Asia
Sohu.com Reports Second Quarter 2020 Unaudited Financial Results
Sohu.com Limited, China’s leading online media, video, search and gaming business group, reported unaudited financial results for the second quarter ended June 30, 2020.
Second Quarter Highlights[1]
The privatization of Changyou was completed on April 17, 2020. After the effectiveness of the transaction, Changyou’s net income/loss was wholly attributable to Sohu.com Limited. For the second quarter of 2020, Changyou recognized an additional accrual of withholding income tax of US$88 million, as Changyou changed its policy for its PRC subsidiaries with respect to distribution of cash dividends after the completion of the privatization.
Total revenues were US$421 million[2], down 9% year-over-year and 3% quarter-over-quarter.
Brand advertising revenues were US$38 million, down 14% year-over-year and up 48% quarter-over-quarter.
Search and search related advertising revenues[3] were US$241 million, down 13% year-over-year and up 1% quarter-over-quarter.
Online game revenues were US$106 million, up 4% year-over-year and down 21% quarter-over-quarter.
GAAP net loss attributable to Sohu.com Limited was US$80 million. Excluding the impact of the additional accrual of withholding income tax described above, GAAP net income attributable to Sohu.com Limited was US$8 million, compared with a net loss of US$35 million in the second quarter of 2019 and a net loss of US$20 million in the first quarter of 2020.
Excluding the impact of the additional accrual of withholding income tax described above, non-GAAP net income attributable to Sohu.com Limited was US$11 million. Further excluding the loss generated by Sogou, non-GAAP net income attributable to Sohu.com Limited was US$12 million, compared with a net loss of US$41 million in the second quarter of 2019 and a net loss of US$8 million in the first quarter of 2020.
Dr. Charles Zhang, Chairman and CEO of Sohu.com Limited, commented, “In the second quarter of 2020, our brand advertising business performed well, the brand advertising revenue had a decent increase, up 48% quarter-over-quarter. Both the brand advertising revenue and bottom line exceeded our prior guidance. During the quarter, we integrated our Media Portal’s brand advantage and influence with Sohu Video’s advanced broadcast technologies. These initiatives allowed us to more effectively generate and distribute our high-quality original content, and further enhanced our credibility by reflecting the attitude and values of Sohu. For Changyou, the privatization was completed on April 17, 2020, and after that Changyou’s net income/loss was wholly attributable to Sohu.com Limited. During the second quarter of 2020, online game revenues met our prior guidance and declined quarter-over-quarter, mainly due to the resumption of work following the easing of COVID-19 restrictions. For Sogou, it delivered in-line results in the second quarter with Search maintaining a steady share of traffic and Mobile Keyboard further expanding its DAU base.”
[1] As Changyou’s cinema advertising business ceased operations during the third quarter of 2019, its results of operations have been excluded from the Company’s results from continuing operations in the condensed consolidated statements of operations 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 the cinema advertising business.
[2] On a constant currency (non-GAAP) basis, if the exchange rate in the second quarter of 2020 had been the same as it was in the second quarter of 2019, or RMB6.81=US$1.00, US$ total revenues in the second quarter of 2020 would have been US$438 million, or US$17 million more than GAAP total revenues, and down 5% year-over-year.
[3] Search and Search related advertising revenues exclude intra-Group transactions.
Second Quarter Financial Results
Revenues
Total revenues for the second quarter of 2020 were US$421 million, down 9% year-over-year and 3% 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 2020 were US$279 million, down 13% year-over-year and up 6% quarter-over-quarter.
Brand advertising revenues for the second quarter of 2020 totaled US$38 million, down 14% year-over-year and up 48% quarter-over-quarter. The year-over-year decrease was mainly due to the continuous negative impact on the brand advertising industry from the outbreak of the COVID-19 in the first quarter of 2020. The quarter-over-quarter increase was mainly due to the increased revenues in our portal and video advertising businesses as a result of our continuing efforts to boost our revenues and the easing of the impact of COVID-19.
Search and search-related advertising revenues for the second quarter of 2020 were US$241 million, down 13% year-over-year and up 1% quarter-over-quarter.
Online game revenues for the second quarter of 2020 were US$106 million, up 4% year-over-year and down 21% quarter-over-quarter. The quarter-over-quarter decrease was mainly due to a decrease in player engagement as a result of work resumption during the quarter following the easing of COVID-19 restrictions in China.
Gross Margin
Both GAAP and non-GAAP[4] gross margin was 41% for the second quarter of 2020, compared with 46% in the second quarter of 2019 and 37% in the first quarter of 2020.
Both GAAP and non-GAAP gross margin for the online advertising business for the second quarter of 2020 was 23%, compared with 33% in the second quarter of 2019 and 10% in the first quarter of 2020.
Both GAAP and non-GAAP gross margin for the brand advertising business in the second quarter of 2020 were 40%, compared with 28% in the second quarter of 2019 and nil in the first quarter of 2020. The year-over-year margin improvement was mainly due to decreased video content cost. The quarter-over-quarter margin improvement was mainly due to increased revenues in the portal and video advertising businesses.
Both GAAP and non-GAAP gross margin for the search and search-related advertising business in the second quarter of 2020 were 21%, compared with 34% in the second quarter of 2019 and 11% in the first quarter of 2020. The year-over-year decrease primarily resulted from an increase in traffic acquisition cost as a percentage of search and search related advertising revenues. The quarter-over-quarter increase was due to a decrease in traffic acquisition cost as a percentage of search and search related advertising revenues due to normalized user traffic following the easing of COVID-19 restrictions in China.
GAAP gross margin for online games in the second quarter of 2020 was 77%, compared with 82% in the second quarter of 2019 and 79% in the first quarter of 2020. Non-GAAP gross margin for online games in the second quarter of 2020 was 78%, compared with 82% in the second quarter of 2019 and 79% in the first quarter of 2020. The year-over-year decrease in gross margin was mainly due to an increase in revenue-sharing payments related to TLBB Honor, which was launched during the third quarter of 2019.
[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; a one-time impairment charge recognized for an investment unrelated to the Company’s core businesses; 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 2020, GAAP operating expenses totaled US$194 million, down 13% year-over-year and up 4% quarter-over-quarter. Non-GAAP operating expenses were US$187 million, down 14% year-over-year and up 3% quarter-over-quarter. The year-over-year decrease in operating expenses was mainly due to decreased marketing expenses.
Operating Loss
GAAP operating loss for the second quarter of 2020 was US$23 million, compared with an operating loss of US$11 million in the second quarter of 2019 and an operating loss of US$24 million in the first quarter of 2020.
Non-GAAP operating loss for the second quarter of 2020 was US$16 million, compared with an operating loss of US$7 million in the second quarter of 2019 and an operating loss of US$20 million in the first quarter of 2020.
Income Tax Expense
GAAP income tax expense was US$85 million for the second quarter of 2020, compared with income tax expense of US$4 million in the second quarter of 2019 and income tax expense of US$14 million in the first quarter of 2020. Non-GAAP income tax expense was US$82 million for the second quarter of 2020, compared with income tax expense of US$2 million in the second quarter of 2019 and income tax expense of US$11 million in the first quarter of 2020. For the second quarter of 2020, Changyou recognized an additional accrual of withholding income tax of US$88 million, as Changyou changed its policy for its PRC subsidiaries with respect to distribution of cash dividends after the completion of the privatization of Changyou.
Net Income/(Loss)
GAAP net loss attributable to Sohu.com Limited for the second quarter of 2020 was US$80 million, or a net loss of US$2.04 per fully-diluted ADS. Non-GAAP net loss attributable to Sohu.com Limited for the second quarter of 2020 was US$77 million, or a net loss of US$1.96 per fully-diluted ADS.
Excluding the impact of the additional accrual of withholding income tax described above, GAAP net income attributable to Sohu.com Limited for the second quarter of 2020 was US$8 million, or a net income of US$0.20 per fully-diluted ADS; non-GAAP net income attributable to Sohu.com Limited for the second quarter of 2020 was US$11 million, or a net income of US$0.27 per fully-diluted ADS.
Liquidity
As of June 30, 2020, cash and cash equivalents and short-term investments held by the Sohu Group, minus short-term bank loans, were US$1.35 billion, compared with US$1.51 billion as of December 31, 2019.
Supplementary Information for Changyou Results
Second Quarter 2020 Operational Results
For PC games, total average monthly active accounts[5] were 1.9 million, a decrease of 5% year-over-year and 10% quarter-over-quarter. Total quarterly aggregate active paying accounts[6] were 0.9 million, flat year-over-year and a decrease of 10% quarter-over-quarter. The quarter-over-quarter decreases were mainly due to a decrease in player engagement as a result of the resumption of work during the quarter following the easing of COVID-19 restrictions in China.
For mobile games, total average monthly active accounts were 3.1 million, an increase of 15% year-over-year and a decrease of 9% quarter-over-quarter. The year-over-year increase was mainly due to the contribution of TLBB Honor, which was launched during the third quarter of 2019. Total quarterly aggregate active paying accounts were 0.6 million, flat year-over-year and a decrease of 40% quarter-over-quarter. The quarter-over-quarter decreases were mainly due to a decrease in player engagement as a result of the resumption of work during the quarter following the easing of COVID-19 restrictions in China.
[5] Monthly active accounts refers to the number of registered accounts that are logged in to these games at least once during the month.
[6] Quarterly aggregate active paying accounts refers to the number of accounts from which game points are utilized at least once during the quarter.
Second Quarter 2020 Unaudited Financial Results
Total revenues for the second quarter of 2020 were US$109 million, an increase of 3% year-over-year and a decrease of 20% quarter-over-quarter. Online game revenues were US$106 million, an increase of 4% year-over-year and a decrease of 21% quarter-over-quarter. Online advertising revenues were US$3 million, a decrease of 16% year-over-year and an increase of 23% quarter-over-quarter.
GAAP and non-GAAP gross profit for the second quarter of 2020 were both US$85 million, a decrease of 2% year-over-year and 21% quarter-over-quarter.
GAAP operating expenses for the second quarter were US$51 million, an increase of 10% year-over-year and a decrease of 6% quarter-over-quarter. The year-over-year increase in operating expenses was mainly due to an increase in share-based compensation expenses as new share-based awards took effect in the fourth quarter of 2019. The quarter-over-quarter decrease was mainly due to a decrease in marketing and promotional spending for TLBB Honor.
Non-GAAP operating expenses for the second quarter were US$48 million, a decrease of 1% year-over-year and 6% quarter-over-quarter.
GAAP operating profit for the second quarter of 2020 was US$33 million, compared with an operating profit of US$40 million in the second quarter of 2019 and US$52 million in the first quarter of 2020.
Non-GAAP operating profit for the second quarter of 2020 was US$37 million, compared with a non-GAAP operating profit of US$38 million in the second quarter of 2019 and US$56 million in the first quarter of 2020.
Recent Developments
On July 27, 2020, Sohu’s subsidiary Sogou announced that its board of directors (the “Sogou Board”) received a letter containing a preliminary non-binding proposal (the “Proposal”) from Tencent Holdings Limited (including its affiliates, “Tencent”) for Tencent to acquire all of the outstanding ordinary shares, including ordinary shares represented by ADSs, of Sogou that are not already owned by Tencent for US$9.00 in cash per ordinary share or ADS (as the same may be amended from time to time, a “Proposed Transaction”). The Proposed Transaction, if completed, would result in Sogou becoming a privately-held, indirect wholly-owned subsidiary of Tencent, and Sogou’s ADSs would be delisted from the New York Stock Exchange.
On July 31, 2020, the Sogou Board established a special committee of the Sogou Board, composed solely of independent directors, to consider the Proposal.
Sohu’s board of directors has not had an opportunity to review and evaluate the Proposal in detail, or to make a determination as to how to respond to the Proposal or as to whether or not the proposed acquisition of Sogou would be in the best interests of Sohu, in its capacity as Sogou’s controlling shareholder, and Sohu’s shareholders for Sohu to approve or reject the Proposal or a Proposed Transaction.
Business Outlook
For the third quarter of 2020, Sohu estimates:
Brand advertising revenues to be between US$37 million and US$42 million; this implies an annual decrease of 9% to 20% and a sequential decrease of 3% to a sequential increase of 11%.
Online game revenues to be between US$85 million and US$95 million; this implies an annual decrease of 12% to 21% and a sequential decrease of 10% to 20%.
Excluding the profit/loss generated by Sogou, non-GAAP net loss attributable to Sohu.com Limited to be between US$10 million and US$20 million; and GAAP net loss attributable to Sohu.com Limited to be between US$15 million and US$25 million.
For the third quarter 2020 guidance, the Company has adopted a presumed exchange rate of RMB7.00=US$1.00, as compared with the actual exchange rate of approximately RMB6.99=US$1.00 for the third quarter of 2019, and RMB7.08=US$1.00 for the second quarter of 2020.
This forecast reflects Sohu’s management’s current and preliminary view, which is subject to substantial uncertainty, particularly in view of the potential ongoing impact of the COVID-19 virus, which remains difficult to predict.
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 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, established by Dr. Charles Zhang, one of China’s internet pioneers, is in its twenty-fourth year of operation.
SOURCE Sohu.com Ltd.
Citing risks posed by Philippine Offshore Gaming Operators (POGO) operations in the country, President Ferdinand R. Marcos Jr. issued Executive Order No. 74 imposing an immediate ban on offshore and internet gaming in the country.
In issuing the EO 74, President Marcos said “the State has the paramount duty to safeguard national security, maintain public order, uphold the rule of law, protect the safety of its citizens, and ensure the integrity of the social fabric of the nation.”
“…In pursuit of such duty, an unequivocal ban of POGO/IGL operations was pronounced during the State of the Nation Address on 22 July 2024.”
The EO cited the Department of Finance (DOF) study in saying that POGO activities significantly outweigh the economic and social benefits derived from the POGO industry because of the risks and negative consequences such as increased crime rates, social instability and exploitation of vulnerable people associated with them.
The Anti-Money Laundering Council (AMLC) Report also indicated POGOs have been identified as susceptible to money laundering, fraud and other illicit financial activities, and therefore pose substantial threats to the integrity of the national financial system.
“The high reputational risks associated with POGO/IGL operations deter foreign investment and tourism, undermining the efforts of the National Government in promoting the country as a safe and sustainable investment and tourism destination,” the EO stated.
The President’s order, signed by Executive Secretary Lucas Bersamin on Nov. 5, will cover Philippine Offshore Gaming Operators and Offshore Gaming Operations and Services.
All POGOs/IGLs and other offshore gaming operations and other offshore gaming-related/auxiliary/ancillary services with issued licenses, permits are expected to completely cease operations, including the winding up of their affairs, on December 31, 2024 or earlier.
And to develop and implement a comprehensive strategy, Technical Working Groups (TWGs) will be created. The TWG on Employment Recovery and Reintegration will address the impact of the foregoing ban on the affected sectors of the economy and ensure the reintegration of displaced Filipino workers.
This will also involve the provision of assistance and safety nets which include upskilling and reskilling programmes to ensure displaced workers could find new jobs.
The President also issued directives to national government agencies in response to the immediate POGO operations prohibition.
He wants the Presidential Anti-Organised Crime Commission (PAOCC), Philippine Drug Enforcement Agency, and other law enforcement agencies to intensify their efforts against illegal POGOs/GLs and other offshore gaming operations and services.
The Department of Human Settlements and Urban Development (DHSUD) was instructed to assist the TWG on Anti-Illegal Offshore Gaming Operations in securing the cooperation of homeowners associations to ensure the non-proliferation of POGO/IGL and other offshore gaming operations and services in subdivisions, condominiums and other real estate developments.
The post PBBM Orders Immediate Ban Against All PH POGO Operations appeared first on European Gaming Industry News.
Asia
Making Indian Presence Felt: Natural8 India gears up to take a contingent of nine winners of its latest India Exclusive to Asian Poker Tour (APT) Phu Quoc!
With fully expense paid trip to the breathtaking island and a whopping INR 15 lakh in additional benefits, the winners will compete with Asia’s best poker players for the ultimate prize in the Main and Mini Main Events
Underlining its commitment to establishing India’s competitive poker scene on a global stage, Natural8 India is taking a massive contingent of nine players on an all-expenses paid trip to compete at the Asian Poker Tour (APT) Phu Quoc. In doing so, these nine players – Kishore Kumar V C, Romit Advani, Akhand Shukla, Myron Pereira, Pranav Khandalkar, Arindam Nayak, Anurag Rawat, Rasik Bhatia, and Harsh Bharti – will have a shot at winning the ultimate prize at the Main Event: the APT Trophy and the Main Event prize pool!
To facilitate this, Natural8 India has offered bonuses worth a whopping INR 15 lakh to the nine winners of its latest India Exclusive. In addition to travel and accommodation (worth around INR 85,000 per head) to all players, it has also offered the top four players a chance to compete at the main table with Main Event tickets worth INR 1,23,905 each while the other five players are set to compete at the Mini Main Event with tickets worth INR 41,301 each.
Speaking at the announcement, Kunal Patni, Executive Director and Country Head, Natural8 India, said, “The Indian competitive poker community is rapidly establishing itself as a thriving space and actively challenging the top players, whether in Asia or a global stage. At Natural8 India, we are proud to be driving this shift with events such as our India Exclusives, where we uncover the next wave of talented competitive poker players and give them a chance to shine at the grandest stages. It is inspiring to witness the energy at these tables, with both seasoned players and fresh talent coming together to elevate the game. We’re eagerly anticipating more intense showdowns at the APT Phu Quoc as our contingent takes on the best poker players from across Asia. We wish all the participants the very best!”
The post Making Indian Presence Felt: Natural8 India gears up to take a contingent of nine winners of its latest India Exclusive to Asian Poker Tour (APT) Phu Quoc! appeared first on European Gaming Industry News.
Lui Che Woo, the casino tycoon who helped propel Macau to eclipse rival Las Vegas in gambling revenues, has died at the age of 95, his company said in a statement late on Monday.
Lui, chairman of Macau casino company Galaxy Entertainment, died in Hong Kong on Nov. 7, it said, adding that his “vision, tremendous leadership and guidance” were the foundation for the group’s development and continued success.
Also the chairman of K. Wah Group, a Hong Kong-listed company focused on construction and quarry mining before turning to property, Lui was widely recognised in both Hong Kong and Macau as an influential businessman with close ties to the Chinese government.
One of Hong Kong’s richest men, Lui kept a low profile and was always seen wearing a flat cap as he went about the city and when he attended press conferences.
A member of China’s national advisory body, the Chinese People’s Political Consultative Conference, Lui had close ties to Beijing and was part of a business delegation that met with President Xi Jinping in 2014 in China’s capital.
Galaxy Entertainment holds one of six coveted gaming licenses that were granted after Macau liberalised the casino industry in 2002.
Competing with rivals like the now deceased Stanley Ho, whose family runs the SJM Holdings casino empire, the late U.S. billionaire Sheldon Adelson and Wynn Resorts founder Steve Wynn, Lui steered Galaxy to become of Macau’s top operators.
It operates several large casino resorts in Macau, both on the Las Vegas-style Cotai strip and on the teeming main peninsula.
The post Hong Kong Construction Titan Turned Macau Casino Boss Lui Che-Woo Dies Aged 95 appeared first on European Gaming Industry News.
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