Ladies and gentlemen, thank you for standing by and good evening. Thank you for joining Sohu's Third Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a 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, Huang Pu, Investor Relations Director of Sohu. Please, go ahead.

Thanks operator. Thank you for joining us today to discuss Sohu's third quarter 2019 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and Vice President of Finance, James Deng. Also with us today are Changyou's CEO, Dewen Chen; and the CFO, Yaobin Wang; and Sogou's CEO, Xiaochuan Wang; and the 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 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 in its most recent Annual Report on Form 20-F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thanks, Huang. And thank you to everyone for joining our call. For the third quarter of 2019, although there is still much uncertainty in the macroeconomic environment, both of our total revenue and our bottomline exceeded our prior guidance, mainly driven by our online gaming and search businesses, as well as the continued cost saving initiatives that we're pushing through in our Sohu Media and Sohu Video segments. Sohu Media is making a comeback as a mainstream media platform with an enormous amount of high quality original content and the various events. These premium features further enhance the reputation of Sohu Media and its sub-brand and further strengthen our overall competitiveness. For Sohu Video, we continue to deliver unique and high quality dramas and other shows to our users. We've also integrating various social functionalities into our products to help users build and find their own social community. We also strictly kept our budget under control, and our activity exploring new ways to diversify our revenue streams in cooperation with advertisers. In the third quarter of 2019, Sogou experience healthy growth and its search revenue continue to growth faster than industry average. Beside, Sogou consistently focus on integrating its language-centric AI capabilities to fully support innovations in search, mobile keyboard and the smart hardware businesses. And lastly, Changyou's overall performance continues to be stable. In addition to the solid result delivered by TLBB PC and the Legacy TLBB mobile, TLBB Honor, a new mobile game launch during the quarter also performed well. Before I go into more details about our key financial results, please be reminded that since Changyou's cinema advertising business ceased operation. This release is related to continuing operations only and excludes the results from is related from Changyou's cinema advertising business. So, for the financials; for the…

Thank you, Charles. I will walk you through the key financials of our four major segments. For the third quarter of 2019, all of the numbers that I will mention are all on a non-GAAP basis. You can find a reconciliation of non-GAAP to GAAP measures on our IR website. For Sohu Media Portal, quarterly revenues were $25 million and quarterly loss was $31 million. For Sohu Video, quarterly revenues were $22 million and quarterly loss was $20 million. Excluding Sogou and Changyou non-GAAP net loss was $53 million compared with a net loss of $77 million in the third quarter of 2018. And then net loss of $68 million in the second quarter of 2019. For Sogou, quarterly revenues were $350 million, up 14% year-over-year and 4% quarter-over-quarter. Net income was $41 million compared with net income of $28 million in the same quarter last year. For Changyou, quarterly revenues including 17173 were $111 million, up 9% [ph] year-over-year and down 4% quarter-over-quarter. Changyou posted net income of $34 million compared with net income of $67 million in the same quarter last year. For the fourth quarter of 2019, we expect total revenues to be between $435 million and $470 million. Brand advertising revenues to be between $40 million and $45 million, this implies annual decrease of 21% to 30% and a sequential increase of 3% to 14%. Sogou revenues to be between $290 million and $310 million, this implies annual increase of 3% to annual increase of 4% and a sequential increase of 2% to 8%. Online game revenues to be between $95 million and $105 million; this implies annual increase of 1% to 12% and a sequential decrease of 3% to 12%. Non-GAAP net loss attributable to Sohu.com Limited to be between $12 million and $22 million and non-GAAP loss per fully diluted ADS to be between $0.30 and $0.55; GAAP net loss attributable to Sohu.com Limited to be between $17 million and $27 million and GAAP loss per fully diluted ADS to be between $0.45 and $0.70. Excluding the profit generated by Sogou and Changyou, non-GAAP loss to be between $45 million and $50 million, GAAP net loss to be between $48 million and $53 million. For the fourth quarter 2019 guidance, we used a presumed exchange rate of RMB71 to $1, which compares with the actual exchange rate of approximately RMB6.91 to $1, for the fourth quarter of 2018, and RMB6.99 to $1 for the third quarter of 2019. Lastly, please be reminded that we want to caution regarding Changyou's privatization proposal in the Q&A session. And this concludes our prepared remarks. Operator, we will now like to open the call to questions.

[Operator Instructions] The first question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask a question.

Hey, good evening. I have two questions about the media pieces. The first one is about the advertisers spending. Are we seeing more pressure on our small and medium-sized enterprise or more on our key accounts? And if you could remind us the revenue mix between SMEs and key accounts for our media pieces. That will be great? And then second, could you also talk a little bit about your top advertising industries and how are they trending? Thank you.

Ed, this is Charles. Yes, the macroeconomic situation has a larger impact over the key accounts compared with the SMEs. So like the auto industries and some key IT sectors are under pressure, while the fast-moving consumer good products are more resilient and at this moment it's more or less impacted. In terms of percentage, I think, let's say 25% of our – no, yes, the 25% or 30% -- 25% of our revenue are coming from the small and medium SMEs, while 70% from the brand, but even though among the brands, there are some key sector like auto really affected by the fast-moving consumer good. Those are less affected.

Got you, Charles. Thank you.

Welcome.

Thank you. The next question comes from the line of Thomas Chong from Jeffries. Please ask your question.

Hi. Thanks management for taking my question. I have a question regarding the online video sector. Can management comment about the regulatory environment these days and how we should think about our timing, our profitability? Should we expect is a profitable business next year? Any color would be great. Thank you.

The regular -- in terms of media business, well, the regulation has been ongoing. There's not much major event have an impact on regulation side. We are looking at the media advertising business. The loss will continue to be less or shrink. But since as we just reported, the – it's $31 million loss, so it still far from reaching profitability on its own. But combined with the video and also with the contribution from Changyou and Sogou, the group, the Sohu Group, where the profitability were actually – we are already achieving $70 million non-GAAP loss. So give us a couple of quarters, we should be able to reach profitability on a group level.

Got it. Thank you, Charles.

Thank you. The next question comes from the line of Alicia Yap from Citigroup. Please ask the question.

Hi. Good evening, Charles and auto management. Thanks for taking my questions. I have two quick questions. Number one is, Charles, related to the Sohu Media. So can you elaborate a little bit besides the photography content, what are the contents, also the high quality original content that you refer to that results to a comeback and the strength in the Sohu Media. And that improving content quality translates to higher revenue opportunity? And have seen the higher demand from advertiser or this improve content? And then second is just wanted to follow-on the video. I guess from a lot of different peers, they were commenting about because of the National Day, we're kind of 3Q, 4Q, some of the content got delays or factored by the tightening regulation. So, just curious having seen any easing of the regulations last weeks, given now we past the National Day celebration and also past the conference meeting. So, any anticipations of the relaxing of the video content in the coming week, so any comments about next year in terms of further tightening that would be great. Thank you.

Okay. First of all, the Sohu Media not just the drone competition that contribute a lot of photographic video, vlog, but the overall Sohu Media, first of all we have this Sohu Hub like we have actually over 600,000 Sohu writer or comp where all these writers contribute to content and to post their content on Sohu hub. And also among the 600,000 more than 600,000 there is a lot of in-house accounts manageable -- in-house accounts of Sohu's own accounts that cover Sohu Technology, Sohu Finance, Sohu Fashion and internally we basically to just managing better and for our own authors to write better article, to report more accurately to really make sure and also to really become very professional, very to report industry events and with more depths, in-depths analysis and also – so that's the overall improvement of our content generation and also we continue to improve the algorithm so that Sohu News App to basically to match the right content with the right users in the videos. So that's overall the content improvement. And also another feature is really we consider as a media platform, we consider activities to the common generation source like, so we have this forum like 5G forum or upcoming AI forum. We have this Sohu Fashion for fashion events, all these events and also recently the Sohu School Girls Beauty Context and all those kind of things. Those are just ways to generate good content and also opportunities for advertisers, brand advertisers to sponsor those events. And together with your routine advertising on our platform, they are more like to competing for deals because of Sohu's unique events, so that the money will probably move towards Sohu instead of competing platforms. So these are the ways that how we under -- even with the worsening of microeconomic situation we're able to achieve a flattish or even kind of increase of brand advertising.

So and on the video side we been, as we said that we have this double engine or two-engine strategy, ones that really deliver long format video, but on that part we really keep our pace really slow because this year we spend in order to control cost, we really spend less on new dramas creation. But we have such library of dramas that we either purchase or we produced over the years. So by better -- personalized those content with people. And so we're actually being able to have a flattish or even some increase of the subscription income of the Sohu video. With two delayed -- our two dramas now after the National Day we are -- in Q4 we are – we look forward to launch two drama. It’s kind of – regulation wise, it's ease a little bit, but it’s had less impact or kind of to Sohu, because we're now rely more and more on some short videos and some social function, social network functions for Sohu video, instead of purely depend on long form in videos or dramas. Did I answer your question?

Okay. Yes. It is. Thank you so much Charles.

All right.

Thank you. [Operator Instructions]. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.