Sohu.com Reports Second Quarter 2010 Unaudited Financial Results
-- Total Revenues reach US$146.1 Million, Up 15% Year-over-Year, Exceeding High End of Group Guidance by US$2 Million;
-- GAAP Net Income before Non-Controlling Interest Up 7% Year-over-Year to US$45.5 Million, Non-GAAP Net Income before Non-Controlling Interest Up 7% Year-over-Year to US$52.5 Million, Exceeding High End of Group Guidance by US$2 Million;
-- GAAP Fully Diluted EPS of 82 US cents, Non-GAAP Fully Diluted EPS of 96 US cents, Exceeding High End of Group Guidance by 4 US cents
BEIJING, July 26 /PRNewswire-Asia/ -- Sohu.com Inc. (Nasdaq: SOHU), China's leading online media, communications, search, online games and wireless value-added services group, today reported unaudited financial results for the second quarter ended June 30, 2010.
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Second Quarter 2010 Highlights(1)
-- Record high total revenues and record high revenues for brand
advertising and online games. All such operating parameters exceeded
Group guidance.
-- Brand advertising revenues were US$53.2 million, up 22% year-over-year,
exceeding high end of Group guidance.
-- Online game revenues reached US$77.7 million, up 17% year-over-year and
8% quarter-over-quarter, exceeding high end of Group guidance.
-- Before deducting the share of net income pertaining to the Non-
Controlling Interest, GAAP net income for the second quarter of 2010
was US$45.5 million, up 7% year-over-year and 10% quarter-over-quarter,
and non-GAAP net income for the second quarter of 2010 was US$52.5
million, up 7% year-over-year and up 9% quarter-over-quarter, exceeding
high end of Group guidance.
-- After deducting the share of net income pertaining to the Non-
Controlling Interest, GAAP net income for the second quarter of 2010
was US$31.3 million, or 82 US cents per fully diluted share, and non-
GAAP net income for the second quarter of 2010 was US$37.5 million, or
96 US cents per fully diluted share, exceeding high end of Group
guidance.
(1) Explanation of the Group' non-GAAP financial measures and related
reconciliations to GAAP financial measures are included in the
accompanying "non-GAAP Disclosure" and the "Reconciliation to
Unaudited Condensed Consolidated Statements of Operations."
Dr. Charles Zhang, Chairman and CEO of Sohu.com, commented, "Our results for the second quarter of 2010 surpassed our expectations as we established record total revenues and set new highs in our brand advertising and online game businesses. For our brand advertising business, we continue to place emphasis on online video and are convinced this will be an area of significant future growth. We have successfully expanded and diversified our collection of licensed and in-house produced quality video content, and develop innovative applications that cater to various devices, including the most sought after iPad. We are very encouraged by the fast-growing user base and new advertisers. For our online game business, Changyou demonstrated that the ongoing strategic release of feedback-driven content and a diverse portfolio of games are helping retain existing users, attract new ones, and reinforce the popularity of our games. We are optimistic about our ability to build on our momentum this year and add value over the long term.
Commenting on Sohu's brand advertising business, Ms. Belinda Wang, Co- President and COO, added, "Our brand advertising business performed well in the second quarter. The World Expo and World Cup clearly drove our strong performance. These events also enabled us to build stronger relationships with a growing roster of advertisers. Our investments in online video also led to encouraging increases in revenue in this area. As a result, we are starting to gain significant and sustained traction as we increasingly provide higher value advertising solutions to our advertising partners around China."
Second Quarter Financial Results
Revenues
Total revenues for the second quarter ended June 30, 2010 were US$146.1 million, up 15% year-over-year and 13% quarter-over-quarter.
Brand advertising revenues for the second quarter of 2010 totaled US$53.2 million, up 22% year-over-year and 35% quarter-over-quarter.
Online game revenues for the second quarter of 2010 were US$77.7 million, up 17% year-over-year and 8% quarter-over-quarter.
Wireless revenues for the second quarter of 2010 were US$11.1 million, down 26% year-over-year and 17% quarter-over-quarter.
Gross Margin
Gross margin was 73% for the second quarter of 2010, compared with 75% in the first quarter of 2010 and 77% in the second quarter of 2009. Non-GAAP gross margin for the second quarter of 2010 was 74%, compared with 75% in the first quarter of 2010 and 78% in the second quarter of 2009.
Brand advertising gross margin for the second quarter of 2010 was 58%, compared with 56% in the first quarter of 2010 and 68% in the second quarter of 2009. Non-GAAP brand advertising gross margin for the second quarter of 2010 was 60 %, compared with 59% in the first quarter of 2010 and 68% in the second quarter of 2009.
Online game gross margin for the second quarter of 2010 was 91%, compared with 93% in the first quarter of 2010 and 94% in the second quarter of 2009. Non-GAAP online game gross margin for the second quarter of 2010 was also 91%, compared with 93% in the first quarter of 2010 and 94% in the second quarter of 2009.
Wireless gross margin for the second quarter of 2010 was 48%, compared with 48% in the first quarter of 2010 and 45% in the second quarter of 2009. Non-GAAP wireless gross margin for the second quarter of 2010 was 48%, compared with 48% in the first quarter of 2010 and 45% in the second quarter of 2009.
Operating Expenses
For the second quarter of 2010, Sohu's operating expenses totaled US$56.0 million. Non-GAAP operating expenses totaled US$50.8 million, up 18% sequentially from US$43.0 million and up 17% year-over-year. The year-over- year increase primarily reflects an increase in marketing expenses.
Operating Margin
Operating margin was 35% for the second quarter of 2010, compared with 37% in the first quarter of 2010 and 38% in the second quarter of 2009. Non-GAAP operating margin was 39% for the second quarter of 2010, compared with 42% in the previous quarter and 43% in the second quarter of 2009.
Income Tax Expense
For the second quarter of 2010, excluding non-cash income tax expense of US$0.6 million recorded for tax benefits from share-based awards, non-GAAP income tax expense was US$5.7 million, compared with US$7.4 million in the previous quarter.
Net Income
Before deducting the share of net income pertaining to the Non-Controlling Interest, GAAP net income for the second quarter of 2010 was US$45.5 million, up 7% year-over-year and 10% quarter-over-quarter. Non-GAAP net income for the second quarter of 2010 was US$52.5 million, up 7% year-over-year and 9% quarter-over-quarter, exceeding Group guidance by US$2 million.
After deducting the share of net income pertaining to the Non-Controlling Interest, GAAP net income for the second quarter of 2010 was US$31.3 million, or 82 US cents per fully diluted share. Non-GAAP net income for the second quarter of 2010 was US$37.5 million, or 96 US cents per fully diluted share, an increase of 11% quarter-over-quarter, exceeding Group guidance.
Cash Balance
Sohu group continued to maintain a debt-free balance sheet and a strong cash position of US$599.1 million as of June 30, 2010.
Ms. Carol Yu, Co-President and CFO of Sohu, commented, "We had a solid quarter as both our core businesses reported record revenues with strong growth. With our debt-free balance sheet, strong cash flows, and robust platform, we believe we are particularly well positioned to further expand and deliver long-term value to our shareholders."
Business Outlook
Sohu estimates total revenues for the third quarter of 2010 to be between US$153.0 million and US$158.0 million, with advertising revenues of US$61.0 million to US$63.0 million.
Sohu estimates brand advertising revenues for the third quarter of 2010 to be between US$57.0 million and US$59.0 million.
Sohu estimates online game revenues for the third quarter of 2010 to be between US$80.0 million and US$83.0 million.
Sohu estimates non-GAAP net income for the third quarter of 2010, before deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest, to be between US$54.0 million to US$56.5 million. After deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest, Sohu estimates non-GAAP net income for the third quarter of 2010 to be between US$39.0 million to US$41.0 million, and non-GAAP fully diluted earnings per share for the third quarter of 2010 to be between US$1.00 and US$1.05.
Assuming no new grants of share-based awards, Sohu estimates compensation expense and income tax expense related to share-based awards for the third quarter of 2010 to be between US$6.5 million and US$7.5 million, which includes Changyou's share-based compensation expense for the third quarter of 2010 estimated to be between US$1.5 million and US$2.0 million. Considering Sohu's share in Changyou, the estimated impact of this expense under US GAAP is expected to reduce Sohu's fully diluted earnings per share for the third quarter of 2010 by 16 US cents to 18 US cents.
Supplementary Information for Online Game Business
Operational Results
Aggregate registered accounts for Changyou's games(2) grew 12% quarter- over-quarter and 42% year-over-year to 98.2 million.
Changyou has adopted a new method for reporting aggregate peak concurrent users ("PCU") for Changyou's games. Aggregate PCU for Changyou's games determined under the previous method rose 23% quarter-over-quarter and 35% year-over-year to approximately 1.28 million. Aggregate PCU for Changyou's games determined under the new method rose 25% quarter-over-quarter and 21% year-over-year to approximately 1.14 million. Under the previous method, aggregate PCU for a quarter was determined by adding up the separate PCUs for each of Changyou's games for the quarter. Under the new method, the aggregate PCU reported by Changyou for its games will be the highest aggregate PCU of the games for a day that occurs during the quarter. We believe that the new method will provide investors with a better foundation for understanding the performance of our online game business on a comparative quarter-over-quarter and year-over-year basis. In this release, we are providing quarter-over- quarter and year-over-year comparisons using both methods in order to facilitate investors' understanding as Changyou transitions from the previous method to the new method. Going forward, we plan to only report aggregate PCU for Changyou's games determined under the new method.
Aggregate active paying accounts ("APA") for Changyou's games grew 17% quarter-over-quarter and 17% year-over-year to approximately 2.79 million.
Average revenue per active paying account ("ARPU") for Changyou's games was RMB184 for the quarter, a decline of 8% quarter-over-quarter and 1% year- over-year, which is consistent with Changyou's intention to have ARPU within a range that keeps Changyou's games affordable for the majority of Chinese game players.
(2) Comprising Tian Long Ba Bu, Blade Online, Blade Hero 2, Da Hua Shui Hu,
and Zhong Hua Ying Xiong.
Revenues
Total online game revenues for the second quarter of 2010 increased 8% quarter-over-quarter and 17% year-over-year to US$77.7 million.
Revenues from game operations for the second quarter of 2010 increased 8% quarter-over-quarter and 16% year-over-year to US$75.6 million. The increases were mainly due to the ongoing popularity of TLBB, Changyou's flagship game.
Overseas licensing revenues for the second quarter of 2010 increased 15% quarter-over-quarter and 29% year-over-year to US$2.1 million. The increases were largely the result of increased momentum of TLBB in Vietnam and Malaysia.
Recent Business Developments
Open Beta Testing of Zhong Hua Ying Xiong
On May 20, 2010, Changyou began open beta testing of Zhong Hua Ying Xiong, Changyou's first 3D martial arts-themed massively multi-player online role- playing game ("MMORPG"). This licensed game is based on a popular Hong Kong comic book of the same name. The game features advanced 3D graphics, cinematic cutscenes, and dynamic real-time fighting movements that are designed to attract 3D online game enthusiasts.
Acquisition of I.C.E. Entertainment
In May 2010, Changyou completed the acquisition of I.C.E Entertainment Limited, a Shanghai-based online game developer and operator. The acquisition adds over 140 game engineers and game operation professionals to Changyou's platform.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Sohu's management uses non-GAAP measures of cost of revenues, operating expenses, income tax expense, net income and net income per share, which are adjusted from results based on GAAP to exclude the impact of share- based awards granted to employees on the consolidated statements of operations, which consists mainly of share-based compensation expense and non-cash tax benefits from excess tax deductions related to share-based awards. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
Sohu's management believes excluding the impact of share-based awards from its non-GAAP financial measure is useful for itself and investors. Further, the impact of share-based awards cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts, which have been the basis for information Sohu provides to analysts and investors as guidance for future operating performance. As the impact of share-based awards does not involve any upfront or subsequent cash outflow, Sohu does not factor this in when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result, in general, the monthly financial results for internal reporting and any performance measure for commissions and bonuses are based on non-GAAP financial measures that exclude the impact of share- based awards.
The non-GAAP financial measures are provided to enhance investors' overall understanding of Sohu's current financial performance and prospects for the future. A limitation of using non-GAAP cost of revenues, operating expenses, net income and net income per share, excluding the impact of share-based awards, is that the impact of share-based awards have been and will continue to be a significant recurring expense in Sohu's business for the foreseeable future. In order to mitigate these limitations Sohu has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between the GAAP financial measures that are most directly comparable to the non-GAAP financial measures that have been presented.
Notes to Financial Information
Financial information in this press release other than the information indicated as being non-GAAP is extracted from Sohu's unaudited interim financial statements prepared in accordance with GAAP.
Safe Harbor Statement
This announcement contains forward-looking statements. It is currently expected that the Business Outlook will not be updated until release of Sohu's next quarterly earnings announcement; however, Sohu reserves right to update its Business Outlook at any time for any reason. Statements that are not historical facts, including statements about Sohu's beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, the current global financial and credit markets crisis and its potential impact on the Chinese economy, the slower growth the Chinese economy experienced during the latter half of 2008 and in 2009, which could recur in the future, the uncertain regulatory landscape in the People's Republic of China, fluctuations in Sohu's quarterly operating results, and Sohu's reliance on online advertising sales, online games and wireless services (most wireless revenues are collected from a few mobile network operators) for its revenues. Further information regarding these and other risks is included in Sohu's annual report on Form 10-K for the year ended December 31, 2009, and other filings with the Securities and Exchange Commission.
Conference Call and Webcast
Sohu's management team will host a conference call on July 26, 2010 at 8:30 a.m. U.S. Eastern Time (8:30 p.m. Beijing/Hong Kong time, July 26, 2010).
The dial-in details for the live conference call are:
US Toll-Free: +1-877-941-6009
International: +1-480-629-9772
Hong Kong: +852-3009-5027
Passcode: SOHU
Please dial in 10 minutes before the call is scheduled to begin and provide the pass code to join the call.
A telephone replay of the call will be available after the conclusion of the conference call at 11:00 a.m. Eastern Time on July 26 through August 8, 2010. The dial-in details for the telephone replay are:
International: +852-3056-2777
Passcode: 4328860
The live webcast and archive of the conference call will be available on the Investor Relations section of Sohu's website at http://corp.sohu.com/ .
About Sohu.com
Sohu.com Inc. (NASDAQ: SOHU) is China's premier online brand and indispensable to the daily life of millions of Chinese, providing a network of web properties and community based/web 2.0 products which offer the vast Sohu user community a broad array of choices regarding information, entertainment and communication. Sohu has built one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and leading online media destination http://www.sohu.com; interactive search engine http://www.sogou.com; #1 games information portal http://www.17173.com; the top real estate website http://www.focus.cn; #1 online alumni club http://www.chinaren.com; wireless value-added services provider http://www.goodfeel.com.cn; leading online mapping service provider www.go2map.com; and developer and operator of online games http://www.changyou.com .
Sohu corporate services consist of brand advertising on its matrix of websites as well as paid listing and bid listing on its in-house developed search directory and engine. Sohu also offers wireless value-added services such as news, information, music, ringtone and picture content sent over mobile phones. The Companies's massively multiplayer online role-playing game (MMORPG) subsidiary, Changyou.com (NASDAQ: CYOU), currently operates five online games, including the in-house developed Tian Long Ba Bu, one of the most popular online games in China, and the licensed Blade Online, Blade Hero 2, Da Hua Shui Hu and Zhong Hua Ying Xiong. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its fourteenth year of operation.
For investor and media inquiries, please contact:
In China:
Ms. Li Mei
Sohu.com Inc.
Tel: +86-10-6272-6596
Email: [email protected]
Mr. Chen Yuan Yuan
Christensen
Tel: +86-10-5971-2001
Email: [email protected]
In the United States:
Mr. Jeff Bloker
Christensen
Tel: +1-480-614-3003
Email: [email protected]
SOHU.COM INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
2010 2010 2009 2010 2009
Revenues:
Advertising
Brand advertising $53,162 $39,512 $43,621 $92,674 $82,695
Sponsored search 3,891 2,834 1,769 6,725 3,331
Subtotal of advertising
revenues 57,053 42,346 45,390 99,399 86,026
Online games 77,721 72,072 66,596 149,793 128,203
Wireless and others 11,323 15,036 15,099 26,359 28,594
Total revenues 146,097 129,454 127,085 275,551 242,823
Cost of revenues:
Advertising
Brand advertising (includes
share-based compensation
expense of $1,204, $967,
$261, $2,171 and $497,
respectively) 22,256 17,283 14,065 39,539 27,795
Sponsored search (includes
share-based compensation
expense of $1, $1, $3, $2
and $6, respectively) 3,507 2,913 2,265 6,420 4,563
Subtotal of cost of
advertising revenues 25,763 20,196 16,330 45,959 32,358
Online games (includes share-
based compensation expense
of $43, $67, $90, $110 and
$98, respectively) 7,008 5,384 3,937 12,392 7,373
Wireless and others (includes
share-based compensation
expense of $0, $0, $1, $0
and $1, respectively) 6,150 7,246 8,512 13,396 16,641
Total cost of revenues 38,921 32,826 28,779 71,747 56,372
Gross profit 107,176 96,628 98,306 203,804 186,451
Operating expenses:
Product development (includes
share-based compensation
expense of $2,218, $2,445,
$3,299, $4,663 and $4,573,
respectively) 16,881 15,518 14,637 32,399 27,951
Sales and marketing (includes
share-based compensation
expense of $1,176, $955,
$214, $2,131 and $499,
respectively) 29,606 23,009 25,810 52,615 42,636
General and administrative
(includes share-based
compensation expense of
$1,811, $2,093, $2,746,
$3,904 and $3,227,
respectively) 9,384 9,883 9,208 19,267 17,102
Amortization of intangible
assets 139 108 128 247 202
Total operating expenses 56,010 48,518 49,783 104,528 87,891
Operating profit 51,166 48,110 48,523 99,276 98,560
Other (expense) / income (330) (25) 62 (355) 63
Interest income and exchange
difference 958 1,199 1,274 2,157 2,396
Income before income tax
expense 51,794 49,284 49,859 101,078 101,019
Income tax expense 6,329 7,963 7,969 14,292 14,555
Income from continuing
operations 45,465 41,321 41,890 86,786 86,464
Gain from discontinued e-
commerce operations -- -- 446 -- 446
Net income 45,465 41,321 42,336 86,786 86,910
Less: Net income attributable
to the noncontrolling
interest 12,012 11,130 8,801 23,142 8,780
Net income attributable to
Sohu.com Inc. 33,453 30,191 33,535 63,644 78,130
Basic net income per share
attributable to Sohu.com
Inc. $0.88 $0.80 $0.88 $1.68 $2.04
Shares used in computing
basic net income per share
attributable to Sohu.com
Inc. 37,822 37,778 38,284 37,800 38,223
Diluted net income per share
attributable to Sohu.com
Inc. $0.82 $0.73 $0.79 $1.54 $1.94
Shares used in computing
diluted net income per share
attributable to Sohu.com
Inc. 38,289 38,443 39,018 38,366 38,935
SOHU.COM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
As of Jun. 30, As of Dec. 31,
2010 2009
ASSETS
Current assets:
Cash and cash equivalents $599,105 $563,782
Accounts receivable, net 62,014 46,610
Prepaid and other current assets 19,263 10,781
Total current assets 680,382 621,173
Fixed assets, net 119,136 115,088
Goodwill 67,708 55,555
Intangible assets, net 14,073 7,933
Other assets, net 73,242 28,524
Total assets $954,541 $828,273
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,397 $4,602
Accrued liabilities to suppliers and
agents 49,233 41,103
Receipts in advance and deferred
revenue 41,780 36,944
Accrued salary and benefits 29,697 28,860
Tax payables 19,997 21,953
Other accrued liabilities 23,436 17,035
Total current liabilities $171,540 $150,497
Contingent consideration 1,325 --
Commitments and contingencies -- --
Shareholders' equity:
Sohu.com Inc. shareholders' equity 684,174 609,781
Noncontrolling interest 97,502 67,995
Total shareholders' equity $781,676 $677,776
Total liabilities and shareholders'
equity $954,541 $828,273
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Three Months Ended Jun. 30, 2010
Non-GAAP
Adjustments
GAAP (a) Non-GAAP
Advertising revenues $57,053 $-- $57,053
Less: Cost of advertising revenues 25,763 (1,205) 24,558
Advertising gross profit $31,290 $1,205 $32,495
Advertising gross margin 55% 57%
Online games revenues $77,721 $-- $77,721
Less: Cost of online games revenues 7,008 (43) 6,965
Online games gross profit $70,713 $43 $70,756
Online games gross margin 91% 91%
Wireless and others revenues $11,323 $-- $11,323
Less: Cost of wireless and others
revenues 6,150 -- 6,150
Wireless and others gross profit $5,173 $-- $5,173
Wireless and others gross margin 46% 46%
Total revenues $146,097 $-- $146,097
Less: Total cost of revenues 38,921 (1,248) 37,673
Gross profit $107,176 $1,248 $108,424
Gross margin 73% 74%
Operating expenses $56,010 $(5,205) $50,805
Operating profit $51,166 $6,453 $57,619
Operating margin 35% 39%
Income tax expense / (benefit) $6,329 $(624) $5,705
Net income before Non-Controlling
Interest $45,465 $7,077 $52,542
Net income attributable to Sohu.com
Inc. for basic net income per share $33,453 $6,511 $39,964
Net income attributable to Sohu.com
Inc. for diluted net income per
share (b) $31,265 $6,187 $37,452
Diluted net income per share
attributable to Sohu.com Inc. $0.82 $0.96
Shares used in computing diluted net
income per share attributable to
Sohu.com Inc. 38,289 39,037
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Three Months Ended Mar. 31, 2010
Non-GAAP
Adjustments
GAAP (a) Non-GAAP
Advertising revenues $42,346 $-- $42,346
Less: Cost of advertising revenues 20,196 (968) 19,228
Advertising gross profit $22,150 $968 $23,118
Advertising gross margin 52% 55%
Online games revenues $72,072 $-- $72,072
Less: Cost of online games revenues 5,384 (67) 5,317
Online games gross profit $66,688 $67 $66,755
Online games gross margin 93% 93%
Wireless and others revenues $15,036 $-- $15,036
Less: Cost of wireless and others
revenues 7,246 -- 7,246
Wireless and others gross profit $7,790 $-- $7,790
Wireless and others gross margin 52% 52%
Total revenues $129,454 $-- $129,454
Less: Total cost of revenues 32,826 (1,035) 31,791
Gross profit $96,628 $1,035 $97,663
Gross margin 75% 75%
Operating expenses $48,518 $(5,493) $43,025
Operating profit $48,110 $6,528 $54,638
Operating margin 37% 42%
Income tax expense / (benefit) $7,963 $(531) $7,432
Net income before Non-Controlling
Interest $41,321 $7,059 $48,380
Net income attributable to Sohu.com
Inc. for basic net income per share $30,191 $6,224 $36,415
Net income attributable to Sohu.com
Inc. for diluted net income per
share (b) $27,927 $5,842 $33,769
Diluted net income per share
attributable to Sohu.com Inc. $0.73 $0.86
Shares used in computing diluted net
income per share attributable to
Sohu.com Inc. 38,443 39,079
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Three Months Ended Jun. 30, 2009
Non-GAAP
Adjustments
GAAP (a) Non-GAAP
Advertising revenues $45,390 $-- $45,390
Less: Cost of advertising revenues 16,330 (264) 16,066
Advertising gross profit $29,060 $264 $29,324
Advertising gross margin 64% 65%
Online games revenues $66,596 $-- $66,596
Less: Cost of online games revenues 3,937 (90) 3,847
Online games gross profit $62,659 $90 $62,749
Online games gross margin 94% 94%
Wireless and others revenues $15,099 $-- $15,099
Less: Cost of wireless and others
revenues 8,512 (1) 8,511
Wireless and others gross profit $6,587 $1 $6,588
Wireless and others gross margin 44% 44%
Total revenues $127,085 $-- $127,085
Less: Total cost of revenues 28,779 (355) 28,424
Gross profit $98,306 $355 $98,661
Gross margin 77% 78%
Operating expenses $49,783 $(6,259) $43,524
Operating profit $48,523 $6,614 $55,137
Operating margin 38% 43%
Income tax expense / (benefit) $7,969 $-- $7,969
Net income before Non-Controlling
Interest $42,336 $6,614 $48,950
Net income attributable to Sohu.com
Inc. for basic net income per share $33,535 $5,162 $38,697
Net income attributable to Sohu.com
Inc. for diluted net income per
share (b) $30,876 $4,323 $35,199
Diluted net income per share
attributable to Sohu.com Inc. $0.79 $0.90
Shares used in computing diluted net
income per share attributable to
Sohu.com Inc. 39,018 39,092
Note:
(a) To eliminate the impact of share-based awards as measured using the
fair value method.
(b) To adjust Sohu's economic interest in Changyou under the treasury
stock method.
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Six Months Ended Jun. 30, 2010
Non-GAAP
Adjustments
GAAP (a) Non-GAAP
Advertising revenues $99,399 $-- $99,399
Less: Cost of advertising revenues 45,959 (2,173) 43,786
Advertising gross profit $53,440 $2,173 $55,613
Advertising gross margin 54% 56%
Online games revenues $149,793 $-- $149,793
Less: Cost of online games revenues 12,392 (110) 12,282
Online games gross profit $137,401 $110 $137,511
Online games gross margin 92% 92%
Wireless and others revenues $26,359 $-- $26,359
Less: Cost of wireless and others
revenues 13,396 -- 13,396
wireless and others gross profit $12,963 $-- $12,963
wireless and others gross margin 49% 49%
Total revenues $275,551 $-- $275,551
Less: Total cost of revenues 71,747 (2,283) 69,464
Gross profit $203,804 $2,283 $206,087
Gross margin 74% 75%
Operating expenses $104,528 $(10,698) $93,830
Operating profit $99,276 $12,981 $112,257
Operating margin 36% 41%
Income tax expense $14,292 $(1,155) $13,137
Net income before Non-Controlling
Interest $86,786 $14,136 $100,922
Net income attributable to Sohu.com
Inc. for basic net income per share $63,644 $12,735 $76,379
Net income attributable to Sohu.com
Inc. for diluted net income per
share (b) $59,192 $12,029 $71,221
Diluted net income per share
attributable to Sohu.com Inc. $1.54 $1.82
Shares used in computing diluted net
income per share attributable to
Sohu.com Inc. 38,366 39,058
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING IMPACT OF SHARE-BASED AWARDS
Six Months Ended Jun. 30, 2009
Non-GAAP
Adjustments
GAAP (a) Non-GAAP
Advertising revenues $86,026 $-- $86,026
Less: Cost of advertising revenues 32,358 (503) 31,855
Advertising gross profit $53,668 $503 $54,171
Advertising gross margin 62% 63%
Online games revenues $128,203 $-- $128,203
Less: Cost of online games revenues 7,373 (98) 7,275
Online games gross profit $120,830 $98 $120,928
Online games gross margin 94% 94%
Wireless and others revenues $28,594 $-- $28,594
Less: Cost of wireless and others
revenues 16,641 (1) 16,640
wireless and others gross profit $11,953 $1 $11,954
wireless and others gross margin 42% 42%
Total revenues $242,823 $-- $242,823
Less: Total cost of revenues 56,372 (602) 55,770
Gross profit $186,451 $602 $187,053
Gross margin 77% 77%
Operating expenses $87,891 $(8,299) $79,592
Operating profit $98,560 $8,901 $107,461
Operating margin 41% 44%
Income tax expense $14,555 $-- $14,555
Net income before Non-Controlling
Interest $86,910 $8,901 $95,811
Net income attributable to Sohu.com
Inc. for basic net income per share $78,130 $7,449 $85,579
Net income attributable to Sohu.com
Inc. for diluted net income per
share (b) $75,471 $6,610 $82,081
Diluted net income per share
attributable to Sohu.com Inc. $1.94 $2.10
Shares used in computing diluted net
income per share attributable to
Sohu.com Inc. 38,935 39,057
Note:
(a) To eliminate the impact of share-based awards as measured using the
fair value method.
(b) To adjust Sohu's economic interest in Changyou under the treasury
stock method.
(c) Certain amounts from prior periods have been reclassified to conform
with current period presentation.
SOURCE Sohu.com Inc.
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