Q1 2023 Sohu.com Limited Earnings Call

Okay.

Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining so foods first quarter 2023 earnings conference call.

This time all participants are in a listen only mode. After management's prepared remarks, there will be a Q&A session. This conference call is being recorded.

You may disconnect at this time I would now.

I'd like to turn the conference over to your host for today's conference call One pool Investor Relations director of Sogou. Please go ahead.

Thanks, operator, thank you for joining us, but he took us toward fourth quarter, because it's only three days off on the call are chairman and Chief Executive Officer, Dr. Charles Zhang.

Fortunately and Vice President Finance Gemstone also read that I tried to say auto insurance and let's see I'll be I'll be long before imagine when speaking with their prepared remarks, I would like to remind you of the Companys Safe Harbor statement in connection with today's conference call.

Except for the historical information contained herein the.

The matters discussed on this call may contain forward looking statements. These statements are based on current plans estimates and projections and therefore, you should not place undue last all of them.

Forward looking statements involve inherent risks and uncertainties. We caution you with that and then both are important factors could cause actual results to differ materially from those containing any forward looking statements.

For more information about the potential risks and uncertainties. Please refer to the companys body with us because it doesn't change commission, including the most recent annual report on form 20-F with that I will now turn the call almost a Dr. Charles Zhang Charles Please proceed.

Thanks, Michael and thank you everyone for joining our call.

In the first quarter of 2023.

He hit the high end of our prior guidance for brand advertising revenue, while our bottom line bottom line performance came in well above expectations. Despite the impact of seasonality.

And so the media we further improved operating operational efficiency and are focused on enhancing user experience.

Through product and algorithm refinements.

We closely monitored.

Market trends and provided you know.

Marketing solutions to our advertisers.

And Sohu video, we continue to develop both long form and short form original content and there are twin engine strategy.

Leveraging the advantages of our product mix.

Matrix.

We were able to consolidate.

Our resources and proactively explore diverse range of monetization opportunities.

Our online games remain remained stable during the quarter with revenues in line with the prior guidance.

Now, let me go into detail about each of our businesses.

I'll go into our HR business in a moment, but first a quick overview of the overall financial performance.

For the first quarter of 2023.

Total revenue of $162 million down, 16% year over year up 1% quarter over quarter.

Brand advertising revenue $23 million down, 5% year over year, and 22% quarter over quarter.

Online game revenues $129 million.

18% year over year, and up 7% quarter over quarter.

GAAP net loss attributable to Sohu Dot Com limited was.

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$18 million.

Compared with a net income of $3 million in the net income of $3 million in the first quarter of 2022, and net loss of $7 million in the fourth quarter plenty of money to it.

non-GAAP net loss attributable to Sohu Dot Com limited was $30 million 13.

Compared with net income of $9 million in the first quarter of last year and a net loss of $2 million in the fourth quarter of 2022.

Now I'll go through our key businesses in more detail.

First media portal.

And physical video.

So all the media portal, we harnessed the cutting edge technology to steadily optimize our product and algorithms.

As a as a mainstream media platform will not only deliver a reliable and real time news and information to our users, but also stimulate high quality self media content generating.

Generation among users and expand their social network distribution distribution.

Through this effort.

We have continuously improved user experiences and further strengthened our brand influence.

Okay.

Total video with focused on developing high quality long form and short form content.

For the long form.

Content.

First quarter, we have rollout.

Yeah from a food.

Different pool and sour plan.

Sweet.

You may not you may southern weekend.

Both of which won a claim from audiences.

In April .

We released the.

A crime themed idol romance love of replica when you go out.

The upgrade cycle to 2021 miscarriage love.

When you have that you're going to go back.

So the love of replica became a hit show again at the time of use relief actually last week and further boosted.

Our audience base.

For reality shows.

We saw the successful release of anchor away home Special Special edition for the Spring Festival.

And the other way home serious has gained.

Thinking about when you heard without them.

<unk> has been widespread.

Brad attention.

And the generated in depth discussion of various social issues, helping it's rich.

And penetrate larger audiences.

In terms of short form content, we continue to focus on the social.

Science related live streaming.

And supported by our vast library broadcasting technology.

With the bounded and professional reserve of broadcasters across numerous verticals, such as AR and the rich offering of high quality content Sohu video continues to consolidate its reputation as a leading our.

<unk> is a leading science and technology based live broadcasting platform.

On the monetization front the overall market.

Recovered moderately during the quarter.

As advertising demand advanced back we proactively explore various monetization opportunities in differentiated scenarios.

For example, during the quarter, we successfully hosted the.

Annual Sogou Fashion Award Sogou.

And so we're constantly.

And offline event, which has become a distinctive IP for sogou and.

And demonstrates our position as a mainstream media platform.

The Sogou fashion award together with the Charles Physics caught my attention.

And also the top end or the very Sky and talk on the show up the mountain.

Yeah.

Yeah.

Program.

Generated significant attention and create a very hot topics and.

In discussions on our product metrics as well as across various social media.

Platforms.

These unique campaigns leveraging our by our dual platform of Sogou video and Sogou.

News.

And reinforced our strong brand influence.

And I.

Good contents and provided our ever.

Same time I provided.

Titers with ample market exposures.

So next.

Turning to online game business.

During the first quarter of 2003 online game revenues or in line with the company's prior guidance.

Women.

Our PC games business, we launched some Chinese new year themed holiday events and promotions for the regular <unk>.

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Continuing to improve the functionality of <unk> vintage.

Based on players' needs.

And also introduced a new.

Cross server.

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Event.

That matches players randomly.

In our mobile game businesses.

We launched updates for legacy <unk> mobile to celebrate the Chinese new year introducing.

Not only are serious holiday events, but also optimization.

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In the second quarter of 2023, we will launch expansion packs and content updates for <unk>.

The <unk> mobile and other games to keep players engaged.

That technology in the game business the industry keeps advancing end market demand became becomes deeper and more diversified we intend to stick with our top games strategy allocating more resources to professional talent development as well as content and technology innovation.

In order to roll out more high quality mobile games.

In terms of the game pipeline, while maintaining our core competitiveness in MMO RPG were also produced gains in various tax including car based Rpgs.

Strategy sport and Idaho game.

I'll now turn the call over to our CFO , Joanna who will walk you through our financial result, Jenna.

Yes.

Thank you Charles.

I will now walk you through financials two of our major said.

For the first quarter of 2023.

Members of the non-GAAP basis.

You may find a reconciliation of non-GAAP to GAAP measures.

IR web site.

For Sohu media portal quarterly revenues were $80 million compared with revenue of $80 million in the same quarter last year.

Quarterly operating loss.

$35 million compared with an operating loss of $45 million in the same quarter last year.

For Sohu video quarterly revenues were $30 million.

Compared with revenue of $50 million during the same quarter last year.

Quarterly operating loss was $32 million compared with an operating loss of $21 million in the same quarter last year.

So child, unlike in business and 171 73 quarterly.

Quarterly revenue of $131 million compared with revenue of $160 million in the same quarter last year.

Quarterly operating profit was $55 million.

Compared with operating profit of $85 million in the same quarter last year.

For the second quarter of 2023.

We expect.

Advertising revenues to be between $23 million and $26 million.

This implies annual decrease of 8% annually.

The annual increase of 4%.

And a sequential increase of 2% to 15%.

Unlike in revenue.

To be between $112 million and $122 million.

<unk> and <unk>.

The decrease of 22% to 29%.

And a sequential decrease of 6% to 13%.

non-GAAP net loss attributable to Sohu com limited to be between $15 million.

The $25 million.

And GAAP net loss attributable to Sogou limited.

To be between $18 million and $28 million.

Our guidance reflects our current and the preliminary view.

Which is subject to substantial uncertainty.

This concludes our prepared remarks.

Operator, we would now like to open the call to questions. Thank.

Thank you.

We will now begin the question and answer session, if you'd like to ask a question. Please press star one on your telephone to cancel request. Please press star one one.

We are short silos, what questions are being collected thank you for your patience.

One moment for the first question.

Our first question is have shops, Thomas Chong of Jefferies. Please proceed.

Thanks management for taking my questions I have two questions. The first one is about pricing.

In 2023.

So I am putting spending budget among all tall FMC G International restaurants.

Hi.

And my second question is about online game outlook.

Perp license without 23 thanks.

So.

For 2023.

Advertising.

We see the yeah.

The top three categories of <unk>, 25% CAGR, 15%.

Service.

15%.

We see some opportunities.

For auto industry.

Probably yes.

And later in Q2 or Q3 later this year for Q1.

It's.

Uh huh.

Because there is a new policy for the July 1st policy.

For for a stricter emission standard so some cargo auto companies trying to.

<unk> lowered the price and trying to.

Trying to get rid off their stockpile.

The stockpiles so there is some.

Having on Q1 is a kind of a soft interest a negative impact on that.

<unk> new energy.

Metro card.

Industries.

And.

For <unk>, we see some.

The.

People aren't has less money.

Spending on large item.

Larger item spending but for small items it seems.

There is.

Kind of recovery because of Q1 and this year is the first the first quarter and first year. After the 2019 basically.

After the lift.

Lifting.

The lockup.

Lockdown or the zero carbon policy, so everything in Q1, and Q2 will be very indicative of the.

A normal economy.

The economy should be.

It seems.

It's less.

Bouncing back not as much as we expected expected, but we do see some.

Yes.

I would say.

The lipstick.

Economy Lipstick.

Economies in fact, right because people had less and less money. So this now spending on larger items.

But then they left with more theyre not buying real estate, they're not buying houses theyre not spending.

Large items, but that's why I leave them with more some cash to spend the most smart venue.

Including the.

Spend some paid some monthly subscription to two to pay for hours of video lawful.

Video drama subscription.

So this is what I see for the other.

The thing this year.

Okay.

Glenn <unk> formulations available, we look at long slow on the legacy.

So youll see together.

Sure Bob.

Today, you'll hear the Bahar <unk> Samsung.

So he'll soil.

Typically you'll see it sounds essentially bajo question Keith.

<unk> hi, thank you.

Now coordinate about how the hunting client.

And Andy hordes of millions for sanction.

No leeway.

Well mahala tighter lasagna.

Ill hand go higher than that.

Pricing is taking in that business at all.

Hail event do you need to have.

Okay got a hunger only ETE.

Absolutely.

How ITG fashion.

Tom King and you'll hear a lessor.

Deno.

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Yeah.

Closer she.

<unk> built the hottest in Cuba.

In terms of ethane pipeline, we will for these new <unk>.

Mobile in in the third quarter of this year it has.

The license approval in February .

Otherwise new lessor journey.

Mobile project it.

It is applying for the license and we plan to launch in the Chinese Hong Kong, Macau, and Taiwan regions in the third quarter of this year.

Comcast the iPhone. So this year, we will relieve us from Chinese mainland probably before year end or first quarter next year.

The overseas market, we licensed ethane a Japanese manga game card.

Q hydro failure.

It is it in Korea in South Korea, and Japan.

In the fourth quarter this year and also our self developed game <unk>.

We plan to launch it in South Dakota and also American.

In Europe versus market in the third quarter of this year for overall gaming business. This year. We our goal is to contain the steps last ever ability of our older games and also it depends on the new game performance. Thank you.

Thank you.

Thank you for the questions.

As a reminder to ask a question. Please press star one one.

Sure.

Next up we have to lines from Alicia Yap from Citigroup. Please proceed.

Hi, Good evening, Charles Joanna and management team. Thanks for taking my questions.

I do have a follow up on both the advertising and gaming. So first of all on advertising Charles mentioned during the first quarter. It was recovering moderate and then you did.

Also explain the big ticket items are small ticket items.

Then.

What about in general in Comm Sol.

That all at Santana.

So for advertisers in the industry that is.

Still kind of.

Lacking a bit.

So preparing maybe they wanted to spend more they're actually still cautious on their spending.

You expect second half.

Some of these big ticket items spending could be improving and she will be driving the advertising growth. So this.

This is the first question and then second question on the gaming.

Our second quarter guidance.

It does looks like the guidance was relatively weak compared to what we have delivered for the first quarter is that because there's lack of new games and also the seasonality and then given are we going to launch the T. IBD in the quarter should we expect a pretty meaningful.

For sequential.

In the third quarter, and then fourth quarter. Thank you.

Alright so.

Actually I'm basically answering because we are continuing with the previous question.

About the advertising I wanted to.

Draw the attention of your attention that actually.

In Q1, and also the Q2 forecast our advertising in terms of R&D is actually.

Representing a growth of 2%, both 2% in Q1 and 2% in Q3.

3% is between growth in terms of the guidance because of the entre.

Currency exchange adjustment.

That's what I went through them.

It up.

I think.

I think real estate is just.

Basically no hope okay.

<unk>.

Real estate is just.

I don't not possible.

The growth or.

And this is one of the.

Big ticket item.

And.

Although industry, yes, we do see some opportunities and I hope that in.

In Q3.

Some pickup from advertising recovery.

Because of competition.

The electric car industry.

Intense competition drive.

The marketing, especially if we can provide them unique differentiated marketing package unique that can really.

Have their brand.

Exposed across the whole.

Social network.

The industry that represents that mortality will spend money on our platform.

And.

I have more hope for these small ticket item.

Mcg and.

So the good thing about our advertising platform is that the.

Any any businesses any products they need market they need to have a Brent beer brand building we will.

We need our platform.

No.

So if one industry.

Just the wind down there is other industries emerging.

People are spending as I mentioned the lip.

With coho meeting the Lib.

Lipstick exam.

In fact in some.

Area in Atlanta.

<unk>, even some luxury good I mean.

The.

Cosmetics and all those places.

Actually they're present some opportunity.

Yes, because people don't have the money now.

Just like people.

During the May.

Holiday people goes to the board, who have Colorado, that's the kind of really low cost spending.

Right.

Don't have much larger items to go to the SMT hotels and or perhaps.

The sports clubs to health clubs to spend but people do have them.

With the money to spend on other small item things and Thats. The FMC decided that we'd see some opportunity in the later half of the year.

So we look at our growth.

Yes.

Yes.

Gaming.

Yes.

This year was unusual for <unk> controller to each of the railroads attributing and Mayo clinic.

Thank you Jason.

Central to our fashion channel.

With image sensors.

Lisa.

Archie to Yoshio solar seeing lumpy shutdown. So we are seeing me Archie towards truly helpful towards <unk>.

Yes.

<unk> hi.

<unk>.

Hi.

Second quarter guidance as we expect fewer promotions for Q2, then for what the.

Some of our older games, including cloud he will have some asset class. It is.

Still too far to.

Forecast performance in third quarter.

Sure.

Okay. Thank you.

Given the question.

Once again to ask a question. Please press star one one.

We have no further questions at this time. Thank you everyone that concludes today's conference call. You may now disconnect your lines.

Alright.

Okay.

Okay.

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