Good evening. Thank you for joining Sohu's First Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After management 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 first quarter 2020 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 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 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 most recent annual report on Form 20-F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thank you, Huang Pu. Thank you for -- to everyone for joining our call. Let me [Indiscernible]. So, during the first quarter of 2020, the COVID-19 outbreak inevitably impacted the overall economy and advertising industry as well. Facing these challenges, we continue to explore new opportunities and differentiated development strategies. For Soho Media Portal as a mainstream media platform, we continue to refine the product to generate and distribute a large amount of timely and accurate information, especially regarding the pandemic and its prevention. For Sohu Video, we proactively brought new opportunities in the live broadcasting of medical and health-related content and provided unique content and valuable information to our audiences. We'll continue to explore diversified revenue sources and ways to further narrow losses. For Changyou, online games performed well during the first quarter, mainly driven by the solid performance of both TLBB PC and the Legacy TLBB Mobile. The privatization of Changyou was completed on April 17, after which Changyou's profit will be wholly acceptable to Soho.com Limited. Going forward, we plan to increase the integration of resources and combine Changyou onto Sohu's platform. For Sogou, despite the challenging environment during the COVID-19, Sogou's core search business continue to outperform energy. The search on mobile keyboard recorded new highs in terms of traffic and user base, respectively. If I go into more detail about our key financial results, please be reminded that the Changyou's cinema advertising business ceased operations in the third quarter of 2019. The results that we will discuss today and comparative figures that we refer to here only cover continuing operations and exclude the cinema advertising business. So, for the first quarter of 2020, total revenue was $436 million, up 6% year-over-year and down 11% quarter-over-quarter. On a non-GAAP constant currency basis, total revenues would have…

Thank you, Charles. I will walk you through the key financials of our four major segments. For the first quarter of 2020, all of the numbers that I will mention are all on a non-GAAP basis. You can find a reconciliation for non-GAAP to GAAP measures on our IR website. For Sohu Media Portal, quarterly revenues were $50 [ph] million; down 43% year-over-year and 34% quarter-over-quarter. Quarterly operating loss was $23 million compared with an operating loss of $35 million in the same quarter last year. For Sohu Video, quarterly revenues were $23 million, down 11% year-over-year and up 8% quarter-over-quarter. Quarterly operating loss was $11 million compared with an operating loss of $34 million in the same quarter last year. For Changyou, quarterly revenues including 17173 were $136 million, up 32% year-over-year and 1% quarter-over-quarter. Changyou posted an operating profit of $56 million compared with an operating profit of $45 million in the same quarter last year. For Sogou, quarterly revenues were $257 million, up 2% year-over-year and down 15% quarter-over-quarter. Net loss was $31 million compared with a net loss of $3 million in the same quarter last year. Before going [ph] through the outlook for the second quarter of 2020, please note that after the completion of Changyou's privatization, Changyou changed its policies for its TLB [ph] subsidiaries with respect to distribution of cash dividends. As a result, it is expected that Changyou will recognize an additional accrual of withholding income tax of $88 million for the second quarter of 2020. For the second quarter of 2020, we expect total revenue to be between $410 million and $44$5 million, brand advertising revenue to be between $32 million and $37 million. This implies annual decrease of 15% to 27% and a sequential increase of 25% to 45%. Total…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from the line of Eddie Leung of Bank of America Merrill Lynch. Please go ahead.

Hi, good evening, guys. Just a question on perhaps Changyou and another one on the Media Portal pieces. On Changyou could management give us more color on the potential pipeline for the upcoming -- couple of quarters? We understand that there should be some uncertainty, but would be great to hear management target and planned? And then on the Media Portal business, probably also you related to Soho Video advertising as well, we have seen a big decline in the first quarter because of the coronavirus outbreak, but we're also seeing recovery in the second quarter. So, in terms of the advertise segment, could to give us some color on the strengths and weaknesses of different advertiser industries? And which ones have been driving recovery in the second quarter? Thank you.

[Foreign Language] Hi, Eddie, it's Zhang translating for [Indiscernible] today. For self-developed games, we will have Tetris and DMD Mobile for the next two quarters. For licensed games, we have one that has been launched in South Korea. That is KOS extreme match. And we also plan to launch some of the strategy in the coming quarters. As well as a total defense product. [Foreign Language]

Okay. To answer your second question about the Media. Yes, the brand advertising actually includes both the portal and the video. Yes, suffered some, there's an impact in the first quarter, but you can look at the numbers actually, according to our forecast or estimate, business outlook that is recovered actually, pretty strongly right, above the average, I think about average industry level. So, it's -- it's mostly from the, the portal side, but we are basically as I said in the script that we actually channeled through different apps, the Sohu News app and Sohu Video app, especially the live broadcasting all happening on a Sohu Video app. But all these portal advertisers and they can have --innovative a new marketing -- marketing initiative with our live broadcasting with both app combined. So that, especially when people are not, especially offline gathering are kind of restricted or limited or there is limited number of people appear in the same hall, this live broadcasting and the online format of communication actually helped them to launch new products. So that's the -- because of our innovation in the live broadcasting area in the first quarter. We are able to get some real good advertising deals. So the overall portal advertising have recovered stronger -- stronger than expected. And it's some -- I can see some auto industry -- auto industry, just there's kind of a rebound in the second quarter. They need to market their products, it's almost like a yes, rebound I would say. And also some other industries, I think lead by the -- by the auto industry, right. Yes. I hope. I answer the question.

Thank you for the questions. I will take the next question from the line of Thomas Chong of Jeffries. Please go ahead

Hi, management. Thank you for taking my question. This is [indiscernible] on behalf of Thomas. Could management provide some colors on their SME and key appetizer? And moreover, could you talk more about the profitability timing? Thank you.

Yes, the SME, I think for the Sohu side, our recovery mostly are due to the brand advertising of some large brands, because they can take advantage over innovative products the live broadcasting Well, I think the Sohu side or -- also Dewen can comment on the SME side, that's represented SME companies advertising trend seems to slower -- recovering slower from brand -- from our experience and the profitability -- you're asking about probabilities, right? Scheduled probability.

Yes.

Okay. If you look at our forecast for Q2, excluding Sogou, the group because in Q2 there's excluding 17 days of profit contribution from -- there's 90 days you have like a certain, 60 -- 70 -- 73 days of contribution of earning from trial. And with the, you know, cost management of Sohu and also the relatively recovery of the brand advertising, we have a forecast of actually profit excluding Sogou of between zero to $10 million. You can see that, so that's basically it -- the time, the schedule is already Q2, we are going to -- we're going to be profitable. Yes. Any other questions?

Thank you. The next question -- I beg your pardon. Please continue. [Foreign Language]

Yes, which is true. Okay.

Thank you. Our next question -- thank you. Our next question comes from the line of Alicia Yap of Citigroup. Please go ahead.

Hi. Good evening, Charles and management team. Thanks for taking my question. So wanted to get a sense on the impact of the postponing of the Olympic in terms of the budget issue. So, how are advertisers spending, commitment change? Are these budget conned with the postponing of the event? Or are they redeploying some of that to other events? And then related to, the guidance, which I think you alluded to, is actually much better than the industry standards. So how much are we expecting to get from the new live broadcasting initiative in the second quarter? And how should we think about into the second half as well? We will, so who actually get benefit from these new features that we are introducing. Thank you.

Yes. I think definitely the postponed of the Tokyo Olympics have -- it's among the many things that cannot, postpone. So it's very hard to see this, this one event what's the impact on advertising. So yes, as you know, we have improved or better than expected results for Q2, because these live broadcasting technology -- application of the technologies and not only helped with the -- some of those brand advertisers, to secure deals, secure advertising deals from them. It's just -- and also it helped -- it becomes -- it becomes very much needed, because all companies need to have an online offline strategy. And Sohu Video or Sohu the matrix can provide that solution to them. And also, but most importantly, it actually helped Sohu’s own events. As you look at 2019, we had a lot of events, marketing events or we call it, content -- activities that content, because and then all these almost due to the COVID-19 we postpone it, but because of our own technology, we are able now to launch it in Q2. Like, in Q2, we launched the drone contest event with online offline technology help and also we launched the talents for south -- campus basically the contest of shout out. And also we were able to hold -- to hold the -- it took place yesterday, right, the 5G forum with online offline with like probably only 200 people or less than 200 people as a site in the -- in the conference -- in the conference hall, but versus there are hundreds of thousand people are watching from other places, and also even some panelists can actually interact with the panel from anywhere in the world. So that helped us, so it's really actually these new online broadcasting technologies that helped our only events. And these events are a kind of a catalyst or some kind of to help us to secure some really marketing deals. Yes. As we -- as I did in 2019, and then it's continued to -- it's working because of this new approach. So I think this trend will continue -- in the second half of the year, we will refine our technology and with also new applications, new lite application VR or even 5G Technologies. So, we'll be able to help to have more innovative tools for company to market themselves at a time of COVID-19. And so we will look at, you know, continued a profitable quarters-after-quarters. I'm saying that, excluding Sogou. Of course, we hope that Sogou will also recover in the second or third quarter. Yes.

Okay. Thank you, Charles.

Thank you for the questions. [Operator Instructions] We do have a last question from the line of Forum Tech Research, Chang Chu [ph]. Please go ahead.

Hey, good evening, Charles. You know, after Changyou privatization, I just wonder, do you guys have any changes in terms of a strategy in terms of a resource allocation -- whether you keep Changyou go in, grow -- put necessary resources into it to grow the gaming business?

I think -- most part -- for the most part I think Changyou will continue to operate like an independent company. And then to really have good games and really -- really compete in the gaming industry, just like an independent company. And then the group, the Sohu side they can only try, if we can do something if we can help Changyou to grow. Say, let's say some of those games -- some of the games are suitable or good for the Sohu platform to market the games and then it will very cost effective, we will do that, but still Changyou there is a lot of other platforms that Changyou have to spend money to buy -- to distribute the games. So, and -- there is some synergy, but I will be very cautious. We want to make sure Changyou continue to fight and compete like a, a standalone company and compete with industries.

Thank you for the questions. [Operator Instructions] At this time, there are no further questions on the line. Thank you ladies and gentlemen, that does conclude the conference call for today. You may now disconnect your lines.