Sohu.com Ltd. Q3 FY2024 earnings call

• Sohu Media and Sohu Video: Continued product refinements and user experience improvements, integrated resources, hosted unique events and marketing campaigns. For example, successfully hosted the 2024 autumn convention of Sohu Video influencers and a groundbreaking overseas collaboration with the 2024 Dream Concert in South Korea. Consistently reinforced leading position in knowledge and science live streaming with Charles' Physics Class and others.
• Online game business: Changyou's online game revenues exceeded prior guidance due to TLBB PC performing better than expected. Launched Qixi Festival crossover events for TLBB PC, revamped skills for regular TLBB PC, and upgraded skills for Legacy TLBB Mobile based on player feedback.

For the third quarter of 2024, total revenues were $152 million, up 5% year-over-year and down 12% quarter-over-quarter. Brand advertising revenues were $19 million, down 15% year-over-year and 6% quarter-over-quarter. Online game revenues were $128 million, up 9% year-over-year and down 13% quarter-over-quarter. For Sohu Media and Sohu Video, quarterly revenues were $23 million compared with $27 million in the same quarter last year, and operating loss was $72 million compared with $66 million in the same quarter last year. For Changyou's online game business and 17173, quarterly revenues were $129 million compared with $118 million in the same quarter last year, and operating profit was $62 million compared with $52 million in the same quarter last year.

• For the fourth quarter of 2024, brand advertising revenues are expected to be between $17 million and $19 million, implying annual decrease of 6% to 16% and sequential decrease of 9% to sequential increase of 2%.
• Online game revenues are expected to be between $97 million and $107 million, implying annual decrease of 7% to 15% and sequential decrease of 16% to 24%.
• Non-GAAP net loss attributable to Sohu.com Limited is expected to be between $26 million and $36 million, and GAAP net loss is expected to be between $30 million and $40 million.

• Advertising market still soft due to macroeconomic factors. Game segment faces natural decline in some titles like New Westward Journey and intensifying market competition.

Q: In terms of the advertising outlook, have you seen any improvement in terms of the ad budget spend by advertiser entering fourth quarter? Do you think overall advertiser sentiment has improved slightly heading into the remaining of the year? And then given your guidance actually implying year-over-year decline is narrowing for your ad revenue guidance, is that what you are seeing is an improving trend and also possible if you could also resume positive growth as we enter 2025?

A: The economy is steady but gradually losing growth rate, advertising market is still soft. In Q3, achieved higher end of forecast due to unique events providing advertiser opportunities. Recently, policy stimulus package, effects to be seen, market may recover next year.

Q: On your gaming guidance versus your reported revenue. So in 3Q, you guided very conservatively and then yet you delivered a massive beat in third quarter, like $128 million. And then you guided 4Q again very conservative. So just what are the main reasons for you to guide conservatively? Which game performance that you have not factored into the guidance for 4Q?

A: The reason for revenue beat in 3Q is new content and servers launched for TLBB Vintage and regular TLBB PC performing better than expected. The reason for conservative 4Q guidance is strategy for TLBB PC in 4Q is to maintain user stability instead of increasing revenue.

Q: It seems like it takes a little bit slow to execute your buyback, given the trading liquidity. Just wondering if management could think of any better way to enhance the return to shareholder. Or would you consider to speed up? Is there any way you consider to speed up the buyback in more shares in the shorter-term period?

A: The buyback program is limited by daily volume limit, don't want to impact price too much, that's why extended the program to November 10, 2026.

Q: How should we expect the 2025 online games outlook? And my second question is that how should we expect the operating margin trend in the next few years?

A: For 2025, goal is to maintain stability of older games and strive for growth. Have around 10 games under development, including NBA Absolute Superstar and Hero: Three Kingdoms, with some having license approvals and testing starting for new TLBB PC version.