Sohu.com (SOHU) Q2 2025 Earnings Call August 04, 2025 07:30 AM ET Company ParticipantsPu Huang - Investor Relations Officer - ChinaCharles Zhang - Chairman & CEOJoanna Lv - Chief Financial OfficerThomas Chong - Managing DirectorYaobin Wang - CFO, ChangyouConference Call ParticipantsAlicia Yap - Equity Research AnalystOperatorLadies 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 participant ...

Financial Performance - Total revenues for Q2 2025 were $126 million, down 27% year over year and 7% quarter over quarter [7] - Marketing services revenues were $16 million, down 21% year over year but up 14% quarter over quarter [7] - Online game revenues were $106 million, down 28% year over year and 10% quarter over quarter [7] - GAAP net loss attributable to Silver dot com Limited was $20 million, compared to a net loss of $38 million in Q2 2024 [8] - Non-GAAP net loss attributable to total.com Limited was $20 million, compared to a net loss of $34 million in the same quarter last year [8] Business Segment Performance - Sohu Media Platform revenues for the quarter were $19 million, down from $24 million in the same quarter last year, with an operating loss of $69 million [16] - Changyou's quarterly revenues were $107 million, down from $148 million in the same quarter last year, but operating profit increased to $51 million from $32 million [16] Market Insights - The advertising market is experiencing weakness due to macroeconomic uncertainties and lower consumer spending [24] - The auto sector remains the largest advertising sector, followed by FMCG and IT services, with stabilization noted in the auto sector [25] Company Strategy and Industry Competition - The company is focusing on enhancing user engagement through differentiated events and product optimization [6] - There is a strategy to diversify game offerings and explore new verticals, including card-based RPGs and casual games [14] - The company aims to build a larger user base in social media, which is seen as critical for future growth [36] Management Commentary on Future Outlook - Management acknowledges the current macroeconomic challenges but remains optimistic about future user growth and market share expansion [24][26] - The company is utilizing AI to improve operational efficiency in gaming and enhance user experience in social media platforms [26][27] Other Important Information - As of July 2025, the company had repurchased 6.6 million ADS for approximately $83 million [15] - There are no current plans for additional capital returns beyond the share buyback program, as the focus remains on user base expansion [28] Q&A Session Summary Question: Insights on marketing services revenue and advertising sentiment - Management noted that advertising revenue is facing sequential weakness due to macroeconomic conditions and lower disposable income [24][25] Question: AI application in operations - AI is being used to improve efficiency in gaming and enhance search capabilities in social media apps, utilizing various language models [26][27] Question: Future capital return plans - Management confirmed that the focus is on the share buyback program, with no immediate plans for dividends or other capital returns [28] Question: Breakeven timing for marketing services revenue - Management indicated that breakeven is uncertain due to the nonlinear growth of the user base in social networks [36] Question: Sequential improvement in gaming revenue - The gaming segment is expected to perform stably, with new game releases anticipated to contribute to revenue [37] Question: Impact of events on user growth - Events like K-pop competitions are seen as community builders that help attract users to the Sohu app [39][40]

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]