Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Q-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 2018 results. On the call are Chairman and CEO, Dr. Charles Zhang; CFO, Joanna Lv. Also with us today are Changyou's CEO, Dewen Chen; CFO, Yaobin Wang; and Sogou's CEO, Xiaochuan Wang; and CFO, Joe Zhou. 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 with that a number of important factors could cause actual results to differ materially from those presenting, any forward looking statements. For many information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission, including its registration statements 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.

Thanks, Eric, and thanks to everyone for joining our call. During 2018, as we faced a challenging macroeconomic environment, we focused our resources on key mobile products and worked hard to improve operating efficiencies. While annual revenues were largely flat compared with 2017, our bottom-line performance was meaningfully improved, thanks to a variety of cost saving efforts. For Sohu Media Portal, daily active users of Sohu News app, our flagship mobile product, outpaced the industry's growth benefiting from superior content and continued upgrades of the recommendation engine. For Sohu Video, we focused on original program production, providing users unique and high quality dramas and shows. In the meantime, we significantly cut spending our traditional TV programs and successfully lowered the segment's loss over 60% compared to 2017. In 2018 Sogou mobile search and mobile keyboard continued to gain user traction over its leading AI capabilities have now been -- and have been not only recognized in the international context but also applied to new commercial use cases. Lastly, Changyou delivered in line financial results supported by solid performance of TLBB PC and mobile games like TLBB and other more mobile games. For 2019 Changyou will strengthen its research and development capabilities to launch more hit games. Before I go into more details of our key business let me summarize our financial results for the fourth quarter. So for the fourth quarter, total revenues $482 million, down 5% year-over-year, up 5% quarter-over-quarter. If on the constant currency basis, total revenue would have been $22 million higher than our reported revenues and down 1% year-over-year. Net brand advertising revenue is $57 million, down 20% year-over-year and flat quarter-over-quarter. Search and search related advertising revenues $277 million, up 12% year-over-year and 8% quarter-over-quarter. Online games revenue $94 million, down 14% year-over-year and 2%…

Thank you, Charles. I will walk you through the key financials of our four major segments for the first quarter and full year of 2018. All the numbers that I will mention are all under non-GAAP basis. For Sohu Media Portal, quarterly revenues were $33 million, down 10% year-over-year. Quarterly loss was $36 million, which compares with a net loss of $25 million in the fourth quarter of 2017. For full year 2018, Sohu Media Portal revenues were $128 million, down 16% from 2017. Its full year net loss was $141 million compared with net loss of $67 million in 2017. For Sohu Video, quarterly revenues were $26 million, down 34% from a year ago, of which advertising revenues were $13 million. Quarterly loss was $13 million, which compares with a net loss of $69 million in the same quarter last year. For full year 2018, Sohu Video's total revenues were $150 million, down 29% from a year ago, of which advertising revenue was $64 million. Sohu Video's full year loss was $113 million compared with a net loss of $302 million in 2017. For Sogou, quarterly revenues were $298 million, up 7% year-over-year and 8% quarter-over-quarter. Net income was $27 million compared with net income of $38 million in the same quarter last year. For full year 2018, its total revenues were $1.12 billion, up 24% compared with 2017. Net income was $113 million compared with net income of $106 million in 2017. For Changyou, quarterly revenues, including 17173 were $180 million, down 18% year-over-year and flat quarter-over-quarter. Changyou posted net income of $11 million compared with net income of $34 million in the same quarter last year. For full year 2018, Sohu revenues were $486 million, down 16% compared with 2017. Changyou posted net income of $78 million…

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

I've got a question on our brand advertising. When I'm looking at the Q1 guidance, can management talk about how much is coming from negative seasonality? And any impacts do we see from macro headwinds? Thank you.

So Thomas your question is how much is from the [indiscernible] account?

Yes. Basically, for brand advertising, our sequential metrics decline is about, somewhere around 15% to 21% on a sequential basis. So I just wanted to get a sense about how much is actually for macro headwinds and how much is coming from negative seasonality, because historically, when we're looking at the brand advertising business, typically [indiscernible] developing someway along that range. So just want to get a sense about -- do we actually see any impact on the macro headwinds.

I think it's more of seasonality. We have Chinese New Year, the fourth quarter. So the macroeconomic situations definitely have an impact, but since Sohu's having brand advertising market share is still relatively small. The headwinds or the impact is less -- secondary to the seasonality of the Chinese New Year.

Our next question comes from the line of Alicia Yap from Citigroup. Please ask your question.

I have a question about macro impact. How is this year macro softness compared to previous down cycle? And what are the industry vertical that we will be most impacted? Thank you.

Yes. So -- it is -- we're looking at -- we're seeing the some of the traditional factors are that our advertisers like auto and IT sectors are actually have -- [indiscernible] but we just need to develop new clients, new customers to have a just broader range or mix of customers because there is one point for one billion people in China, and we need to consume things. So there's always companies have need to advertise something. So we just need to have better spread of advertisers. And also as I said earlier, since the Sohu's advertising market share is relatively small, so the -- we just need to have -- although the overall price shrinking some expense, we just need to work harder and do a better job to have a larger allocation of the price. So that's why we're looking at the growth in this year.

Thank you. Our next question comes from the line of Shi Jialong from Nomura. Please ask you question.

I have two questions both about your video business. And we saw the net loss -- the operating loss for your video business narrowed quite meaningfully in Q4. So I just wondered if you can update us where your video business can hit breakeven based on the latest progress they made? And also what do you think is a long-term sustainable option margin for your online video business? So this is question number one. And question number two is about your regulation. Online video business or industry in China used to enjoy less regulation than TV in content productions as well as in the types of contents that were allowed to air. And however, we saw regulations on video contents were tightening quite rapidly, in particular, in the past two years. So I just wonder where we are now in terms of the video regulation that you -- I just wonder if you guys do enjoy relatively less regulations than TV? Thank you.

For the first question, we already established a trend of cost cutting. So we -- compared with, so we are -- so the Q4 loss is $30 million. And actually there is kind of a -- it's a new number because of some kind of [indiscernible] effect

Impairment …

Impairment of some of the American TV dramas -- there is like $6 million of goodwill. Actually the real loss is actually $24 million. That means a reduction -- a significant reduction compared with a year ago. Actually we've already established this trend of narrowing the loss. And we’re looking at, I feel -- I am still looking at a quarter in this year that we -- the Sohu Video will reach profitability. As I've just said in our -- in my talk that we already -- we found the way toward the future because a mix of house produced -- in-house produced dramas and [indiscernible] and also variety shows were advertising and also low cost-cutting TV programs instead of the very high expensive ones and also short videos. So with the good video mix and a better monetization, we are looking at a path to profitability a quarter -- some quarter in this year. Your second question, about regulations, yes, it's tightening the -- both the long clips, I mean, the video, the dramas or the variety show of the long clips or the short clips, they're tightening. But actually I would say the impact is less on the video compared with actually on the news side, so -- on the media side. So, and since -- especially was -- it affect everyone, because as we all know about when an economic downturn, people mostly stay home and don’t go out and spend money, and people order things and keep things and people just to play online games and watching video. That’s why that’s a good time to produce a lot of good video programs for people to watch. So it's actually an online activity. And we all know that actually in the last 1930s Hollywood got really [indiscernible] recession, right. So we’re looking at opportunities.

Thank you. [Operator Instructions] There are no more questions. That does conclude our conference for today. Thank you for your participating. You may all disconnect.