Sohu.com (SOHU) Q2 2025 Earnings Call August 04, 2025 07:30 AM ET Speaker0Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Second Quarter twenty twenty five 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'd now like to turn the conference ove ...

Financial Performance and Key Metrics - In Q1 2025, total revenues were $136 million, down 3% year-over-year and up 1% quarter-over-quarter [7] - Marketing services revenues were $14 million, down 15% year-over-year and 27% quarter-over-quarter [7] - Online game revenues were $117 million, flat year-over-year and up 7% quarter-over-quarter [7] - GAAP net income was $182 million compared to a net loss of $25 million in Q1 2024 [8] - Non-GAAP net loss was $16 million compared to a net loss of $22 million in Q1 2024 [8] Business Line Performance - Sohu Media platform revenues were $70 million, compared to $20 million in the same quarter last year, with an operating loss of $70 million [19] - Changyou's quarterly revenues were $180 million, down from $190 million in the same quarter last year, with an operating profit of $55 million [19] Market Data and Key Metrics - For Q2 2025, marketing services revenues are expected to be between $60 million and $70 million, implying a year-over-year decrease of 14% to 19% [20] - Online game revenues are expected to be between $96 million and $106 million, implying a year-over-year decrease of 28% to 35% [20] Company Strategy and Industry Competition - The company is focusing on enhancing its social media platform and leveraging unique IPs for monetization opportunities [6] - The online gaming business is adopting a top game strategy, diversifying its portfolio with various game types, and expanding into global markets [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted that the advertising sentiment is mixed, with the auto sector performing better while luxury goods and alcohol spending is declining [24] - The company expects a similar trend in advertising for the second half of the year, with a focus on accelerating growth through its social network platform [25] - AI is seen as beneficial for the gaming business, improving efficiency in art design and production [29] Other Important Information - The company reversed a tax expense previously recognized, amounting to approximately $199 million, which was an accounting treatment issue rather than a cash flow event [8][42] Q&A Session Summary Question: Recent trend in advertising sentiment and outlook for the second half - Management indicated that the auto sector is performing better, while luxury goods and alcohol spending is declining, with expectations for a similar trend in the second half [24][25] Question: Impact of AI on advertising and online games - Management stated that AI has a marginal impact on the media platform but is beneficial for gaming, improving efficiency in various production aspects [26][29] Question: Details on the tax reversal - The tax reversal was an accounting issue related to uncertainty that has now been resolved, with no actual cash flow involved [42][45] Question: ADR delisting risk and alternative plans - Management noted that the situation is speculative and that they would consider alternatives if necessary, but currently, there are no immediate plans [48][52]

Financial Performance Overview - In Q4 2024, total revenues were $135 million, down 5% year-over-year and 11% quarter-over-quarter [6] - Brand advertising revenues were $19 million, down 7% year-over-year and 1% quarter-over-quarter [6] - Online game revenues were $110 million, down 4% year-over-year and 14% quarter-over-quarter [6] - GAAP net loss attributable to Sohu was $21 million, compared to a net loss of $13 million in Q4 2023 [6] - Non-GAAP net loss attributable to Sohu was $15 million, compared to a net loss of $11 million in Q4 2023 [6] - For the full year 2024, total revenues were $598 million, flat compared to 2023 [7] Business Segment Performance Sohu Media Platform - Quarterly revenues were $24 million, compared to $25 million in the same quarter last year [15] - Quarterly operating loss was $69 million, compared to an operating loss of $68 million in the same quarter last year [15] - For the full year 2024, revenues were $91 million, down from $140 million in 2023 [16] - Full year operating loss was $287 million, compared to an operating loss of $269 million in 2023 [16] Online Games - Quarterly revenues for Changyou's online games were $111 million, compared to $115 million in the same quarter last year [16] - Quarterly operating profit was $48 million, compared to an operating profit of $47 million in the same quarter last year [16] - For the full year 2024, revenues were $506 million, down from $485 million in 2023 [16] - Full year operating profit was $196 million, compared to an operating profit of $203 million in 2023 [16] Market Trends and Strategic Direction - The company is focusing on improving technology and optimizing products to enhance user experience [8] - Sohu is integrating online and offline events to attract younger users and stimulate content generation [9][10] - The online game business is expected to maintain a user-centric approach while expanding its portfolio with diverse game types [13][14] Management Commentary on Economic Environment - Management noted that the decline in advertising revenue is attributed to a weak macroeconomic environment, leading to reduced marketing budgets from advertisers [23][34] - There is a trend of decreased spending in the automotive sector, with FMCG now becoming the top sector for advertising [36] Other Important Information - As of February 2025, Sohu had repurchased 4.2 million ADS for approximately $52 million, with $100 million remaining in the buyback program [15][33] Q&A Session Summary Question: Insights on brand advertising business and gaming expectations - Management acknowledged that the decline in advertising is due to the overall economic situation, with advertisers spending less [23] - For gaming, the performance is expected to be flat quarter-over-quarter [24] Question: Overall macro sentiment and advertising budget - Management indicated that consumer spending is down, affecting marketing budgets, particularly in the automotive sector [34] - FMCG has risen to become the top sector for advertising, with increased spending noted in smaller items like food and electronics [36]