SOHU

Sohu.com Inc. (SOHU)

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Sohu.com Inc. (SOHU)

Q1 2010 Earnings Call Transcript

April 26, 2010 8:30 am ET

Executives

Tip Fleming – IR, Christensen

Charles Zhang – Chairman and CEO

Belinda Wang – Co-President and COO

Carol Yu – Co-President and CFO

Analysts

Catherine Leung – Citigroup

Dick Wei – JP Morgan

Eddie Leung – Banc of America/Merrill Lynch

Jenny Wu – Morgan Stanley

Wallace Cheung – Credit Suisse

Kathy Chen – Goldman Sachs

Ming Zhao – Susquehanna Financial Group

Paul Wuh – Samsung

Wendy Huang – RBS

Gene Munster – Piper Jaffray

James Lee – CLSA

Presentation

Operator

Ladies and gentlemen, welcome to the 1Q, 2010 earnings conference call on the 26th of April 2010. Throughout the recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

I would now hand the conference over to Mr. Tip Fleming from Christensen. Please go ahead, sir.

Tip Fleming

Thank you, operator and thank you for joining us today to discuss Sohu.com's first quarter 2010 results. On the call today our Chairman and Chief Executive Officer, Dr. Charles Zhang; Co-President and Chief Operating Officer, Belinda Wang, Co-President and Chief Financial Officer, Carol Yu; Chief Executive Officer of Changyou.com, Tao Wang; Chief Financial Officer of Changyou.com, Alex Ho; and Sohu's Senior Finance Director, James Deng.

Before management begins their remarks today, I would like to read you the Safe Harbor statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed in this conference call 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 statements. For more information about the potential risks and uncertainties, please refer to the Company's filings with the Securities and Exchange Commission including its registration statement and most recent Annual Report on Form 10-K.

Now let me turn the call over to Charles, Chairman and CEO. Charles, please proceed.

Charles Zhang

Thank you. Hello everyone, welcome to our call. I am pleased to report another solid quarter with results in line with our expectations. During the quarter, total revenues were $129.5 million which was up 12% year-over-year and had up our expectations.

Brand advertising revenues were $39.5 million, which was up slightly compared with the same quarter last year, and it was in line with our expectations. Online game revenues hit another record reaching $72.1 million, which was up 17% year-over-year and 2% compared to last quarter.

Non-GAAP net income before deducting the shares of net income pertaining to the non-Controlling Interest in Changyou was $48.4 million, which was ahead of our guidance. I will let Carol go through the rest of the financials in more detail. I will talk about our business strategy.

We continue to execute our strategies through in our portal and online game businesses. We're significantly ramping up our library of the exclusive and licensed video content as many of the great media companies in China and around the world partner with us. By combining license content with our own in-house produced material. We are able to expand and promote our full offerings or rapidly growing online community.

Our online game business also continues to produce encouraging results. Aggregate peak concurrent users surpassed 1 million for the first time, which clearly shows our growing momentum as we retain existing users and attract new one. Strategic releases of updates proved to be successful in reinforcing the popularity of our existing games.

Meanwhile, we've been focusing on diversifying our game portfolio through greater efforts on developing the differentiated games in our 2010 pipeline. I'd like to start by discussing some of our key initiatives and the major achievements in our portal business. For the video site, our extensive efforts in fighting online video piracy and our leading media platform have allowed us to attract greater amount of authorized high definition video content from the most well established media companies in China and around the world.

During the quarter, we purchased exclusive broadcasting rights for the premium of many highly anticipated TV dramas. To name one, Go Lala Go will debut exclusively on Sohu's high definition video channel before it is broadcast by any TV station. Our sophisticated internal production allows us to create additional video programs and the bonus material making a total offering even more popular.

For example, for exclusively initial online broadcast of the highly popular TV drama, Love stories in the countryside in the villages, three, number three. We created in-house produced previews, clips from the premium party video news, interviews with many actors and producers and other bonus materials, all of which helped, drive the number of video views passed the 100 million of view after the first two weeks.

New addition, our unique offering of documentary selection and our deep library of exclusive overseas content attract a loyal user-base largely comprised of well educated of high income demographics, which is a specific and the desirable demographic for advertisers. Our investment efforts in this strategically important area are starting to bear fruit.

For the first quarter, average daily video views of high definition content, and average daily page views on our TV channel grow by over 40%, compared to last quarter despite the typical slowdown due to seasonal factors despite the seasonal factors.

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