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spk00: Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining Sohu's fourth quarter 2023 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. I'll now like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu. Please go ahead.
spk04: Thanks, operator. Thank you for joining us to discuss Sohu's fourth quarter 2023 results. On the call are Chairman and Chief Executive Officer Dr. Charles Zhang, CFO John Lee, and Vice President of Finance James Dunn. Also with us are Chang Youth CEO Du Wenchuan and CFO Bing Wang. Before management begins their prepared remarks, I would like to remind you of the conference safe harbor statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed on this call may contain forelooking statements. These statements are based on current plans, estimates, and projections, and therefore, you should not place undue reliance on them. Forelooking statements involve inherent risks and uncertainties. We caution you that A number of important factors could cause X results to differ materially from those contained in any full written statement. For more information about the potential risks and uncertainties, please refer to the Commerce Filings with the Security and Exchange Commission, including the most recent annual report on Form 20F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.
spk02: Thanks, Huangpu. And thank you, everyone, for joining our call. In the fourth quarter and the full year of 2023, we continue to optimize operating efficiency with strict budget control. Despite the external economic environment and the cautious budgeting by advertisers, thanks to these efforts, our bottom line performance hit the high end of our guidance for the fourth quarter of 2023. At Sohu Media Portal, we further refined our products upgraded technology and expanded premium content offerings, resulting in an enhanced user experience. At Soho Video, we continue to execute our Twin Engine strategy by developing engaging long and short-form content. In addition to the social network distribution of short-form content, We also worked hard on science-based live broadcasting and other live broadcasting events, which further boosted user interactions and engagement on our platforms. We also proactively explored diversified monetization opportunities by integrating our advantageous resources and hosting various content marketing campaigns with our unique IPs. Lastly, our online game business remained stable, delivering revenues in line with our expectations. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the fourth quarter of 2023, total revenues $141 million, down 12% year over year and 3% quarter over quarter. Brand advertising revenues, $20 million, down 30% year-over-year, and 9% quarter-over-quarter. Online game revenues, $115 million, down 5% year-over-year, and 2% quarter-over-quarter. Gas net loss attributable to Soho.com Limited, $13 million, compared with a loss of $7 million in the fourth quarter of 2022, and a net loss of $14 million in the third quarter of 2023. Non-GAAP net loss attributable to Soho.com Limited was $11 million, compared with a net loss of $2 million in the fourth quarter of 2022, and a net loss of $10 million in the third quarter of 2023. For the full year of 23, total revenues $601 million, down 18% compared with 2022. Brand advertising revenues $89 million, down 14% compared with 2022. Online game revenues $480 million, down 18% compared with 2022. Gap net loss attributable to SOHO.com Limited was $66 million compared with a net loss of $17 million in 2022. Non-gap net loss attributable to SOHO.com Limited was $51 million compared with net income of $2 million in 2020. Now I will go through our key businesses in more detail. First, Media Portal and Soho Video. At Soho Media Portal in 2023, we focus on improving the user experience through algorithms and products optimization. We continue to refine our operations, expand our premium content offerings, and diversify their delivery formats. which resulted in stable user metrics and user stickiness. Simultaneously, we also focused on the generation and distribution of premium content. While driving the content consumptions, we continuously enhanced the social features, social network features, which not only enhanced interactions between users, but also stimulated the generation and social distribution of more high-quality content. As Sohu Video, we continue to execute our Twin Engine strategy to expand and diversify our offerings across different formats, including live streaming content. In 2023, we released several original content, including the crime-themed idol romance drama Love of Replica, 为你逆光而来, Reality Shows, This Is Me, 这样的你, and Hi Summer, Friends, 属于我们的夏天, and . These series have generated widespread discussions across various social media platforms. For short format and live streaming, we reinforced our leading position in knowledge and science-related live streaming with IT, Charles' physics class. leading the way since the launch of the health physics class in November 2021. The class has livestreamed over 200 online live broadcasts, held more than 20 offline seminars, and published two science books, and a third one is coming, forming a continuous multidimensional dissemination We launched a series of online and offline child physics class during the quarter, attracting millions of viewers of all ages, especially the youngsters, younger generation across different platforms. These further consolidated our position and unique competitive advantages in the popular science and knowledge dissemination verticals and demonstrated an upward value in our commitment to being a socially responsible media platform. We also proactively promoted the social distribution features and enhanced the broadcaster's ecosystem by hosting various events centered on hot topics. In the fourth quarter of 2023, we successfully hosted the 2023 Sohu Dancing Festival, the K-pop, and 2023 Sohu Hanfu Festival, These live broadcasting events brought together users with common interests to our platform, enhancing the vitality and engagement within our user community online and offline. On the monetization side, despite Advertisers' cautious approach, we explored monetization opportunities by strategically integrating resources across our product metrics. Empowered by our distinctive IP, the physics class, we hosted various innovative content marketing campaigns such as Talk Under the Starry Sky and Talk on Top of Snow Mountain, which served as a continuous source of premium content and sparked discussions and disseminations across multiple platforms. These events gained widespread recognition from advertisers, significantly expanding our monetization abilities and highlighted our competitive advantage. Besides these innovative events, we also continue to host our traditional flagship events, such as Soho Finance Ending Forum, Soho Fashion Awards, and leveraging these high-profile events we were able to better meet advertisers' needs and further consolidate our influence and differentiated advantages as a mainstream media platform. Next, turning to the online game business. During the fourth quarter of 2023, online game revenues were in line with our expectations. Within our PC game business, we revamped the skill sets of each clan in regular TLBB PC to highlight their respective characteristics and allow players to combine skills more freely. With TLBB Vintage, we introduced a new gear and a related development system to enrich players' battle strategies. In our mobile game business, we upgraded character attributes and many other aspects a major clan in legacy TLBB mobile, which helped to increase player engagement. Next quarter, we will launch expansion packs and the content updates for the TLBB series and other titles to keep players engaged. Our top games strategy will continue to guide us going forward as gaming technology rapidly advances and the market demand becomes deeper and more diversified. We will creatively explore new ways to better meet players' needs, expand our portfolio for international markets, allocate additional resources to professional talent development, and invest in content and technology innovation to bring more high-quality games to the market. We will maintain our core competitiveness in developing MMORPGs going forward. We are also producing card-based RPGs sports games and casual games. Before I pass the call to Joanna to go through our financial results in detail, we are pleased to announce that on March 2nd, a few days ago, 2024, our board of directors authorized an increase in SOHO's previously announced share purchase program from up to $80 million to up to $150 million of the outstanding ADS shares of Soho over a two-year period. As of February 29th, 2024, Soho had repurchased approximately 1.3 million ADS under the Share Repurchase Program for an aggregate cost of approximately $12 million. With that, I will now turn the call over to Joanna. Joanna, please.
spk05: Thank you, Charles. I will now walk you through the key financials of our major segments for the fourth quarter and the full year of 2023. All the numbers on a non-GAAP basis. You may find a reconciliation for non-GAAP to GAAP measures on our website. For social media portal, quarterly revenues were $16 million. compared with revenues $71 million in the same quarter last year. The quarterly operating loss was $36 million, compared with the operating loss $33 million in the same quarter last year. For the full year 2023, social media portal revenues were $66 million, compared with revenues $77 million in 2022. The full year operating loss was $139 million compared with operating loss $161 million in 2022. For SOHO video, quarterly revenues were $9 million compared with revenue $16 million in the same quarter last year. Quarterly operating loss was $32 million compared with operating loss $21 million in the same quarter last year. For the full year 2023, full video revenues was $47 million, compared with revenues $63 million in 2022. Full year operating loss was $130 million, compared with operating loss $99 million in 2022. For child's online game business and 17173, quarterly revenues were $116 million, compared with revenues $122 million in the same quarter last year. Quarterly operating profit was $47 million, compared with an operating profit of $54 million in the same quarter last year. For the full year 2023, Chaoyang's online game business and 17173 revenues were $485 million, compared with revenue of $592 million in 2022. The full year operating profit was $203 million, compared with an operating profit of $282 million in 2022. For the first quarter of 2024, we expect brand advertising revenues to be between $50 million and $70 million. This implies an annual decrease of 25% to 33% and a sequential decrease of 15% to 26%. Unlike in revenues, to be between $110 million and $120 million. This implies an annual decrease of 7% to 15% and a sequential decrease of 4% and a sequential increase of 5%. Now gap debt loss attributable to SOHO.com Limited to be between $23 million and $33 million. And the gap debt loss attributable to SOHO.com Limited to be between $26 million and $36 million. This forecast reflects management's current and preliminary view which is subject to substantial uncertainty. This concludes our prepared remarks. Operator, we would now like to open the call to questions.
spk00: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 11 on your telephone. If you wish to cancel requests, please press the star 11 again. One moment for the first question. Our first question comes from the line of Thomas Chong of Jefferies. Please go ahead.
spk01: Hi, good evening. Thanks, management, for taking my question. I have two questions. My first question is about our thoughts about the impact of macro headwind to the advertising market in 2024. And for SOHO brand advertising, How's the trend so far across auto, FMCG, internet services, and property sectors? And my second question is about our capital allocation strategies. What makes us increase the authorized amount from $18 million to $115 million as we purchase only about $12 million as of the end of February? Thank you.
spk02: So your first question is about the advertising trend. So the macroeconomic situation is not that good. It will trend down, basically. The advertisers are being cautious in their budgets. So our exposure to real estate is really small. So the property market, property advertising is not a lot. We'll see a continued percentage of advertisers. Industries are number one in the auto and the internet services, and FMCG is the three sectors. But it's trending down. Yes, we increased the repurchase from 80 million to 150 million. We've been able to repurchase $1 million so far due to, you know, there's limitation to daily volumes. That's why we would like to complete them all, you know, but it takes time because daily volume is really low. Yeah. Did I answer your question?
spk00: Hello, Thomas. Your line is still open. If you have any follow-up questions, please ask ahead.
spk01: Yes, thank you.
spk00: Thank you for the questions. Once again, if you'd like to ask questions, please press star 11. Next question comes from Alicia Yap from Citigroup. Please go ahead.
spk03: Hi, can you hear me? Okay. Hi, management.
spk00: Yeah.
spk03: Yeah. Hi, thank you, Charles. Good evening. I have a couple questions. First is that your first quarter guidance, I think the advertising came a little bit softer than our estimate. Can you elaborate a little bit the current macro environment that you have seen? and the advertiser budget sentiment, is that being trending weaker than you previously expected, or is it in line with what you are expecting? And then do you expect the macro to turn better in the second half this year, or do you think the weak macro could last a little bit longer? And then second question is on your loss guidance. If we are keeping some of the cost of revenue I mean, the cost of revenue for online advertising, you know, does that suggest that the gross profit for online advertising in the first quarter could be actually negative? Just kind of a little bit color, like how you guided so much wider on the loss. And then lastly, on the share buyback, is there any reason the buyback pace during the quarter has been a little bit slow? Is that the limit on the daily trading volume? Or is it a predetermined price that prevent you from getting more aggressive? Thank you.
spk02: Yeah, I think the, yeah, I think the the other planning market seems is trending even down faster than we expected, right? Is that we can see that? And also this year's Spring Festival, the Chinese New Year is kind of February 10th. It's a little later than last year, right? So people are, most of the Q1, people are in holidays. So many of the companies or our advertisers, they're just, you know, they start to plan for the year only after, the after the Chinese New Year and after, you know, the after the 15th of the year. So that's why we only started talking to these advertisers last few days, you know, because they all came back to work. And that's why Q1 is even a slower quarter compared with Q1 of last year. So, it seems I don't see any, you know, definitely the seasonality definitely will not be, no problem with Q2, right? There's no seasonality issues. Q2 is normally, is a strong quarter for advertising, but But the macroeconomy situation seems not improving in the near future, right? So we expect not much improvement. But definitely will be better than Q1 because of seasonality. And also, I hope to do it better because we have some also some continue our effective and innovative marketing campaigns that bring . Cost of revenue or gross profit widening because our current goal or our ambition is really to have strong products and attrition of basically to develop a large user base. And with the cash we have, We're still fighting, we're not retreating or we're still fighting. We need to develop user bases so that in the coming years, months or year, we're spending more on marketing and on building our products and the video social network and live streaming, user generated products. So that explains that we have forecast a wider loss for Q2. Share-rich purchase pace is purely due to the daily volume limitation. It's not the price target. No, we don't have a tight price target. to limit the purchase.
spk03: OK, thank you, Charles. Yeah, thank you, Charles.
spk00: Thank you for the questions. Once again, to ask questions, please press star 11. There are no further questions at this time. I'd like to conclude the call. Thank you for participating to the conference call. You may now disconnect your lines.
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