Sohu.com Limited

Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining SOHU's third quarter 2025 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 call, Huang Pu, Investor Relations Director of Soho. Please go ahead.

Thanks, Rebecca. Thank you for joining us to discuss Soho for the quarter 2025 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang, CFO of General Li, and Investor President of Finance, James Dunn. Also with us, Chang-Yu Hsieh, with Owen Chen, and CFO, Yubing Wang. Before management begins their prepared remarks, I would like to remind you of the Common Safe Harbor Statement in connection with today's conference call. Except for the historic information contained herein, the matters discussed on this call may contain full-looking statements. These statements are based on current plans and estimated projections, and therefore, you should not place any relies on them. Full-looking statements involve inherent risks and uncertainties. We caution you that A number of important factors could cause accurate results from those contained in the statements. For more information about the potential risks and uncertainties, please refer to the committee 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, Guangpu, and thank you everyone for joining our call. In the third quarter of 2025, our marketing services revenues were in line with our guidance. Well, both our online game revenues and the bottom line performance benefiting from our continuous efforts in the gaming business were well above our prior expectations. We recorded positive net income this quarter. For the social media platform, we continue to refine our products and integrate resources to better meet users' needs and enhance their experiences. Meanwhile, leveraging our product matrix and distinctive events, we remain committed to generating and distributing diversified premium content and continuously energizing our platform. Our differentiated advantages and unique IP enabled us to further unlock monetization potential. four online games, both new and established titles, delivered outstanding performance, driven by our deep understanding of our needs and proven operational expertise. Before going through each business unit in more detail, let me first give you a quick overview of financial performance. For the third quarter of 2025, total revenues, $180 million, up 19% year-over-year, and 43% quarter-over-quarter. Marketing services revenues, $14 million, down 27% year-over-year and 13% quarter-over-quarter. Online game revenues, $162 million, up 27% year-over-year and 53% quarter-over-quarter. Gap net income attributable to Soho.com Limited, $9 million. Compared with the net loss of $16 million in the third quarter of 24 and the net loss of $20 million in the second quarter, of this year. Non-GAAP net income attributable to SOHO.com Limited was $9 million compared to a net loss of $12 million in the third quarter of last year and net loss of $20 million in the second quarter of this year. Now I'll go through our key businesses in more detail. So for SOHO platform, we continue to leverage the cutting-edge technologies to optimize our products and promote deeper integration across our product matrix. These enable us to further adapt to various scenarios, improve operation efficiencies, enhance users' experiences, and at the same time, relying on the synergies between various online and offline events, we continue to stimulate the generation and dissemination of premium content and attract more users to our platform. During the quarter, we hosted a variety of events and activities to further build a vigorous social networking platform, providing users with abundant opportunities for online and offline communications. The 2025 Autumn Convention of Soho Video Influencers effectively promoted deeper communication among broadcasters across different verticals. and significantly increase their vitality and retention on our platform. The ongoing 2025 Sohu K-pop Dancing Festival and also the Hanfu Model Competition both successfully ignited the passion of young people and further consolidated our influence in these areas. All these activities gained widespread recognition and popularity and continuously infused a large amount of content and traffic into our platform. As a result, we were able to further expand the influence of SOHO and fostered a prosperous platform ecosystem. In addition, we also held special themed activities such as the Halloween American TV Series Party, It not only engaged users with innovative content forms, but also became a highlight of our Social Video American TV Series Month, which brought audiences with classic dramas such as the Western Westworld and also the Mandalorian. Meanwhile, we also launched multiple TV dramas, original drama, and short dramas during the quarter to attract and retain users. The original drama, The Rebirth, Su Yeji, was well received by audiences and attracted more users to our platform. Through our flagship IT physics class, Charles' physics class, we continue to strengthen our differentiated competitive advantages while at the same time exploring greater monetization opportunities. With Charles' physics class, we were able to reach a wider range of audiences through discussions on popular science topics and hot events and brought physics knowledge closer to the general public. Not only helped us generate unique and premium content, but also consistently unlock monetization potentials. Together with the resources of SoFu's product matrix and our marketing capabilities, we actively adapted who changes in the market trend and provided advertisers with customized marketing solutions through a series of innovative campaigns and events, which are highly recognized by our both audiences and advertisers. Next turning to our Garland game business. In the third quarter of 2025, we launched a new PC game, PC game LBB Return. Based on a beloved early version of the TLBB PC, the game features reduced grinding and pay-to-win pressure, offering players a lighter gaming experience. It helped us attract back many former players, and its revenue performance has so far exceeded our expectations. For TLBB PC, we also launched game content for TLBB Vantage that recreated the classic design of the game, which evoked a wave of nostalgia among players. Players' enthusiasm and in-game spending were far beyond our expectations. With regular TLBB PC, we offered a new rare gear as rewards for our promotional events and redesigned the cross-server clan wall gameplay, which boosted willingness to pay among higher-paying players. For mobile games, we launched an expansion pack for Legacy TLBB Mobile, which brought an enhancement to the skills of the Wend Clan, alongside a new storyline and engaging activities. The revenue for this game remained stable on a sequential basis. the mobile, the TLBB mobile. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to further keep players engaged. Amid an increasingly competitive market, we remain committed to our top game strategy. We follow a user-centric philosophy and adhere to some ontologies and a systematic R&D process to enhance efficiency and product success rate. As a part of strategy, we are taking concrete steps to unlock the potential of our TLBB IP. Meanwhile, building upon our core strengths in MMORPGs, we are working to diversify into new types of games, including card-based RPGs, sports games, and casual games, as well as to expand our offerings for global markets. Now, I'd like to give an update on the ongoing Share Repurchase Program. As of November 13, 2025, Soho has repurchased 7.6 million ABS for an aggregate cost of approximately $97 million, so basically two-thirds of the $150 million program. With that, I will now turn the call over to Joanna, please.

Thank you, Charles. I will now walk you through the key financials of our major segments for third quarter of 2025. All numbers on the non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our website. For social media platform, quarterly revenues were $70 million compared with $23 million in the same quarter last year. Quarterly operating loss was $71 million compared with operating loss $72 million in the same quarter last year. For Chang You, quarterly revenue $163 million compared with $129 million in the same quarter last year. Quarterly operating profit was $88 million compared with operating profit $62 million in the same quarter last year. For the fourth quarter of 2025, we expect Marketing service revenues should be between $15 million and $16 million. This implies annual decrease of 15% to 20% and a sequential increase of 10% to 18%. Online game revenues should be between $130 million and $123 million. This implies annual increase of 3% to 12%. and a sequential decrease of 24% to 30%. Both net gap and gap net loss attributable to Soho Document Limited to be between $25 million and $35 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 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.

Hi, good evening. Thanks, management, for taking my question. My first question is about the online game business. Given our online games perform very strongly in Q3, I'm just wondering how's the quarter-to-date performance so far? In particular, when I look into the guidance, it basically implies a sequential decline. So I'm not sure if we are a bit conservative in giving out the Q4 gaming guidance. And on the other hand, when I look into our portal business, when I look into the advertising side, we are actually seeing quite a sequential rebound in terms of the advertising revenue. Charles, may I ask about how you think about the macro sentiment coming into Q4 as well as the trend for different categories? And based on the current visibilities, how should we think about the brand advertising outlook in 2026 if there's any color on that? Thank you.

The first question is about the online game. Yeah. Yeah. Whether I'm being conservative in guidance.

The performance of the fourth season is very strong. How is the performance of the fourth season so far? And then the fourth season's guide, Shihua Misha, I'd like to ask if this guide is more conservative.

At the moment, the performance of the fourth season is basically in line with expectations. The third season is mainly about the return of the new game, Tenenbaub. uh, uh, uh, uh,

The performance of the fourth quarter so far is in line with our expectation.

The strong third quarter results is primarily driven by the successful launch of the new game, TLPB Return. And meanwhile, the new servers of TLPB Vintage also performed very well, achieving historic high. So the actual revenue of third quarter exceeded our expectation a lot. And the performance of the fourth quarter depends mainly on the performance of new day in TLPB return and the performance of the content and the activities that will be launched during the first quarter for TLPB PC, like TLPB Mobile.

Yes, thank you.

Eli, right? Yeah. Okay, so I think the...

Q4 rebound, right, Thomas? You're saying? Yes, about the Q4. Yeah, I think since the whole ad base is not that big, right, so it's kind of not, it's kind of oscillated a little bit. It depends on some, you know, a contract, was allocated to this quarter because the contract was signed late and then went to the next quarter, right? So it's, but we do have some, so first of all, the macroeconomic situation is really not that good, you know, and the pressure in the different sectors like auto and IT services. So it's continued to kind of, you know, deteriorating. But as our new, we have kind of an innovative, unique marketing campaign or the services that are kind of unique that still were able to attract some of the advertising. So we were able to go against the trend and basically stabilize the advertising revenue on a small basis. So because I think in Q4, we have some good events that are able to create such opportunities for them to advertise.

I see.

Thank you, Charles. May I ask a follow-up question about AI? Can you comment about how AI is integrated within the show who right now? And are we actually seeing better productivity, cost savings, or better advertising monetization so far? Thank you.

I think AI has more impact, more usage or improvement of productivity on the gaming business, right? For Sohu, we are not developing a large language model. We are using AI to improve the user experience. Like for our social media platform, the AI can summarize the video's content and give the, you know, and... So the subtitles, and also in our news service, news app, there is this AI enhanced search and question answering features. So we're basically using AI and different models to improve our existing service of media and social network instead of spending a lot on the hardcore, you know, large language model. Yeah, maybe the, you know, the AI can improve. 据说那个AI确实大模型, 确实可以改善游戏的效率,是吧?

对。 那是在美术生产,编程, 以及在方案,方案分析,对,执行。

The application of AI is mainly applied in art design and the code generation and the game planning creation.

Thank you. Thank you. Okay.

Thank you. We will now take our next question from Alicia Yap, a city. Please go ahead, Alicia.

Hi. Yeah, thank you. Good evening, management. Thanks for taking my questions. I have a couple follow-up. First of all, on the gaming, can management share with us what are the biggest surprise that you learned from the TLBB return versions? And which one is the bigger driver in terms of helping on the outperformance for this quarter? Is that the TLBB Vintage new server or is that the new games TLBB return? And I understand you give out the 4Q guidance. You mentioned this is reflecting the current situation that you're seeing. and wanted to know if the vintage server that you are seeing the drop-off of the user, or you actually see that the new title TRBB returns are seeing the sequential drop-off or decline on the user and their revenue. So any colors that you can give us on that for the 3Q and 4Q would be helpful. And then second question for Charles on the macro situation. I think you mentioned auto IT services. The ad sentiment seems to be a little bit deteriorating. Are there any industry verticals or industry subsector that you are seeing is actually either improving on the sentiments or at least, you know, the sentiments is about the same as last few quarters.

Thank you. Okay.

The first surprise from Delby return is the user spending is beyond our expectation. Because, um, because, um, because, um,

to be a gameplay is more relaxing and it requires less time and the demand for paying spending is also less. So originally we thought the user's paying would not be very good.

The second reason is that the user's flow is very good. Very stable. It's better than we thought.

Second, the retention of TLB returns is very stable, better than our expectations.

As for the contribution to revenue increase of the quarter, we don't disclose the specific number for individual gains. For the fourth quarter, in terms of supply and demand, the users of Huaijiu and Zhenrong Guilin are relatively stable. Of course, the revenue is decreasing, mainly because Huaijiu did very well in the third quarter. So, in the fourth quarter, we will not do so many small activities. The revenue of Guilin in the fourth quarter is due to its new online game. So far, the user base of both TLB Return and TLB Vantage are both very steady.

But their revenues are actually trending down because for TWV Vintage, its performance in third quarter was very good. So in the fourth quarter, we planned to roll out fewer operational, fewer promotional activities. And for Guilai, as it was newly launched in the third quarter, so it really experienced natural decline compared with the initial launch period, because users tend to have stronger willingness to pay when the game was initially launched.

Okay, so your second question is about the ad situation, right, the sectors?

Yeah. So I think the overall, you're really kind of, ad planning market is under pressure. For example, the auto industry, there are two counter-effective trends. First of all, the competition is fierce because there are just too many car companies, right? So they need to stand out to try to have a larger market share. There's the pressure to market and to promote their brands and the sales. On the other hand, because of the too many cars, the profit margin is very low for them. So the ad budget for each car companies are thinning, you know, getting less. So that's why it's the, so with this situation, we have some kind of unique, like the physics class or, you know, like myself and live streaming to live streaming visit of their factories and some unique and also with a social network, social media distribution, all kind of unique. Instead of the traditional sponsorship of our channels, the portal channels, we're able to get the ad budget. So the auto industry is kind of flat, you know. But it's still declining. And also we are also looking at other consumer electronics. We are just, and that manufacturer base, China's manufacturer base is very strong. And they have a lot of new products, but they need to also market those products to domestic market. And still with our innovative offering of live streaming or social media distribution and lectures, physics lectures and the various events, we were able also to get some of those consumer electronics advertisers. And so that's why we were able to, with this, deteriorating market situation, we're still able to get some of the advertising, you know, part or fraction and the stills at a relatively small space.

Okay. Thank you, Charles. Thank you.

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