BEIJING, Aug. 1, 2011 /PRNewswire-Asia/ -- Sohu.com Inc. (NASDAQ: SOHU), China's leading online media, search, gaming, community and mobile service group, today reported unaudited financial results for the second quarter ended June 30, 2011.
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Second Quarter Highlights(1)
- Record total revenues and record revenues in online brand advertising, Sogou, and online game businesses. All such operating parameters exceeded the Group's expectations.
- Total revenues were US$198.7 million, up 36% year-over-year and 14% quarter-over-quarter.
- Online brand advertising revenues were US$67.7 million, up 27% year-over-year and 19% quarter-over-quarter.
- Sogou revenues were US$13.6 million, up 252% year-over-year and 71% quarter-over-quarter.
- Online game revenues reached US$101.5 million, up 31% year-over-year and 7% quarter-over-quarter.
- GAAP net income attributable to Sohu.com Inc. was US$42.7 million, up 37% year-over-year and 9% quarter-over-quarter, or US$1.10 per fully diluted share. Non-GAAP net income attributable to Sohu.com Inc. was US$47.4 million, up 27% year-over-year and 8% quarter-over-quarter, or US$1.21 per fully diluted share.
- On May 11, 2011, Changyou.com Limited (Changyou), a subsidiary of Sohu, completed the acquisition of 68.258% of the equity in Shenzhen 7Road Technology Co., Ltd. ("7Road"), a Web-based game company in China. 7Road's financial statements were consolidated in Changyou's financial statements starting on June 1, 2011.
(1) Explanation of the Group's non-GAAP financial measures and related
reconciliations to GAAP financial measures are included in the
accompanying "Non-GAAP Disclosure" and the "Reconciliation to
Unaudited Condensed Consolidated Statements of Operations."
"I am pleased to report strong financial results for the second quarter," commented Dr. Charles Zhang, chairman and chief executive officer of Sohu.com. "We set new records for total revenue as a result of strong performance in three of our core business lines -- brand ads, Sogou and Changyou, each of which set new individual highs for revenue. Sohu Video outperformed its larger competitors and expanded its audience reach, while Sogou accelerated its growth trajectory with over 250% top-line growth, driven by strong improvements in search traffic and monetization."
Dr. Zhang added, "I am also excited to report that on July 22nd, Changyou launched Duke of Mount Deer, or DMD, which is the company's second in-house developed game. The unique technological innovations brought about by the four years of development have been well received by players. Since its launch, the user base has been growing steadily and we already need to add more servers. With DMD, our flagship game Tian Long Ba Bu, and the acquisition of 7Road, a Web-based game company in China, Changyou is successfully transforming itself into a diversified gaming company and escalating our leading position in China's online gaming industry. "
Commenting on Sohu's online brand advertising business, Ms. Belinda Wang, Co-President and COO added, "Second quarter revenue in our online brand advertising business hit a new high as we saw strong advertising demand from the Internet sector, including e-commerce companies. Among all channels, online video was the fastest growing one with over 150% increase in revenues and nearly 50% increase in the number of advertisers on a year-over-year basis."
Second Quarter Financial Results
Revenues
Total revenues for the second quarter of 2011 were US$198.7 million, up 36% year-over-year and 14% quarter-over-quarter.
Online brand advertising revenues for the second quarter of 2011 totaled US$67.7 million, up 27% year-over-year and 19% quarter-over-quarter. The increases were mainly due to the increased number of brand advertising customers and strong advertising demand from the IT sector including e-commerce companies.
Sogou revenues for the second quarter of 2011 were US$13.6 million, up 252% year-over-year and 71% quarter-over-quarter. Sogou revenues include search and start-up page revenues. The increases were mainly due to increased search traffic and improved monetization of traffic.
Online game revenues for the second quarter of 2011 were US$101.5 million, up 31% year-over-year and 7% quarter-over-quarter.
Wireless revenues for the second quarter of 2011 were US$11.6 million, up 5% year-over-year and down 1% quarter-over-quarter.
Gross Margin
Gross margin was 73% for the second quarter of 2011, compared with 74% in the first quarter of 2011 and 73% in the second quarter of 2010. Non-GAAP gross margin for the second quarter of 2011 was 74%, which was unchanged from the first quarter of 2011 and the second quarter of 2010.
Online brand advertising gross margin for the second quarter of 2011 was 62%, compared with 61% in the first quarter of 2011 and 58% in the second quarter of 2010. Non-GAAP online brand advertising gross margin for the second quarter of 2011 was 63%, compared with 62% in the first quarter of 2011 and 60% in the second quarter of 2010.
Both GAAP and non-GAAP gross margin for Sogou in the second quarter of 2011 were 55%, compared with 39% in the first quarter of 2011 and 14% in the second quarter of 2010.
Both GAAP and non-GAAP gross margin for online games in the second quarter of 2011 were 90%, compared with 91% in the first quarter of 2011 and 91% in the second quarter of 2010.
Both GAAP and non-GAAP gross margin for the wireless business for the second quarter of 2011 were 39%, compared with 41% in the first quarter of 2011 and 48% in the second quarter of 2010.
Operating Expenses
For the second quarter of 2011, Sohu's operating expenses totaled US$76.8 million, up 37% year-over-year and 18% quarter-over-quarter. Non-GAAP operating expenses totaled US$72.9 million, up 43% year-over-year and 20% quarter-over-quarter. The increases in both GAAP and non-GAAP operating expenses were mainly due to increases in both headcount and average compensation and higher expenses associated with marketing activities in the second quarter of 2011.
Operating Margin
Operating margin was 35% for the second quarter of 2011, compared with 36% in the previous quarter and 35% in the second quarter of 2010. Non-GAAP operating margin was 37% for the second quarter of 2011, compared with 39% in the previous quarter and 39% in the second quarter of 2010.
Income Tax Expense
For the second quarter of 2011, excluding a non-cash income tax expense of US$0.9 million recorded for tax benefits from share-based awards, non-GAAP income tax expense was US$9.3 million, compared with US$10.8 million in the previous quarter.
Net Income
Before deducting the share of net income pertaining to the Non-controlling Interest, GAAP net income for the second quarter of 2011 was US$61.6 million, up 36% year-over-year and 12% quarter-over-quarter. Non-GAAP net income for the second quarter of 2011 was US$67.0 million, up 27% year-over-year and 10% quarter-over-quarter, exceeding the high end of the Group's expectations.
GAAP net income attributable to Sohu.com Inc. for the second quarter of 2011 was US$42.7 million, or US$1.10 per fully diluted share. Non-GAAP net income attributable to Sohu.com Inc. for the second quarter of 2011 was US$47.4 million, or US$ 1.21 per fully diluted share, up 27% year-over-year and 8% quarter-over-quarter, exceeding the high end of the Group's expectations.
Cash Balance
Sohu Group continued to maintain a debt-free balance sheet and a strong cash position of US$718.1 million as of June 30 2011.
Ms. Carol Yu, Co-President and CFO of Sohu commented, "We are pleased with our strong second quarter results. Our key online game, online video and Sogou business units are all expanding rapidly as a result of years of steady investment and hard work. We have demonstrated a consistent ability to cultivate new businesses from the incubation stage to the point where they can prosper as a separately listed company. We will continue to proactively support all of our underlying businesses as we strive to create value for our shareholders over the long term."
Supplementary Information for Online Game Results
Second Quarter 2011 Operational Results
- Aggregate registered accounts for Changyou's games(2) increased 34% year-over-year and 13% quarter-over-quarter to 131.9 million.
- Aggregate peak concurrent users ("PCU") for Changyou's games were 970,000, down 15% year-over-year and 3% quarter-over-quarter.
- Aggregate active paying accounts ("APA") for Changyou's games increased 4% year-over-year and 1% quarter-over-quarter to 2.91 million.
- Average revenue per active paying account ("ARPU") for Changyou's games increased 15% year-over-year and 1% quarter-over-quarter to RMB211, which is consistent with Changyou's intention to have ARPU within a range that keeps Changyou's games affordable for the majority of Chinese game players.
(2) Comprises the following games operated in China: Tian Long Ba Bu
("TLBB"), Blade Online, Blade Hero 2, Da Hua Shui Hu, Zhong Hua Ying
Xiong, Immortal Faith, San Jie Qi Yuan and Legend of Ancient World.
Second Quarter 2011 Revenues
Online game revenues for the second quarter of 2011, which includes revenues from Changyou's game operations and overseas licensing revenues and revenues from 7Road, increased 31% year-over-year and 7% quarter-over-quarter to US$101.5 million. The increases were mainly due to the continued popularity of TLBB in China during the quarter and consolidation of 7Road's financial statements starting on June 1, 2011.
Recent Business Developments
Changyou Completes Acquisition of Majority Stake in 7Road
On May 11, 2011, Changyou completed the acquisition of 68.258% of the equity in 7Road for fixed cash consideration of approximately US$68.26 million, plus additional variable cash consideration of up to a maximum of US$32.76 million that is contingent upon the achievement of specified performance milestones through December 31, 2012. 7Road is a developer of Web-based games and the creator of DDTank, one of the most popular multiplayer Web-based shooting games in China. Translated into 9 different languages, DDTank has been launched in countries or territories overseas including Vietnam, Taiwan, Brazil and others.
Changyou Begins Open Beta Testing of Legend of Ancient World
On May 19, 2011, Changyou began open-beta testing of Legend of Ancient World, the Company's first 2.5D oriental fantasy massively multi-player online role-playing game. Transporting players back some 4,000 years ago to the ancient Huaxia period, the game allows players to take on multiple roles from a selection of 21 occupations while exploring ancient Chinese civilization. The game was licensed from a game studio in China.
Changyou Licenses Battlefield Online from Electronic Arts
Changyou has entered into a licensing agreement with Electronic Arts, a global leader in digital interactive entertainment, for the exclusive rights to operate Battlefield Online, a massively multiplayer online first-person shooter game in China. The game is the first online game in the Battlefield franchise, which is a long-standing series of first-person shooter games for the PC.
Changyou Begins Open Beta Testing of Duke of Mount Deer
On July 22, 2011, Changyou began open-beta testing of Duke of Mount Deer, Changyou's inhouse-developed 3D fantasy martial-arts massively multi-player online role-playing game. Using two different game engines and the latest 3D rendering technology, the game displays beautifully rendered, cinematic quality graphics, and recreates the imaginary martial arts world from the final book of Louis Cha's popular novel series. The game also features Changyou's self-developed seamless server connectivity technology that, for the first time in a massively multi-player online role-playing game ("MMORPG"), allows gamers to move beyond the server where they originally registered and engage in competitions and social activities with users that are logged in on separate servers. In addition, the game introduces a novel "server vs. server" battle mode that brings communities of users on different servers together to fight against competing teams on other servers for land, resources and dominance over the whole game universe.
Business Outlook
For the third quarter of 2011, Sohu expects:
- Total revenues to be between US$225.0 million and US$230.0 million.
- Online brand advertising revenues to be between US$75.0 million and US$77.0 million. This implies sequential growth of 11% to 14%, and 27% to 30% year-over-year growth.
- Sogou revenues to be around US$16.0 million.
- Total revenues from Changyou to be between US$115.0 million and US$118.0 million, including online game revenues of US$112.0 million to US$114.0 million.
- Before deducting the share of non-GAAP net income pertaining to the Non-controlling Interest, non-GAAP net income to be between US$64.5 million and US$67.0 million.
- Non-GAAP net income attributable to Sohu.com Inc. to be between US$47.0 million and US$49.0 million and non-GAAP fully diluted earnings per share to be between US$1.20 and US$1.25.
- Assuming no new grants of share-based awards, compensation expenses and income tax expenses relating to share-based awards to be around US$4.0 million to US$4.8 million. The estimated impact of this expense is expected to reduce Sohu's fully diluted earnings per share for the third quarter of 2011, under US GAAP, by 10 to 12 cents.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Sohu's management uses non-GAAP measures of cost of revenues, operating expenses, income tax expense, net income and net income per share, which are adjusted from results based on GAAP to exclude the impact of share-based awards granted to employees in the consolidated statements of operations, which consists mainly of share-based compensation expense and non-cash tax benefits from excess tax deductions related to share-based awards. 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 the impact of share-based awards from its non-GAAP financial measure is useful for itself and investors. Further, the impact of share-based awards cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts, which have been the basis for information Sohu provides to analysts and investors as guidance for future operating performance. As the impact of share-based awards does not involve any upfront or subsequent cash outflow, Sohu does not factor this 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 measure for commissions and bonuses are based on non-GAAP financial measures that exclude the impact of share-based awards.
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 cost of revenues, operating expenses, net income and net income per share, excluding the impact of share-based awards, is that the impact of share-based awards has been and will continue to be a significant recurring expense in Sohu's business for the foreseeable future. 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.
Mezzanine Equity consists of non-controlling interests in 7Road and a put option that gives the non-controlling shareholders the right to put their shares to Changyou at a pre-determined price if 7Road achieves specified performance milestones before the expiry of the put option and certain circumstances occur. The put option will expire in 2014. Non-controlling interests of 7Road and the put option are classified as mezzanine equity in Changyou's consolidated balance sheets, as redemption of the non-controlling interests is not solely within the control of Changyou.
In accordance with ASC subtopic 480-10, Changyou accretes the balance of non-controlling interests to its redemption value over the period from the date of the 7Road acquisition to the earliest exercise date of the put right. Any subsequent changes in the redemption value are considered to be changes in accounting estimates and are also recognized over the same period as net income attributable to mezzanine classified non-controlling interests.
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, the current global financial and credit markets crisis and its potential impact on the Chinese economy, the uncertain regulatory landscape in the People's Republic of China, fluctuations in Sohu's quarterly operating results, and Sohu's reliance on online advertising sales, online games and wireless services (most wireless revenues are collected from a few mobile network operators) for its revenues. Further information regarding these and other risks is included in Sohu's annual report on Form 10-K for the year ended December 31, 2010, and other filings with the Securities and Exchange Commission.
Conference Call and Webcast
Sohu's management team will host a conference call on August 1, 2011 (8:30 p.m. Beijing/Hong Kong time, August 1, 2011) at 8:30 a.m. U.S. Eastern Time.
The dial-in details for the live conference call are:
US Toll-Free: +1-866-314-4483
International: +1-617-213-8049
Hong Kong: +852-3002-1672
China Mainland: +86-400-881-1629 / +86-400-881-1630
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 1 through August 8, 2011. The dial-in details for the telephone replay are:
International: +1-617-801-6888
Passcode: 81711413
The live webcast and archive of the conference call will be available on the Investor Relations section of Sohu's website at http://corp.sohu.com/.
About Sohu.com
Sohu.com Inc. (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; #1 games information portal www.17173.com; the top real estate website www.focus.cn; #1 online alumni club www.chinaren.com; wireless value-added services provider www.goodfeel.com.cn; leading online mapping service provider www.go2map.com; and developer and operator of online games www.changyou.com/en/.
Sohu corporate services consist of online brand advertising on its matrix of websites as well as paid listing and bid listing on its in-house developed search directory and engine. Sohu also offers wireless value-added services such as news, information, music, ringtone and picture content sent over mobile phones. Sohu's online game subsidiary, Changyou.com (NASDAQ: CYOU) and its subsidiaries currently operates over 10 online games that mainly includes in-house developed MMORPGs, such as Tian Long Ba Bu, one of the most popular online games in China, and Duke of Mount Deer, as well as web-based games, such as DDTank. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its fifteenth year of operation.
For investor and media inquiries, please contact:
In China:
Mr. James Deng
Sohu.com Inc.
Tel: +86-10-6272-6596
E-mail: ir@contact.sohu.com
Ms. Jenny Wu
Christensen
Tel: +86-10-5826-4939
E-mail: jwu@ChristensenIR.com
In the United States:
Mr. Jeff Bloker
Christensen
Tel: +1-480-614-3003
E-mail: jbloker@ChristensenIR.com
SOHU.COM INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
------------------
Jun. 30, Mar. 31, Jun. 30,
2011 2011 2010
--------- --------- ---------
Revenues:
Online brand
advertising $67,728 $57,153 $53,162
Online games 101,531 94,930 77,721
Sogou search and
start-up page 13,613 7,979 3,872
Wireless 11,645 11,704 11,073
Others 4,188 2,603 269
----- ----- ---
Total revenues 198,705 174,369 146,097
------- ------- -------
Cost of revenues:
Online brand
advertising
(includes stock-
based compensation
expense of $536,
$702, $1,204,
$1,238 and $2,171,
respectively) 25,781 22,445 22,256
Online games
(includes stock-
based compensation
expense of $19,
$33, $43, $52 and
$110,
respectively) 9,950 8,968 7,008
Sogou search and
start-up page
(includes stock-
based compensation
expense of $0, $0,
$0, $0 and $0,
respectively) 6,104 4,877 3,343
Wireless (includes
stock-based
compensation
expense of $0, $0,
$0, $0 and $0,
respectively) 7,109 6,892 5,810
Others (includes
stock-based
compensation
expense of $0, $0,
$1, $0 and $2,
respectively) 4,220 2,670 504
----- ----- ---
Total cost of
revenues 53,164 45,852 38,921
------ ------ ------
Gross profit 145,541 128,517 107,176
Operating expenses:
Product development
(includes stock-
based compensation
expense of $1,421,
$1,772, $2,218,
$3,193 and $4,663,
respectively) 24,858 22,782 16,881
Sales and marketing
(includes stock-
based compensation
expense of $872,
$1,089, $1,176,
$1,961 and $2,131,
respectively) 38,316 30,177 29,606
General and
administrative
(includes stock-
based compensation
expense of $1,568,
$1,672, $1,811,
$3,240 and $3,904,
respectively) 12,982 11,998 9,384
Amortization of
intangible assets 597 192 139
Total operating
expenses 76,753 65,149 56,010
------ ------ ------
Operating profit 68,788 63,368 51,166
Other income/
(expense) 1,479 510 (330)
Interest income and
exchange
difference 1,621 2,293 958
----- ----- ---
Income before
income tax
expenses 71,888 66,171 51,794
Income tax expense 10,281 11,002 6,329
------ ------ -----
Net income 61,607 55,169 45,465
====== ====== ======
Less: Net income
attributable to
the mezzanine
classified
noncontrolling
interest
shareholders 361 - -
Net income
attributable to
the noncontrolling
interest
shareholders 16,981 10,362 12,012
------ ------ ------
Net income
attributable to
Sohu.com Inc. 44,265 44,807 33,453
====== ====== ======
Basic net income
per share
attributable to
Sohu.com Inc. $1.16 $1.17 $0.88
===== ===== =====
Shares used in
computing basic
net income per
share attributable
to Sohu.com Inc. 38,295 38,193 37,822
====== ======
Diluted net income
per share
attributable to
Sohu.com Inc. $1.10 $1.01 $0.82
===== ===== =====
Shares used in
computing diluted
net income per
share attributable
to Sohu.com Inc. 38,860 38,767 38,289
====== ====== ======
Six Months Ended
----------------
Jun. 30, Jun. 30,
2011 2010
--------- ---------
Revenues:
Online brand advertising $124,881 $92,674
Online games 196,461 149,793
Sogou search and start-up page 21,592 6,696
Wireless 23,349 24,361
Others 6,791 2,027
----- -----
Total revenues 373,074 275,551
------- -------
Cost of revenues:
Online brand advertising
(includes stock-based
compensation expense of $536,
$702, $1,204, $1,238 and $2,171,
respectively) 48,226 39,539
Online games (includes stock-
based compensation expense of
$19, $33, $43, $52 and $110,
respectively) 18,918 12,392
Sogou search and start-up page
(includes stock-based
compensation expense of $0, $0,
$0, $0 and $0, respectively) 10,981 6,096
Wireless (includes stock-based
compensation expense of $0, $0,
$0, $0 and $0, respectively) 14,001 12,721
Others (includes stock-based
compensation expense of $0, $0,
$1, $0 and $2, respectively) 6,890 999
----- ---
Total cost of revenues 99,016 71,747
------ ------
Gross profit 274,058 203,804
Operating expenses:
Product development (includes
stock-based compensation
expense of $1,421, $1,772,
$2,218, $3,193 and $4,663,
respectively) 47,640 32,399
Sales and marketing (includes
stock-based compensation
expense of $872, $1,089, $1,176,
$1,961 and $2,131, respectively) 68,493 52,615
General and administrative
(includes stock-based
compensation expense of $1,568,
$1,672, $1,811, $3,240 and
$3,904, respectively) 24,980 19,267
Amortization of intangible assets 789 247
Total operating expenses 141,902 104,528
------- -------
Operating profit 132,156 99,276
Other income/(expense) 1,989 (355)
Interest income and exchange
difference 3,914 2,157
----- -----
Income before income tax expenses 138,059 101,078
Income tax expense 21,283 14,292
------ ------
Net income 116,776 86,786
======= ======
Less: Net income attributable to
the mezzanine classified
noncontrolling interest
shareholders 361 -
Net income attributable to the
noncontrolling interest
shareholders 27,343 23,142
------ ------
Net income attributable to
Sohu.com Inc. 89,072 63,644
====== ======
Basic net income per share
attributable to Sohu.com Inc. $2.33 $1.68
===== =====
Shares used in computing basic
net income per share
attributable to Sohu.com Inc. 38,245 37,800
Diluted net income per share
attributable to Sohu.com Inc. $2.11 $1.54
===== =====
Shares used in computing diluted
net income per share
attributable to Sohu.com Inc. 38,814 38,366
====== ======
Note:
(a) Certain amounts from prior periods have been reclassified to
conform with current period presentation.
SOHU.COM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
As of Jun 30, As of Dec 31,
2011 2010
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $718,055 $678,389
Short term investments 16,070 -
Investment in debt securities 77,280 75,529
Accounts receivable, net 85,998 62,603
Prepaid and other current
assets 27,124 19,646
------ ------
Total current assets 924,527 836,167
------- -------
Fixed assets, net 134,297 120,627
Goodwill 176,562 67,761
Intangible assets, net 67,021 17,308
Prepaid non-current assets 151,412 137,999
Other assets 6,487 7,728
Total assets $1,460,306 $1,187,590
========== ==========
LIABILITIES
Current liabilities:
Accounts payable $25,177 $5,940
Accrued liabilities 75,923 65,229
Receipts in advance and
deferred revenue 57,392 51,513
Accrued salary and benefits 39,210 35,409
Taxes payable 26,154 31,719
Other short-term liabilities 25,376 21,862
Contingent consideration 13,978 -
Total current liabilities $263,210 $211,672
-------- --------
Long-term accounts payable 1,727 -
Deferred tax liabilities 4,718 -
Contingent consideration 15,646 1,359
Total long-term liabilities $22,091 $1,359
------- ------
Total liabilities $285,301 $213,031
-------- --------
MEZZANINE EQUITY 53,577 -
SHAREHOLDERS' EQUITY:
Sohu.com Inc. shareholders'
equity 903,390 796,117
Noncontrolling Interest 218,038 178,442
------- -------
Total shareholders' equity $1,121,428 $974,559
---------- --------
Total liabilities, mezzanine
equity and shareholders'
equity $1,460,306 $1,187,590
Note:
(a) Certain amounts from prior periods have been reclassified to
conform with current period presentation.
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Three Months Ended Jun.
30, 2011
Non-
GAAP GAAP (a) Non-GAAP
---- Adjustments --------
-----------
Online brand advertising
revenues $67,728 $ - $67,728
Less: Cost of online
brand advertising
revenues 25,781 (536) 25,245
------ ---- ------
Online brand advertising
gross profit $41,947 $536 $42,483
======= ==== =======
Online brand advertising
gross margin 62% 63%
=== ===
Online games revenues $101,531 $ - $101,531
Less: Cost of online
games revenues 9,950 (19) 9,931
----- --- -----
Online games gross
profit $91,581 $19 $91,600
======= === =======
Online games gross
margin 90% 90%
=== ===
Sogou search and start-
up page revenues $13,613 $ - $13,613
Less: Cost of Sogou
search and start-up
page revenues 6,104 - 6,104
----- --- -----
Sogou search and start-
up page gross profit $7,509 $ - $7,509
====== === ======
Sogou search and start-
up page gross margin 55% 55%
=== ===
Wireless revenues $11,645 $ - $11,645
Less: Cost of wireless
revenues 7,109 - 7,109
----- --- -----
Wireless gross profit $4,536 $ - $4,536
====== === ======
Wireless gross margin 39% 39%
=== ===
Others revenues $4,188 $ - $4,188
Less: Cost of others
revenues 4,220 - 4,220
----- --- -----
Others gross profit $(32) $ - $(32)
==== === ====
Others gross margin (1%) (1%)
==== ====
Total revenues $198,705 $ - $198,705
Less: Total cost of
revenues 53,164 (555) 52,609
------ ---- ------
Gross profit $145,541 $555 $146,096
======== ==== ========
Gross margin 73% 74%
=== ===
Operating expenses $76,753 $(3,861) $72,892
------- ------- -------
Operating profit $68,788 $4,416 $73,204
======= ====== =======
Operating margin 35% 37%
=== ===
Income tax expense
/(benefit) $10,281 $(934) $9,347
------- ----- ------
Net income before
noncontrolling interest $61,607 $5,350 $66,957
======= ====== =======
Net income attributable
to Sohu.com Inc. for
basic net income per
share $44,265 $4,849 $49,114
======= ====== =======
Net income attributable
to Sohu.com Inc. for
diluted net income per
share (b) $42,693 $4,698 $47,391
======= ====== =======
Diluted net income per
share attributable to
Sohu.com Inc. $1.10 $1.21
===== =====
Shares used in computing
diluted net income per
share attributable to
Sohu.com Inc. 38,860 39,105
====== ======
Three Months Ended Mar. 31,
2011
GAAP Non-GAAP (a) Non-GAAP
---- Adjustments --------
-----------
Online brand advertising
revenues $57,153 $ - $57,153
Less: Cost of online
brand advertising
revenues 22,445 (702) 21,743
------ ---- ------
Online brand advertising
gross profit $34,708 $702 $35,410
======= ==== =======
Online brand advertising
gross margin 61% 62%
=== ===
Online games revenues $94,930 $ - $94,930
Less: Cost of online
games revenues 8,968 (33) 8,935
----- --- -----
Online games gross
profit $85,962 $33 $85,995
======= === =======
Online games gross
margin 91% 91%
=== ===
Sogou search and start-
up page revenues $7,979 $ - $7,979
Less: Cost of Sogou
search and start-up
page revenues 4,877 - 4,877
----- --- -----
Sogou search and start-
up page gross profit $3,102 $ - $3,102
====== === ======
Sogou search and start-
up page gross margin 39% 39%
=== ===
Wireless revenues $11,704 $ - $11,704
Less: Cost of wireless
revenues 6,892 - 6,892
----- --- -----
Wireless gross profit $4,812 $ - $4,812
====== === ======
Wireless gross margin 41% 41%
=== ===
Others revenues $2,603 $ - $2,603
Less: Cost of others
revenues 2,670 - 2,670
----- --- -----
Others gross profit $(67) $ - $(67)
==== === ====
Others gross margin (3%) (3%)
==== ====
Total revenues $174,369 $ - $174,369
Less: Total cost of
revenues 45,852 (735) 45,117
------ ---- ------
Gross profit $128,517 $735 $129,252
======== ==== ========
Gross margin 74% 74%
=== ===
Operating expenses $65,149 $(4,533) $60,616
------- ------- -------
Operating profit $63,368 $5,268 $68,636
======= ====== =======
Operating margin 36% 39%
=== ===
Income tax expense
/(benefit) $11,002 $(173) $10,829
------- ----- -------
Net income before
noncontrolling interest $55,169 $5,441 $60,610
======= ====== =======
Net income attributable
to Sohu.com Inc. for
basic net income per
share $44,807 $4,908 $49,715
======= ====== =======
Net income attributable
to Sohu.com Inc. for
diluted net income per
share (b) $39,336 $4,675 $44,011
======= ====== =======
Diluted net income per
share attributable to
Sohu.com Inc. $1.01 $1.13
===== =====
Shares used in computing
diluted net income per
share attributable to
Sohu.com Inc. 38,767 39,097
====== ======
Three Months Ended Jun. 30,
2010
GAAP Non-GAAP (a) Non-GAAP
---- Adjustments --------
-----------
Online brand advertising
revenues $53,162 $ - $53,162
Less: Cost of online
brand advertising
revenues 22,256 (1,204) 21,052
------ ------ ------
Online brand advertising
gross profit $30,906 $1,204 $32,110
======= ====== =======
Online brand advertising
gross margin 58% 60%
=== ===
Online games revenues 77,721 - 77,721
Less: Cost of online
games revenues 7,008 (43) 6,965
----- --- -----
Online games gross
profit $70,713 43 70,756
======= === ======
Online games gross
margin 91% 91%
=== ===
Sogou search and start-
up page revenues $3,872 - 3,872
Less: Cost of Sogou
search and start-up
page revenues 3,343 - 3,343
----- --- -----
Sogou search and start-
up page gross profit $529 - 529
==== === ===
Sogou search and start-
up page gross margin 14% 14%
=== ===
Wireless revenues $11,073 - 11,073
Less: Cost of wireless
revenues 5,810 - 5,810
----- --- -----
Wireless gross profit $5,263 - 5,263
====== === =====
Wireless gross margin 48% 48%
=== ===
Others revenues $269 - 269
Less: Cost of others
revenues 504 (1) 503
--- --- ---
Others gross profit $(235) 1 (234)
===== === ====
Others gross margin (87%) (87%)
===== =====
Total revenues $146,097 $ - $146,097
Less: Total cost of
revenues 38,921 (1,248) 37,673
------ ------ ------
Gross profit $107,176 $1,248 $108,424
======== ====== ========
Gross margin 73% 74%
=== ===
Operating expenses $56,010 $(5,205) $50,805
------- ------- -------
Operating profit $51,166 6,453 57,619
======= ===== ======
Operating margin 35% 39%
=== ===
Income tax expense
/(benefit) $6,329 (624) 5,705
------ ---- -----
Net income before
noncontrolling interest $45,465 7,077 52,542
======= ===== ======
Net income attributable
to Sohu.com Inc. for
basic net income per
share $33,453 6,511 39,964
======= ===== ======
Net income attributable
to Sohu.com Inc. for
diluted net income per
share (b) $31,265 $6,187 $37,452
======= ====== =======
Diluted net income per
share attributable to
Sohu.com Inc. $0.82 $0.96
===== =====
Shares used in computing
diluted net income per
share attributable to
Sohu.com Inc. 38,289 39,037
====== ======
Note:
(a) To eliminate the impact of share-based awards as measured using
the fair value method.
(b) To adjust Sohu's economic interest in Changyou and Sogou under
the treasury stock method and if-converted method, respectively.
(c) Certain amounts from prior periods have been reclassified to
conform with current period presentation.
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Six Months Ended Jun. 30, 2011
GAAP Non-GAAP (a) Non-GAAP
---- Adjustments --------
-----------
Online brand advertising
revenues $124,881 $ - $124,881
Less: Cost of online
brand advertising
revenues 48,226 (1,238) 46,988
------ ------ ------
Online brand advertising
gross profit $76,655 $1,238 $77,893
======= ====== =======
Online brand advertising
gross margin 61% 62%
=== ===
Online games revenues $196,461 - 196,461
Less: Cost of online
games revenues 18,918 (52) 18,866
------ --- ------
Online games gross profit $177,543 52 177,595
======== === =======
Online games gross margin 90% 90%
=== ===
Sogou search and start-
up page revenues $21,592 - 21,592
Less: Cost of Sogou
search and start-up
page revenues 10,981 - 10,981
------ --- ------
Sogou search and start-
up page gross profit $10,611 - 10,611
======= === ======
Sogou search and start-
up page gross margin 49% 49%
=== ===
Wireless revenues $23,349 - 23,349
Less: Cost of wireless
revenues 14,001 - 14,001
------ --- ------
Wireless gross profit $9,348 - 9,348
====== === =====
Wireless gross margin 40% 40%
=== ===
Others revenues $6,791 - 6,791
Less: Cost of others
revenues 6,890 - 6,890
----- --- -----
Others gross profit $(99) - (99)
==== === ===
Others gross margin (1%) (1%)
==== ====
Total revenues $373,074 $ - $373,074
Less: Total cost of
revenues 99,016 (1,290) 97,726
------ ------ ------
Gross profit $274,058 $1,290 $275,348
======== ====== ========
Gross margin 73% 74%
=== ===
Operating expenses $141,902 $(8,394) $133,508
-------- ------- --------
Operating profit $132,156 9,684 141,840
======== ===== =======
Operating margin 35% 38%
=== ===
Income tax expense
/(benefit) $21,283 (1,107) 20,176
------- ------ ------
Net income before
noncontrolling interest $116,776 10,791 127,567
======== ====== =======
Net income attributable
to Sohu.com Inc. for
basic net income per
share $89,072 9,757 98,829
======= ===== ======
Net income attributable
to Sohu.com Inc. for
diluted net income per
share (b) $82,029 $9,373 $91,402
======= ====== =======
Diluted net income per
share attributable to
Sohu.com Inc. $2.11 $2.34
===== =====
Shares used in computing
diluted net income per
share attributable to
Sohu.com Inc. 38,814 39,102
====== ======
Six Months Ended Jun. 30, 2010
GAAP Non-GAAP (a) Non-GAAP
---- Adjustments --------
-----------
Online brand advertising
revenues $92,674 $ - $92,674
Less: Cost of online
brand advertising
revenues 39,539 (2,171) 37,368
------ ------ ------
Online brand advertising
gross profit $53,135 $2,171 $55,306
======= ====== =======
Online brand advertising
gross margin 57% 60%
=== ===
Online games revenues 149,793 - 149,793
Less: Cost of online
games revenues 12,392 (110) 12,282
------ ---- ------
Online games gross profit 137,401 110 137,511
======= === =======
Online games gross margin 92% 92%
=== ===
Sogou search and start-
up page revenues 6,696 - 6,696
Less: Cost of Sogou
search and start-up
page revenues 6,096 - 6,096
----- --- -----
Sogou search and start-
up page gross profit 600 - 600
=== === ===
Sogou search and start-
up page gross margin 9% 9%
=== ===
Wireless revenues 24,361 - 24,361
Less: Cost of wireless
revenues 12,721 - 12,721
------ --- ------
Wireless gross profit 11,640 - 11,640
====== === ======
Wireless gross margin 48% 48%
=== ===
Others revenues 2,027 - 2,027
Less: Cost of others
revenues 999 (2) 997
--- --- ---
Others gross profit 1,028 2 1,030
===== === =====
Others gross margin 51% 51%
=== ===
Total revenues $275,551 $ - $275,551
Less: Total cost of
revenues 71,747 (2,283) 69,464
------ ------ ------
Gross profit $203,804 $2,283 $206,087
======== ====== ========
Gross margin 74% 75%
=== ===
Operating expenses $104,528 $(10,698) $93,830
-------- -------- -------
Operating profit 99,276 12,981 112,257
====== ====== =======
Operating margin 36% 41%
=== ===
Income tax expense
/(benefit) 14,292 (1,155) 13,137
------ ------ ------
Net income before
noncontrolling interest 86,786 14,136 100,922
====== ====== =======
Net income attributable
to Sohu.com Inc. for
basic net income per
share 63,644 12,735 76,379
====== ====== ======
Net income attributable
to Sohu.com Inc. for
diluted net income per
share (b) $59,192 $12,029 $71,221
======= ======= =======
Diluted net income per
share attributable to
Sohu.com Inc. $1.54 $1.82
===== =====
Shares used in computing
diluted net income per
share attributable to
Sohu.com Inc. 38,366 39,058
====== ======
Note:
(a) To eliminate the impact of share-based awards as measured using
the fair value method.
(b) To adjust Sohu's economic interest in Changyou and Sogou under
the treasury stock method and if-converted method, respectively.
(c) Certain amounts from prior periods have been reclassified to
conform with current period presentation.
SOURCE Sohu.com Inc.
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