Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 1, 2016

 

 

SOHU.COM INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   0-30961   98-0204667

(State or other jurisdiction

Of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

Level 18, SOHU.com Media Plaza

Block 3, No. 2 Kexueyuan South Road, Haidian District

Beijing 100190

People’s Republic of China

(011) 8610-6272-6666

(Address, including zip code, of registrant’s principal executive offices and registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On August 1, 2016, the registrant announced its unaudited financial results for the second quarter ended June 30, 2016. A copy of the press release issued by the registrant regarding the foregoing is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1    Press Release dated August 1, 2016

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

DATED: August 2, 2016   SOHU.COM INC.
  By:  

/s/ Joanna Lv

    Joanna Lv
    Acting Chief Financial Officer

 

3

EX-99.1

Exhibit 99.1

SOHU.COM REPORTS SECOND QUARTER 2016 UNAUDITED FINANCIAL RESULTS

BEIJING, CHINA, August 1, 2016 –Sohu.com Inc. (NASDAQ: SOHU), China’s leading online media, video, search and gaming business group, today reported unaudited financial results for the second quarter ended June 30, 2016.

Second Quarter Highlights

 

    Total revenues were US$420 million1, down 15% year-over-year and up 3% quarter-over-quarter.

 

    Brand advertising revenues were US$113 million, down 25% year-over-year and 10% quarter-over-quarter.

 

    Sogou2 revenues were US$176 million, up 19% year-over-year and 19% quarter-over-quarter.

 

    Online game revenues were US$99 million, down 42% year-over-year and 3% quarter-over-quarter.

 

    GAAP net loss attributable to Sohu.com Inc. was US$63 million, or US$1.64 loss per fully-diluted share.

Non-GAAP3 net loss attributable to Sohu.com Inc. was US$63 million, or US$1.62 loss per fully-diluted share.

Dr. Charles Zhang, Chairman and CEO of Sohu.com Inc., commented, “In the second quarter, despite the fact that we were facing macro headwinds and a challenging operating environment, we managed to deliver a top-line result that is within the range of our prior guidance. Our brand advertising business was under pressure as large customers cut back their spending, but we did see solid growth from SME customers that helped partially offset the impact.”

Dr. Zhang added, “For Sohu Media Portal, we further enhanced overall content quality and actively promoted our popular mobile Sohu News App. Sohu Video stepped up investment in content and marketing as planned and we reorganized the video sales team to improve synergies. For Sogou, mobile search traffic growth remained robust, with corresponding search revenues approaching 50% of total search revenues. For Changyou, we are glad to see that games revenues were stable from a quarter ago, while stringent expense control helped post better than expected profits.”

Mr. Xiaochuan Wang, CEO of Sogou, commented, “In the second quarter, Sogou moved ahead with our ongoing product differentiation efforts, and our financial performance continued to outgrow the industry. In response to a major healthcare incident within the industry, we swiftly unveiled an ad-free service called Sogou Wise Doctor that provides users authentic and authoritative healthcare information. In addition, supported with the technology of Microsoft Bing, we were able to enrich our English and academic search results. Quarterly total revenues reached US$176 million, or RMB1.15 billion, up 27% year-over-year in RMB terms. Excluding a one-time item, non-GAAP net income would have been US$33.6 million, or RMB 220 million, up 30% from a year ago in RMB terms.”

Second Quarter Financial Results

Revenues

Total revenues for the second quarter of 2016 were US$420 million, down 15% year-over-year and up 3% quarter-over-quarter.

Total online advertising revenues, which include revenues from the brand advertising and search and search-related businesses, for the second quarter of 2016 were US$273 million, down 5% year-over-year and up 5% quarter-over-quarter.

 

1  For the second quarter of 2016, on yearly basis, depreciation of the RMB against the U.S. dollar impacted our reported financial results. On a constant currency basis, total revenues in the second quarter of 2016 would have been US$28 million higher, or down 9% year-over-year.
2  Sogou operates the search and search-related business and offers Internet value-added services (“IVAS”) with respect to Web games developed by third-party developers. In the statements of operations, revenues from search and search-related services are recorded as “Search and search-related” revenue, and revenues from IVAS are recorded as “Others” revenue.
3  Non-GAAP results exclude share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions and dividend and deemed dividend to non-controlling preferred shareholders of Sogou. 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 “Reconciliations of Non-GAAP Results of Operation Measures to the Nearest Comparable GAAP Measures.”

 

1


Brand advertising revenues for the second quarter of 2016 totaled US$113 million, down 25% year-over-year and 10% quarter-over-quarter. The year-over-year decrease was mainly due to decreases in revenues from online video business. The quarter-over-quarter decrease was mainly due to decreases in revenues from online video and real estate. Revenues of Sohu Media Portal, or Sohu.com excluding Sohu Video, were US$47 million, down 10% year-over-year and up 4% quarter-over-quarter. Revenues of Sohu Video were US$32 million, down 44% year-over-year and 24% quarter-over-quarter.

Search and search-related revenues for the second quarter of 2016 were US$160 million, up 18% year-over-year and 20% quarter-over-quarter. The increases were mainly driven by robust growth in mobile traffic and monetization.

Online game revenues for the second quarter of 2016 were US$99 million, down 42% year-over-year and 3% quarter-over-quarter. The year-over-year decrease was mainly due to the natural decline in revenues of older games, such as TLBB and TLBB 3D, and a decrease in Web game revenues upon the completion of the sale of the 7Road business during the third quarter of 2015.

Gross Margin

Both GAAP and non-GAAP gross margin was 49% for the second quarter of 2016, compared with 55% in the second quarter of 2015 and 53% in the first quarter of 2016.

Both GAAP and non-GAAP gross margin for the online advertising business for the second quarter of 2016 was 39%, compared with 45% in the second quarter of 2015 and 43% in the first quarter of 2016.

Both GAAP and non-GAAP gross margin for the brand advertising business in the second quarter of 2016 was 17%, compared with 34% in the second quarter of 2015 and 32% in the first quarter of 2016. The year-over-year and quarter-over-quarter decreases were mainly due to decreased revenues.

Both GAAP and non-GAAP gross margin for the search and search-related business in the second quarter of 2016 was 55%, compared with 57% in the second quarter of 2015 and 54% in the first quarter of 2016. The year-over-year decrease was mainly due to higher traffic acquisition cost as a percentage of search and search-related revenues. The quarter-over-quarter increase was due to normal seasonal fluctuation.

Both GAAP and non-GAAP gross margin for online games in the second quarter of 2016 was 74%, compared with 75% in the second quarter of 2015 and 75% in the first quarter of 2016.

Operating Expenses

For the second quarter of 2016, GAAP operating expenses totaled US$237 million, down 7% year-over-year and up 18% quarter-over-quarter. Non-GAAP operating expenses were US$234 million, down 1% year-over-year and up 17% quarter-over-quarter. The quarter-over-quarter increases were mainly due to increased marketing and promotion expenses.

Operating Loss

GAAP operating loss for the second quarter of 2016 was US$29 million, compared with an operating profit of US$18 million in the second quarter of 2015 and an operating profit of US$15 million in the first quarter of 2016.

Non-GAAP operating loss for the second quarter of 2016 was US$26 million, compared with an operating profit of US$36 million in the second quarter of 2015 and an operating profit of US$15 million in the first quarter of 2016.

Other expense

Other expense for the second quarter of 2016 was US$25 million, compared with other expense of US$0.4 million in the second quarter of 2015 and other income of US$4 million in the first quarter of 2016. In the second quarter of 2016, we recognized one-time expense of $27.8 million that was related to a donation by Sogou to Tsinghua University related to setting up a joint research institute focusing on artificial intelligence technology.

 

2


Income Tax Expense

Both GAAP and non-GAAP income tax expense was US$2 million for the second quarter of 2016, compared with income tax expense of US$12 million in the second quarter of 2015 and income tax expense of US$12 million in the first quarter of 2016. In the second quarter of 2016, the Company recognized a reversal of about $5 million deferred tax liability accrued in the fourth quarter of 2015 for gain on disposal of a long-term investment.

Net Loss

Before deducting the share of net income pertaining to non-controlling interest, GAAP net loss for the second quarter of 2016 was US$47 million, compared with a net income of US$11 million in the second quarter of 2015 and net income of US$11 million in the first quarter of 2016. Before deducting the share of net income pertaining to non-controlling interest, non-GAAP net loss for the second quarter of 2016 was US$44 million, compared with a net income of US$30 million in the second quarter of 2015 and net income of US$11 million in the first quarter of 2016.

GAAP net loss attributable to Sohu.com Inc. for the second quarter of 2016 was US$63 million, or US$1.64 loss per fully-diluted share, compared with a net loss of US$28 million in the second quarter of 2015 and net loss of US$21 million in the first quarter of 2016. Non-GAAP net loss attributable to Sohu.com Inc. for the second quarter of 2016 was US$63 million, or US$1.62 loss per fully-diluted share, compared with a net loss of US$14 million in the second quarter of 2015 and net loss of US$22 million in the first quarter of 2016.

Liquidity

As of June 30, 2016, the Sohu Group had cash and cash equivalents, short-term investments and time deposits of US$1.40 billion, compared with US$1.42 billion as of December 31, 2015.

Ms. Joanna Lv, acting CFO of Sohu.com Inc. commented, “In the second quarter, while our brand advertising business was pressured by a weakened economy, Sogou and Changyou performed well and their financial results were in-line with our expectation. With Sohu Group’s strong balance sheet, we are continuously investing in key initiatives and diligently develop and promote our leading mobile internet products. We are confident to continue to drive our growth and generate returns for our shareholders over the long-term.”

Business Outlook

For the third quarter of 2016, Sohu estimates:

 

    Total revenues to be between US$400 million and US$430 million.

 

    Brand advertising revenues to be between US$110 million and US$120 million; this implies an annual decrease of 21% to 27% and a sequential decrease of 3% to a sequential increase of 6%. Sohu Media Portal revenues to be between US$47 million and US$50 million. Sohu Video revenues to be between US$32 million and US$36 million.

 

    Sogou revenues to be between US$165 million and US$175 million; this implies an annual increase of 2% to 8% and a sequential decrease of 6% to nil.

 

    Online game revenues to be between US$90 million and US$100 million; this implies an annual decrease of 34% to 41% and a sequential decrease of 9% to a sequential increase of 1%.

 

    Before deducting the share of non-GAAP net income pertaining to non-controlling interest, non-GAAP net loss to be between US$70 million and US$80 million.

 

    Non-GAAP net loss attributable to Sohu.com Inc. to be between US$90 million and US$100 million, and non-GAAP loss per fully-diluted share to be between US$2.35 and US$2.60.

 

    Assuming no new grants of share-based awards and that the market price of our shares is unchanged; we estimate that compensation expense relating to share-based awards will be around US$5 million to US$6 million.

 

    GAAP net loss attributable to Sohu.com Inc. to be between US$100 million and US$110 million, and GAAP loss per fully-diluted share to be between US$2.60 and US$2.85.

For the third quarter 2016 guidance, the Company has adopted a presumed exchange rate of RMB6.7=US$1.00, as compared with the actual exchange rate of approximately RMB6.26=US$1.00 for the third quarter of 2015, and RMB6.53=US$1.00 for the second quarter of 2016.

 

3


Non-GAAP Disclosure

To supplement the unaudited consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), Sohu’s management uses non-GAAP measures of gross profit, operating profit, net income, net income attributable to Sohu.com Inc. and diluted net income attributable to Sohu.com Inc. per share, which are adjusted from results based on GAAP to exclude the impact of the share-based awards, which consist mainly of share-based compensation expenses and non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders. 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, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions and dividend and deemed dividend to non-controlling preferred shareholders from its non-GAAP financial measure is useful for itself and investors. Further, the impact of share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders 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 compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders does not involve subsequent cash outflow or is reflected in the cash flows at the equity transaction level, Sohu does not factor this impact 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 measures for commissions and bonuses are based on non-GAAP financial measures that exclude the share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders.

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 gross profit, operating profit, net income, net income attributable to Sohu.com Inc. and diluted net income attributable to Sohu.com Inc. per share, excluding share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders is that the impact of share-based awards and non-cash tax benefits from excess tax deductions related to share-based awards has been and will continue to be a significant recurring expense in Sohu’s business for the foreseeable future, income/expense from the adjustment of contingent consideration previously recorded for acquisitions may recur in the future, and dividend and deemed dividend to non-controlling preferred shareholders may recur when Sohu and its affiliates enter into equity transactions. 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.

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, instability in global financial and credit markets and its potential impact on the Chinese economy; exchange rate fluctuations, including their potential impact on the Chinese economy and on Sohu’s reported US dollar results; recent slow-downs in the growth of the Chinese economy; the uncertain regulatory landscape in the People’s Republic of China; fluctuations in Sohu’s quarterly operating results; Sohu’s current and projected future losses due to increased spending by Sohu for video content; the possibilities that Sohu will be unable to recoup its investment in video content and that Changyou will be unable to develop a series of successful games for mobile platforms or successfully monetize mobile games it develops or acquires; and Sohu’s reliance on online advertising sales, online games and mobile services 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, 2015, and other filings with the Securities and Exchange Commission.

 

4


Conference Call and Webcast

Sohu’s management team will host a conference call at 8:30 a.m. U.S. Eastern Time, August 1, 2016 (8:30 p.m. Beijing/Hong Kong time, August 1, 2016) following the quarterly results announcement.

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

 

US Toll-Free:

  

+1-866-519-4004

  

International:

  

+65-6713-5090

  

Hong Kong:

  

+852-3018-6771

  

China Mainland

  

+86-800-819-0121 / +86-400-620-8038

  

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 11:30 a.m. Eastern Time on August 1 through August 8, 2016. The dial-in details for the telephone replay are:

 

International:    +1-646-254-3697   
Passcode:    51307438   

The live Webcast and archive of the conference call will be available on the Investor Relations section of Sohu’s Website at http://investors.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; the interactive search engine www.sogou.com; the developer and operator of online games www.changyou.com/en/ and the leading online video Website tv.sohu.com .

Sohu corporate services consist of online brand advertising on its matrix of websites as well as bid listing and home page on its in-house developed search directory and engine. Sohu also provides multiple news and information service on mobile platforms, including Sohu News App and mobile news portal m.sohu.com. Sohu’s online game subsidiary, Changyou.com (NASDAQ: CYOU) has a diverse portfolio of popular online games, such as Tian Long Ba Bu (“TLBB”), one of the most popular PC games in China, as well as a number of mobile games. Changyou also owns and operates the 17173.com Website, a leading game information portal in China. Sohu.com, established by Dr. Charles Zhang, one of China’s internet pioneers, is in its twentieth year of operation.

For investor and media inquiries, please contact:

In China:

 

Mr. Eric Yuan
Sohu.com Inc.
Tel:   +86 (10) 6272-6593
E-mail:   ir@contact.sohu.com

 

5


In the United States:

 

Ms. Linda Bergkamp
Christensen
Tel:   +1 (480) 614-3004
E-mail:   lbergkamp@christensenir.com

 

6


SOHU.COM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

 

     Three Months Ended  
     Jun. 30, 2016     Mar. 31, 2016     Jun. 30, 2015  

Revenues:

      

Online advertising

      

Brand advertising

   $ 112,887      $ 125,503      $ 150,849   

Search and search-related

     160,152        133,814        135,206   
  

 

 

   

 

 

   

 

 

 

Subtotal

     273,039        259,317        286,055   
  

 

 

   

 

 

   

 

 

 

Online games

     99,227        102,529        172,350   

Others

     47,872        46,106        35,161   
  

 

 

   

 

 

   

 

 

 

Total revenues

     420,138        407,952        493,566   
  

 

 

   

 

 

   

 

 

 

Cost of revenues:

      

Online advertising

      

Brand advertising (includes stock-based compensation expense of $-73, $62 and $508, respectively)

     93,654        85,636        99,847   

Search and search-related (includes stock-based compensation expense of $0, $0 and $54, respectively)

     71,998        62,092        58,552   
  

 

 

   

 

 

   

 

 

 

Subtotal

     165,652        147,728        158,399   
  

 

 

   

 

 

   

 

 

 

Online games (includes stock-based compensation expense of $17, $-7 and $44, respectively)

     25,380        26,133        43,929   

Others

     21,226        18,986        18,872   
  

 

 

   

 

 

   

 

 

 

Total cost of revenues

     212,258        192,847        221,200   
  

 

 

   

 

 

   

 

 

 

Gross profit

     207,880        215,105        272,366   

Operating expenses:

      

Product development (includes stock-based compensation expense of $1,699, $-3 and $6,234, respectively)

     88,959        82,679        100,771   

Sales and marketing (includes stock-based compensation expense of $161, $14 and $862, respectively)

     117,966        90,047        103,977   

General and administrative (includes stock-based compensation expense of $740, $367 and $10,838, respectively)

     29,650        27,607        49,720   
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     236,575        200,333        254,468   
  

 

 

   

 

 

   

 

 

 

Operating (loss) /profit

     (28,695     14,772        17,898   

Other (expense) /income

     (24,573     3,924        (437

Interest income

     5,040        5,139        6,228   

Exchange difference

     3,866        (1,022     (687
  

 

 

   

 

 

   

 

 

 

(Loss) /income before income tax expense

     (44,362     22,813        23,002   

Income tax expense

     2,430        11,868        11,519   
  

 

 

   

 

 

   

 

 

 

Net (loss) /income

     (46,792     10,945        11,483   
  

 

 

   

 

 

   

 

 

 

Less: Net income attributable to the noncontrolling interest shareholders

     16,232        31,231        38,682   
  

 

 

   

 

 

   

 

 

 

Net loss attributable to Sohu.com Inc.

     (63,024     (20,286     (27,199
  

 

 

   

 

 

   

 

 

 

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

   $ (1.63   $ (0.52   $ (0.70
  

 

 

   

 

 

   

 

 

 

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

     38,691        38,666        38,587   
  

 

 

   

 

 

   

 

 

 

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

   $ (1.64   $ (0.53   $ (0.71
  

 

 

   

 

 

   

 

 

 

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

     38,691        38,666        38,587   
  

 

 

   

 

 

   

 

 

 

 

7


SOHU.COM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

     As of Jun. 30, 2016      As of Dec. 31, 2015  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 1,148,070       $ 1,245,205   

Restricted time deposits (a)

     —           227,285   

Short-term investments

     118,820         174,515   

Accounts receivable, net

     215,577         273,617   

Prepaid and other current assets

     250,731         158,890   
  

 

 

    

 

 

 

Total current assets

     1,733,198         2,079,512   
  

 

 

    

 

 

 

Long-term investments

     69,561         62,093   

Fixed assets, net

     508,156         508,692   

Goodwill

     153,421         154,219   

Intangible assets, net

     38,884         55,415   

Time deposits

     135,393         —     

Restricted time deposits (a)

     9,270         136,694   

Prepaid non-current assets

     5,453         6,254   

Other assets

     26,166         39,315   
  

 

 

    

 

 

 

Total assets

   $ 2,679,502       $ 3,042,194   
  

 

 

    

 

 

 

LIABILITIES

     

Current liabilities:

     

Accounts payable

   $ 158,052       $ 129,025   

Accrued liabilities

     309,212         309,657   

Receipts in advance and deferred revenue

     123,372         135,385   

Accrued salary and benefits

     86,980         99,631   

Taxes payable

     35,638         67,480   

Deferred tax liability

     25,461         24,884   

Short-term bank loans (a)

     —           344,500   

Other short-term liabilities

     206,998         154,017   
  

 

 

    

 

 

 

Total current liabilities

   $ 945,713       $ 1,264,579   
  

 

 

    

 

 

 

Long-term accounts payable

     17,749         4,600   

Long-term tax payable

     33,306         24,732   

Deferred tax liabilities

     13,573         17,531   
  

 

 

    

 

 

 

Total long-term liabilities

   $ 64,628       $ 46,863   
  

 

 

    

 

 

 

Total liabilities

   $ 1,010,341       $ 1,311,442   
  

 

 

    

 

 

 

SHAREHOLDERS’ EQUITY:

     

Sohu.com Inc. shareholders’ equity

     1,158,320         1,241,022   

Noncontrolling Interest

     510,841         489,730   
  

 

 

    

 

 

 

Total shareholders’ equity

   $ 1,669,161       $ 1,730,752   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 2,679,502       $ 3,042,194   
  

 

 

    

 

 

 

Note:

a) Changyou had repaid all of the remaining bank loans of $344.5 million, and restricted time deposits of $354.7 million that secured these loans had been released during the first quarter of 2016.

 

8


SOHU.COM INC.

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATION MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES

(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

 

     Three Months Ended Jun. 30, 2016     Three Months Ended Mar. 31, 2016     Three Months Ended Jun. 30, 2015  
     GAAP     Non-GAAP
Adjustments
         Non-GAAP     GAAP     Non-GAAP
Adjustments
         Non-GAAP     GAAP     Non-GAAP
Adjustments
          Non-GAAP  
       (73   (a)          62      (a)          508       (a)   
    

 

 

          

 

 

          

 

 

       

Brand advertising gross profit

   $ 19,233      $ (73      $ 19,160      $ 39,867      $ 62         $ 39,929      $ 51,002      $ 508          $ 51,510   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Brand advertising gross margin

     17          17     32          32     34           34
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 
                         54       (a)   
                      

 

 

       

Search and search-related gross profit

   $ 88,154      $ —        (a)    $ 88,154      $ 71,722      $ —        (a)    $ 71,722      $ 76,654      $ 54          $ 76,708   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Search and search-related gross margin

     55          55     54          54     57           57
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 
       (73   (a)          62      (a)          562       (a)   
    

 

 

          

 

 

          

 

 

       

Online advertising gross profit

   $ 107,387      $ (73      $ 107,314      $ 111,589      $ 62         $ 111,651      $ 127,656      $ 562          $ 128,218   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Online advertising gross margin

     39          39     43          43     45           45
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 
       17      (a)          (7   (a)          44       (a)   
    

 

 

          

 

 

          

 

 

       

Online games gross profit

   $ 73,847      $ 17         $ 73,864      $ 76,396      $ (7      $ 76,389      $ 128,421      $ 44          $ 128,465   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Online games gross margin

     74          74     75          75     75           75
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 

Others gross profit

   $ 26,646      $ —        (a)    $ 26,646      $ 27,120      $ —        (a)    $ 27,120      $ 16,289      $ —         (a)    $ 16,289   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Others gross margin

     56          56     59          59     46           46
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 
       (56   (a)          55      (a)          606       (a)   
    

 

 

          

 

 

          

 

 

       

Gross profit

   $ 207,880      $ (56      $ 207,824      $ 215,105      $ 55         $ 215,160      $ 272,366      $ 606          $ 272,972   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Gross margin

     49          49     53          53     55           55
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 
       2,544      (a)          433      (a)          18,540       (a)   
    

 

 

          

 

 

          

 

 

       

Operating (loss) /profit

   $ (28,695   $ 2,544         $ (26,151   $ 14,772      $ 433         $ 15,205      $ 17,898      $ 18,540          $ 36,438   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

Operating margin

     -7          -6     4          4     4           7
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

         

 

 

 
       2,550      (a)          448      (a)          18,540       (a)   
    

 

 

          

 

 

          

 

 

       

Net (loss) /income before non-controlling interest

   $ (46,792   $ 2,550         $ (44,242   $ 10,945      $ 448         $ 11,393      $ 11,483      $ 18,540          $ 30,023   
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

       

 

 

 

 

9


     Three Months Ended Jun. 30, 2016     Three Months Ended Mar. 31, 2016     Three Months Ended Jun. 30, 2015  
     GAAP     Non-GAAP
Adjustments
         Non-GAAP     GAAP     Non-GAAP
Adjustments
         Non-GAAP     GAAP     Non-GAAP
Adjustments
         Non-GAAP  
       2,550      (a)          448      (a)          18,540      (a)   
       (2,001   (b)          (1,403   (b)          (5,452   (b)   
    

 

 

          

 

 

          

 

 

      

Net loss attributable to Sohu.com Inc. for diluted net loss per share

   $ (63,386   $ 549         $ (62,837   $ (20,576   $ (955      $ (21,531   $ (27,538   $ 13,088         $ (14,450
  

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

      

 

 

 

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

   $ (1.64        $ (1.62   $ (0.53        $ (0.56   $ (0.71        $ (0.37
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

        

 

 

 

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

     38,691             38,691        38,666             38,666        38,587             38,587   
  

 

 

        

 

 

   

 

 

        

 

 

   

 

 

        

 

 

 

Note:

(a) To eliminate the impact of share-based awards as measured using the fair value method.
(b) To adjust Sohu’s economic interests in Changyou and Sogou under the treasury stock method.

 

10