Sohu.com Limited

Ladies and gentlemen, thank you for standing by and good day. Thank you for joining SOHU's first quarter 2026 earnings conference call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. And I'd like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Soho.

Please go ahead. Thank you, operator. Thank you for joining us to discuss Soho's fourth quarter, 2026 results. On the call are Chairman and Chief Executive Officer Dr. Charles Chang, CFO John DeLue, and Vice President of Finance James Stone. Also with us are Chang Youseo, Du Wencheng, and CFO Albin Wang. Before Martin begins their prepared remarks, I would like to remind you of the common CFR statement in connection with today's conference conference. Except for the historical information contained herein, the matters discussed may contain forwarding statements. These statements are based on current plans as made to protect and protect projections. Therefore, you should not place any relies on them. They caution you that a number of important factors could cause actions that are different materially from those contained in the anti-fault listing statement. For more information about potential risks and uncertainties, please refer to the Congress' findings with the Securities and Exchange Commission, including the most recently reported forms on that. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thanks, Hongbo, and thank you, everyone, for joining our call. In the first quarter of 2026, our marketing service revenue, online game revenue, and offline performance all exceeded our previous guidance. For the social media platform, we continue to focus on promoting a healthy and vibrant atmosphere on our platform with a series of differentiated events. At the same time, we kept refining our products to cater to users' needs. Leveraging our unique events and brand influence, we were able to explore new monetization opportunities. For our online games, we delivered another solid quarter, given by a wealth of high-quality content and targeted operational refinements that resonated with our diverse player base. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the first quarter of 2026, total revenues were $141 million, up 4% year-over-year, and down 1% quarter-over-quarter. Marketing services revenues were $13 million, down 8% year-over-year, and then 26% quarter-over-quarter. Online game revenues were $125 million, up 6% year-over-year, and 3% quarter-over-quarter. Net loss attributable to SOHO.com Limited was $4 million, compared with the net income of $182 million in the first quarter of 2025, and the net income of $423 million in the fourth quarter of 2025. Non-GAAP net loss attributable to SOHO.com Limited was $4 million loss in $4 million. loss net loss performing dollars compared with the net loss of 16 million dollars in the first quarter of 2025 and a net income of 261 million in the fourth quarter of 2025. now i'll go through our key businesses in more detail first social media platform in the first quarter of 2026 we continue to integrate resources in debt and upgrade our products with cutting-edge technologies We offered users various practical and easy-to-use functions to optimize the user experience, enhance user engagement, and further promote dissemination of content. At the same time, we kept focusing on promoting a vigorous atmosphere in our community and fostering a prosperous platform ecosystem. Benefiting from unique offline events, we provided users with plenty of interaction opportunities, improve their social engagement, and generate abundant premium content that was widely spread over the internet. In March, for example, in March we successfully held the 18th Social News Marathon in Hong Kong and the offline seminar of our physics class in Hong Kong. This season's marathon attracted active participation by celebrities and broadcasters nationwide, greatly promoting social interaction on our platform. Meanwhile, the Power Physics Lab made its debut at the Hong Kong University of Science and Technology, bringing in-depth physics knowledge to the public. Both events were well received by audiences, creating a strong synergy between our flagship IPs and further expanding our brand influence. In April, we hosted the 2026 Spring Convention of Sohu Video Influencers, for example, which has been held bi-annually for the past three years. We invited celebrities and gathered influencers from various fields, including verticals popular with young users, such as PPOP and the verticals in professional fields, such as science and health. The convention created a chance for broadcasters to interact in person, promoting content generation and dissemination, and building genuine social connections. During the quarter, we also launched the 2026 Sohu K-pop Dancing Festival competition throughout the year, and also the 2026 Hanzhou Modern Competition. It's also a year-long event. It further consolidates our influence and appeal in these areas. We continue to combine offline events with online interactions to upgrade our profile and the standard of our competition. With these efforts, we garnered widespread attention and attracted some interior guests with shared interest to participate and interact on our platform. We continued to leverage our unique content and live broadcasting technology while exploring new business opportunities. We provided targeted marketing solutions for advertisers through our innovative and customized events and campaigns, such as As the physics class IP is a derivative, it needs to be brought in influence. In fact, it will traffic to the platform in order to unlock monetization potential. Next, turning to our online game business. During the quarter, our online game business performed well, with revenues exceeding our prior guidance. In our PC game business, We roll out various holiday events around the Chinese New Year and Valentine's Day, as well as promotional events for the regular TLBB PC, which helps sustain stable player engagement. Apart from holiday events, we also introduced a new move-on plan for TLBB Vantage. It's boosted player enthusiasm. Meanwhile, we continue to update and refine TLBB Returns, to ensure its long-term vitality. Turning to our mobile side, mobile game business, we launched an expansion pack for Legacy TLBB Mobile to celebrate the Chinese New Year, along with the diverse online and offline events. The opening for this game stays largely stable on a sequential basis. Next quarter, we will continue to launch expansion packs and content updates. for the TLBG series and other titles to further keep players engaged. Looking ahead, we will remain committed to our top games strategy. On the product development front, we will stay anchored in a user-centric approach and adhere to a systematic R&D processes while driving the implementation of new technologies to enhance efficiency and product success rate. Regarding our pipeline, we seek to further unlock the potential of our TLDB IT. Meanwhile, as we maintain our competitive edge in the MMORPGs, we will continue to diversify our portfolio with multiple types of games and expand our product offerings with global appeal. Now, I'd like to provide an update on the ongoing share repurchase program. As of May 13, 2026, Soho had repurchased 8.7 million ABS from aggregated cost of approximately $116 million. With that, I'll turn now the call to .

Thank you, Charles. I will now walk you through the key financials of our major segments for the first quarter of 2026. All the numbers on a non-GAAP basis. You may find a reconciliation for non-GAAP to GAAP measures on our IR website. For social media platforms, quarterly revenues were $16 million, compared with $17 million in the same quarter last year. Quarterly operating loss was $17 million. flat with the same quarter last year. For Changyong, quarterly revenues, $125 million, compared with $180 million in the same quarter last year. Quarterly operating profit, $66 million, compared with operating profit, $55 million in the same quarter last year. For the second quarter of 2026, we expect Marketing services revenue to be between $30 million and $40 million. This implies annual decrease of 10% to 17% and a sequential increase of 4% to 11%. Online game revenue to be between $104 million and $140 million. This implies annual decrease of 2% to an annual increase of 8% and a sequential decrease of 8% to 17%. Both land gas and the gas net loss attributable to SOHO.com Limited to be between $15 million and $25 million. This forecast reflects SOHO's management current and the 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. If you wish to ask a question now, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. We will now take Alpha's question. And Alpha's question comes from the line of Thomas Chong at Jefferies. Please ask your question, Thomas. Your line is open.

Hi. Thanks, management, for taking my question. I have a couple of questions. I think first is on our marketing services, on our advertising revenue. Can management comment about how we should think about the advertising outlook in second half? and full year, and in particular, we are going soon to have World Cup. Would this be a big positive to our advertising revenue in Q2 and Q3? And my second question is about the gaming business. Can you comment about the quarter-to-date performance so far we are seeing in Q2? Is it more likely to hit the low end or the high end of the revenue guidance? And my third question is about the earnings outlook. Given our solid performance in Q1, and we are expecting the losses to widen sequentially in Q2, I'm just wondering, is this a conservative assumption? And should we use Q2 as a benchmark to project Q3 and Q4 bottom line? Thank you.

Okay, Thomas, so the first question about marketing services revenue, right? Q2 forecast, as Joanna just said, is going to be 13, right, 13 to 15 minutes, about 7% sequential growth compared with the Q1. First of all, the overall economy and, you know, situation is kind of a downturn, right, economic situation. Advertisers tend to be cautious in spending. We are able to maintain some growth because we have our unique and differentiated marketing solutions and events. Especially we can take advantage of our, you know, going through the network and also influencers and also some IPs like my own physics class IP and the, you know, the offline events like the K-pop competition. So, we have quite a unique, you know, tailor-made or customized, you know, marketing stance based on what is available in our own, you know, platform and also its activities.

So, your next question is about the overall year-long outlook or just the Q2. I think it will be similar, right, to last year.

About the game, right? The game, so the first quarter is good, and then the second half, you want to see that second half is not, you know, is that a low end or a high end, right?

Thomas, I want to ask you about the current performance of our Q2. The current performance of our Q2 is not good.

Uh, uh, So far, the performance of the second quarter is largely in line with our expectation.

And the level of revenue will largely depend on the performance of the content and activities we plan to roll out for our TLBB series games. to see whether they can satisfy users' needs. So far, we believe it is in line with our expectations. Also, as we plan to roll out fewer promotional and revenue-boosting activities in the second quarter, so we expect our gaming revenue to experience a natural decline.

So, so we gave a return, right? That was in Q1, you had impact by Q3.

That's for gaming. Right.

So you have a third question, Thomas?

Oh, yes. Yes, on the bottom line, because Q1, we are better than expected. But Q2, we are seeing sequential. sequential widening of the losses. So I just want to see if Q2 is a benchmark for Q3 and Q4. Thank you. Thank you, Charles.

I think this year Q2 and Q3 will be similar to last year because on the blockchain service side, on the platform side, we are basically about the same. We're still working on our token network and make sure that we have a lot of user base so that we can have an update. But now still we are maintaining a stable and end of time growth. So the Q2 result or the earnings dropped compared with Q1 mainly because of gains rather than profit, right?

It's much less than Q1 as we just described. Got it. Thank you.

Thank you. We will now take our next question from the line of Alicia Yap at CT. Please ask your question, Alicia. Your line is open.

Hello. Good evening. Good afternoon, management. Thanks for taking my questions. I have two follow-up on the earlier question. So I guess, you know, you mentioned on, I think, the second quarter, obviously, the guidance, etc. It is a bit, you know, weaker than I expected in terms of the sequential trend that typically we would see from the 1Q to 2Q, even though sequentially it is growth. But then I think the year-over-year decline, it seems to be worse than the first quarter year-over-year decline. I'm just wondering, you know, is the macro getting, you know, even weaker than what you have? previously expected, let's say, compared to five months ago in the beginning of the year. So yeah, any colors you can share with overall the macro outlook, is that worse than what you had previously expected? And then on the The operating loss, I just wanted to make sure I did not hear it wrong. For this one queue, the marketing ad business, if the operating loss was $17 million, I just wanted to double-check on that because I think our revenues is only like $16 million, but then we are losing $17 million. So it seems like the expense is a double of the revenues. So just wanted to make sure I heard it correctly. And then if so, then where were the money got spent? Is it mostly on the product development or is it on the user acquisition?

Thank you. So first, let's answer your last question about the what? You have a question about the loss, the amount of spending in Q1, then? What number you're talking about?

This is 17 million, the OP loss for the ad business.

17 million, or loss of what? We don't have a 17 million loss.

Yeah, the operating loss.

Operating loss. 17 million operating loss in Q1.

platform, the operating loss is $70 million. Seventy.

Seventy. Seventy, yeah. Yeah. I mean, it's similar, right, to previous, yeah?

Yeah, it's similar to previous quarters.

Okay, so this is not something that we spent. Yeah, yeah.

We didn't spend more money, just as we did before, the previous quarters. Mostly to, I think, well, we don't, it's either on user acquisition or on product development. So it's all together because we are building... Actually, we have three social network products. One is Sohu Videos, Guan Zhuliu. We also have Huyou and also have Sohu News app and also turn that into a, you know, the Shijianqian. So... um and also for each of the products uh especially for the one wheel in one wheel we uh we have uh yeah we do spend some money on um the user acquisition and also the team uh you know the uh cost and and also product development so it's similar to previous quarters it's um until we you know build a really uh until we have a really successful uh product that you know obviously explode into a lot much larger scale uh we are now the uh and also considering the macroeconomic situation so the advertising uh dollars will not be able to cover the cost we are you know encouraging you know we encourage uh color environment and user acquisition so that's similar 70 million dollars per quarter

Okay, okay. And then the revenue, the guidance, is that worse than you expected?

That's because of the bank response, right? It's worse than last year because all the auto car companies there. Because of the competition and the low margin of their, you know, so they are more cautious and spending less. and we have to come up with a really unique um you know event or optimities like you know so like for example i have to myself i have to uh you know to to apply you know this physics class ip to to try to try to explain, you know, to, how do you say, give lectures about their products, the machines, the engines, and also the cars, why the car is good, the better. So it's, and also sometimes to outline the users, our users, influencers to have the forums, whatever. But we have to have differentiated unique opportunities to have an marketing solution offered to them so that we can compare with a few years ago. A few years ago, they are just with, you know, it's an easy position to spend money to advertise.

But now, it's very difficult.

I see. I see. Just lastly, to follow up.

Can you share with us, I know you mentioned Auto is one of the industry vertical probably are cutting back the app budgets. Any other vertical that you're actually seeing is also facing more cautious app budgets?

It's across the board, all companies. Because just the Chinese consumers are spending less. Consumers are spending less. That's why those companies are not making money or not making good money. That's why they are actually reduced. They're at a reduction in dollars. They're also IT and FMCG and all across the board.

Maybe just lastly, in terms of the first quarter on your advertising, revenue contribution by industry vertical if you can rank them by the contribution percentage?

Nineteen percent. Also industry, 19 percent. IT services like home appliances and electronics and, you know, that's 19 percent. And FMCG, 14 percent. I see.

Okay. Very helpful.

Thank you, Charles. There's some good signs in the IT sector because the traditional home appliances now, because of the IT, AI, you know, they're all turning into an AI product with, you know, intelligence. So that's the, we have seen a lot of new kind of products that tend to market to the market, you know. So. For example, I went to the Shanghai AWE, the annual AWE, and I see a lot of new traditional home products, home appliance electronics with the, you know, in Chinese called AI, turning, you know, really a lot of, you know, that's an opportunity.

I see, I see. And then, so that is, you are seeing, you know, decent budget. And then, in terms of, you know, in the second quarter, should we also rank, maybe you are seeing more updates from the IT, and then maybe FNCG also okay, but then weaker in auto. Is that fair to assume that on the second quarter?

Yeah, the second quarter, the auto,

Right, we, yeah, also, the fear competition, yes, we are, we're, and also the electric vehicle, you know, it's a higher, a more beneficial electric vehicle into the market, into the market share.

And, yeah. Yeah, I would say it's similar, right? So all the industries graduate, right?

And now they're all trying to, you know, export more to the European market or to the Middle East, right? So basically the consumption, you know, consuming power is really a problem. People are not spending money. It's too saturated, right? Because people are all, you know, paying their mortgage, that's why they don't have money to spend, right? They're all paying the high, you know, housing price mortgage. That's a major, that's mostly the biggest problem with the Chinese economy. So people all have debts and have to pay back their, to pay their mortgage. So they don't have time, they don't have the money to spend on other things.

Okay. Okay. Thank you so much, Charles. Thanks for sharing. Okay.

Thank you. As a reminder, please press star 1-1 on your telephone keypad if you wish to ask a question. 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.