Q4 2022 Sohu.com Ltd Earnings Call
Participants
Chaoyang Zhang; Founder, Chairman & CEO; Sohu.com Limited
Pu Huang; IR Officer - China; Sohu.com Limited
Unidentified Company Representative
Yanfeng Lv; CFO; Sohu.com Limited
Alicia Yap; MD & Head of Pan-Asia Internet Research; Citigroup Inc., Research Division
Eddie Leung; MD in Equity Research and Analyst; BofA Securities, Research Division
Thomas Chong; Equity Analyst; Jefferies LLC, Research Division
Presentation
Operator
Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Fourth Quarter 2022 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu. Please go ahead.
Pu Huang
Thanks, operator. Thank you for joining us to discuss Sohu's fourth quarter 2022 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and Vice President of Finance, James Deng. Also with us are Changyou's CEO Dewen Chen; and CFO Yaobin Wang.
Chaoyang Zhang
Thank you, everyone, for joining our call. In the fourth quarter and full year of 2022, we continue to refine our products and optimize operating efficiency with strict budget control, despite the negative impact of COVID-19 and the macroeconomic challenges, thanks to our efforts, brand advertising revenue and bottom line performance both exceeded our prior guidance for the fourth quarter of 2022.
Yanfeng Lv
Thank you, Charles. I will now walk you through the key financials of our major segments for the fourth quarter and full year of 2022. All the numbers on a non-GAAP basis -- you may find a reconciliation of non-GAAP to GAAP measures on our IR website. For Sohu Media Portal, quarterly revenues were $16 million, down 16% year-over-year and up 9% quarter-over-quarter. The quarterly operating loss was $32 million compared with an operating loss of $38 million in the same quarter last year. For the full year 2022, Sohu Media Portal revenues were $61 million, down 19% compared with 2021. The full year operating loss was $156 million compared with an operating loss of $134 million in 2021.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Thomas Chong from Jefferies.
Thomas Chong
My first question is about the overall advertising industry outlook in 2023. Can management comment about the sentiment so far? And on Sohu, how should -- we should think about the advertising spending among [auto] FMCG, Internet services? And my second question is more about the use of cash and our investment strategies for this year. And finally, may I also get some color for management about our thoughts on the recent (inaudible) and how we shape the Internet sector?
Chaoyang Zhang
Okay. So the first overall advertising market after the -- basically, the lift of the lockup and after the COVID-19, I think the economy is picking up in the first quarter. So we are seeing an outlook of -- kind of optimistic about the overall advertising market compared with the last year 2022 because companies are starting to spend -- start marketing events -- spending money to market their products and brand building. In terms of the industry, I think auto is the first one, right? Auto -- followed by FMCG, right? Interim service in Q4 of '21, Yes. Actually, for both part of Q4, we're still in the lockdown era, right? So -- but because of our some live broadcasting activities, we were -- we have growth, right, improving advertising up, right? Improvement of 12% in Q4. But that was still during the lockup years. And -- so 2023, we're kind of optimistic. We see the economy is picking up and the company is starting to spend money now. And the investment strategy, I think first of all, we will have -- we will continue to invest in the products, refining our products and building the -- and also the Sohu networks and also to spend on user acquisition with a -- with the products ready and with its features with improving stickiness. We're going to spend money, use the acquisition. As we did in 2022 online video -- on video -- Sohu Video, spending more than before on Sohu Video. That's why you see the loss of video business widening, right, in last year. So this year, we'll spend both on video on the Sohu new -- Sohu Media Portal. It separates Sohu News App. When we believe that our product is ready and with stickiness and to acquire users and make sure they come and they stay. In terms of more investment, probably with AI technology and ChatGPT and we'll -- actually, our new premium -- our new recommendation algorithms is a deep application of AI technology like deep learning and all these algorithms or AI. (inaudible) have the whole ChatGPT type of openAI services. It's -- since we already -- Sogou, we already sold Sogou so this need to have the whole -- develop the whole algorithm from bottom up is really need the kind of company with a search engine background. Now we already sold Sogou. Right now, we are not able to develop the whole openAI system, but we can outsource the fundamental layers of those algorithms and to some other companies and then to just use the applications apply them to our for our social network because it's about questioning and answering and interactivity. So it fits well with our social network strategy. Well, I hope I answered your question.
Operator
Our next question comes from the line of Eddie Leung from Bank of America Merrill Lynch.
Eddie Leung
Just two questions. The first one is about games. Just wondering if that one has any, I won't say guidance, but any outlook on the potential launch time of some of the new games. And then secondly, I think Charles you talked a little bit about that. So in terms of use of cash because you guys still have a very good cash balance. In addition to investment, will there be any potential plan for, for example, more share buyback or even dividend?
Unidentified Company Representative
[Interpreted] Currently, we plan to launch new TLBB in third quarter this year.
Chaoyang Zhang
So we -- we will not exclude the possibility of share buybacks this year. Yes, it's possible. We may.
Operator
Our next question comes from the line of Alicia Yap from Citi.
Alicia Yap
Can you hear me? I have a couple of questions. First, on a follow-up on the gaming business. So the driver for your sequential improvement for your gaming business that you've guided for first quarter, is that mainly on some of the expansion packs that has released and been doing well. So that's you guided slight improvement on the gaming for 1Q. That's the first question within the gaming. And then a follow up on the new TLBB launch because we also know there is another similar title, which is called TLBB 2 by Perfect War. So would that be -- can you comment? Would there be any confusions or any cannibalization effect from this similar title? And then for advertising business, can you also elaborate a little bit in terms of the first quarter guidance? Do you think this is actually considering an improving trend? Because it does look like your guidance on a year-over-year basis, is still a negative growth despite the entire year already having declined. And -- but is it because of the Chinese New Year in first quarter? So would you expect second quarter of where we should start to get positive year-over-year growth?
Unidentified Company Representative
[Interpreted] Because we launched some promotional activities for our existing games in the first quarter around Chinese New Year.
Chaoyang Zhang
All right. In terms of advertising, so the first quarter of 2022 is basically before it's prior -- it's before the real lockdown that happened in Q2, right? So it's relatively a more normal quarter, right, Q1. But this quarter, the Q1 of 2023 is -- as Q4, we already pick up some time pick up some, but it's due to some of our potential unique offering of this (inaudible). But Q1, first of all, it's a slow season, but it's also a -- it's still restoring, right? It's resuming, but still not fully to its prior guidance -- prior locked quarter, right? That's why it's kind of decrease. I answer your question?
Alicia Yap
Yes, I see what you mean. In terms of the year-over-year.
Chaoyang Zhang
Q2 is to pick up speed, yes. I'm sure Q2 will definitely be better. Q2 in 2022. I think Q2 and Q3 of 2022 were worst, right, because the lockdown is in the lockdown, in Shanghai and then -- so this Q1 is we already see some hope, right? So it's picking up, but it's still not fully resumed or...
Alicia Yap
I just have one very quick follow-up. In terms of the Sohu Media and Sohu Video, do we have any plan or target to narrow the loss this year?
Chaoyang Zhang
Actually, the answer is no because we're going to spend, as you ask -- you were asking the question about how do I spend -- we have a cash -- good cash balance, right? So that's why we need a war chest to really develop in order to have ultimately have the profitable platform, we have to have a larger user base. You have to have the scale, scale of the user base. And that's the only way for a platform to make money, right? So -- but to reach that, you need to spend. That's why we're into this year, as I said, when we have -- when we believe that the kind of products that we are designing or we have been perfecting or developing are ready. Have the right kind of stickiness and so to make the user stay then where we spend. As we did in -- on Video, kind of spending a little more on Video in 2022, so -- and we see the user base actually grow quite well. But -- so we're going to spend both on Video and News App.
Operator
(Operator Instructions) All right. I am showing no further questions. And with that, we conclude today's conference call. Thank you for participating. You may now disconnect.