Sohu.com Reports Third Quarter 2019 Unaudited Financial Results
BEIJING, Nov. 4, 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 third quarter ended September 30, 2019.
Third Quarter Highlights([1])
-- Total revenues were US$482 million([2]), up 9% year-over-year and 4%
quarter-over-quarter.
-- Brand advertising revenues were US$46 million, down 19% year-over-year
and up 5% quarter-over-quarter.
-- Search and search related advertising revenues([3]) were US$288 million,
up 13% year-over-year and 4% quarter-over-quarter.
-- Online game revenues were US$108 million, up 13% year-over-year and 6%
quarter-over-quarter.
-- GAAP net loss attributable to Sohu.com Limited was US$21 million,
compared with a net loss of US$26 million in the third quarter of 2018.
-- Non-GAAP net loss attributable to Sohu.com Limited was US$17 million,
compared with a net loss of US$23 million in the third quarter of 2018
and a net loss of US$32 million in the second quarter of 2019.
-- Excluding the profit/loss generated by Sogou and Changyou, the Non-GAAP
net loss attributable to Sohu.com Limited was US$53 million, compared
with a net loss of US$77 million in the third quarter of 2018 and a net
loss of US$68 million in the second quarter of 2019.
Dr. Charles Zhang, Chairman and CEO of Sohu.com Limited, commented, "For the third quarter of 2019, though there is still much uncertainty in the macroeconomic environment, both of our total revenue and our bottom line exceeded our prior guidance, mainly driven by our online gaming and search businesses, as well as the continued cost saving initiatives that we are pushing through in our Sohu Media and Sohu Video segments. Sohu Media is making a comeback as a mainstream media platform with an enormous amount of high-quality original content and various events. These premium features further enhanced the reputation of Sohu Media and its sub-brands, and further strengthened our overall competitiveness. For Sohu Video, we continued to deliver unique and high-quality dramas and other shows to our users. We have been integrating various social functionality into our products to help users build and find their own unique social communities. We also strictly kept our budget under control and are actively exploring new ways to diversify our revenue streams in cooperation with advertisers. In the third quarter of 2019, Sogou experienced healthy growth and its search revenue continued to grow faster than the industry average. Besides, Sogou consistently focused on integrating its language-centric AI capabilities to fully support innovations in its search, mobile keyboard and smart hardware businesses. Lastly, Changyou's overall performance continued to be stable. In addition to the solid results delivered by TLBB PC and Legacy TLBB Mobile, TLBB Honor, a new mobile game launched during the quarter, also performed well."
[1] Changyou's wholly-owned subsidiary
Shanghai Jingmao Culture Communication Co.,
Ltd. ("Shanghai Jingmao"), which operated
Changyou's cinema advertising business, ceased
operations and wound down the business during
the third quarter of 2019 as a result of a
Chinese court having granted a petition by
Shanghai Jingmao for bankruptcy relief.
Accordingly, the results of operations for
Changyou's cinema advertising business and its
impact on the noncontrolling interest have
been excluded from the Company's results from
continuing operations in the condensed
consolidated statements of operations for the
third quarter and are presented in separate
line items as discontinued operations.
Retrospective adjustments to the historical
statements have been made in order to provide
a consistent basis of comparison. Unless
indicated otherwise, results presented in this
release are related to continuing operations
only, and exclude results from Changyou's
cinema advertising business.
[2] On a constant currency (non-GAAP) basis,
if the exchange rate in the third quarter of
2019 had been the same as it was in the third
quarter of 2018, or RMB6.80=US$1.00, US$ total
revenues in the third quarter of 2019 would
have been US$496 million, or US$13 million
more than GAAP total revenues, and up 12%
year-over-year.
[3] Search and Search related advertising
revenues exclude intra-Group transactions.
Third Quarter Financial Results
Revenues
Total revenues for the third quarter of 2019 were US$482 million, up 9% year-over-year and 4% quarter-over-quarter.
Total online advertising revenues, which include revenues from the brand advertising and search and search-related advertising businesses, for the third quarter of 2019 were US$335 million, up 7% year-over-year and 5% quarter-over-quarter.
Brand advertising revenues for the third quarter of 2019 totaled US$46 million, down 19% year-over-year and up 5% 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 third quarter of 2019 were US$288 million, up 13% year-over-year and 4% quarter-over-quarter.
Online game revenues for the third quarter of 2019 were US$108 million, up 13% year-over-year and 6% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly due to the revenue contribution from new games launched during the quarter.
Gross Margin
Both GAAP and non-GAAP([4]) gross margin was 48% for the third quarter of 2019, compared with 46% in the third quarter of 2018 and 46% in the second quarter of 2019.
Both GAAP and non-GAAP gross margin for the online advertising business for the third quarter of 2019 was 37%, compared with 32% in the third quarter of 2018 and 33% in the second quarter of 2019.
Both GAAP and non-GAAP gross margin for the brand advertising business in the third quarter of 2019 was 31%, compared with 23% in the third quarter of 2018 and 28% in the second quarter of 2019. The year-over-year 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 third quarter of 2019 was 38%, compared with 34% in the third quarter of 2018 and 34% in the second quarter of 2019. The year-over-year and quarter-over-quarter increases primarily resulted from revenue growth outpacing the growth of traffic acquisition cost.
Both GAAP and non-GAAP gross margin for online games in the third quarter of 2019 was 78%, compared with 84% in the third quarter of 2018 and 82% in the second quarter of 2019.
Operating Expenses
For the third quarter of 2019, GAAP operating expenses totaled US$219 million, down 9% year-over-year and 1% quarter-over-quarter. Non-GAAP operating expenses were US$215 million, down 10% year-over-year and 1% quarter-over-quarter. The year-over-year decrease in operating expenses was mainly due to decreased marketing expenses and general and administrative expenses.
Operating Profit/(Loss)
GAAP operating profit for the third quarter of 2019 was US$12 million, compared with an operating loss of US$36 million in the third quarter of 2018 and an operating loss of US$11 million in the second quarter of 2019.
Non-GAAP operating profit for the third quarter of 2019 was US$16 million, compared with an operating loss of US$35 million in the third quarter of 2018 and an operating loss of US$7 million in the second quarter of 2019.
Income Tax Expense
GAAP income tax expense was US$17 million for the third quarter of 2019, compared with income tax benefit of US$13 million in the third quarter of 2018 and income tax expense of US$4 million in the second quarter of 2019. Non-GAAP income tax expense was US$15 million for the third quarter of 2019, compared with income tax benefit of US$12 million in the third quarter of 2018 and income tax expense of US$2 million in the second quarter of 2019. The income tax benefit in the third quarter of 2018 was mainly due to some of Changyou's subsidiaries having been granted preferential tax rates upon their receipt of 2017 Key National Software Enterprise status or 2017 Software Enterprise status.
Net Loss
GAAP net loss attributable to Sohu.com Limited for the third quarter of 2019 was US$21 million, or US$0.55 loss per fully-diluted ADS, compared with a net loss of US$26 million in the third quarter of 2018 and a net loss of US$35 million in the second quarter of 2019. Non-GAAP net loss attributable to Sohu.com Limited for the third quarter of 2019 was US$17 million, or US$0.43 loss per fully-diluted ADS, compared with a net loss of US$23 million in the third quarter of 2018 and a net loss of US$32 million in the second quarter of 2019.
Liquidity
As of September 30, 2019, cash and cash equivalents and short-term investments held by the Sohu Group, minus short-term bank loans, were US$1.47 billion, compared with US$1.73 billion as of December 31, 2018.
[4] 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."
Business Outlook
For the fourth quarter of 2019, Sohu estimates:
-- Total revenues to be between US$435 million and US$470 million.
-- Brand advertising revenues to be between US$40 million and US$45
million; this implies an annual decrease of 21% to 30% and a sequential
decrease of 3% to 14%.
-- Sogou revenues to be between US$290 million and US$310 million; this
implies an annual decrease of 3% to an annual increase of 4% and a
sequential decrease of 2 to 8%.
-- Online game revenues to be between US$95 million and US$105 million;
this implies an annual increase of 1% to 12% and a sequential decrease
of 3% to 12%.
-- Non-GAAP net loss attributable to Sohu.com Limited. to be between US$12
million and US$22 million, and non-GAAP loss per fully-diluted ADS to be
between US$0.30 and US$0.55. GAAP net loss attributable to Sohu.com
Limited to be between US$17 million and US$27 million, and GAAP loss per
fully-diluted ADS to be between US$0.45 and US$0.70.
-- Excluding the profit/loss generated by Sogou and Changyou, Non-GAAP net
loss attributable to Sohu.com Limited. to be between US$45 million and
US$50 million, GAAP net loss attributable to Sohu.com Limited to be
between US$48 million and US$53 million.
For the fourth quarter 2019 guidance, the Company has adopted a presumed exchange rate of RMB7.10=US$1.00, as compared with the actual exchange rate of approximately RMB6.91=US$1.00 for the fourth quarter of 2018, and RMB6.99=US$1.00 for the third 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 recognized 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, November 4, 2019 (9:30 p.m. Beijing/Hong Kong time, November 4, 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 November 4 through November 12, 2019. The dial-in details for the telephone replay are:
International: +1-646-254-3697
Passcode: 2176139
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
Sep. 30
, 20 Jun. 30
, Sep. 30
,
19 20
19 20
18
Revenues:
Online advertising
Brand advertising $
46,323 $
43,958 $
56,958
Search and search-related advertising 288,198 275,942 255,130
Subtotal 334,521 319,900 312,088
Online games 108,012 102,147 95,971
Others 39,750 40,199 35,951
Total revenues 482,283 462,246 444,010
Cost of revenues:
Online advertising
Brand advertising (includes stock-based 31,992 31,432 44,058
compensation expense of $4, $-22, and $-14,
respectively)
Search and search-related (includes stock-
based 178,343 182,593 167,664
compensation expense of $64, $$127, and $235
respectively)
Subtotal 210,335 214,025 211,722
Online games (includes stock-based
compensation 23,286 18,163 14,902
expense of $0, $-17, and $-3, respectively)
Others 17,680 19,624 12,086
Total cost of revenues 251,301 251,812 238,710
Gross profit 230,982 210,434 205,300
Operating expenses:
Product development (includes stock-based 104,207 109,048 107,164
compensation expense of $2,863, $3,587, and
$2,362,
respectively)
Sales and marketing (includes stock-based 91,335 90,580 100,496
compensation expense of $1,126, $1,355, and
$201,
respectively)
General and administrative (includes stock-
based 23,797 21,987 33,980
compensation expense of $316, $-572, and
$-1,062,
respectively)
Total operating expenses 219,339 221,615 241,640
Operating profit/(loss) 11,643 (11,181) (36,340)
Other income 15,832 5,684 28,790
Interest income 1,959 3,286 4,656
Interest expense (2,631) (3,737) (6,174)
Exchange difference 4,714 3,551 7,970
Income/(loss) before income tax expense 31,517 (2,397) (1,098)
17,011 3,941 (13,145)
Income tax expense
Income from continuing operations 14,506 (6,338) 12,047
Net loss from discontinued operations (2,706) (27,037) (12,443)
Net income/(loss) 11,800 (33,375) (396)
Less: Net income from continuing operations 35,615 28,467 37,926
attributable to the noncontrolling interest
shareholders
Less: Net income from discontinued operations (896) (8,949) (4,056)
attributable to the noncontrolling interest
shareholders
Net loss from continuing operations
attributable to (21,109) (34,805) (25,879)
Sohu.com Limited
Net loss from discontinued operations
attributable to (1,810) (18,088) (8,387)
Sohu.com Limited
Net loss attributable to Sohu.com Limited (22,919) (52,893) (34,266)
Basic net loss from continuing operations per
ADS (0.54) (0.89) (0.66)
attributable to Sohu.com Limited
Basic net loss from discontinued operations
per ADS (0.04) (0.46) (0.22)
attributable to Sohu.com Limited
Basic net loss per ADS
attributable to Sohu.com Limited $
(0.58) $
(1.35) $
(0.88)
ADS used in computing basic net loss per ADS
attributable 39,254 39,244 38,936
to Sohu.com Limited
Diluted net loss from continuing operations
per ADS (0.55) (0.89) (0.68)
attributable to Sohu.com Limited
Diluted net loss from discontinued operations
per ADS (0.04) (0.46) (0.21)
attributable to Sohu.com Limited
Diluted net loss per ADS
attributable to Sohu.com Limited $
(0.59) $
(1.35) $
(0.89)
ADS used in computing diluted net loss per
ADS 39,254 39,244 38,936
attributable to Sohu.com Limited
SOHU.COM LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
As of Sep. 30, 2019 As of Dec. 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $
252,592 $
819,485
Restricted cash 5,521 3,539
Short-term investments 1,305,243 1,041,395
Accounts receivable, net 194,667 264,411
Prepaid and other current assets 215,538 225,744
Current assets associated with discontinued operations 34,324
Total current assets 1,973,561 2,388,898
Long-term investments 123,681 108,356
Fixed assets, net 460,572 504,647
Goodwill 52,641 53,263
Intangible assets, net 12,474 24,071
Restricted time deposits 1,654 244,179
Prepaid non-current assets 2,107 3,107
Other assets[5] 63,265 43,928
Non-current assets associated with discontinued operations 398
Total assets $
2,689,955 $
3,370,847
LIABILITIES
Current liabilities:
Accounts payable $
280,059 $
286,745
Accrued liabilities 254,503 292,282
Receipts in advance and deferred revenue 126,188 120,404
Accrued salary and benefits 99,277 108,011
Taxes payable 99,414 93,073
Short-term bank loans 84,686 129,677
Other short-term liabilities[5] 151,272 123,921
Current liabilities associated with discontinued operations 101,105
Total current liabilities $
1,095,399 $
1,255,218
Long-term accounts payable 730 752
Long-term Bank Loans 28,277 302,323
Long-term tax liabilities 269,810 259,603
Other long-term liabilities[5] 7,459
Total long-term liabilities $
306,276 $
562,678
Total liabilities $
1,401,675 $
1,817,896
SHAREHOLDERS' EQUITY:
Sohu.com Limited shareholders' equity 450,509 588,840
Noncontrolling Interest 837,771 964,111
Total shareholders' equity $
1,288,280 $
1,552,951
Total liabilities and shareholders' equity $
2,689,955 $
3,370,846
[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 $19 million in other assets, and a lease liability of approximately $10 million and $7 million in other short-term liabilities and other long-
term liabilities, respectively, on our consolidated balance sheet as of September 30, 2019.
SOHU.COM LIMITED
RECONCILIATIONS OF NON-GAAP RESULTS MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Sep
. 30 Three Months Ended Jun
. 30 Three Months Ended
Sep. 30
, 2019 , 2019 , 2018
GAAP
Non-GAAP Non-GAAP GAAP
Non-GAAP Non-GAAP GAAP
Non-GAAP Non-GAAP
Adjustments Adjustments Adjustments
4
(a) (22)
(a) (14)
(a)
Brand advertising
gross profit $
14,331 $
4 $
14,335 $
12,526 $
(22) $
12,504 $
12,900 $
(14) $
12,886
Brand advertising gross 31% 31% 28% 28% 23% 23%
margin
64
(a) 127
(a) 235
(a)
Search and
search-related $
109,855 $
64 $
109,919 $
93,349 $
127 $
93,476 $
87,466 $
235 $
87,701
advertising gross profit
Search and search-related 38% 38% 34% 34% 34% 34%
advertising gross margin
68
(a) 105
(a) 221
(a)
Online
advertising
gross profit $
124,186 $
68 $
124,254 $
105,875 $
105 $
105,980 $
100,366 $
221 $
100,587
Online advertising gross 37% 37% 33% 33% 32% 32%
margin
(a) (17)
(a) (3)
(a)
Online games
gross profit $
84,726
$ $
84,726 $
83,984 $
(17) $
83,967 $
81,069 $
(3) $
81,066
Online games gross margin 78% 78% 82% 82% 84% 84%
Others gross
profit $
22,070
$
(a) $
22,070 $
20,575
$
(a) $
20,575 $
23,865
$
(a) $
23,865
Others gross margin 56% 56% 51% 51% 66% 66%
68
(a) 88
(a) 218
(a)
Gross profit $
230,982 $
68 $
231,050 $
210,434 $
88 $
210,522 $
205,300 $
218 $
205,518
Gross margin 48% 48% 46% 46% 46% 46%
Operating
expenses $
219,339 $
(4,306)
(a) $
215,033 $
221,615 $
(4,370)
(a) $
217,245 $
241,640 $
(1,501)
(a) $
240,139
4,374
(a) 4,458
(a) 1,719
(a)
Operating profit/
(loss) $
11,643 $
4,374 $
16,017 $
(11,181) $
4,458 $
(6,723) $
(36,340) $
1,719 $
(34,621)
Operating margin 2% 3% -2% -1% -8% -8%
Income tax
expense $
(17,011) $
2,468
(c,d) $
(14,543) $
(3,941) $
1,566
(c,d) $
(2,375) $
13,145 $
(1,286) $
11,859
4,374
(a) 4,458
(a) 1,719
(a)
448
(c) 794
(c) 3,861
(c)
2,618
(d) 1,831
(d)
Net income/
(loss) before
non- $
14,506 7,440 21,946 $
(6,338) 7,083 745 $
12,047 $
5,580 $
17,627
controlling interest
4,374
(a) 4,458
(a) 1,719
(a)
(2,863)
(b) (3,733)
(b) (2,583)
(b)
448
(c) 794
(c) 3,861
(c)
2,618
(d) 1,831
(d)
Net loss from
continuing $
(21,400) 4,577 (16,823) $
(34,932) 3,350 (31,582) $
(26,361) $
2,997 (23,364)
operations attributable to
Sohu.com Limited for diluted
net loss per ADS
Net loss from discontinued (1,807) (1,807) (18,062) (18,062) (8,324) 12 (8,312)
operations attributable to
Sohu.com Limited for diluted
net loss per ADS
Net loss attributable to (23,207) 4,577 (18,630) (52,994) 3,350 (49,644) (34,685) 3,009 (31,676)
Sohu.com Limited for diluted
net loss per ADS
Diluted net loss
from $
(0.55) (0.43) $
(0.89) (0.80) $
(0.68) (0.60)
continuing operations per
ADS attributable to Sohu.com
Limited
Diluted net loss from (0.04) (0.04) (0.46) (0.46) (0.21) (0.21)
discontinued operations per
ADS attributable to Sohu.com
Limited
Diluted net loss per ADS (0.59) (0.47) (1.35) (1.27) (0.89) (0.81)
attributable to Sohu.com
Limited
39,254 39,254 39,244 39,244 38,936 38,936
Shares used in computing
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.
