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spk09: Ladies and gentlemen, thank you for standing by and good evening. Thank you for Jingxiu Hu's third quarter 2020 earnings conference call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. And I'd like to turn the conference over to your host for today's conference, Cole Huangpu, Investor Relations Director of SOHO. Please go ahead.
spk08: Thanks, operator. Thank you for joining us today to discuss SOHO Super Quarters 2020 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang, CFO Joanna Liu, and the Vice President of Finance, James Dunn. Also with us today are Chang Youth CEO Duowen Chen and CFO Yaobing Wang. Before management begins their prepared remarks, I would like to remind you of the comprehensive Harvard statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed on this conference call may contain full looking statements. These statements are based on current plans, estimates, and projections, and therefore you should not place any reliance on them. Full-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 full-looking statement. For more information about the potential risks and uncertainties, please refer to the complex findings with the Securities and Exchange Commission, including the most recent annual report on Form 20-F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.
spk03: In the third quarter 2020 to further consolidate our core competitiveness and credibility, we continued to optimize our products, refine our technology, enhance the quality of premium content and improve its distribution. At the same time, we kept exploring creative, new, and differentiated monetization opportunities. Benefiting from our more mature and sophisticated Sohu video app and its advanced live broadcasting technology, we successfully hosted many innovative content marketing campaigns that could leverage the broad reach of our product portfolio. We saw positive feedback in terms of user interaction and from advertisers. So for this quarter, despite the current challenging macroeconomic environment, our brand advertising revenue reached the high end of our prior guidance and achieved an 8% quarter-over-quarter growth. Our game business Changyou's online games performed well for the third quarter of 2020. with revenue exceeding the high end of our prior guidance. So before I go into more detail about our key financial goals, please be reminded that on September 29th, 2020, our controlled subsidiary of Sogo and the subsidiary of Tencent entered into an agreement and a plan of merger which contemplates that Sogo will become a wholly owned subsidiary of Tencent. On the same date, we entered into a share purchase agreement in which we agreed to sell all of our Sogo Class A and Class B ordinary shares to Tencent shortly before the completion of the merger transaction between Tencent and Sogo. Accordingly, Sogo's results of operations have been excluded from the company's results from continuing Retrospective adjustments to the historical statements have been made in order to provide a consistent basis of comparison. And let's indicate otherwise, the results that we talk about here are related to continuing operations only. So for the third quarter of 2020, total revenues, $158 million, down 6% year-over-year and 1% quarter over quarter. Brand advertising revenues, $41 million, down 11% year over year and up 8% quarter over quarter. Online game revenues were $101 million, down 60% year over year and 4% quarter over quarter. Gap net loss from continuing operations attributable to Sohu Limited, Sohu.com Limited was 15 million US dollars compared with a net loss of 33 million US dollars in the third quarter of 2019 and net loss of 77 million US dollars in the second quarter of 2020, but that was due to the tax planning. Non-GAAP net loss from continuing operations attributable to SOHO.com Limited was net loss of $7 million, compared with the net loss of $30 million in the third quarter last year, and net loss of $75 million in the second quarter 2020. Now let me go into each key business. first media portal and Soho Video. So we continue to upgrade our products, improve the technology, and refine social distribution features. We stimulated the generation of new content and further expanded our content dissemination. User interaction was enhanced on both the Soho News app and the Soho Video app. We're constantly looking for new ways to boost organic growth across our products. while strictly controlling the budget. In addition to video, we further strengthened our two engine strategy with long form and short form videos and accelerated the layout of value live streaming where we disseminate professional knowledge and the reliable information across various vertical areas. We continue to concentrate on improving our live streaming technology and have applied these advanced technologies to various events which allow users to interact with each other in real time and without upper limit of user numbers. During the quarter, we successfully hosted a number of flagship events such as the Sixth International Drone Photography Contest, Huyo Campus Beauty Contest, Best Selection Series, live streaming e-commerce basically, and others with our enhanced video sharing technology. We not only stimulated online and offline interaction among viewers, but also enhanced the generation of high quality content and improved distribution across the sellers. On the monetization side, and with these technologies and the more mature Soku Video app, we proactively explored new monetization opportunities and increased our monetization efficiency. Featured as value streaming, live streaming, and live commerce, Zhibo Dai Huo provided a new way for the advertisers to promote their brand and stimulate sales. Under the live commerce, we share ideas, knowledge, and thoughts about lifestyle while recommending premium products. We're able to meet advertisers' marketing demands and capture their attention and budgets. So going forward, we'll continue to diversify our monetization strategies and actively explore new opportunities. Now let me turn to Changyou Game Business. For the third quarter of 2020, Changyou's online games performed well. For PC games, Changyou launched this year's second in-game promotional event and various holiday events for TLBB PC. which maintained user engagement and the game's revenue remained stable on a sequential basis. For mobile games, Changyou launched a new expansion pack for legacy TLVB mobile, featuring the addition of new clan and new method of character development. Next quarter, Changyou will continue to focus on maintaining user stability by updating game content and making optimization for TLBB PC and Alexa TLBB Mobile. More recently, in October, Changyou rolled out some special servers for TLBB PC that use the content from an old version of the game. It has already attracted some players that we lost over the years who love the game and feel nostalgic for their experience from years ago. We expect these new servers will drive up revenue for TLB-BPC by some extent in the fourth quarter. Looking ahead, Chang'e will firmly execute its core strategy of top games. Chang'e's strategic focus will continue to be on MMORPG mobile games while we're also developing and looking to roll out other games across various generals. Currently, the development of several key games is well underway, and we believe Chang'e will bring more quality games to market in the future. Now let me turn to Joanna, our CFO, who works you through our financial results.
spk02: Thank you, Charles. I will work you through the key financials of our major segments for the third quarter of 2020. All of the numbers that I will mention are all on a non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our IR website. For Soho Media Portal, quarterly revenues were $25 million, down 3% year-over-year and up 9% quarter-over-quarter. The quarterly operating loss was $23 million, compared with an operating loss of $31 million in the same quarter last year. For Soho Video, quarterly revenues were $23 million, up 1% year-over-year and 2% quarter-over-quarter. The quarterly operating loss was $12 million, compared with an operating loss of $20 million in the same quarter last year. For Changyou, quarterly revenues, including 17173, were $104 million, down 6% year-over-year and 5% quarter-over-quarter. Chang You posted an operating profit of $33 million compared with $35 million in the same quarter last year. For the fourth quarter of 2020, we expect brand advertising revenues to be between $37 million and $42 million. This implies annual decrease of 11% to an annual increase of 1%. and a sequential decrease of 10% to a sequential increase of 6%. Online game revenues should be between $140 million and $150 million. This implies annual increase of 6% to 14% and a sequential increase of 38% to 48%. Non-GAAP debt income from continuing operations attributable to SOHO.com Limited to be between $50 million and $25 million, and gap net income from continuing operations attributable to SOHO.com Limited to be between $10 million and $20 million. This forecast reflects SOHO's management current and preliminary view, which is subject to substantial uncertainty particularly in view of the potential ongoing impact of COVID-19 virus. Lastly, please be reminded that in the Q&A session, we won't take questions regarding any SoGo business updates or the agreements with Tencent for SoGo's privatization. And this concludes our prepared remarks. Operator, we would now like to open the call to questions.
spk09: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question now, please press star 1 on your telephone and white for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, ladies and gentlemen, if you wish to ask a question now, please press star 1 on your telephone. Your first question comes from the line of Thomas Chong from Jefferies. Please go ahead.
spk00: Hi, good evening. Thanks management for taking my questions. My question is about the brand advertising. Can management comment about the trend for different key categories and how we should think about the momentum in 2021?
spk03: Well, key sector, right? Auto industry, number one, then internet services, followed by real estate. That's the top three categories. Yeah, we achieved a 8% increase quarter over quarter. I mean, yeah. With, you know, this microeconomics, basically a challenging microeconomics, you know, situation by being, you know, with, well, we are having organic growth or stabilized user base, so we are not spending a lot of money on marketing channels and marketing for our products, so, but with this creative marketing event, and actually content generation events and also with live streaming to beaming those events. This is very attractive to brand advertisers. That's the reason why we are able to achieve a advertising revenue growth without spending marketing and sales cost more.
spk09: Thank you. Thank you. Our next question comes from the line of Alicia Yap from CT Group. Please ask your question.
spk04: Thanks. I'm asking a question on behalf of Alicia Yap. For online games, can you remind us the breakdown of PC versus mobile games in the third quarter? and what are the drivers for the strong sequential growth of online games implied on your 4Q guidance? Thank you.
spk03: Basically, in Q3, the division between the PC game and mobile game, right?
spk06: In terms of revenue, PC game accounts for 61% in the third quarter and mobile game 39%. In terms of gross billing cash receipts,
spk07: PC game accounts for 45% and the mobile game accounts for 55%.
spk06: 第四季度遊戲收入上漲主要是因為 天龍當有懷舊版以及夢境連結在韓國上線帶來的收入增長。 In the fourth quarter of the increase, mainly due to TLB PC, actually we launched
spk07: some special servers, like Charles mentioned, that have an old version for its content and attracted some players that we lost over years. And the other reason is we launched a game called Illusion Connect in the South Korean market. Thank you.
spk09: Thank you. Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 now. Your next question comes from the line of Chang Chiu from Foreign Tech Research. Please ask a question.
spk05: Yeah, good evening, management. Your guidance in online games are very encouraging. I just wonder, is that, you know, we are going to a, growth mode for the online games going forward? .
spk07: Yeah, I think currently we can only say the performance of fourth quarter.
spk05: Or maybe can you provide us some, you know, outlook in terms of your pipeline in games? You know, what are you going to do next year? 游戏的排期情况就下一年的这个上限计划。
spk06: Actually, we still have a lot of games in development or on-line. But because of the changes in the game and the number plate, it's not easy to determine the time for the game to be on-line. However, the time for the game to be on-line for the number plate is relatively accurate.
spk07: We have a couple of games that the development is well underway, but the schedule depends on the license approval applying progress and also the testing and their adjustment progress. So it's not very easy to predict the specific launch date. But for those games that we have obtained the license approval, we may have some more specific timing.
spk06: For example, the Sea of Liming and the Russian Square Game will definitely be released next year.
spk07: Two of those are Project Z, Sea of Dawn, Sea of Liming, and also Tetris. We have had license approval. We will launch the two games in the next year.
spk06: In addition, we will increase the number of games released in the overseas market next year.
spk07: Next year, we will also put more effort in the overseas market. We will launch some other new games in the overseas market. Thank you.
spk05: Thanks. That's great.
spk09: Thank you. Our next question comes from the line of Alex Coe from Morgan Stanley. Please ask a question.
spk01: Hi, management, thanks for taking my question. So I have a question on video. So we know that the industry peers have been stepping up for content investment these days. So just want to get more color, like how would the management plan to navigate like this kind of industry trend and like the content investment strategy going forward? Thank you.
spk03: Well, we have, as I just said, we have this two engine strategy with long form content and then short form, basically UGC. So for the long form, our spending on basically to produce a like 12 or at most 15 episodes of drama episodes with the reasonable investment and then make sure that it can again, you know, become a hit with much less spending compared with our peers. So our spending on producing the long-form TV dramas remain similar to the previous year. But for this UGC and also social network, product of video, it's not much. It doesn't need a lot of investment. And also this live streaming, it's user-generated. All the spending are on the product development. Got it. Thank you.
spk09: Thank you. Just a reminder, ladies and gentlemen, to ask a question, please press star 1. There are no further questions. So with that, we conclude our conference for today. Thank you for participating.
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