Q2 2023 Sohu.com Limited Earnings Call

Ladies and gentlemen, thank you for standing by and good evening.

You for joining <unk> second quarter 2023 earnings conference call.

At this time all participants are in a listen only mode.

After managements prepared remarks, there will be question and answer session.

Today's conference call is being recorded if.

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 call Huangpu Investor Relations Director of Sohu. Please go ahead.

Yeah. So Peter Thank you for joining us to discuss the second quarter, So I'm going to let the results on the call I'll share a mountain of cheap because I don't think the Gulf Choctaw, Seattle Genetics, and Nebraska Gemstone also lived off a policy holder in Shanghai.

Sure.

Before imagine once they get their prepared remarks, I would like to remind you of the safe Harbor statement in connection with this.

Conference call.

Because obviously, there's a darker information content.

The matters discussed on this call I'm in contact with all of these statements.

They've done it up based on kind of a class I can make on our production.

And therefore, you should not place undue reliance on them.

He's got a list here.

We caution you that a number of 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.

What's your thoughts are accomplished bodies, whether it's the goofy I think it tells commission, including our most recent annual report on sometimes yeah.

Uh huh.

No problem.

Thanks, <unk> and thank you everyone.

Uh huh.

The second quarter of 2023, we delivered stable performance with both revenues and the bottom line, beating our expectations.

And social media.

Well you have the user experience through continuous refinement to our products and technology and by offering users.

Steady stream of reliable content in real time.

And so with video.

Execution of our two scrubbed twin engine strategy, we expanded our portfolio of long and short form video content.

[noise] proactively.

Improve the social distribution.

Leveraging our advanced live broadcasting technology, and so who product matrix.

Nitric matrix.

We hosted traditional flagship events and innovative content marketing campaigns.

Which generated abandoned abandoned premium content and attracted more users.

And this also put us in a position to explore more monetization opportunities.

Again advertising dollars.

Online games remain steady.

Revenues in line with our prior guidance.

Now let me first give a quick overview of the financial performance.

For the second quarter 2023, total revenues of $152 million.

Down, 22% year over year, and 6% quarter over quarter.

Brand advertising revenues $24 million down, 4% year over year and up 6% quarter over quarter.

Online game revenues $118 million down, 25% year over year, and 9% quarter over quarter.

GAAP net loss attributable to Sohu Dot Com limited was $21 million compared with a net income of $9 million in the second quarter of last year and net loss of $18 million in the first quarter of 2023.

non-GAAP net loss attributable to Sohu Dot Com limited was $18 million compared with net income of $12 million in the second quarter of last year.

And the net loss.

$30 million in the first quarter of this year.

No I'll go through our key businesses in more detail.

First media portal and Sohu video.

As all media portal.

We continue to focus on refining our product and optimizing the algorithms.

We further enhanced.

User experience by integrating cutting edge technology into our products and expanding premium content and the various forms of presentation.

Thanks to our continuous dedication and integration of rich media sources.

Resources.

We strengthened our advantage.

And influence as a mainstream media platform.

And took video will continue to execute our transcon twin engine strategy.

Our long form video content.

Pleased the crime themed idol romance love of replica.

You Garland.

During the quarter to widespread.

Popularity and further expanded our audience base.

Same time, we launched several reality shows like this is me is Germany.

Which would be 60 million of her on her way home.

And hi, Tom or friends, who you are and the shut in are transferred to boot.

These shows have created a lot of engaging discussions online and attracted millions of viewers across various social media platforms.

In terms of short form content and live streaming we kept concentrating on knowledge and science related live broadcasters.

Driven by our Stickney IP of myself physics, Charles Physics.

Which is becoming very popular.

And we further promoted high quality content generation and its social distribution, attracting more users to produce video content and interact with each other on our platform.

Yes.

On the monetization side, we closely monitored.

Market trends and explore potential opportunities leveraging our advanced live broadcasting technology in.

Youll platform of Sohu media and Sohu video, we provided advertisers with unique and a diversified online and offline marketing strategies.

That cater to their needs and boosted our other billion dollars.

And the second second quarter of <unk>.

This year, we hosted a traditional content marketing event.

The 15th.

Local news marathon in Xi'an.

Demonstrating the Invigoration reinvigoration of the popularity of traditional Chinese culture as well so it was a positive upward social values.

We also prove out proactively developed new monetization opportunities by integrating innovative ideas into diversified events.

And expanded.

Application scenarios, using our advanced our library cutting technology.

We integrated the couch physics class into.

Sohu Tech conference.

And for the extended this IP into a new series of activities tuck.

Under the stairs Sky Shimbun.

These events have generated and abandoned abundance of premier content and obtain that recommendation from advertisers.

Next turning to the online game business during the second quarter of 2023.

Gaming revenues were in line with our prior guidance.

When you are a PC game business, we optimized the character development system of regular <unk> to make it clears investments more worthwhile.

And also improved the social relations system for COPD vintage.

In our mobile game business, we launched an expansion pack for the anniversary of legacy <unk> mobile with the addition of a limited time a player versus player event.

Satisfy demand for traditional therefore additional in game combat.

Next quarter, we will launch new <unk> mobile our next generation <unk> product along with the expansion packs and content updates.

Allow us.

Expanding impact and kind of update for other games to maintain player engagement.

Yes.

Nowadays as technology in the gaming industry advances rapidly and market demand became deeper and more deeper.

Diversified we intend to stick to our top games strategy.

Allocating more resources for research and development.

To generate ideas professional talent development as well as content and technology innovation.

Order to rollout.

More high quality mobile games.

In terms of games pipeline, we will maintain our core competitiveness in the Mmm Oh Rpgs, while also producing various game other impacts including car based Rpgs sports.

Sport and casual games.

I will turn over other hard to CFO , Joanna who will walk you through our financials.

Thank you Charles.

I'll walk you through the key financials.

<unk> segment for the second quarter of 2023.

All the numbers on a non-GAAP basis, you may find a reconciliation of non-GAAP to GAAP measures.

Our web site.

For Sohu media portal quarterly revenues were $17 million compared with revenue of $20 million.

The quarter last year.

Quarterly operating loss was $45 million compared with net operating loss of $44 million.

In the same quarter last year.

First of all video quarterly revenues were $50 million compared with revenues of $60 million in the same quarter last year.

Quarterly operating loss was $32 million compared.

Compared with an operating loss <unk> $5 million from the same quarter last year.

Hotel.

So Charles I'll, I can business and the wealth of about seven straight.

Quarterly revenues of $119 million compared with revenue of $159 million in the same quarter last year.

Quarterly operating profit was $49 million.

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

For third quarter of 2023.

We expect.

Advertising revenues to be between $21 million and $24 million.

This impacts annual decrease of 7% to 18%.

The sequential decrease of Neil to 12%.

All I can business.

All our game revenues to be between $108 million.

$180 million.

This implies annual decrease of 21% to 27% and.

And a sequential decrease of two 9%.

non-GAAP net loss attributable to Sohu Dot com are limited.

To be between $20 million and $13 million.

GAAP net loss attributable to Sohu Dot Com limited.

<unk> to be between $23 million and $43 million.

Our guidance reflects our current and preliminary view.

Which is subject to substantial uncertainty.

Also please be noted that the apple above guidance excludes projections for the new <unk> mobile game.

Which is scheduled to launch in the third quarter of 2023.

Given that the game is not yet launched revenue projections for the game remains uncertain.

Therefore, the company believes that it took.

Appropriate to take a conservative approach with our fourth quarter guidance.

This concludes our prepared remarks.

Operator, we will now like to open the call for questions.

Thank you.

To ask a question. Please press star one one on your telephone you will then you an automated message advising yohan <unk> raised.

To withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question Thomas.

Hi, Good evening, Thanks management Paul.

Taking my question.

A question on the <unk>.

At the pricing.

First.

But when I look into the Q3 guidance it seems that the low end of the guidance at the high end since the range is quite high.

If I try to exclude the foreign exchange exchange impact looking into a local carbon to see it feels that there is a chance that we will have a positive.

Quite a show quote so I just wanted to ask management about.

How's the advertising sentiment.

So far we are seeing in the month of July versus June and how we should think about the advertising trend.

Of course, if Brian is that categories like off Paul FMC, EG and Internet services. Thank you.

So you said a sequential growth.

Yes.

Gross.

For Q3 Q3 guidance.

Got it.

So internal RFP.

Yes.

But so overall.

For the second quarter the advertising revenue.

He is not.

So the overall market is not bouncing back as expected.

So.

So that's why.

Compare with last.

Last year the Q2.

Dropped right 4%.

But we are still holding holding steady because.

In terms of RMB, its still 2% growth for Q2.

Normally we.

<unk>.

A better Q3 normally normal economy situation.

Because of the sluggish economy as I said, the bounce back as expected.

We are forecasting a downward.

Revenue for Q3.

And.

Hum.

Yes, because we are holding our holding up the revenue.

So far.

Innovative.

Marketing.

Our solutions to our advertisers as as I just said.

That's great.

Our live broadcasting.

Events and.

But overall in terms of the categories.

And so the.

Real estate is basically.

Alright doesn't exist anymore.

So the our top advertisers auto.

26% Internet service, 18% <unk>, 16%.

With auto it seems.

Seems not doing well because.

<unk>.

Automakers are more hesitant in spending.

Yeah.

Yeah.

Marketing campaigns not have they did.

Because the overall economy.

And our service as well as the same thing fame because our people are spending.

Plus even.

Buying less and online so.

<unk> seems a little bit.

It's okay, but it's still a smaller percentage of our overall.

Revenue so that's the kind of.

The overall picture.

Did I answer your question Thomas.

Yes. Thank you Charles for the detailed answer May I have a quick follow up.

About <unk> and the industry.

Just wanted to sneak management's thoughts about how AIG see.

Benefit so who in the field and one of our strategies.

And the spending in this area. Thank you.

We believe that <unk> is a major technology advancement.

And a very important it's a revolutionized.

The way.

Formerly it's a search engine now it's totally different.

Way of delivering information or.

So is it.

Very important opportunity, especially for our media and information providers like <unk>. So we are.

We're not.

Investing in.

Larger.

A large model.

Big data model block model.

We all.

We will probably all source the larger models.

Two use of some services.

Providers third party provider to us and then we are.

Sure.

Redeveloped.

Those applications in our.

In our consumer and services like Google.

Local news silver news.

And so.

And social.

The social network.

Like for example, we are now.

Four.

Each article we have a machine generated.

Yes.

Sure.

Okay.

Uh huh.

Okay Abstracts, correct, yes, exactly abstract.

And also some of our products are actually using.

So we are going to be.

Heavy user of Aig's and will closely monitoring its development and also in auto.

Two to.

Turn those development into the.

Real.

Attracting new applications.

And turned it into a.

User consumer side product.

Sure.

Got it. Thank you Charles I will get back to the queue.

Okay.

Great. Thank you Thomas.

Next question comes from Alicia Yap from Citi. Please go ahead Alicia.

Hi, Yes, good evening, Charles Johanna and management, Thanks for taking my questions.

Three questions.

First I wanted to follow up.

The previous on Tommy's questions on the advertising Charles.

So can you elaborate you mentioned.

It was a little bit.

Sluggish and bouncing back.

A little bit weaker than expected. So do you expect this situation to actually continue.

Into the next few months and also with the rest of the year.

Yeah.

Internally is that.

Is that.

Is that worse than what you had.

Betsy aspect, though is just like where.

Everybody has expected. So this is the first question is on advertising just a follow up.

Oh, I think it's probably.

Throughout this throughout the year not just a quarter.

And.

It's just like everyone.

Actually in Q2 you.

Probably remember last quarter.

Phone call or conference call that we have.

So it seems.

After the.

Three years of the.

Coffee lockdown occurred.

Everyone expected a.

Longer bounce back of economy, but then now in the middle of Q3.

We are seeing.

Not seeing that strong bounce back like everyone did.

Everyone.

Yeah.

Nothing.

So pretty.

Okay.

I understood would you also.

<unk> actually built some of the leasing of natural events like the flooding too.

May be you know cov lite amplify it doesn't that nikhil.

The overall macro sentiment is also getting softer or worse because of some of.

The natural events that happened as well.

The flooding just happened is nothing to do with the flooding.

But I think the overall macroeconomic situation.

The export.

Yeah.

The.

People have less disposable income because of people.

So not having enough disposal environment people are not buying things.

And then then the if you don't have to export and people are not by does not have the money to buying things than those products.

No.

Those products those companies.

Then.

Stop hiring.

Jonathan Pumpkin in new job opportunities.

Negative downward.

Spiral downward rate trend.

But okay.

That's true.

In terms of entire companies.

On top of Alexa, who.

I think.

I'm still.

Not that I'm not that.

Pessimistic because.

If our people are not.

Spending.

Last item spending like buying cars or buying.

Houses.

Then in terms of cash they probably have more cash to buy a little things.

Like the best.

Subscription of the mentally excuse me <unk> drama.

Membership.

Or.

Just playing games playing online games.

Consuming the social networks and <unk>.

And then so if the auto and some larger item advertisers are kind of.

Yeah.

Spending is declining.

A little bit, but then probably some small items FMC decided could come up because as China economy at the large end of the population and the consumers. The number of consumers who is still the largest so I'm still kind of optimistic.

So that's why we are we are investing.

Sure.

Continuing to develop our.

Social network.

The information.

Delivery and also social networks so that.

Economic downtime.

Take advantage of it.

Actually we're more we're actually a cash rich.

Spend to grow our user base.

So it's a good time of the base.

Uh-huh Okay. Thanks, Charles the second question I wanted to ask is gaming.

You mentioned the small items, so I think I understand your guidance Hudson Bay in COPD launched just anything that you can share in terms of Sofia expectation is it something that the gain potentially.

It could be a typo that you got is you haven't seen it for a long time that you guys actually unlocking are very much looking forward.

That launch that control a chop back some of the gamers.

And also.

<unk> brings in.

The growth for the gaming business again, so any expectation that you can share would be helpful.

Alright.

Sure.

So if I'm hearing your entry in America.

Hey, John .

Thanks, Jonathan.

Ladies and gentlemen.

We are now seeing Aladdin regeneron.

Zero.

Function.

To each of the some more English Chinese OEM fast Thompson Athena.

Sanjay it's since it's a shame.

Thank you Shannon.

Yes.

Say women middle of Bahar.

So closer to the fashion of course.

So the associate icon.

Hi, Scott.

So this is Jim.

So listen later.

Production. So that is on a path to achieve also an answer with some clients.

So he tweets and send the quality women.

<unk> funding question Kenneth Pablo's Toyota.

Okay. Thanks.

So vishal.

Yes.

Developed by <unk>, South and the royalties.

Despite.

And now before it launches are being prepared and the rich.

The excess accretion.

<unk>.

Tessa.

And charge off process so.

We just did the monetization path in June and the testing results matter with our product.

Spectation for the testing phase, but.

Sure we cannot do any project.

Mid to long term.

<unk> performance so to be conservative we just.

And then put it into our guidance.

Okay. Thank you and then lastly, Charles.

Can you also share with us any update the views or thoughts on the cash use and also to shareholder return policy for example, any.

Thinking about our regular dividend policy or any upcoming new share buyback program. Thank you.

Well.

Currently.

Currently right now we don't have any.

Plan for dividend or.

Buyback plans.

We are you have.

A huge task of.

Growing our user base.

And.

We've been working on our products for last few years to refine it and to develop new applications, especially in a social network side on the Suezmax side and we.

And our battlefield will enter or entering into the stage of.

Yeah.

A major user acquisition.

Yes stage user accretion that will that but we need to.

The farmer to do that so the use of cash will be continue to be to develop our user base.

We don't have any currently we don't have much.

On the plans to.

Investment.

Okay Alright, Thank you Charles Thank you management.

Thank you.

Sure.

Thank you.

As a reminder to ask a question. Please press star one one on your telephone keypad.

Alright, there are no further questions. So with that we conclude today's conference call. Thank you for participating you may now disconnect.

Okay.

Okay.

Okay.

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