Sohu.com Reports Second Quarter 2019 Unaudited Financial Results
BEIJING, Aug. 5, 2019 /PRNewswire/ -- Sohu.com Limited (NASDAQ: SOHU), China's leading online media, video, search and gaming business group, today reported unaudited financial results for the second quarter ended June 30, 2019.
Second Quarter Highlights
-- Total revenues were US$475 million([1]), down 2% year-over-year and up
10% quarter-over-quarter.
-- Brand advertising revenues were US$44 million, down 29% year-over-year
and up 2% quarter-over-quarter.
-- Search and search related advertising revenues([2]) were US$276 million,
up 2% year-over-year and 18% quarter-over-quarter.
-- Online game revenues were US$102 million, up 8% year-over-year and 3%
quarter-over-quarter.
-- Operating loss for Sohu Video was US$23 million, compared with a loss of
US$35 million in the second quarter of 2018.
-- GAAP net loss attributable to Sohu.com Limited was US$53 million,
compared with a net loss of US$48 million in the second quarter of 2018.
-- Non-GAAP net loss attributable to Sohu.com Limited was US$50 million.
Excluding a charge for impairment of assets recognized by Changyou in
the second quarter of 2019 related to the cinema advertising business,
Non-GAAP net loss attributable to Sohu.com Limited was US$38 million,
compared with a net loss of US$49 million in the second quarter of 2018.
-- Excluding the profit/loss generated by Sogou and Changyou, the Non-GAAP
net loss attributable to Sohu.com Limited was US$68 million, compared
with a net loss of US$80 million in the second quarter of 2018.
[1] On a constant currency (non-GAAP) basis,
if the exchange rate in the second quarter of
2019 had been the same as it was in the second
quarter of 2018, or RMB6.38=US$1.00, US$ total
revenues in the second quarter of 2019 would
have been US$507 million, or US$32 million
more than GAAP total revenues, and up 4% year-
over-year.
[2] Search and Search related advertising
revenues exclude intra-Group transactions.
Dr. Charles Zhang, Chairman and CEO of Sohu.com Limited, commented, "Under the current challenging macroeconomic environment, our total revenues stayed largely in-line with our prior guidance. Our bottom line performance, excluding the charge for impairment of assets recognized by Changyou related to its cinema advertising business, met the high-end of our prior guidance. This was mainly driven by the continued cost savings that we were able to achieve at Sohu Video, and the solid performance of our online game business. Sohu Media is making a comeback and living up to its reputation as a top tier media platform. We have been hosting high-quality events, generating and distributing premium content, and strengthening our core competitiveness and credibility among media brands. Meanwhile, Sohu Video continues to provide users with unique, high-quality dramas and shows. We have seen the positive effects of this differential development strategy and stable improvements in monetization at both Sohu Media and Sohu Video. We hope to see further progress in the coming quarters. In the second quarter of 2019, Sogou achieved steady growth in its core search business while Sogou Mobile Keyboard further expanded its user base and contributed a larger portion to total revenues. As for Changyou, both its revenue and profit exceeded expectations, excluding the aforementioned charge for impairment. Changyou is demonstrating a stable profitability while developing more games to provide a diversified product portfolio."
Second Quarter Financial Results
Revenues
Total revenues for the second quarter of 2019 were US$475 million, down 2% year-over-year and up 10% quarter-over-quarter.
Total online advertising revenues, which include revenues from the brand advertising and search and search-related advertising businesses, for the second quarter of 2019 were US$320 million, down 4% year-over-year and up 15% quarter-over-quarter.
Brand advertising revenues for the second quarter of 2019 totaled US$44 million, down 29% year-over-year and up 2% quarter-over-quarter. The year-over-year decrease was mainly due to decreases in portal and video advertising revenues.
Search and search-related advertising revenues for the second quarter of 2019 were US$276 million, up 2% year-over-year and 18% quarter-over-quarter.
Online game revenues for the second quarter of 2019 were US$102 million, up 8% year-over-year and 3% quarter-over-quarter. The year-over-year increase was due to the improved performance of some of the Changyou's older games as a result of some promotional activities during the quarter.
Gross Margin
Both GAAP and non-GAAP([3]) gross margin was 43% for the second quarter of 2019, compared with 44% in the second quarter of 2018 and 40% in the first quarter of 2019.
Both GAAP and non-GAAP gross margin for the online advertising business for the second quarter of 2019 was 33%, compared with 35% in the second quarter of 2018 and 23% in the first quarter of 2019.
GAAP gross margin for the brand advertising business in the second quarter of 2019 was 29%, compared with 23% in the second quarter of 2018 and 20% in the first quarter of 2019. Non-GAAP gross margin for the brand advertising business was 28%, compared with 23% in the second quarter of 2018 and 20% in the first quarter of 2019. The margin improvement was mainly due to decreased video content cost.
Both GAAP and non-GAAP gross margin for the search and search-related advertising business in the second quarter of 2019 was 34%, compared with 38% in the second quarter of 2018 and 24% in the first quarter of 2019. The year-over-year decrease primarily resulted from the growth of traffic acquisition cost outpacing revenue growth. The quarter-over-quarter increase was primarily due to seasonal factors.
Both GAAP and non-GAAP gross margin for online games in the second quarter of 2019 was 82%, compared with 85% in the second quarter of 2018 and 86% in the first quarter of 2019.
[3] Non-GAAP results exclude share-
based compensation expense; non-cash
tax benefits from excess tax deductions
related to share-based awards; changes
in fair value recognized in the
Company's consolidated statements of
operations with respect to equity
investments with readily determinable
fair values; income/expense from the
adjustment of contingent consideration
previously recorded for acquisitions;
dividends and deemed dividends to non-
controlling preferred shareholders of
Sogou; a one-time income tax expense
recognized in the fourth quarter of
2017 as a result of the one-time
transition tax (the "Toll Charge")
imposed by the U.S. Tax Cuts and Jobs
Act signed into law on December 22,
2017 (the "TCJA"); the subsequent re-
evaluation for the fourth quarter of
2018 and adjustment of the tax expense
previously recognized for the Toll
Charge; the resulting recognition of a
previously unrecognized tax benefit and
recording of an uncertain tax position
related to the balance of the Toll
Charge; and interest accrued in
relation to the previously unrecognized
tax benefit. Explanation of the
Company's non-GAAP financial measures
and related reconciliations to GAAP
financial measures are included in the
accompanying "Non-GAAP Disclosure" and
"Reconciliations of Non-GAAP Results
of Operation Measures to the Nearest
Comparable GAAP Measures."
Operating Expenses
For the second quarter of 2019, GAAP operating expenses totaled US$242 million, down 1% year-over-year and up 12% quarter-over-quarter. Non-GAAP operating expenses were US$238 million, down 2% year-over-year and up 11% quarter-over-quarter. The quarter-over-quarter increase in operating expenses was mainly due to a charge for impairment of assets of US$17 million related to Changyou's cinema advertising business.
Operating Loss
GAAP operating loss for the second quarter of 2019 was US$38 million, compared with an operating loss of US$32 million in the second quarter of 2018 and an operating loss of US$46 million in the first quarter of 2019.
Non-GAAP operating loss for the second quarter of 2019 was US$34 million, compared with an operating loss of US$31 million in the second quarter of 2018 and an operating loss of US$44 million in the first quarter of 2019.
Income Tax Expense
GAAP income tax expense was US$4 million for the second quarter of 2019, compared with income tax expense of US$6 million in the second quarter of 2018 and income tax expense of US$11 million in the first quarter of 2019. Non-GAAP income tax expense was US$2 million for the second quarter of 2019, compared with income tax expense of US$6 million in the second quarter of 2018 and income tax expense of US$9 million in the first quarter of 2019. Income tax expense in the second quarter of 2019 included a tax benefit from Sogou's tax filing adjustment of income tax expense previously recognized, which was due to a reduction in taxable income related to Chinese government initiatives to encourage investment in R&D.
Net Loss
GAAP net loss attributable to Sohu.com Limited for the second quarter of 2019 was US$53 million, or US$1.35 loss per fully-diluted ADS, compared with a net loss of US$48 million in the second quarter of 2018 and a net loss of US$57 million in the first quarter of 2019. Non-GAAP net loss attributable to Sohu.com Limited for the second quarter of 2019 was US$50 million, or US$1.27 loss per fully-diluted ADS, compared with a net loss of US$49 million in the second quarter of 2018 and a net loss of US$55 million in the first quarter of 2019.
Liquidity
As of June 30, 2019, cash and cash equivalents and short-term investments held by the Sohu Group, minus short-term bank loans, were US$1.56 billion, compared with US$1.73 billion as of December 31, 2018.
Recent Development
Sogou today announced that on August 3, 2019, its Board of Directors authorized a share repurchase program of up to US$50 million of the outstanding American depositary shares, or ADSs, of Sogou over the next twelve months. The ADSs may be purchased from time to time at management's discretion at prevailing market prices in accordance with Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. Sogou's management will determine the timing and amount of any purchases of Sogou ADSs based on their evaluation of market conditions, the trading price of Sogou's ADSs and other factors. The purchase program may be suspended or discontinued at any time. Sogou plans to fund repurchases from its existing cash balance.
Business Outlook
For the third quarter of 2019, Sohu estimates:
-- Total revenues to be between US$445 million and US$470 million.
-- Brand advertising revenues to be between US$45 million and US$50
million; this implies an annual decrease of 12% to 21% and a sequential
increase of 2% to 14%.
-- Sogou revenues to be between US$304 million and US$314 million; this
implies an annual increase of 10% to 14% and a sequential increase of
nil to 3%.
-- Online game revenues to be between US$80 million and US$90 million; this
implies an annual decrease of 6% to 17 % and a sequential decrease of
12% to 22%.
-- Non-GAAP net loss attributable to Sohu.com Limited. to be between US$22
million and US$32 million, and non-GAAP loss per fully-diluted ADS to be
between US$0.55 and US$0.80. GAAP net loss attributable to Sohu.com
Limited to be between US$25 million and US$35 million, and GAAP loss per
fully-diluted ADS to be between US$0.65 and US$0.90.
-- Excluding the profit/loss generated by Sogou and Changyou, Non-GAAP net
loss attributable to Sohu.com Limited. to be between US$50 million and
US$55 million, GAAP net loss attributable to Sohu.com Limited to be
between US$53million and US$58 million.
For the third quarter 2019 guidance, the Company has adopted a presumed exchange rate of RMB6.90=US$1.00, as compared with the actual exchange rate of approximately RMB6.80=US$1.00 for the third quarter of 2018, and RMB6.81=US$1.00 for the second quarter of 2019.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), Sohu's management uses non-GAAP measures of gross profit, operating profit, net income, net income attributable to Sohu.com Limited and diluted net income attributable to Sohu.com Limited per share, which are adjusted from results based on GAAP to exclude the impact of the share-based awards, which consist mainly of share-based compensation expenses and non-cash tax benefits from excess tax deductions related to share-based awards; changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values; income/expense from the adjustment of contingent consideration previously recorded for acquisitions; dividend and deemed dividend to non-controlling preferred shareholders; the one-time income tax expense recognized in the fourth quarter of 2017 as a result of the Toll Charge imposed by the TCJA and the subsequent re-evaluation for the fourth quarter of 2018 and adjustment of the tax expense previously recognized for the Toll Charge; the resulting recognition of a previously unrecognized tax benefit and recording of an uncertain tax position related to the balance of the Toll Charge; and interest expense recognize in connection with the Toll Charge. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
Sohu's management believes excluding share-based compensation expense, changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values; non-cash tax benefits from excess tax deductions related to share-based awards; income/expense from the adjustment of contingent consideration previously recorded for acquisitions; dividend and deemed dividend to non-controlling preferred shareholders; and income tax expense, income tax benefit, uncertain tax position, and interest recognized in relation to the Toll Charge from its non-GAAP financial measure is useful for itself and investors. Further, the impact of share-based compensation expense and changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values; non-cash tax benefits from excess tax deductions related to share-based awards; income/expense from the adjustment of contingent consideration previously recorded for acquisitions; dividend and deemed dividend to non-controlling preferred shareholders; the one-time income tax expense recognized in the fourth quarter of 2017 as a result of the Toll Charge imposed by the TCJA and the subsequent re-evaluation for the fourth quarter of 2018 and adjustment of the tax expense previously recognized for the Toll Charge; the resulting recognition of a previously unrecognized tax benefit and recording of an uncertain tax position related to the balance of the Toll Charge; and interest expense recognized in connection with the Toll Charge cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts that have been the basis for information Sohu provides to analysts and investors as guidance for future operating performance. As the impact of share-based compensation expense and changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders does not involve subsequent cash outflow or is reflected in the cash flows at the equity transaction level, Sohu does not factor this impact in when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result, in general, the monthly financial results for internal reporting and any performance measures for commissions and bonuses are based on non-GAAP financial measures that exclude share-based compensation expense and changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders, and also excluded the one-time income tax expense recognized in the fourth quarter of 2017 as a result of the Toll Charge imposed by the TCJA and the subsequent re-evaluation for the fourth quarter of 2018 and adjustment of the tax expense previously recognized for the Toll Charge, the resulting recognition of a previously unrecognized tax benefit and recording of an uncertain tax position related to the balance of the Toll Charge, and interest expense recognized in connection with the Toll Charge.
The non-GAAP financial measures are provided to enhance investors' overall understanding of Sohu's current financial performance and prospects for the future. A limitation of using non-GAAP gross profit, operating profit, net income, net income attributable to Sohu.com Limited and diluted net income attributable to Sohu.com Limited per share, excluding share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, dividend, and deemed dividend to non-controlling preferred shareholders is that the impact of share-based awards and non-cash tax benefits from excess tax deductions related to share-based awards has been and will continue to be a significant recurring expense in Sohu's business for the foreseeable future, income/expense from the adjustment of contingent consideration previously recorded for acquisitions may recur in the future, and dividend and deemed dividend to non-controlling preferred shareholders may recur when Sohu and its affiliates enter into equity transactions. In order to mitigate these limitations Sohu has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between the GAAP financial measures that are most directly comparable to the non-GAAP financial measures that have been presented.
Notes to Financial Information
Financial information in this press release other than the information indicated as being non-GAAP is derived from Sohu's unaudited interim financial statements prepared in accordance with GAAP.
Safe Harbor Statement
This announcement contains forward-looking statements. It is currently expected that the Business Outlook will not be updated until release of Sohu's next quarterly earnings announcement; however, Sohu reserves right to update its Business Outlook at any time for any reason. Statements that are not historical facts, including statements about Sohu's beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, instability in global financial and credit markets and its potential impact on the Chinese economy; exchange rate fluctuations, including their potential impact on the Chinese economy and on Sohu's reported US dollar results; recent slow-downs in the growth of the Chinese economy; the uncertain regulatory landscape in the People's Republic of China; fluctuations in Sohu's quarterly operating results; the possibilities that Sohu will be unable to recoup its investment in video content and that Changyou will be unable to develop a series of successful games for mobile platforms or successfully monetize mobile games it develops or acquires; Sohu's reliance on online advertising sales, online games and mobile services for its revenues; and the impact of the U.S. TCJA. Further information regarding these and other risks is included in Sohu's annual report on Form 20-F for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission.
Conference Call and Webcast
Sohu's management team will host a conference call at 8:30 a.m. U.S. Eastern Time, August 5, 2019 (8:30 p.m. Beijing/Hong Kong time, August 5, 2019) following the quarterly results announcement.
The dial-in details for the live conference call are:
US Toll-Free: +1-866-519-4004
International: +65-6713-5090
Hong Kong: +852-3018-6771
China Mainland +86-800-819-0121 /
+86-400-620-8038
Passcode:
SOHU
Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.
A telephone replay of the call will be available after the conclusion of the conference call at 11:30 a.m. Eastern Time on August 5 through August 12, 2019. The dial-in details for the telephone replay are:
International: +1-646-254-3697
Passcode: 8053369
The live Webcast and archive of the conference call will be available on the Investor Relations section of Sohu's Website at http://investors.sohu.com/.
About Sohu.com
Sohu.com Limited (NASDAQ: SOHU) is China's premier online brand and indispensable to the daily life of millions of Chinese, providing a network of web properties and community based/web 2.0 products which offer the vast Sohu user community a broad array of choices regarding information, entertainment and communication. Sohu has built one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and leading online media destination www.sohu.com; interactive search engine www.sogou.com; developer and operator of online games www.changyou.com/en/ and online video website tv.sohu.com.
Sohu's corporate services consist of online brand advertising on Sohu's matrix of websites as well as bid listing and home page on its in-house developed search directory and engine. Sohu also provides multiple news and information services on mobile platforms, including Sohu News App and the mobile news portal m.sohu.com. Sohu's online game subsidiary, Changyou.com (NASDAQ: CYOU) develops and operates a diverse portfolio of PC and mobile games, such as Tian Long Ba Bu ("TLBB"), one of the most popular PC games in China. Changyou also owns and operates the 17173.com Website, a game information portal in China. Sohu's online search subsidiary Sogou (NYSE: SOGO) has grown to become the second largest search engine by mobile queries in China. It also owns and operates Sogou Input Method, the largest Chinese language input software. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its twenty-third year of operation.
For investor and media inquiries, please contact:
In China:
Ms. Pu Huang
Sohu.com Limited
Tel:
+86 (10) 6272-6645
E-mail:
ir@contact.sohu.com
In the United States:
Ms. Linda Bergkamp
Christensen
Tel:
+1 (480) 614-3004
E-mail:
lbergkamp@christensenir.com
SOHU.COM LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
Jun. 30
, 20 Mar. 31
, 20 Jun. 30
, 20
19 19 18
Revenues:
Online advertising
Brand advertising $
43,944 $
42,981 $
61,511
Search and search-related advertising 275,942 234,130 270,359
Subtotal 319,886 277,111 331,870
Online games 102,147 99,054 94,250
Others 52,725 55,215 59,894
Total revenues 474,758 431,380 486,014
Cost of revenues:
Online advertising
Brand advertising (includes stock-based 31,419 34,305 47,319
compensation expense of $-22, $38, and $-2,
respectively)
Search and search-related (includes stock-based 182,593 178,824 168,126
compensation expense of $127, $$27, and $263
respectively)
Subtotal 214,012 213,129 215,445
Online games (includes stock-based compensation 18,163 14,362 14,461
expense of $-17, $0, and $-23, respectively)
Others 38,309 32,734 44,346
Total cost of revenues 270,484 260,225 274,252
Gross profit 204,274 171,155 211,762
Operating expenses:
Product development (includes stock-based 109,048 100,434 113,843
compensation expense of $3,587, $1,019, and $2,136,
respectively)
Sales and marketing (includes stock-based 93,679 85,454 102,138
compensation expense of $1,355, $120, and $77,
respectively)
General and administrative (includes stock-based 39,666 23,833 27,982
compensation expense of $-572, $911, and $-1,260,
respectively)
Goodwill impairment and impairment of intangibles via 7,245
acquisitions of businesses
Total operating expenses 242,393 216,966 243,963
Operating loss (38,119) (45,811) (32,201)
Other income 5,693 14,215 9,991
Interest income 3,290 3,795 5,156
Interest expense (3,737) (5,501) (3,004)
Exchange difference 3,552 (2,662)
10,774[4]
Loss before income tax expense (29,321) (35,964) (9,284)
4,054 11,208 5,891
Income tax expense
Net loss (33,375) (47,172) (15,175)
Less: Net income attributable to the noncontrolling 19,518 9,257 32,463
interest shareholders
(52,893) (56,429) (47,638)
Net loss attributable to Sohu.com Limited
Basic net loss per ADS attributable to Sohu.com Limited $
(1.35) $
(1.44) $
(1.22)
ADS used in computing basic net loss per ADS attributable 39,244 39,236 38,927
to Sohu.com Limited
Diluted net loss per ADS attributable to Sohu.com Limited $
(1.35) $
(1.44) $
(1.23)
ADS used in computing diluted net loss per ADS 39,244 39,236 38,927
attributable to Sohu.com Limited
[4] The exchange gain in the second quarter of 2018 primarily resulted from depreciation of the RMB against the USD.
SOHU.COM LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
As of Jun. 30, 2019
As of Dec. 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $
375,190 $
819,713
Restricted cash 5,462 5,974
Short-term investments 1,323,096 1,041,395
Accounts receivable, net 177,010 242,361
Prepaid and other current assets 191,462 207,117
Total current assets 2,072,220 2,316,560
Long-term investments 123,434 108,356
Fixed assets, net 485,473 504,998
Goodwill 53,228 53,263
Intangible assets, net 13,644 24,118
Restricted time deposits 240 244,179
Prepaid non-current assets 2,479 3,107
Other assets[5] 70,598 43,928
Total assets $
2,821,316 $
3,298,509
LIABILITIES
Current liabilities:
Accounts payable $
345,189 $
295,954
Accrued liabilities 260,990 301,915
Receipts in advance and deferred revenue 123,023 124,782
Accrued salary and benefits 102,981 112,898
Taxes payable 97,192 93,569
Short-term bank loans 140,220 129,677
Other short-term liabilities[5] 132,041 124,085
Total current liabilities $
1,201,636 $
1,182,880
Long-term accounts payable 751 752
Long-term Bank Loans 29,092 302,323
Long-term tax liabilities 266,554 259,603
Other long-term liabilities[5] 10,858
Total long-term liabilities $
307,255 $
562,678
Total liabilities $
1,508,891 $
1,745,558
SHAREHOLDERS' EQUITY:
Sohu.com Limited shareholders' equity 476,147 588,840
Noncontrolling Interest 836,278 964,111
Total shareholders' equity $
1,312,425 $
1,552,951
Total liabilities and shareholders' equity $
2,821,316 $
3,298,509
[5] We have adopted ASU No. 2016-02, "Leases," beginning January 1, 2019. As a result of adoption of the standard, we recognized a right-of-use asset of
approximately $23 million in other assets, and a lease liability of approximately $11 million and $11 million in other short-term liabilities and other
long-term liabilities, respectively, on our consolidated balance sheet as of June 30, 2019.
SOHU.COM LIMITED
RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATION MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Jun
. 30 Three Months Ended Mar
. 31 Three Months Ended Jun
. 30
, 2019 , 2019 , 2018
GAAP
Non-GAAP Non-GAAP GAAP
Non-GAAP Non-GAAP GAAP
Non-GAAP Non-GAAP
Adjustments Adjustments Adjustments
(22)
(a) 38
(a) (2)
(a)
Brand advertising gross profit $
12,525 $
(22) $
12,503 $
8,676 $
38 $
8,714 $
14,192 $
(2) $
14,190
Brand advertising gross 29% 28% 20% 20% 23% 23%
margin
127
(a) 27
(a) 263
(a)
Search and search-related $
93,349 $
127 $
93,476 $
55,306 $
27 $
55,333 $
102,233 $
263 $
102,496
advertising gross profit
Search and search-related 34% 34% 24% 24% 38% 38%
advertising gross margin
105
(a) 65
(a) 261
(a)
Online advertising gross profit $
105,874 $
105 $
105,979 $
63,982 $
65 $
64,047 $
116,425 $
261 $
116,686
Online advertising gross 33% 33% 23% 23% 35% 35%
margin
(17)
(a)
(a) (23)
(a)
Online games gross profit $
83,984 $
(17) $
83,967 $
84,692
$ $
84,692 $
79,789 $
(23) $
79,766
Online games gross margin 82% 82% 86% 86% 85% 85%
Others gross profit $
14,416
$
(a) $
14,416 $
22,481
$
(a) $
22,481 $
15,548
$
(a) $
15,548
Others gross margin 27% 27% 41% 41% 26% 26%
88
(a) 65
(a) 238
(a)
Gross profit $
204,274 $
88 $
204,362 $
171,155 $
65 $
171,220 $
211,762 $
238 $
212,000
Gross margin 43% 43% 40% 40% 44% 44%
Operating expenses $
242,393 $
(4,370)
(a) $
238,023 $
216,966 $
(2,050)
(a) $
214,916 $
243,963 $
(953)
(a) $
243,010
4,458
(a) 2,115
(a) 1,191
(a)
Operating loss $
(38,119) $
4,458 $
(33,661) $
(45,811) $
2,115 $
(43,696) $
(32,201) $
1,191 $
(31,010)
Operating margin -8% -7% -11% -10% -7% -6%
Income tax expense $
(4,054) $
1,566
(c,d) $
(2,488) $
(11,208) $
1,778
(c,d) $
(9,430) $
(5,891) $
165 $
(5,726)
4,458
(a) 2,115
(a) 1,191
(a)
794
(c) (744)
(c) (494)
(c)
1,831
(d) 1,531
(d)
Net loss before non- $
(33,375) 7,083 (26,292) $
(47,172) 2,902 (44,270) $
(15,175) $
697 $
(14,478)
controlling interest
4,458
(a) 2,115
(a) 1,191
(a)
(3,733)
(b) (798)
(b) (1,976)
(b)
794
(c) (744)
(c) (494)
(c)
1,831
(d) 1,531
(d)
Net loss attributable to $
(52,994) 3,350 (49,644) $
(56,650) 2,104 (54,546) $
(47,965) $
(1,279) (49,244)
Sohu.com Limited for diluted
net loss per ADS
Diluted net loss per ADS $
(1.35) (1.27) $
(1.44) (1.39) $
(1.23) (1.27)
attributable to Sohu.com
Limited
Shares used in computing 39,244 39,244 39,236 39,236 38,927 38,927
diluted net loss per ADS
attributable to Sohu.com
Limited
Note:
(a) To eliminate the impact of share-based awards as measured using the fair value method. This adjustment does not have an impact on income tax expense.
(b) To adjust Sohu's economic interests in Changyou and Sogou attributable to the above non-GAAP adjustments. This adjustment does not have an impact on income tax expense.
(c) To adjust for a change in the fair value of the Company's investment in Hylink and the income tax effect.
(d) To adjust for the effect of the U.S. TCJA.
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SOURCE Sohu.com Ltd.
