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4-Traders Homepage  >  Equities  >  Nasdaq  >  Sohu.com Inc    SOHU

Delayed Quote. Delayed  - 03/28 09:31:20 pm
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02/21 SOHU.COM INC. ( : SOHU) Files An 8-K Results of Operations and Finan..
02/21 SOHU COM : Q4 Loses Money
02/21 SOHU COM : reports 4Q loss
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Sohu com : C O R R E C T I O N -- Sohu.com/

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02/21/2017 | 06:27am CEST

In the news release, Sohu.com Reports Fourth Quarter and Fiscal Year 2016 Unaudited Financial Results, issued 21-Feb-2017 by Sohu.com over PR Newswire, we are advised by the company that the third paragraph, final two sentences, should not be included: "For 2016, our total revenues reach RMB4.4 billion, up 19% from 2015. Excluding the impact of certain one-time items, non-GAAP net income reached RMB640 million." rather than as originally issued inadvertently. The complete, corrected release follows:

Sohu.com Reports Fourth Quarter and Fiscal Year 2016 Unaudited Financial Results

BEIJING, Feb. 21, 2017 /PRNewswire/ -- Sohu.com Inc. (NASDAQ: SOHU), China's leading online media, video, search and gaming business group, today reported unaudited financial results for the fourth quarter and fiscal year ended December 31, 2016.

http://photos.prnewswire.com/prnvar/20100201/CNM013LOGO

Fourth Quarter Highlights

    --  Total revenues were US$412 million([1]), down 12% year-over-year and
        flat quarter-over-quarter.
    --  Brand advertising revenues were US$99 million, down 30% year-over-year
        and 11% quarter-over-quarter.
    --  Sogou([2]) revenues were US$172 million, up 4% year-over-year and 3%
        quarter-over-quarter.
    --  Online game revenues were US$95 million, down 25% year-over-year and 3%
        quarter-over-quarter.
    --  GAAP net loss attributable to Sohu.com Inc. was US$66 million, or
        US$1.71 loss per fully-diluted share.
    --  Non-GAAP([3]) net loss attributable to Sohu.com Inc. was US$69 million,
        or US$1.79 loss per fully-diluted share.

    [1] For the fourth quarter of 2016, on a
     yearly basis, depreciation of the RMB
     against the U.S. dollar impacted our
     reported financial results. If the exchange
     rate in the fourth quarter of 2016 had been
     the same as it was in the fourth quarter of
     2015, or RMB6.39=US$1.00, total revenues in
     the fourth quarter of 2016 would have been
     US$440 million, or US$28 million higher than
     GAAP total revenues, and down 6% year-over-
     year.

    [2] Sogou operates the search and search-
     related business and offers Internet value-
     added services ("IVAS") with respect to Web
     games developed by third-party developers.
     In the statements of operations, revenues
     from search and search-related services are
     recorded as "Search and search-related"
     revenue, and revenues from IVAS are recorded
     as "Others" revenue.

    [3] Non-GAAP results exclude share-based
     compensation expense, non-cash tax benefits
     from excess tax deductions related to share-
     based awards, income/expense from the
     adjustment of contingent consideration
     previously recorded for acquisitions and
     dividend and deemed dividend to non-
     controlling preferred shareholders of Sogou.
     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."

Fiscal Year 2016 Highlights

    --  Total revenues were US$1.65 billion, down 15% compared with 2015.
    --  Brand advertising revenues were US$448 million, down 22% compared with
        2015.
    --  Sogou revenues were US$660 million, up 12% compared with 2015.
    --  Online game revenues were US$396 million, down 38% compared with 2015.
    --  GAAP net loss attributable to Sohu.com Inc. was US$226 million, or
        US$5.83 loss per fully-diluted share.
    --  Non-GAAP net loss attributable to Sohu.com Inc. was US$219 million, or
        US$5.65 loss per fully-diluted share.

Dr. Charles Zhang, Chairman and CEO of Sohu.com Inc., commented, "Looking back at 2016, we faced a challenging operating environment. The sluggish economy, intensified competition and tightening regulatory rules on search industry impacted Sohu Group's financial performance. However, these challenges didn't stop us from pursuing innovation across our key products and exploring new business opportunities. We saw encouraging progress in each of our major business lines. For Sohu Media Portal, through improved content and product design, the Sohu News App gained solid user traction. For Sohu Video, we made original production one of our top priorities as we released several hit shows and the exclusive content helped us rapidly expand our subscriber base. For Sogou, mobile search traffic and revenues continued to outgrow the industry, and we have made artificial intelligence, or AI, a major cornerstone of our long-term strategic direction. And lastly, Changyou focused their efforts on building a pipeline of high quality mobile games. It now prepares to roll out a few promising titles, including the Legacy TLBB mobile game, in 2017. "

Mr. Xiaochuan Wang, CEO of Sogou, commented, "In 2016, Sogou strengthened its competitive position through product differentiation and AI-powered technology innovation. We launched and upgraded a series of vertical channels, including English, Academic and Healthcare. We also rolled out the first cross-language search engine globally that uses our proprietary machine translation technology. Sogou's traffic and revenue share trended higher. Compared to a year ago, mobile search traffic grew 70%. As the No. 1 mobile app for voice input in China, Sogou Mobile Keyboard's daily voice input more than doubled to over 200 million times."

Fourth Quarter Financial Results

Revenues

Total revenues for the fourth quarter of 2016 were US$412 million, down 12% year-over-year and flat quarter-over-quarter.

Total online advertising revenues, which include revenues from the brand advertising and search and search-related businesses, for the fourth quarter of 2016 were US$251 million, down 14% year-over-year and 4% quarter-over-quarter.

Brand advertising revenues for the fourth quarter of 2016 totaled US$99 million, down 30% year-over-year and 11% quarter-over-quarter. The year-over-year decrease was mainly attributable to a decrease in the video advertising business. The quarter-over-quarter decrease was mainly attributable to decreases in revenues from the media portal and 17173 advertising businesses.

Search and search-related revenues for the fourth quarter of 2016 were US$153 million, up 1% year-over-year and quarter-over-quarter.

Online game revenues for the fourth quarter of 2016 were US$95 million, down 25% year-over-year and 3% quarter-over-quarter.

Gross Margin

Both GAAP and non-GAAP gross margin was 44% for the fourth quarter of 2016, compared with 57% in the fourth quarter of 2015 and 46% in the third quarter of 2016.

Both GAAP and non-GAAP gross margin for the online advertising business for the fourth quarter of 2016 was 33%, compared with 47% in the fourth quarter of 2015 and 32% in the third quarter of 2016.

Both GAAP and non-GAAP gross margin for the brand advertising business in the fourth quarter of 2016 was 9%, compared with 38% in the fourth quarter of 2015 and 8% in the third quarter of 2016. The year-over-year decrease was mainly due to decreased video revenues and increased video content cost.

Both GAAP and non-GAAP gross margin for the search and search-related business in the fourth quarter of 2016 was 48%, compared with 55% in the fourth quarter of 2015 and 49% in the third quarter of 2016. The year-over-year decrease was mainly due to higher traffic acquisition cost as a percentage of search and search-related revenues.

Both GAAP and non-GAAP gross margin for online games in the fourth quarter of 2016 was 78%, compared with 78% in the fourth quarter of 2015 and 76% in the third quarter of 2016.

Operating Expenses

For the fourth quarter of 2016, GAAP operating expenses totaled US$232 million, down 6% year-over-year and 3% quarter-over-quarter. Non-GAAP operating expenses were US$229 million, up 3% year-over-year and 1% quarter-over-quarter.

Operating Profit /(Loss)

GAAP operating loss for the fourth quarter of 2016 was US$52 million, compared with an operating profit of US$19 million in the fourth quarter of 2015 and an operating loss of US$52 million in the third quarter of 2016. The year-over-year change in profitability was mainly attributable to the decrease in brand advertising and online games revenues, coupled with the increase in video content cost.

Non-GAAP operating loss for the fourth quarter of 2016 was US$49 million, compared with an operating profit of US$44 million in the fourth quarter of 2015 and an operating loss of US$38 million in the third quarter of 2016.

Other Income

Other income for the fourth quarter of 2016 was US$6 million, compared with other income of US$2 million in the fourth quarter of 2015 and other income of US$4 million in the third quarter of 2016.

Income Tax Expense

Both GAAP and non-GAAP income tax expense was US$6 million for the fourth quarter of 2016, compared with income tax expense of US$20 million in the fourth quarter of 2015 and income tax expense of US$1 million in the third quarter of 2016.

Net Income /(Loss)

Before deducting the share of net income pertaining to non-controlling interest, GAAP net loss for the fourth quarter of 2016 was US$37 million, compared with a net income of US$9 million in the fourth quarter of 2015 and net loss of US$42 million in the third quarter of 2016. Before deducting the share of net income pertaining to non-controlling interest, non-GAAP net loss for the fourth quarter of 2016 was US$34 million, compared with a net income of US$34 million in the fourth quarter of 2015 and net loss of US$29 million in the third quarter of 2016.

GAAP net loss attributable to Sohu.com Inc. for the fourth quarter of 2016 was US$66 million, or US$1.71 loss per fully-diluted share, compared with a net loss of US$31 million in the fourth quarter of 2015 and net loss of US$75 million in the third quarter of 2016. Non-GAAP net loss attributable to Sohu.com Inc. for the fourth quarter of 2016 was US$69 million, or US$1.79 loss per fully-diluted share, compared with a net loss of US$13 million in the fourth quarter of 2015 and net loss of US$65 million in the third quarter of 2016.

Liquidity

As of December 31, 2016, the Sohu Group had cash and cash equivalents and short-term investments of US$1.30 billion compared with US$1.42 billion as of December 31, 2015.

Fiscal Year 2016 Financial Results

Revenues

Total revenues for 2016 were US$1.65 billion, down 15% compared with 2015.

Total online advertising revenues, which include revenues from the brand advertising and search and search-related businesses, for 2016 were US$1.05 billion, down 6% compared with 2015.

Brand advertising revenues for 2016 were US$448 million, down 22% compared with 2015, mainly due to the drag of the video businesses.

Search and search-related revenues for 2016 were US$597 million, up 11% compared with 2015. The increase was mainly driven by continued growth in mobile traffic.

Online game revenues for 2016 were US$396 million, down 38% compared with 2015. The year-over-year decrease was mainly due to the natural decline in revenues of Changyou's older games, and a decrease in Web game revenues upon the completion of the sale of the 7Road business in 2015.

Gross Margin

Both GAAP and non-GAAP gross margin was 48% for 2016, compared with 56% in 2015.

Both GAAP and non-GAAP gross margin for the online advertising business for 2016 was 37%, compared with 44% in 2015.

Both GAAP and non-GAAP gross margin for the brand advertising business for 2016 was 17%, compared with 34% in 2015. The decrease mainly reflected a decrease in advertising revenues and increasing video content cost.

Both GAAP and non-GAAP gross margin for the search and search-related business for 2016 was 51%, compared with 56% in 2015. The decrease in gross margin was mainly due to higher traffic acquisition costs as a percentage of search and search-related revenues.

Both GAAP and non-GAAP gross margin for online games for 2016 was 76%, compared with 75% in 2015.

Operating Expenses

For 2016, GAAP operating expenses totaled US$908 million, down 9% compared with 2015. Non-GAAP operating expenses were US$889 million, down 6% compared with 2015. The decreases were primarily due to decreases in salary and compensation expenses.

Operating Profit /(Loss)

GAAP operating loss for 2016 was US$117 million, compared with an operating profit of US$82 million in 2015.

Non-GAAP operating loss for 2016 was US$98 million, compared with an operating profit of US$136 million in 2015.

Other Income /(Expense)

Other expense for 2016 was US$11 million, mainly related to a donation of US$27.8 million made by Sogou to Tsinghua University in the second quarter of 2016, compared with other income of US$75 million in 2015, which included gain recognized from the divestment of 7Road in the third quarter of 2015.

Income Tax Expense

Both GAAP and non-GAAP income tax expense for 2016 was US$21 million, compared with income tax expense of US$77 million in 2015.

Net Income /(Loss)

Before deducting the share of net income pertaining to non-controlling interest, GAAP net loss for 2016 was US$115 million, compared with net income of US$109 million in 2015. Before deducting the share of net income pertaining to non-controlling interest, non-GAAP net loss for 2016 was US$96 million, compared with net income of US$162 million in 2015.

GAAP net loss attributable to Sohu.com Inc. for 2016 was US$226 million, or US$5.83 loss per fully-diluted share, compared with a net loss of US$51 million in 2015. Non-GAAP net loss attributable to Sohu.com Inc. for 2016 was US$219 million, or US$5.65 loss per fully-diluted share, compared with a net loss of US$4 million in 2015.

Business Outlook

For the first quarter of 2017, Sohu estimates:

    --  Total revenues to be between US$345 million and US$375 million.
    --  Brand advertising revenues to be between US$75 million and US$85
        million; this implies an annual decrease of 32% to 40% and a sequential
        decrease of 14% to 24%.
    --  Sogou revenues to be between US$145 million and US$155 million; this
        implies an annual decrease of 2% to an annual increase of 5% and a
        sequential decrease of 10% to 15%.
    --  Online game revenues to be between US$80 million and US$90 million; this
        implies an annual decrease of 12% to 22% and a sequential decrease of 6%
        to 16%.
    --  Before deducting the share of non-GAAP net income pertaining to
        non-controlling interest, non-GAAP net loss to be between US$45 million
        and US$55 million. Assuming no new grants of share-based awards and that
        the market price of our shares is unchanged; we estimate that
        compensation expense relating to share-based awards will be around US$5
        million. Including the impact of these share-based awards, GAAP net loss
        before non-controlling interest to be between US$50 million and US$60
        million.
    --  Non-GAAP net loss attributable to Sohu.com Inc. to be between US$60
        million and US$70 million, and non-GAAP loss per fully-diluted share to
        be between US$1.55 and US$1.80. Including the impact of the
        aforementioned share-based awards, and netting off approximately US$1
        million of Sohu's economic interests in Changyou and Sogou, GAAP net
        loss attributable to Sohu.com Inc. to be between US$64 million and US$74
        million, and GAAP loss per fully-diluted share to be between US$1.65 and
        US$1.90.

For the first quarter 2017 guidance, the Company has adopted a presumed exchange rate of RMB7.00=US$1.00, as compared with the actual exchange rate of approximately RMB6.53=US$1.00 for the first quarter of 2016, and RMB6.83=US$1.00 for the fourth quarter of 2016.

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 Inc. and diluted net income attributable to Sohu.com Inc. per share, which are adjusted from results based on GAAP to exclude the impact of the share-based awards, which consist mainly of share-based compensation expenses and non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders. 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, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions and dividend and deemed dividend to non-controlling preferred shareholders from its non-GAAP financial measure is useful for itself and investors. Further, the impact of share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders 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 the impact of share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders does 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 the share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders.

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, operating profit, net income, net income attributable to Sohu.com Inc. and diluted net income attributable to Sohu.com Inc. per share, excluding share-based compensation expense, non-cash tax benefits from excess tax deductions related to share-based awards, income/expense from the adjustment of contingent consideration previously recorded for acquisitions, and dividend and deemed dividend to non-controlling preferred shareholders is that the impact of share-based awards and non-cash tax benefits from excess tax deductions related to share-based awards has been and will continue to be a significant recurring expense in Sohu's business for the foreseeable future, income/expense from the adjustment of contingent consideration previously recorded for acquisitions may recur in the future, and dividend and deemed dividend to non-controlling preferred shareholders may recur when Sohu and its affiliates enter into equity transactions. 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 interim 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 US 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; Sohu's current and projected future losses due to increased spending by Sohu for video content; the possibilities that Sohu will be unable to recoup its investment in video content and that Changyou will be unable to develop a series of successful games for mobile platforms or successfully monetize mobile games it develops or acquires; and Sohu's reliance on online advertising sales, online games and mobile services for its revenues. Further information regarding these and other risks is included in Sohu's annual report on Form 10-K for the year ended December 31, 2015, and other filings with the Securities and Exchange Commission.

Conference Call and Webcast

Sohu's management team will host a conference call at 8:30 a.m. U.S. Eastern Time, February 21, 2017 (9:30 p.m. Beijing/Hong Kong time, February 21, 2017) following the quarterly results announcement.

The dial-in details for the live conference call are:


    US Toll-Free:                      +1-866-519-4004

    International:                     +65-6713-5090

    Hong Kong:                         +852-3018-6771

    China Mainland                      +86-800-819-0121 /
                                        +86-400-620-8038

    Passcode:                          SOHU

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

A telephone replay of the call will be available after the conclusion of the conference call at 11:30 a.m. Eastern Time on February 21 through February 28, 2017. The dial-in details for the telephone replay are:


    International:                     +1-646-254-3697

    Passcode:                                            60086018

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

About Sohu.com

Sohu.com Inc. (NASDAQ: SOHU) is China's premier online brand and indispensable to the daily life of millions of Chinese, providing a network of Web properties and community based/Web 2.0 products which offer the vast Sohu user community a broad array of choices regarding information, entertainment and communication. Sohu has built one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and leading online media destination www.sohu.com; the interactive search engine www.sogou.com; the developer and operator of online games www.changyou.com/en/ and the leading online video Website tv.sohu.com.

Sohu corporate services consist of online brand advertising on its matrix of websites as well as bid listing and home page on its in-house developed search directory and engine. Sohu also provides multiple news and information service on mobile platforms, including Sohu News App and mobile news portal m.sohu.com. Sohu's online game subsidiary, Changyou.com (NASDAQ: CYOU) has a diverse portfolio of popular online games, such as Tian Long Ba Bu ("TLBB"), one of the most popular PC games in China, as well as a number of mobile games. Changyou also owns and operates the 17173.com Website, a leading game information portal in China. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its twenty-first year of operation.

For investor and media inquiries, please contact:

In China:


    Mr. Eric Yuan

    Sohu.com Inc.

    Tel:                                             +86 (10) 6272-6593

    E-mail:            ir@contact.sohu.com

In the United States:



    Ms. Linda Bergkamp

    Christensen

    Tel:                                           +1 (480) 614-3004

    E-mail:            lbergkamp@christensenir.com


                                                                                 SOHU.COM INC.

                                                                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                               (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


                                                                                                                          Three Months Ended                            Twelve Months Ended
                                                                                                                          ------------------                            -------------------

                                                                                           Dec. 31, 2016                    Sep. 30, 2016                Dec. 31, 2015              Dec. 31, 2016               Dec. 31, 2015
                                                                                           -------------                    -------------                -------------              -------------               -------------

    Revenues:

    Online advertising

            Brand advertising                                                                                     $98,695                       $110,871                   $140,927                     $447,956                    $577,114

            Search and search-related                                                                           152,500                        150,667                    151,251                      597,133                     539,521
                                                                                                                -------                        -------                    -------                      -------                     -------

                 Subtotal                                                                                       251,195                        261,538                    292,178                    1,045,089                   1,116,635
                                                                                                                -------                        -------                    -------                    ---------                   ---------

    Online games                                                                                                 95,400                         98,553                    127,001                      395,709                     636,846

    Others                                                                                                       65,164                         50,491                     46,924                      209,633                     183,610
                                                                                                                 ------                         ------                     ------                      -------                     -------

                       Total revenues                                                                           411,759                        410,582                    466,103                    1,650,431                   1,937,091
                                                                                                                -------                        -------                    -------                    ---------                   ---------


    Cost of revenues:

    Online advertising

           Brand advertising (includes stock-based                                                               89,658                        102,137                     87,625                      371,085                     383,187
    compensation expense of $-91, $265, $534, $163 and
                                                                                $1,381, respectively)

    Search and search-related (includes stock-based                                                              79,611                         76,457                     68,108                      290,158                     238,944
    compensation expense of $168, $4, $211, $172 and
                                                                                  $330, respectively)


    Subtotal                                                                                                    169,269                        178,594                    155,733                      661,243                     622,131
                                                                                                                -------                        -------                    -------                      -------                     -------

    Online games (includes stock-based compensation                                                              20,936                         23,719                     28,266                       96,168                     156,315
    expense of $-5, $26, $45, $31 and $37, respectively)

    Others                                                                                                       41,606                         20,571                     17,552                      102,389                      80,618
                                                                                                                 ------                         ------                     ------                      -------                      ------

            Total cost of revenues                                                                              231,811                        222,884                    201,551                      859,800                     859,064
                                                                                                                -------                        -------                    -------                      -------                     -------


    Gross profit                                                                                                179,948                        187,698                    264,552                      790,631                   1,078,027


    Operating expenses:

         Product development (includes stock-based                                                               91,499                         90,007                    102,402                      353,144                     398,143
    compensation expense of $3,383, $4,105, $9,665, $9,184
    and $19,343,  respectively)

         Sales and marketing (includes stock-based                                                              116,183                        110,584                     98,230                      434,780                     383,931
    compensation expense of $1,467, $752, $1,482, $2,394 and
                                                                                $3,055, respectively)

         General and administrative (includes stock-based                                                        23,914                         38,670                     44,946                      119,841                     173,160
    compensation expense of $-1,949, $8,018, $13,042, $7,176
    and $29,297, respectively)

         Goodwill impairment and impairment of intangibles via                                         -                                 -                           -                          -                      40,324
    acquisitions of businesses

           Total operating expenses                                                                             231,596                        239,261                    245,578                      907,765                     995,558
                                                                                                                -------                        -------                    -------                      -------                     -------


    Operating (loss) /profit                                                                                   (51,648)                      (51,563)                    18,974                    (117,134)                     82,469


    Other  income /(expense)                                                                                      6,258                          3,678                      1,590                     (10,713)                     74,526

    Interest income                                                                                               5,051                          6,327                      7,748                       22,499                      30,643

    Interest expense                                                                                              (205)                         (209)                   (1,744)                     (1,356)                    (7,184)

    Exchange difference                                                                                           9,257                            702                      1,885                       12,803                       5,337
                                                                                                                  -----                            ---                      -----                       ------                       -----

     (Loss) /income before income tax expense                                                                  (31,287)                      (41,065)                    28,453                     (93,901)                    185,791

                                                                                                                  5,800                            974                     19,656                       21,072                      76,936

    Income tax expense


    Net (loss) /income                                                                                         (37,087)                      (42,039)                     8,797                    (114,973)                    108,855


         Less: Net income attributable to the noncontrolling                                                     28,810                         32,775                     39,197                      109,048                     146,542
    interest shareholders

         Deemed dividend to non-controlling Sogou                                                      -                                 -                           -                          -                      11,911
    series A preferred shareholders


    Net loss attributable to Sohu.com Inc.                                                                     (65,897)                      (74,814)                  (30,400)                   (224,021)                   (49,598)
                                                                                                                =======                        =======                    =======                     ========                     =======


    Basic net loss per share attributable to Sohu.com Inc.                                                        $(1.70)                       $(1.93)                   $(0.79)                     $(5.79)                    $(1.28)


    Shares used in computing basic net loss per share                                                            38,739                         38,728                     38,646                       38,706                      38,598
    attributable to Sohu.com Inc.



    Diluted net loss per share attributable to Sohu.com Inc.                                                      $(1.71)                       $(1.94)                   $(0.80)                     $(5.83)                    $(1.32)


    Shares used in computing diluted net loss  per share                                                         38,739                         38,728                     38,646                       38,706                      38,598
    attributable to Sohu.com Inc.


                                                                    SOHU.COM INC.

                                                        CONDENSED CONSOLIDATED BALANCE SHEETS

                                                              (UNAUDITED, IN THOUSANDS)


                                                                                              As of Dec. 31, 2016             As of Dec. 31, 2015
                                                                                              -------------------             -------------------

    ASSETS

    Current assets:

               Cash and cash equivalents                                                                           $1,050,957                      $1,245,205

    Restricted time deposits (a)                                                                                -                         227,285

    Short-term investments                                                                                          247,926                         174,515

               Accounts receivable, net                                                                             189,167                         273,617

               Prepaid and other current assets (b)                                                                 260,133                         154,217

    Assets held for sale (c)                                                                                        103,079                               -
                                                                                                                    -------                             ---

                         Total current assets                                                                     1,851,262                       2,074,839
                                                                                                                  ---------                       ---------

    Long-term investments                                                                                            74,273                          62,093

    Fixed assets, net                                                                                               503,631                         508,692

    Goodwill (c)                                                                                                     68,290                         154,219

    Intangible assets, net                                                                                           32,131                          55,415

    Restricted time deposits (a)                                                                                        269                         136,694

    Prepaid non-current assets                                                                                        4,734                           6,254

    Other assets (b)                                                                                                 29,100                          43,988

                             Total assets                                                                          $2,563,690                      $3,042,194



    LIABILITIES

    Current liabilities:

               Accounts payable                                                                                      $193,209                        $129,025

               Accrued liabilities                                                                                  324,876                         309,657

               Receipts in advance and deferred revenue                                                             118,951                         135,385

               Accrued salary and benefits                                                                           92,475                          99,631

               Taxes payable                                                                                         40,014                          67,480

               Short-term bank loans (a)                                                                        -                         344,500

               Other short-term liabilities                                                                         159,315                         154,017

    Liabilities held for sale (c)                                                                                     3,902                               -
                                                                                                                      -----                             ---

                         Total current liabilities                                                                   $932,742                      $1,239,695



    Long-term accounts payable                                                                                          744                           4,600

    Long-term tax payable                                                                                            32,625                          24,732

    Deferred tax liabilities (b)                                                                                     39,784                          42,415

    Total long-term liabilities                                                                                       $73,153                         $71,747


                             Total liabilities                                                                     $1,005,895                      $1,311,442



    SHAREHOLDERS' EQUITY:

              Sohu.com Inc. shareholders' equity                                                                    993,580                       1,241,022

              Noncontrolling Interest                                                                               564,215                         489,730
                                                                                                                    -------                         -------

                         Total shareholders' equity                                                                $1,557,795                      $1,730,752



    Total liabilities and shareholders' equity                                                                     $2,563,690                      $3,042,194


    Note:

    (a)              Changyou had repaid all of the
                     remaining bank loans of $345
                     million, and restricted time
                     deposits of $355 million that
                     secured these loans were released
                     during the first quarter of 2016.

    (b)              The Company early adopted the
                     Accounting Standards Update 2015-
                     17, Balance Sheet Classification of
                     Deferred Taxes, retrospectively
                     from the fourth quarter of 2016.
                     The guidance requires current
                     deferred income tax assets and
                     liabilities to be classified as
                     non-current assets and liabilities
                     in balance sheet. As a result of
                     the adoption of this guidance, $4.7
                     million of current deferred tax
                     assets recorded in prepaid and
                     other current assets, and $24.9
                     million of deferred tax liabilities
                     were reclassified to non-current
                     as of December 31, 2015.

    (c)              Changyou's management had an
                     intention to divest its interest in
                     MoboTap in the third quarter of
                     2016. Therefore, the assets and
                     liabilities of MoboTap were
                     recognized as "Assets held for
                     sale" and "Liabilities held for
                     sale," respectively, since the
                     third quarter of 2016.


                                                                                                              SOHU.COM INC.

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

                                                                                           (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


                                                  Three Months Ended Dec. 31, 2016                                       Three Months Ended Sep. 30, 2016                                   Three Months Ended Dec. 31, 2015
                                                  --------------------------------                                       --------------------------------                                   --------------------------------

                                    GAAP                   Non-GAAP                           Non-GAAP                         GAAP                      Non-GAAP                         Non-GAAP                        GAAP                      Non-GAAP                         Non-GAAP
                                                         Adjustments                                                                                   Adjustments                                                                                Adjustments
                                                         -----------                                                                                   -----------                                                                                -----------


                                                                 (91)   (a)                                                                                     265    (a)                                                                                  534    (a)
                                                                  ---                                                                                            ---                                                                                         ---

    Brand advertising gross profit              $9,037                            $(91)                            $8,946                       $8,734                            $265                           $8,999                      $53,302                            $534                          $53,836


    Brand advertising gross               9%                                                            9%                           8%                                                            8%                          38%                                                            38%
    margin


                                                                  168    (a)                                                                                       4    (a)                                                                                  211    (a)
                                                                  ---                                                                                            ---                                                                                         ---

    Search and search-related                  $72,889                             $168                            $73,057                      $74,210                              $4                          $74,214                      $83,143                            $211                          $83,354
    gross profit


    Search and search-related            48%                                                           48%                          49%                                                           49%                          55%                                                            55%
    gross margin



                                                                   77    (a)                                                                                     269    (a)                                                                                  745    (a)
                                                                  ---                                                                                            ---                                                                                         ---

    Online advertising gross profit            $81,926                              $77                            $82,003                      $82,944                            $269                          $83,213                     $136,445                            $745                         $137,190


    Online advertising gross             33%                                                           33%                          32%                                                           32%                          47%                                                            47%
    margin



                                                                  (5)   (a)                                                                                      26    (a)                                                                                   45    (a)
                                                                  ---                                                                                            ---                                                                                         ---

    Online games gross profit                  $74,464                             $(5)                           $74,459                      $74,834                             $26                          $74,860                      $98,735                             $45                          $98,780


    Online games gross margin            78%                                                           78%                          76%                                                           76%                          78%                                                            78%
                                         ===                                                            ===                           ===                                                            ===                           ===                                                             ===



    Others gross profit                        $23,558               $                -   (a)                     $23,558                      $29,920               $               -   (a)                   $29,920                      $29,372               $               -   (a)                   $29,372
                                                                  ===                    ===                                                                    ===                   ===                                                                  ===                   ===

    Others gross margin                  36%                                                           36%                          59%                                                           59%                          63%                                                            63%
                                         ===                                                            ===                           ===                                                            ===                           ===                                                             ===



                                                                   72    (a)                                                                                     295    (a)                                                                                  790    (a)
                                                                  ---                                                                                            ---                                                                                         ---

    Gross profit                              $179,948                              $72                           $180,020                     $187,698                            $295                         $187,993                     $264,552                            $790                         $265,342


    Gross margin                         44%                                                           44%                          46%                                                           46%                          57%                                                            57%
                                         ===                                                            ===                           ===                                                            ===                           ===                                                             ===



    Operating expenses                        $231,596                         $(2,901)   (a)                    $228,695                     $239,261                       $(12,875)   (a)                  $226,386                     $245,578                       $(24,189)   (a)                  $221,389
                                                                                                                   ===                                                                                         ===                                                                                         ===



                                                                2,973    (a)                                                                                  13,170    (a)                                                                               24,979    (a)
                                                                -----                                                                                         ------                                                                                      ------

    Operating (loss) /profit                 $(51,648)                          $2,973                          $(48,675)                   $(51,563)                        $13,170                        $(38,393)                     $18,974                         $24,979                          $43,953


    Operating margin                    -13%                                                          -12%                         -13%                                                           -9%                           4%                                                             9%
                                         ===                                                            ===                           ===                                                            ===                           ===                                                             ===




    Income tax expense                          $5,800               $                -   (a)                      $5,800                         $974               $               -   (a)                      $974                      $19,656               $               -   (a)                   $19,656
                                                                  ===                    ===                                                                    ===                   ===                                                                  ===                   ===


                                                                2,973    (a)                                                                                  13,147    (a)                                                                               25,047    (a)
                                                                -----                                                                                         ------                                                                                      ------

    Net (loss) /income                       $(37,087)                          $2,973                          $(34,114)                   $(42,039)                        $13,147                        $(28,892)                      $8,797                         $25,047                          $33,844
    before non-controlling interest



                                                                2,973    (a)                                                                                  13,147    (a)                                                                               25,047    (a)

                                                              (6,051)   (b)                                                                                 (2,806)   (b)                                                                              (7,352)   (b)
                                                               ------                                                                                         ------                                                                                      ------

    Net  loss attributable to                $(66,411)                        $(3,078)                         $(69,489)                   $(75,286)                        $10,341                        $(64,945)                   $(30,746)                        $17,695                        $(13,051)
    Sohu.com Inc. for diluted net
    loss per share


    Diluted net loss per share                 $(1.71)                                                           $(1.79)                     $(1.94)                                                        $(1.68)                     $(0.80)                                                        $(0.34)
    attributable to Sohu.com Inc.


                                      38,739                                                         38,739                        38,728                                                         38,728                        38,646                                                          38,646

    Shares used in computing
    diluted net loss per share
    attributable to Sohu.com Inc.


    Note:

    (a)              To eliminate the impact of
                     share-based awards as
                     measured using the fair
                     value method.

    (b)              To adjust Sohu's economic
                     interests in Changyou and
                     Sogou under the treasury
                     stock method.


                                                                              SOHU.COM INC.

                                    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, 2016                                      Twelve Months Ended Dec. 31, 2015
                                                            ---------------------------------                                      ---------------------------------

                                           GAAP                       Non-GAAP                          Non-GAAP                         GAAP                       Non-GAAP                        Non-GAAP
                                                                    Adjustments                                                                                   Adjustments
                                                                    -----------                                                                                   -----------


                                                                             163    (a)                                                                                   1,381    (a)
                                                                             ---                                                                                          -----

    Brand advertising gross profit                        $76,871                             $163                           $77,034                      $193,927                         $1,381                      $195,308


    Brand advertising gross                     17%                                                              17%                          34%                                                            34%
    margin



                                                                             172    (a)                                                                                     330    (a)
                                                                             ---                                                                                            ---

    Search and search-related                            $306,975                             $172                          $307,147                      $300,577                           $330                      $300,907
    gross profit


    Search and search-related                   51%                                                              51%                          56%                                                            56%
    gross margin



                                                                             335    (a)                                                                                   1,711    (a)
                                                                             ---                                                                                          -----

    Online advertising gross profit                      $383,846                             $335                          $384,181                      $494,504                         $1,711                      $496,215


    Online advertising gross                    37%                                                              37%                          44%                                                            44%
    margin



                                                                              31    (a)                                                                                      37    (a)
                                                                             ---                                                                                            ---

    Online games gross profit                            $299,541                              $31                          $299,572                      $480,531                            $37                      $480,568


    Online games gross margin                   76%                                                              76%                          75%                                                            75%
                                                ===                                                               ===                           ===                                                             ===




    Others gross profit                                  $107,244               $                -   (a)                   $107,244                      $102,992               $              -   (a)               $102,992
                                                                             ===                    ===                                                                    ===                  ===

    Others gross margin                         51%                                                              51%                          56%                                                            56%
                                                ===                                                               ===                           ===                                                             ===



                                                                             366    (a)                                                                                   1,748    (a)
                                                                             ---                                                                                          -----

    Gross profit                                         $790,631                             $366                          $790,997                    $1,078,027                         $1,748                    $1,079,775


    Gross margin                                48%                                                              48%                          56%                                                            56%
                                                ===                                                               ===                           ===                                                             ===



    Operating expenses                                   $907,765                        $(18,754)   (a)                   $889,011                      $995,558                      $(51,695)   (a)               $943,863
                                                                                                                             ===                                                                                      ===



                                                                          19,120    (a)                                                                                  53,443    (a)
                                                                          ------                                                                                         ------

    Operating (loss) /profit                           $(117,134)                         $19,120                         $(98,014)                      $82,469                        $53,443                      $135,912


    Operating margin                            -7%                                                              -6%                           4%                                                             7%
                                                ===                                                               ===                           ===                                                             ===



    Income tax expense                                    $21,072               $                -   (a)                    $21,072                       $76,936               $              -   (a)                $76,936
                                                                             ===                    ===                                                                    ===                  ===



                                                                          19,118    (a)                                                                                  53,511    (a)
                                                                          ------                                                                                         ------

    Net (loss) /profit before non-                     $(114,973)                         $19,118                         $(95,855)                     $108,855                        $53,511                      $162,366
    controlling interest



                                                                                                                                                                        53,511     (a)

                                                                          19,118    (a)                                                                                (18,230)   (b)

                                                                        (12,260)   (b)                                                                                  11,911    (c)
                                                                         -------                                                                                         ------

    Net loss attributable to                           $(225,660)                          $6,858                        $(218,802)                    $(50,829)                       $47,192                      $(3,637)
    Sohu.com Inc for diluted net
    loss per share



    Diluted net loss per share               (5.83)                                                          $(5.65)                       (1.32)                                                        $(0.09)
    attributable to Sohu.com Inc.
                                                  $                                                                                             $
                                                ===                                                                                           ===

    Shares used in computing                 38,706                                                            38,706                        38,598                                                          38,693
    diluted net loss per share
    attributable to Sohu.com Inc.


    Note:

    (a)              To eliminate the impact of share-
                     based awards measured using the
                     fair value method.

    (b)              To adjust Sohu's economic
                     interests in Changyou and Sogou
                     under the treasury stock method.

    (c)              Dividend or deemed dividend to
                     non-controlling Sogou series A
                     preferred shareholders.

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