Sohu.com Limited

Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining SOHU's second quarter 2025 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'd 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.

Thanks, operator. Thank you for joining us to discuss Sohu's second quarter 2025 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang, CFO Joanna Liu, and the Vice President of Finance, James Stone. Also with us are Chang-Yu, CEO Duowen Chen, and CFO Yao-Bing Wang. Before management begins their prepared remarks, I would like to remind you of the Compute Safe Hub 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 interior risks and uncertainties. We caution you that, A number of important factors could cause X results different from those contained in any following 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 29. 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 second quarter of 2025, our marketing services revenues were in line with our expectations, while our online game revenues and the bottom line performance hit the high end of our guidance. For Soho Media Platform, we continue to focus on refining products, enhancing the operation of our social networks, and improving synergies across our product matrix. During the quarter, we hosted differentiated events that not only attracted numerous participants with shared interests, but also encourage them to build social connections and interact vibrantly with each other on our platform. With these efforts, we were able to increase our user engagement, further consolidate our brand influence, and capture more monetization opportunities. Our online games delivered solid results. underpinned by our dedication to serving users' needs through compelling new content and continued optimization of our games. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the second quarter of 2025, total revenues were $126 million, down 27% year-over-year, and 7% quarter-over-quarter. Marketing services revenues were $16 million, down 21% year-over-year, and up 14% quarter-over-quarter. Online game revenues were $106 million, down 28% year-over-year, and 10% quarter-over-quarter. Gap net loss attributable to SOFO.com Limited was $20 million, compared with a net loss of $38 million in the second quarter of 2024, and a net income of $182 million in the first quarter of 2025. Non-gap net loss attributable to SOFO.com Limited was $20 million compared with the net loss of $34 million in the second quarter of last year and the net loss of $16 million in the first quarter of 2025. Now I'll go through our key businesses in more detail. First, Soho Media Platform. We kept optimizing our products and refining operations while continuing to enhance its social features. We actively hosted diverse and distinctive events and activities, generated plenty of premium content, and stimulated social distributions, and improved the interactive experience inherent in our product matrix. These robustly supported the thriving development of our online communities. This quarter, building on last year's success, we continue to expand our influence in the area of K-pop and the Chinese custom hanfu by hosting a series of attractive events and competitions. For example, in June, in K-pop, we launched the 2025 Sohu K-pop Dancing Festival, the Wudang Fengtiao Dazheng, we do it every year, which attracted the participation of numerous K-pop enthusiasts and quickly become became a blockbuster event in the field of K-pop dancing. For the July, we held a special K-pop random dancing event with K-pop superstars VV, which the NCT, the South Korean NCT SM, which also gained a significant attraction. During the quarter, we also hosted the 2025 Chinese custom model competition. which has completed almost 80 contacts in nearly 30 regions in China so far this year. In addition, we continue to explore new verticals. In June, we held the first salute to the ultimate explorer attracting lots of outdoor ultimate explorer broadcasters, you know, self-media. hosts and celebrities who share their insights through speeches and panel discussions. These events not only provided opportunities for participants to connect and communicate, but also stimulated them to actively interact with each other on our platform in the longer term. With these, we were able to successfully enhance user metrics and foster a vibrant social atmosphere. In terms of leading IP, the physics class, my physics class, is continuing to deliver cutting-edge physics knowledge to a wide range of audiences under various scenarios. During the quarter, July, and myself conducted several high-end dialogues with Nobel laureates and well-known physicists. highly-achieved physicists and entrepreneurs in topics ranging from physics knowledge to the latest industry trends and social interests, promoting a multidimensional dissemination of SOHO's brand influence and attracting greater traffic to our platform. These competitions and live broadcasting events not only brought vitality and premium content to our platform, but also brought us more exposure and recognition from advertisers, providing us with additional monetization opportunities. Leveraging the advantages of our product matrix and our brand influence, we were able to satisfy the needs of advertisers by delivering differentiated marketing solutions through targeted campaigns. next turning our turning to our online game business during the quarter our online game business performed well with revenues reaching the high end of our guidance in our pc game businesses we launched an expansion pack regular tlbb pc to celebrate its 18th anniversary as well as various events for the dragon boat festival which received an enthusiastic response from the community we fully upgraded the skill enhancement system of TLBB Vintage to refresh the combat experience of players of each clan. And we celebrated eighth anniversary of Legacy TLBB Mobile with an expansion pack filled with diverse gameplay and generous rewards, effectively increasing player engagement. Next quarter, we will continue to launch expansion packs and the content updates for the TLBB series and other titles for further to further keep players engaged. Amid intensifying market competition and growing user demand for the quality and innovation, we will advance our top games strategy anchored in user-centric principles. By continuously optimizing our research and development system, we aim to enhance efficiency and product success rates, specifically in product offerings we are actively exploring opportunities to unlock the potential of our TLBB IP. Meanwhile, building upon our core strengths in MMORPGs, we are diversifying into multiple types of games, including card-based RPGs, sports games, and casual games, as well as expanding our offerings for global markets. Now I'd like to give an update on the ongoing share repurchase program. As of July 31st this year, 2025, Soho had repurchased 6.6 million ADS for an aggregated cost of approximately 83 million US dollars. So about one and a half of the total commitment, yeah. With that, I will now turn to the call over to Joanna. Joanna, I'll see you at home.

Thank you, Charles. I will now walk you through the key financials of our major segment for the second quarter of 2025. All the numbers on the NETGAP basis. You may find our reconciliation of NETGAP to GAP measures on our IR website. Also, the media platform. Quarterly revenue, $19 million. compared with $24 million in the same quarter last year. Quarterly operating loss was $69 million, compared with an operating loss of $72 million in the same quarter last year. For Changyong, quarterly revenues, $107 million, compared with $148 million in the same quarter last year. Quarterly operating profit was $51 million, compared with operating profit $32 million in the same quarter last year. For third quarter of 2025, we expect marketing services revenues to be between $40 million and $50 million. This implies annual decrease of 20% to 25% and a sequential decrease of 4% to 10%. Online game revenues to be between $107 million and $117 million. This implies annual decrease of 8% to 16% and a sequential increase of 1% to 10%. Both non-GAAP and GAAP net loss attributes go to Turbo.com Limited to be between $25 million and $35 million. This forecast reflects focus management 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 now, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. We will now take our first question from the line of Thomas Chong at Jefferies. Please go ahead, Thomas.

Hi, good evening. Thanks, management, for taking my question. First of all, may I ask about our marketing services revenue? We talk about our marketing services revenue are basically largely in line with the low end of the previous guidance and we saw that in Q3 it seems that the advertising revenue is still suffering some sequential weaknesses. I just want to get some color for management with regard to our thoughts about the recent advertising sentiment. Is there any changes or deterioration because of the macro uncertainties. Any color that can be shared about the trend of different categories like auto, IT, FMCG, these categories. That's on the marketing services part. And then on AI part, can management comment about how AI is applied into our operations in advertising and gaming? And are we also using our own model or third-party models? And then lastly, regarding the share buyback program, can management share about other than a share buyback program, are we thinking of any other capital return like a dividend or other program to shareholders?

Thank you. Okay. All right, Thomas. So the question about the forecast for the future Q3 advertising situation, yes, it's kind of there's a weakness because of the microeconomic situation is not that good and a lot of uncertainties and also The downgrade of consumptions because of people just don't have less disposable income to buy things and also the competition of companies, the profit margin is lower and so they're more cautious in investing in marketing spending. And as to sectors, still our largest sector is auto sector and followed by FMCG and IT services. For auto sectors, well, it's now kind of stabilized with the price wall is getting steady. And it's the new energy. I mean, electric cars market share is expanding. Well, the luxury cars and also joint ventures are kind of shrinking. So with this kind of market situation, we have this unique event and IPs and created or to launch the kind of a unique events and combined with our online properties to have some kind of a unique marketing opportunities so that they yeah they still yeah they do spend still on so yeah that's about this we're trying to yeah so so the whole macroeconomic situation is really that not that good but since our adaptation uh, market share is very small. So if we are successful in our social media, uh, success, uh, platform, we will just get a larger share. Uh, so that we hope, but that's, well, that will not happen in the next few quarters. It will continue to build our user base. Um, as to your second question about the AI application, I think, uh, Yeah, it's improved, especially in the online game part, right? It does improve the efficiency, productivity, online game. But for the media platform and social networks, it helps to help our users to get answers or get results with the search capability on each app. So now people are actually doing information search on separate apps. So we are using AI to improve the AI answering capability of the Sohu video and the Sohu news app. But that two apps, mostly social networks, now we turn it into a social network platform. So the AI help is only marginal. Right. So we are using the open source language model, and then build on that to develop on that. We're using various models, a lot like the model. About share buyback, yes, we are halfway into it, and $83 million already consumed. And we don't have any plan to have other investments or capital investment, because we are fighting a major user-based building and social network wall. So we need a wall chest to fight, to battle, to do the battle. Yeah, I hope I answered your question.

Got it. Thank you, Charles, for the detailed answer. Thank you.

Thank you. Our next question comes from the line of Alicia Yup from City Group. Please ask your question, Alicia.

Oh, hi. Good evening. Can you hear me okay? Yeah. Hello, can you hear me? Okay. Good evening.

Yeah, we can hear you.

Okay, yeah. Good evening, Charles and management. Thanks for taking my questions. A few questions for me. First is that I'm just wondering if you can share with us when should we expect the loss from the marketing service revenue to last? In other words, do you have a break-even timing that you can share with us? This is the first question. Second question is related to the gaming guidance. It seems like sequentially we are guiding a sequential increase. So if management can elaborate a little bit the reason for the sequential improvement on the game revenue. And then the third question is, I think, Charles, on your opening remark, you mentioned a little bit on those like, K-pop or these events. So just wondering, How those events actually able to help you accelerate your user growth for your SOHU app? I mean, SOHU user app. Sorry, SOHU app user. Yeah, sure. Yeah, sorry. Thank you. That's all my questions, yeah.

Well, so the, as I said, you know, with the current, this traditional, Interim media platform it's very for this kind of user base or it's very hard to break even Especially when we have where I actually have three Three products that will focus on three products so it's kind of a Multiple you know Battlefield three battlefields fight. That's why and I since all the social network products and the user base growth is non-linear, it could hit a critical point, critical mass that explode or go exponentially and sometimes in the future. And we don't know what that critical point is. So we don't know. So until that happens, before that, I don't think we We'll be able to break even because we have a . So, yeah, I don't know. But we hope, I hope, I'm optimistic, I'm hopeful, I'm optimistic that I'm confident that it will happen. The critical point for social network to break, you know, to grow. As to the game's sequential increase, yeah.

The second question is, what is the reason for the game's sequential increase in the third quarter?

It's because in the third quarter, our previous old games were relatively stable. At the same time, on July 25th, we released a new version of the game, the new version of the game. It will bring some increase in revenue.

The old games are expected to perform relatively stable during the third quarter. And we also wrote out a new version, a new game for TLBB PC on the 25th of July, which is called TLBB Gui Lai or TLBB Return in English. We expect the new game will bring some additional revenue.

Yeah, Gui Lai. Well, K-pop events, it's just like the Hanfu events and other, yeah. And also the third question, all these events are community builders because when people actually, this competition is, you know, continued in the whole year, competition and the events, and then people get to know each other and people to become users and broadcasters or self-media. People get into your communities by groups, right? So now we are the video is the most top, uh, keep up platform in China. That's why, um, when, when the Korean, when the South Korean pop, you know, uh, keep up teams and they're coming to China to do events, um, um, after, you know, competitions among platforms, and then Sohu Video is the designated or chosen platform to do that, because we are the number one in this field. And also in Hanfu. And we are building verticals after verticals and becoming the best in the verticals. And that helps to help us to consolidate or attract our user base.

I see. Thanks, Charles. I'll just follow up on that. Is there any revenue implications from this event that will contribute to the, I mean, already the second quarter, or maybe you can carry forward to the third quarter? Yeah.

Yes, the revenue sponsorship for these events are Unlike those physics class or other, you know, unlike those ones, this is a secondary or less, I mean, it's not a priority, but we do get sponsorship, yes, for the K-pop and for the handful events.

I see. I see.

Okay. All right. Great. Thank you. Yeah, we really accept the top sponsor, like the name sponsor. We refuse the name sponsor. I mean, the title sponsorship, right? Yeah. Because our goal is to develop users and to market our brand, the product brand.

All right. Okay, thank you. Thank you.

Thank you. I am showing no further questions and with that we conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.