Sohu.com Reports Higher Internet Advertising Revenue, But Drop In Wireless Services

Chinese online services company Sohu.com Inc. today reported unaudited financial results for the second quarter ended June 30, 2010.

Total revenues for the second quarter ended June 30, 2010 were USD146.1 million, up 15% year-over-year and 13% quarter-over-quarter. Of that total, brand advertising revenues totaled USD53.2 million, up 22% year-over-year and 35% quarter-over-quarter, and online game revenues were USD77.7 million, up 17% year-over-year and 8% quarter-over-quarter. Wireless revenues were only USD11.1 million, down 26% year-over-year and 17% quarter-over-quarter.

Gross margin was 73% for the second quarter of 2010, compared with 75% in the first quarter of 2010 and 77% in the second quarter of 2009. Non-GAAP gross margin for the second quarter of 2010 was 74%, compared with 75% in the first quarter of 2010 and 78% in the second quarter of 2009.

For the second quarter of 2010, Sohu’s operating expenses totaled USD56.0 million. Non-GAAP operating expenses totaled USD50.8 million, up 18% sequentially from USD43.0 million and up 17% year-over-year. The year-over- year increase primarily reflects an increase in marketing expenses, stated the company.

For the second quarter of 2010, excluding non-cash income tax expense of USD0.6 million recorded for tax benefits from share-based awards, non-GAAP income tax expense was USD5.7 million, compared with USD7.4 million in the previous quarter.

Before deducting the share of net income pertaining to the non-controlling interest, GAAP net income for the second quarter of 2010 was USD45.5 million, up 7% year-over-year and 10% quarter-over-quarter. Non-GAAP net income for the second quarter of 2010 was USD52.5 million, up 7% year-over-year and 9% quarter-over-quarter, exceeding the company’s guidance by USD2 million.

Sohu group continued to maintain a debt-free balance sheet and a strong cash position of USD599.1 million as of June 30, 2010.

Sohu estimates total revenues for the third quarter of 2010 to be between USD153.0 million and USD158.0 million, with advertising revenues of USD61.0 million to USD63.0 million.