Revenue momentum maintained, costs under control, record page view growth
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BEIJING, CHINA, February 8, 2001 - Chinese Internet portal
SOHU.com (NASDAQ: SOHU) today reported unaudited results for the fiscal fourth
quarter and year ended December 31, 2000.
- Q4 2000 net revenue of US$ 2.2 million
beats consensus expectations of US$ 2.1 million
- Sequential quarterly
revenue growth of 36% and year-on-year growth of 297%
- Market leadership
maintained with #1 China ranking by Iamasia
- Consistent growth of page views
and registered users
- Focused integration of ChinaRen.com operations, now
- Burn rate to drop below pre-merger levels entering
Net revenues for the fourth quarter ended
December 31, 2000 were $2,179,000, a 297% increase over net revenues of $549,000
for the quarter ended December 31, 1999, and a 36% sequential increase over net
revenues of $1,602,000 for the third quarter ended September 30, 2000.
Pro forma net loss for the fourth quarter, at $4.7 million or $0.14 per
share, included the consolidated results of the October 18, 2000 ChinaRen.com
merger. This compares to a pro forma net loss of $1.7 million or $0.07 per share
for the fourth quarter of 1999 and a $3.5 million or $0.12 pro forma net loss
per share for the third quarter ended September 30, 2000. Pro forma net loss
excludes non-cash charges for amortization of intangibles, accretion on
mandatorily redeemable convertible preferred stock, investment write-down, and
stock-based compensation. Taking into account non-cash charges, net loss
attributable to common stockholders for the fourth quarter of fiscal 2000 was
$8.3 million or $0.24 loss per share. This compares to the net loss attributable
to common stockholders of $2.3 million or $0.25 loss per share for the fourth
quarter of 1999 and the net loss attributable to common stockholders of $4.3
million or $0.16 loss per share for the last quarter.
Net revenues for the year 2000 were $6.0 million, representing a 270%
increase over net revenues of $1.6 million in 1999. Pro forma net loss for 2000
was $14.7 million or $0.50 per share compared to a pro forma net loss of $3.4
million or $0.16 per share in 1999. Taking into account non-cash pro forma
charges, the 2000 net loss attributable to common stockholders was $23.2 million
or $1.14 per share and 1999 net loss attributable to common stockholders was
$4.4 million or $0.47 per share.
During the fourth quarter of fiscal 2000, online advertising comprised 95% of
net revenues. Revenues from multinational advertising as a percentage of total
revenues increased from 30% in the previous quarter to 44% in the fourth
quarter, while domestic companies remained relatively constant at 39% of
revenues. Exposure to dotcom companies dropped significantly from 28% to 19%.
"Our customer mix reflects an intelligent approach to the China advertising
sector. Domestic companies are plentiful. They will always advertise in their
home market and are increasingly embracing the online media. MNC's, while more
limited in number, have larger contract sizes and are more stable than dotcom
companies. SOHU.com is an early-mover in capitalizing on this important market
dynamic," said Charles Zhang, CEO and President of SOHU.com.
Although pro forma net loss increased sequentially from $3.5 million in the
third quarter to $4.7 million in the fourth quarter due to the ChinaRen.com
acquisition, SOHU.com immediately implemented cost reductions to realize the
economies sought in the merger. ChinaRen.com spending (cost of revenue plus
operating expenses) was reduced from a pre-merger level of $1.2 million per
month to an average of $0.5 million per month in the fourth quarter and down
further to $0.4 million in the month of December. This was accomplished through
integration of promotional activities, content operations, and sales forces with
Sohu departments as well as a company-wide December workforce reduction.
"SOHU.com and ChinaRen.com have accomplished
significant integration in less than three months of joint operations and have
achieved superior metrics. The ChinaRen.com acquisition has made SOHU.com a more
balanced portal with very strong community offerings on top of SOHU.com's
strengths in news and search. The former founders of ChinaRen.com are key
drivers of the new combined company. Additionally, the merger has afforded us
the opportunity to consolidate content operations, accelerate technology
projects and to realize economies on expenses, capital equipment and bandwidth.
Through further economies planned in the first quarter of 2001 and beyond,
SOHU.com reiterates its commitment to improve upon its pre-merger third quarter
2000 burn rate level as we enter the second quarter of 2001," said Charles
Zhang, CEO and President of SOHU.com.
SOHU.com's leadership position in the China Internet market, as demonstrated
by its top ranking in the latest Iamasia survey, was further solidified in the
fourth quarter through stronger sequential quarterly page view growth than in
the previous three quarters.
Total page views for SOHU.com properties
increased by 80%, from 44 million averaged in September to 79.2 million average
page views for the month of December. Registered users totaled 12.4 million as
of December 31, 2000, up 49% from 8.3 million users registered as of September
30, 2000. "By all measures we are the Number One portal in the hearts and minds
of the Chinese. And this is underscored by the latest survey by Iamasia in which
SOHU.com surpassed all other web properties by a large margin on size, reach and
user base," said Charles Zhang.
During the fourth quarter of 2000, SOHU.com introduced a number of new
business initiatives designed to further attract, retain and entrench
advertisers. For example, SOHU.com introduced its Email Group List service,
which in its first eight weeks accumulated 225,000 registered users, comprising
over 25,000 community lists. This greater ability to target market segments is
deemed valuable to advertisers.
Furthermore, SOHU.com expanded into the realm of E-Business Solutions
offering Internet professional services including turn-key corporate portal
solutions, web-based application development, Internet consulting services, and
web-site development services. Additionally, the Interactive Business Center was
introduced in the fourth quarter to provide online marketing services to
companies including on-line road shows, conferencing, training, and polling.
Each new business initiative is marked by its ability to leverage SOHU.com's
existing assets and large user database. They also support advertising revenues
by further entrenching existing relationships and by attracting new advertising
clients. These non-advertising revenue sources and Short Messaging subscription
services, while minimal in the current first quarter, are expected to approach
20% of revenue by the fourth quarter of this year.
SOHU.com was one of only two Internet content providers to be granted ICP and
News licenses by the Chinese government in December 2000. "The government
regulations published during Q4 have provided clarity in the regulatory
landscape. SOHU.com was among the first to comply fully with the new rules,
providing greater comfort to investors and further emphasizing our leadership
role in the Internet industry in China," commented Charles Zhang.
SOHU.com's primary objective for 2001 is
a relentless drive to profitability via sustainable growth and stringent
During 2000 the competitive landscape in China's Internet industry changed
markedly, with a limited number of companies going public in foreign markets in
the first half of the year while smaller or later Internet companies experienced
difficulties in raising capital. The resulting consolidation of Internet
companies has focused advertiser attention on a few remaining viable portals
leading to greater market share amongst fewer players.
While the growth rate of online advertising experienced in the first half of
2000 was not sustained into the second half, China's online advertising demand
continues to offer attractive growth rates given the large market size. The
present advertising environment offers SOHU.com the opportunity to increase
market share (and revenues) in two ways. First, through the overall market
expansion; and second, through exploiting its competitive advantages during the
market's consolidation. "As expected, order intake was weak in the early weeks
of January. However, order intake rebounded in the two weeks after the Chinese
New Year holidays as the advertising budgets of our clients were released.
Although it is too early to predict ad revenue for the full year, we expect
moderate sequential growth in the first quarter of 2001," said CEO and President
"Our plan is to substantially narrow the pro forma net loss and burn rate in
the first half of 2001. In the first quarter we expect an improvement of $0.5
million over Q4 2000's pro forma net loss due predominantly to workforce
reductions implemented in December, consolidation of promotional budgets of
SOHU.com and ChinaRen.com, and, of course, revenue growth. We expect this
reduction in net loss to continue in the second quarter of 2001," said Derek
Palaschuk, SOHU.com's VP of Finance.
SOHU.com expects annual capital expenditures to decrease from $8.0 million
spent by SOHU.com and ChinaRen.com during the year ended 2000 to less than $6.0
million for the combined company during the year ending 2001; headcount to
decline from 524 at year end 2000 to 470 at year end 2001; and total operating
expenses to track lower accordingly for 2001.
"Transparency and financial discipline remain hallmarks of SOHU.com's finance
department. We have re-established strong sales momentum in the quarter while
maintaining a strict revenue recognition policy," said Derek Palaschuk. Among
other things, SOHU.com prides itself on not recording barter transactions as
revenue. SOHU.com remains committed to exploiting its competitive advantages in
order to drive a successful and sustainable business model.
SOHU.com is the leading Internet portal in
Mainland China with current daily page views exceeding 12 million. It provides
navigation/search, news, sports, business and finance, real estate channel,
entertainment, chat, email and e-commerce activities for a solid and wide base
of visitors. Dr. Charles Zhang founded SOHU.com in 1997. Its investors include
Intel, Dow Jones, IDG, the Morningside China Group, PCCW, Legend and Hikari. Its
content partners include CNET, DOW Jones and dozens of local media organizations
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