Q4 2020 Sohu.com Ltd Earnings Call

Yeah.

Okay.

Alright.

[music], Inc.

Yes.

Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining so whose full quarter of 2020 earnings conference call.

This time, all participants are in the listen only mode.

The management's prepared remarks for your question and answer session.

Today's conference call is being recorded if you have it.

On the I'll kick things you may disconnect at this time.

I would now like to turn the conference of Whats Your host for today's conference call for Investor Relations Director of Sohu. Please go ahead.

Thanks, operator, thank you for joining us today to discuss that with what's called the towards other times. They moved out on the call of Chairman and Chief Executive Officer of adult chunk out of the.

And the vice President of Finance gemstone, How's the waste out of the day Charles the other Lin Chen and exactly all of the walk before making the Haynesville prepared remarks, I would like to remind you of the Companys Safe Harbor statement when Covid.

With todays conference call because that's for the historical information content of hanging the matters discussed on this conference call may contain forward looking statements. These statements are based on kind of play that's nice and the projections and therefore, you should not place undue without some of them.

Forward looking statements involve inherent risks and uncertainties.

Caution you that a number of important the factors could cause actual results to differ materially from those contained in any forward looking statement for more.

For information about the potential of the uncertainties.

For two of the company's filings with the Securities and exchange of Commission income.

Moving the most of it was in the annual report on the 20th he's always there'll be remind you. That's so go through results of operations have things called either from all of the results from continuing operations reached.

Charles Beck adjustments to the historical statements have been made in order to provide a consistent basis of.

Comparison.

I think the KD they otherwise he's also the other way to talk about our religion are related to continuing operations only.

So that's the I will now turn the call Charles Chao Charles Please proceed.

Thank you for everyone for joining our call.

For the fourth quarter of 'twenty.

Year of 2020, we faced significant challenges for all.

The call.

And the uncertain macroeconomic environment, however, with our continued efforts to innovate products and technology.

The improved monetization efficiency.

And the strictly control our budget.

The return for profitability.

As we reported net income of $53 million this quarter.

Which greatly exceeded our previous guidance.

For the whole year of 2020, excluding the additional accrual of for recruiting income taxes paid by telling you in the second quarter. We also achieved the profit of $51 million.

So for Sohu media portal in the video we continue to focus on generating and distributing real time in the reliable news and the premium content.

The strengthen our competitiveness and the credibility of administering media platform.

We consistently upgraded our live broadcasting technology integrated into the social product matrix and applied widely for the various content marketing events, which further enhance the overall value of the Sohu media portal and the <unk>.

Video.

Benefiting from our continued efforts of rent out of your revenue reached the high end of the previous guidance for Q4.

And for triangle. Thanks for the solid performance of some of the federal servers for T. L. B B P. C that launched that were launched during the quarter the.

Online games business performed well at the revenue exceeded the high end of our guidance.

All of it.

For the so let me know kind of the front of your members of the for the fourth quarter of 2020.

Total revenues of $253 million.

Up 34% year over year in the 60% of quarter over quarter.

Brand advertising revenues $42 million flat year over year, and up 2% of the quarter over quarter.

Online game revenues of $196 million up 49% year over year in the 94% in the quarter over quarter.

GAAP net income from continuing operations attribute of the boat for civil Dot Com limited of $47 million.

Net loss of $29 million of in the fourth quarter of 2019, and the net loss of <unk> 15 in the third quarter of 2020, non-GAAP net income from continuing operations attributable to Sohu Dot Com limited was.

The 53 million.

For Q4, compared with a net loss of $6 million in the fourth quarter of <unk>.

19, and the net loss of $7 million in the third quarter of unfunded.

[noise] for the whole year of 2020 total revenue of $750 million.

The 11% compared with 2019 brand advertising revenue of 147 million down 16% compared with 19.

Online game revenues.

The $537 million of 'twenty 'twenty two plus.

And the comparable with 2019.

Excluding the impact of the additional accrual of withholding income tax of Brooklynite by triangle in the second quarter of 2020, GAAP net income attributable to Sohu Dot Com limited was $33 million compared with the net loss of 150 of settlement in 2019 ex.

Excluding the impact of the additional growth of the withholding income tax of mentioned non-GAAP net income from continuing operations.

Beautiful for civil Dot Com limited was.

The $51 million.

For 2020, compared with the net loss of $128 million in 2019.

Now let me go through some of our key businesses.

For media portal and the Sohu video.

For Sohu media portal in the face of the COVID-19, pandemic and the challenging macroeconomic environment, we continue to innovate our product upgrade our technology and keeping the refining our content distribution features for stimulating content generation of younger generation usually on the U S.

Of the interaction.

We were able to further enhance our credibility by reflecting the attitude and the core values of the who.

For Sohu video in 2020 will continue to execute our team of engine strategy for long format of content that we successfully rolled out.

New original Idol romance content.

The intended love the macro biofuel Chihuahua episodes.

The two.

And my Dear Leidy, and some of them into other if we were both well received by audiences.

Thanks for the high quality the compound in the better operating efficiency, our subscription revenue subscription revenue increased significantly during 2020.

Despite delays in shooting new dramas as the result of the outbreak of COVID-19.

We currently have several of original dramas.

Our pipeline.

That will be steadily rollout of in 'twenty 'twenty one.

Most of the more films in the later part of 2020.

For the short form content.

The other part of the 200 of teenagers 'twenty 300 system of trends in the strategy.

<unk>.

We accelerated the deployment of value of live broadcasting in various areas such as the medical health.

We're glad to see the life of feeling technology advancements that we have achieved with deeply integrated our unique live broadcasting technology, such as the multi person microphone relay feature with our products on the platform and the widely expanded the live broadcasting landscape.

Proactively apply these advanced technology across the board the creative activities, including large content marketing events of adding live broadcasting and life E Commerce.

Enabling users to interact with each other in real time whenever they are during this past quarter with this live broadcasting.

Andrew we successfully hosted.

Hi, and those of you like box, one plus one and.

The also the.

E Commerce the time for.

For how we will create a best of luck.

The best elections.

As of.

Uh-huh whereby the <unk>.

Celebrities and the February traditional flagship events, such as the Sohu fashion or in the finance of annual conference.

These events not only attracted a lot of attention real time in terms of content.

So we were able to build even more attraction of upward and and also attract advertisers. These event greatly reinforced our brand influence and help to effectively secure high budget from enterprises.

Thanks, Let me kind of Congo for the fourth quarter of 2020, we launched from the special servers for COPD.

PC.

That use a memorable early version of the game for content.

We're calling the <unk> the vintage.

Thanks to its exceptional performance online game revenue exceeded the high end of our guidance for PC games <unk> vintage helped us to drawback. Many players that were we lost over the years, who love and a few of the steel fuel not project for.

For the of experience from years ago.

We were able to build up a lot of excitement around the launch and the effort.

Help the efforts helped to significantly boost in game spending Meanwhile, triangle upgraded regular <unk> bye.

Introducing for the first time of capital City map, which players from old servers kind of interact freely and the redesigning of the cross server clan Wars system.

For mobile games mobile games, Changyou launched a new expansion pack for legacy <unk> mobile the feature of the additional piece of the addition of a new clan and other creative cultural content.

Which helped the key player.

With the stable.

The next quarter of triangle will further optimize the LTV vintage.

Based on the user feedback and then we will both.

So unveil a variety of holiday events as well as promotions for the regular <unk> and the legacy <unk> mobile.

Currently several key games are being developed and we look forward for introducing the players soon.

Looking ahead of time will firmly execute its core strategy of top games.

It's kind of the strategic focus will continue to be Oh, RPG mobile games.

<unk>.

We're also developing and looking for rollout.

<unk> across the various the generic.

Now, let me turn two of our CFO, Joanna who will walk you through our financial results in detail.

So for Paul I'll walk you through the key financials of our major seven of them.

Of course on whole year of 2020.

All of the numbers of our.

The amount of Oh on the non-GAAP tables.

So first off of media portal.

Revenue for the pumping for meeting.

Our problem for them.

Thanks for the year over year and one.

1% quarter over quarter for <unk>.

What are the operating loss was $28 million.

Compared with the operating loss of $25 million, Inc.

Same quarter last year.

For full year 2020 some.

Sohu media portal revenue for $86 million.

Microphones compared with 2019.

For full year.

Lots of almost 92 of meaning.

Comparatively for the operating loss of 130 of meeting.

In 2019.

For Sohu video part of evolves or for $23 million.

6% year over year on the 1% quarter over quarter for.

Because of the operating loss of $11 million.

Tom part of as the operating loss of $18 million in.

In the same quarter last year.

For full year of 2020.

Sohu video revenues were $91 million flow.

Plausible to fall of making full year net loss of 43 of meeting.

Compile the was the operating loss of Nike for meeting.

In 2019.

For Changyou.

The revenue, including whilst other ones have been suite of hunt.

The 19 $9 million up 47% year over year in light of 1% quarter over quarter.

All of you posted an operating profit of $112 million for.

Part of is $50 million in the same quarter last year.

For full year 2020.

Total revenue of $548 million.

20% comparable with 2019 cash.

<unk> posted an operating profit of $248 million.

Comparator with the operating profit of 100 of $69 million in 2019.

For the first quarter of 2021.

Pat.

Advertising revenue to the between $27 million of $32 million.

Oh like Enron zone two.

Of the between $137 million and $147 million.

Non-GAAP net income from continuing operations.

The deal both pro forma talk on the GDP.

<unk> $5 million and $15 million.

And the GAAP net income from continuing operations.

Did you give both of the phone without kind of limited to.

The between $1 million.

$11 million.

This forecast reflects management's current and preliminary view.

Which is subject to substantial uncertainty.

Particularly in view of the potential ongoing impact of the cash.

COVID-19 pandemic.

Lastly, please phase of a mandate that's in the Q&A session.

What's the question regarding I mean stock of business update all of the agreements with Paulson for spoke of privatization.

This concludes our prepared remarks.

Operator.

I'd now like to open the call to questions.

Thank you for that.

Ladies and gentlemen, we will now begin the question and answer session to answer questions at the phone you May press Star one.

And then to be announce the can.

Sorry of requests you're kind of suppress the powerful heskey.

That's the game to ask a question. Please press star one.

That'd be a shock pilots of our questions have been collected thank you for your patience.

[noise]. Our first question comes from the lack of Eddie Leung from Merrill Lynch. Please go ahead.

Hey, good evening guys. Thank.

Thank you for taking my questions.

All of the smelting as if one of you I'm just curious on your outlook.

For the first quarter 'twenty 'twenty one.

Number one it seems to be a pretty big range, especially on the advertising side and then the mature the middle of the year on year growth on the advertising side of brand advertising.

Could you talk a little bit Oh, how much is more from.

From the industry.

The bank industry, the tougher rate and how much is for these begin coming from the.

The assays.

In the past year for example, having more of rich media, including live streaming in your.

As far as of the offline.

You held for the la market.

Market test.

So a piece of that my two quick questions I think.

Okay, Hi, Ed in the Charles.

The actually the several elements of all contributed to the outlook of 20 of the first quarter of 'twenty one.

The first of all of Europe.

So we have pandemic operating rate.

So this year.

The in fact the blood.

The theories of both both of our the first quarter of the slow slow quarter because of the Chinese new year and this.

'twenty 'twenty, one 'twenty sooner, it's actually a little later than the than 2019 to.

Plenty of money right.

So these are the negative impact.

The.

The last effect of the pandemic.

Most of the contribution.

The Chinese new year.

And.

Then there is definitely the contribution of our efforts with our live broadcasting.

The technology and its application to our various marketing events too.

To create both content and also.

The opportunities for for advertisers.

Advertisers to be.

Just the.

Interest at all.

Excited about the <unk>.

<unk> events.

Waiting so like.

And like you know this month and we are also having to do for.

The good is the collection.

E Commerce.

And also.

On the Chinese new year.

We have this live broadcasting programs featuring there as the program there's people in the.

And the the celebrities. So these are all contributing filling for that.

The number of factors contributed to a.

Yeah.

Outlook of AMETEK, Inc.

And then the I don't know where the is.

Thank you Charles that window of childhood, Joanna can talk about kind of like the the.

Range of the.

Advertising outlook I believe the life of these the question is that I know that most of your advertisers our quality of like.

Brian So I think typically I think would have a marketing plan.

Some type of a project in a light so usually the ability should be pretty good. Unlike Q1 performance advertising. It seems like this year, especially at the quarter, we're looking at.

The range in terms of the outlook.

5% to 25% year on year, so all of them.

Yeah, I think this is a bit of them.

Lots of that vision.

Yes, just because we have.

The brand advertising other mode.

Part of the.

With the most of those the top advertisers so it's like the big items right.

So is this kind of if you have the.

If you have a.

A small number of advertisers with ease of sort of like.

10000, or the firepower that we have like a few hundred or.

So those.

So.

And the big one each one spending like.

A large number.

The so the any change of what type of hydro <unk>.

The the.

Hello.

The revenue up and down so ex.

So in cloud and also the first quarter event.

The flow season, we're kind of in year <unk>.

<unk> made a kind of the kind of.

<unk>.

Changed or something.

Oh I see thank you very much thank you.

Right.

Thank you for the questions once again, ladies and gentlemen ask the question you can press star one.

Yes.

The next question comes from the line of.

Alicia Yap of.

The Citigroup. Please go ahead.

Hi, Good evening, Charles and management, Thanks for taking my questions I have two questions.

First of all on our Nike, Inc. I wanted to understand the outperformance for the P. C. P. I P P.

So what do we need for the special sometimes wonder.

Hmm.

Alright, moving first.

Why the strength is actually continue into the first quarter net.

I just wonder if you can share that humming like the old game that you have successfully brought back and then candidly my I founded the first scheduled for for the PC games, how the that actually be benefiting of the strength for Q should that also.

Benefit for <unk> and also the second quarter and then any expansion pack. The knees are planning later this year that you can share.

So this is on the gaming.

And then second questions relate that true.

The overall advertising outlook I'm, not sure Charles or management of house.

Our view so far in terms of some of the sentiment a GAAP.

In terms of the appetite.

The share prices last year, and then for the fourth quarter and could you also remind us which category actually performed well during the quarter in each quarter of actually has.

From the other indication you know you'll have a stronger recovery in 2021. Thank you.

Okay.

So you were first talking about the other other.

Gaming and about the special surveys and the the.

The piece of the spectrum.

In the old the game nursing for brought back of English contributing most of the in the Q4 and the trend of continuing a little bit but definitely.

Fall back a little bit right now in Q1.

So maybe kind of.

The other ore.

The decline partially the range of the DCP two <unk>.

Some of these people.

With tissue.

Volume and yeah, I feel like the whole equity she none of these.

Net income for me.

Great I don't think of it.

But the the expansion pack for the ease of use.

Uh huh.

Pak Pak.

Sure Gwen mobile happy for them.

Yeah, so glad to see that.

Yeah.

Okay.

Our weighted.

Yeah.

I do that though they realize the go deeper.

Okay. Thank you for finding ways of free time for Kurt Kimber of Antonio it'll you'll see them for the fruitful sales.

We see the off I drove bang for your pool.

So now Neal maybe the 10 games on the door.

Those of the same time crushing the in the call.

The average, let's say kind of call.

Nah.

Tony.

<unk> dot com part of the so.

So for the truth of the Shanghai Fab.

At the edge of sounds in the accordion.

Think of it so I'm really curious so quickly.

Yes.

Sure.

Yeah.

For the tailgate of encase really powerful.

All of the.

That's a separate the two.

Hong Kong for the very well.

The world five of the hard core players that the weight loss over a year like 10 years ago.

So the total number of the per.

Returning users the top so big.

Of the hardcore on the.

Of the consumption level of this quarter far beyond our expectation so fast in the first quarter, there will be a match with the cry for.

The choppiness of inputs on the also considering the festival traveling.

So we see the thought of them.

Pretty conservative.

The answer to eat the Youll see that can answer the pension of until some of the mainly Shanghai.

But in doing that.

So in terms of the active payer for food.

The operating.

The number it's a quite stable currently speaking.

We like 10 of Antonio the senior bonds.

Well it sounds like Youre right.

So thanks John.

Yeah.

The <unk>, Kevin Hydro Polycom Kalvar Johan Santana find County, Inc.

As I've sort of player thing two versions of pursuing total of different experiences for them.

So we will apply different the operating strategy for regular assortment of Tc oil make more.

Listen the expansion like before.

But for the vintage will keep the classic compound.

Some of our strong social and for the update based on their feedback.

Feedback 10 of them.

I'm, the senior management team of heated.

Just in the Gulf China.

That's the kind of hydro volume all of this issuance below NAV.

All of the I'm sorry.

For the rest of the children's excuse me, it's focused more on Covid team here for the for.

For Ya fighting.

Thus for the top of the vintage where we'll be focusing all of more casual and more social the thing.

Momentum built is when one of your key people quickly for kind of hydro one does it help you.

While we plan to launch the first expansion pack for a couple of the vintage in the second quarter of tens of anyone okay.

Alright.

Other filing.

The outlook so since the total I think.

The total of macroeconomic situation I'm not sure of maybe maybe a little bit better than through 2020 buses.

Actually.

It doesn't matter of true social because of our estimate of.

Revenue base is relatively small because it really depends on how we.

We work.

However, we do so.

Dan will continue the trend in 2020.

Because of our.

The development of the live broadcasting technology, and live streaming and applied for variance for the marketing kind of marketing events and the created some value for advertisers some of that we are cheap.

Not only recovered from Q1.

As the pandemic.

Recede.

In Q2 in Q3 and Q4, we actually achieved the slow growth.

And that trend I believe that in in 'twenty 'twenty, one we will continue that flow.

Both with our.

The strategy of live broadcasting.

Quadruple and all of those kinds of things.

And the events, but based on.

Based on that and then if we there is a big if if we have.

We can half of our product and innovation like our Sohu news App and the Sohu video App.

And the innovation, so that the user base kind of growth organically and actually Oh, even half of uptake with.

And without a highway spending.

Pre installment the devices or or online stores, but without channel of marketing basically continuing for with our strategies really continue to have cost control of the basically.

Not much more spending, but some of the technical product.

They share in especially the our of social media feature introduction of ADP and sort of that and can draw of user base without much.

The additional cost by the growth user base and the user base growth.

Largely so that we can grow our revenue.

The faster than than the pace that we did in 2020. So it's the big if depending on whether our product innovation will be successful or not.

Okay.

And the categories of mostly auto auto and the Fms seats per month.

E Commerce physically.

Okay.

Thank you Charles.

Thank you Charles.

Thank you for the question once again to ask question you can press one for of named the P&L.

The next question comes from the line Thomas Chong of Jefferies. Please go ahead.

Hi, Thanks management for taking my questions.

My question is about advertising as well, but on the BDO Zhang keeping.

Given that we have been seeing the.

The COVID-19 without all of the.

Should we expect the Tam might be at the rate in terms of the construction timeline or the release timeline.

For this year and on that front, how should we see the competition.

In long form the advertising versus the shortfall.

The deal on advertising.

Seeing our short form video advertising.

Actually affects the advertising budget.

Two of our portal and the deal.

And then on my follow up question.

About the long game operating line.

All of the gaming business.

Should we think about the fundamentals or the operating operating loss for the law.

<unk> in the range.

We expect.

Profitability or breakeven thank you.

Yeah.

First of all of the advertising.

The long form.

The first of all of the production. So the 20th plenty of the first half of we actually because of the pandemic.

We don't have a much filming.

And then the later part of we weighted filmed.

You introduced a few.

Uh huh.

Drama episodes so.

I think we have five five years ago and will be.

We have already launched already.

Thanks.

One in January and then we'll have another one.

So wherever the pipeline for a few drama are lining up for for this.

Sure.

And also we are also producing more.

So basically this year, we're proud of turn right turn from us.

That actually most of them so we'll drive the subscription business.

For advertising.

Our video advertising actually now does not.

Depend that much on our long form.

The drama because most of the people who are subscribed in the universe.

The subscription so there's sort of subscribers to that has the advertising.

So.

So our video advertising are mostly depend on the some of our okay. Yeah. It depends on.

They do out of height.

For variety shows right at the moment.

Alrighty shows and also some of the live broadcasting events and in the.

For them. So Sohu video also have this.

Chin.

The strategy.

Actually actively developing with the.

So for me the type of the short form.

Video.

So so you will see first of all so you basically see of fuel.

The 10 drama this year and that will drive our continued to drive our six of them growth through the business growth and advertising will not depend on that much on the production of long form of drama, but but some a variety shows and also short form and the like for screening events.

So we will see a gradual.

The new slow growth of our advertising and also a I.

I think the strong growth of <unk>.

Our subscription.

Non-GAAP business, well will reach breakeven and that also depend on what I. Just said is the first of all with the current.

In the last few years of being able to effectively to cut costs almost like by half right. So that the.

To the the media platform basically now.

For the last like around or even below $40 million per quarter.

And that's why with the game.

The good news.

The kind of appreciate repute achieved profitability moving forward, we hope that.

We hope that the.

The.

The innovation.

Product innovation.

The not only in the editorial distribution of kind of of the projects between content of NSO.

The.

The algorithm or.

The recommendation distribution and those of the third one is most importantly is the social media distribution.

So if we can achieve that and basically what would kind of achieve product user base user base without much spending.

Basically with the suite of product innovation. So that's the form of traction in users is the growth then.

Our out of having.

The both of them hanging in the solution business will grow.

And the faster.

That will determine whether when we will breakeven with the media, but non game business.

The.

But that is really dependent on so when we talk about innovate technology to innovate.

We just we're not just.

Generally speaking you know of innovation and product innovation.

Really mean, it and we're going at a very detailed very detailed the user experience and also of the.

Product.

The buy in.

The environment, So it's really.

We're working on and we hope that we'll be successful and I hope the.

The one point of for the product uptake is really this year.

Got it thank you.

Thank you for the question.

The next question comes from the lot of John Sheehan.

Please go ahead.

Hi, Charles the amendment, Thanks, a lot for it.

Let me ask the question and congratulations for a strong quarter. My question relates I know you are not allowed to comment much on Sogou I just want to.

Pick your brain on the hypothetical case.

In case the deal goes through the end.

Keith.

Cash allocation, just wondering how you're thinking about.

The few training classes in terms of the breakdown.

What are the specific project for any too.

Allocate too.

The investors are not yet.

All of hypothetically.

Cash I kind of.

So now with all of the cash we can only draw our products by and the user base by organic by by.

By product in the region.

That with the with the.

More cash than we can do both we can do of marketing on <unk> comment that.

Our user base kind of a factor.

And also.

Definitely in terms of the product innovation.

Ken.

Getting into more areas like.

Delivering news and content.

Exploring the AI.

Enabled.

The voice.

Also the.

The.

More features more.

Definitely.

Now we are basically.

Assuming that do everything because of especially the last three years of experience.

We are really.

In the improve the.

The operating efficiency so that for me can we try to do things with the low budget and.

So.

We hope that we will continue with the basically assuming that.

We were always assuming that we don't have the money and then we will just really what kind of product innovation.

The.

The spend less on the.

The.

The free installment or Apd.

Before then the older the things I'm really pleased.

The weather the product itself kind of effect.

The.

I'd say, it's still just based upon that political scenario I was wondering cause of.

M&A acquisitions, and potentially maybe a special dividend of dividend policy.

The outlook on beef.

End of things changed over the last few months.

How are you thinking about these type of allocation.

Well.

I think.

For a quite a conservative, but we only think about the things when we have them for money.

Okay, Okay and just the last question for me is in terms of the innovation projects that youre pursuing.

Maybe can you help us understand a bit more.

Are you how what's the progress here.

What kind of team.

Hiring some of them.

The new people to help with the progress.

It's more of a.

The current team.

This.

Basically the promotional.

People of member of the team.

The good one.

To provide for the tasks and the basics and then it's.

Also organic.

Process instead of just as I said have a new of the continent.

So it's the product of product innovation environment is really a something very very detailed on the very daily daily work instead of so yeah, we're hiring more people, but we're also we're getting.

Yeah the <unk>.

<unk>.

Involving the evolve the team and.

So.

And then the the product side of the basically as I said, we focus on the free distribution of content delivery of content basically editorial.

All of them and the social media social.

And we focus more on social media.

Network side aspect.

And also with the social magnitude for networking social network.

Correct.

For the <unk> era that we're in.

Looking at more of.

The video.

Or the.

BDO streaming type of video.

Type of content and also true to February two world the.

Video content and live streaming.

For the networking.

The network.

The product.

Thanks very much ex.

Okay. Thank you for the questions, ladies and gentlemen, with that that concludes the conference for today. Thank you for your participation you may now disconnect of things.

[music] per se.

Okay.

[noise].

Yes.

[music].