SOHU.COM Reports Fourth Quarter & 2002 Fiscal
Year Financial Results
Fourth Quarter Income 6
Cents Per Share Fourth Quarter Revenue Growth of 157% Full Year Revenues Growth
of 121% over 2001
BEIJING,
Jan. 20 /PRNewswire-FirstCall/ -- SOHU.COM Inc. (Nasdaq: SOHU - News), China's leading online
media, communications, commerce and mobile value-added services company, today
reported results for the fourth quarter ended December 31, 2002 and fiscal year
2002.
Business Highlights Highlights for the fourth quarter 2002: * US GAAP profitability of US$1.9 million, or US$ 0.06 per share * Revenues rise 157% year-on-year and 41% quarter-on-quarter to US$10.6 million beating company guidance of US$8.2 million * 10 consecutive quarters of double-digit quarterly sequential revenue growth * Advertising revenues rise 72% year-on-year to US$4.3 million, reflecting growing online marketing spend in China * Non-advertising revenues soar 291% year-on-year to US$6.3 million through sustained conversion of SOHU's user base into consumers * Gross margins reach record high of 61% Highlights for fiscal 2002: * Record total revenues of US$28.7 million, a 121% increase year-on-year * Revenue diversification for the year of 48%-52% mix between advertising and non-advertising business lines meets company guidance * Positive cash flow from operations for the full year of 2002 * Proven monetisation strategy and scalability: revenues more than doubled with 6% reduction in operating expenses in 2002 compared to 2001 * Consistent business strategy, management stability and proven execution track record
"2002 has been a year of unstoppable momentum for SOHU.
Both our consumer products and online advertising business lines flourished as
users and advertisers alike recognised the Internet as a mainstream media and
entertainment platform in China. SOHU's stellar performance throughout 2002
proves that our business model of diversified revenue on a scalable cost base
has lead towards sustainable profitability," commented Charles Zhang, CEO
and Chairman of SOHU.
SOHU reported record revenues of US$10.6 million for its
fourth quarter ended December 31, 2002, an increase of 157% year-on-year. Gross
margins rose to 61% in Q4 2002. The Q4 2002 US GAAP (Generally Accepted
Accounting Principles) net income of US$1.9 million or US$0.06 per share was a
US$1.8 million improvement from the Q3 2002 net profit of US$112,000 and a
US$4.4 million improvement from the Q4 2001 net loss of US$2.5 million.
SOHU's fiscal year 2002 revenues totaled US$28.7 million,
representing a 121% increase over revenues of US$13.0 million in 2001. Gross
margins rose to 53% in 2002, up from 28% in 2001. The US GAAP net loss for 2002
was US$1.0 million or US$0.03 per share compared to a net loss of US$13.3
million or US$0.37 per share in 2001 (after adjusting for the effects of
amortisation of intangibles and a one-time write down of intangible assets).
Business Results
With SOHU's revenues from advertising and consumer business
growing at an accelerated pace in the fourth quarter, the Company is realising
its goal of building a sustainable and diversified business model on two strong
pillars: a stable home-market corporate advertising base and a massive, paying
user population.
For the fourth quarter of 2002, SOHU's advertising revenue
totaled US$4.3 million, a 72% year-on-year improvement and a 17% increase from
US$3.7 million in Q3 2002, beating company guidance by US$630,000. Advertising
revenue gross margins improved sequentially from 60% in Q3 to 65% in Q4,
underscoring how SOHU successfully operates on a scalable cost structure.
As in previous quarters, domestic advertising clients,
including TCL, Capitel and Dopod mobile phone manufacturers, Top Sun
Pharmaceuticals and Fujian Industrial Bank, provided a dominant 82% share of
advertising revenue. Multinational companies, among them Motorola and IBM,
accounted for 18% of ad revenues.
In fiscal year 2002, SOHU's advertising revenues surged 50%
from US$9.2 million in 2001 to US$13.9 million as a result of domestic
corporations adopting the Internet as a necessary means of advertising to young
urban Chinese under growing competition in many sectors of the economy.
"We were able to improve on our Q3 record sales because
SOHU offers its corporate clients a powerful online branding platform with the
much sought- after market segment of young, urban consumers. Our latest success
in partnering with the National Basketball Association underscores the extent
to which SOHU can help companies reach consumers in a most effective, appealing
way," Victor Koo, COO of SOHU.COM, observed.
For the fourth quarter of 2002, SOHU's non-advertising
revenues grew 291% year-on-year to US$6.3 million and 63% from the prior
quarter's US$3.8 million, beating guidance by US$1.8 million. Non-advertising
revenue gross margins reached a record high of 59%.
Non-advertising revenues from consumer services, consisting
of e-subscriptions (mainly mobile services and short messaging) and e-commerce
sales, contributed 59% of total revenues in Q4 2002. Through e-subscriptions,
SOHU is monetising its vast user base of over 50 million registered users and
leveraging existing products. This organic growth was attributable to
converting SOHU's users into paying consumers with over 2/3 of e-subscriptions
revenue now derived from monthly subscriptions for news, community, email and
alumni club services.
In fiscal year 2002, SOHU's non-advertising revenues rose
three-fold from US$3.8 million in 2001 to US$14.9 million as a result of
unprecedented fast-paced user acceptance of paid online and wireless services.
"SOHU's central focus on our consumer business during
2002 has paid off. Our registered users have become paying consumers for mobile
services, which are an important part of their daily lifestyle. SOHU's millions
of registered users and China's 200 million plus mobile phone users form a
strong basis for long-term growth prospects of our e-subscriptions," said
Charles Zhang.
SOHU remains committed to profitability through revenue
growth and controlled spending. Q4 2002 operating expenses of US$4.8 million
went up by 10% from Q4 2001. Operating expenses for fiscal year 2002 were down
6% over fiscal year 2001, while revenues have increased by 121% in the same
period.
Q4 2002 US GAAP net income reached US$1.9 million, a US$1.8
million improvement over US$112,000 in Q3 2002.
In fiscal year 2002 cash flow from operating activities was
US$5.3 million, as compared to negative US$10 million in fiscal year 2001. Q4
2002 cash flow from operating activities improved over the previous quarter by
US$3.5 million.
At December 31, 2002, SOHU's cash and marketable debt
securities balance was US$44.2 million, an increase of US$1.1 million from the
previous quarter's balance of US$43.1 million.
"Due to the strong execution ability of our employees,
SOHU has delivered its second consecutive profitable quarter well ahead of
plan. The combination of the opportunities offered by the Chinese Internet
industry and our loyal employees lays a strong foundation for sustainable
profitability," commented Derek Palaschuk, Chief Financial Officer of
SOHU.
Business Outlook
In 2003, SOHU expects that advertising revenues will grow as
both domestic and multinational companies continue to adopt the Internet to
reach the rapidly growing Internet population. E-subscriptions (i.e. our
consumer-based products) will remain the fastest growing area of the business
and we expect non-advertising revenues for 2003 to account for 65 to 70% of
total revenues.
SOHU believes that it can sustain its momentum of continued
revenue growth and controlled spending to achieve first quarter net income no
less than US$1.9 million ($0.06 per share). SOHU expects total revenues for Q1
2003 to be US$12.5 million, with advertising revenues of US$4.3 million and
non- advertising revenues of US$8.2 million. Gross margin percentages in Q1
2003 are estimated to be similar to Q4 2002. First quarter capital expenditures
are expected to be US$2.0 million.
"SOHU's solid execution, stable management and high
employee morale have been crucial factors contributing to the 2002
achievements. I am confident we can reach our financial and operational targets
for 2003 by maintaining our strategic direction and continue to bring into play
the dynamic business opportunities in the Chinese Internet industry,"
concluded Charles Zhang, CEO and Chairman of SOHU.COM
Safe Harbour Statement
This company's announcement contains forward-looking
statements. It is currently expected the Business Outlook will not be updated
until the release of SOHU's next quarterly earnings announcement; however, SOHU
reserves the right to update its Business Outlook at any time for any reason.
We may also make written or oral forward-looking statements in our periodic
reports to the Securities and Exchange commission on forms 10-K, 10-Q, 8-K,
etc., in our annual report to shareholders, in our proxy statements, in our
offering circulars and prospectuses, in press releases and other written
materials and in oral statements made by our officers, directors or employees
to third parties. Statements that are not historical facts, including
statements about our 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,
SOHU's historical and future losses, limited operating history, uncertain
regulatory landscape in the People's Republic of China, fluctuations in
quarterly operating results and the company's reliance on online advertising
sales, e-subscriptions (most of which are collected from a few telecom
operators) and e-commerce for its revenues. Further information regarding these
and other risks is included in SOHU's prospectus, 10K, 10Q and in its other
filings with the Securities and Exchange Commission.
Conference Call
SOHU's management team will host a conference call at 7:30
PM EST, January 20, 2003 (8:30 AM on January 21, 2003 in the Hong Kong/China
time zone) following the quarterly results announcement.
Conference call dial-in details: TELEPHONE: from Asia at
(852) 2258-4002 or from within U.S.A.: (1-630) 395-0018, PASSCODE: 4570216,
LEADER: Caroline Straathof.
Instant replay dial-in numbers (available for 24 hours):
TELEPHONE: from Asia at (852) 2802-5151 or from within U.S.A.: (1-402)
220-1046, PASSCODE: 761922.
The conference call will be available on web cast live and
replay at: http://www.sohu.com/about/English/conference.htm
About SOHU
SOHU.COM is one of China's most recognised and established
Internet brands and indispensable to the daily life of millions of Chinese who
use the portal for e-mail, alumni club, short messaging services, news, search,
browsing and shopping. Apart from continuous product and services development,
SOHU.com also concentrates its efforts on making the Internet ubiquitously
available, whether in the office, at home or on the road. SOHU.com, established
by Dr. Charles Zhang, one of China's Internet pioneers, is in its sixth year of
operation.