Sohu.com Slips To Loss In Q2, Changyou's Profit Plunges - Update

(RTTNews) - Sohu.com Inc. (SOHU), a China-based web-portal and online game developer, Monday reported a net loss in its second quarter, compared to prior year's profit, hurt mainly by higher expenses related to its online game developer subsidiary Changyou.com Ltd (CYOU). Meanwhile, Changyou's quarterly net income plunged from last year. Both Sohu and Changyou also provided third-quarter estimates.

For Sohu, second-quarter net loss attributable to the company was $41.09 million or $1.16 loss per share, compared to last year's profit of $21.63 million or $0.56 per share. Adjusted attributable net loss, which excluded items, was $34.01 million or $0.88 per share, compared to profit of $22.50 million or $0.58 per share a year ago.

On average, 10 analysts polled by Thomson Reuters expected loss per share of $1.38 for the quarter. Analysts' estimates typically exclude one-time items.

Sohu's total revenues climbed 18 percent to $400.15 million driven up strong growth in online video and Sogou businesses. Analysts expected revenues of $407.78 million.

Online game revenues, meanwhile, dropped 9 percent mainly due to decreased revenues from Wartune and DDTank in China.

Gross margin was 58 percent for the second quarter, compared to 66 percent a year earlier. Operating expenses climbed 82 percent, mainly due to higher expenses of Changyou for various software applications.

For Changyou, second-quarter net income attributable to the company fell to $1.9 million from last year's $75.2 million. Earnings per ADS dropped to $0.04 from $1.41. Adjusted attributable net income was $2.4 million, compared to net income of $75.6 million in 2013. Earnings per ADS was $0.04, compared to $1.41 a year ago. On average, 6 analysts polled by Thomson Reuters expected loss per share of $0.27 for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the second quarter slid 3 percent to $177.8 million. Analysts estimated revenues of $186.69 million for the quarter.

Changyou's total average monthly active accounts of games were 24 million, a decrease of 33 percent year-over-year. Total average monthly active accounts of the Company's platform channels were 252 million, an increase of 196 percent. Gross margin was 76 percent, compared to 83 percent in 2013. Total operating expenses grew 143 percent year-over-year.

Looking ahead for the third quarter, Sohu estimates total revenues to be between $427 million and $442 million, and net loss to be between $28 million and $34 million. Adjusted net loss attributable to Sohu.com Inc. is projected between $29 million and $33 million, and loss per share between $0.75 and $0.85.

Analysts expect third-quarter loss per share of $0.97 and revenues of $451.35 million.

Carol Yu, President and CFO of Sohu.com, said, "Although our near-term margin is under pressure due to strategic deployment for online video and Changyou, I am confident that such investments will yield long-term return for our shareholders."

For the third quarter, Changyou expects adjusted attributable net loss between $0 million and $6.0 million, adjusted loss per ADS in the range of $0.00 - $0.11, on total revenues of $186.0 million - $192.0 million. Analysts are looking for loss per share of $0.04 and revenues of $200.06 million.

Sohu closed Friday's regular trading at $57.40, up $1.25 or 2.23 percent. Changyou settled at $23.95, down 2.84 percent. In after hours trading on Friday, Changyou gained 3.76 percent, and traded at $24.85.