Sohu.com (SOHU)

Business Outlook

Sohu estimates total revenues for the fourth quarter of 2009 to be between US$134.5 million and US$138.5 million, with advertising revenues of US$48.0 million to US$50.0 million.

Sohu estimates brand advertising revenues for the fourth quarter of 2009 to be between US$45.0 million and US$47.0 million.

Sohu estimates online game revenues for the fourth quarter of 2009 to be between US$69.0 million and US$71.0 million.

Sohu estimates non-GAAP net income for the fourth quarter of 2009, before deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest in Changyou, to be between US$49.5 million to US$51.5 million. After deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest in Changyou, Sohu estimates non-GAAP net income for the fourth quarter of 2009 to be between US$35.0 million to US$37.0 million and non-GAAP fully diluted earnings per share for the fourth quarter of 2009 to be between US 90 cents and US 95 cents.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the fourth quarter of 2009 to be between US$3.5 million and US$4.5 million, which includes Changyou’s share-based compensation expense for the fourth quarter of 2009 estimated to be between US$3.0 million and US$3.5 million. Considering Sohu’s share in Changyou, the estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the fourth quarter of 2009 under US GAAP by US 6 cents to US 8 cents.

Business Outlook

Sohu estimates total revenues for the third quarter of 2009 to be between US$133.5 million and US$137.5 million, with advertising revenues of US$49.5 million to US$51.5 million.

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Sohu estimates brand advertising revenues for the third quarter of 2009 to be between US$48.0 million and US$50.0 million.

Sohu estimates online game revenues for the third quarter of 2009 to be between US$67.0 million and US$69.0 million.

Sohu estimates non-GAAP net income for the third quarter of 2009, before deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest in Changyou, to be between US$50.0 million to US$52.0 million. After deducting the share of non-GAAP net income pertaining to the Non-Controlling Interest in Changyou, Sohu estimates non-GAAP net income for the third quarter of 2009 to be between US$36.0 million to US$38.0 million and non-GAAP fully diluted earnings per share for the third quarter of 2009 to be between US 92 cents and US 97 cents.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the third quarter of 2009 to be between $4.0 million and $5.0 million, which includes Changyou’s share-based compensation expense for the third quarter of 2009 estimated to be between $3.5 million and $4.0 million. Considering Sohu’s share in Changyou, the estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the third quarter of 2009 under US GAAP by US 7 cents to US 9 cents.

Business Outlook

Sohu estimates total revenues for the second quarter of 2009 to be between US$121 million and US$125 million, with advertising revenues of US$43.5 million to US$45.5 million and non-advertising revenues of US$77.5 million to US$79.5 million.

Sohu estimates brand advertising revenues for the second quarter of 2009 to be between US$42 million and US$44 million.

Sohu estimates online game revenues for the second quarter of 2009 to be between US$63 million and US$65 million.

Sohu estimates non-GAAP net income for the second quarter of 2009, before deducting the share of net income pertaining to the Non-Controlling Interest in Changyou, to be between US$44 million to US$46 million. After deducting the share of net income pertaining to the Non-Controlling Interest in Changyou, Sohu estimates non-GAAP net income for the second quarter of 2009, to be between US$31 million to US$33 million and non-GAAP fully diluted earnings per share for the second quarter of 2009 to be between $0.80 and $0.85.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the second quarter of 2009 to be between $6.0 million and $7.0 million, which includes Changyou’s share-based compensation expense for the second quarter of 2009 estimated to be between $5.5 million and $6.0 million. Considering Sohu’s share in Changyou, the estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the second quarter of 2009, under US GAAP, by $0.10 to $0.13.

Business Outlook

Sohu estimates total revenues for the first quarter of 2009 to be between US$111.5 million and US$115.5 million, with advertising revenues of US$40.5 million to US$42.5 million and non-advertising revenues of US$71.0 million to US$73.0 million.

Sohu estimates brand advertising revenues for the first quarter of 2009 to be between US$39.0 million and US$41.0 million.

Sohu estimates online game revenues for the first quarter of 2009 to be between US$58.0 million and US$60.0 million.

Sohu estimates non-GAAP fully diluted earnings per share for the first quarter of 2009 to be between US$1.05 and US$1.10.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the first quarter of 2009 to be between US$2.0 million and US$2.5 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the first quarter of 2009, under US GAAP, by US$0.05 to US$0.06.

Sohu anticipates the preferential tax rate for 2009 to be in the low-teens for both its portal business and online game business.

Business Outlook

Sohu estimates total revenues for the fourth quarter of 2008 to be between US$118 million and US$122 million, with advertising revenues of US$45.5 million to US$47.5 million and non-advertising revenues of US$72.5 million to US$74.5 million.

Sohu estimates brand advertising revenues for the fourth quarter of 2008 to be between US$44 million and US$46 million.

Sohu estimates online game revenues for the fourth quarter of 2008 to be between US$57 million and US$59 million.

Sohu estimates non-GAAP fully diluted earnings per share for the fourth quarter of 2008 to be between US$1.20 and US$1.25.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the fourth quarter of 2008 to be between US$2.5 million and US$3.0 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the fourth quarter of 2008, under US GAAP, by US$0.06 to US$0.07.

Business Outlook

Sohu estimates total revenues for the third quarter 2008 to be between US$112 million to US$116 million, with advertising revenues of US$48.5 million to US$50.5 million and non-advertising revenues of US$63.5 million to US$65.5 million.

Sohu estimates brand advertising revenues for the third quarter of 2008 to be between US$47 million and US$49 million.

Sohu estimates online games revenues for the third quarter of 2008 to be between US$51.5 million and US$53.5 million.

Sohu estimates non-GAAP fully diluted earnings per share for the third quarter of 2008 to be between US$1.00 and US$1.05.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the third quarter of 2008 to be between US$2.5 million and US$3 million.  The

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estimated impact of this expense is expected to reduce Sohu's fully diluted earnings per share for the third quarter of 2008, under US GAAP, by US$0.06 to US$0.07.

Business Outlook

Sohu estimates total revenues for the second quarter of 2008 to be between US$93 million to US$96 million, with advertising revenues of US$40 million to US$41 million and non-advertising revenues of US$53 million to US$55 million.

Sohu estimates brand advertising revenues for the second quarter of 2008 to be between US$38.5 million to US$39.5 million.

Sohu estimates online game revenues for the second quarter of 2008 to be between US$43 million to US$45 million.

Sohu estimates non-GAAP fully diluted earnings per share for the second quarter of 2008 to be between US$0.72 and US$0.75, assuming statutory income tax rate for our major operating entities in China to be 25%.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the second quarter of 2008 to be between US$2.0 million and US$2.5 million.  The estimated impact of this expense is expected to reduce Sohu's fully diluted earnings per share for the second quarter of 2008, under US GAAP, by US$0.05 to US$0.06.

To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), Sohu's management uses non-GAAP measures of cost of revenues, operating expenses, net income and net income per share, which are adjusted from results based on GAAP to exclude the compensation cost of share-based awards granted to employees under Statement of Financial Accounting Standard 123R. 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 the share-based compensation expense from its non-GAAP financial measure is useful for itself and investors. Further, the amount of share-based compensation expense cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts, which have been the basis for information Sohu provides to analysts and investors as guidance for future operating performance. As share-based compensation expense does not involve any upfront or subsequent cash outflow, Sohu does not factor this in when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result, the monthly financial results for internal reporting and any performance measure for commission and bonus are based on non-GAAP financial measures that exclude share-based compensation expense.

The non-GAAP financial measures are provided to enhance the investors’ overall understanding of Sohu's current financial performance and prospects for the future. A limitation of using non-GAAP cost of revenues, operating expenses, net income and net income per share, excluding share-based compensation expenses is that the share-based compensation charge has been and will continue to be a significant recurring expense in our business for the foreseeable future. In order to mitigate these limitations we have provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between GAAP financial measures that are most directly comparable to the non-GAAP financial measures we have presented.

Business Outlook

Sohu estimates total revenues for the first quarter 2008 to be between US$66.5 million to US$68.5 million, with advertising revenues of US$33.5 million to US$34.5 million and non-advertising revenues of US$33 million to US$34 million.

Sohu estimates brand advertising revenues for the first quarter of 2008 to be between US$32 million to US$33 million.

Sohu estimates online game revenues for the first quarter of 2008 to be between US$25.5 million to US$26.5 million.

Sohu estimates non-GAAP fully diluted earnings per share for the first quarter of 2008 to be between US$0.43 and US$0.45.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the first quarter of 2008 to be between US$3 million and US$3.5 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the first quarter of 2008, under US GAAP, by US$0.08 to US$0.09.

Business Outlook

Sohu estimates total revenues for the fourth quarter 2007 to be between US$53.5million to US$55.5 million, with advertising revenues of US$31 million to US$32 million and non-advertising revenues of US$22.5 million to US$23.5 million. Sohu estimates brand advertising revenues for the fourth quarter of 2007 to be between US$29.5 million to US$30.5 million.

Sohu estimates non-GAAP fully diluted earnings per share for the fourth quarter of 2007 to be between US$0.33 and US$0.35.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the fourth quarter of 2007 to be between US$1.8 million and US$1.9 million. The estimated impact of this expense is expected to reduce Sohu's fully diluted earnings per share for the fourth quarter of 2007, under US GAAP, by US$0.05.

Business Outlook

Sohu estimates total revenues for third quarter 2007 to be between US$45 million to US$47 million, with advertising revenues of US$30 million to US$31 million and non-advertising revenues of US$15 million to US$16 million. Sohu estimates brand advertising revenues for the third quarter of 2007 to be between US$28.5 million to US$29.5 million.

Sohu estimates non-GAAP fully diluted earnings per share for the third quarter of 2007 to be between US$0.25 and US$0.27.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the third quarter of 2007 to be between US$2.0 million and US$2.1 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the third quarter of 2007, under US GAAP, by US$0.05.

Business Outlook

Sohu estimates total revenues for the second quarter of 2007 to be between US$35.5 million to US$37.5 million, with advertising revenues of US$26.5 million to US$27.5 million and non-advertising revenues of US$9 million to US$10 million. Sohu estimates brand advertising revenues for the second quarter of 2007 to be between US$24.5 million to US$25.0 million.

Sohu expects to invest approximately $1 million for server depreciation costs, bandwidth and marketing of our new online game, TLBB, for the second quarter of 2007. Sohu estimates non-GAAP fully diluted earnings per share for the second quarter of 2007 to be between US$0.17 and US$0.19.

Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for the second quarter of 2007 to be between US$2.3 million and US$2.4 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the second quarter of 2007, under US GAAP, by US$0.06.

Business Outlook

Sohu estimates total revenues for first quarter 2007 to be between US$32.0 million to US$34.0

million, with advertising revenues of US$25.0 million to US$26.0 million and non-advertising revenues of US$7.0 million to US$8.0 million. Sohu estimates brand advertising revenues for the first quarter 2007 to be between US$22.5 million to US$23.0 million.

Assuming no effect of the new accounting standards FIN 48 “Accounting for Uncertainty in Income Taxes” which was effective on January 1, 2007, Sohu estimates non-GAAP fully diluted earnings per share for the first quarter of 2007 to be between US$0.18 and US$0.20.

Assuming no new grants of share-based awards, Sohu estimates the share-based compensation expense for the first quarter of 2007 to be between US$2.3 million and US$2.4 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the first quarter of 2007, under US GAAP, by US$0.06.

Business Outlook

Sohu estimates total revenues for fourth quarter 2006 to be between US$34.0 million to US$36.0 million, with advertising revenues of US$24.0 million to US$25.0 million and non-advertising revenues of US$10.0 million to US$11.0 million. Sohu estimates brand advertising revenues for the fourth quarter 2006 to be between US$21.5 million to US$22.0 million.

Sohu estimates the non-GAAP fully diluted earnings per share for the fourth quarter of 2006 to be between US$0.20 and US$0.22.

Assuming no new grants of share-based awards, Sohu estimates the share-based compensation expense for the fourth quarter of 2006, due to the effect of adoption of Statement of Financial Accounting Standard 123R, Share-Based Payment, which requires the expensing of share-based compensation expense, to be between US$2.1 million and US$2.2 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the fourth quarter of 2006, under US GAAP, by US$0.05 to US$0.06.

Business Outlook

Sohu estimates total revenues for third quarter 2006 to be between US$32.5 million to US$34.5 million, with advertising revenues of US$23.5 million to US$24.5 million and non-advertising revenues of US$9.0 million to US$10.0 million. Sohu estimates that brand advertising revenues for the third quarter 2006 to be between US$20.0 million to US$20.5 million.

Sohu estimates the non-GAAP fully diluted earnings per share for the third quarter of 2006 to be between US$0.19 and US$0.21.

In July 2006, Sohu granted approximately 420,000 restricted stock units to its employees and directors under the 2000 Stock Incentive Plan. Assuming no other new grants of share-based awards, Sohu estimates the share-based compensation expense for the third quarter of 2006, due to the effect of adoption of Statement of Financial Accounting Standard 123R, Share-Based Payment, which requires the expensing of share-based compensation expense, to be between US$1.9 million and US$2.0 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the third quarter of 2006, under US GAAP, by US$0.05.

Business Outlook

Sohu estimates total revenues for second quarter 2006 to be between US$31.5 million to US$33.5 million, with advertising revenues of US$21.5 million to US$22.5 million and non-advertising revenues of US$10 million to US$11 million.

Sohu estimates the non-GAAP fully diluted earnings per share for the second quarter of 2006 to be between US$0.20 and US$0.22.

Assuming no new grants of share-based awards, Sohu estimates the share-based compensation expense for the second quarter of 2006, due to the effect of adoption of Statement of Financial Accounting Standard 123R, Share-Based Payment, which requires the expensing of share-based compensation expense, to be between US$1.2 million and US$1.3 million. The estimated impact of this expense is expected to reduce Sohu’s fully diluted earnings per share for the second quarter of 2006, under US GAAP, by US$0.03 to US$0.04.

Business Outlook

Sohu estimates total revenues for first quarter 2006 to be between US$28.0 million to US$30.0 million, with advertising revenues of US$19.0 million to US$20.0 million and non-advertising revenues of US$9.0 million to US$10.0 million.

Sohu estimates the stock-based compensation expense for the first quarter of 2006, due to the effect of adoption of Statement of Financial Accounting Standard 123R,

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Share-Based Payment which requires the expensing of stock-based compensation expense, to be between US$1.7 million to US$1.8 million. In addition, starting from January 1, 2006, the applicable PRC income tax rate of Sohu has increased to 7.5%. Sohu estimates that the PRC income tax expense for the first quarter of 2006 to be between US$0.5 million to US$0.7 million. The estimated total impact of these two expenses is expected to reduce Sohu’s fully diluted earnings per share for the first quarter of 2006 by US$0.05 to US$0.06.

After deducting the stock-based compensation expense and PRC income tax expense mentioned above, Sohu estimates fully diluted earnings per share for the first quarter of 2006, under US generally accepted accounting principles, to be between US$0.14 and US$0.16.

Business Outlook

Sohu estimates total revenues for fourth quarter 2005 to be between US$28.0 million and US$30.0 million, with advertising revenues of US$19.0 million to US$20.0 million and non-advertising revenues of US$9.0 million to US$10.0 million. Fourth quarter earnings per fully diluted share are expected to be between US$0.19 and US$0.22.

Business Outlook

SOHU estimates total revenues for the third quarter 2005 to be between US$26.5 million and US$28.5 million, with advertising revenues of US$17.5 million to US$18.5 million and non-advertising revenues of US$9.0 million to US$10.0 million. Third quarter earnings per fully diluted share are expected to be between US$0.18 and US$0.22.

Business Outlook

SOHU estimates total revenues for the second quarter 2005 to be between US$25.0 million and US$26.0 million, with advertising revenue of US$16.5 million to US$17.0 million and non-advertising revenues of US$8.5 million to US$9.0 million. Second quarter earnings per fully diluted share are expected to be between US$0.17 and US$0.19.

Business Outlook

SOHU estimates total revenues for the first quarter 2005 to be between US$22.5 million to US$23.5 million, with advertising revenue of US$14.5 million to US$15.0 million and non-advertising revenues of US$8.0 million to US$8.5 million. First quarter earnings per diluted share are expected to be between US$0.14 to US$0.16.