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Sohu.com Restricted, China’s leading online media, movie, search and gambling company team, reported unaudited financial results for its second quarter ended June 30, 2020.

Second Quarter Highlights[1]

The privatization of all Changyou has been finished on April 17, 2020. Following the power of the trade, Changyou’s internet income/loss was completely conducive to Sohu.com Limited. For the next quarter of 2020, Changyou acknowledged another accrual of income taxation of US$88 million, even since Changyou altered its coverage for its own PRC subsidiaries related to supply of cash gains after the conclusion of this privatization.

Total earnings were US$421 million[2], down 9 percent year-over-year and 3 percent quarter-over-quarter.
Brand marketing earnings were US$38 milliondown 14percent year-over-year and upward 48percent quarter-over-quarter.
Research and research related advertising earnings [3] have been US$241 milliondown 13% up and down 1 percent quarter-over-quarter.

Online game earnings have been US$106 million, up 4 percent down and up 21percent quarter-over-quarter.
GAAP net loss caused by Sohu.com Limited has been US$80 million. ) Excluding the effects of the further accrual of income tax explained previously, GAAP earnings accounted for Sohu.com Limited has been US$8 billion, as compared with a net reduction of US$35 million from the next quarter of 2019 and a net reduction of US$20 million from the first quarter of 2020.
Excluding the effects of the further accrual of income tax explained previously, non-GAAP internet income payable to Sohu.com Limited has been US$11 million. Further excluding the reduction made by Sogou, non-GAAP internet income caused by Sohu.com Limited has been US$12 million, as compared with a net reduction of US$41 billion from the next quarter of 2019 and a net reduction of US$8 million from the first quarter of 2020.

Dr. Charles Zhang, Chairman and CEO of Sohu.com Limited, remarked,”From the next quarter of 2020, our new marketing firm performed well, the newest marketing revenue needed a good growth, upward 48percent quarter-over-quarter. The newest marketing sales and bottom line exceeded our earlier advice. Throughout this quarter, we incorporated our Media Portal’s new benefit and sway using Sohu Video’s innovative broadcast technology. These initiatives enabled us to effectively create and disperse our high quality initial articles, and further improved our credibility by representing the mindset and worth of Sohu. To get Changyou, the privatization has been performed April 17, 2020, and following the Changyou’s internet income/loss was completely conducive to Sohu.com Limited. During the next quarter of 2020, online game revenues fulfilled our previous guidance and diminished quarter-over-quarter, largely on account of the resumption of job after the easing of COVID-19 limitations. To get Sogou, it delivered revealed results in the next quarter Search keeping a constant share of visitors and Mobile Keyboard further enlarging its DAU base”

[1] Since Changyou’s theater advertising firm ceased operations through the next quarter of 2019, its results of operations are excluded in the business’s results from ongoing operations in the condensed consolidated statements of operations and so are introduced in different line items as discontinued operations. Retrospective adjustments to the historic statements are made to be able to supply a consistent basis . Unless indicated differently, the results introduced in this release are associated with ongoing operations only, and exclude outcomes in the cinema marketing enterprise.

[2] On a constant currency (non-GAAP) foundation, in the event the exchange rate at the next quarter of 2020 was exactly the same as it had been in the next quarter of 2019, or even RMB6. 81=US$1. ) 00, US$ total earnings in the next quarter of 2020 could have been US$438 million, roughly US$17 million over GAAP annual earnings, and down 5 percent high-income.

[3] Lookup and Lookup related advertising earnings exclude intra-Group transactions.

Second Quarter Financial Results

Earnings

Total earnings for its next quarter of 2020 have been US$421 million, down 9 percent year-over-year and 3 percent quarter-over-quarter.

Complete online marketing revenues, including revenues in the newest marketing and research and search-related advertising companies, for its next quarter of 2020 have been US$279 million, downward 13percent up and down 6 percent quarter-over-quarter.

Brand marketing earnings for its next quarter of 2020 totaled US$38 milliondown 14percent year-over-year and upward 48percent quarter-over-quarter. The year-over-year reduction was mostly as a result of constant bad effect on the brand marketing industry from the epidemic of this COVID-19 from the first quarter of 2020. The quarter-over-quarter growth was mainly because of the increased earnings within our portal and movie advertisements companies as a consequence of our ongoing efforts to improve our earnings as well as the facilitating of the effects of both COVID-19.

Research and search-related advertising earnings for its next quarter of 2020 have been US$241 milliondown 13percent up and down 1 percent quarter-over-quarter.

Online game earnings for the next quarter of 2020 have been US$106 million, up 4 percent down and up 21percent quarter-over-quarter. The quarter-over-quarter reduction was mainly because of a reduction in participant participation as a consequence of work resumption through the quarter after the easing of COVID-19 limitations in China.

Gross Margin

Both GAAP and also non-GAAP[4] gross margin was 41percent for the next quarter of 2020, in comparison with 46percent in the next quarter of 2019 and 37percent in the first quarter of 2020.

Both GAAP and also non-GAAP gross margin to its internet marketing firm for the next quarter of 2020 has been 23 percent, in comparison to 33percent in the next quarter of 2019 and 10percent from the first quarter of 2020.

Both GAAP and also non-GAAP gross margin for its brand marketing company in the next quarter of 2020 have been 40 percent, in comparison to 28percent in the next quarter of 2019 and nil in the first quarter of 2020. The year-over-year margin improvement was mostly due to diminished video content price. Even the quarter-over-quarter margin improvement was mostly due to increased earnings in the portal site and movie advertisements companies.

Both the GAAP and also non-GAAP gross margin to its research and search-related marketing company in the next quarter of 2020 have been 21 percent, in comparison to 34percent in the next quarter of 2019 and 11percent from the first quarter of 2020. The earnings decrease primarily resulted in a rise in traffic acquisition price for a proportion of lookup and research related advertising revenue. The quarter-over-quarter growth was because of a reduction in traffic acquisition price for a proportion of lookup and research related advertising revenues because of normalized user traffic after the easing of COVID-19 limitations in China.

GAAP gross margin for internet games in the next quarter of 2020 has been 77 percent, in comparison to 82percent in the next quarter of 2019 and 79percent from the first quarter of 2020. Non-GAAP gross margin for internet games in the next quarter of 2020 has been 78 percent, in comparison to 82percent in the next quarter of 2019 and 79percent in the first quarter of 2020. The year-over-year reduction in gross margin was largely because of a rise in revenue-sharing payments linked to TLBB Honor, that was established through the next quarter of 2019.

[4] Non-GAAP consequences exclude share-based settlement expense; excise taxation advantages from excessive tax deductions linked to share-based awards; fluctuations in fair value recognized in the provider’s consolidated statements of operations with regard to equity investments with readily determinable fair values; a one-time impairment charge known for an investment conducive to the business’s core companies; income/expense in the alteration of contingent consideration formerly listed for imports; wages and deemed dividends to non-controlling favorite investors of Sogou; a one-time income tax expense recognized in the fourth quarter of 2017 as a consequence of the one-time transition taxation (the”Toll Charge”) levied from the U.S. Tax Cuts and Jobs Act signed into legislation on December 22, 2017 (the”TCJA”); the following re-evaluation for its fourth quarter of 2018 and modification of the tax cost previously recognized for its Toll Fee; the consequent recognition of some previously unrecognized tax advantage and also documenting of the uncertain tax position linked to the equilibrium of the Charge; and interest payable in connection to the previously excise tax advantage. Explanation of the Organization’s non-GAAP monetary steps and related reconciliations to GAAP financial measures are contained in the corresponding”Non-GAAP Disclosure” and”Reconciliations of Non-GAAP Outcomes of Operation Steps to the Closest Comparable GAAP Measures.”

Operating Expenses

For the next quarter of 2020, GAAP operating expenditures totaled US$194 milliondown 13% up and down 4 percent quarter-over-quarter. Non-GAAP working costs were US$187 milliondown 14% up and down 3 percent quarter-over-quarter. The year-over-year reduction in operating costs was largely due to diminished marketing expenditures.

Running Loss

GAAP operating loss for its next quarter of 2020 has been US$23 million, compared with the operating loss of US$11 million in the next quarter of 2019 and an operating loss of US$24 million in the first quarter of 2020.

Non-GAAP operating loss for its next quarter of 2020 has been US$16 million, compared with the operating loss of US$7 billion in the next quarter of 2019 and an operating loss of US$20 million in the first quarter of 2020.

Income Tax Expense

GAAP income tax expense has been US$85 million for its next quarter of 2020, as well as income tax cost of US$4 million in the next quarter of 2019 and income tax cost of US$14 million from the first quarter of 2020. Non-GAAP income tax cost has been US$82 million for its next quarter of 2020, as well as income tax cost of US$two million in the next quarter of 2019 and income tax cost of US$11 million in the first quarter of 2020. For the next quarter of 2020, Changyou acknowledged another accrual of income taxation of US$88 million, even since Changyou altered its coverage for its own PRC subsidiaries related to supply of cash gains after the conclusion of the privatization of both Changyou.

Net Revenue /(Loss)

GAAP net loss caused by Sohu.com Limited for its next quarter of 2020 has been US$80 million, and a net reduction of US$2. ) 04 a fully-diluted ADS. Non-GAAP net loss caused by Sohu.com Limited for its next quarter of 2020 has been US$77 million, and a net reduction of US$1. 96 a fully-diluted ADS.

Excluding the effects of the further accrual of income tax explained previously, GAAP earnings attributable to Sohu.com Limited to its next quarter of 2020 has been US$8 million, or even a net earnings of US$0. 20 a fully-diluted ADS; non-GAAP internet income attributable to Sohu.com Limited to its next quarter of 2020 has been US$11 million, and a net earnings of US$0. 27 a fully-diluted ADS.

Liquidity

As of June 30, 2020, cash and cash equivalents and short term investments held from the Sohu Group, without short-term bank obligations, had been US$1. 35 billion, in comparison to US$1. 51 billion at December 31, 2019.

Supplementary Information for Changyou Outcomes

Second Quarter 2020 Operational Results

For PC games, overall average monthly active accounts[5] have been 1.9 billion, a reduction of 5 percent high and 10percent quarter-over-quarter. Total Rs aggregate occupied paying balances [6] have been 0.9 million, horizontal year-over-year along with a reduction of 10percent quarter-over-quarter. The quarter-over-quarter declines were largely because of a reduction in participant participation as a consequence of the resumption of labour throughout the quarter after the easing of COVID-19 limitations in China.

For cellular games, overall average yearly active accounts were 3.1 million, a rise of 15% and also a reduction of 9 percent quarter-over-quarter. The year-over-year growth was mostly because of the participation of TLBB Honor, that has been established during the next quarter of 2019. Entire quarterly aggregate occupied paying balances have been 0.6 million, horizontal year-over-year and a reduction of 40percent quarter-over-quarter. The quarter-over-quarter declines were largely because of a reduction in participant participation as a consequence of the resumption of labour throughout the quarter after the easing of COVID-19 limitations in China.
[5] Daily active accounts identifies the amount of enrolled accounts which are logged into such games at least one time throughout the entire month.

[6] Quarterly aggregate occupied paying balances identifies the amount of accounts where sport points are used at least one time throughout the quarter.

Second Quarter 2020 Unaudited Financial Results

Total earnings for its next quarter of 2020 have been US$109 million, a rise of 3 percent year-over-year along with a reduction of 20percent quarter-over-quarter. Online game earnings have been US$106 million, a rise of 4 percent year-over-year along with a reduction of 21percent quarter-over-quarter. Online advertising revenues were US$3 million, a reduction of 16percent year-over-year and a rise of 23percent quarter-over-quarter.

GAAP and also non-GAAP gross profit for its second quarter of 2020 were equally US$85 million, a reduction of 2 percent and 21percent quarter-over-quarter.

GAAP operating costs for the second quarter have been US$51 million, a growth of 10percent ) along with also a reduction of 6 percent quarter-over-quarter. The year-over-year growth in operating costs was largely because of a rise in share-based settlement expenditures as fresh share-based awards took place from the fourth quarter of 2019. The quarter-over-quarter reduction was mainly because of a reduction in promotional and marketing paying on TLBB Honor.

Non-GAAP working expenditures for the second quarter have been US$48 million, a reduction of 1 percent year-over-year and 6 percent quarter-over-quarter.

GAAP operating earnings for its next quarter of 2020 has been US$33 million, compared with an operating profit of US$40 million in the next quarter of 2019 and also US$52 million in the first quarter of 2020.

Non-GAAP operating gain for the next quarter of 2020 has been US$37 million, as well as a non-GAAP operating profit of US$38 million from the next quarter of 2019 and also US$56 million from the first quarter of 2020.

Recent Developments

About July 27, 2020, Sohu’s subsidiary Sogou declared its board of directors (the”Sogou Board”) received a letter containing a preliminary non-binding proposal (the”Proposal”) by Tencent Holdings Limited (including its franchisees,”Tencent”) for Tencent to obtain all the outstanding ordinary shares( such as ordinary shares represented by ADSs, of Sogou who aren’t already possessed by Tencent to get US$9. 00 in cash per ordinary share or ADS (as the exact same may be amended from time to time, a”Proposed Transaction”). The Proposed Transaction, when completed, will lead to Sogou getting a privately-held, direct wholly-owned subsidiary of Tencent, also Sogou’s ADSs will be delisted from the New York Stock Exchange.

About July 31, 2020, the Sogou Board created a special committee of this Sogou Board, composed only of independent directors, to think about the Proposal.

Sohu’s board of supervisors hasn’t had an chance to examine and rate the Proposal in detail, or even to make a decision concerning the way to reply to this Proposal or as to whether the planned purchase of Sogou will maintain the best interests of Sohu, in its own capacity as Sogou’s controlling shareholder, along with Sohu’s shareholders for Sohu to accept or refuse the Proposal or some Proposed Transaction.

Company Outlook

For the next quarter of 2020, Sohu quotes:

Brand marketing earnings to be between US$37 million and US$42 million; that suggests an yearly reduction of 9 percent to 20per cent and a sequential reduction of 3 percent to a successive growth of 11%. )
Online game earnings to be between US$85 million and US$95 million; this suggests an yearly reduction of 12percent to 21per cent and a sequential reduction of 10percent to 20%. )
exceeding the profit/loss made by Sogou, non-GAAP net loss caused by Sohu.com Limited to become involving US$10 million and US$20 million; along with GAAP net loss caused by Sohu.com Limited to become involving US$15 million and US$25 million.
For the next quarter 2020 advice, the business has embraced a supposed trade rate of RMB7. 00=US$1. ) 00, when compared with the true exchange rate of roughly RMB6. 99=US$1. ) 00 to its next quarter of 2019, also RMB7. 08=US$1. ) 00 for its next quarter of 2020.

This prediction reflects Sohu’s administration’s present and preliminary perspective, which can be subject to significant uncertainty, especially in light of the possible continuing effect of this COVID-19 virus, that remains difficult to forecast.

Around Sohu.com

Sohu.com Limited (NASDAQ: SOHU) is China’s premier online brand and indispensable to the daily life of countless Chinese, giving a network of internet properties and neighborhood based/web 2.0 goods that provide the enormous Sohu consumer community a wide selection of choices regarding information, communication and entertainment. Sohu has assembled 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; programmer and operator of online games www.changyou.com/en/ and internet video site tv.sohu.com.

Sohu’s corporate services include online brand marketing on Sohu’s matrix of sites in addition to bid list and page on its own in-house developed search engine and directory. Sohu also offers multiple information and data providers on mobile platforms, such as Sohu News App along with the cellular portal m.sohu.com. Sohu’s internet sport subsidiary Changyou grows and operates a diverse portfolio of both PC and mobile games, for example Tian Long Ba Bu (“TLBB”), among the hottest PC games at China. Changyou also owns and operates the 17173. Com Site, a sport data portal in China. Sohu’s internet lookup subsidiary Sogou (NYSE: SOGO) has grown to be the 2nd biggest search engine by cellular inquiries in China. Additionally, it owns and manages Sogou Input Method, the biggest Chinese language input program. Sohu, according to Dr. Charles Zhang, one of China’s net pioneers, is at its own twenty-fourth year of performance.

SOURCE Sohu.com Ltd.