omniture

Sohu.com Reports Fourth Quarter and Fiscal Year 2010 Unaudited Financial Results

2011-01-31 14:36 1170

Group Sets Record Financial and Operating Results for Fourth Quarter and Full Year 2010


BEIJING, Jan. 31, 2011 /PRNewswire-Asia/ -- Sohu.com Inc. (NASDAQ: SOHU), China's leading online media, search, gaming, community and mobile service group, today reported unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter Highlights(1)

  • Record total revenues and record revenues in each of the Group's brand advertising, online game and search businesses. All such operating parameters exceeded the Group's expectations.
  • Total revenues were US$173.2 million, up 27% year-over-year and 6% quarter-over-quarter.
  • Brand advertising revenues were US$60.1 million, up 31% year-over-year and 2% quarter-over-quarter.
  • Online game revenues reached US$91.7 million, up 30% year-over-year and 7% quarter-over-quarter.
  • Search revenues were US$6.6 million, up 126% year-over-year and 23% quarter-over-quarter.
  • After deducting the share of net income pertaining to the Noncontrolling Interest, GAAP net income was US$41.5 million, up 41% year-over-year and 7% quarter-over-quarter, or US$1.07 per fully diluted share. Non-GAAP net income was US$47.9 million, up 34% year-over-year and 6% quarter-over-quarter, or US$1.23 per fully diluted share.

(1) Explanation of the Group's 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."

Fiscal Year 2010 Highlights

  • Record total revenues and record revenues in each of the Group's brand advertising, online game and search businesses.
  • Total revenues reached US$612.8 million, up 19% compared with 2009.
  • Brand advertising revenues were US$211.8 million, up 20% compared with 2009.
  • Online game revenues were US$327.1 million, up 22% compared with 2009.
  • Search revenues reached US$18.6 million, up 120% compared with 2009.
  • After deducting the share of net income pertaining to the Noncontrolling Interest, GAAP net income was flat compared with 2009, reaching US$139.3 million, or US$3.62 per fully diluted share. Non-GAAP net income was up 6% compared with 2009, reaching US$164.3 million, or US$4.21 per fully diluted share.
  • Cash balance was US$678.4 million as of December 31, 2010, representing an increase of US$114.6 million from December 31, 2009.

Dr. Charles Zhang, Chairman and CEO of Sohu, commented, "While I am encouraged by these strong results across our multiple business lines, I am even more excited when we look beyond our financial performance. First, our conscientious efforts in online video and our strategy to secure high quality authorized content have brought our market share from 3.4% to 13.4% in a mere 12-month period. Second, while TLBB continues to be a strong and popular game, Changyou will unveil the full trial version of the highly anticipated Duke of Mount Deer to players once it officially kicks off the game's marketing campaign in March. And third, with its new capital structure in place, Sogou's business is quickly picking up momentum. Over the fourth quarter of 2010, active users of the Sogou browser, related search traffic and search revenue, all grew north of 20% quarter-to-quarter."

Commenting on Sohu's brand advertising business, Ms. Belinda Wang, Co-President and COO, added, "We achieved another record year in our brand advertising business.  Brand advertising revenues for the fourth quarter rose 31% compared with the fourth quarter of 2009.  We are optimistic that we will be able to attract attention from the top companies that are seeking effective and efficient marketing solutions for their 2011 plans.  And with advertising revenue from online video for the year 2010 grew to three times that of 2009, we are convicted that this business has vast potential."

Fourth Quarter Financial Results

Revenues

Total revenues for the fourth quarter of 2010 were US$173.2 million, up 27% year-over-year and 6% quarter-over-quarter.

Brand advertising revenues for the fourth quarter of 2010 totaled US$60.1 million, up 31% year-over-year and 2% quarter-over-quarter.

Online game revenues for the fourth quarter of 2010 were US$91.7 million, up 30% year-over-year and 7% quarter-over-quarter.

Search revenues for the fourth quarter of 2010 were US$6.6 million, up 126% year-over-year and 23% quarter-over-quarter.

Wireless revenues for the fourth quarter of 2010 were US$14.4 million, down 8% year-over-year and up 6% quarter-over-quarter.

Gross Margin

Gross margin was 74% for the fourth quarter of 2010, compared with 74% in the third quarter of 2010 and 75% in the fourth quarter of 2009. Non-GAAP gross margin for the fourth quarter of 2010 was 75%, compared with 74% in the third quarter of 2010 and 75% in the fourth quarter of 2009.

Brand advertising gross margin for the fourth quarter of 2010 was 60%, compared with 61% in the third quarter of 2010 and 65% in the fourth quarter of 2009. Non-GAAP brand advertising gross margin for the fourth quarter of 2010 was 63%, compared with 62% in the third quarter of 2010 and 65% in the fourth quarter of 2009.

Both GAAP and non-GAAP gross margin for online games in the fourth quarter of 2010 were 90%, compared with 90% in the third quarter of 2010 and 92% in the fourth quarter of 2009. The decline in gross margin was mainly due to an increase in salaries and benefits and higher bandwidth and server depreciation costs associated with the operation of more games in the fourth quarter of 2010.

Both GAAP and non-GAAP gross margin for the search business in the fourth quarter of 2010 were 32%, compared with 32% in the third quarter of 2010 and 2% in the fourth quarter of 2009.

Both GAAP and non-GAAP gross margin for the wireless business for the fourth quarter of 2010 were 45%, compared with 46% in the third quarter of 2010 and 44% in the fourth quarter of 2009.

Operating Expenses

For the fourth quarter of 2010, Sohu's operating expenses totaled US$61.8 million, up 27% year-over-year and 11% quarter-over-quarter. Non-GAAP operating expenses totaled US$55.5 million, up 23% year-over-year and 11% quarter-over-quarter. The sequential increases in both GAAP and non-GAAP operating expenses were primarily attributable to the hiring of more game engineers and expenses related to royalties for licensed games in the fourth quarter of 2010.

Operating Margin

Operating margin was 38% for the fourth quarter of 2010, compared with 40% in the previous quarter and 39% in the fourth quarter of 2009. Non-GAAP operating margin was 43% for the fourth quarter of 2010, compared with 44% in the previous quarter and 42% in the fourth quarter of 2009.

Income Tax Expense

For the fourth quarter of 2010, excluding a non-cash income tax expense reversal of US$0.7 million recorded for tax benefits from share-based awards in connection with the recent U.S. Congress's enactment of legislation with favorable tax provisions that were reinstated retroactively to January 1, 2010, non-GAAP income tax expense was US$11.1 million, compared with US$10.6 million in the previous quarter.

Net Income

Before deducting the share of net income pertaining to the Noncontrolling Interest, GAAP net income for the fourth quarter of 2010 was US$57.4 million, up 35% year-over-year and 6% quarter-over-quarter. Non-GAAP net income for the fourth quarter of 2010 was US$64.6 million, up 28% year-over-year and 5% quarter-over-quarter, exceeding the high end of the Group's expectations.

After deducting the share of net income pertaining to the Noncontrolling Interest, GAAP net income for the fourth quarter of 2010 was US$41.5 million, or US$ 1.07 per fully diluted share. Non-GAAP net income for the fourth quarter of 2010 was US$47.9 million, or US$ 1.23 per fully diluted share, up 34% year-over-year and 6% quarter-over-quarter, exceeding the high end of the Group's expectations.

Cash Balance

Sohu Group continued to maintain a debt-free balance sheet and a strong cash position of US$678.4 million as of December 31, 2010.

Fiscal Year 2010 Financial Results

Revenues

Total revenues for fiscal year 2010 were US$612.8 million, up 19% compared with 2009.

Brand advertising revenues for fiscal year 2010 were US$211.8 million, up 20% compared with 2009.

Online game revenues for fiscal year 2010 were US$327.1 million, up 22% compared with 2009.

Search revenues for fiscal year 2010 were US$18.6 million, up 120% compared with 2009.

Wireless revenues for fiscal year 2010 were US$52.3 million, down 14% compared with 2009.

Gross Margin

Gross margin was 74% and non-GAAP gross margin was 75% for fiscal year 2010, compared with 76% for both GAAP and non-GAAP gross margin in 2009.

Brand advertising gross margin was 59% for fiscal year 2010, compared with 66% in 2009. Brand advertising non-GAAP gross margin was 61% for fiscal year 2010, compared with 67% in 2009.

Online game gross margin was 91% for fiscal year 2010, compared with 93% in 2009. Online game non-GAAP gross margin was 91% for fiscal year 2010, compared with 94% in 2009. The decline in gross margin was mainly due to an increase in salaries and benefits and higher bandwidth and server depreciation costs associated with the operation of more games in 2010.

Both GAAP and non-GAAP gross margin for the search business were 24% for fiscal year 2010, compared with -14% in 2009.

Both GAAP and non-GAAP gross margin for the wireless business were 46% for fiscal year 2010, compared with 43% in 2009.

Operating Expenses

For fiscal year 2010, Sohu's operating expenses totaled US$221.9 million, up 18% compared with 2009. Non-GAAP operating expenses increased 16% to US$199.4 million. The year-over-year increase primarily reflects an increase in salaries and compensation expenses as a result of increased headcount, an increase in content and bandwidth costs, as well as an increase in expenses related to royalties for licensed games at Changyou.

Operating Margin

Operating margin for fiscal year 2010 was 38%, compared with 40% in 2009. Non-GAAP operating margin was 42%, compared with 43% in 2009.

Income Tax Expense

For fiscal year 2010, excluding non-cash income tax expense of US$1.2 million recorded for the tax benefits from share-based awards, non-GAAP income tax expense was US$34.9 million, compared with US$29.8 million in the previous year.

Net Income

Before deducting the share of net income pertaining to the Noncontrolling Interest, GAAP net income for fiscal year 2010 was US$198.2 million, up 12% compared with 2009; non-GAAP net income for fiscal year 2010 was US$226.8 million, up 15% compared with 2009.

After deducting the share of net income pertaining to the Noncontrolling Interest, GAAP net income for fiscal year 2010 was US$139.3 million, or US$3.62 per fully diluted share. Non-GAAP net income for fiscal year 2010 was US$164.3 million, or US$4.21 per fully diluted share.

Ms. Carol Yu, Co-President and CFO of Sohu, commented, "While we are pleased with this set of record financial results for both the quarter and the year, we are even more upbeat about Sohu's bright future.  Our past investments in both online video and search are starting to bear fruit and emerging to be new growth engines for our shareholders.  "

Supplementary Information for Online Game Results

Fourth Quarter 2010 Operational Results

Aggregate registered accounts for Changyou's games (2) as of December 31, 2010 increased 6% quarter-over-quarter and 38% year-over-year to 111.4 million.

Aggregate peak concurrent users ("PCU") for Changyou's games increased 5% quarter-over-quarter and 7% year-over-year to 1,030,000.

Aggregate active paying accounts ("APA") for Changyou's games increased 3% quarter-over-quarter and 13% year-over-year to 2.7 million.

Average revenue per active paying account ("ARPU") for Changyou's games increased 2% quarter-over-quarter and 12% year-over-year to RMB219, which is consistent with Changyou's intention of having ARPU remain within a range that keeps Changyou's games affordable for the majority of game players in China.

(2) Comprises the following games operated in China: Tian Long Ba Bu ("TLBB"), Blade Online, Blade Hero 2, Da Hua Shui Hu, Zhong Hua Ying Xiong, Immortal Faith and San Jie Qi Yuan.

Fourth Quarter and Fiscal Year 2010 Revenues

Total revenues for the fourth quarter of 2010 increased 7% quarter-over-quarter and 30% year-over-year to US$91.7 million. Total revenues for the fiscal year 2010 were US$327.1 million, an increase of 22% from US$267.6 million in 2009.

Revenues from game operations for the fourth quarter of 2010 increased 7% quarter-over-quarter and 30% year-over-year to US$89.5 million. Revenues from game operations in 2010 were US$318.9 million, an increase of 23% from US$259.8 million in 2009. The increases for the fourth quarter and the full year were mainly due to the continued popularity of TLBB in China.

Overseas licensing revenues for the fourth quarter of 2010 were $2.2 million, an increase of 11% sequentially and 7% year-over-year. The increases for the fourth quarter were mainly due to increased momentum of TLBB in Vietnam and revenue contribution for a full quarter from the game in Thailand in the fourth quarter of 2010. Overseas licensing revenues in 2010 were US$8.2 million, an increase of 5% from US$7.8 million in 2009. The increases for the full year were largely due to increased momentum of TLBB in Vietnam and Malaysia.

Recent Business Developments

Open Beta Testing of San Jie Qi Yuan

On December 3, 2010, Changyou began open beta testing of San Jie Qi Yuan, a 2D turn-based cartoon-style massively multi-player online role-playing game. Adapted from one of the four great classical novels, Journey to the West, the game allows users to experience fast-paced martial arts combat in entertaining 2D graphics within a mythical fantasy world in ancient China. The game was licensed from a game studio in China and is operated by Changyou's wholly-owned subsidiary I.C.E. Entertainment Limited.

Changyou To Acquire Remaining Stake in Jing Mao

In January 2011, Changyou entered into a definitive agreement under which Changyou will acquire the remaining 50% of the equity in Shanghai Jing Mao Cultural Communications Ltd. and its affiliate ("Jing Mao").  Jing Mao is primarily engaged in cinema advertising in China. The purpose of the acquisition is to secure additional advertising resources for the promotion of Changyou's online games. Following the completion of the transaction, Changyou will hold 100% of the equity in Jing Mao. Jing Mao will be consolidated into Changyou's financial statements starting from February 1, 2011.

Business Outlook

For the first quarter of 2011, Sohu estimates:

  • Total revenues to be between $164.5 million and $169.5 million
  • Brand Advertising revenues to be between $55.0 million and $57.0 million. This implies a sequential decline of 5% to 8%, and 39% to 44% year-over-year growth.
  • Total revenues from Changyou to be between US$92.0 million and US$95.0 million, of which revenues from online games, which are revenues exclusive of revenues from Jing Mao, are expected to be between US$91.0 million and US$93.0 million.
  • Search revenues to be around $6.5 million.
  • Before deducting the share of non-GAAP net income pertaining to the Noncontrolling Interest, Sohu estimates its pro forma non-GAAP net income to be between $54.5 million and $57.0 million.
  • After deducting the share of non-GAAP net income pertaining to the Noncontrolling Interest, Sohu estimates non-GAAP net income to be between $40.0 million and $42.0 million and non-GAAP fully diluted earnings per share to be between $1.03 and $1.08.
  • Assuming no new grants of share-based awards, Sohu estimates that compensation expenses and income tax expenses relating to share-based awards will be around $5.0 million to $6.0 million, which includes $1.5 million to $2.0 million for Changyou. Considering Sohu's shares in Changyou, the estimated impact of this expense is expected to reduce Sohu's fully diluted earnings per share for the first quarter of 2011, under US GAAP, by 11 to 13 cents.

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 in 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 has 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 derived from Sohu's unaudited interim financial statements prepared in accordance with GAAP.

On June 20, 2006, Sohu discontinued its own e-commerce platform of physical consumer goods. While processing the disposal of its e-commerce business, Sohu is reporting the related business activities as discontinued operations. Sohu's income statement separates out discontinued operations for both current and prior periods in order to focus on continuing operations and provide a consistent basis for comparing financial performance over time.

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 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 January 31, 2011 (9:30 p.m. Beijing/Hong Kong time, January 31, 2011) at 8:30 a.m. U.S. Eastern Time.

The dial-in details for the live conference call are:

US Toll-Free:

 

+1-877-941-2927

 
 

International:

 

+1-480-629-9724

 
 

Hong Kong:

 

+852-3009-5027

 
 

Passcode:

 

SOHU

 
 
   

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

A telephone replay of the call will be available after the conclusion of the conference call at 10:30 a.m. Eastern Time on January 31 through February 8, 2011. The dial-in details for the telephone replay are:

International:

 

+852-3056-2777

 
 

Passcode:

 

4398395

 
 
   

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 www.sohu.com; interactive search engine www.sogou.com; #1 games information portal www.17173.com; the top real estate website www.focus.cn; #1 online alumni club www.chinaren.com; wireless value-added services provider www.goodfeel.com.cn; leading online mapping service provider www.go2map.com; and developer and operator of online games 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 Company's massively multiplayer online role-playing game (MMORPG) subsidiary, Changyou.com (NASDAQ: CYOU), currently operates seven online games in China, 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, Zhong Hua Ying Xiong, Immortal Faith and San Jie Qi Yuan. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its fifteenth year of operation.

For investor and media inquiries, please contact:

In China:

Ms. Mei Li

Sohu.com Inc.

Tel: +86 (10) 6272-6596

E-mail: ir@contact.sohu.com

In the United States:

Mr. Jeff Bloker

Christensen

Tel: +1 (480) 614-3003

E-mail: jbloker@ChristensenIR.com

SOHU.COM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

 
 

 

 

Three Months Ended

 

 

Twelve Months Ended

 
 

 

 

Dec. 31, 2010

 

 

Sep. 30, 2010

 

 

Dec. 31, 2009

 

 

Dec. 31, 2010

 

 

Dec. 31, 2009

 
 

Revenues:

 

 

 

 

 

 

 

 

 

 

 
 

       Brand advertising

 

$

 

60,064

 

$

 

59,083

 

$

 

45,876

 

$

 

211,821

 

$

 

177,073

 
 

       Online games

 

 

91,735

 

 

85,623

 

 

70,698

 

 

327,151

 

 

267,585

 
 

       Sponsored search

 

 

6,596

 

 

5,357

 

 

2,914

 

 

18,649

 

 

8,491

 
 

       Wireless and others

 

 

14,767

 

 

14,001

 

 

16,343

 

 

55,156

 

 

62,090

 
 

            Total revenues

 

 

173,162

 

 

164,064

 

 

135,831

 

 

612,777

 

 

515,239

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 
 

      Brand advertising (includes stock-based compensation expense of $1,610, $1,022, $141,  $4,803 and $787,  respectively)

 

 

23,889

 

 

23,256

 

 

16,238

 

 

86,684

 

 

59,451

 
 

Online games (includes stock-based compensation expense of $44, $40,  $57,  $194 and  $324,  respectively)

 

 

8,923

 

 

8,537

 

 

5,419

 

 

29,852

 

 

17,505

 
 

Sponsored search (includes stock-based compensation expense of $0, $0, $0,  $0 and $0 , respectively)

 

 

4,497

 

 

3,650

 

 

2,854

 

 

14,243

 

 

9,669

 
 

Wireless and others (includes stock-based compensation expense of $0, $1, $1,  $3 and $38, respectively)

 

 

8,075

 

 

7,733

 

 

9,322

 

 

29,528

 

 

36,770

 
 

  Total cost of revenues

 

 

45,384

 

 

43,176

 

 

33,833

 

 

160,307

 

 

123,395

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Gross profit

 

 

127,778

 

 

120,888

 

 

101,998

 

 

452,470

 

 

391,844

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 
 

Product development (includes stock-based compensation expense of $2,791, $2,238, $1,952, $9,692 and $8,729, respectively)

 

 

23,747

 

 

19,454

 

 

14,461

 

 

75,600

 

 

56,943

 
 

Sales and marketing (includes stock-based compensation expense of $1,625, $1,271, $96, $5,027 and $747, respectively)

 

 

27,381

 

 

25,410

 

 

25,405

 

 

105,406

 

 

93,498

 
 

General and administrative (includes stock-based compensation expense of $1,879, $1,989, $1,687, $7,772 and $6,694, respectively)

 

 

10,489

 

 

10,619

 

 

8,801

 

 

40,375

 

 

36,624

 
 

     Amortization of intangible assets

 

 

148

 

 

163

 

 

93

 

 

558

 

 

388

 
 

    Total operating expenses

 

 

61,765

 

 

55,646

 

 

48,760

 

 

221,939

 

 

187,453

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Operating profit

 

 

66,013

 

 

65,242

 

 

53,238

 

 

230,531

 

 

204,391

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Other income/(expense)

 

 

504

 

 

(939)

 

 

239

 

 

(790)

 

 

342

 
 

Interest income and exchange difference

 

 

1,267

 

 

1,050

 

 

1,136

 

 

4,474

 

 

5,001

 
 

Income before income tax expenses

 

 

67,784

 

 

65,353

 

 

54,613

 

 

234,215

 

 

209,734

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Income tax expense/(benefit)

 

 

10,399

 

 

11,340

 

 

12,168

 

 

36,031

 

 

33,745

 
 

Income from continuing operations

 

 

57,385

 

 

54,013

 

 

42,445

 

 

198,184

 

 

175,989

 
 

Gain from discontinued e-commerce operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

446

 
 

Net income

 

 

57,385

 

 

54,013

 

 

42,445

 

 

198,184

 

 

176,435

 
 

Less: Net income attributable to the Noncontrolling Interest

 

 

13,409

 

 

13,004

 

 

10,096

 

 

49,555

 

 

28,602

 
 

Net income attributable to Sohu.com Inc.

 

 

43,976

 

 

41,009

 

 

32,349

 

 

148,629

 

 

147,833

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Basic net income per share attributable to Sohu.com Inc.

 

$

 

1.16

 

$

 

1.08

 

$

 

0.84

 

$

 

3.92

 

$

 

3.86

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Shares used in computing basic net income per share attributable to Sohu.com Inc.

 

 

37,981

 

 

37,896

 

 

38,317

 

 

37,870

 

 

38,294

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Diluted net income per share attributable to Sohu.com Inc.

 

$

 

1.07

 

$

 

1.01

 

$

 

0.76

 

$

 

3.62

 

$

 

3.57

 
 

 

 

 

 

 

 

 

 

 

 

 
 

Shares used in computing diluted net income per share attributable to Sohu.com Inc.

 

 

38,669

 

 

38,377

 

 

38,920

 

 

38,445

 

 

38,969

 
 

Note:

(a)     Certain amounts from prior periods have been reclassified to conform with current period presentation.

 
 
                     



SOHU.COM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 
 

 

 

As of Dec 31, 2010

 

 

As of Dec 31, 2009

 
 

ASSETS

 

 

 

 

 
 

Current assets:

 

 

 

 

 
 

          Cash and cash equivalents

 

$

 

678,389

 

$

 

563,782

 
 

          Investment in debt securities

 

 

75,529

 

 

 
 

          Accounts receivable, net

 

 

62,603

 

 

46,610

 
 

          Prepaid and other current assets

 

 

20,416

 

 

10,781

 
 

                  Total current assets

 

 

836,937

 

 

621,173

 
 

Fixed assets, net

 

 

120,627

 

 

115,088

 
 

Goodwill

 

 

67,761

 

 

55,555

 
 

Intangible assets, net

 

 

11,806

 

 

7,933

 
 

Prepaid non-current assets

 

 

142,731

 

 

26,207

 
 

Other assets, net

 

 

7,728

 

 

2,317

 
 

                      Total assets

 

$

 

1,187,590

 

$

 

828,273

 
 

 

 

 

 

 
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 
 

Current liabilities:

 

 

 

 

 
 

          Accounts payable

 

$

 

5,940

 

$

 

4,602

 
 

          Accrued liabilities to suppliers and agents

 

 

65,917

 

 

41,103

 
 

          Receipts in advance and deferred revenue

 

 

51,513

 

 

36,944

 
 

          Accrued salary and benefits

 

 

35,409

 

 

28,860

 
 

          Tax payables

 

 

31,719

 

 

21,953

 
 

          Other accrued liabilities

 

 

21,174

 

 

17,035

 
 

                   Total current liabilities

 

$

 

211,672

 

$

 

150,497

 
 

 

 

 

 

 
 

Contingent consideration

 

 

1,359

 

 

 
 

            Total liabilities

 

$

 

213,031

 

$

 

150,497

 
 

 

 

 

 

 
 

Commitments and contingencies

 

 

 

 

 
 

 

 

 

 

 
 

Shareholders' equity:

 

 

 

 

 
 

         Sohu.com Inc. shareholders' equity

 

 

796,117

 

 

609,781

 
 

         Noncontrolling Interest

 

 

178,442

 

 

67,995

 
 

                 Total shareholders' equity

 

$

 

974,559

 

$

 

677,776

 
 

 

 

 

 

 
 

              Total Liabilities and shareholders' equity

 

$

 

1,187,590

 

$

 

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 Dec. 31, 2010

 

 

Three Months Ended Sep. 30, 2010

 

 

Three Months Ended Dec. 31, 2009

 
 

 

 

GAAP

 

 

Non-GAAP Adjustments

 

(a)

 

Non-GAAP

 

 

GAAP

 

 

Non-GAAP Adjustments

 

(a)

 

Non-GAAP

 

 

GAAP

 

 

Non-GAAP Adjustments

 

(a)

 

Non-GAAP

 
 

Brand advertising revenues

 

$

 

60,064

 

$

 

 

$

 

60,064

 

$

 

59,083

 

$

 

 

$

 

59,083

 

$

 

45,876

 

$

 

 

$

 

45,876

 
 

   Less: Cost of brand advertising revenues

 

 

23,889

 

 

(1,610)

 

 

22,279

 

 

23,256

 

 

(1,022)

 

 

22,234

 

 

16,238

 

 

(141)

 

 

16,097

 
 

   Brand advertising gross profit

 

$

 

36,175

 

$

 

1,610

 

$

 

37,785

 

$

 

35,827

 

$

 

1,022

 

$

 

36,849

 

$

 

29,638

 

$

 

141

 

$

 

29,779

 
 

   Brand advertising gross margin

 

 

60%

 

 

 

 

63%

 

 

61%

 

 

 

 

62%

 

 

65%

 

 

 

 

65%

 
 

Online games revenues

 

$

 

91,735

 

$

 

 

$

 

91,735

 

 

85,623

 

 

 

 

85,623

 

 

70,698

 

 

 

 

70,698

 
 

   Less: Cost of online games revenues

 

 

8,923

 

 

(44)

 

 

8,879

 

 

8,537

 

 

(40)

 

 

8,497

 

 

5,419

 

 

(57)

 

 

5,362

 
 

   Online games gross profit

 

$

 

82,812

 

$

 

44

 

$

 

82,856

 

$

 

77,086

 

$

 

40

 

$

 

77,126

 

$

 

65,279

 

$

 

57

 

$

 

65,336

 
 

   Online games gross margin

 

 

90%

 

 

 

 

90%

 

 

90%

 

 

 

 

90%

 

 

92%

 

 

 

 

92%

 
 

Sponsored search revenues

 

$

 

6,596

 

$

 

 

$

 

6,596

 

$

 

5,357

 

$

 

 

$

 

5,357

 

$

 

2,914

 

$

 

 

 

2,914

 
 

   Less: Cost of sponsored search revenues

 

 

4,497

 

 

 

 

4,497

 

 

3,650

 

 

 

 

3,650

 

 

2,854

 

 

 

 

2,854

 
 

   Sponsored search gross profit

 

$

 

2,099

 

$

 

 

$

 

2,099

 

$

 

1,707

 

$

 

 

$

 

1,707

 

$

 

60

 

$

 

 

 

60

 
 

   Sponsored search gross margin

 

 

32%

 

 

 

 

32%

 

 

32%

 

 

 

 

32%

 

 

2%

 

 

 

 

2%

 
 

Wireless and others revenues

 

$

 

14,767

 

$

 

 

$

 

14,767

 

$

 

14,001

 

$

 

 

$

 

14,001

 

$

 

16,343

 

$

 

 

 

16,343

 
 

   Less: Cost of wireless and others revenues

 

 

8,075

 

 

 

 

8,075

 

 

7,733

 

 

(1)

 

 

7,732

 

 

9,322

 

 

(1)

 

 

9,321

 
 

   Wireless and others gross profit

 

$

 

6,692

 

$

 

 

$

 

6,692

 

$

 

6,268

 

$

 

1

 

$

 

6,269

 

$

 

7,021

 

$

 

1

 

 

7,022

 
 

   Wireless and others gross margin

 

 

45%

 

 

 

 

45%

 

 

45%

 

 

 

 

45%

 

 

43%

 

 

 

 

43%

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Total revenues

 

$

 

173,162

 

$

 

 

$

 

173,162

 

$

 

164,064

 

$

 

 

$

 

164,064

 

$

 

135,831

 

$

 

 

$

 

135,831

 
 

   Less: Total cost of revenues

 

 

45,384

 

 

(1,654)

 

 

43,730

 

 

43,176

 

 

(1,063)

 

 

42,113

 

 

33,833

 

 

(199)

 

 

33,634

 
 

   Gross profit

 

$

 

127,778

 

$

 

1,654

 

$

 

129,432

 

$

 

120,888

 

$

 

1,063

 

$

 

121,951

 

$

 

101,998

 

$

 

199

 

$

 

102,197

 
 

   Gross margin

 

 

74%

 

 

 

 

75%

 

 

74%

 

 

 

 

74%

 

 

75%

 

 

 

 

75%

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Operating expenses

 

$

 

61,765

 

$

 

(6,295)

 

$

 

55,470

 

$

 

55,646

 

$

 

(5,498)

 

$

 

50,148

 

$

 

48,760

 

$

 

(3,735)

 

$

 

45,025

 
 

Operating profit

 

$

 

66,013

 

$

 

7,949

 

$

 

73,962

 

$

 

65,242

 

$

 

6,561

 

$

 

71,803

 

$

 

53,238

 

$

 

3,934

 

$

 

57,172

 
 

Operating margin

 

 

38%

 

 

 

 

43%

 

 

40%

 

 

 

 

44%

 

 

39%

 

 

 

 

42%

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Income tax expense /(benefit)

 

$

 

10,399

 

$

 

718

 

$

 

11,117

 

$

 

11,340

 

$

 

(733)

 

$

 

10,607

 

$

 

12,168

 

$

 

(3,927)

 

$

 

8,241

 
 

Net income before Noncontrolling Interest

 

$

 

57,385

 

$

 

7,231

 

$

 

64,616

 

$

 

54,013

 

$

 

7,294

 

$

 

61,307

 

$

 

42,445

 

$

 

7,861

 

$

 

50,306

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Net income attributable to Sohu.com Inc. for basic net  income per share

 

$

 

43,976

 

$

 

6,699

 

$

 

50,675

 

$

 

41,009

 

$

 

6,780

 

$

 

47,789

 

$

 

32,349

 

$

 

6,996

 

$

 

39,345

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Net income attributable to Sohu.com Inc for diluted net income per share (b)

 

$

 

41,489

 

$

 

6,404

 

$

 

47,893

 

$

 

38,654

 

$

 

6,498

 

$

 

45,152

 

$

 

29,396

 

$

 

6,447

 

$

 

35,843

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Diluted net income per share attributable to Sohu.com Inc.

 

$

 

1.07

 

 

 

$

 

1.23

 

$

 

1.01

 

 

 

$

 

1.16

 

$

 

0.76

 

 

 

$

 

0.92

 
 

Shares used in computing diluted net income per share attributable to Sohu.com Inc.

 

 

38,669

 

 

 

 

39,079

 

 

38,377

 

 

 

 

39,019

 

 

38,920

 

 

 

 

38,957

 
 

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 and Sogou under the treasury stock method and if-converted method, respectively.

(c)     Certain amounts from prior periods have been reclassified to conform with current period presentation.

 
 
                                     



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

 
 

 

 

Twelve Months Ended Dec. 31, 2010

 

 

Twelve Months Ended Dec. 31, 2009

 
 

 

 

GAAP

 

 

Non-GAAP Adjustments

 

(a)

 

Non-GAAP

 

 

GAAP

 

 

Non-GAAP Adjustments

 

(a)

 

Non-GAAP

 
 

Brand Advertising revenues

 

$

 

211,821

 

$

 

 

$

 

211,821

 

$

 

177,073

 

$

 

 

$

 

177,073

 
 

   Less: Cost of brand advertising revenues

 

 

86,684

 

 

(4,803)

 

 

81,881

 

 

59,451

 

 

(787)

 

 

58,664

 
 

   Brand advertising gross profit

 

$

 

125,137

 

$

 

4,803

 

$

 

129,940

 

$

 

117,622

 

$

 

787

 

$

 

118,409

 
 

   Brand advertising gross margin

 

 

59%

 

 

 

 

61%

 

 

66%

 

 

 

 

67%

 
 

Online games revenues

 

$

 

327,151

 

$

 

 

$

 

327,151

 

$

 

267,585

 

$

 

 

$

 

267,585

 
 

   Less: Cost of online games revenues

 

 

29,852

 

 

(194)

 

 

29,658

 

 

17,505

 

 

(324)

 

 

17,181

 
 

   Online games gross profit

 

$

 

297,299

 

$

 

194

 

$

 

297,493

 

$

 

250,080

 

$

 

324

 

$

 

250,404

 
 

   Online games gross margin

 

 

91%

 

 

 

 

91%

 

 

93%

 

 

 

 

94%

 
 

Sponsored search revenues

 

$

 

18,649

 

$

 

 

$

 

18,649

 

$

 

8,491

 

$

 

 

$

 

8,491

 
 

   Less: Cost of sponsored search revenues

 

 

14,243

 

 

 

 

14,243

 

 

9,669

 

 

 

 

9,669

 
 

   Sponsored search gross profit

 

$

 

4,406

 

$

 

 

$

 

4,406

 

$

 

(1,178)

 

$

 

 

$

 

(1,178)

 
 

   Sponsored search gross margin

 

 

24%

 

 

 

 

24%

 

 

(14%)

 

 

 

 

(14%)

 
 

Wireless and others revenues

 

$

 

55,156

 

$

 

 

$

 

55,156

 

$

 

62,090

 

$

 

 

$

 

62,090

 
 

   Less: Cost of wireless and others revenues

 

 

29,528

 

 

(3)

 

 

29,525

 

 

36,770

 

 

(38)

 

 

36,732

 
 

   Wireless and others gross profit

 

$

 

25,628

 

$

 

3

 

$

 

25,631

 

$

 

25,320

 

$

 

38

 

$

 

25,358

 
 

   Wireless and others gross margin

 

 

46%

 

 

 

 

46%

 

 

41%

 

 

 

 

41%

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Total revenues

 

$

 

612,777

 

$

 

 

$

 

612,777

 

$

 

515,239

 

$

 

 

$

 

515,239

 
 

   Less: Total cost of revenues

 

 

160,307

 

 

(5,000)

 

 

155,307

 

 

123,395

 

 

(1,149)

 

 

122,246

 
 

   Gross profit

 

$

 

452,470

 

$

 

5,000

 

$

 

457,470

 

$

 

391,844

 

$

 

1,149

 

$

 

392,993

 
 

   Gross margin

 

 

74%

 

 

 

 

75%

 

 

76%

 

 

 

 

76%

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Operating expenses

 

$

 

221,939

 

$

 

(22,491)

 

$

 

199,448

 

$

 

187,453

 

$

 

(16,170)

 

$

 

171,283

 
 

Operating profit

 

 

230,531

 

 

27,491

 

 

258,022

 

 

204,391

 

 

17,319

 

 

221,710

 
 

Operating margin

 

 

38%

 

 

 

 

42%

 

 

40%

 

 

 

 

43%

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Income tax expense/(benefit)

 

$

 

36,031

 

$

 

(1,170)

 

$

 

34,861

 

$

 

33,745

 

$

 

(3,927)

 

$

 

29,818

 
 

Net income before Noncontrolling Interest

 

$

 

198,184

 

$

 

28,661

 

$

 

226,845

 

$

 

176,435

 

$

 

21,246

 

$

 

197,681

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Net income attributable to Sohu.com Inc. for basic net  income per share

 

$

 

148,629

 

$

 

26,214

 

$

 

174,843

 

$

 

147,833

 

$

 

18,012

 

$

 

165,845

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Net income attributable to Sohu.com Inc for diluted net income per share (b)

 

$

 

139,335

 

$

 

24,931

 

$

 

164,266

 

$

 

139,272

 

$

 

16,058

 

$

 

155,330

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Diluted net income per share attributable to Sohu.com Inc.

 

$

 

3.62

 

 

 

$

 

4.21

 

$

 

3.57

 

 

 

$

 

3.98

 
 

Shares used  in computing diluted net income per share attributable to Sohu.com Inc.

 

 

38,445

 

 

 

 

39,054

 

 

38,969

 

 

 

 

39,051

 
 

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 and Sogou under the treasury stock method and if-converted method, respectively.

(c)     Certain amounts from prior periods have been reclassified to conform with current period presentation.

 
 
                         
Source:
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