|
|
244,845
|
|
249,810
|
Receipts in advance and deferred revenue
|
|
113,496
|
|
118,222
|
Accrued salary and benefits
|
|
90,730
|
|
110,833
|
Taxes payable
|
|
93,859
|
|
102,686
|
Short-term bank loans
|
|
84,540
|
|
114,528
|
Other short-term liabilities
|
|
145,700
|
|
149,311
|
Total current liabilities
|
$
|
1,095,163
|
$
|
1,098,793
|
|
|
|
|
|
Long-term accounts
payable
|
|
755
|
|
767
|
Long-term tax
liabilities
|
|
281,677
|
|
277,544
|
Other long-term
liabilities
|
|
4,321
|
|
5,769
|
Total long-term
liabilities
|
$
|
286,753
|
$
|
284,080
|
Total liabilities
|
$
|
1,381,916
|
$
|
1,382,873
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
Sohu.com Limited shareholders' equity
|
|
403,122
|
|
428,454
|
Noncontrolling interest
|
|
855,228
|
|
878,463
|
Total shareholders' equity
|
$
|
1,258,350
|
$
|
1,306,917
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$
|
2,640,266
|
$
|
2,689,790
|
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
Mar. 31, 2020
|
|
Three Months Ended
Dec. 31, 2019
|
|
Three Months
Ended Mar. 31, 2019
|
|
|
GAAP
|
|
Non-GAAP
Adjustments
|
|
Non-GAAP
|
|
GAAP
|
|
Non-GAAP
Adjustments
|
|
Non-GAAP
|
|
GAAP
|
|
Non-GAAP
Adjustments
|
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40)
|
(a)
|
|
|
|
|
2
|
(a)
|
|
|
|
|
38
|
(a)
|
|
Brand advertising
gross profit
|
$
|
61
|
$
|
(40)
|
$
|
21
|
$
|
12,922
|
$
|
2
|
$
|
12,924
|
$
|
8,676
|
$
|
38
|
$
|
8,714
|
Brand advertising
gross
margin
|
|
0%
|
|
|
|
0%
|
|
31%
|
|
|
|
31%
|
|
20%
|
|
|
|
20%
|
|
|
|
|
77
|
(a)
|
|
|
|
|
256
|
(a)
|
|
|
|
|
27
|
(a)
|
|
Search and
search-related
advertising gross profit
|
$
|
25,379
|
$
|
77
|
$
|
25,456
|
$
|
111,206
|
$
|
256
|
$
|
111,462
|
$
|
55,306
|
$
|
27
|
$
|
55,333
|
Search and
search-related
advertising gross margin
|
|
11%
|
|
|
|
11%
|
|
40%
|
|
|
|
41%
|
|
24%
|
|
|
|
24%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
(a)
|
|
|
|
|
258
|
(a)
|
|
|
|
|
65
|
(a)
|
|
Online advertising
gross profit
|
$
|
25,440
|
$
|
37
|
$
|
25,477
|
$
|
124,128
|
$
|
258
|
$
|
124,386
|
$
|
63,982
|
$
|
65
|
$
|
64,047
|
Online advertising
gross
margin
|
|
10%
|
|
|
|
10%
|
|
39%
|
|
|
|
39%
|
|
23%
|
|
|
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161
|
(a)
|
|
|
|
|
137
|
(a)
|
|
|
|
|
-
|
(a)
|
|
Online games gross
profit
|
$
|
104,971
|
$
|
161
|
$
|
105,132
|
$
|
98,508
|
$
|
137
|
$
|
98,645
|
$
|
84,692
|
$
|
-
|
$
|
84,692
|
Online games gross
margin
|
|
79%
|
|
|
|
79%
|
|
75%
|
|
|
|
75%
|
|
86%
|
|
|
|
86%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others gross
profit
|
$
|
30,903
|
$
|
-
|
(a) $
|
30,903
|
$
|
29,571
|
$
|
-
|
(a) $
|
29,571
|
$
|
21,055
|
$
|
-
|
(a) $
|
21,055
|
Others gross
margin
|
|
78%
|
|
|
|
78%
|
|
71%
|
|
|
|
71%
|
|
60%
|
|
|
|
60%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198
|
(a)
|
|
|
|
|
395
|
(a)
|
|
|
|
|
65
|
(a)
|
|
Gross
profit
|
$
|
161,314
|
$
|
198
|
$
|
161,512
|
$
|
252,207
|
$
|
395
|
$
|
252,602
|
$
|
169,729
|
$
|
65
|
$
|
169,794
|
Gross
margin
|
|
37%
|
|
|
|
37%
|
|
52%
|
|
|
|
52%
|
|
41%
|
|
|
|
41%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
185,549
|
$
|
(3,575)
|
(a) $
|
181,974
|
$
|
210,701
|
$
|
(6,909)
|
(a) $
|
203,792
|
$
|
211,317
|
$
|
(2,050)
|
(a) $
|
209,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,773
|
(a)
|
|
|
|
|
7,304
|
(a)
|
|
|
|
|
2,115
|
(a)
|
|
Operating
profit/(loss)
|
$
|
(24,235)
|
$
|
3,773
|
$
|
(20,462)
|
$
|
41,506
|
$
|
7,304
|
$
|
48,810
|
$
|
(41,588)
|
$
|
2,115
|
$
|
(39,473)
|
Operating
margin
|
|
-6%
|
|
|
|
-5%
|
|
8%
|
|
|
|
10%
|
|
-10%
|
|
|
|
-10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
|
(13,600)
|
$
|
2,195
|
(c,d) $
|
(11,405)
|
$
|
954
|
$
|
2,737
|
(c,d) $
|
3,691
|
$
|
(11,178)
|
$
|
1,778
|
$
|
(9,400)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,773
|
(a)
|
|
|
|
|
7,304
|
(a)
|
|
|
|
|
2,115
|
(a)
|
|
|
|
|
|
(855)
|
(c)
|
|
|
|
|
(2,490)
|
(c)
|
|
|
|
|
(744)
|
(c)
|
|
|
|
|
|
1,910
|
(d)
|
|
|
|
|
1,907
|
(d)
|
|
|
|
|
1,531
|
(d)
|
|
|
|
|
|
-
|
|
|
|
|
|
23,154
|
(e)
|
|
|
|
|
-
|
|
|
Net income/(loss)
before non-
controlling interest
|
$
|
(25,114)
|
|
4,828
|
|
(20,286)
|
$
|
25,356
|
|
29,875
|
|
55,231
|
$
|
(42,917)
|
$
|
2,902
|
$
|
(40,015)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,773
|
(a)
|
|
|
|
|
7,304
|
(a)
|
|
|
|
|
2,115
|
(a)
|
|
|
|
|
|
(2,761)
|
(b)
|
|
|
|
|
(5,416)
|
(b)
|
|
|
|
|
(798)
|
(b)
|
|
|
|
|
|
(855)
|
(c)
|
|
|
|
|
(2,490)
|
(c)
|
|
|
|
|
(744)
|
(c)
|
|
|
|
|
|
1,910
|
(d)
|
|
|
|
|
1,907
|
(d)
|
|
|
|
|
1,531
|
(d)
|
|
|
|
|
|
-
|
|
|
|
|
|
23,154
|
(e)
|
|
|
|
|
-
|
|
|
Net income/(loss)
from
continuing operations
attributable to Sohu.com
Limited for diluted net loss
per ADS
|
$
|
(20,441)
|
|
2,067
|
|
(18,374)
|
$
|
(17,613)
|
|
24,459
|
|
6,846
|
$
|
(53,808)
|
$
|
2,104
|
|
(51,704)
|
Net loss from
discontinued
operations attributable to
Sohu.com Limited for diluted
net loss per ADS
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,842)
|
|
-
|
|
(2,842)
|
Net income/(loss) attributable
to Sohu.com Limited for
diluted net loss per ADS
|
|
(20,441)
|
|
2,067
|
|
(18,374)
|
|
(17,613)
|
|
24,459
|
|
6,846
|
|
(56,650)
|
|
2,104
|
|
(54,546)
|
Diluted net income/(loss)
from continuing operations per
ADS attributable to Sohu.com
Limited
|
$
|
(0.52)
|
|
|
|
(0.47)
|
$
|
(0.45)
|
|
|
|
0.17
|
$
|
(1.37)
|
|
|
|
(1.32)
|
Diluted net
loss from
discontinued operations per
ADS attributable to Sohu.com
Limited
|
|
-
|
|
|
|
-
|
|
-
|
|
|
|
-
|
|
(0.07)
|
|
|
|
(0.07)
|
Diluted net
income/(loss) per
ADS attributable to Sohu.com
Limited
|
|
(0.52)
|
|
|
|
(0.47)
|
|
(0.45)
|
|
|
|
0.17
|
|
(1.44)
|
|
|
|
(1.39)
|
Shares used in
computing
diluted net loss per ADS
attributable to Sohu.com
Limited
|
|
39,270
|
|
|
|
39,270
|
|
39,263
|
|
|
|
39,396
|
|
39,236
|
|
|
|
39,236
|
|
|
Note:
|
(a) To eliminate the
impact of share-based awards as measured using the fair value
method. This adjustment does not have an 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 an 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.
|
(e) To adjust for a
one-time impairment charge recognized for an investment unrelated
to the Company's core businesses
|
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SOURCE Sohu.com Ltd.