Chinese web portal Sohu.com (SOHU) says its net earnings fell to US$6.6 million, from US$8.03 million a year ago, as it reported unaudited financial results for the third quarter ended September 30, 2006.
Total revenues for quarter totaled US$35.4 million, compared to revenues of US$34.1 million for second quarter ended June 30, 2006, and US$27.4 million for third quarter ended September 30, 2005.
Gross margin was 65% in the third quarter of 2006, compared to 64% in the previous quarter and 67% in the same period of 2005. Non-GAAP gross margin of 66% in third quarter of 2006 remained at similar levels compared with 65% in the previous quarter and 67% in the same period of 2005.
Net income for the third quarter was US$6.6 million or US$0.17 per fully diluted share. Non-GAAP net income for third quarter of 2006 was US$8.5 million or US$0.22 per fully diluted share. This compares to non-GAAP net income of US$8.4 million or US$0.22 per fully diluted share for the previous quarter and US$8.0 million or US$0.21 per fully diluted share for third quarter of 2005.
Sohu's advertising revenues for third quarter of 2006 totaled US$23.9 million, a 27% year-on-year and 5% quarter-on-quarter growth. Advertising revenues, consisting of US$21.0 million in brand advertising and US$2.9 million in sponsored search, accounted for 67% of total revenues in third quarter of 2006.
Brand advertising revenues for third quarter of 2006 were US$21.0 million, an increase of 35% year-on-year and 9% quarter-on-quarter. Sponsored search revenues for third quarter of 2006 were US$2.9 million, down 10 % year-on-year and 19% quarter-on quarter, mainly due to further enhancement of Sohu's anti-fraudulent click mechanism and a decrease in revenues from fixed-fee paid listing.
For the first nine months of 2006, brand advertising revenues and sponsored search revenues grew 37% and 9% year-on- year, respectively. Advertising gross margin was 69%, compared to 70% in the previous quarter and 74% in the third quarter of 2005. Advertising non-GAAP gross margin was 71%, unchanged from the previous quarter and a decline from 74% in third quarter of 2005.
For third quarter of 2006, Sohu's non-advertising revenues, which are derived mainly from wireless value-added services and online games, increased by 34% year-on-year and 2% quarter-on-quarter to US$11.5 million, representing 33% of total revenues.
Wireless revenues for third quarter of 2006 totaled US$8.8 million, a modest decline of 2% from the previous quarter despite new policy changes by the mobile network operators and up 31% over the same period last year.
For the third quarter, Sohu's operating expenses was US$16.9 million. Non- GAAP operating expenses totaled US$15.4 million, an increase of 7% from the previous quarter and 39% year-on-year.
As of September 30, 2006, Sohu's cash, cash equivalents and investments in marketable debt securities balance was US$120.0 million, compared to US$132.9 million as of June 30, 2006 and US$133.1 million as of December 31, 2005.
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.