PC Games Drive Sohu.com's Q2 Earnings, Margins, Issues Solid Q3 Online Game Revenue Outlook

Chinese online media, video, gaming, and search business group Sohu.com Ltd SOHU reported second-quarter FY21 revenue growth of 28% year-on-year to $204 million.
Brand advertising revenues declined 3% Y/Y to $37 million. It improved by 20% Q/Q aided by seasonality and revenue boost initiatives.
Online game revenues grew 43% Y/Y to $151 million, driven by TLBB Vintage.
The non-GAAP gross margin expanded 900 bps to 76% due to the higher percentage revenue contribution from PC games.
Non-GAAP earnings per ADS were $0.63.
Sohu held $349 in cash and equivalents.
Average monthly active user accounts for Changyou PC games increased 9% Y/Y to 2.1 million, mainly due to the TLBB Vintage. Average MAU for Changyou mobile games declined 39% Y/Y to 1.9 million due to Legacy TLBB Mobile and TLBB Honor decline.
Changyou reported Q2 revenue growth of 41% to $154 million. Online game revenues increased 43% Y/Y to $151 million, while Online advertising revenues declined 19% to $3 million. Non-GAAP gross profit grew 61% Y/Y to $136 million.
Sohu continued to execute its "Twin engine" strategy of developing high-quality long-form and short-form content, refining advanced live broadcasting technologies, and diversifying Sohu Video.
Outlook: Sohu sees Q3 brand advertising revenue decrease 5%-15% Y/Y to $35 million - $39 million.
It sees Q3 online game revenues growth 43%-53% to $145 million - $155 million.
Price action: SOHU shares closed lower by 2.89% at $19.50 on Friday.

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