Yahoo Finance

Joanna Lv

Thank you, Charles. I will now walk you through the key financials of our major segments for the second quarter of 2024. All the numbers are on a non-GAAP basis. You may find the reconciliation of non-GAAP to GAAP measures on our website.
So Sohu Media and Sohu Video, quarterly revenues were $24 million, compared with $32 million in the same quarter last year. Quarterly operating loss was $72 million compared with an operating loss $67 million in the same quarter last year. For Changyou's online game business and the 17173, quarterly revenues are $148 million, compared with $120 million in the same quarter last year. Quarterly operating profit was $32 million, compared with operating profit $49 million in the same quarter last year.
For third quarter of 2024, we expect brand advertising revenues to be between $70 million and $90 million. This impacts annual decrease of 14% to 23% and a sequential decrease of 4% to 14%, online game revenues to be between $104 million and $114 million. This implies annual decrease of 3% to 11% and a sequential decrease of 22% to 29%. Non-GAAP net loss attributable to Sohu.com Limited to be between $30 million and $40 million, and the GAAP net loss attributable to Sohu.com Limited to be between $34 million and $44 million. This forecast reflects Sohu's management's current and preliminary view, which is subject to substantial uncertainties.
This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Question and Answer Session

Operator

(Operator Instructions) Thomas Chong, Jefferies.

Thomas Chong

My first question is about the brand advertising business. Can management comment about how the macro happenings affect the advertising market quarter to date? Because if I look at the guidance, we are expecting a sequential decline of 4% to 14%. Just want to get some color with regard to sectors like auto, FMCG, Internet service and property sector, how are we seeing the quarter to date so far?
And my second question is about our gaming business. Given that we are expecting our gaming business to decline by about 22% to 29%, I just want to get some color with regard to the sequential decline. Is it mainly due to Westward Journey? How should we think about TLBB series?
And my third question is about our share repurchase program. Given that we have $150 million share repurchase program, how should we think about the share repurchase in the second half, if any color?

Charles Zhang

Okay. Thank you for the question. And let me -- first of all, on advertising, the overall macroeconomic situation is not that good, it's a downward trend. So there's -- advertising is still a challenge, a big challenge because advertisers are very cautious in spending. And some advertisers tend to have the effect. Effect-driven advertising, right? You want to -- the brand side is spending less. So overall, it's not good.
But because of -- as I just said in the script report, that we've been using innovative marketing campaigns. And this platform, innovative platform to -- was able to attract some brand advertising spending so that we achieve a 24% quarter-to-quarter increase over Q1.
And of course, in Q1, the -- in Q2, the auto industry spending is more -- is going to spend more compared with Q1. And in the long run, auto industry is still, it's hopeful, It looks promising, but it's still very competitive. And there's the electric car. The EV, I think, is upcoming an increase, but the luxury cars are really phasing out of the -- probably because of price wars and everything.
So Q2, auto now have 25% of our overall advertising, and then also Internet services. So Q2, the auto spend more. And also, Q2 is an e-commerce quarter, especially, like the (spoken in foreign language) during 18th. And in the summer, the FMCG is coming out because of the hot weather and drink companies, beverage companies are spending. So that's the overall. And yeah. We -- yeah, that's the advertising situation.
About Changyou. So Chen Dewen?

Joanna Lv

(spoken in foreign language)

Dewen Chen

(spoken in foreign language)

Joanna Lv

The sequential decrease of the third-quarter gaming revenue guidance is mainly because Westward Journey, which accounts about half of the decrease. And the natural decline of other older games account the other half.

Charles Zhang

And then, about the share repurchase. We'll be -- we spent $26 million all of the -- we have a program of $150 million for that. So we'll keep the same pace in Q3 because of the limitation of the volume, the total volume, percentage volume, right, each day. That's why we're not able to purchase faster or the same pace in Q3.

Operator

Alicia Yap, Citigroup.

Alicia Yap

A few questions here. One -- number one, I wanted to follow up on the gaming question. So 3Q, the guidance obviously implying there is a sequential reversal or decline, mainly as you mentioned, half of it is driven by Westward Journey. Just wondering, will this game actually have a chance to rebound in the later quarters? Or you actually would expect after the decline, there's probably less hope for that to recover back to the 2Q level?
And then, second question is on your sales and marketing spend. Obviously, 2Q, due to the game promotion, you spent a very big number, which I think is you guided. But then for 3Q, the loss guidance, it also seems to be implying the expenses side seems to be remain quite high. So can you maybe elaborate a little bit among the expense in terms of the gross margin trend, and also the sales and marketing trend? And then just related to that, on the last question, is that any planning or initiatives for you to think about to narrow your operating loss in the coming quarter?

Joanna Lv

(spoken in foreign language)

Dewen Chen

(spoken in foreign language)

Joanna Lv

We think there's possibility for new Westward Journey to rebound because it's a licensed game. And before we have some -- we were divided out the games improvement and its development direction with a third-party developer. And recently, we have agreed upon it and the center will be around the user's experience. And we do -- we did a lot of user research. If those measures are effective, we think it should have a chance to recover. Thank you.

Dewen Chen

(spoken in foreign language)

Joanna Lv

The retention rate before 30 days are excellent, and the main problem lies in the content after 30 days. So we -- actually, we have postponed our overseas plan -- overseas release plan. And we hope we can improve the game, modify the game, solve the problem. And after that, we will release the game in the overseas market.

Charles Zhang

(spoken in foreign language)

Joanna Lv

The gross margin for online game will recover in the third quarter because the marketing expenditure and as well as the revenue sharing payments will decrease as well.

Alicia Yap

Sorry. I wanted to follow up. Any plans or initiatives to narrow the operating loss in the coming quarters?

Charles Zhang

In terms of game or the overall Sohu?

Alicia Yap

Overall business.

Charles Zhang

A lot depend on the gaming, right, spending because that's the large part, right? So if the game does not rebound in Q3, then our spending will not -- has been not that much. So gross margin definitely will improve for the gaming part.
For Sohu, I think we are at -- people often ask us about the -- with our cash, how are we going to spend our cash. Besides repurchasing of the shares, we are actually still in the battlefield, right? So we need to build a user base. And only when we have a sizable user base, that we can turn the Sohu part, the Media part to be turning profitable -- turn profitable. So we need to invest in building the products, developing the products and also acquire new users, and that's where we're going to spend. So I think the -- on the Sohu part, the gross margin will be similar, right, or we'll spend, keep spending.

Alicia Yap

I see. I see. Maybe, just slip in one last one regarding the cash position. I mean, given there is this 20% daily limit restriction, any other thinking about other shareholder return policy that's in your mind?

Charles Zhang

No, not now. Yeah, buyback. Buyback is one of -- is the main one. And then, the best one is we are very confident, we're hopeful that we are going to be successful in building up the user base, and then to turn Sohu into a profitable -- yeah, into a highly profitable company. That's the best reward for our shareholders.

Operator

(Operator Instructions) There are no more questions on the line. I would like to conclude today's conference call. Thank you for your participation. You may now disconnect your lines.