Sohu.com, Inc. (NASDAQ: SOHU) reported Q1 EPS of ($0.52), $0.20 better than the analyst estimate of ($0.72). Revenue for the quarter came in at $436 million versus the consensus estimate of $427.85 million.

First Quarter Highlights[1]

• Total revenues were US$436 million[2], up 6% year-over-year and down 11% quarter-over-quarter.
• Brand advertising revenues were US$26 million, down 40% year-over-year and 39% quarter-over-quarter.
• Search and search related advertising revenues[3] were US$238 million, up 1% year-over-year and down 13% quarter-over-quarter.
• Online game revenues were US$133 million, up 35% year-over-year and 1% quarter-over-quarter.
• GAAP net loss attributable to Sohu.com Limited was US$20 million, compared with a net loss of US$54 million in the first quarter of 2019 and a net loss of US$18 million in the fourth quarter of 2019.
• Non-GAAP net loss attributable to Sohu.com Limited was US$18 million, compared with a net loss of US$52 million in the first quarter of 2019 and net income of US$7 million in the fourth quarter of 2019.
• Excluding the profit/loss generated by Sogou, non-GAAP net loss attributable to Sohu.com Limited was US$8 million, compared with a net loss of US$51 million in the first quarter of 2019 and a net loss of US$6 million in the fourth quarter of 2019.

Dr. Charles Zhang, Chairman and CEO of Sohu.com Limited, commented, "During the first quarter of 2020, the COVID-19 outbreak inevitably impacted the overall economy and the advertising industry as well. Facing these challenges, we continued to explore new opportunities and differentiated development strategies. For Sohu Media Portal, as a mainstream media platform, we continued to refine the product to generate and distribute a large amount of timely and accurate information, especially regarding the pandemic and its prevention. For Sohu Video, we proactively explored new opportunities in the live broadcasting of medical and health-related content, and provided unique content and valuable information to our audiences. We will continue to explore diversified revenue sources and ways to further narrow losses. For Changyou, online games performed well during the first quarter, mainly driven by the solid performance of both TLBB PC and Legacy TLBB Mobile. The privatization of Changyou was completed on April 17th, after which Changyou's profit will be wholly attributable to Sohu.com Limited. Going forward, we plan to increase the integration of resources and combine Changyou onto Sohu's platforms. For Sogou, despite the challenging environment during COVID-19, Sogou's core Search business continued to outperform the industry. The Search and Mobile Keyboard recorded new highs in terms of traffic and user base, respectively."

GUIDANCE:

Sohu.com, Inc. sees Q2 2020 EPS of ($0.13)-$0.13, versus the consensus of ($0.13). Sohu.com, Inc. sees Q2 2020 revenue of $410-445 million, versus the consensus of $502.14 million.

For the second quarter of 2020, Sohu estimates:

• Total revenues to be between US$410 million and US$445 million.
• Brand advertising revenues to be between US$32 million and US$37 million; this implies an annual decrease of 16% to 27% and a sequential increase of 25% to 45%.
• Sogou revenues to be between US$260 million and US$280 million; this implies an annual decrease of 8% to 14% and a sequential increase of 1% to 9%.
• Online game revenues to be between US$102 million and US$112 million; this implies an annual increase of nil to 10% and a sequential decrease of 16% to 24%.
• Excluding the expected accrual during the second quarter of withholding income tax of approximately US$88 million discussed above, non-GAAP net income/loss attributable to Sohu.com Limited to be between a net loss of US$5 million and a net income of US$5 million, and non-GAAP income/loss per fully-diluted ADS to be between a net loss of US$0.13 per fully-diluted ADS and a net income of US$0.13 per fully-diluted ADS; excluding the expected accrual of withholding income tax, GAAP net loss attributable to Sohu.com Limited to be between nil and US$10 million, and GAAP loss per fully-diluted ADS to be between nil and US$0.25.
• Excluding the profit/loss generated by Sogou, and further excluding the expected accrual of withholding income tax, non-GAAP net income attributable to Sohu.com Limited to be between nil and US$10 million; and GAAP net income/loss attributable to Sohu.com Limited to be between a net loss of US$4 million and a net income of US$6 million.

For the second quarter 2020 guidance, the Company has adopted a presumed exchange rate of RMB7.07=US$1.00, as compared with the actual exchange rate of approximately RMB6.81=US$1.00 for the second quarter of 2019, and RMB6.97=US$1.00 for the first quarter of 2020.

This forecast reflects Sohu's management's current and preliminary view, which is subject to substantial uncertainty, particularly in view of the potential ongoing impact of the COVID-19 virus, which remains difficult to predict.

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