Sohu.com Corporate Presentation

Transcription

1 Sohu.com Corporate Presentation SOHU.COM INC. (NASDAQ: SOHU) December 2013

2 Safe Harbor Statement This presentation contains forward-looking statements. Statements that are not historical facts, including statements about Sohu and Changyou s beliefs and expectations, 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 statement. Potential risks and uncertainties include, but are not limited to, the current global financial and credit markets crisis and its potential impact on the Chinese economy, the uncertain regulatory landscape in the People's Republic of China, fluctuations in Sohu's quarterly operating results, and Sohu s reliance on online advertising sales, online games and wireless services (most wireless revenues are collected from a few mobile network operators) for its revenues. Further information regarding these and other risks is included in Sohu's annual report on Form 10-K for the year ended December 31, 2012 and quarterly report on Form 10-Q for the quarter ended September 30, 2013, Changyou s annual report on Form 20-F for the year ended December 31, 2012, and other filings by Sohu and Changyou with the Securities and Exchange Commission. 2

3 Unique Combination of Strong Businesses Sohu.com Leading Mainstream Media Platform Changyou Leading MMORPG Company Sogou Online Search Subsidiary Strong brand recognition Extensive advertising resources Top-tier online video service provider in China Flagship MMO game TLBB continues its popularity DDTank and Wartune -- 2 topranked Web 3games in China Implement platform-based strategy through com, a leading game information portal in China Sogou Pinyin, a dominant Chinese language input method, has over 80% penetration rate measured by monthly active users Top 3 search engine in China in terms of traffic Top 3 web browser in China in terms of user base Sohu.com: connects advertising partners across China to their targeted audience Online game business (Changyou): delivers solid performance and sees steady progress with diversifying into fast growing game segments Sogou business: sustains solid growth; forms a partnership with Tencent to become a credible and fastest growing contender in both PC and mobile search 3

4 Financial Highlights 2013 Q Q2 Q-o-Q % 2012 Q3 Y-o-Y % 2013 Q4 Guidance Y-o-Y % Total revenues $368.3m $338.9m 9% $285.4m 29% $378~390m 26%~30% Brand advertising $124.8m $100.2m 25% $77.9m 60% $120~125m 46%~52% Sogou * $56.9m $49.9m 14% $37.2m 53% $68~70m 66%~71% Online games $161.5m $168.3m (4%) $151.1m 7% $171~176m 8%~11% Mobile and others $29.7m $24.2m 23% $21.1m 41% - - Operating margin (non- GAAP) Net income before NCI (non-gaap) Net income after NCI for diluted EPS (non-gaap) Diluted EPS after NCI (non-gaap) 15% 19% - 24% $44.3m $54.5m (19%) $58.5m (24%) $(10)~(6)m - $19.8m $22.5m (12%) $29.5m (33%) $(13)~(11)m - $0.51 $0.58 (12%) $0.77 (33%) $(0.35)~(0.30) - Cash balance $1,240.8m $770.5m - $773.5m Cash inflow from operations $123.7m $105.0m - $144.0m * Sogou revenues include revenues from Search, Web directory, and Web games. For 2013 Q3, Web game revenues were about $4.6 million, which is also included in the Wireless and others revenues. 4

5 Strong Results Delivered by an Experienced and Focused Team Dr. Charles Zhang Chairman and Chief Executive Officer 17 yrs Ms. Carol Yu Co-President and Chief Financial Officer 10 yrs Ms. Belinda Wang Co-President and Chief Operating Officer 17 yrs Mr. Xiaochuan Wang CEO of Sogou 15 yrs Mr. Tao Wang Chief Executive Officer 9 yrs Mr. Alex Ho Chief Financial Officer 9 yrs Mr. Dewen Chen President 9 yrs Mr. Xiaojian Hong Chief Operating Officer 9 yrs 5

6 Brand Advertising 6

7 Brand Advertising Business Updates In 2013 Q3, net revenues were $125m, up 60% YoY, the highest growth rate since 2008 Q3 Top 5 sectors : FMCG, Auto, Real Estate, IT, and Online Game Online video is strongest unit, while FMCG and IT were fastest-growing sectors Sohu mobile portal sees quick traffic ramp-up, while Sohu News Mobile APP is the top news application Q4 Outlook Net Revenues to be between $120m and $125m, up 46-52% YoY 7

8 Online Video 8

9 A Glance at Average Daily Unique Visitors (on PC) million users One of the most recognized premier online video brands Sep' 2012 Sep' 2013 Source: iresearch Expanding audience reach in quick pace million hours Monthly Time Spent (on PC) Diversified and comprehensive content portfolio Sep' 2012 Sep' 2013 Source: iresearch 9

10 Online Video Business Updates Operating Metrics Show Impressive Growth From August to October, we re No.1 online video platform by MUV* Video views and total time spent grew 45% and 52%, respectively** Ad revenues grew ~60% QoQ and more than tripled YoY Content Leadership No.1 destination for American TV Series No.1 online platform for variety shows Wide coverage of hot domestic TV dramas Step up investment on in-house produced content, i.e. one web drama series every month from Q4 Traffic Surge on Mobile In 2013 Q3 through August, mobile traffic grew at the fastest rate in industry* Total number of activated users of Sohu Video app grew 30% QoQ to 140 million** User time spent and video views on mobile device rose 67% and 115% QoQ, respectively** Mobile monetization began from 2013 Q3 with positive response * Source: iresearch ** Source: Company data 10

11 Key Competitive Advantages Content Strong pipeline of premium content No. 1 viewer s choice for American TV series High quality original productions customized for web audiences Brand Influential entertainment media brand Broad connections with traditional media players, e.g. TV stations, movie studios Trusted brand that highly appeals to advertisers User Base Sohu.com Web properties cover mass population of internet users Cross marketing by leveraging the Sohu matrix, i.e. portal, Sogou Financial Strength On Group level, ~$1,241 million cash balance with healthy operating cash flow 11

12 Comprehensive Content Offering HD Premium Sohu Original Media UGC Paid Content Micro Film Funny Movie TV Drama Dramas Cartoon Variety show Music Documentary Variety Show Programs Documentary News and Commentary Live TV Gossip Oddly enough Music Video ~ 32k episodes of TV series ~2,700 movies ~47k clips of variety shows ~15k episodes of cartoons ~20k clips of documentaries Contents across Chinese, Japanese, Korean, Thai, American, and European Pioneer of online video website inhouse productions Wide varieties of inhouse productions, from short film, web drama, to documentary, talk show, celebrity interview, variety show, etc. ~ 517k clips of news & entertainment news 73 channels of live TV station broadcasts 24/7, offers 3D channels Topic driven, live broadcast on breaking news and social events ~37 million clips of UGC content ~ 31k daily UGC uploads ~ 800 movies ~ episodes of educational contents Seamless and advertisement free HD viewing experience Preferred partner with Fox, WB, Sony, Lions Gate, Paramount, etc. in China 12

13 Sogou 13

14 Sogou / Tencent Transaction Recap Sohu s affiliates On September 16, we formed a partnership with Tencent Inject net cash of US$448m 63.5% New 36.5% Transfer Soso, QQ Pinyin and other assets to Sogou Immediately after the transaction, Tencent holds 36.5% of Sogou s equity capital which could further increase to ~40% in the near future. 14 Business Collaboration Tencent and Sogou to jointly develop, crosspromote and integrate their respective products and services, while collaborating in areas of search technology, user insights and data sharing. Sogou's leading products, including Sogou Pinyin and Sogou Search, will have direct access to the vast user base of Tencent's online and mobile social communities. 14

15 Stronger Foothold in Online Search Market Transforming the competitive landscape of China s online search market as New Sogou emerges as a credible and fastest growing contender in both PC and mobile search secures a solid top 3 position in this important space PC search market share by PV Mobile search market share by PV #3 13.5% #3 10.2% #4 3.3% #2 16.0% 2.0% #3 14.0% Sogou + Soso Sogou Soso Source: CNZZ, Sep 2013 Sogou + Soso Sogou Soso Source: iimedia For the Sohu Group, generating synergies to video, online gaming and other businesses as News Sogou is capable of bringing more users and traffic More Users More Traffic Others 15

16 Integration Well on Track New Sogou team has been well in place one month after announcement Over the next two months, to migrate Soso s traffic, service and business and expect to complete the transition by year end Infrastructure: to relocate Soso servers Service: to include Soso Baike and Wenwen into Sogou Traffic: to migrate PC traffic at no TAC and mobile traffic on revenue sharing agreement Business: to transfer or migrate Soso existing agencies and advertisers 16

17 New Sogou with Promising Monetization Outlook Revenue (US$ million) For 2013 Q4, Sogou revenues are expected to be between $68 million and $70 million. Assuming the completion of integration, the quarterly revenues would have been $5 million higher ~ Q Q Q Q4* * 2013 Q4 Sogou guidance is used Search Revenues = Traffic x CTR x CPC More ad customers More ad opportunities Higher coverage ratio Higher CTR Improved Monetization Intensified keywords bidding Higher CPC 17

18 Healthy 2013 Q3 Results: Extending Revenue Growth Revenues US$ millions Q Q Q Q Q Q Q Q Q3 18

19 Healthy 2013 Q3 Results: Fast Expanding Advertiser Network Number of Advertisers and ARPA Revenue Breakdown by Sectors 2013 Q3 In thousands Number of Advertisers ARPA In US$ Healthcare, 14% Others, 52% E-commerce, 13% Franchising, 5% Game and IT products, 9% Travel and living services, 6% Q Q Q Q Q3 0 19