Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be Q&A 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's conference call, Mr. Eric Yuan, Investor Relations Director of Sohu. Please go ahead, sir.

Thanks, operator. Thank you for joining us today to discuss Sohu's second quarter 2018 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv. Also with us today are Changyou's CEO, Dewen Chen and CFO, Yaobin Wang. 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 statements. 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, Eric and thanks to everyone for joining our call. We saw mixed financial performance in the second quarter. While quarterly revenue was slightly soft given the continued headwinds against our brand advertisement business, the bottom line performance was better than expected than as we aggressively slashed content costs. For Sohu Media, we continued to focus on user growth for the Sohu News App by consistently refining the product design and the content quality. For Sohu Video, we maintained steady momentum with our original content and substantially narrowed the loss as a result of lower spending on licensed content. For Sogou, in second quarter, its core search revenue posted 45% year-over-year growth and Sogou Mobile Keyboard daily active user increased by 36% from prior year to now 380 million videos. Changyou delivered in line performance and its online game business continued to generate healthy cash flow. Before I give more details about our key business, let me summarize our financial results for the second quarter; total revenues $486 million, up 5% year-over-year and 7% quarter-over-quarter; net brand advertising revenues $62 million, down 29% year-over-year and up 9% quarter-over-quarter; search and search-related advertising revenues $217 million, up 45% year-over-year and 23% quarter-over-quarter; online game revenues $94 million, down 22% year-over-year and 11% quarter-over-quarter. Now, let me go through some of the key businesses, first Media. For the same quarter, we continued to work hard on growing the user base with Sohu News App and we made some good progress. More important area is the breadth and depth of content. We believe that Sohu should always be a reliable source so users who can use on daily basis. We introduced a new column, called Sohu Moment, to help user quickly through the hottest stories that are happening in China and abroad…

Thank you, Charles. I will walk you through the key financials of our four major segments. For the second quarter of 2018, all of the numbers that I will mention are all under non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our IR Web site. For Sohu Media Portal, revenues were $43 million, down 2% year-over-year. The quarterly loss was $37 million, which compares with a net loss of $10 million in the second quarter of 2017. For Sohu Video, revenues were $32 million, down 26% from a year ago. Of this, advertising revenues were $60 million. The quarterly loss was $35 million, which compares with a net loss of $103 million in the same quarter last year. For Sogou, total revenues were $301 million, up 43% year-over-year and up 21% quarter-over-quarter. Net income was $38 million, up from $24 million in the same quarter last year. For Changyou, total revenue, including 17173 were $130 million, down 25% year-over-year and 18% quarter-over-quarter. Changyou posted a net income of $28 million compared with net income of $61 million in the same quarter last year. For third quarter of 2018, we expect total revenues to be between $445 million and $470 million; brand advertising revenues to be between $60 million and $65 million, this implies annual decrease of 13% to 20% and a sequential decrease of 2% and a sequential increase of 6%; Sogou revenues to be between $275 million and $285 million, this implies annual increase of 7% to 11% and a sequential decrease of 5% to 9%; online game revenue to be between $80 million and $90 million, this implies annual decrease of 32% to 40% and a sequential decrease of 5% to 15%. Before deducting the share of non-GAAP net income pertaining to non-controlling interest, non-GAAP net loss to be between $44 million and $54 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 $5 million; including the impact of these share-based awards, GAAP net loss before non-controlling interest to be between $49 million and $59 million; non-GAAP net loss attributable to Sohu.com Limited to be between $55 million and $65 million, and non-GAAP loss per fully-diluted ADS to be between $1.40 and $1.65; including the impact of the aforementioned share-based awards and netting off around $2 million of Sohu's economic interests in Changyou and Sogou; GAAP net loss attributable to Sohu.com Limited to be between $58 million and $68 million and GAAP loss per fully-diluted ADS to be between $1.50 and $1.75. For the third quarter 2018 guidance, we used a presumed exchange rate of RMB6.8 to $1, which compares with the actual exchange rate of approximately RMB6.38 to $1 for the second quarter of 2018, and RMB6.67 to $1 for the third quarter of 2017. This concludes our prepared remarks. Operator, we would now like to open the call for questions.

Ladies and gentlemen, we will now begin a question-and-answer session [Operator Instructions]. The first question comes from the line of Thomas Chong from Crédit Suisse. Please go ahead.

I have two questions the first one is on the competitive landscape for news feed market. And how we should think about the trend in second half and 2019? And my second question is about the original content strategy and how we differentiate from our peers? And if there is any update about the timing of even of our video business will be great. Thank you.

So the competitive landscape for our news app, we expect the trend growth of DAUs will continue into the second half of the year. And also as in my prepared remarks I mentioned our partnership with Huwaei -- the channel distribution, actually that spending or the cost of that part is still not generating the DAUs yet, because it’s installed in the smartphone and to be sold to actually end users and then gets activated. So in Q1 and Q2s app deal growth -- that spending on Huwaei channels that part has not contributed to the growth yet. So that's -- and it will show up in the Q3 and Q4 gradually, not only the channel, but the overall improvement of our content quality and also the algorithm for the information stream. And also Sohu's news, the positioning of it has differentiated ourselves as a news provider, so that a quality news even then. That's for news app. So we expect to continue to grow and also more inventories will be created and, and then they will contribute to our gradual ramp up of advertising revenue, especially from SMEs. Your next question about the Sohu Video’s [indiscernible] content, we are already differentiating ourselves. And so with the current level of spending and the original content dramas and other variety of shows, especially now we use our own -- we find our own actor and actresses so that the cost of actors and actresses are not rocking sky high. And so with the current level of spending, we can maintain the current DAUs and also high video views and also actually expect the growth. So that we are looking at probably -- I think probably Q2 or Q3, Sohu Video will really reach probability next year.

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

Charles, just a follow-up question on original content under your video business, could you also comment a little bit on the industry's production cost. It seems like most of the peers also going into original content. So just wondering whether that would affect the overall production cost for Sohu Video, and any strategy to differentiate would be helpful, if you can?

Our peers and competitors are still -- even they’re growing in volume and content, they are spending much more than us, and also they’re still buying very expensive head content. So the way we do it, we actually already discovered or found a unique path for the future by -- for no budget drama episodes -- by have just a better team to really have the -- we basically can create a quality drama TV series under about, actually $2 million, $2 million to $3 million, a piece for like 20 episodes TV dramas and also with a coordinated marketing over on the Sohu platform; so that we can make a low budget episode and make it a really, in term of traffic and brand name -- popularity actually almost as important as a hit as a high -- large volume video. This is not exactly correlated if you spend a lot of money, it does have -- some time doesn’t actually generate a good content.

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

Two questions here, first one is about Sohu Video. So just wondering what’s the run rate of Sohu Video’s last and current stage, and how should we look at that going forward? Should we be concerned about the cash adequacy of your company in new term? Second quarter is about the Sohu News App, just curious about the current level of Sohu News App MAU and DAU? And what should we see the growth rate about as to operating metrics going forward? Thank you.

First of all, in terms of the Video, the current loss of the quarter is $35 million. And if you look at the history, last year actually Q2 last year, it’s over $100 million and then actually Q1 of 2018, its $48 million. So you see a trend of basically coming down. Well, in terms of cash flow, I think we have enough cash just because it’s now become control -- I mean, it’s under control now. So we’re looking at -- this current quarter is $35 million loss and next quarter we’ll have -- we’ll reduce it more and have further reduction. And then as I said, it will be next Q2 or Q3 Sohu Video will be profitable. And for Sohu News App, do we -- we published the DAU, MAU? No. We are not giving out for competitive -- we are not giving the overall number of MAU for competitive reasons, but we do see a very healthy growth over the last quarter, two quarters actually. It go back -- in terms of DAU, it grow back 40% or 50%, right and then video views doubled or almost tripled.

So DAU is growing at 40% to 50% on year-on-year basis. Is that correct?

It's just that we were just at the low point last year and -- at the end of last year. And that through the improvement -- and we really pick up speed. I mean we basically rallied up, I mean really catching up. So it's grown -- over the last six months, it has grown already in terms of DAU of over 50%.

Thank you [Operator Instructions]. There are no further questions at this time. I'd now like to hand the conference back to Mr. Eric Yuan for his closing remarks. Please continue.

Thank you all for joining this call. And have a good evening, and good day.