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SOHU.COM REPORTS FIRST QUARTER 2022 UNAUDITED FINANCIAL RESULTS
First Quarter Highlights
- Total revenues were
US$193 million [1], down 13% year-over-year and flat quarter-over-quarter. - Brand advertising revenues were US$24 million, down 23% year-over-year and 29% quarter-over-quarter.
- Online game revenues were US$158 million, down 11% year-over-year and up 10% quarter-over-quarter.
- GAAP net income[2] attributable to
Sohu.com Limited was US$3 million, compared with net income of US$32 million in the first quarter of 2021 and net income of US$4 million in the fourth quarter of 2021. - Non-GAAP[3] net income attributable to
Sohu.com Limited was US$9 million, compared with net income of US$37 million in the first quarter of 2021 and net income ofUS$0 .2 million in the fourth quarter of 2021.
Dr.
First Quarter Financial Results
Revenues
Total revenues were
Brand advertising revenues totaled US$24 million, down 23% year-over-year and 29% quarter-over-quarter. The decrease was mainly due to a decrease in portal advertising revenues.
Online game revenues were US$158 million, down 11% year-over-year and up 10% quarter-over-quarter. The year-over-year decrease was mainly due to the natural decline of TLBB Vintage. The quarter-over-quarter increase was mainly due to improved performance of TLBB PC, as a result of content updates and promotional activities launched during the quarter.
Gross Margin
Both GAAP and non-GAAP gross margin were 75%, compared with 79% in the first quarter of 2021 and 73% in the fourth quarter of 2021.
Both GAAP and non-GAAP gross margin for the brand advertising business were 2%, compared with 20% in the first quarter of 2021 and 28% in the fourth quarter of 2021. The margin decrease was mainly due to the decrease in brand advertising revenues.
GAAP gross margin for online games was 86%, compared with 89% in the first quarter of 2021 and 84% in the fourth quarter of 2021. Non-GAAP gross margin for online games was 86%, compared with 90% in the first quarter of 2021 and 84% in the fourth quarter of 2021.
Operating Expenses
For the first quarter of 2022, GAAP operating expenses totaled US$132 million, up 6% year-over-year and down 9% quarter-over-quarter. Non-GAAP operating expenses were US$130 million, up 6% year-over-year and down 9% quarter-over-quarter. The year-over-year increase was mainly due to increases in traffic and user acquisition cost. The quarter-over-quarter decrease was mainly due to decreases in salary and benefits expenses.
Operating Profit/(Loss)
GAAP operating profit was US$13 million, compared with an operating profit of US$51 million in the first quarter of 2021 and an operating loss of US$3 million in the fourth quarter of 2021.
Non-GAAP operating profit was US$14 million, compared with an operating profit of US$53 million in the first quarter of 2021 and an operating loss of US$3 million in the fourth quarter of 2021.
Income Tax Expense
GAAP income tax expense was US$17 million, compared with income tax expense of
Net Income
GAAP net income attributable to
Non-GAAP net income attributable to
Liquidity and Capital Resources
As of
Supplementary Information for Changyou Results
First Quarter 2022 Operating Results
- For PC games, total average monthly active user accounts[4] (MAU) were 2.0 million, a decrease of 13% year-over-year and 1% quarter-over-quarter. The year-over-year decrease was mainly due to the natural decline of Changyou's older games. Total quarterly aggregate active paying accounts[5] (APA) were 1.0 million, an increase of 4% year-over-year and quarter-over-quarter.
- For mobile games, total average MAU were 2.4 million, an increase of 16% year-over-year and a decrease of 6% quarter-over-quarter. The year-over-year increase was mainly from Bright Stars, a game designed for female players launched during the quarter, and Little Raccoon: Heroes launched during the third quarter of 2021. The quarter-over-quarter decrease was mainly due to the natural decline of Changyou's older games, including Little Raccoon: Heroes. Total quarterly APA were 0.5 million, an increase of 14% year-over-year and 6% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly from Bright Stars.
First Quarter 2022 Unaudited Financial Results
Total revenues were
GAAP and non-GAAP gross profit were both
GAAP operating expenses were
Non-GAAP operating expenses were
GAAP operating profit was
Non-GAAP operating profit was
Business Outlook
For the second quarter of 2022, Sohu estimates:
- Brand advertising revenues to be between US$22 million and
US$25 million ; this implies an annual decrease of 32% to 40%, and a sequential decrease of 7% to a sequential increase of 5%. - Online game revenues to be between
US$150 million andUS$160 million ; this implies an annual decrease of 1% to an annual increase of 6%, and a sequential decrease of 5% to a sequential increase of 1%. - Non-GAAP net loss attributable to
Sohu.com Limited to be between US$15 million andUS$5 million ; and GAAP net loss attributable toSohu.com Limited to be betweenUS$18 million andUS$8 million .
For the second quarter 2022 guidance, the Company has adopted a presumed exchange rate of
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 worldwide COVID-19 pandemic, which remains difficult to predict.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with accounting principles generally accepted in
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; 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 equity investments with readily determinable fair values; 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 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, changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values, and also excluded the 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
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
Conference Call and Webcast
Sohu's management team will host a conference call at
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
International: |
+1-646-254-3697 |
Passcode: |
5725798 |
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 provides online brand advertising services as well as multiple news, information and 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
For investor and media inquiries, please contact:
In
Ms. |
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Tel: |
+86 (10) 6272-6645 |
E-mail: |
In
Ms. |
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Christensen |
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Tel: |
+1 (480) 614-3004 |
E-mail: |
[1] On a constant currency (non-GAAP) basis, if the exchange rate in the first quarter of 2022 had been the same as it was in the first quarter of 2021, or |
[2] Following the completion on |
[3] Non-GAAP results exclude 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; and interest expense recognized in connection with the one-time transition tax (the "Toll Charge") imposed by the |
[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. |
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS) |
|||||||
Three Months Ended |
|||||||
|
|
|
|||||
Revenues: |
|||||||
Brand advertising |
$ |
23,770 |
$ |
33,638 |
$ |
30,741 |
|
Online games |
157,854 |
143,708 |
176,495 |
||||
Others |
11,794 |
15,645 |
14,857 |
||||
Total revenues |
193,418 |
192,991 |
222,093 |
||||
Cost of revenues: |
|||||||
Brand advertising (includes share-based |
23,413 |
24,214 |
24,532 |
||||
Online games (includes share-based compensation |
21,971 |
23,053 |
18,560 |
||||
Others |
3,725 |
4,477 |
3,784 |
||||
Total cost of revenues |
49,109 |
51,744 |
46,876 |
||||
Gross profit |
144,309 |
141,247 |
175,217 |
||||
Operating expenses: |
|||||||
Product development (includes share-based |
63,839 |
68,392 |
69,319 |
||||
Sales and marketing (includes share-based |
51,707 |
54,793 |
36,988 |
||||
General and administrative (includes share-based |
16,092 |
20,970 |
18,127 |
||||
Total operating expenses |
131,638 |
144,155 |
124,434 |
||||
Operating profit/(loss) |
12,671 |
(2,908) |
50,783 |
||||
Other income, net |
4,879 |
12,982 |
3,882 |
||||
Interest income |
2,593 |
3,359 |
3,861 |
||||
Interest expense |
- |
- |
(2,511) |
||||
Exchange difference |
(477) |
(1,150) |
(1,304) |
||||
Income before income tax expense |
19,666 |
12,283 |
54,711 |
||||
Income tax expense |
16,997 |
8,695 |
23,177 |
||||
Net income from continuing operations |
2,669 |
3,588 |
31,534 |
||||
Net income from discontinued operations, net of tax[6] |
- |
- |
52,252 |
||||
Net income |
2,669 |
3,588 |
83,786 |
||||
Less: Net income/( loss) from continuing operations |
3 |
(1) |
(1) |
||||
Less: Net income from discontinued operations |
- |
- |
34,591 |
||||
Net income from continuing operations attributable to |
2,666 |
3,589 |
31,535 |
||||
Net income from discontinued operations attributable |
- |
- |
17,661 |
||||
Net income attributable to |
2,666 |
3,589 |
49,196 |
||||
Basic net income from continuing operations per |
$ |
0.07 |
$ |
0.09 |
$ |
0.80 |
|
Basic net income from discontinued operations per |
$ |
- |
$ |
- |
$ |
0.45 |
|
Basic net income per share/ADS attributable to |
$ |
0.07 |
$ |
0.09 |
$ |
1.25 |
|
Shares/ADSs used in computing basic net income per |
36,802 |
39,373 |
39,509 |
||||
Diluted net income from continuing operations per |
$ |
0.07 |
$ |
0.09 |
$ |
0.80 |
|
Diluted net income from discontinued operations per |
$ |
- |
$ |
- |
$ |
0.44 |
|
Diluted net income per share/ADS attributable to |
$ |
0.07 |
$ |
0.09 |
$ |
1.24 |
|
Shares/ADSs used in computing diluted net income per |
36,802 |
39,373 |
39,509 |
||||
[6] Following the completion on |
|||||||
[7] Each ADS represents one ordinary share. |
|||||||
|
||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
(UNAUDITED, IN THOUSANDS) |
||||
As of |
As of |
|||
ASSETS |
||||
Current assets: |
||||
Cash and cash equivalents |
$ |
534,244 |
$ |
998,949 |
Restricted cash |
5,207 |
1,969 |
||
Short-term investments |
816,282 |
399,345 |
||
Accounts receivable, net |
78,949 |
82,550 |
||
Prepaid and other current assets |
106,445 |
107,311 |
||
Total current assets |
1,541,127 |
1,590,124 |
||
Fixed assets, net |
326,328 |
329,997 |
||
Goodwill |
48,883 |
48,811 |
||
Long-term investments, net |
46,959 |
53,121 |
||
Intangible assets, net |
7,983 |
9,136 |
||
Long-term time deposits |
191,141 |
189,007 |
||
Other assets |
25,302 |
25,589 |
||
Total assets |
$ |
2,187,723 |
$ |
2,245,785 |
LIABILITIES |
||||
Current liabilities: |
||||
Accounts payable |
$ |
88,459 |
$ |
87,447 |
Accrued liabilities |
137,749 |
138,196 |
||
Receipts in advance and deferred revenue |
52,940 |
57,041 |
||
Accrued salary and benefits |
77,207 |
91,485 |
||
Taxes payables |
15,607 |
16,714 |
||
Other short-term liabilities |
114,783 |
112,568 |
||
Total current liabilities |
$ |
486,745 |
$ |
503,451 |
Long-term other payables |
4,360 |
3,922 |
||
Long-term tax liabilities |
450,325 |
443,083 |
||
Other long-term liabilities |
2,670 |
3,142 |
||
Total long-term liabilities |
$ |
457,355 |
$ |
450,147 |
Total liabilities |
$ |
944,100 |
$ |
953,598 |
SHAREHOLDERS' EQUITY: |
||||
|
1,242,302 |
1,290,869 |
||
Noncontrolling interest |
1,321 |
1,318 |
||
Total shareholders' equity |
$ |
1,243,623 |
$ |
1,292,187 |
Total liabilities and shareholders' equity |
$ |
2,187,723 |
$ |
2,245,785 |
|
||||||||||||||||||
RECONCILIATIONS OF NON-GAAP RESULTS OFOPERATIONS MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES |
||||||||||||||||||
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS) |
||||||||||||||||||
Three Months Ended |
Three Months Ended |
Three Months Ended |
||||||||||||||||
GAAP |
Non-GAAP Adjustments |
Non-GAAP |
GAAP |
Non-GAAP Adjustments |
Non-GAAP |
GAAP |
Non-GAAP Adjustments |
Non-GAAP |
||||||||||
23 |
(a) |
(115) |
(a) |
19 |
(a) |
|||||||||||||
Brand advertising gross profit |
$ |
357 |
$ |
23 |
$ |
380 |
$ |
9,424 |
$ |
(115) |
$ |
9,309 |
$ |
6,209 |
$ |
19 |
$ |
6,228 |
Brand advertising gross margin |
2% |
2% |
28% |
28% |
20% |
20% |
||||||||||||
41 |
(a) |
43 |
(a) |
77 |
(a) |
|||||||||||||
Online games gross profit |
$ |
135,883 |
$ |
41 |
$ |
135,924 |
$ |
120,655 |
$ |
43 |
$ |
120,698 |
$ |
157,935 |
$ |
77 |
$ |
158,012 |
Online games gross margin |
86% |
86% |
84% |
84% |
89% |
90% |
||||||||||||
- |
(a) |
- |
(a) |
- |
(a) |
|||||||||||||
Others gross profit |
$ |
8,069 |
$ |
- |
$ |
8,069 |
$ |
11,168 |
$ |
- |
$ |
11,168 |
$ |
11,073 |
$ |
- |
$ |
11,073 |
Others gross margin |
68% |
68% |
71% |
71% |
75% |
75% |
||||||||||||
64 |
(a) |
(72) |
(a) |
96 |
(a) |
|||||||||||||
Gross profit |
$ |
144,309 |
$ |
64 |
$ |
144,373 |
$ |
141,247 |
$ |
(72) |
$ |
141,175 |
$ |
175,217 |
$ |
96 |
$ |
175,313 |
Gross margin |
75% |
75% |
73% |
73% |
79% |
79% |
||||||||||||
Operating expenses |
$ |
131,638 |
$ |
(1,499) |
(a) $ |
130,139 |
$ |
144,155 |
$ |
(361) |
(a) $ |
143,794 |
$ |
124,434 |
$ |
(2,203) |
(a) $ |
122,231 |
1,563 |
(a) |
289 |
(a) |
2,299 |
(a) |
|||||||||||||
Operating profit/(loss) |
$ |
12,671 |
$ |
1,563 |
$ |
14,234 |
$ |
(2,908) |
$ |
289 |
$ |
(2,619) |
$ |
50,783 |
$ |
2,299 |
$ |
53,082 |
Operating margin |
7% |
7% |
-2% |
-1% |
23% |
24% |
||||||||||||
Income tax expense |
$ |
16,997 |
$ |
125 |
(b,c)$ |
17,122 |
$ |
8,695 |
$ |
(2,863) |
(b,c)$ |
5,832 |
$ |
23,177 |
$ |
(618) |
(b,c)$ |
22,559 |
1,563 |
(a) |
289 |
(a) |
2,299 |
(a) |
|||||||||||||
4,010 |
(b) |
(4,900) |
(b) |
1,677 |
(b) |
|||||||||||||
1,213 |
(c) |
1,230 |
(c) |
1,178 |
(c) |
|||||||||||||
Net income before non-controlling interest |
$ |
2,669 |
$ |
6,786 |
$ |
9,455 |
$ |
3,588 |
$ |
(3,381) |
$ |
207 |
$ |
31,534 |
$ |
5,154 |
$ |
36,688 |
1,563 |
(a) |
289 |
(a) |
2,299 |
(a) |
|||||||||||||
4,010 |
(b) |
(4,900) |
(b) |
1,677 |
(b) |
|||||||||||||
1,213 |
(c) |
1,230 |
(c) |
1,178 |
(c) |
|||||||||||||
Net income from continuing |
$ |
2,666 |
$ |
6,786 |
$ |
9,452 |
$ |
3,589 |
$ |
(3,381) |
$ |
208 |
$ |
31,535 |
$ |
5,154 |
$ |
36,689 |
Net income from discontinued |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
17,556 |
$ |
405 |
$ |
17,961 |
Net income attributable to |
$ |
2,666 |
$ |
6,786 |
$ |
9,452 |
$ |
3,589 |
$ |
(3,381) |
$ |
208 |
$ |
49,091 |
$ |
5,559 |
$ |
54,650 |
Diluted net income from continuing |
$ |
0.07 |
$ |
0.26 |
$ |
0.09 |
$ |
0.01 |
$ |
0.80 |
$ |
0.93 |
||||||
Diluted net income from |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
0.44 |
$ |
0.45 |
||||||
Diluted net income per share/ADS |
$ |
0.07 |
$ |
0.26 |
$ |
0.09 |
$ |
0.01 |
$ |
1.24 |
$ |
1.38 |
||||||
Shares/ADSs used in computing |
36,802 |
36,802 |
39,373 |
39,373 |
39,509 |
39,509 |
||||||||||||
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] Following the completion on |
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