Sohu.com(SOHU) - 2025 Q1 - Earnings Call Transcript

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 attributable to Sohu was $182 million, compared to a net loss of $25 million in Q1 2024 [8] - Non-GAAP net loss attributable to Sohu was $16 million, compared to a net loss of $22 million in Q1 2024 [8] Business Segment 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 [17] - Changyou's quarterly revenues were $180 million, down from $190 million in the same quarter last year, with an operating profit of $55 million [17] 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% [18] - Online game revenues are expected to be between $96 million and $106 million, implying a year-over-year decrease of 28% to 35% [19] 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] Management's Comments on Operating Environment and Future Outlook - Management indicated that the advertising sentiment is mixed, with the auto sector performing better while luxury goods and alcohol spending is declining [22] - The company expects a similar trend in the second half of the year, with a focus on accelerating growth in its social network platform [23] Other Important Information - The company reversed a tax expense previously recognized as an uncertain tax position, amounting to approximately $199 million [8] - As of May 2025, Sohu had repurchased 5.5 million ADS for an aggregate cost of approximately $67 million [15] Q&A Session Summary Question: Recent trend in advertising sentiment and outlook for the second half - Management noted that the auto sector is performing better, while FMCG and IT services are stable, but luxury goods and alcohol spending is declining [22] 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 the gaming business, improving efficiency in art design and production [26][27] Question: AI models being integrated into gaming - The company is using various AI tools, including open-source language models, for different aspects of game production [34] Question: Clarification on tax reversal - The tax reversal is mainly an accounting issue related to uncertainty that has now been resolved, with no actual cash flow involved [41] Question: ADR delisting risk and alternative plans - Management indicated that they are not currently considering alternatives like a secondary listing in Hong Kong, stating they will think about it if the situation arises [46]