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Sohu.com (SOHU) Q1 Loss Narrower Than Expected, Top Line Falls
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Sohu.com Limited (SOHU - Free Report) reported relatively modest first-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. Declining net sales in Online games induced by the natural fall of older games and lower revenues from Brand advertising led to year-over-year contraction in the top line for the leading provider of online advertising, media and gaming services in China.
However, management is focused on improving user experience and expanding brand influence through incorporating advanced technology to steadily enhance its products, optimize operations, develop high-quality content and improve monetization.
Net Income
On a GAAP basis, the company witnessed a net loss of $17.9 million or a loss of 53 cents per ADS against a net income of $2.7 million or 7 cents per ADS in the prior-year quarter. Lower net sales and higher operating expenses are the main drivers behind the net loss.
Non-GAAP net loss stood at $12.6 million or a loss of 37 cents per ADS against a net income of $9.5 million or 26 cents per ADS in the year-ago quarter. Non-GAAP net loss for the reported quarter was narrower than the consensus estimate of a loss of 50 cents.
Revenues in the reported quarter declined to $161.8 million from $193.4 million in the year-ago quarter. Low demand for mobile games and some older PC games hampered revenue growth during the quarter. The top line surpassed the consensus estimate of $160 million.
Brand advertising revenues declined 5% year over year to $22.5 million from $23.7 million in the prior-year quarter. Revenues from Online Game totaled $129.5 million, down 18% year over year. The downside was caused by sluggish demand for older games like Little Raccoon: Heroes and TLBB PC. Other revenues totaled $9.8 million, down from $11.8 million in the year-ago quarter.
For PC games, the total average monthly active user accounts (MAU) were 2.2 million, up 8% year over year, owing to content updates and the optimization of some older games. Total quarterly aggregate active paying accounts (APA) were 0.9 million, down 4% year over year.
For mobile games, the total average MAU was 1.6 million, down 32% year over year and the total quarterly APA was 0.3 million, down 39% year over year. The decline in Bright Stars and some older games affected this vertical.
Other Details
Quarterly GAAP gross profit was $121.3 million compared with the year-ago quarter’s figure of $144.3 million, with gross margin of 75% in both cases. Non-GAAP gross margin for brand advertising business increased to 17% from 2% in the prior-year quarter. Non-GAAP gross margin for online games was flat at 85%.
GAAP operating expenses rose to $139.8 million up 6% from $131.6 million in prior year quarter. Increase in salary and benefit expenses, marketing costs and Changyou licensing fees led to higher operating expenses.
Cash Flow & Liquidity
As of Mar 31, 2023, the company had $525.5 million in cash and cash equivalents with $458.5 million of long-term tax liabilities.
Outlook
For the second quarter of 2023, Brand Advertising revenues are estimated to be in the range of $23-$26 million, which indicates a decrease of 4% year over year. Online game revenues are estimated in the band of $112-$122 million, which signals a reduction of 22% to 29% year over year. Sohu’s non-GAAP net loss is likely to be between $15 million and $25 million. GAAP net loss is projected between $18 million and $28 million.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%.
It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2(Buy), delivered an earnings surprise of 7.67%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 11.24%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
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Sohu.com (SOHU) Q1 Loss Narrower Than Expected, Top Line Falls
Sohu.com Limited (SOHU - Free Report) reported relatively modest first-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. Declining net sales in Online games induced by the natural fall of older games and lower revenues from Brand advertising led to year-over-year contraction in the top line for the leading provider of online advertising, media and gaming services in China.
However, management is focused on improving user experience and expanding brand influence through incorporating advanced technology to steadily enhance its products, optimize operations, develop high-quality content and improve monetization.
Net Income
On a GAAP basis, the company witnessed a net loss of $17.9 million or a loss of 53 cents per ADS against a net income of $2.7 million or 7 cents per ADS in the prior-year quarter. Lower net sales and higher operating expenses are the main drivers behind the net loss.
Non-GAAP net loss stood at $12.6 million or a loss of 37 cents per ADS against a net income of $9.5 million or 26 cents per ADS in the year-ago quarter. Non-GAAP net loss for the reported quarter was narrower than the consensus estimate of a loss of 50 cents.
Sohu.com Inc. Price, Consensus and EPS Surprise
Sohu.com Inc. price-consensus-eps-surprise-chart | Sohu.com Inc. Quote
Revenues
Revenues in the reported quarter declined to $161.8 million from $193.4 million in the year-ago quarter. Low demand for mobile games and some older PC games hampered revenue growth during the quarter. The top line surpassed the consensus estimate of $160 million.
Brand advertising revenues declined 5% year over year to $22.5 million from $23.7 million in the prior-year quarter. Revenues from Online Game totaled $129.5 million, down 18% year over year. The downside was caused by sluggish demand for older games like Little Raccoon: Heroes and TLBB PC. Other revenues totaled $9.8 million, down from $11.8 million in the year-ago quarter.
For PC games, the total average monthly active user accounts (MAU) were 2.2 million, up 8% year over year, owing to content updates and the optimization of some older games. Total quarterly aggregate active paying accounts (APA) were 0.9 million, down 4% year over year.
For mobile games, the total average MAU was 1.6 million, down 32% year over year and the total quarterly APA was 0.3 million, down 39% year over year. The decline in Bright Stars and some older games affected this vertical.
Other Details
Quarterly GAAP gross profit was $121.3 million compared with the year-ago quarter’s figure of $144.3 million, with gross margin of 75% in both cases. Non-GAAP gross margin for brand advertising business increased to 17% from 2% in the prior-year quarter. Non-GAAP gross margin for online games was flat at 85%.
GAAP operating expenses rose to $139.8 million up 6% from $131.6 million in prior year quarter. Increase in salary and benefit expenses, marketing costs and Changyou licensing fees led to higher operating expenses.
Cash Flow & Liquidity
As of Mar 31, 2023, the company had $525.5 million in cash and cash equivalents with $458.5 million of long-term tax liabilities.
Outlook
For the second quarter of 2023, Brand Advertising revenues are estimated to be in the range of $23-$26 million, which indicates a decrease of 4% year over year. Online game revenues are estimated in the band of $112-$122 million, which signals a reduction of 22% to 29% year over year. Sohu’s non-GAAP net loss is likely to be between $15 million and $25 million. GAAP net loss is projected between $18 million and $28 million.
Zacks Rank & Stocks to Consider
Sohu currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%.
It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2(Buy), delivered an earnings surprise of 7.67%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 11.24%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.