Q3 2021 Sohu.com Ltd Earnings Call
Goodbye and good evening. Thank you for joining so who's towards quarter of 2021 earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session.
Today's conference call is being recorded if you have any objections you may disconnect at this time.
I would now like to turn the conference over to your host for today's conference call one to <unk>.
Investor Relations director of Sogou. Please go ahead.
So what is it somehow fortune yesterday, because he felt the stub quarter plenty to no. One goes out on the call are chairman and Chief Executive Officer, Dr. Charles Zhang.
Also John Moody, and Vice President of Finance gemstone.
I always thought today I'll try to stay or the Lin Chen CFO, all being well before Mike begins their prepared remarks, I would like to remind me of the company's safe Harbor statement in connection with today's conference call.
That's for the historical information contained herein the matters discussed on this call may contain forward looking statements. These statements are based on current plans estimates and projections.
Therefore, you should not place on deal that I saw that.
These statements emo he risks and uncertainties.
And you know that a number of important factors could cause actual results to differ materially from those contending any forward looking statement.
For more information about the potential of it I know, there's something to push it forward to the public filings with the Securities and Exchange Commission, including the most recent annual report on form 20-F. Please also be reminded that so both resolved hopefully sogou to results of operations and a disposal gain recognized English.
Quarter have been classified as discontinued operations.
It's all about the way you talk about are related to continuing operations only.
With that I will now turn the call almost without a child jaw Charles Please proceed.
Hmm.
Thank you to everyone for joining our call for the third quarter of 2021.
Spot outbreaks of the Kobe 19 pandemic uncertainties in the macroeconomic environment, we continued to focus on.
Funding, our technology and development of products.
Overall, we delivered better than expected topline and Bottomline performance.
Thanks to the solid performance of the game.
For Sohu media, we kept improving our products were all constantly expanding premium content and its stimulating sohu media distributor distributions.
With further consolidated our influence.
Media platform.
And Sohu video.
Continue to focus on our two engine strategy.
Florida.
On live broadcasting technology, there is events and scenarios.
If I could.
We're generating even more video content.
For game Changyou.
Online games performed well during the quarter revenue exceeding the high end of our prior guidance.
Now let me go into details about each of these business I'll go into each of the businesses in detail in a moment.
A quick overview of our financial performance.
Our third quarter third quarter of 2021 total revenues.
$216 million.
Up 37% year over year, and 6% up quarter over quarter.
Brent Andrew hanging revenues were 30.
$34 million.
18% year over year, and 8% quarter over quarter.
Online game revenues $167 million up 65%, a year over year and 10% quarter over quarter.
GAAP net income from continuing operations attributable to silver Dot Com limited.
A prominent.
Compared with a net loss of $15 million in the third quarter of 2020 and net income.
$22 million in the second quarter of 2021.
Non-GAAP net income from continuing operations attributable to Sohu Dot Com limited.
$17 million.
Compared with a net loss of $7 million in the third quarter of last year and net income of $25 million in the second quarter of this year.
Now I'll go through some of the key businesses first our media portal until video first.
For Sohu media portal.
We constantly work on upgrading our products and the refining our technology during the quarter. We further enhanced the audio function of our new App.
And significantly improve the overall audio video usage.
This largely improved the content distribution efficiency and further demonstrated that these differentiated fusion.
Advantages.
With this video.
The two engine two and three.
Engine strategy, we kept working on developing long form original drama series.
Out of these shows to enrich our content library and also the short video content.
And our events live broadcasting technology has been.
Comprehensively integrating integrated into our product mix.
And widely adopted in various scenarios, including content marketing campaigns as well.
Uh huh.
Important still read news and major events.
The technology also play an important role in our daily lives, rather just show them support the creation of premium content.
Next turning portfolio.
For the third quarter of 2021 triangle performed well in these revenue exceeded the high end of our prior guidance the life of the card game Little Raccoon heroes.
It was doing good operators launching augurs well games that has <unk> PC and the legacy <unk> mobile manage to hold onto users and performed better than expected as they can.
Two eight.
For PC game, we launched new expansion packs and holiday events for Tc and other festivals.
With regular <unk> and <unk> vintage.
We're also further optimized <unk> vintage based on player feedback.
For legacy <unk> mobile, we launched an expressive expansion pack featuring a new dungan dungeon and storyline.
Well received by players next.
Next quarter, we will roll out the new content for <unk> legacy <unk> mobile lithograph, KOL heroes and other game too.
To sustain thereby <unk>.
In terms of new game pipeline, and we're developing and the fine tuning several key game, which will introduce players later.
We'll continue to execute our top games strategy promotion in promote innovation and the rollout high of more high quality mobile games, including <unk> RPG and other diversified products.
Before I pass the call to try not to go through our financial results in detail, we are pleased putting them.
That on November 13.
This year, our board of directors authorized a share repurchase program of up to $100 million.
A year period.
The repurchase program underscores our continued confidence in our long term growth prospects as well as ongoing commitment to increase shareholder value.
With that I'll now turn to China.
Yeah.
Our financials.
Thank you Charles.
I'll walk you through the key financials.
All our major segments for the third quarter of 2021.
The numbers that I will mention Oh on the non-GAAP basis.
You may find a reconciliation of non-GAAP to GAAP measures.
Our website.
For Sohu media portal.
<unk> revenue was $17 million.
32% year over year, and 23% sort of a quarter.
The operating loss was $37 million compared with operating loss of $23 million in the same quarter last year.
For Sogou video call.
What are the revenues were $23 million flat year over year and up 1% quarter over quarter.
The quarterly operating loss was $10 million compared with an operating loss of $12 million in the same quarter last year.
For Changyou quarterly revenues, including 171, 73, <unk> hundred $17 million up 63% year over year, and 10% quarter over quarter.
<unk> posted an operating profit of $79 million compared with $33 million in the same quarter last year.
For the first for the fourth quarter of 2020, one we expect.
Brand advertising revenues to be between $28 million and $31 million.
This impact of annual decrease of 26% to 33% and a sequential decrease of 8% to 17%.
Like game revenues to be between $140 million and $150 million.
This implies 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 now and $10 million and.
GAAP net loss attributable to Sohu com limited to be between $3 million.
Meeting.
This forecast reflects our current and preliminary.
Which is subject to a substantial offer.
This concludes our prepared remarks.
Operator, we would now like to open the call to questions.
Ladies and gentlemen is even now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request you can say its about little hashed E.
Please note there might be a slight pause asked the questions ive been correlated.
[noise] [noise].
We have a question I don't have a line of Alicia Yap from Citigroup. Please go ahead.
Hi, Thank you good evening, Charles and management. Thanks for taking my questions I have a few questions regarding the advertising. So first of all can you.
And maybe a bit more into weakness our office on my AD revenue that we saw increased Q how much of that was due to the soft macro that leads to the I've got caught.
And I'm just wondering is there any impact from the recent regulations on just elaborate on the crack down also fan based economy that could impact you all detail.
Robin you.
And then.
As related to that for the quarter can you remind us.
Which vertical industry vertical that actually has a soccer and comes up the budget is coming in lower than expected and reach what it could actually outperforms our yard.
Expectation and then as we got to the fourth quarter our online revenue.
Our revenue guidance.
If that makes sense.
Thing they'll continue macro weakness.
Or is there any you know, especially at our industry body cut that will be actually suffered more from COVID-19.
Thank you.
For both the third quarter and fourth quarter, it's more of a.
The vertical industry like real estate, we had.
Some exposure to the real estate industry.
Some of the companies.
Yeah.
Yeah.
Then there is a.
Secondly, yes, there's also some factor.
Macroeconomic situation.
Yeah.
In terms of regulatory 10 base those kind of things.
Yes.
The impact on us.
And the revenue.
Okay.
So.
The same thing for fourth quarter because of the real estate. So that that's why the guidance came in.
Yes, but the fourth quarter or the like.
I think the impact, but the impact will be less right.
Or is it going.
We organized our sales team effort too.
True.
Spend are.
[noise] add base and two two.
The new kinds of customers to procure in two two.
Uh huh.
Yes.
And maybe can you can you remind Sunday debate.
Maybe talk to us all.
One of our top five category.
Before we choose.
Also what is the top three are taxes, and then <unk> came out and shop.
Definitely definitely.
Although the number one.
And then for <unk>, I think number two and real estate numbers right. So the impact really on the roof.
So there are some.
You know the pandemic now because.
Where are.
Brand advertising.
And a lot on the content marketing and event driven.
Having because of the pandemic some of those major key events.
We couldnt do it and we cannot do it.
That had some impact.
Yeah.
So that helps me yet and although there's also.
Some kind of impact because of the shortage of.
Chips.
So some of those other.
Other companies they are marketing plan or.
Due to lack of chips and the lower production.
Our marketing activities.
I see okay. That's very helpful. Thanks Charles.
And then if I have a last one if I may.
The gaming guidance that you have a full fourth quarter on the sequential decline.
Is that because the performance at least VITAS lethal.
A raccoon kilos.
You are expecting them to drop off.
The performance in fourth quarter, and then any expansion plan.
Asia Pac plan for Tee up even in the fourth quarter. Thank you.
Yeah to answer that.
[noise] sounds like either funding in Chile.
So I'll answer on the.
So really shop.
And should I cant honestly, they're trying to.
Balance it out.
So the key to the EC shots without seeing the Shanghai show and stuff like that.
<unk> Shah.
And the whole 10 O I certainly unhelpful.
That's actually in a negative way putting something out.
Yes.
Next quarter, our revenue was mainly due to later record heroes.
And for other <unk> Gainesville, upstate four expansion packs.
At our regularly.
Okay.
Right. Thank you so much.
Okay.
If you have the next question is coming from Thomas Chong from Jefferies. Please go ahead.
Hi, Good evening, Thanks management for taking my question a question regarding to the online gaming.
That's literally and vitamin <unk>.
Management comments about Oh.
Exactly.
And you called out with regard to gaming.
And then my second question is about Mexico.
How should we think about piece new industry trends and our thoughts about our long time.
Spending investment.
Thank you.
Okay.
On T.
And he said listen gentlemen, pardon me in for holiday.
Somebody on the team brought in Chelsea, Ohio gathering English language OTA.
The conflict of a car.
Okay.
The ship at home they can de Mayo can throw the Chelsea does seem like Toyota to getting there. She led me to high teens and she does about half anyway, that's when you'll see Tim.
General Pavel.
I can see Mayo sanctioned a T a C.
Say, Tony has about holiday timing with any chance you can parse it out.
We don't have further comments on the approval issues, but <unk> CFO.
One of our key titles, we have called the license approval last year and floating hotels, because recently with all we want to launch it. So it's not a big Cassara flower child.
So I didn't say it goes to Oh Gee, They say you were teaching the young.
Shanxi Huh.
It seems like.
It was the highest of all the time, they say, it's always hitachi enrollment to the tenacity. She told us how it did have.
Confronted alger format over.
She has built a small team to do more research and try some new things based on the opportunities brought by the lack of a concept.
Sure Yeah.
Thank you.
Okay. Thank you.
Okay.
Once again, ladies and gentlemen, it is star followed by one on your telephone keypad, if you wish to ask a question.
Yes.
[noise] do you have the next question.
No that would be call it the questions.
The next one comes from the line of Eddie Leung from Bank of America. Please go ahead.
Yes.
Good evening.
Charles I know everyone. Just a quick follow up on the advertising weakness.
So we understand that there is a demand issue because some of the advertisers could you also talk a little bit about a potential impact you have seen from the data fun, including oppose a new privacy policy.
As far as the new date.
Data protection or.
China I think.
That is.
Small impact.
No impact.
There is some more.
Stricter requirement for.
The kind of advertising you can you have the format that so that you know like the maximum effect.
Front loading page.
Areas that require to be you know.
And not to.
People into cricket. So is this kind of thing, but that's not a major impact.
On the advertising.
And.
So.
[noise], probably got all that thank you.
Yes.
<unk> been very careful and very.
Complying with them has been very we're not very aggressive in terms of.
Collecting users' data and.
Take advantage of you that they'd have to do marketing and targeting so that's why these kind of policy.
At least.
In fact, our impact on Sogou.
And Michigan. Thank you Tom.
Yeah.
Yeah.
Thank you do you have the next question is coming from the line of Alex Goh from Morgan Stanley. Please go ahead.
Okay.
Sure. Thank you management for taking my question. So one on the ground soon Sohu media portal quarterly loss wanted me well why didn't it whereas for the social Oh, sorry for the Sohu video quite lot Tycho, we feel like having a pretty good constant discipline. So just wanted to get a sense of like a house Uh huh.
I like the investments went on words for the Sohu media portal and video businesses. Thank you.
So the the loss for Sohu video.
As you know.
The increase because the advertising side as a more.
More exposure to real estate industry.
Well the two video advertising are.
Mostly about MCT advertisers and also to videos.
Okay.
Revenue coming from the subscription of Grandma's right paid subscriptions, that's why it has as its Bob.
And also we do especially.
We are yeah, increasing.
Increasing.
Kind of a little bit.
I mean in the future will be much more.
Through user acquisition spending so on video and social media first.
But if you explain why.
The immediate losses.
Lager.
Yeah.
Yeah.
Got it thanks a lot.
Yeah.
Okay.
Yeah.
Thank you. The next question is coming from the line of Alicia Yap from Citigroup. Please go ahead.
Oh, hi, Thanks for taking my follow up questions I just have one question on the use of cash. So in addition to the buyback that you announced a would you also consider a one time special dividend given the amount of the cash that now you think.
You.
Use of cash first of all I think the.
Aside you know besides the.
Buyback.
Will.
We will spend it will basically use it for user acquisition because over the last few years.
The last two or three years, we've been innovated.
On our products.
Better content and better product features with our media portal and news App and also the Super video.
Innovations, but.
We eat.
Other two basically to prove it proved a viable those innovations or does the product features in the right direction and prove the attraction of it you have to have a more users.
To prove it so that's why we've been under spending in the last few years tried to reach profitability.
Not on user acquisition.
So with this newly.
Again, the capital we will spend more money.
Two.
To get more users to two.
To testify.
Are you know basically.
Our last two years in product innovation, whether its no viable amount.
So.
You may ask is that when is the breakeven point right. So before we breakeven I think we need to have some kind of user explosion all user user.
User based spilled out major user base buildup for platform like media and video to reach breakeven so before that point, we need to spend.
Spend some money.
On user acquisition and also we're going to spend also spent some money on.
Hum artificial intelligence.
R&D.
Like the new apps feature to audio feature of these.
The direct application of AI technology.
So the food.
Medical margins.
Each of them.
Our product innovation will have.
A strong technology base.
The support.
Just follow up on your user acquisition would that maybe you want to push more into lower tier city.
Or any kind of demographic that you are focusing on.
But yes, I think the demographics, I think especially orange.
Susan.
We will.
We'll probably have more younger and.
Younger generations younger younger age demographic, because sohu news users.
In the past.
More of a kind of a.
More you know.
Uh huh.
Uh huh.
H and with high income and those kind of thing.
Careful at the major breaking news, though international news.
Huh.
But we want to develop.
Acquire more younger users.
Yeah.
Yes.
Some.
Sure.
Third or fourth tier cities.
Cool.
Okay very helpful. Thanks Charles.
Okay.
Yeah.
Once again, ladies and gentlemen, and his strong followed by one on your telephone keypad. If you wish to ask a question.
Yeah.
Okay.
Do you have a question coming from the line of lapsed DM from Alicia capital. Please go ahead.
Yeah.
Hi, This is calling from past capital. Thank you for taking my question and congratulation to Ken on get all closing, so they'll sell and unlocking value.
We understand the company has announced that the buyback and also.
Just explained.
Potential use of cash or use acquisition.
R&D.
First question would be after the closing of the sickle cell.
A very significant firepower.
Well any other potential future investment area, that's so who have in mind.
My whether you consider M&A.
M&A or other investment strategy.
It'd be great to hear a bit more.
To elaborate that.
So far we don't we don't have a platform acquisition.
Mostly we will.
Five hour battle in the in the in the battlefield than we ever have been doing where we understand the spend and now we're going to spend some money.
Then.
As time.
We will probably look at them.
Some we will probably look at some.
Smaller investing the early stage companies.
And technologies for the purpose strategic strategic investment and defend our basically two two.
Four four technology for us for them, yes.
Yeah.
No.
Am I thinking yet or not.
Yeah.
Understood.
Terms of technology investment or small size company that venture capital invested yet any specific.
And I'll, let you or sector.
So who would be particularly interested in.
Yeah, as I said that probably artificial intelligence.
He is the area that we are.
We had a we were.
We had a sogou before and there's some really nice technologies now.
Bogo.
So we don't have a you know we need to get our own.
Our Tech center to really.
He was a tech firepower too.
Two.
No.
To drive our <unk>.
Innovation.
So I think he did.
Particularly in agents AI era.
Like the audio feature and and also the digital digital image those really using a lot of.
Deep learning technology to deal with those.
So I think this.
For media.
Portal for media and four new sample media for communication company innovation, mostly in terms of.
The human machine interface.
And.
This is kind of a <unk> application.
Application in this area.
Okay.
Yeah. Thank you very much.
My last question.
Related more to China in your business.
<unk> has great IP attracting loyal.
Hey, My base and also has good a very good cash generating ability.
Well just wondering if you have any capital market strategy for Changyou in the future considering beds, we have multiple.
Let the market exchange in China.
Now and then also in Hong Kong very attractive for this type of.
Just wondering if there's something that's in line with your corporate strategy in the future.
Yes, it is attractive option, we will seek that.
Yeah.
It depends on the rig.
I'll go through your requirement for it.
Let's say for four domestic listening it's kind of a.
Regulatory.
Right now it's still not possible.
Other markets if it is attractive.
We can't we can't we will configure that.
Yes.
Thank you very much.
Okay Youre welcome.
Okay.
Yeah.
Thank you you have no further questions at this moment.
Ladies and gentlemen that concludes our conference call for today. Thank you all clear participation you may disconnect now.
[music].
[music].
[music].
[music].
Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining Sogou third quarter upward.
'twenty One earnings conference call at this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded if you have any objections you may disconnect at this time.
I would now like to turn the conference over to your host for today's conference call.
Two Investor Relations director of Sogou. Please go ahead.
Walks away some heel fortune yesterday that he thought the whole stub quarter plenty to no. One goes out on the call are chairman and Chief Executive Officer, Dr. Charles Zhang CFO job and that's probably the low for next Gen stuff.
So we've got the day I'll try to stay at the Lynch L. L.
It'll be awhile before.
Before management begins their prepared remarks, I would like to remind me of how many states have a statement in connection with today's conference call is that what does it all come information contained herein. The matters discussed on this call may contain forward looking statements. Those statements are based on how the plot of mace and the projections.
And therefore, you should not place on deal that I saw that.
These statements and uncertainties, we caution you that a number of important factors could cause actual results to differ materially from those compounding I look forward looking statements.
More information about the potential of it.
Please refer to the public filings with the Securities and Exchange Commission, including the most recent annual report on form 20-F. Please also be reminded that so both a result of sogou to results of operations and a disposal gain recognized in this quarter have been classified as discontinued.
Operations, but with all the way to talk about our religious towards publishing operations only.
With that I will now turn the call, although without a child jaw Charles Please proceed.
Thanks, Robert and thank you to everyone for joining our call.
The third quarter of 2021 briefing spot outbreaks of the Kabi 19 pandemic and uncertainties in the macroeconomic environment. We continued to focus on refining our technology and develop a product.
Overall, we delivered better than expected topline and Bottomline performance.
Thanks to the solid performance of our online game business.
For social media, we kept improving our products well constantly expanding premium content and its stimulating.
So media distributed distributions.
With further consolidated our influence Master media platform.
The total video.
We continue to focus on our two.
And just grab it.
Flight hours.
Live broadcasting technology.
Events in this scenario.
Got it.
We're generating even more video content.
For game Changyou our ALM.
Our games performed well during the quarter.
Exceeding the high end of our prior guidance.
Now let me go into details about each of these business.
I'll go to in the India business in details in a moment.
Quick overview of our financial performance.
So third quarter third quarter of 2021 total revenues.
$216 million.
Up 37% year over year, and 6% up quarter over quarter.
Brand advertising revenues were.
$34 million.
18% year over year, and 8% quarter over quarter.
Online game revenues $167 million up 65%, a year over year and 10% quarter over quarter.
GAAP net income from continuing operations attributable to silver Dot Com limited.
It was a $12 million compared with a net loss of $15 million in third quarter of 2020 and net income.
$22 million in the second quarter of 2021.
Non-GAAP net income from continuing operations attributable to Sogou Dotcom limited.
A $17 million.
Compared with a net loss of $7 million in the third quarter of last year.
Net income of $25 million in the second quarter of this year.
Now I'll go through some of the key businesses.
First our media portal and video.
For Sohu media portal.
We constantly work on upgrading our products and the refining our technology during the quarter. We further enhanced the audio function opera news App and.
<unk> significantly improved the overall audio video usage.
<unk> library improve the content distribution efficiency and further demonstrated its differentiate ashish.
Advantages.
We continue to execute the two engine and twin engine strategy, we kept working on developing long form original drama series.
These shows to enrich our content library and also the short video content.
And our advanced live broadcasting technology has been.
Comprehensively integrating integrated into our product mix.
And widely adopted in various scenarios, including content marketing campaigns as well.
Hap.
So read news and major events.
The technology also play an important role in our daily lives, rather just show and support the creation of premium content.
Turning portfolio.
The third quarter of 2021 triangle performed well in these revenue exceeded the high end of our prior guidance the lighter card game little recall heroes.
Doing good Opex largely August well games that has T. L. B B B C and the legacy <unk> mobile manage to hold onto users performed better than they expected.
Two eight.
For PC games, we launched a new expansion packs and holiday events for TC and other festival for both regular <unk> and <unk> vintage.
We're also further optimized <unk> vintage based on player feedback.
For legacy <unk> mobile, we launched an expected expansion pack, featuring a new Congress dungeon and storyline, which.
Well received by players next.
Next quarter, we'll roll out the new contract for Shelby DTC legacy <unk> mobile lithograph, KOL heroes and other game too.
To sustain thereby <unk>.
In terms of new game pipeline, we are developing and the fine tuning several key game, which will reduce players later.
We'll continue to execute our top games strategy promotion promote innovation and the rollout of more high quality mobile games, including RPG and other diversified products.
Before I pass the call to try not to go through our financial results in detail. We are pleased putting animals that.
On November 13.
This year, our board of directors authorized a share repurchase program of up to $100 million.
Over a year period.
The repurchase program underscore our continued confidence in our.
Our long term growth prospects.
Well as ongoing commitment to increase shareholder value.
With that I'll now turn to China.
We are financially.
Thank you Chau.
I'll walk you through the key financials of our major segments for the third quarter of 2021.
The numbers that I will mention Oh on the non-GAAP basis.
You may find a reconciliation of non-GAAP to GAAP measures.
Our web site.
Well, so well media portal.
Today revenues for $17 million.
32% year over year and 23% quarter.
The quarterly operating loss was $37 million.
Paired with an operating loss of $23 million in the same quarter last year.
So sogou video.
Quarterly revenues were $23 million.
Flat year over year, and up 1% quarter over quarter.
The quarterly operating loss was $10 million.
Compared with an operating loss of $12 million in the same quarter last year.
For Changyou quarterly revenues, including 171, 73, $117 million up 63% year over year, and 10% quarter over quarter.
<unk> posted an operating profit of $79 million compared with $33 million in the same quarter last year.
For the first four.
The fourth quarter of 2020, one we expect.
Brand advertising revenues to be between $28 million and $31 million.
This implies annual decrease of 26% to 33%.
The sequential decrease of 8% to 17%.
Online game revenues to be between $140 million and $150 million.
This implies annual decrease of 23% to <unk> project, and a sequential decrease of 10% to 16%.
Non-GAAP net loss attributable to Sohu com limited to be between now and $10 million.
GAAP net loss attributable to Sohu dot com limited to be between $3 million.
Median.
This forecast reflects our current and preliminary.
Which is subject to a substantial offshore.
This concludes our prepared remarks.
Operator, we would now like to open the call to questions.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request you can place a volatile hashed E.
Please note there might be a slight pause to ask the questions are being related.
[noise] [noise].
We have a question coming from the line of Alicia Yap from Citigroup. Please go ahead.
Hi, Thank you good.
Good evening, Charles and management, Thanks for taking my questions.
I have got few questions regarding the advertising. So first of all can you elaborate a little bit more like a week next oh on my AD revenue that we saw in Q2, how much of that was due to the soft macro that leads to the I've got caught.
And I'm just wondering is there any impact from the recent regulations on the celebrity or even the crack down also fan based economy that could impact your video apps.
Revenue.
And then.
As related to gas for the quarter can you remind us.
Which vertical industry body call that actually have a softer in terms of budget is coming in lower than expected and beach watercolor actually outperformed your expectations and then as we got to the fourth quarter, our online AD revenue.
Guidance.
Is that reflecting the continued macro weakness.
Or is there any.
Especially at our industry vertical that will be actually suffer more.
Thank you.
Yeah.
For both the third quarter and fourth quarter.
Sure.
The vertical industry like real estate, we had.
Some exposure to the real estate industry.
Some of the companies.
Yes.
Then there is.
Secondly, yes, there's also some factor.
Hmm.
Macroeconomic situation.
Yes.
Uh huh.
In terms of regulatory 10 base those kind of things.
It's very little impact on us.
And the revenue.
Okay.
So.
So the same thing for fourth quarter because of the real estate. So that that's why the guidance came in.
Yes, but the fourth quarter.
Yeah.
I think the impact the impact will be less right.
We are particularly reorganized our sales team effort too.
Okay.
Expand our.
[noise] add pace and two to have.
The new kinds of customers to procure in two two.
Hi.
Yes.
And maybe can you can you remind our Sunday debate.
You all may be first top.
Top three years.
One of our top five category.
Before which is let's say a year ago, what is the top three patents.
And then for <unk>.
Definitely definitely.
Although the number one.
And then for FMC AG, Okay number two and real estate numbers right. So the impact really on their routes and also there are some.
You know the pandemic.
Well.
Right.
Brand advertising dependent a lot on the content marketing and event driven.
Having.
The pandemic some of those major key events.
We couldnt do it and we cannot do it.
That had some impact.
Yeah.
So that helps her yet and although there's also.
Some kind of impact because of the shortage of chips.
Chips.
Some of those other.
Other companies they are marketing plan or.
Right.
For chips and lower production.
Ross or banking practice.
Please.
I see okay. That's very helpful. Thanks Charles.
And then if I have a last one if I may the gaming guidance that you have the full fourth quarter on the sequential decline.
Is that because the performance of these we don't leave a raccoon kilos.
You are expecting them to drop off.
After performance in fourth quarter, and then any expansion plant expansion pack plan for tee up even in the fourth quarter. Thank you.
Yes.
Answer that.
Yes.
[noise] Tahira.
Funding in Chile.
So I'll answer on the children Sapphire, Tallow and should I can only answer that I tried to get them.
Sure.
Yep.
So the key to the.
So that's what we are seeing in Shanghai, China.
And so soda shaffer.
And the whole 10 O I certainly unveil.
Sure I'll make a few hot play clean tons out.
Yes.
Next quarter, our revenue was mainly due to later record heroes.
And for other <unk>.
James a little update for us.
Expansion packs.
Are there regularly.
Okay.
Great. Thank you so much.
Thank you.
We have the next question is coming from Thomas Chong from Jefferies. Please go ahead.
Hi, Good evening management for taking my question.
A question just regarding the online games.
That will easily and vitamin <unk>.
Management comments about.
How that's.
That's trending and any color with regard to gaming.
And then my second question is about met affairs.
How we should be thinking about.
New industry trends and our thoughts about our long term spending investment.
Thank you.
Okay.
On T.
And can you just give us a general Permian for holiday.
The amount of Chamberlain, Chelsea, Ohio gathering English language order.
The consistent.
Okay.
We see about how long they can de Mayo can throw the Chelsea does seem Toyota towards getting there. She led me to high since.
She does about how many lives that's when you'll see Tim.
General Babble.
It's I can't see Mayo sanctioned a T a C.
Say, Tony has about how they tie up anytime soon.
Yeah.
We don't have further comments on the approval initial thoughts for <unk> one.
One of our key titles, we have called the license approval last year and floating hotels EPS because recently with all we want to launch it so it's not a paypal Sarah for Chile.
So that's a concern.
I thought you said you were teaching the young.
Shaky Huh Zhengzhou.
It was the highest of all the time D. J, so hitachi enrollments of the <unk>. So that's how it did happen and I know youll.
L J.
For metals.
She has built a small team to do more research and try some new things based on the opportunities brought by the lack of Earth's concept.
Sure.
Thank you.
Okay. Thank you.
Okay.
Once again, ladies and gentlemen, it is star followed by one on your telephone keypad. If you wish to ask your questions. The next one comes from the line of Eddie Leung from Bank of America. Please go.
Got it.
Okay.
Good evening.
Charlie then everyone just a quick follow up.
The advertising weakness so.
So we understand that there is a demand issue because some of the advertisers could you also talk a little bit about potential impact you have seen from the.
The data front, including pose a new privacy policy that merits a fee.
The new data.
Data protection or in China, I think it.
That is.
A small impact.
No impact.
There is some more strict.
Stricter requirement for.
The kind of advertising you can you have the formats that are so that I would like to note that with respect.
App from loading page.
The area that required.
Uh huh.
And not to treat.
People into cricket so those kinds of things, but that's not a major impact.
On the advertising.
Uh huh.
So.
[noise] pardon me that all of us. Thank you.
Yes.
So who has been to be very careful and very.
Complying with it has to be very not were not very aggressive in terms of.
Collecting user data and.
Take advantage of you that they'd have to do marketing and targeting.
So that's why these kind of policy.
At least.
In fact or impact on Sogou.
Thank you Tom.
Okay.
Yeah.
Thank you do you have the next question is coming from the line of Alex Goh from Morgan Stanley. Please go ahead.
Yeah.
Sure. Thank you management for taking my question. So once a lot on the.
Routing Sohu media portal quarterly loss widely Ah why didn't it whereas for the social sorry for the Sohu video credit loss, we're still having a pretty good cockpit discipline. So just wanted to get a sense of like how how about like the investment went outwards for Sohu media portal and video business.
Thank you.
Yeah.
So the.
The loss for video.
As you know.
The increase because the advertising side as a more.
More exposure to real estate industry.
Well the Sohu video advertising are.
Mostly about <unk> advertisers and also to videos.
Of the revenue coming from the <unk>.
Subscription of dramas right paid subscriptions, that's why I had.
And also we do especially.
We are.
Increasing.
Kind of a little bit.
Third quarter I mean in the future we'll invest more.
Into user acquisition spending so on video.
That's sort of immediate first.
No.
Let's explain why.
The immediate losses.
Lager.
Uh huh.
Got it thanks a lot.
Yeah.
Okay.
Yeah.
Thank you. The next question is coming from the line of Alicia Yap from Citigroup. Please go ahead.
Oh, hi, Thanks for taking my follow up questions I just have one question on the use of cash. So in addition to the buyback that you announced a would you also consider a one time special dividend given the amount of the cash that you have thank you.
Okay.
Use of cash first of all I think the AR.
You know besides the.
Our buyback.
Well.
We will spend will basically use it for user acquisition because over the last few years.
It's been the last two or three years, we've been innovated.
On their products better content and a better product features.
Our media portal and news App and also the Super video and.
Innovation, but.
We ordered.
<unk> basically to prove it and approve a viable those innovations or does the product features that you need in the right direction and prove the traction of it.
You have to have a more users.
To prove it.
That's why we've been under spending in the last few years tried to reach profitability.
Ability so.
User acquisition.
So with this newly.
Again, the capital we will spend more money.
Two.
To get more users too.
To testify.
Sure you know basically.
Our last three years product innovation, whether its variable amount.
So.
You may ask is that when is the breakeven point right. So before we breakeven I think we need to have some kind of user explosion or user user.
User base buildup major use of as we build up a platform like media and video to reach breakeven so before that point, we need to.
Spend some money.
User acquisition and also we're going to spend also spend some money.
Artificial intelligence.
R&D.
Like the new apps features audio features.
A direct application of AI technology.
So.
Medical margins.
Each of them.
Our product innovation will have.
A strong technology base.
So the support.
Just follow up on your user acquisition would that maybe you're going to push more into lower tier city.
Or any kind of demographic that you are focusing on.
Yes, I think the demographics I think he especially orange.
Well you know it will probably be the more younger and.
Younger generations younger younger age demographic, because sohu news users.
In the past.
More a kind of a.
More.
Uh huh.
Middle mid age and with high income and those kind of thing.
Careful in the major breaking news, though international news.
Sure.
But we want to develop.
Acquire more younger users.
Oh yeah.
Yeah.
Awesome.
Sure.
Third or fourth tier cities.
Hmm.
Okay very helpful. Thanks Charles.
Okay.
Okay.
Once again, ladies and gentlemen, and installed followed by one on your telephone keypad. If you wish to ask a question.
Yeah.
Yeah.
Do you have a question coming from the line of lots of Gms from Felicia capital. Please go ahead.
Yeah.
Hi, This is calling from captain. Thank you for taking my question and congratulation to Ken I'll get all clothing, they'll go sell and unlocking value.
We understand the company has announced the buyback and also.
I just explained.
Potential use of cash or use acquisition.
R&D.
First question would be after the closing of the so called <unk>.
A very significant firepower.
Well any other potential future investment area, that's so who have in mind.
My whether you consider M&A.
M&A or other investment strategy.
It'd be great to hear a bit more.
To elaborate that.
So far we don't and we don't have a platform acquisition.
Mostly we will.
Five hour battle in the in the in the battlefield, Delaware had been doing.
Where are we understand and know we're going to spend some money.
Then.
As time.
We will probably look at some.
We will probably look at some smaller investing the early stage companies.
And technologies for the purpose of strategic strategic investment and defend our basically two two.
For for technology for the program.
Nobody's sure.
Am I thinking yet or.
Yeah.
Okay.
Understood.
The technology investment or a small size company as venture capital invested yet any specific.
Like technology or sector.
So who would be particularly interested in.
Yeah, as I've said, probably artificial intelligence.
Is the area that we are.
We had a we.
We had a sogou before and there's some really nice technologies now.
Bogo.
So we don't have a you know we need to get our own.
Our Tech center to really.
Abuse of Tech firepower to two two.
No.
To drive our product innovation.
So I think he did it in the artificial intelligence AI era.
The audio feature and and also.
Digital a digital image.
Really using a lot of it.
Deep learning technology to deal with those.
So I think this.
For media.
Portal for media and four new sample media for communication company innovation, mostly in terms of.
You know.
The human machine interface.
And.
You know this kind of.
Yeah application in this area.
Okay.
Yeah. Thank you very much my my last question related more to telling your business.
<unk> has great IP attracting loyal.
Hey, My base and also has good a very good cash generating abilities.
Well just wondering if you have any capital market strategy portfolio in the future.
Considering that we have multiple.
Let the market exchange in China.
Now and then also.
In Hong Kong.
Practice for this type of.
Just wondering if there's something that's in.
In line with your corporate strategy in the future.
Yes. It is attractive option, we will we will seek that path.
It depends on the regulatory requirement for let's say poor for domestic lifting its kind of.
Regulatory.
Right now it's still not possible.
In other markets.
Active now.
We can we can we will consider that.
Yes.
Thank you very much.
Okay Youre welcome.
Okay.
Yeah.
Yes.
Thank you we have no further questions at this point.
And gentlemen that concludes our conference call for today. Thank you all clear participation you may disconnect now.