Sohu.com Limited

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

Thanks, operator. Thank you for joining us to discuss SOHO's First Quarter 2024 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Cheung, CFO, Joanne Lu, and Vice President for Nance James Stone. Also with us are Chang You-Seo, Dewen Chen, and CFL, Bing Wang. Before management begins their prepared remarks, I would like to remind you of the company's safe harbor statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed at the call may contain forelooking statements. These statements are based on current plans, estimates, and projections. Therefore, you should not place undue rights on them. Forelooking statements involve inherent risks and uncertainties. We caution you that a number important factors could cause actual results of different material from those contained in 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 Cheung. 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, while both our online game revenues and the bottom line performance was much better than expected. For the social media platform, including social media and video, we continue to refine our products, optimize algorithms, and strictly control 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 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 games. 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 Soho.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-GAP, net loss attributable to Soho.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, $2 million, up 5% compared with 2023. Get net loss attributable to Soho.com limited, $100 million, compared with a net loss of $66 million in 2023. Non-GAP, net loss attributable to Soho.com limited, was $83 million, compared with a net loss of $51 million in 2023. Now let me go through our key businesses in more detail.

First,

the Soho 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. So in 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 Soho 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 popular dance festival in the US. During this quarter, we hosted the 2024 Soho 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 Soho Fashion Awards and at the end of the year and the 2024 Soho 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 as you see, we further persisted in broadcasting the child physics class, Wulike, which has been going on for three years with three books published, and also the Ying Yike 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 everything budget. In 2024, we continuously enriched our content library by acquiring TV dramas, rolling out original dramas, and bringing 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, Xun Jia Can Guan, and also the HBO series were well received by the audience. Yeah, we're talking about Soho media platforms include both the, you know, Soho news and Soho 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 plan 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 game plays 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 the themed dungeons, outfits, and rich innovative game plays, which drove higher users' satisfaction. Next quarter, we'll continue to launch expansion packs and the 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'll 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 13, 2025, Seoul had repurchased 4.2 million ADS for an aggregated cost of approximately $52 million. With that, I will turn the call to our CFO Joanna.

Thank you, Charles. I will walk you through the key financials of our major segment for the fourth quarter and the full year of 2024. All the numbers on the ManGap basis, you may find the information on our website. For the social media platform, 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 Chinese online game business and the 17173, quarterly revenues $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 revenue to be between $30 million and $40 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 $150 million. This implies annual decrease of 2% to 11% and a sequential decrease of 4% to a sequential increase of 5%. Now GapNet loss attributable to Soho.com Limited to be between $16 million and $26 million. And GapNet loss attributable to Soho.com Limited to be between $20 million and $30 million. This forecast reflects Soho's management's current and preliminary review, 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 1-1 on your telephone and wait for an MTB announcement. First question comes from the line of Thomas Chong from Jeffreys. Please go ahead.

Hi, good evening. Thanks, management, for taking my question. 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 -on-year decline is a bit 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 Q1 decline or Q1 to grow? 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 DPC. Can management comment about how we should think about the integration with Soho? Thank you. So your

first question is about the ad-applying, right? The second question is about game?

All right.

The third one is the application of the DPC, right? Okay, the first one, our answer, the first question for Q1, right, decline, right?

It's

because of the macroeconomic situation. So the 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, the range of income that Q1 gives is a bit wide. So he wants to ask about the possibility of our decline and growth in the ratio. And then, and then, how is the current performance trend?

Q1 should be at a level with the fourth quarter last year.

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

Okay, so about the 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 content. Abstract writing and internal editing with the 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 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, -to-people interaction will be, our product in the future will have the

AI

-aided interaction or, and also with -to-text and also sometimes in the future probably help with a deep or deep seek or in large model, language model to help users to generate content with the voice and the word, text to turn them into some pictures and the videos and to have really generated some quality, really ease the production process and make it really very, actually some of the content would not be able to produce but not be 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 get deep seek funding 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 the editing and yeah. And also I think it's also, we are gaming, right, also apply 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 the 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 is Carl 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 hives and talks about the technology breakthrough from China. So I'm not sure with some of these positive technology sentiment, have you seen any of these actually translate to slightly better advertiser budget spend 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 developments? 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 million, right?

4.2

million. So we spend one third of the $150 million, right? One third of 52 million already. So there's another 100 million to go, right? Approved by the board. So that's 4.2 million ADS, okay? Okay. In terms as to the macroeconomic situation, I think it's just consumption. It's just people that have less money to consume, you know, to spend. That's why companies or, you know, products and companies that accordingly spend less in marketing, in terms, for example, the most of our auto companies, they are advertising budget. I can see in the year of 2024, I can see a trend of like almost like a cut by half. A lot of companies just, if they want to spend 6 million RMB, now they spend 3 million. So 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 an advertising platform, we can feel the decline, right? So as to the deep state, I mean, not only deep state, 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 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 that drops, I think. And I don't think AI technology can help that in the short run. And sometimes the AI technology actually destroys drops, right? Not creating drops. That's what I can 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 software ad spending on any of the categories?

Yeah, I think FMCG has risen to the top sector among our other sectors. Previously, before I remember, you know, auto is always number one, right? Number one sector. But now FMCG is number one and auto and IT services are becoming number three and number four. Yes, people are actually spending more on some smaller items, like food, alcohol, liquor, and electronics. Yes. And also, I think the mix them.

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.