Total Revenues Up 25% Year-on-Year to US$127.1 Million, Exceeding High End of Company Guidance;
Non-GAAP Fully Diluted EPS of US$0.90, Exceeding High End of Company Guidance by US 5 Cents
BEIJING, July 27 /PRNewswire-Asia/ -- Sohu.com Inc. (Nasdaq: SOHU), China’s leading online media, communications, search, online games and mobile value-added services company, today reported unaudited financial results for the second quarter ended June 30, 2009.
Second Quarter Highlights
-- The ninth quarter of record high total revenues out of the past
ten quarters. Total revenues of US$127.1 million, up 25% year-
on-year, exceeding high end of company guidance.
-- Brand advertising revenues of US$43.6 million, up 5% year-on-
year and 12% quarter-on-quarter, within company guidance.
-- Online game revenues reached record US$66.6 million, up 39%
year-on-year and 8% quarter-on-quarter, exceeding high end of
company guidance by US$1.6 million.
-- Before deducting the share of net income pertaining to the Non-
Controlling Interest in Changyou, non-GAAP net income for the
second quarter of 2009 was $49.0 million, exceeding the high end
of company guidance of $46.0 million, up 16% year-on-year and 4%
quarter-on-quarter.
-- After deducting the share of net income pertaining to the Non-
Controlling Interest in Changyou, GAAP net income attributable
to Sohu.com Inc. for the second quarter of 2009 was $30.9
million, or US 79 cents per fully diluted share. Non-GAAP net
income attributable to Sohu.com Inc. for the second quarter of
2009 was $35.2 million, or US 90 cents per fully diluted share,
exceeding the high end of company guidance of $33.0 million, or
US 85 cents per fully diluted share, by US 5 cents.
Explanation of the Company’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.”
Dr. Charles Zhang, chairman and CEO of Sohu.com, commented, “We are pleased to report another quarter of solid financial results from a unique combination of our two core businesses, our portal business and online game business. Even in this weak economic environment, our portal business continues to show modest growth and a strong ability to grab market share. Our ongoing investment in branding, content offering, and technological products has continued to strengthen our leading position as one of the most powerful mainstream media platforms in China.
“Our online game business delivered another quarter of record revenues and as a strong defensive play in a difficult economic environment it continues to be an ideal complement to our portal business. We are resolute in our efforts to build the online game business for the long-term by utilizing Changyou’s game development platform, player feedback system and strong R&D capabilities to deliver quality games that improve the user experience. We remain confident that this focus and growing user base, will allow our online game business to maintain its upward momentum.”
Dr. Zhang continued, “As we continue to execute on our strategy, we expect ongoing synergies between our portal business and our online game business to secure long-term and sustainable growth for Sohu.”
Commenting on Sohu’s brand advertising business, Ms. Belinda Wang, Sohu.com co-president and chief marketing officer, added, “Despite tough year-on-year comparisons from heavy ad spending leading up to the 2008 Beijing Olympic Games, brand advertising revenues grew at 5% year-on-year, demonstrating that our continual investments in branding, content offering and technological products are paying off. On the advertising business front, advertisers have begun to deploy their budgets in response to signs of economic recovery in China and increasingly look toward internet media as a cost-effective alternative to advertising in traditional media. Our strong user growth, robust media platform and continually evolving technologies make Sohu well-positioned to capitalize on these trends.”
Second Quarter Financial Results
Revenues
Total revenues for the second quarter ended June 30, 2009 were US$127.1 million, representing an increase of 10% sequentially and an increase of 25% year-on-year.
Brand advertising revenues for the second quarter of 2009 totaled US$43.6 million, representing a sequential increase of 12% and a year-on-year increase of 5%.
Online game revenues for the second quarter of 2009 were US$66.6 million, representing an increase of 8% sequentially and 39% year-on-year.
Wireless revenues for the second quarter of 2009 were US$15.0 million, an increase of 12% sequentially and 63% year-on-year. The increase in wireless revenues was mainly because the Company promoted its products through a greater number of channels.
Gross Margin
Gross margin was 77% in the second quarter of 2009, compared to 76% in the first quarter of 2009, and 76% in the second quarter of 2008. Non-GAAP gross margin for the second quarter of 2009 was 78%, compared with 76% in both the first quarter of 2009 and the second quarter of 2008.
Brand advertising gross margin for the second quarter was 68%, compared with 65% in the first quarter of 2009 and 67% in the second quarter of 2008. Non-GAAP brand advertising gross margin for the second quarter of 2009 was 68%, compared with 65% in the first quarter of 2009 and 67% in the second quarter of 2008.
Online game gross margin for the second quarter of 2009 was 94%, unchanged from the first quarter of 2009 and up from 93% in the second quarter of 2008. Non-GAAP online game gross margin in the second quarter of 2009 was also 94%, unchanged from the first quarter of 2009 and up from 93% in the second quarter of 2008.
Wireless gross margin for the second quarter of 2009 was 45%, compared with 43% in the first quarter of 2009 and 40% in the second quarter of 2008. Non-GAAP wireless gross margin for the second quarter of 2009 was 45%, compared to 43% in the first quarter of 2009 and 40% in the second quarter of 2008.
Operating Expenses
For the second quarter of 2009, Sohu's operating expenses totaled US$49.8 million. Non-GAAP operating expenses totaled US$43.5 million, up 21% from US$36.1 million for the first quarter of 2009 and up 23% year-on-year. The quarter-on-quarter increase reflects higher sales and marketing expenses in the second quarter of 2009. The year-on-year increase was primarily due to an increase in salaries and compensation expenses as a result of increased headcounts, an increase in marketing expenses for Sohu’s branding, and an increase in professional fees.
Operating Margin
Non-GAAP operating profit margin was 43% for the second quarter of 2009, compared to 45% in the previous quarter and 41% in the second quarter of 2008.
Income Tax Expense
For the second quarter of 2009, income tax expense was $8.0 million, compared to $6.6 million in the previous quarter.
In the second quarter of 2009, the Company recorded an income tax adjustment of $1.2 million. Excluding such adjustment, the effective tax rate for the second quarter was 14%.
Net Income
Before deducting the share of net income pertaining to the Non-Controlling Interest in Changyou, GAAP net income for the second quarter of 2009 was $42.3 million, a decrease of 5% quarter-on-quarter and an increase of 5% year-on-year. Non-GAAP net income for the second quarter of 2009 was $49.0 million, exceeding the high end of company guidance of $46.0 million, up 4% quarter-on-quarter and 16% year-on-year.
After deducting the share of net income pertaining to the Non-Controlling Interest in Changyou, GAAP net income attributable to Sohu.com Inc. for the second quarter of 2009 was $30.9 million, or US 79 cents per fully diluted share. Non-GAAP net income attributable to Sohu.com Inc. for the second quarter of 2009 was $35.2 million, or US 90 cents per fully diluted share, exceeding the high end of company guidance of $33.0 million or US 85 cents per fully diluted share, by US 5 cents.
Cash Balance
The Company continued to maintain a debt-free balance sheet and a strong cash position of US$546.7 million as of June 30, 2009.
Stock Repurchase Program
For the second quarter of 2009, no shares were repurchased under the US$150 million share repurchase program approved by the Company’s Board of Directors in October 2008. As of June 30, 2009, approximately 500,000 shares had been repurchased under this program for a total consideration of US$20 million.
Second Quarter Online Game Results
Operations
Aggregate registered accounts for Changyou’s MMORPGs as of June 30, 2009 increased 9% quarter-on-quarter and 53% year-on-year to 69.1 million.
Aggregate active paying accounts (“APA”) for Changyou’s MMORPGs increased 5% quarter-on-quarter and 32% year-on-year to 2.39 million.
Average revenue per user (“ARPU”) for Changyou’s MMORPGs increased 4% sequentially and 6% year-on-year to RMB186, which Changyou believes is within a range that is relatively affordable for the majority of Chinese game players.
Aggregate peak concurrent users (“PCU”) for Changyou’s MMORPGs was approximately 950,000, a decrease of 2% quarter-on-quarter and an increase of 23% year-on-year.
Revenue
Revenues from game operations for the second quarter of 2009 increased 9% quarter-on-quarter and 42% year-on-year to US$64.9 million. The increases were mainly due to user base expansion and higher APA, which reflect the growing popularity of Changyou’s online games.
Overseas licensing revenues for the second quarter of 2009 decreased 27% quarter-on-quarter and 23% year-on-year to US$1.7 million. The decreases were largely the result of greater competition in mature overseas markets.
Ms. Carol Yu, co-president and CFO of Sohu.com, commented, “This quarter was the ninth quarter out of the past ten quarters we achieved record total revenues, a significant achievement given the challenging global economic backdrop over the past several months. We were especially encouraged to see modest growth in our brand advertising business despite the weak economy. In addition, Changyou, our MMORPG subsidiary and one of our crowning achievements, again posted record revenue growth. Our results this quarter demonstrate our ability to achieve balanced growth across different parts of our business, which is a testament to the execution capabilities of our knowledgeable and experienced management team.”
Business Outlook
Sohu estimates total revenues for the third quarter of 2009 to be between US$133.5 million and US$137.5 million, with advertising revenues of US$49.5 million to US$51.5 million.
Sohu estimates brand advertising revenues for the third quarter of 2009 to be between US$48.0 million and US$50.0 million.
Sohu estimates online game revenues for the third quarter of 2009 to be between US$67.0 million and US$69.0 million.
Sohu estimates non-GAAP net income for the third quarter of 2009, before deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest in Changyou, to be between US$50.0 million to US$52.0 million. After deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest in Changyou, Sohu estimates non-GAAP net income for the third quarter of 2009 to be between US$36.0 million to US$38.0 million and non-GAAP fully diluted earnings per share for the third quarter of 2009 to be between US 92 cents and US 97 cents.
Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the third quarter of 2009 to be between $4.0 million and $5.0 million, which includes Changyou’s share-based compensation expense for the third quarter of 2009 estimated to be between $3.5 million and $4.0 million. Considering Sohu’s share in Changyou, the estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the third quarter of 2009 under US GAAP by US 7 cents to US 9 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, net income and net income per share, which are adjusted from results based on GAAP to exclude the compensation cost of share-based awards granted to employees under Statement of Financial Accounting Standard 123R (“SFAS 123R”). 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 share-based compensation expense from its non-GAAP financial measure is useful for itself and investors. Further, the amount of share-based compensation expense 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 share-based compensation expense 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, the monthly financial results for internal reporting and any performance measure for commissions and bonuses are based on non-GAAP financial measures that exclude share-based compensation expense.
The non-GAAP financial measures are provided to enhance the 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 share-based compensation expense, is that the share-based compensation charge has been and will continue to be a significant recurring expense in our business for the foreseeable future. In order to mitigate these limitations we have 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 we have 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 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 our 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 first half of 2009 which could continue through the remainder of 2009, the uncertain regulatory landscape in the People’s Republic of China, fluctuations in Sohu’s quarterly operating results, EPS dilution resulting from Changyou’s initial public offering, Sohu’s historical and possible future losses, and its 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, 2008, and other filings with the Securities and Exchange Commission.
Conference Call and Webcast
Sohu’s management team will host a conference call today at 8:30 a.m. ET, July 27, 2009 (8:30 p.m. July 27, 2009 Beijing/Hong Kong time). To listen to the conference call, please use the dial in numbers below:
US: +1-866-730-5764
Hong Kong: +852-3002-1672
International: +1-857-350-1588
Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is “SOHU.”
A replay of the conference call may be accessed by phone at the following number until August 3, 2009:
International: +1-617-801-6888
Passcode: 88741180
The conference call will be available on webcast live and available for replay 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 engines. 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 two massively multiplayer online role-playing games (MMORPGs), Tian Long Ba Bu and Blade Online. Sohu.com, established by Dr. Charles Zhang, one of China’s internet pioneers, is in its thirteenth year of operation.
For investor and media inquiries, please contact:
In China:
Mr. James Deng
Senior Finance Director
Sohu.com Inc.
Tel: +86-10-6272-6596
Email: ir@contact.sohu.com
Ms. Cathy Li
Ogilvy Financial, Beijing
Tel: +86-10-8520-6104
Email: cathy.li@ogilvy.com
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
Email: jessica.cohen@ogilvypr.com
SOHU.COM INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
Jun. Mar. Jun. Jun. Jun.
30, 31, 30, 30, 30,
2009 2009 2008 2009 2008
Revenues:
Advertising
Brand advertising $43,621 $39,074 $41,691 $82,695 $74,846
Sponsored search 1,769 1,562 1,693 3,331 3,307
Subtotal of
advertising
revenues 45,390 40,636 43,384 86,026 78,153
Online games 66,596 61,607 47,896 128,203 88,851
Wireless and others 15,099 13,495 10,700 28,594 19,799
Total revenues 127,085 115,738 101,980 242,823 186,803
Cost of revenues:
Advertising
Brand advertising
(includes
share-based
compensation
expense under
SFAS 123(R) of
$261, $236, $295,
$497 and $604,
respectively) 14,065 13,730 13,907 27,795 25,159
Sponsored search
(includes
share-based
compensation
expense under
SFAS 123(R) of
$3, $3, $6, $6
and $12,
respectively) 2,265 2,298 1,605 4,563 3,125
Subtotal of cost
of advertising
revenues 16,330 16,028 15,512 32,358 28,284
Online games
(includes
stock-based
compensation
expense under
SFAS 123 (R) of
$90, $8, $5, $98
and $10,
respectively) 3,937 3,436 3,505 7,373 6,713
Wireless and
others (includes
share-based
compensation
expense under
SFAS 123(R) of
$1, $0, $2, $1
and $4,
respectively) 8,512 8,129 5,858 16,641 10,170
Total cost of
revenues 28,779 27,593 24,875 56,372 45,167
Gross profit 98,306 88,145 77,105 186,451 141,636
Operating
expenses:
Product development
(includes
share-based
compensation
expense under
SFAS 123(R) of
$3,299, $1,274,
$1,228, $4,573
and $3,491,
respectively) 14,637 13,314 10,798 27,951 22,277
Sales and
marketing
(includes
share-based
compensation
expense under
SFAS 123(R) of
$214, $285, $228,
$499 and $508,
respectively) 25,810 16,826 21,408 42,636 37,548
General and
administrative
(includes
share-based
compensation
expense under
SFAS 123(R) of
$2,746, $481,
$394, $3,227 and
$1,039,
respectively) 9,208 7,894 4,827 17,102 11,012
Amortization of
intangible assets 128 74 199 202 395
Total operating
expenses 49,783 38,108 37,232 87,891 71,232
Operating profit 48,523 50,037 39,873 98,560 70,404
Other income (expense) 62 1 (575) 63 (532)
Interest income and
exchange difference 1,274 1,122 1,480 2,396 1,646
Income before income
tax expense 49,859 51,160 40,778 101,019 71,518
Income tax expense 7,969 6,586 577 14,555 9,762
Income from continuing
operations 41,890 44,574 40,201 86,464 61,756
Gain (Loss) from
discontinued
e-commerce
operations 446 -- -- 446 (1)
Net income 42,336 44,574 40,201 86,910 61,755
Less: Net income
attributable to
the noncontrolling
interest 8,801 (21) 12 8,780 4
Net income
attributable to
Sohu.com Inc. 33,535 44,595 40,189 78,130 61,751
Basic net income
per share
attributable to
Sohu.com Inc. $0.88 $1.17 $1.05 $2.04 $1.63
Shares used in
computing basic
net income per
share attributable
to Sohu.com Inc. 38,284 38,162 38,108 38,223 37,934
Diluted net income
per share
attributable to
Sohu.com Inc. $0.79 $1.15 $1.02 $1.94 $1.57
Shares used in
computing diluted
net income per
share attributable
to Sohu.com Inc. 39,018 38,851 39,429 38,935 39,234
SOHU.COM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
As of Jun. 30, As of Dec. 31,
2009 2008
ASSETS
Current assets:
Cash and cash equivalents $546,746 $314,425
Accounts receivable, net 53,333 36,869
Prepaid and other current assets 10,833 27,551
Total current assets 610,912 378,845
Fixed assets, net 74,974 76,237
Goodwill 55,555 55,555
Intangible assets, net 5,207 5,654
Restricted cash -- 2,671
Other assets, net 2,358 2,914
Total assets $749,006 $521,876
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,716 $4,339
Accrued liabilities to suppliers and agents 34,184 33,054
Receipts in advance and deferred revenue 28,320 31,446
Tax payables 21,680 18,892
Other accrued liabilities 43,480 43,051
Total current liabilities 134,380 130,782
Shareholders' equity
Sohu.com Inc. shareholders' equity 573,057 385,946
Noncontrolling interest 41,569 5,148
Total shareholders' equity 614,626 391,094
Total liabilities and shareholders' equity $749,006 $521,876
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING SHARE-BASED COMPENSATION EXPENSE
Three Months Ended Jun. 30, 2009
Non-GAAP
GAAP Adjustments (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%
Net income attributable to
Sohu.com Inc. $33,535 5,162 $38,697
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
Three Months Ended Mar. 31, 2009
Non-GAAP
GAAP Adjustments (a) Non-GAAP
Advertising revenues $40,636 $-- $40,636
Less: Cost of advertising
revenues 16,028 (239) 15,789
Advertising gross profit $24,608 $239 $24,847
Advertising gross margin 61% 61%
Online games revenues $61,607 $-- $61,607
Less: Cost of online games
revenues 3,436 (8) 3,428
Online games gross profit $58,171 $8 $58,179
Online games gross margin 94% 94%
Wireless and others revenues $13,495 $-- $13,495
Less: Cost of wireless and
others revenues 8,129 -- 8,129
Wireless and others gross
profit $5,366 $-- $5,366
Wireless and others gross
margin 40% 40%
Total revenues $115,738 $-- $115,738
Less: Total cost of revenues 27,593 (247) 27,346
Gross profit $88,145 $247 $88,392
Gross margin 76% 76%
Operating expenses $38,108 $(2,040) $36,068
Operating profit 50,037 2,287 52,324
Operating margin 43% 45%
Net income attributable to
Sohu.com Inc. $44,595 $2,287 $46,882
Diluted net income per share
attributable to Sohu.com Inc. $1.15 $1.20
Shares used in computing
diluted net income per share
attributable to Sohu.com Inc. 38,851 39,020
Three Months Ended Jun. 30, 2008
Non-GAAP
GAAP Adjustments (a) Non-GAAP
Advertising revenues $43,384 $-- $43,384
Less: Cost of advertising
revenues 15,512 (301) 15,211
Advertising gross profit $27,872 $301 $28,173
Advertising gross margin 64% 65%
Online games revenues $47,896 $-- $47,896
Less: Cost of online games
revenues 3,505 (5) 3,500
Online games gross profit $44,391 $5 $44,396
Online games gross margin 93% 93%
Wireless and others revenues $10,700 $-- $10,700
Less: Cost of wireless and
others revenues 5,858 (2) 5,856
Wireless and others gross
profit $4,842 $2 $4,844
Wireless and others gross
margin 45% 45%
Total revenues $101,980 $-- $101,980
Less: Total cost of revenues 24,875 (308) 24,567
Gross profit $77,105 $308 $77,413
Gross margin 76% 76%
Operating expenses $37,232 $(1,850) $35,382
Operating profit 39,873 2,158 42,031
Operating margin 39% 41%
Net income attributable to
Sohu.com Inc. $40,189 $2,158 $42,347
Diluted net income per share
attributable to Sohu.com Inc. $1.02 $1.07
Shares used in computing
diluted net income per share
attributable to Sohu.com Inc. 39,429 39,540
SOHU.COM INC.
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NON-GAAP NET INCOME EXCLUDING SHARE-BASED COMPENSATION EXPENSE
Six Months Ended Jun. 30, 2009
Non-GAAP
GAAP Adjustments (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%
Net income attributable to
Sohu.com Inc. $78,130 $7,449 $85,579
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
Six Months Ended Jun. 30, 2008
Non-GAAP
GAAP Adjustments (a) Non-GAAP
Advertising revenues $78,153 $-- $78,153
Less: Cost of advertising
revenues 28,284 (616) 27,668
Advertising gross profit $49,869 $616 $50,485
Advertising gross margin 64% 65%
Online games revenues $88,851 $-- $88,851
Less: Cost of online games
revenues 6,713 (10) 6,703
Online games gross profit $82,138 $10 $82,148
Online games gross margin 92% 92%
Wireless and others revenues $19,799 $-- $19,799
Less: Cost of wireless and
others revenues 10,170 (4) 10,166
Wireless and others gross
profit $9,629 $4 $9,633
Wireless and others gross
margin 49% 49%
Total revenues $186,803 $-- $186,803
Less: Total cost of revenues 45,167 (630) 44,537
Gross profit $141,636 $630 $142,266
Gross margin 76% 76%
Operating expenses $71,232 $(5,038) $66,194
Operating profit 70,404 5,668 76,072
Operating margin 38% 41%
Net income attributable to
Sohu.com Inc. $61,751 $5,668 $67,419
Diluted net income per share
attributable to Sohu.com Inc. $1.57 $1.71
Shares used in computing
diluted net income per share
attributable to Sohu.com Inc. 39,234 39,381
Note:
(a) To eliminate share-based compensation expense as measured using
the fair value method under SFAS 123(R).
(b) Certain amounts from prior periods have been reclassified to
conform with current period presentation.
