Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining Sohu's Fourth Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. After management's prepared remarks there will be a question-and-answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today, Mr. Eric Yuan, Investor Relations Director of Sohu. Please go ahead, sir.

Thanks, operator. Thank you for joining us today to discuss Sohu's fourth quarter 2015 results. On the call are our Chairman and Chief Executive Officer, Dr. Charles Zhang; President and Chief Financial Officer, Carol Yu. Also with us from Changyou our Co-CEO Dewen Chan; CFO, Jasmine Zhou; as well as CEO of Sogou, Xiaochuan Wang; and VP Finance of Sohu, Steven Sim. Before management begins their prepared remarks, I would like to remind you of the Company's Safe Harbor statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed in this conference call 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. For more information about the potential risks and uncertainties, please refer to the Company's filings with the Securities and Exchange Commission, including its registration statement and most recent Annual Report on Form 10-K. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thank you and thanks to everyone for joining our call. We ended 2015 with a solid quarter as both top line and bottom line results were better than our entire expectation. For the full year of 2015 despite the weak macro condition and adverse foreign exchange impact we managed to deliver steady growth. Portal revenues set a new record at $1.9 billion U.S. up 16% from 2014. For Sohu Media Portal, while the slowdown of the economy shrunk the budget of traditional brand enterprisers, the rapid growth of revenues from small media enterprises, SME customers helped offset the impact. For Sohu Video, its 2015 total revenues rose 33% from 2014 as non-advertising business gained encouraging traction. Sogou grew annual revenue to a new record high while achieving a sizeable profit. Changyou's full year revenues reached $762 million, the highest in its history, and its profit rebounded substantially as a result of effective cost control measures. On the business side, we are pleased to see the strong momentum across our key products. Benefiting from improved product design and enriched content, 2015 Sohu's news application, News App's daily active users rose about 50%. Sohu Video invested heavily in developing professionally-generated content or PGC, a more cost effective category, where the traffic of PGC almost doubled during the year in terms of video views. In 2015, Sogou's operating metrics set new records across the board. In particular, the aggregate search traffic increased 34%, mainly attributable to the triple-digit growth in mobile search traffic. Sogou's mobile keyboard application solidified its number one position in the Chinese language input market and ranked number three among all mobile Apps in China in terms of daily active users according to our research. Before I give more details about our key businesses, let me summarize our financial results…

[Foreign Language] In 2015 Sogou continued to focus its efforts on enhancing overall user experience of its core product through innovation and differentiation. Operating on the financial metrics set new records across the Board, aggregate search traffic increase by 34% in particular mobile search traffic more than doubled contributing 57% in total traffic by year end compared with 37% at the beginning of the year. Financially total revenues in 2015 approached $600 million up 53% from 2014. Our non-GAAP net income surpassed the $100 million which almost tripled from a year ago. On the product front during 2015 we continuously raised the bar in terms of qualities for our call search service and further added a variety of exclusive and trending content to our platform through a close cooperation with Tencent, our exclusive excess tuition [ph] and QQ group content has helped boost the local search brand among users. On top of that we were actively exploring other partnership opportunities. In the fourth quarter we made a strategic investment in Zhihu which is the largest online knowledge sharing platform in China and became its exclusive search partner. Users of Sogou Search are now privileged to enjoy instant and fast Zhihu question and answer based accountant. Also the input method [ph] it has been the dominant brand in the Chinese language input application market. During 2015 we made notable improvement in our voice recognition technology to date as the top mobile app for voice input in China. Each day Sogou mobile keyboard processed over 100 million voice inputs. In terms of financial performance, for the fourth quarter Sogou's total revenues reached $166 million, up 39% year-on-year. The deceleration of the Chinese economy had more or less an impact on our revenue growth in the past quarter. Having said that mobile search revenues kept its healthy momentum contributing 34% of total search revenues up from 17% a year ago. Non-GAAP net income was $31 million, up 63% from a year ago. In summary, in the past year helped by a variety of unique and high quality content from Hoi Shing [ph], QQ Group, and Zhihu that we have made available on our platform, Sogou achieved solid progress in creating a truly differentiated search service. Looking out 2016 we will continue to enhance our search product while proactively look for strategic partnerships with mobile internet companies to further increase the market penetration of Sogou's product. I will now like to turn the call over to our VP Finance, Steven who will walk you through Groups financial results.

Thank you Xiaochuan. I will walk you through the key financials for the fourth quarter and 2015. The profit and loss numbers mentioned below are all on a non-GAAP basis. For brand ad business, in the fourth quarter net brand advertising revenues were $141 million, down 5% year-over-year and 7% quarter-over-quarter. Of this, revenues of Sohu Media Portal were $49 million, flat year-over-year. Sohu Media posted net income of $5 million as compared to net loss of $1 million in the prior year. Ad revenues of Sohu Video were $51 million, up 1% year-over-year. For 2015 net brand advertising revenues were $577 million, up 7% compared with 2014. Of this revenues of Sohu Media Portal were $198 million slightly shift [ph] compared with 2014. Sohu Media posted net income of $21 million in 2015. Revenues of Sohu Video were $213 million up 21% compared with 2014. For the Sogou, for the fourth quarter total revenues were $166 million up 39% year-over-year and 2% quarter-over-quarter. Of this such related revenues were $151 million up 37% year-over-year and 2% quarter-over-quarter. Before non-controlling interest, Sogou posted net income of $31 million as compared to net income of $90 million in the prior year. For 2015 total revenues were $592 million up 53% compared with 2014. Before non-controlling interest Sogou posted net income of $110 million as compared to net income of $38 million in 2014. For Changyou, for the fourth quarter total revenues including 17173 were $162 million down 25% year-over-year and 14% quarter-over-quarter. Before non-controlling interest, Changyou posted net income of $26 million compared to net income of $40 million in the prior year. For 2015 total revenues were $762 million up 1% compared with 2014. Before non-controlling interest Changyou posted net income of $228 million as compared to net income of…

Thanks Steven. For 2015 I am pleased to see our key businesses largely achieve respectively -- their respective financial goals set at the beginning of the year. More importantly it is our privilege to work with the team of capable managers at each of the business lines. When today we faced the challenges in light of rapid change of the industry, I believe our cohesive team is able to ensure our success in the years to come. This concludes our prepared remarks. Operator we would now like to open the call for questions.

[Operator Instructions]. Your first question comes from the line Dick Wei from Credit Suisse. Please go ahead.

Hi, thank you for taking my questions. I had two questions, first I was wondering if management can comment more on the enterprising market outlook for this year, is it like a better year this year versus last year and does the Olympics going to help, so this was my first question? And second question is on the online video spending trends. I understand we have like different buckets of spending but I wonder what is kind of the general thinking around the spending this year particular with Charles comments about spend as much ads to company too? Thank you. [Multiple Speakers]

Alright, I think the -- what we see for the advertising market in 2016 is either -- well the general trend especially for the traditional advertisers, the state owned companies and the larger companies doing brand advertising has the downward trend, shrinking their budget. But we do see sort of macroeconomic conditions do have an impact on the advertising. But we do see -- people don’t have -- so many people in China and people have to live right. They need to eat, they need to consume so those small media enterprises throughout China, in different cities they still strive unwell [ph]. So we see the -- calling it media and long tail advertisers have an upward trend so that is why -- that neutralize our media advertising revenues. So we see flattish or even gross advertising. Well Olympic will help but I don’t think it will help much because it is not happening in Beijing so and not like 2008 Olympics. For Video we do have a few buckets to spend on basically three categories. The head content, the self developed content, and also the PGC content. The most expensive one, the head content, with our competitors each have deep pockets and spending a lot of money. I think we will continue to spend enough to stay competitive in the first tier group -- first tier video companies by smart spending and continuing our tradition or our capability of picking. So we spend probably a small amount -- smaller amount of money compared with the competitors but we have a more accurate bet on the top block buster hit of those purchased content. At the same time our own self developed content, we also have a very successful track record like what I just said. We have the [indiscernible] all those big box earnings. We basically developed those projects and this year we are going to develop many more and we hope that it will be set of few blockbusters out of those self developed content. And third category actually consuming not much money is the PGC so work with few thousand partners. So those are the -- yeah, so that is why -- I think with a lighter spending than the competitor we will spend enough to stay competitive and the first tier companies and through tech product innovation. I think as long as the traffic comes to Sohu developments will become of the PGC and the community they will stay. So that is how the stickiness and its very critical in the video business model.

Got it thanks Charles. This is a quick follow up, as far as the advertising markets go which verticals do you see like better strength to this year versus some of the ones that is not that strong?

Yes, so I think the most impact happened on the auto industry and the IT industry and the fast moving consumer goods and especially of the large ones reduced their budgets. And this trend will continue in 2016. But the internet services companies will continue to grow and also all kind of other service like restaurant or education or those kind of training those are really small -- e-companies that’s related to -- relevant to people's life, daily lives are well steady and the growing business customer spots.

Got it, thank you Charles.

Welcome.

Thank you. Your next question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.

Good evening, thank you for taking my questions. I have two questions on your advertising business as well. The first one is a follow up question on your advertisers, could you give us an idea on your top advertising industries for your portal search and video business so that we can see whether we have any change in the top categories, so that’s my first question? And the second is about the first quarter guidance especially from Sogou, just wondering if there is any macro impact as Xiaochuan commented there has been some impact for the fourth quarter. Any impact carried it into the first quarter and in addition to that how big would be the impact from the RMB exchange rate changes that you will factor in your guidance? Thank you.

So about the categories of - the Media Portal categories, as I just said the top is steel, auto and the ranking is like the top is auto industry and then the internet service company industry and also the big IT electronics and consumer goods, so these are the ranks of order. So your question is -– video is mostly the home appliance right, the number one personal care especially and the cosmetics right, those kinds of things are number one. And then the food and beverage industry number two and e-commerce and internet services are number three and auto is the last. Auto is actually shrinking. So it’s dropped to the number four right. But previously also very big right or no we don’t advertise much on video before.

So for search our top of our sectors include healthcare, e-commerce business, there is gaming and merchant services. For our QN [ph] guidance we think that the later impact drama macro its economy has carried into QN [ph] and we’ve seen slower as ascend from major sectors including e-commerce, healthcare, and gaming. The guidance actually factored in the adverse currency impact for QN RMB depreciated by 7 percentage points.

3% right.

3 percentage point.

3% okay. [Multiple Speaker]

Over Q4 is 3%.

Got that thanks very much Xiaochuan. Thank you very much.

Thank you. Your next question comes from the line Zhao Ming from 86Research. Please go ahead.

Hi, good evening Charles, Carol, Xiaochuan, Steven, and Eric. Thank you for taking my question. My question is related your guidance on Sohu Media Portal. According your guidance it seems that Sohu Media Portal is projected to decline sequentially much less than video ad and search ad and also much less than its own historical pattern. And I am just wondering what are the reasons behind the solid performance for Sohu Media Portal ad in the first quarter. Is that because of SME, as far as I understand SME ads usually decline either faster in the first quarter versus brand ad, so could you please help to clarify that? Thank you.

Yes, it is due to SME and because of this new format, because we have a growing user base of the Sohu News App and also Sohu Html5 portal and also the innovative new ad formats and also more targeted position -- targeted auto piling [ph] system that based on the big data and user profile. So we actually developed this new category of advertisers so that it was zero, it was none before but now it is growing. And so, that has offset the macroeconomic downward trend. And yeah…

Sorry, if I may follow-up on that, I am wondering what is the revenue contributed by mobile within your Sohu Media Portal advertising?

I think it is really over 50% of revenue of Sohu Media Portal coming from Mobile.

You mean over half of the revenue comes from mobile.

Yes, exactly.

Oh, thank you.

Thank you. Your next question comes from the line of Natalie Wu from CICC.

Hi, good evening management. Thanks for taking my question. I just had sort of follow-up with Eddie's question, just wondering how much revenue contribution from healthcare for your search business? You mentioned that the ghost rate of auto -- healthcare is slowing, wondering if it is general industry trend or it is just typically associated with Sogou? And have you sensed any budget allocations from your competitors for the medical and healthcare industry for search business lately? This is my first question. And I will have a very quick follow-up.

So, in the fourth quarter healthcare accounted for roughly 12% of search revenue and actually as a percentage it is decreasing slightly from the third quarter which means that we haven’t benefited a great deal from the recent industry development.

Good, thanks. Also can you breakdown the growth rate of KA and SME separately underlying the first two quarters search revenue guidance?

Key accounts account for one third of our revenue and the rest goes to SME and the percentage is roughly stable from quarter-to-quarter.

So the growth rate of KA and SME is roughly the same for the first quarter search revenue guidance right?

And that’s correct.

Great, thank you.

Thank you your next question comes from the line of [indiscernible] from Macquarie. Please go ahead.

Good evening management, thank you for taking my question. As PGC is growing more important to your video strategy so I want to understand a little bit more how do Sohu Video differentiate from other video platforms to attract PGC producer to your platform and how are you going to drive growth further?

Well, it is basically through first the product innovation like -- product interface user friendly and also basically the product -- it's very easy to use and also had a very effective team to manage those producers and also have a very transparent revenue sharing matters. So it is all about operation of the management. And also to develop a very good advertising system and very smart advertising system so that we will be enable a lot of advertisers including SMEs to advertise Sohu Video so that those producers can have a steady transparent revenue sharing with us. And also you will have a formal kind of communities. So these things -- so the PGC growth is really about technology product and also management system rather than in pure money spending unlike the head content where you basically compete on the money you spent while PGC is really compete on technology and product.

And how much does PGC contribute to traffic, the video traffic currently?

Well we see PGC traffic doubled in the year of 2015 and we have not disclosed our PGC traffic yet.

Okay and could you talk a little bit more about the paid subscription, any progress data points that you can share on that would be helpful?

We started with a low base but it grows rapidly so I think it grows three times in 2016. It started from very low base so this means a lot of potential to grow and people start to paying now. So paid business, so I think in our current categories headcount and then second is really self developed content we will be able to for the self developed content we will be owning online rights of those products, those content so that we sell advertising but same time to charge fees for people to have binge watching. Right, like to see the whole season and so these self developed content will be also one of the goals of those content is to drive subscription. We probably have like 20 or 30 self developed dramas, online series this year and we hope that there will be few blockbusters out of those 30.

Okay and on your movie production any plan that you can, also the number of movies that you plan to go out this year?

Well, probably we will continue with our maybe one or two or three movies but it’s not really our central and core strategy. Although we did -- we achieved our success last year but it’s not really our online where Sohu will continue to committed to online properties. So offline box office -- if we do some big hit movie that’s good, but it’s not really our core strategy.

Okay, thank you Charles. That’s all my questions.

Thank you. Your next question comes from the line of Chi Tsang from HSBC. Please go ahead.

Hi, good evening. Thank you very much for taking my question. I had a question for Charles, I was wondering if you could give us an update on your proposed investment into the company that was announced in December? And then secondly I was wondering if you could put into context your 1Q guidance for Sohu Video clearly reflects slight macro environment. Can you help us think about whether or not Sohu Video, what pace that might grow after the full year? Thank you so much.

I didn’t get the last sentence you said that if Q1 Video business what?

It looks like the Q1 -- in the first quarter the video business is down I think 18% Q-on-Q and also down about 17% year-on-year. I am wondering sort of given the macro backdrop what your expectations might be for the video business this year on a full year basis?

Well, I think about the investment I don’t have any comment on that. Basically we filed -- basically all the information we provided with my 13D filing and also the company filing is there. So I don’t have any comment on that. For the video business we definitely -- its very critical -- since video business is very critical it’s a very central business for Sohu, as our media platform we believe that video is part of a media platform because it is just a matter from text based content or video based content. And we believe that in the future all kind of knowledge will be expressed, communicated through video. So it is very central strategy, core strategy of the Sohu Group -- media company. So we will make sure that our video business will stay competitive and also sustainable in the long-term. While all these competitors are really competing on their money and then try to get market share but we believe that it’s an internet company and these long terms really depend on you provide us stickiness and community for people to like the YouTube, those kind of internet things. Well now the current video business is still basically competing like a paid TV station but we will spend enough to stay in the first year to compete on this content at the same time to move aggressively into this internet video nature. So we hope that for the full year of 2016 by investing enough, by a successful marketing, and by a great more picking of the good content and by a technology innovation I think we will -- and also by a progressed -- as of having a system as we did with our portal business we hope that our video advertising will regain its momentum.

Can I just have a quick follow up. In terms of your video advertising revenue, what is the contribution from head content, in house production in PGC? Thank you.

Right now the PGC video view and enhanced video view are all in the same video view pool and we now do not disclose the advertising amount that are allocated to those PGC video views.

And in house production of the same pool as well or is that separate?

Yes, it is all in the same pool like video view because the PGC content is actually not necessarily short clips. It is actually, some of them are 20 minutes or 15 minutes and quite attractive. So it is actually in terms of user quality. It attracts the same kind of quality of users as the paid content. So we do not differentiate them and put them in the same video view pool and we hope in the future that our advertising system will place ad according to the user profile.

Thank you.

Thank you. [Operator Instructions]. Your next question comes from the line of Fen Liu [ph] from Goldman Sachs. Please go ahead.

Good evening management, thank you for taking my question. This is Jason asking on behalf of Fen Liu [ph]. Apologize if we missed, it is regarding your relatively soft guidance on the Sogou search and video growth. So apart from the overall macro economy weaknesses and RMB depreciation you already mentioned, are there any other factors you factor in for this guidance? Thank you.

Apart from macro having an adverse currency impact we also see some changing search industry. In the past year PC search market started to shrink a little bit and our growth in mobile search has become less strong as before. So this leads to slower traffic growth and also slower revenue [ph] monetization

For video I want to add that actually in Q4 or in the past few months I mean in Q4 and Q1 we were not spending enough. We actually backed -- retreat a little bit from spending on those like the variety shows that are really becoming also expensive. And also last Q1 2015 we have the Sing My Song, and that Q1 we had that but for this Q1 we don’t. We don’t have any major variety hit -- hit variety shows. We do have recently a -– we do have some variety shows but not as -- so we were not spending enough and we spend rationally but we probably will upgrade our spending a little bit. Basically spend enough to stay competitive. As I said that spending money is not the only way to make it competitive, it’s actually only part of the reason so we’ll resort to other means.

Thank you management. Just a quick question, so what the traffic contribution from Beijing [ph] and Zhihu to Sogou Search right now and could you remind us have you already started monetization of this traffic? Thank you.

Our excess Zhihu content is actually helping Sogou Search brand among users which indirectly propel the growth of our mobile traffic. There is currently -- we haven't currently monetizing the traffic ideas.

Thank you.

Let me add. When you search a webpage it’s actually the retab [ph] and Zhihu content will appear on the same page. So that page is monetized so it’s indirectly monetized. Yes.