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Sohu.com Reports Third Quarter 2021 Unaudited Financial Results
Third Quarter Highlights
- Total revenues were
US$216 million [1], up 37% year-over-year and 6% quarter-over-quarter. - Brand advertising revenues were
US$34 million , down 18% year-over-year and 8% quarter-over-quarter. - Online game revenues were
US$167 million , up 65% year-over-year and 10% quarter-over-quarter. - GAAP net income from continuing operations[2] attributable to
Sohu.com Limited wasUS$12 million , compared with a net loss ofUS$15 million in the third quarter of 2020 and net income ofUS$22 million in the second quarter of 2021. - Non-GAAP[3] net income from continuing operations attributable to
Sohu.com Limited wasUS$17 million , compared with a net loss ofUS$7 million in the third quarter of 2020 and net income ofUS$25 million in the second quarter of 2021.
Dr.
Third Quarter Financial Results
Revenues
Total revenues were
Brand advertising revenues totaled
Online game revenues were
Gross Margin
Both GAAP and non-GAAP gross margin was 74%, compared with 66% in the third quarter of 2020 and 76% in the second quarter of 2021.
GAAP gross margin for the brand advertising business was 29%, compared with 31% in the third quarter of 2020 and 27% in the second quarter of 2021. Non-GAAP gross margin for the brand advertising business was 29%, compared with 31% in the third quarter of 2020 and 28% in the second quarter of 2021.
Both GAAP and non-GAAP gross margin for online games was 83%, compared with 80% in the third quarter of 2020 and 89% in the second quarter of 2021. The quarter-over-quarter decrease in gross margin was mainly due to a higher percentage revenue contribution from mobile games, which typically require higher revenue-sharing payments.
Operating Expenses
For the third quarter of 2021, GAAP operating expenses totaled
Operating Profit/(Loss)
GAAP operating profit was
Non-GAAP operating profit was US$28 million, compared with an operating loss of US$5 million in the third quarter of 2020 and an operating profit of
Income Tax Expense
GAAP income tax expense was
Net Income/(Loss)
GAAP net income from continuing operations attributable to
Non-GAAP net income from continuing operations attributable to
Liquidity
As of
Supplementary Information for Changyou Results
Third Quarter 2021 Operating Results
- For PC games, total average monthly active user accounts[4] (MAU) were 2.0 million, an increase of 3% year-over-year and a decrease of 5% quarter-over-quarter. Total quarterly aggregate active paying accounts[5] (APA) were 1.0 million, an increase of 4% year-over-year and 14% quarter-over-quarter. The quarter-over-quarter increase in APA was mainly due to in-game promotional activities launched for TLBB PC.
- For mobile games, total average MAU were 4.6 million, an increase of 22% year-over-year and 143% quarter-over-quarter. Total quarterly APA were 1.0 million, an increase of 55% year-over-year and 99% quarter-over-quarter. The increases in both MAU and APA were mainly due to the launch of Little Raccoon: Heroes during the third quarter of 2021.
Third Quarter 2021 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
Sohu today announced that on
Business Outlook
For the fourth quarter of 2021, Sohu estimates:
- Brand advertising revenues to be between US$28 million and
US$31 million ; this implies an annual decrease of 26% to 33% and a sequential decrease of 8% to 17%. - Online game revenues to be between
US$140 million andUS$150 million ; this implies an annual decrease of 23% to 29% and a sequential decrease of 10% to 16%. - Non-GAAP net loss attributable to
Sohu.com Limited to be between nil andUS$10 million ; and GAAP net loss attributable toSohu.com Limited to be betweenUS$3 million US$13 million .
For the fourth quarter 2021 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; the impairment charge recognized for an investment unrelated to the Company's core businesses; and interest 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 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 impairment charge recognized for an investment unrelated to the Company's core businesses; 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, changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values, and the impairment charge recognized for an investment unrelated to the Company's core businesses 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, the impairment charge recognized for an investment unrelated to the Company's core businesses, 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 US dollar results; recent slow-downs in the growth of the Chinese economy; the uncertain regulatory landscape in
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: |
8218759 |
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 and information 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.
Tel: +86 (10) 6272-6645
E-mail: ir@contact.sohu.com
In
Ms.
Christensen
Tel: +1 (480) 614-3004
E-mail: lbergkamp@christensenir.com
[1] On a constant currency (non-GAAP) basis, if the exchange rate in the third quarter of 2021 had been the same as it was in the third quarter of 2020, or |
[2] In view of the completion of the transaction with Tencent related to Sogou, the results of operations for Sogou and the gain from its disposal 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. |
[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; an impairment charge recognized for an investment unrelated to the Company's core businesses; 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 |
$ |
33,748 |
$ |
36,840 |
$ |
41,094 |
|
Online games |
166,750 |
151,272 |
101,324 |
||||
Others |
15,592 |
16,290 |
15,476 |
||||
Total revenues |
216,090 |
204,402 |
157,894 |
||||
Cost of revenues: |
|||||||
Brand advertising (includes share-based |
24,006 |
26,770 |
28,459 |
||||
Online games (includes share-based compensation |
28,977 |
17,026 |
20,024 |
||||
Others |
3,754 |
5,518 |
5,075 |
||||
Total cost of revenues |
56,737 |
49,314 |
53,558 |
||||
Gross profit |
159,353 |
155,088 |
104,336 |
||||
Operating expenses: |
|||||||
Product development (includes share-based |
65,898 |
65,254 |
59,532 |
||||
Sales and marketing (includes share-based |
45,349 |
45,560 |
40,250 |
||||
General and administrative (includes share-based |
23,290 |
19,493 |
15,176 |
||||
Total operating expenses |
134,537 |
130,307 |
114,958 |
||||
Operating profit/(loss) |
24,816 |
24,781 |
(10,622) |
||||
Other income, net |
5,043 |
7,509 |
7,859 |
||||
Interest income |
4,200 |
4,221 |
1,933 |
||||
Interest expense |
(2,501) |
(2,488) |
(1,352) |
||||
Exchange difference |
317 |
(1,325) |
(2,043) |
||||
Income/(loss) before income tax expense |
31,875 |
32,698 |
(4,225) |
||||
Income tax expense |
19,577 |
10,847 |
11,082 |
||||
Net income/(loss) from continuing operations |
12,298 |
21,851 |
(15,307) |
||||
Net income/(loss) from discontinued operations, net of tax[6],[7] |
756,768 |
55,882 |
(42,181) |
||||
Net income/(loss) |
769,066 |
77,733 |
(57,488) |
||||
Less: Net loss from continuing operations shareholders |
(1) |
- |
(50) |
||||
Less: Net income/(loss) from discontinued |
(65,134) |
36,994 |
(27,874) |
||||
Net income/(loss) from continuing operations |
12,299 |
21,851 |
(15,257) |
||||
Net income/(loss) from discontinued operations |
821,902 |
18,888 |
(14,307) |
||||
Net income/(loss) attributable to |
834,201 |
40,739 |
(29,564) |
||||
Basic net income/(loss) from continuing operations per |
$ |
0.31 |
$ |
0.55 |
$ |
(0.39) |
|
Basic net income/(loss) from discontinued operations |
$ |
20.75 |
$ |
0.48 |
$ |
(0.36) |
|
Basic net income/(loss) per share/ADS attributable to |
$ |
21.06 |
$ |
1.03 |
$ |
(0.75) |
|
Shares/ADSs used in computing basic net |
39,614 |
39,509 |
39,286 |
||||
Diluted net income/(loss) from continuing operations |
$ |
0.31 |
$ |
0.55 |
$ |
(0.39) |
|
Diluted net income/(loss) from discontinued operations |
$ |
20.75 |
$ |
0.48 |
$ |
(0.36) |
|
Diluted net income/(loss) per share/ADS attributable to |
$ |
21.06 |
$ |
1.03 |
$ |
(0.75) |
|
Shares/ADSs used in computing diluted net |
39,614 |
39,509 |
39,286 |
||||
[6] In view of the completion of the transaction with Tencent related to Sogou, the results of operations for Sogou and the gain from its |
|||||||
[7] For the third quarter of 2021, net income from discontinued operations included the disposal gain recognized during the quarter as a result of |
|||||||
[8] Each ADS represents one ordinary share. |
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(UNAUDITED, IN THOUSANDS) |
|||||
As of |
As of |
||||
ASSETS |
|||||
Current assets: |
|||||
Cash and cash equivalents[9] |
$ |
1,407,504 |
$ |
217,057 |
|
Restricted cash[10] |
2,864 |
330,791 |
|||
Short-term investments |
165,948 |
100,745 |
|||
Accounts receivable, net |
81,769 |
87,521 |
|||
Prepaid and other current assets |
105,954 |
106,590 |
|||
Assets held for sale (current)[9] |
- |
1,412,168 |
|||
Total current assets |
1,764,039 |
2,254,872 |
|||
Long-term investments, net |
45,941 |
31,634 |
|||
Fixed assets, net |
324,594 |
337,674 |
|||
Goodwill |
48,532 |
48,434 |
|||
Intangible assets, net |
9,725 |
4,842 |
|||
Restricted time deposits[10] |
- |
101,519 |
|||
Prepaid non-current assets |
- |
1,006 |
|||
Other assets |
28,634 |
42,140 |
|||
Total assets |
$ |
2,221,465 |
$ |
2,822,121 |
|
LIABILITIES |
|||||
Current liabilities: |
|||||
Accounts payable |
$ |
92,202 |
$ |
107,611 |
|
Accrued liabilities |
132,696 |
157,513 |
|||
Receipts in advance and deferred revenue |
53,828 |
52,055 |
|||
Accrued salary and benefits |
81,449 |
100,826 |
|||
Taxes payable |
23,606 |
28,006 |
|||
Short-term bank loans[10] |
- |
315,550 |
|||
Other short-term liabilities |
112,787 |
106,171 |
|||
Liabilities held for sale (current)[9] |
- |
416,998 |
|||
Total current liabilities |
$ |
496,568 |
$ |
1,284,730 |
|
Long-term accounts payable |
2,503 |
3,202 |
|||
Long-term bank loans[10] |
- |
92,000 |
|||
Long-term tax liabilities |
430,977 |
406,353 |
|||
Other long-term liabilities |
3,769 |
3,855 |
|||
Total long-term liabilities |
$ |
437,249 |
$ |
505,410 |
|
Total liabilities |
$ |
933,817 |
$ |
1,790,140 |
|
SHAREHOLDERS' EQUITY: |
|||||
|
1,286,329 |
347,369 |
|||
Noncontrolling interest |
1,319 |
684,612 |
|||
Total shareholders' equity |
$ |
1,287,648 |
$ |
1,031,981 |
|
Total liabilities and shareholders' equity |
$ |
2,221,465 |
$ |
2,822,121 |
|
[9] On |
|||||
[10] Following the completion of the Sohu/ |
|
|||||||||||||||||||
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 |
Non- |
GAAP |
Non-GAAP |
Non- |
GAAP |
Non-GAAP |
Non- |
|||||||||||
7 |
(a) |
90 |
(a) |
240 |
(a) |
||||||||||||||
Brand advertising gross profit |
$ |
9,742 |
$ |
7 |
$ |
9,749 |
$ |
10,070 |
$ |
90 |
$ |
10,160 |
$ |
12,635 |
$ |
240 |
$ |
12,875 |
|
Brand advertising gross margin |
29% |
29% |
27% |
28% |
31% |
31% |
|||||||||||||
78 |
(a) |
78 |
(a) |
151 |
(a) |
||||||||||||||
Online games gross profit |
$ |
137,773 |
$ |
78 |
$ |
137,851 |
$ |
134,246 |
$ |
78 |
$ |
134,324 |
$ |
81,300 |
$ |
151 |
$ |
81,451 |
|
Online games gross margin |
83% |
83% |
89% |
89% |
80% |
80% |
|||||||||||||
- |
(a) |
- |
(a) |
- |
(a) |
||||||||||||||
Others gross profit |
$ |
11,838 |
$ |
- |
$ |
11,838 |
$ |
10,772 |
$ |
- |
$ |
10,772 |
$ |
10,401 |
$ |
- |
$ |
10,401 |
|
Others gross margin |
76% |
76% |
66% |
66% |
67% |
67% |
|||||||||||||
85 |
(a) |
168 |
(a) |
391 |
(a) |
||||||||||||||
Gross profit |
$ |
159,353 |
$ |
85 |
$ |
159,438 |
$ |
155,088 |
$ |
168 |
$ |
155,256 |
$ |
104,336 |
$ |
391 |
$ |
104,727 |
|
Gross margin |
74% |
74% |
76% |
76% |
66% |
66% |
|||||||||||||
Operating expenses |
$ |
134,537 |
$ |
(2,639) |
(a) $ |
131,898 |
$ |
130,307 |
$ |
(3,098) |
(a) $ |
127,209 |
$ |
114,958 |
$ |
(5,481) |
(a) $ |
109,477 |
|
2,724 |
(a) |
3,266 |
(a) |
5,872 |
(a) |
||||||||||||||
Operating profit/(loss) |
$ |
24,816 |
$ |
2,724 |
$ |
27,540 |
$ |
24,781 |
$ |
3,266 |
$ |
28,047 |
$ |
(10,622) |
$ |
5,872 |
$ |
(4,750) |
|
Operating margin |
11% |
13% |
12% |
14% |
-7% |
-3% |
|||||||||||||
Income tax expense |
$ |
19,577 |
$ |
(865) |
(b,c)$ |
18,712 |
$ |
10,847 |
$ |
(1,755) |
(b,c)$ |
9,092 |
$ |
11,082 |
$ |
(642) |
(b,c)$ |
10,440 |
|
2,724 |
(a) |
3,266 |
(a) |
5,872 |
(a) |
||||||||||||||
1,068 |
(b) |
(1,673) |
(b) |
1,587 |
(b) |
||||||||||||||
1,221 |
(c) |
1,198 |
(c) |
1,171 |
(c) |
||||||||||||||
- |
156 |
( d) |
- |
||||||||||||||||
Net income/(loss) before non- |
$ |
12,298 |
$ |
5,013 |
$ |
17,311 |
$ |
21,851 |
$ |
2,947 |
$ |
24,798 |
$ |
(15,307) |
$ |
8,630 |
$ |
(6,677) |
|
2,724 |
(a) |
3,266 |
(a) |
5,872 |
(a) |
||||||||||||||
1,068 |
(b) |
(1,673) |
(b) |
1,587 |
(b) |
||||||||||||||
1,221 |
(c) |
1,198 |
(c) |
1,171 |
(c) |
||||||||||||||
- |
156 |
( d) |
- |
||||||||||||||||
Net income/(loss) from continuing |
$ |
12,299 |
$ |
5,013 |
$ |
17,312 |
$ |
21,851 |
$ |
2,947 |
$ |
24,798 |
$ |
(15,257) |
$ |
8,630 |
$ |
(6,627) |
|
Net income/(loss) from discontinued |
$ |
821,902 |
$ |
320 |
$ |
822,222 |
$ |
18,776 |
$ |
493 |
$ |
19,269 |
$ |
(14,307) |
$ |
1,462 |
$ |
(12,845) |
|
Net income/( loss) attributable to |
$ |
834,201 |
$ |
5,333 |
$ |
839,534 |
$ |
40,627 |
$ |
3,440 |
$ |
44,067 |
$ |
(29,564) |
$ |
10,092 |
$ |
(19,472) |
|
Diluted net income/(loss) from |
$ |
0.31 |
$ |
0.44 |
$ |
0.55 |
$ |
0.63 |
$ |
(0.39) |
$ |
(0.17) |
|||||||
Diluted net income/(loss) from |
$ |
20.75 |
$ |
20.76 |
$ |
0.48 |
$ |
0.49 |
$ |
(0.36) |
$ |
(0.33) |
|||||||
Diluted net income/(loss) per |
$ |
21.06 |
$ |
21.19 |
$ |
1.03 |
$ |
1.12 |
$ |
(0.75) |
$ |
(0.50) |
|||||||
Shares/ADSs used in computing |
39,614 |
39,614 |
39,509 |
39,509 |
39,286 |
39,286 |
|||||||||||||
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 for a change in the fair value of the Company's investment in Hylink and the income tax effect. |
|||||||||||||||||||
(c) To adjust for the effect of the |
|||||||||||||||||||
(d) To adjust for an impairment charge recognized for investments unrelated to the Company's core businesses |
|||||||||||||||||||
[11] In view of the completion of the transaction with Tencent related to Sogou, the results of operations for Sogou and the gain from its disposal are presented in separate line items as discontinued |
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