Sohu.com Ltd. (SOHU) CEO Dr. Charles Zhang on Q4 2021 Results – Earnings Call Transcript


Sohu.com Ltd. (NASDAQ:SOHU) This autumn 2021 Outcomes Convention Name February 22, 2022 7:30 AM ET

Firm Members

Huang Pu – Director, IR

Dr. Charles Zhang – Chairman & CEO

Joanna Lv – CFO

James Deng – Vice President, Finance

Dewen Chen – CEO, Changyou

Yaobin Wang – CFO, Changyou

Convention Name Members

Thomas Chong – Jefferies

Eddie Leung – Financial institution of America Merrill Lynch

Alicia Yap – Citigroup

Operator

Girls and gents, thanks for standing by, and good night. Thanks for becoming a member of Sohu’s Fourth Quarter 2021 Earnings Convention Name. Right now, all members are in a listen-only mode. After managements’ ready remarks, there shall be a question-and-answer session. Immediately’s convention name is being recorded. When you’ve got any objections, chances are you’ll disconnect right now.

Now, I would like to show the convention over to your host for right now’s convention name, Huang Pu, Investor Relations Director of Sohu. Please go forward.

Huang Pu

Thanks operator. Thanks for becoming a member of us right now to debate fourth quarter 2021 outcomes. On the decision are Chairman and Chief Government Officer, Dr. Charles Zhang; CFO, Joanna Lv; and Vice President of Finance, James Deng. Additionally with us right now are Changyou’s CEO, Dewen Chen; and CFO, Yaobin Wang.

Earlier than administration begins their ready remarks, I wish to remind you of the Firm’s protected harbor statements in reference to right now’s convention name, aside from the historic data contained herein. The issues mentioned on this convention name could comprise forward-looking statements. These statements are primarily based on present plans, estimates and projections and, subsequently, you shouldn’t place undue reliance on them.

Ahead-looking statements contain inherent dangers and uncertainties. We warning you that quite a few necessary components might trigger precise outcomes to vary materially from these contained in any forward-looking assertion. For extra details about potential dangers and uncertainties, please seek advice from the Firm’s filings with the Securities and Trade Fee, together with the latest Annual Report on Kind 20-F.

Please even be reminded that following the completion of the transaction with Tencent associated to Sogou, Sohu now not has any possession curiosity in Sogou. As indicated in any other case, the outcomes that we’re speaking about exclude outcomes from Sogou operations. For historic statements, the outcomes of operations for Sogou and the achieve from its disposal has been categorized as discontinued operations.

With that, I’ll now flip the decision over to Dr. Charles Zhang. Charles, please proceed.

Dr. Charles Zhang

Thanks, Pu; and thanks, everybody, for becoming a member of our name. Throughout the fourth quarter of 2021 and for the total yr we confronted ongoing important challenges from the macroeconomic atmosphere and uncertainties of the COVID-19 pandemic. Regardless of these headwinds, we have been proactive in refining our expertise, growing product improvements, bettering working effectivity and exploring differentiated monetization alternatives.

Within the fourth quarter, we have been forward of our steerage in model promoting income and achieved profitability for the total yr and each quarter in 2021. For Sohu Media and Sohu Video, we supplied higher consumer expertise via enhancements in merchandise and social interplay options. We utilized superior reside broadcasting applied sciences to giant and distinctive content material advertising and marketing occasions. Based mostly on the aggressive benefits of the Sohu product metrics, these reside broadcasting occasions helped us to generate a excessive quantity of premium content material and vast social distribution.

We have been capable of additional consolidate our affect as a mainstream media platform and higher seize advertisers’ consideration and budgets. For Changyou, its on-line sport enterprise delivered in-line quarterly outcomes, whereas its total income of 2021 continued to develop year-over-year.

Let me go to particulars about every of those enterprise in a second, however first a fast overview of our monetary efficiency. For the fourth quarter of 2021, complete revenues, $193 million down 24% year-over-year and 11% quarter-over-quarter. Model promoting income $34 million, down 20% year-over-year and flat quarter-over-quarter. On-line sport income $144 million, down 27% year-over-year and 14% quarter-over-quarter. GAAP web revenue attributable to Sohu.com Restricted $4 million in contrast with the web revenue of $47 million within the fourth quarter of 2020 and web revenue of $12 million within the third quarter of 2021.

Non-GAAP web revenue attributable to Sohu.com Restricted was $200,000 in contrast with a web revenue of $53 million within the fourth quarter of 2020 and web revenue of $17 million within the third quarter of 2021.

For the entire yr of 2021, complete revenues $836 million, up 11% in contrast with 2020. Model promoting income $135 million, down 8% in contrast with 2020. On-line sport revenues $638 million, up 19% in contrast with 2020. GAAP web revenue attributable to Sohu.com Restricted was $69 million in contrast with a web revenue of $33 million in 2020, excluding the impression of an extra accrual of withholding revenue tax acknowledged by Changyou within the second quarter of 2020. Non-GAAP web revenue attributable to Sohu.com Restricted was $79 million in contrast with a web revenue of $51 million in 2020, excluding the impression of the extra accrual of withholding revenue tax described above.

Now, I’ll undergo a few of our key companies. First, Media Portal and the Sohu Video. At Sohu Media Portal throughout 2021, we continued to refine our merchandise. We developed and upgraded the audio perform of our Information App. We repeatedly enhanced the consumer expertise by extending the apps software eventualities and enriching our content material presentation format and likewise refined the apps’ social community distribution options by offering better motivation for consumer interactions with different customers. We’re capable of additional strengthen our differentiated benefit as a mainstream media platform.

For Sohu Video, now we have a Twin Engine technique that we’re executing with the give attention to each prime quality unique dramas and actuality exhibits and the regular improvement of social distribution of short-form video content material. Leveraging our superior reside broadcasting expertise, we have been capable of additional speed up the structure of worth reside broadcasting and prolonged to scientific information programs.

We’ve attracted students and scientists in quite a few fields to share their information and work together with our customers on our platform, which has strengthened our fame within the area of scientifically and knowledge-based studying — centered learnings.

On the monetization facet, we comprehensively built-in our reside broadcasting expertise with quite a few progressive content material advertising and marketing campaigns. Regardless of the weak macroeconomic atmosphere, now we have developed enticing advertising and marketing methods to realize consideration from advertisers and safe their promoting budgets. In December, we efficiently hosted a number of flagship occasions corresponding to 2021 Sohu Vogue Award and the Sohu Finance Incomes Convention.

These occasions have generated an array of premium content material and created social distribution throughout each Media and Video platforms. By means of the applying of our reside broadcasting expertise and the synergies with the [indiscernible] and Sohu product mergers, we are going to appeal to not solely audiences but in addition promoting by offering these distinctive advertising and marketing alternatives for them and we’re higher capable of meet advertisers demand and seize their promoting {dollars}.

Now for Changyou. Throughout the fourth quarter of 2021, Changyou’s on-line video games income declined on a sequential foundation, according to our prior steerage because of the pure decline of TLBB Classic and the licensed sport Little Raccoon: Heroes.

In our PC video games enterprise traces, we improved participant expertise by lowering the variety of repetitive each day quest for normal TLBB PC. We additionally launched a talented enhancement system and corresponding quest line for TLBB Classic to maintain the video games contemporary. For cellular video games, we launched an enlargement pack of Legacy TLBB Cellular that includes the addition of a brand new plan and varied occasions for the Nationwide Day and New Yr vacation.

Subsequent quarter, we are going to roll out new enlargement packs and make changes bringing content material for TLBB PC, Legacy TLBB Cellular, Little Raccoon: Heroes and different video games to resist their vitality.

By way of the sport pipeline, a number of key video games are beneath improvement and we are actually within the technique of fine-tuning them. We stay up for bringing them to gamers quickly. Within the yr forward, Changyou will execute its high video games technique and by selling innovation main the capability of its staff and rolling out extra prime quality cellular video games, together with MMORPGs and different diversified merchandise.

Earlier than I move the decision to Joanna to undergo the — our monetary ends in element, we would like to offer you an replace on the share buy — repurchase program of as much as $100 million introduced on November 13, 2021. As of February 18, 2022, Sohu had repurchased 3,079,064 ADS shares beneath the share repurchases program for an combination value of roughly $53 million, so principally half, sure — $100 million.

With that, I’ll now flip the decision to Joanna. Joanna?

Joanna Lv

Thanks, Charles. I’ll stroll you thru the important thing financials of our main segments for the fourth quarter and the total yr of 2021. All the numbers that I’ll point out are all on the non-GAAP foundation. Chances are you’ll discover a reconciliation from non-GAAP to GAAP measures on our IR web site.

Sohu Media Portal quarterly revenues have been $90 million, down 20% year-over-year and up 16% quarter-over-quarter. The quarterly working loss was $38 million in contrast with an working lack of $28 million in the identical quarter final yr. For the full-year 2021, Sohu Media Portal revenues have been $76 million, down 13% in contrast with 2020. The total-year working loss $134 million in contrast with an working lack of $92 million.

In 2020, for Sohu Video, quarterly revenues have been $23 million, down 1% year-over-year and flat quarter-over-quarter. The quarterly working loss was $11 million, flat with the identical quarter of final yr. For the full-year 2021, Sohu Video revenues have been $87 million, down 4% in contrast with 2020. The total-year working loss was $47 million in contrast with an working lack of $43 million in 2020.

For Changyou, quarterly revenues, together with 17173, a $146 million, down 27% year-over-year and 14% quarter-over-quarter. Changyou posted an working revenue of $55 million in contrast with $112 million in the identical quarter final yr. For the full-year 2021, complete revenues have been $649 million, up 18% in contrast with 2020. Changyou posted an working revenue of $310 million in contrast with an working revenue of $238 million in 2020.

For the primary quarter of 2022, we anticipate model promoting revenues to be between $23 million and $26 million. This means annual lower of 15% to 25% and a sequential lower of 23% to 32%. On-line sport income to be between $130 million and $140 million. This means annual lower of 21% to 26% and a sequential lower of three% to 10%.

Non-GAAP web loss attributable to Sohu.com Restricted to be between $10 million and $20 million. And GAAP web loss attributable to Sohu.com Restricted to be between $13 million and $23 million. This forecast displays our present and preliminary view, which is topic to substantial uncertainties. This concludes our ready remarks.

Operator, we might now prefer to open the decision to questions.

Query-and-Reply Session

Operator

[Operator Instructions] Our first query comes from the road of Thomas Chong from Jefferies. Please ask your query.

Thomas Chong

Thanks administration for taking my questions. Charles, I simply wish to get some shade with regard our consumer progress methods. I keep in mind in final quarter, we talked about quite a few our methods and the numerous to drive the consumer progress for the media enterprise. Simply wish to get some shade about the way in which or the methods that we’re going to do it and the way a lot are we going to spend in 2022? And my follow-up query can be concerning the promoting outlook in 2022, now we have buoyed — the Q1 promoting steerage. Simply wish to get a way about beneath what scenario will we hit the excessive finish of the steerage and the low finish of the steerage?

Dr. Charles Zhang

Okay. So the consumer base progress technique, principally for the Sohu Media, Sohu Information App and likewise Sohu Video. For Sohu Information App, we’ll proceed with our conventional principally the offering provision of high-quality information and content material with editorial excellency and likewise the advice algorithm. However then we’ll additionally develop this social community channel principally in order that we hope that.

So now and likewise with the audio characteristic with all these principally the editorial content material and the advice channel and likewise the social community distribution channel and likewise the audio. All these options been developed during the last two years and have been maturing. And now it is — we’ll in all probability spend now now we have spent extra money on advertising and marketing and on channels, on the distribution channels on consumer acquisitions so that we’ll have extra customers to come back to our web site to our app and to check principally to check if our merchandise during the last two years — two, three years been properly developed or in the correct path. So, that we hope that we’ll have some — with extra customers to have some viral or chain response occasions or explosion or some type of, these type of issues.

In order that’s our technique. Principally, we have been refining the merchandise for fairly just a few years. And now it is — we put it to a take a look at of a better variety of volumes of customers by spending extra money to amass customers to show and to need to — principally to generate to have — type of viral explosive impact or chain response impact, that is our technique.

For video, it is comparable. For the information, it is actually new. It is content material information. I imply, for the video, it is a video content material, and we are going to proceed with our — we’ll in all probability have extra drama. After which we’ll even have the reside broadcasting and knowledge-based reside casting and the knowledge-based brief type video clip with Twin Engine technique. And likewise we’ll spend extra on consumer acquisitions to show our — additionally the product path within the final two years — final two or three years. So we’ll spend some cash and consumer acquisition.

Individuals could — chances are you’ll ask, now we have a lot money, so what are we going to do with it? So moreover the share repurchase, we’ll spend on product and particularly on consumer acquisition to show to check our merchandise. So on the promoting forecast is that the excessive finish or low finish, I believe…

Thomas Chong

Sure, concerning the total promoting pattern and the way we might hit the excessive finish and the low finish of the steerage?

Dr. Charles Zhang

The general — as we stated, that — there may be the macroeconomic scenario is just not that good. Specifically, the true property business downside with the varied business and likewise the auto business that is because of the lack of chips in order that vehicle firms have a restricted finances for advertising and marketing as a result of you do not have — really haven’t got product to roll out. So that is the challenges we face, and we’re going to face.

In order that’s why throughout Q3 and This autumn, we had and progressive distinctive occasions each in our actions and occasions are — have a twin characteristic. It is content material and on the identical time it is advertising and marketing alternative. In order that’s why now we have this — in Q3, now we have the mountain — snow mountaineering — snow mountaineering and reside broadcasting occasions, in This autumn now we have finance convention and likewise trend awards and all these type of issues. We offer a singular — moreover the common promoting, now we have this distinctive. Different firms haven’t got that type of factor. We’ve these type of distinctive advertising and marketing alternatives for promote that is why are have been capable of obtain.

So even amid this sloppiness of the market and lowering as of [million dollars], we have been capable of exceed the steerage as a result of we have been capable of. So in Q1, we are going to proceed to have this. And since — however in Q1, we’ll begin our consumer acquisition course of in order that now we have — hope that on this coming yr, within the subsequent — on this yr we’ll have — we’ll see some cheap or fairly some type of progress or of the consumer base, which can even assist with the promoting. And or hit the excessive finish or low finish, I am undecided right now is already mid of the quarter, proper? And likewise the seasonality is just like final yr. However as I stated, the sloppy actual property business and likewise the dearth of chips for auto has an impact on Q1. In order that’s why we’re forecasting a lower of 15% in contrast with final yr’s Q1.

Operator

Our subsequent query comes from the road of Eddie Leung from Financial institution of America Merrill Lynch. Please ask your query.

Eddie Leung

Only a follow-up to Thomas’ query on the promoting atmosphere. Charles, you talked about that among the weaker promoting industries. Might you additionally discuss just a little bit about which business you see comparatively stronger for you guys? And likewise, you talked about the true property and auto weak spot. When your gross sales staff talked to them for the total yr 2022 finances, do you get a way that they see type of a backside out in a while this yr, which implies are they planning to extend the finances after that?

Dr. Charles Zhang

I believe the — for the auto business, is I believe the chip scarcity will backside out, I believe, proper? In order that’s a excellent news. Truly even in This autumn, with that downside due to our distinctive advertising and marketing alternatives as a result of total our advertisers have now have restricted budgets. So the extra – the — just like the favor or like extra or like these type of distinctive advertising and marketing actions as a substitute of simply spending cash on the common promoting format like banners or these type of issues.

In order that’s why even in This autumn, amid this chip shortages, our auto business, auto income, different promoting share of auto firms really larger than earlier than, proper, 29%. So we hope — I believe this yr for the auto business shall be — it ought to be a greater yr than final yr. However the true property, I am undecided, actual property is an issue, sure.

Operator

Our subsequent query comes from Alicia Yap from Citigroup. Please ask your query.

Alicia Yap

I’ve just a few questions. The primary one is a follow-up on the promoting steerage. So simply questioning these macro weak spot that you simply’re seeing, is that roughly according to your earlier expectation or the macro or this advert sentiment really will get weaker into 1Q from the 4Q stage that you simply see? And any preliminary view on the general advert finances sentiment when can that we see a restoration, which quarter we are able to see the restoration of the advert sentiment. That is my first query.

Yaobin Wang

Okay. So principally in truth we have internalized weak spot, proper, [Foreign Language], so I believe there’s not a lot change in This autumn when it comes to preliminary expectation in This autumn and now — This autumn is already weaker than the final yr’s This autumn, proper? So Q1 is comparable. And this yr, the one distinction is that the Chinese language New Yr occurred like two weeks earlier, proper and in order that comparable.

Alicia Yap

Okay, I see, any view we are going to that begin to see some rebounds of the sentiment in 2Q or will that be in 3Q?

Dr. Charles Zhang

As I stated, I believe the auto business ought to the chip downside — the chip’s downside is not going to — will in all probability is not going to be later a part of this yr from my dialog with among the auto business advertisers. However so, I believe since our promoting complete quantity of promoting is just not that large. So Sohu’s case — I do not assume Sohu’s case will signify a basic industries case. So Sohu’s efficiency will extra rely upon whether or not we’re capable of proceed to have very profitable advertising and marketing actions.

And likewise whether or not we’re capable of get actually a consumer uptick proper, consumer base uptick, that is the factor that. So since — our market share is — I imply, the share of promoting the greenback is so small, I do not assume our promoting greenback, the pattern signify the business pattern. It actually displays our personal efficiency so.

Alicia Yap

After which second query is on the spending. I believe final quarter, you talked about given the money you’ve got after which now that is the possibility you can larger spend on the consumer progress. And I noticed in 4Q in your gross sales and advertising and marketing, it got here in a a lot larger than the earlier quarter, which is at round $55 billion — I imply, sorry, $55 million. Ought to we really use this as extra going ahead, this would be the quarterly spend that you’ll be spending into every of this quarter in 2022 or will that be even larger than this quantity?

After which I believe that is type of additionally associated to my questions in your loss steerage, proper? It does appear like it is from the sequential foundation, I do know, you realize revenues are declining, that the — it is changed into a loss quarter, proper versus final yr, I believe each quarter, you’ve got a revenue quarter. So are you able to type of like assist us carry the connection with the gross sales and advertising and marketing spend versus your sequential weak spot on the income steerage that resulted within the web loss variety steerage?

Joanna Lv

So that you talked about the $55 million, is that embrace Changyou or simply solely Sohu — contains Changyou. So should you embrace Changyou then it is arduous to say. It is arduous to see as a result of Changyou income base is so large in order that simply Sohu’s income simply various within the numbers. So it’s important to have a look at individually the 2, proper? So I believe once we flip from final quarter’s profitability or into just like the [Technical Difficulty] 1 / 4, that is largely as a result of — Changyou the classic, proper, the good thing about classic already [Technical Difficulty] and classic TLBB Classic and likewise Raccoon, proper.

In order that’s, so it’s important to have a look at individually. In case you have a look at the Sohu alone, the media and video, really in This autumn, our precise finances doesn’t enhance that a lot, proper. Since you’re speaking about $55 million, that is due to Changyou spending on the Raccoon proper — Little Raccoon proper, we may have the spending. So should you have a look at Sohu’s Media and Sohu Information App and Sohu Video, we simply barely elevated the advertising and marketing in This autumn and we will certainly spend extra.

As a result of we’re not going to — we’re not going to spend — we’ll spend correctly and we’ll spend very fastidiously and we’ll actually have a look at arduous on the ROI as a result of, not as a result of now we have quite a lot of money — simply spend independently. So we’ll spend actually fastidiously — we’ll spend cash, and we really in This autumn, we did some pilot spending to see how the consumer acquisition goes, after which we’ll proceed that and we will certainly spend extra in This autumn this yr. We’ll make sure that the consumer spend cash.

Alicia Yap

That is very useful. Thanks for clarifying on that, the enterprise distinction on the Sohu and the Media and the Video. After which lastly, I believe on the share repurchase, I believe you guys been, type of like leveraging alternative very properly. You’ve got purchased again half of your approved program. So within the occasion, for example, should you deplete the remaining of the buyback program later within the subsequent few months or in a one or two quarters, would the Board contemplate to authorize a brand new share buyback program should you use later?

Joanna Lv

Most likely not or we do not know. So let’s end the opposite half after which we’ll see.

Operator

Our subsequent query comes from [Jasper Joshua] from [JVD Holdings]. Please ask your query.

Unidentified Analyst

I’ve received two questions. One is with regard to Changyou, the place Charles final yr stated that if the situations have been nice, you’d contemplate Shanghai itemizing. Might you elaborate on the way you see the situations? Secondly, okay, sorry. Second — my second query is with regard to Sogou. And as I perceive, they’re leasing 18,000 sq. meters from Sohu.com. Have you ever thought of promoting that property now when Sogou is just not part of the group anymore?

Dr. Charles Zhang

Effectively, I believe when it comes to Hong Kong itemizing, we’re not — we do not have a specific time schedule but. We’ll see the chance and as alternative goes. By way of the leasing, I believe we’ll proceed fortunately to be the owner, proper, to gather hire, proper? So we’re not going to promote — sure. No. Why ought to we promote a constructing, we do not want the money, proper? We have already got quite a lot of money. Why can we promote constructing?

Unidentified Analyst

You may give it to the shareholders. Simply curious. Sure.

Operator

Proper. There aren’t any additional questions. So with that, we conclude our convention for right now. Thanks for taking part. Chances are you’ll now disconnect.



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Sohu.com Ltd. (SOHU) CEO Dr. Charles Zhang on Q4 2021 Results – Earnings Call Transcript

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