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Operator
Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining Soho's first quarter 2024 earnings conference call. At this time, all participants are in a 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'd now like to turn the conference over to your host for today's conference, Cole Wang Pu, Investor Relations Director of Sohu. Please go ahead.
Cole Wang Pu
Thanks, Operator. Thank you for joining us to discuss Sohu's fourth quarter 2024 results. On the call are Chairman and Chief Executive Officer Dr. Charles Zhang, CFO Joanna Li, and Vice President of Finance James Dong. Also with us are Changyue CEO Deng Wenquan and CFO Bing Wang. Before management begins their preparatory remarks, I would like to remind you of the common safe harbor statement in connection with today's conference call. Except for the historical information contained here, the matters discussed on this call may contain forwarding statements. These statements are based on current plans, estimates, and projections. And therefore, you should not place undue reliance on them. Forwarding statements involve and uncertainties. We caution you that a number of important factors could cause actual results different materially from those containing any forwarding statements. For more information about the potential risks and uncertainties, please refer to the Commerce Files with the Securities 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.
Charles
Thanks, Huangpu, and thank you everyone for joining our call. In the first quarter of 2024, our top-line performance was in line with our expectations. and our bottom line performance exceeded our guidance, despite the impact of seasonality. For Soho Media and Soho Video, we continue to enhance user experience by refining products and optimizing algorithms. We proactively integrated our product matrix and resources to stimulate content generation, consumption, and social distribution. Meanwhile, leveraging our unique IPs and differentiated advantages, we continued to host various events and campaigns, which not only stimulated users' interaction and content provision on our platforms, but also helped us gain more monetization opportunities. Online games delivered stable performance with revenues in line with our expectations. Before going through each business unit in more detail, let me first give you a quick review of our financial performance. For the first quarter of 2024, total revenues were $139 million, down 14% year-over-year and 1% quarter-over-quarter. Brand advertising revenues were $16 million, down 29% year-over-year and 20% quarter-over-quarter. Online game revenues, $118 million, down 9% year-over-year and up 3% quarter-over-quarter. Gap net loss attributable to SOVO.com Limited was $25 million compared with a net loss of $18 million in the first quarter of last year and a net loss of $30 million in the fourth quarter of last year. Non-gap net loss attributable to SOVO.com Limited was $22 million, compared with a net loss of $13 million in the first quarter of 2023, and a net loss of $11 million in the fourth quarter of 2023. Now, I will go through our key businesses in more detail. First, Sohu Media and Sohu Video. We continue to improve our products, upgrade algorithms, enhance the user experience during the quarter, We deeply integrated the Soho News and Soho Video apps to allow users to generate and distribute premium content across both platforms simultaneously. This resulted in a substantial addition of high quality content to our product matrix, which in turn drove even greater content consumption and distribution. We held a variety of offline campaigns and continue to refine operations of online interest clubs in various verticals. As a result, our user matrix and interactions have steadily increased. In this quarter, we hosted various events to improve user engagement and interactions, and further built up a vigorous video social ecosystem, especially among the young generation. We successfully hosted the offline event, 2024 Spring Convention of Sohu Video Influencers, where users and live broadcasters in different verticals came together in person to share their perspectives and interact with each other. This event further fueled broadcasters' overall enthusiasm and the vitality on our platform. During this quarter, we also launched 2024 Sohu Video K-pop Masterclass, which attracted a large number of K-pop fans to participate in our events, generating lots of fascinating K-pop-related content and widespread discussions and distributions across various social media platforms. Besides, we hosted several noteworthy events promoting Hanfu, the traditional Chinese culture, Chinese customs, which also gained a lot of traction and recognition. We have consistently focused on building our unique IPs in the field of knowledge, live broadcasting, and kept exploring innovative monetization opportunities. For example, We integrated Charles' physics class, myself is giving a physics class for the last two years, into the 2024 Beijing International Automobile Exhibition, Beijing ,, which further expanded our brand influence while at the same time increasing our monetization capabilities. To cater to the needs of advertisers, we also adopted a new approach of live exhibition at the 24 China Home Appliance and Consumer Electronics Expo in Shanghai. This not only allowed audiences to gain a deeper understanding of the product and help advertisers to achieve better marketing outcomes, but it also highlighted the unique monetization value we offer. Going forward, we will continue to leverage the advantages of Sohu product matrix to provide differentiated marketing solutions for advertisers and drive advertising budgets. Next, turning to online game business. During the quarter, online game ad revenues were in line with our expectations. Winning our PC games business, we rolled out holiday events around Chinese New Year and Valentine's Day, as well as promotional events for regular TLBB PC, which increased players' willingness to pay. In addition to holiday events, we fully upgraded simulation gameplay for TLBB Vintage, which was quite popular among players. In our mobile games business, we launched an expansion pack for Legacy TLBB Mobile to celebrate the Chinese New Year and continue to optimize the skills of each clan which resulted in user engagement stabilizing. Next quarter, we will launch expansion packs and content updates for the TLBB series and other titles to keep the players engaged. For new games, we launched a licensed card-based RPG, New Westworld Journey, in the Chinese mainland on May 16 this month. Its current performance is in line with our expectations. As gaming technology rapidly advances and the market demand becomes deeper and more diversified, under our top game strategy, we will creatively explore new ways to better meet players' needs expand our portfolio for international markets, and continue to invest in professional talent development, as well as content and technology innovation in order to bring more high-quality games to the market. We'll maintain our core competitiveness in developing MMORPGs going forward. We are also producing multiple types of games, including card-based RPGs, sports games, and casual games, et cetera. Now I'd like to give an update on the ongoing share repurchase program. As of May 16, 2024, Soho had repurchased 1.7 million ADS for an aggregate cost of approximately $17 million. With that, I will now turn the call to Joanna Arcefo.
Joanna Arcefo
Thank you, Charles. I will now walk you through the key financials of our major segments for the first quarter of 2024. All the numbers on the land gap basis. You may find the reconciliation of land gap to gap measures on our IR website. For Soku Media and Soku Video, quarterly revenues were $20 million, compared with revenues $30 million in the same quarter last year. The quarterly operating loss was $74 million, compared with operating loss $67 million in the same quarter last year. For Chaoyue's online game business and 17173, Quarterly revenues, $190 million, compared with revenues $131 million in the same quarter last year. Quarterly operating profit was $55 million, flat with the same quarter last year. For the second quarter of 2024, we expect brand advertising revenues to be between $80 million and $20 million. This implies an annual decrease of 16% to 25% and a sequential increase of 12% to 24%. Online game revenues to be between $133 million and $143 million. This implies an annual increase of 12% to 21% and a sequential increase of 13% to 21%. Now gap net loss attributable to SOHO.com Limited to be between $27 million and $37 million. And the gap net loss attributable to SOHO.com Limited to be between $30 million and $40 million. This forecast reflects SOCUS 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.
Operator
Thank you. We will now begin the question and answer session. To ask a question, please press star 1-1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Once again, it's star 11 for questions. Our first question comes from Thomas Chong from Jefferies. Please ask your question, Thomas.
Thomas
Hi, good evening. Thanks, management, for picking my questions. My first question is about our advertising business. How should we think about the advertising sentiment in common quarters? In particular, we have Olympics in Q3. Should we expect our advertising back to positive year-on-year growth in the second half? And that's my first question. And then my second question is about our online games. guidance in Q2. Should we assume the sequential growth is mainly coming from our new license scheme, or can we actually break out the contribution from our license scheme in Q2? That would be great. And then my first question is more about our capital allocation strategy. I think, Charles, you also mentioned that the aggregate Among that will be purchased is about 17 million US dollar. Just want to get some color with regard to our full year plan. Should we assume that any color about how much share we purchase we will do in the remainder of the year? Or should we think about the 150 million share we purchase program should be fully used up in two years time? Thank you.
Charles
Well, let me answer your third question first. So we've been bought $70 million, and we have $150 million because of the daily volume that we can buy. So our plan is to finish all the $150 million buyback, and probably takes two years. So limited by daily volume trade. And so the first question of advertising, I think the macroeconomic situation is still kind of with a lot of uncertainty. So economy, yeah. So there is some recovery in certain sectors in Q2, but not very strong. Advertisers spending are kind of cautious. So in Q2, we do have a Q2Q increase for brand advertising compared with Q1. But compared with last year, I'm not sure we can, you know, compared with 20.3, we'll achieve growth or knowledge.
Joanna Arcefo
Decrease.
Charles
Yeah, still decrease, yeah. It all depends on we are able to, because we need to continue to develop our user base so that when we scale up our user base, that's the time when we can achieve advertising growth. Yeah, that's the...
spk00
The second question is about online gaming and about whether, you know, the sequential increase because of the game or... Yes, the income growth in the second quarter is mainly because at the end of April, we launched Paijiu Shao Nian in Japan and Korea, and on May 16, we launched Xiyou and Bihui Xixing in China. The income growth in these two projects led to the growth in the income growth in the second quarter, and then the old game in the second quarter fell slightly.
Paijiu Shao Nian
The sequential increase of our revenue is mainly from Haiku Fly High, which we launched in Japan and South Korea at the end of March, and also from New Westward Journey that we launched in May 16th in the Chinese mainland. And at the same time, there will be some decrease of our older games. Hi, Thomas. Thank you. I think I missed the second part.
Charles
Yeah. So the allocation of capital besides the buyback, we still need to have the cash level to fight the battle, right, to market our products and to develop our products.
Thomas
Got it. Thank you, Charles.
Charles
OK.
Operator
Thank you. Our next question comes from the line of Alicia Yap from Citi. Please ask your question, Alicia.
Alicia Yap
Hi. Yes. Thank you. Good evening, Charles, Johanna, and management team. Thanks for taking my questions. couple questions follow-up so number one is the follow-up on the guidance so I understand the sequential growth in the gaming guidance but however I think given gaming is a high margins and profitable business the sequential increase in revenue and profit from gaming should support overall group profitability and why is your 2q net loss guidance is actually wider than you deliver for the first quarter So any colors you can share with us on the expense side, that would be great. And the follow-up questions on the buyback, just wanted to make sure I got it correct. So I think last quarter you mentioned you bought back about 12 million as of February, you know, the end of February, and now that you have 17 million. So is that true that you actually executed about 5 million over the last like three months or so? And is it just because of the daily volume that is the limitations or is it anything on the the money transfer or kind of like moving out the money. Is there any restrictions on that?
Charles
Thank you. I think the last question is just the daily limit. We'd like to buy them all, right? To carry out all the $150 million buyback, but we can't because of daily volume limit. So, yes, I think your calculation is right, right? The last two months, we bought five million back. Yeah, we are trying to We hope that in the future, the volume will improve so that we can buy more so that we can finish this $150 million as early as possible. As to the Q2 expense, right?
Joanna Arcefo
Because if Q2 net loss of the guidance is lower than Q1, because we will spend more on the marketing expenses for the new game. Yes.
Alicia Yap
Oh. I see. So so it's only for the game promotion, but nothing on like a step up for the video or the media business.
Charles
We we a few TV drama, right? That already spent the money already spent in q1, right? Yeah, so we increase in media side spending.
Alicia Yap
I see. OK, helpful. Maybe can I trip in last questions on also the follow-up? I think, Charles, you mentioned while the macro kind of remained a little bit uncertain, but you did see a little bit of some recovery in certain sector in the second quarter. Can you share with us which vertical or industry vertical that you actually see a little bit improvement in the second quarter?
Charles
I think FMCG is getting better with beverage and the food. And also, the electric vehicle industry competition is very, very intensified. And because of the competition, people are forced to spend the money, although they're spending much less than before. But still, there is some spending in the car auto industry. But overall, advertisers are still very cautious.
Alicia Yap
I see. I see. Thank you, Charles. Maybe just a quick follow-up with reasoned positive policy measures from the government, especially on the real estate side. Do you think overall sentiment from advertisers will be improving maybe in the second half?
Charles
I think that is particular, that is about real estate industry, right? It has nothing to do with other, right? The recent policies about the real estate. But that real estate does not, well, does not reflect any, I don't think that people, consumers, income will be improved. So consumers' spending will not increase. So when consumers are not spending, but they do seem to be spending a lot on traveling. The travel business is coming back a little bit. But overall spending willingness is not that strong. So the product, that means when people are not buying things, then the company's products will not, you will not expect good sales. Then advertising will not, you know, so it's not direct. The recent policies does not have a direct impact, positive impact on the advertising market.
Alicia Yap
Okay. Okay. That's very helpful. Thank you, Charles.
Operator
Thank you. Well, I'm showing no further questions. Thank you very much for all your questions. And with that, we conclude today's conference call. Thank you for participating. You may now disconnect.
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