SOHU.COM REPORTS FOURTH QUARTER AND FISCAL YEAR 2022 UNAUDITED FINANCIAL RESULTS

Author: Sohu.com Limited / 2023-07-24 01:36 / Source: Sohu.com Limited

SOHU.COM REPORTS FOURTH QUARTER AND FISCAL YEAR 2022 UNAUDITED FINANCIAL RESULTS

BEIJING,Feb. 21,2023 -- Sohu.com Limited (NASDAQ: SOHU) ("Sohu" or the "Company"),China's leading online media,video,and game business group,today reported unaudited financial results for the fourthquarter and fiscal year ended December 31,2022.

FourthQuarter Highlights

Total revenues were US$160 million,down 17% year-over-year and 13% quarter-over-quarter.

Brand advertising revenues were US$29million,down 14% year-over-year and up 12% quarter-over-quarter.

Online game revenues were US$121million,down 16% year-over-year and 18% quarter-over-quarter.

GAAP net loss attributable to Sohu.com Limited was US$7 million,compared with net income of US$4 million in the fourth quarter of 2021and a net loss of US$22million in the thirdquarter of 2022.

Non-GAAP[1] net loss attributable to Sohu.com Limited was US$2 million,compared with net income of US$0.2 million in the fourthquarter of 2021and a net loss of US$17million in the thirdquarter of 2022.

Fiscal Year 2022 Highlights

Total revenues were US$734 million,down 12% compared with 2021.

Brand advertising revenues were US$103 million,down 24% compared with 2021.

Online game revenues were US$585 million,down 8% compared with 2021.

GAAP net loss[2] attributable to Sohu.com Limited was US$17 million,compared with net income of US$69 million in 2021.

Non-GAAP net income attributable to Sohu.com Limited was US$2 million,compared withnet incomeof US$79 million in 2021.

[1] Non-GAAP results exclude share-based compensation expense; changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact; an impairment charge recognized for an investment unrelated to the Company's core businesses; and interest expense recognized in connection with the one-time transition tax (the "Toll Charge") imposed by the U.S. Tax Cuts and Jobs Act signed into law on December 22,2017 (the "U.S. TCJA"). Explanation of the Company's non-GAAP financial measures and related reconciliations to GAAP financial measures are included in the accompanying "Non-GAAP Disclosure" and "Reconciliations of Non-GAAP Results of Operation Measures to the Nearest Comparable GAAP Measures."

[2] Following the completion on September 23,2021 of the transaction with Tencent related to Sogou,Sohu no longer has any ownership interest in Sogou. Unless indicated otherwise,results presented in this release exclude results from Sogou operations. For historical statements,the results of operations of Sogou and the gain from its disposal are presented in separate line items as discontinued operations.

Dr. Charles Zhang,Chairman and CEO of Sohu.com Limited,commented,"In the fourth quarter and full year of 2022,we continued to refine our products and optimize operating efficiency with strict budget control,despite the negative impact of COVID-19 and macroeconomic challenges. Thanks to our efforts,brand advertising revenue and bottom line performance both exceeded our prior guidance for the fourth quarter of 2022. At Sohu Media Portal,we continued to dedicate ourselves to improving user experience by providing rich premium content and making significant improvements in both product and technology. At Sohu Video,based on our 'Twin Engine' strategy,we continued to develop both original content and science-based live broadcasting with our advanced live broadcasting technology. Meanwhile,we proactively explored a range of monetization opportunities with our differentiated content marketing campaigns. Online games delivered stable performance,with revenues in line with our prior guidance."

Fourth Quarter Financial Results

Revenues

Total revenues were US$160 million,down14% year-over-year and up 12%quarter-over-quarter.

Online game revenues were US$121million,down 16% year-over-year and 18% quarter-over-quarter.The year-over-year decrease was mainly due to the natural decline of our older games,including Little Raccoon: Heroes and TLBB PC. The quarter-over-quarter decrease was mainly due to fewer in-game promotional activities launched for TLBB PC during the quarter,as well as the natural decline of Sea of Dawn,which was launched during the third quarter of 2022.

Gross Margin

Both GAAP and non-GAAP gross margin were 78%,compared with 73% in the fourthquarter of 2021and 71% in the thirdquarter of 2022.

Both GAAP and non-GAAP gross margin for the brand advertising business were 51%,compared with 28%in the fourthquarter of 2021and 2% in the third quarter of 2022.The margin increase was mainly due to a waiver of unpaid long-term accounts payable of approximatelyUS$10 millionrecognized during the quarter.

Both GAAP and non-GAAP gross margin for online games were 84%,compared with 84% in the fourth quarter of 2021 and 84% in the third quarter of 2022.

Operating Expenses

GAAP operating expenses were US$130million,down 10% year-over-year and 13% quarter-over-quarter. Non-GAAP operating expenses were US$130million,down 10% year-over-year and 13% quarter-over-quarter. The decreases were mainly due to Changyou's decrease in marketing and promotional spending for online games.

Operating Loss

GAAP operating loss was US$6million,compared with an operating lossofUS$3million in the fourth quarter of 2021 and an operating loss ofUS$18 million in the third quarter of 2022.

Non-GAAP operating loss wasUS$5million,compared with an operating lossofUS$3millionin thefourth quarter of 2021 and an operatingloss ofUS$17 millioninthe third quarter of 2022.

Income Tax Expense

GAAP income tax expense was US$7million,compared withincome tax expense of US$9million in the fourthquarter of 2021 andincome tax expense of US$16 million in the thirdquarter of 2022. Non-GAAP income tax expense was US$5 million,compared with income tax expense of US$6 million in the fourthquarter of 2021 andincome tax expense of US$14 million in the third quarter of 2022. Income tax expense in the fourth quarter of 2022 included a one-time tax benefit of US$7 million recognized by Changyou as a result of pre-adjustment of its income tax due for 2022,as well as some of Changyou's subsidiaries having been granted preferential tax rates upon their receipt of Software Enterprise status for 2021.

Net Income/(Loss)

GAAP net loss attributable to Sohu.com Limited was US$7million,ora net loss of US$0.21per fully-diluted ADS,compared withnet incomeof US$4 million in the fourth quarter of 2021 and a net loss of US$22millionin the thirdquarter of 2022.

Non-GAAP net loss attributable to Sohu.com Limited was US$2 million,or a net loss of US$0.06per fully-diluted ADS,compared with net incomeof US$0.2 million in thefourth quarter of 2021 and a net lossof US$17million in the third quarter of 2022.

Liquidity and Capital Resources

As of December 31,2022,cash and cash equivalents,short-term investmentsand long-term time deposits totaled approximately US$1.44 billion.

Fiscal Year 2022Financial Results

Revenues

Total revenues were US$734 million,down 8% compared with 2021.

Gross Margin

Both GAAP and non-GAAP gross margin was 74%,compared with 76% in 2021.

Both GAAP and non-GAAP gross margin for the brand advertising business was 16%,compared with 26% in 2021.

Both GAAP and non-GAAP gross margin for online games was 84%,compared with 86% in 2021.

Operating Expenses

For 2022,GAAP operating expenses totaled US$543 million,up 2% compared with 2021. Non-GAAP operating expenses were US$538 million,up 3% compared with 2021.

Operating Profit/(Loss)

GAAP operating loss was US$1 million,compared with an operating profit ofUS$97 million in 2021.

Non-GAAP operating profit wasUS$4 million,compared with an operating profit ofUS$106 millionin2021.

Income Tax Expense

GAAP income tax expense was US$58 million,compared with income tax expense of US$62 million in 2021. Non-GAAP income tax expense was US$53 million,compared with income tax expense of US$56 million in 2021.

Net Income/(Loss)

GAAP net loss attributable to Sohu.com Limited was US$17 million,or a net loss of US$0.50 per fully-diluted ADS,compared with net incomeof US$69 million in 2021.

Non-GAAP net income attributable to Sohu.com Limited was US$2 million,or net income of US$0.07 per fully-diluted ADS,compared withnet incomeof US$79 million in 2021.

Supplementary Information for Changyou Results[3]

Fourth Quarter 2022 Operating Results

For PC games,total average monthly active user accounts[4] (MAU) were 2.3 million,an increase of 11% year-over-year and 6% quarter-over-quarter. The increases were mainly due to improved performance of some of our older games,including TLBB PC,as a result of content updates launched during the quarter. Total quarterly aggregate active paying accounts[5] (APA) were 0.9 million,an increase of 2% year-over-year and a decrease of 10% quarter-over-quarter. The quarter-over-quarter decrease was mainly due to fewer in-game promotional activities launched for TLBB PC during the quarter.

For mobile games,total average MAU were 1.8 million,a decrease of 30% year-over-year and 31% quarter-over-quarter. Total quarterly APA were 0.4 million,a decrease of 24% year-over-year and 29% quarter-over-quarter. The year-over-year decreases in both MAU and APA were mainly from Little Raccoon: Heroes. The quarter-over-quarter decreases in both MAU and APA were mainly from Sea of Dawn.

[3] "Changyou Results" consist of the results of Changyou's online game business and its 17173.com Website.

[4]Monthly active user accounts refers to the number of registered accounts that are logged in to these games at least once during the month.

[5]Quarterly aggregate active paying accounts refers to the number of accounts from which game points are utilized at least once during the quarter.

Fourth Quarter 2022 Unaudited Financial Results

Total revenueswere US$122 million,a decrease of 16% year-over-year and 18% quarter-over-quarter. Online game revenues were US$121 million,a decrease of 16% year-over-year and 18% quarter-over-quarter. Online advertising revenues were US$1 million,a decrease of 27% year-over-year and 7% quarter-over-quarter.

GAAP and non-GAAP gross profit were both US$103 million,a decrease of 15% year-over-year and 18% quarter-over-quarter.

GAAP operating expenseswere US$50 million,a decrease of 26% year-over-year and27% quarter-over-quarter.

Non-GAAP operating expenseswere US$50 million,a decrease of 26% year-over-year and quarter-over-quarter. The year-over-year decrease was mainly due to a decrease in marketing and promotional spending for online games,as well as a decrease in bonus expenses. The quarter-over-quarter decrease was mainly due to a decrease in marketing and promotional spending for online games.

GAAP operating profitwas US$53 million,compared with an operating profit of US$53 million for the fourth quarter of 2021 and US$57 million for the third quarter of 2022.

Non-GAAP operating profitwas US$54 million,compared with a non-GAAP operating profit of US$55 million for the fourth quarter of 2021 and US$58 million for the third quarter of 2022.

Fiscal Year 2022 Unaudited Financial Results

Total revenueswere US$592 million,a decrease of 9% year-over-year. Online game revenues were US$585 million,a decrease of 8% year-over-year. Online advertising revenues were US$7 million,a decrease of 36% year-over-year.

GAAP and non-GAAP gross profit were both US$499 million,a decrease of 11% year-over-year.

GAAP operating expenseswere US$222 million,a decrease of 13% year-over-year.

Non-GAAP operating expenseswere US$218 million,a decrease of 13% year-over-year.

GAAP operating profitwas US$277 million,compared with an operating profit of US$302 million for 2021.

Non-GAAP operating profitwas US$282 million,compared with a non-GAAP operating profit of US$310 million for 2021.

Business Outlook

For the firstquarter of 2023,Sohu estimates:

Brand advertising revenues to be between US$20 million and US$23 million; this implies an annual decrease of 3% to 16%,and a sequential decrease of 20%to 31%.

Online game revenues to be between US$121 million and US$131 million; this implies an annual decrease of 17% to 23%,and a sequential increase of nilto 8%.

Non-GAAP net loss attributable to Sohu.com Limited to be between US$15millionand US$25 million; and GAAP net loss attributable to Sohu.com Limited to be between US$20 millionandUS$30 million.

For the firstquarter 2023 guidance,the Company has adopted a presumed exchange rate of RMB6.80=US$1.00,as compared with the actual exchange rate of approximately RMB6.35=US$1.00 for the firstquarter of 2022,and RMB7.09=US$1.00 for the fourthquarter of 2022.

This forecast reflects Sohu's management's current and preliminary view,which is subject to substantial uncertainty particularly in view of the ongoing impact of the COVID-19 pandemic and the general macroeconomic environment in China.

Non-GAAP Disclosure

To supplement the unaudited consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"),Sohu's management uses non-GAAP measures of gross profit,operating profit,net income,net income attributable to Sohu.com Limited and diluted net income attributable to Sohu.com Limited per ADS,which are adjusted from results based on GAAP to exclude the impact of share-based compensation expense; changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact; an impairment charge recognized for an investment unrelated to the Company's core businesses;and interest expense recognized in connection with the Toll Charge imposed by the U.S. TCJA. These measures should be considered in addition to results prepared in accordance with GAAP,but should not be considered a substitute for,or superior to,GAAP results.

Sohu's management believes excluding share-based compensation expense;changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact; the impairment charge recognized for an investment unrelated to the Company's core businesses; and interest expense recognized in connection with the Toll Charge from its non-GAAP financial measure is useful for itself and investors. Further,the impact of share-based compensation expense;changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact; the impairment charge recognized for an investment unrelated to the Company's core businesses; and interest expense recognized in connection with the Toll Charge cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts that have been the basis for information Sohu provides to analysts and investors as guidance for future operating performance. As the impact of share-based compensation expense,changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact,and the impairment charge recognized for an investment unrelated to the Company's core businessesdoes not involve subsequent cash outflow or is reflected in the cash flows at the equity transaction level,Sohu does not factor this impact in when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result,in general,the monthly financial results for internal reporting and any performance measures for commissions and bonuses are based on non-GAAP financial measures that exclude share-based compensation expense,and changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact; the impairment charge recognized for an investment unrelated to the Company's core businesses,and also excluded the interest expense recognized in connection with the Toll Charge.

The non-GAAP financial measures are provided to enhance investors'overall understanding of Sohu's current financial performance and prospects for the future. A limitation of using non-GAAP gross profit,net income attributable to Sohu.com Limited and diluted net income attributable to Sohu.com Limited per ADS excluding share-based compensation expense; changes in fair value recognized in the Company's consolidated statements of operations with respect to equity investments with readily determinable fair values,and the related income tax impact; the impairment charge recognized for an investment unrelated to the Company's core businesses; and interest expense recognized in connection with the Toll Chargeis that these excluded itemshavebeen and will continue to be significant recurring expensesin Sohu's business for the foreseeable future and similar impairment charges may also recur. In order to mitigate these limitations Sohu has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between the GAAP financial measures that are most directly comparable to the non-GAAP financial measures that have been presented.

Notes to Financial Information

Financial information in this press release other than the information indicated as being non-GAAP is derived from Sohu's unaudited financial statements prepared in accordance with GAAP.

Safe Harbor Statement

This announcement contains forward-looking statements. It is currently expected that the Business Outlook will not be updated until release of Sohu's next quarterly earnings announcement; however,Sohu reserves right to update its Business Outlook at any time for any reason. Statements that are not historical facts,including statements about Sohu'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,instability in global financial and credit markets and its potential impact on the Chinese economy; exchange rate fluctuations,including their potential impact on the Chinese economy and on Sohu's reported U.S. dollar results; recent slow-downs in the growth of the Chinese economy; the uncertain regulatory landscape in the People's Republic of China; fluctuations in Sohu's quarterly operating results; the possibilities that Sohu will be unable to recoup its investment in video content and will be unable to develop a series of successful games for mobile platforms or successfully monetize mobile games it develops or acquires; Sohu's reliance on online advertising salesandonline games for its revenues; the impact of the U.S. TCJA; the effects of the COVID-19 pandemic on the economy in China in general and on Sohu's business in particular; and the possibility that the agreement governing inspections and investigations of audit firms based in China that was entered into in August 2022 between the U.S. Public Company Accounting Oversight Board (the "PCAOB") and the China Securities Regulatory Commission and the Ministry of Finance of China does not continue to be implemented to the satisfaction of the PCAOB and Securities and Exchange Commission (the "SEC"),which could result in the SEC's prohibiting trading of Sohu's ADSs on Nasdaq,any other U.S. stock exchange,or the U.S. over-the-counter markets Further information regarding these and other risks is included in Sohu's annual report on Form 20-F for the year ended December 31,2021,and other filings with and information furnished to the SEC.

Conference Call and Webcast

Sohu's management team will host a conference call at 7:30 a.m. U.S. Eastern Time,February 21,2023 (8:30p.m. Beijing/Hong Kong time,2023) following the quarterly results announcement. Participants can register for the conference call by clicking here,which will lead them to the conference registration website. Upon registration,participants will receive details for the conference call,including the dial-in numbers and a unique access PIN. Please dial in 10 minutes before the call is scheduled to begin.

The live Webcast and archive of the conference call will be available on the Investor Relations section of Sohu's website at https://investors.sohu.com/

About Sohu.com

Sohu.com Limited (NASDAQ: SOHU) was established by Dr. Charles Zhang,one of China's internet pioneers,in the 1990s. As a mainstream media platform in China,Sohu is indispensable to the daily life of millions of Chinese,providing a network of web properties and community based products which continually offer a broad array of choices regarding information,entertainment and communication to the vast number of Sohu users. Sohu has built one of the most comprehensive matrices of Chinese language web properties,consisting of the leading online media destinations Sohu News App,mobile news portal m.sohu.com,PC portal www.sohu.com; online video websitetv.sohu.com; and the online games platform www.changyou.com/en/.

Sohu provides online brand advertising services as well as multiple news,informationand content services on its matrix of websites and also on its mobile platforms. Sohu's online game business,conducted by its subsidiary Changyou,develops and operates a diverse portfolio of PC and mobile games,such as Tian Long Ba Bu,one of the most popular PC games in China. Changyou also owns and operates the 17173.com Website,a game information portal in China.

For investor and media inquiries,please contact:

In China:

Ms. Pu Huang

Sohu.com Limited

Tel:

+86 (10) 6272-6645

E-mail:

ir@contact.sohu.com

In the United States:

Ms. Linda Bergkamp

Christensen

Tel:

+1 (480) 614-3004

E-mail:

linda.bergkamp@christensencomms.com

SOHU.COM LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED,IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Three Months Ended

Twelve Months Ended

Dec. 31,2022

Sep. 30,2022

Dec. 31,2021

Revenues:

Brand advertising

28,778

25,762

33,638

103,233

134,967

Online games

121,381

148,895

143,708

585,424

638,225

Others

10,241

10,617

15,645

45,215

62,384

Total revenues

160,400

185,274

192,991

733,872

835,576

Cost of revenues:

Brand advertising (includes share-based

compensation expense of $-8,$19,$-115,$48,and $1,

respectively)[6]

14,020

25,245

24,214

86,642

99,522

Online games (includes share-based compensation

expense of $18,$42,$43,$143,and $276,

respectively)

18,888

24,451

23,053

91,001

87,616

Others

2,888

3,972

4,477

13,930

17,533

Total cost of revenues

35,796

53,668

51,744

191,573

204,671

Gross profit

124,604

131,606

141,247

542,299

630,905

Operating expenses:

Product development (includes share-based

compensation expense of $217,$613,$437,$2,026,

and $3,904,respectively)

67,147

64,688

68,392

260,772

268,863

Sales and marketing (includes share-based

compensation expense of $-21,$58,$-186,$128,and

$168,respectively)

47,067

73,347

54,793

225,480

182,690

General and administrative (includes share-based

compensation expense of $332,$720,$110,594,

and $4,229,respectively)

15,970

11,629

20,970

56,920

81,880

Total operating expenses

130,184

149,664

144,155

543,172

533,433

Operating profit/(loss)

(5,580)

(18,058)

(2,908)

(873)

97,472

Other income,net

779

4,750

12,982

17,643

29,416

Interest income

6,190

4,808

3,359

17,311

15,641

Interest expense

(7,500)

Exchange difference

(1,071)

3,129

(1,150)

6,524

(3,462)

Income/(loss) before income tax expense

318

(5,371)

12,283

40,605

131,567

Income tax expense

7,413

16,213

8,695

57,946

62,296

Net income/(loss) from continuing operations

(7,095)

(21,584)

3,588

(17,341)

69,271

Net income from discontinued operations,net of tax[7]

864,902

Net income/(loss)

(7,341)

934,173

Less: Net income/(loss) from continuing operations

attributable to the noncontrolling interest

shareholders

(1)

(3)

Less: Net loss from discontinued operations

attributable to the noncontrolling interest

shareholders

6,451

Net income/(loss) from continuing operations

attributable to Sohu.com Limited

(7,094)

(21,583)

3,589

(17,343)

69,274

Net income from discontinued operations attributable

to Sohu.com Limited

858,451

Net income/(loss) attributable to Sohu.com Limited

(7,343)

927,725

Basic net income/(loss) from continuing operations per

share/ADS attributable to Sohu.com Limited[8]

(0.21)

(0.63)

0.09

(0.50)

1.75

Basic net income from discontinued operations per

share/ADS attributable to Sohu.com Limited

21.74

Basic net income/(loss) per share/ADS attributable to

Sohu.com Limited

(0.21)

(0.63)

0.09

(0.50)

23.49

Shares/ADSs used in computing basic net

income/(loss) per share/ADS attributable to Sohu.com

Limited

34,091

34,387

39,373

34,945

39,501

Diluted net income/(loss) from continuing operations

per share/ADS attributable to Sohu.com Limited

(0.21)

(0.63)

0.09

(0.50)

1.75

Diluted net income from discontinued operations per

share/ADS attributable to Sohu.com Limited

21.74

Diluted net income/(loss) per share/ADS attributable to

Sohu.com Limited

(0.21)

(0.63)

0.09

(0.50)

23.49

Shares/ADSs used in computing diluted net

income/(loss) per share/ADS attributable to Sohu.com

Limited

34,501

[6] The cost of brand advertising revenues for the fourth quarter of 2022 included a waiver of unpaid long-term accounts payable of approximately US$10 million recognized during the quarter.

[7] Following the completion on September 23,the results of operations of Sogou and the gain from its disposal are presented in separate line items as discontinued operations.

[8] Each ADS represents one ordinary share.

SOHU.COM LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED,IN THOUSANDS)

As of Dec. 31,2022

As of Dec. 31,2021

ASSETS

Current assets:

Cash and cash equivalents

697,821

998,949

Restricted cash

3,641

1,969

Short-term investments

473,624

399,345

Accounts receivable,net

67,541

82,550

Prepaid and other current assets

83,093

107,311

Total current assets

1,325,720

1,590,124

Fixed assets,net

288,226

329,997

Goodwill

47,415

48,811

Long-term investments,net

26,012

53,121

Intangible assets,net

5,394

9,136

Long-term time deposits

265,802

189,007

Other assets

19,207

25,589

Total assets

1,977,776

2,245,785

LIABILITIES

Current liabilities:

Accounts payable

56,449

87,447

Accrued liabilities

126,461

138,196

Receipts in advance and deferred revenue

48,080

57,041

Accrued salary and benefits

60,754

91,485

Taxes payables

10,612

16,714

Other short-term liabilities

114,532

112,568

Total current liabilities

416,888

503,451

Long-term other payables

1,795

3,922

Long-term tax liabilities

448,043

443,083

Other long-term liabilities

340

3,142

Total long-term liabilities

450,178

450,147

Total liabilities

867,066

953,598

SHAREHOLDERS' EQUITY:

Sohu.com Limited shareholders' equity

1,109,442

1,290,869

Noncontrolling interest

1,268

1,318

Total shareholders' equity

1,110,710

1,292,187

Total liabilities and shareholders' equity

1,785

SOHU.COM LIMITED

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES

(UNAUDITED,IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Three Months Ended Dec. 31,2022

Three Months Ended Sep. 30,2022

Three Months Ended Dec. 31,2021

GAAP

Non-GAAP Adjustments

Non-GAAP

GAAP

Non-GAAP Adjustments

Non-GAAP

GAAP

Non-GAAP Adjustments

Non-GAAP

(8)

(a)

(115)

(a)

Brand advertising gross profit

14,758

(8)

14,750

517

536

9,424

(115)

9,309

Brand advertising gross margin

51%

28%

(a)

Online games gross profit

102,493

102,511

124,444

124,486

120,655

120,698

Online games gross margin

84%

(a)

Others gross profit

7,353

6,645

11,168

Others gross margin

72%

63%

71%

(a)

(72)

(a)

Gross profit

124,604

124,614

131,606

131,667

141,247

(72)

141,175

Gross margin

78%

71%

73%

Operating expenses

130,184

(528)

(a) $

129,656

149,664

(1,391)

(a) $

148,273

144,155

(361)

(a) $

143,794

538

(a)

1,452

(a)

289

(a)

Operating loss

(5,580)

538

(5,042)

(18,058)

1,452

(16,606)

(2,908)

289

(2,619)

Operating margin

-3%

-10%

-9%

-2%

-1%

Income tax expense

7,413

(1,954)

(c,d)$

5,459

16,213

(1,884)

(c,d)$

14,329

8,695

(2,863)

(c,832

538

(a)

1,452

(a)

289

(a)

2,442

(b)

891

(b)

(6,532)

(b)

(610)

(c)

(224)

(c)

1,632

(c)

2,564

(d)

2,108

(d)

1,230

(d)

Net income/(loss) before non-

controlling interest

(7,095)

4,934

(2,161)

(21,584)

4,227

(17,357)

3,588

(3,381)

207

538

(a)

1,230

(d)

Net income/(loss) attributable to

Sohu.com Limited for diluted net

income/(loss) per share/ADS

(7,094)

4,160)

(21,583)

4,356)

3,589

(3,381)

208

Diluted net income/(loss) per

share/ADS attributable to Sohu.com

Limited

(0.21)

(0.06)

(0.63)

(0.50)

0.09

0.01

Shares/ADSs used in computing

diluted net income/(loss) per

share/ADS attributable to Sohu.com

Limited

34,387

34,373

39,373

Note:

(a)To eliminate the impact of share-based awards.

(b)To adjust for changes in the fair value of the Company's investments.

(d) To adjust for the effect of the Toll Charge.

SOHU.COM LIMITED

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATION MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES

(UNAUDITED,IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Twelve Months Ended Dec. 31,2022

Twelve Months Ended Dec. 31,2021

GAAP

Non-GAAP Adjustments

Non-GAAP

GAAP

Non-GAAP Adjustments

Non-GAAP

(a)

Brand advertising gross profit

16,591

16,639

35,445

35,446

Brand advertising gross margin

16%

26%

143

(a)

276

(a)

Online games gross profit

494,423

143

494,566

550,609

276

550,885

Online games gross margin

84%

86%

(a)

Others gross profit

31,285

44,851

Others gross margin

69%

72%

191

(a)

277

(a)

Gross profit

542,299

191

542,490

630,905

277

631,182

Gross margin

74%

76%

Operating expenses

543,172

(4,748)

(a)$

538,424

533,433

(8,301)

(a)$

525,132

4,939

(a)

8,578

(a)

Operating profit/(loss)

(873)

4,939

4,066

97,472

8,578

106,050

Operating margin

12%

13%

Income tax expense

57,946

(5,118)

(c,d)$

52,828

62,296

(6,101)

(c,d)$

56,195

4,578

(a)

9,659

(b)

(5,102)

(b)

(2,416)

(c)

1,274

(c)

7,534

(d)

4,827

(d)

(e)

156

(e)

Net income/(loss) before non-controlling

interest

(17,341)

19,716

2,375

69,271

9,733

79,004

4,827

(d)

(e)

156

(e)

Net income/(loss) from continuing

operations attributable to Sohu.com

Limited for diluted net income/(loss) per

ADS

(17,343)

19,373

69,274

9,007

Net income from discontinued operations

attributable to Sohu.com Limited for

diluted net income per ADS [9]

858,431

1,216

859,647

Net income/(loss) attributable to

Sohu.com Limited for diluted net

income/(loss) per ADS

(17,373

927,705

10,949

938,654

Diluted net income/(loss) from

continuing operations per ADS

attributable to Sohu.com Limited

(0.50)

0.07

1.75

2.00

Diluted net income from discontinued

operations per ADS attributable to

Sohu.com Limited

21.74

21.76

Diluted net income/(loss) per ADS

attributable to Sohu.com Limited

(0.50)

0.07

23.49

23.76

ADS used in computing diluted net

income/(loss) per ADS attributable to

Sohu.com Limited

34,945

34,501

39,501

Note:

(a)To eliminate the impact of share-based awards.

(b)To adjust for changes in the fair value of the Company's investments.

(d) To adjust for the effect of the U.S. TCJA.

(e) To adjust for the one-time impairment charge recognized for an investment unrelated to the Company's core businesses.

[9] Following the completion on September 23,the results of operations of Sogou and the gain from its disposal are presented in separate line items as discontinued operations.

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