Sohu.com Limited

Relations Director of SOHU. Thank you. Please go ahead.

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 Liu, and Vice President for Nest Gemstone. Also with us are Chang-Yu Seo, Do Wen Chen, and CFO Bin Wang. Before management begins their prepared remarks, I would like to remind you of the Cambridge State Harbor Statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed are to call me content for looking statements. These statements are based on current plans, estimates, and projections. Therefore, you should not place undue rights on them. For looking statements involved in huge risks and uncertainties, we caution you that A number of important factors could cause actual results to differ materially from those containing any forelooking statements. For more information about the potential risks and uncertainties, please refer to the committee's findings 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.

Thanks, Huangpu, and thank you, everyone, for joining our call. In the fourth quarter of 2024, our brand advertising revenues hit the high end of our previous guidance. Well, both our online game revenues and the bottom line performance was much better than expected. For Soho Media platform, including Soho Media and video, we continue to refine our products, optimized algorithms, and strictly controlled budgets. By integrating the advantages of the Soho product matrix with our unique ITs and high energy events, we were able to promote the generation and the social distribution of premier content, effectively enhance user experience to attract more users and further unlock monetization potential. The online games business delivered solid performance thanks to the relentless efforts to produce high quality new games and revitalize legacy gains. 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 2024, total revenues $135 million, down 5% year-over-year and 11% quarter-over-quarter. Brand advertising revenues $19 million, Down 7% year-over-year and 1% quarter-over-quarter. Online game revenues $110 million. Down 4% year-over-year and 14% quarter-over-quarter. Get net loss attributable to Sohu.com Limited. $21 million compared with a net loss of $13 million in the fourth quarter of 2023 and a net loss of $16 million in the third quarter of 2024. Non-GAAP, net loss attributable to Sova.com Limited, $15 million compared with a net loss of $11 million in the fourth quarter of 2023 and a net loss of $12 million in the third quarter of 2024. For the whole year of 2024, total revenues $598 million flat compared with 2023. Brand advertising revenues $73 million, down 17% compared with 2023. Online game revenues $502 million, up 5% compared with 2023. Gap net loss attributable to SOHO.com Limited, $100 million, compared with the net loss of $66 million in 2023. Non-gap net loss attributable to SOHO.com Limited was $83 million, compared with the net loss of $51 million in 2023. Now let me go through our key businesses in more detail. First, the social media platform. We consistently focused on improving our technology and optimizing our products with cutting edge technology. Meanwhile, we also kept improving user experience by closely monitoring their needs. We organically integrated our diverse online and offline events. maximizing the synergy of the SOHO product matrix and fostering a thriving online community. These efforts allowed us to attract more users, especially the younger generation, to our platform, actively promoted their interactions, and stimulated more content generations. 2024, we held a series of K-pop dancing tour competitions in several major cities in China, from which the most outstanding contestants were selected to join the 2024 Dream Concert overseas in South Korea in October. Later in December, as a final show of the above series of dancing events, the 2024 Sohu Video Dancing Festival was hosted with great success. This dancing festival brought together a lot of top dancers in the US and has become the most eye-catching annual event in the field of K-pop dancing for the year. Also, during this quarter, we hosted the 2024 Sohu Video Guofeng Festival. the largest nationwide competition showcasing the traditional Chinese Hanfu costume. It received widespread acclaim and sparked extensive discussions and disseminations across multiple social media platforms. These events not only strongly strengthened our leading position and influence in the K-pop and Hanfu event verticals, but also stimulated numerous social interactions and distributions on our platform. We also continued to host our flagship events, such as the 2024 Sohu Fashion Awards at the end of the year, and the 2024 Sohu Finance Annual Forum, which further consolidated our brand influence as a mainstream media platform and provided us with abundant premium content. These events were not only attractive for users, but also enabled us to provide unique marketing solutions to our advertisers. And we further persisted in broadcasting the child physics class, ,, which has been going on for three years with three books published, and also the English class. These classes have jointly become the leading IPs for SOHO. Leveraging these unique IPs and collaborations with science-related broadcasters, we were able to attract millions of viewers, popularize cutting-edge professional knowledge to them, and reinforce our core competitiveness in the field of knowledge and science-related live streaming. Benefiting from the above, We were able to combine the knowledge, dissemination, and brand marketing through diverse channels, delivering unique experiences to advertisers and audiences, and driving editing budgets. In 2024, we continuously enriched our content library by acquiring TV dramas, rolling out original dramas, and bringing in premium American TV series as well as introducing short dramas. For example, our TV drama, Jin Chai Ying Die, Hairpins in the Palace, and the American TV series, The Bear, and also the HBO series were well received by the audience. Yeah, we're talking about social media problems include both the, you know, social news and social video. Now next, let me turn to the online game business. During the quarter, our online game business performed well with revenues exceeding our prior guidance. In our PC games business, we launched a new clan jointly for regular TLBB PC and TLBB Vantage jointly. Along with the various snow and ice themed events and the gameplay, effectively boosting players' enthusiasm for the game. In addition, we introduced an innovative survival PvP gameplay for regular TLBB PC and refreshed some classic gameplays of TLBB Vantage to enhance player experience and renew their interest in the game. For Legacy TLBB Mobile, we launched a new expansion pack featuring crossover content such as themed dungeons, outfits, and rich, innovative gameplays, which drove higher users' satisfaction. Next quarter, we'll continue to launch expansion packs and content updates for the TLBB series and other titles to further keep players engaged. As market competition intensifies and user demand for quality and innovation continues to rise, we'll forge ahead with our top game strategy, staying true to our user-centric philosophy. We'll continue to optimize our research and development process and enhance execution to improve efficiency and product success rate. Meanwhile, we will intensify our efforts to expand our international presence. While maintaining our core competitiveness on MMORPGs, we will also actively expand our portfolio with diverse types of games, including card-based RPGs, sports games, and casual games, etc. With these efforts, we are confident that we soon can bring more high-quality games to the market. Now, I would like to give an update on the ongoing share repurchase program. As of February 13th this year, 2025, SOHO had repurchased 4.2 million ADS for an aggregated cost of approximately $52 million. So with that, I will turn to the call to our CFO, Joanna.

Thank you, Charles. I will walk you through the key financials of our major segments. For the fourth quarter and the full year of 2024, all the numbers on the non-GAAP basis, you may find the reconciliation of non-GAAP to GAAP measures on our website. For social media platforms, quarterly revenues were $24 million, compared with $25 million in the same quarter last year. Quarterly operating loss was $69 million compared with operating loss $68 million in the same quarter last year. For the full year 2024, revenues were $91 million compared with $140 million in 2023. The full year operating loss was $287 million. compared with operating loss $269 million in 2023. For ChangYu's online game business and 17173, quarterly revenue $111 million, compared with $116 million in the same quarter last year. Quarterly operating profit was $48 million, compared with operating profit $47 million in the same quarter last year. For the full year 2024, revenues were $506 million, compared with revenues $485 million in 2023. The full year operating profit, $196 million, compared with the operating profit, $203 million in 2023. For the first quarter of 2025, we expect brand advertising revenues to be between $13 million and $14 million. This implies annual decrease of 13% to 19% and a sequential decrease of 26% to 31%. Online game revenue to be between $105 million and $115 million. This implies annual decrease of 2% to 11% and a sequential decrease of 4% to a sequential increase of 5%. Now, gap net loss attributable to Soho.com Limited should be between $16 million and $26 million. And gap net loss attributable to Soho.com Limited should be between $20 million and $30 million. This forecast reflects Soho's 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.

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for a name to be announced. First question comes from the line of Thomas Chong from Jefferies. Please go ahead.

Hi, good evening. Thanks, management, for taking my question. My first question is about the brand advertising business. It seems that for the Q1 guidance, the sequential decline is a bit soft versus previous years, and the year-on-year decline is also more than Q4. So I just want to get some color with regard to any reason behind the latest advertising sentiment. And on the gaming business, can management comment about how we should think about when we should expect it to have a Q1Q decline or Q1Q growth? Because it seems the range is a bit wide. And how is the trend so far? And then my last question is about the invitation of comments about how we should think about the integration with SOHO. Thank you.

So your first question is about the other time, right? The second question is about...

Game?

Okay. All right. The third one is the application of the deep seek, right? Okay. The first one, I'll answer this first question for Q1, right? Decline, right? It's because of the macroeconomic situation. People are spending less. Advertisers are spending less in marketing because of the overall economic situation. And so, yeah. It's overall, yeah. overall economy. So the second question is about the game, right?

Thomas, the question about the game is that our QE gave us a relatively wide range of game income. So he wants to ask what the possibility of our return on investment and return on growth are, and what the current performance trend is.

The performance of the first quarter is expected to be flat quarter over quarter.

Okay, so about the deep seek application, we've been actually, in the last two years, we've been applying the language model to our social or media and social network products. For example, the organized of the content, the better, the generation of content and especially knowledge-based content and the text-based abstract writing and internal editing with the applied AI technologies really increased the efficiency. And in the future, we're going to also, for example, in our live streaming, our AI technology can help us to summarize different basically to you know to summarize the video content into text form and to automatically to to mark the different sections of the streaming video content and In terms of social network people, people infraction will be in our product in the future will have the, you know. AI aided. Interaction or and also is. Voice to text. And also sometimes in the future, probably help with the with the deep or deep sequel or in, you know, in large model language model to. Who? you know, to help users to generate content with the voice and, you know, word text to turn them into some pictures and the videos and to have really generate some quality, you know, really ease the production process and make it really very, you know, actually some of the content would not be able to produce, but now we're able to do it. So there is a wide range of application of AI technology and deep seek, probably deep seek. We haven't, you know, we haven't yet, but we're looking at that possibility. So basically help us with our media and the social network, user experience and content generation, content organization and editing and Yeah. And also, I think it's also, we are gaming, right? Also applied language model, right? The AI technology, right?

The AI technology application in terms of gaming development is mainly in the area of video production and Second, and the two-dimension art design.

Yeah. Okay, I hope we answered your question, Thomas.

Got it. Thank you, Charles.

Thank you for the questions. One moment for the next question. The next question comes from Alicia Yap from CT. Please go ahead.

Hello. Good afternoon. Good evening, Charles and management. Thanks for taking my questions. I have a few follow up. Number one, can management maybe comment a little bit on the overall macro sentiment as related to the advertising budget sentiment? Just curious, you know, given there's a lot of huts and talks about the technology breakthrough from China. So not sure, will some of these positive sentiment, positive technology sentiment with that? Have you seen any of these actually translate to slightly better advertiser budget spent on certain category? And also, have you seen any change of the consumer behavior in terms of the consumption as related to some of these positive development? So that's the first question. And then second question is, can you remind us with your 52 million buyback amount? What's the outstanding amount on the buyback currently? Thank you.

Well, the buyback, we bought 4.2, right? 4.2 million ADS. So we spent one-third of the $150 million, right? One-third, 52 million, yeah, already. So there's another 100 million to go, right? Approved by the board. So that's 4.2 million ADS, okay? In terms, as to the macroeconomic situation, I think it's just consumption. Just people that have less money to consume, you know, to spend. That's why companies or, you know, product, you know, companies that accordingly spend less in marketing, you know, in terms, for example, the most of our auto companies, they're advertising Budget, I can see in the year 2024, I can see a trend of almost like a cut by half. A lot of companies, if they want to spend 6 million RMB, now they spend 3 million instead. So it seems that because the consumption is weak, that's why market companies are spending less money in marketing. That's why we can feel that, right? As a promoter, marketing platform, we can feel the decline, right? So as to the deep-seq, I mean, not only deep-seq, but overall AI technology has brought quite an enthusiasm, right, and excitement. But I don't think I can now translate into any immediate you know, benefits of marketing or companies, you know, because it's really, the problem is really people are spending less. People have less money because people, you know, bought houses and then they have much less money left to spend, right? So, especially to pay the mortgage, that's why companies don't have the product and sales volume drops, I think. And I don't think AI technology can help that in the short run. And sometimes the AI technology actually destroy jobs, right? Not creating jobs. That's what I can see. I see.

I see. So maybe can I follow up a little bit, Charles? So any other kind of subsector that is holding up in terms of the ad budget? For example, let's say the FMCG, Or even have you seen, let's say, electronics like the cell phones given the trade-in and all that? Have you seen any increase in terms of the ad spending on any of the categories?

Yeah, I think FMCG has risen to the top sector among our advertisers, I mean the sectors. Previously, before I remember, you know, although it was always number one, right, number one sector, but now FMCG is number one, and auto and IT services are becoming number three or number four. Yes, people are actually spending more on some, you know, smaller items, you know, like, you know, food. alcohol liquor and electronics yes so yeah there and also I think the the trading policy also simulated that to some extent I see I see okay very helpful thank you thanks Charles thanks management

Thank you for the questions. With that, we now conclude the conference for today. Thank you for your participation. You may now disconnect your lines.