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Sohu.com (SOHU) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

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Sohu.com SOHU reported first-quarter 2021 adjusted earnings of 80 cents per share, which beat the Zacks Consensus Estimate by a wide margin of 300%. The company had reported a loss of 52 cents per share in the year-ago quarter.

Moreover, revenues jumped 24% year over year to $222 million.

Notably, on Sep 29, 2020, Sohu.com announced entering into a Share Purchase Agreement with Tencent Holdings Limited TCEHY and its subsidiaries with respect to the sale of Sogou’s shares to Tencent.

Consequently, Sogou’s results of operations were excluded from the company’s fourth-quarter 2020 results from continuing operations.

Notably, the company’s continued focus on providing real-time, reliable news and premium content through Sohu Media Portal and Video contributed to top-line growth.

Sohu.com Inc. Price, Consensus and EPS Surprise

Sohu.com Inc. Price, Consensus and EPS Surprise
Sohu.com Inc. Price, Consensus and EPS Surprise

Sohu.com Inc. price-consensus-eps-surprise-chart | Sohu.com Inc. Quote

Top-Line Details

Brand advertising revenues for the first quarter increased 20% year over year to $31 million, driven by increased revenues in the portal and video advertising businesses.

Moreover, online game revenues of $176 million jumped 32% from the year-ago quarter’s levels, aided by revenues from TLBB Vintage, which was launched during the fourth quarter of 2020.

Meanwhile, other revenues declined 25% year on year to $14.8 million.

For Sohu Media Portal, quarterly revenues were $80 million, up 18% year over year. Meanwhile, for Sohu Video, quarterly revenues were $90 million, down 17% year over year.

For Changyou’s PC games, total average monthly active accounts were 2.3 million, up 7% year over year, mainly due to the contribution of TLBB Vintage, partially offset by the discontinuation of the Warframe operation.

For mobile games, total average monthly active accounts totaled 2 million, a decline of 40% year over year on the reducing life cycles of Changyou’s older games such as Legacy TLBB Mobile and TLBB Honor.

Changyou’s total revenues climbed 32% year over year to $180 million. Changyou posted an operating profit of $101 million compared with $56 million witnessed in the same quarter last year.

Margins

Non-GAAP gross margin in the quarter increased to 79% from 68% reported in the year-ago quarter.

Brand advertising business margin increased to 20%, compared with nil in the first quarter of 2020.

Meanwhile, online games non-GAAP gross margin was 90%, up from the year-ago quarter’s 79%. This uptick primarily resulted from higher percentage revenue contribution from PC games, which typically require lower revenue-sharing payments.

Non-GAAP operating expenses were $122 million, up 20% year on year mainly due to increases in salary and benefits expenses.

Sohu’s non-GAAP operating profit was $53 million, significantly up from the year-ago quarter’s $19 million.

The company reported non-GAAP net income of $37 million against net loss of $8 million in the first quarter of 2020. This was mainly attributable to strict budget control, and solid performance of online game business.

Balance Sheet

As of Mar 31, 2021, Sohu’s cash and cash equivalents (and short-term investments) came in at $335 million compared with $318 million as of Dec 31, 2020.

Q2 Guidance

For second-quarter 2021, Brand advertising revenues are anticipated in the range of $36-$40 million, down 5% to up 5%.

Online game revenues are expected in the band of $134-$144 million, which indicates a year-over-year increase of 26-36%.

Zacks Rank & Stocks to Consider

Sohu.com currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Dell Technologies DELL and NVIDIA NVDA. Both stocks carry a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

NVIDIA and Dell are set to report their earnings on May 26 and 27, respectively.

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