Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After managements' 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. Now, I'd 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 fourth quarter 2021 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. Before management begins their prepared remarks, I would like to remind you of the Company's safe harbor statements in connection with today's conference call, except for the historical information contained herein. The matters discussed on this conference call may contain 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 potential risks and uncertainties, please refer to the Company's filings with the Securities and Exchange Commission, including the most recent Annual Report on Form 20-F. Please also be reminded that following the completion of the transaction with Tencent related to Sogou, Sohu no longer has any ownership interest in Sogou. As indicated otherwise, the results that we are talking about exclude results from Sogou operations. For historical statements, the results of operations for Sogou and the gain from its disposal has been classified as discontinued operations. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thanks, Pu; and thank you, everyone, for joining our call. During the fourth quarter of 2021 and for the full year we faced ongoing significant challenges from the macroeconomic environment and uncertainties of the COVID-19 pandemic. Despite these headwinds, we were proactive in refining our technology, developing product innovations, improving operating efficiency and exploring differentiated monetization opportunities. In the fourth quarter, we were ahead of our guidance in brand advertising revenue and achieved profitability for the full year and every quarter in 2021. For Sohu Media and Sohu Video, we provided better user experience through improvements in products and social interaction features. We applied advanced live broadcasting technologies to large and unique content marketing events. Based on the competitive advantages of the Sohu product metrics, these live broadcasting events helped us to generate a high volume of premium content and wide social distribution. We were able to further consolidate our influence as a mainstream media platform and better capture advertisers' attention and budgets. For Changyou, its online game business delivered in-line quarterly results, while its overall revenue of 2021 continued to grow year-over-year. Let me go to details about each of these business in a moment, but first a quick overview of our financial performance. For the fourth quarter of 2021, total revenues, $193 million down 24% year-over-year and 11% quarter-over-quarter. Brand advertising revenue $34 million, down 20% year-over-year and flat quarter-over-quarter. Online game revenue $144 million, down 27% year-over-year and 14% quarter-over-quarter. GAAP net income attributable to Sohu.com Limited $4 million compared with the net income of $47 million in the fourth quarter of 2020 and net income of $12 million in the third quarter of 2021. Non-GAAP net income attributable to Sohu.com Limited was $200,000 compared with a net income of $53 million in the fourth quarter of…

Thank you, Charles. I will walk you through the key financials of our major segments for the fourth quarter and the full year of 2021. All of the numbers that I will mention are all on the non-GAAP basis. You may find a reconciliation from non-GAAP to GAAP measures on our IR website. Sohu Media Portal quarterly revenues were $90 million, down 20% year-over-year and up 16% quarter-over-quarter. The quarterly operating loss was $38 million compared with an operating loss of $28 million in the same quarter last year. For the full-year 2021, Sohu Media Portal revenues were $76 million, down 13% compared with 2020. The full-year operating loss $134 million compared with an operating loss of $92 million. In 2020, for Sohu Video, quarterly revenues were $23 million, down 1% year-over-year and flat quarter-over-quarter. The quarterly operating loss was $11 million, flat with the same quarter of last year. For the full-year 2021, Sohu Video revenues were $87 million, down 4% compared with 2020. The full-year operating loss was $47 million compared with an operating loss of $43 million in 2020. For Changyou, quarterly revenues, including 17173, a $146 million, down 27% year-over-year and 14% quarter-over-quarter. Changyou posted an operating profit of $55 million compared with $112 million in the same quarter last year. For the full-year 2021, total revenues were $649 million, up 18% compared with 2020. Changyou posted an operating profit of $310 million compared with an operating profit of $238 million in 2020. For the first quarter of 2022, we expect brand advertising revenues to be between $23 million and $26 million. This implies annual decrease of 15% to 25% and a sequential decrease of 23% to 32%. Online game revenue to be between $130 million and $140 million. This implies annual decrease of 21% to 26% and a sequential decrease of 3% to 10%. Non-GAAP net loss attributable to Sohu.com Limited to be between $10 million and $20 million. And GAAP net loss attributable to Sohu.com Limited to be between $13 million and $23 million. This forecast reflects our current and preliminary view, which is subject to substantial uncertainties. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

[Operator Instructions] Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question.

Thanks management for taking my questions. Charles, I just want to get some color with regard our user growth strategies. I remember in last quarter, we talked about a number of our strategies and the significant to drive the user growth for the media business. Just want to get some color about the way or the strategies that we are going to do it and how much are we going to spend in 2022? And my follow-up question would be regarding the advertising outlook in 2022, we have buoyed -- the Q1 advertising guidance. Just want to get a sense about under what situation will we hit the high end of the guidance and the low end of the guidance?

Okay. So the user base growth strategy, basically for the Sohu Media, Sohu News App and also Sohu Video. For Sohu News App, we'll continue with our traditional basically the providing provision of high-quality news and content with editorial excellency and also the recommendation algorithm. But then we'll also develop this social network channel basically so that we hope that. So now and also with the audio feature with all these basically the editorial content and the recommendation channel and also the social network distribution channel and also the audio. All these features been developed over the last two years and have been maturing. And now it's -- we'll probably spend now we have spent more money on marketing and on channels, on the distribution channels on user acquisitions so that we will have more users to come to our site to our app and to test basically to test if our products over the last two years -- two, three years been well developed or in the right direction. So, that we hope that we'll have some -- with more users to have some viral or chain reaction events or explosion or some kind of, those kind of things. So that's our strategy. Basically, we've been refining the products for quite a few years. And now it's -- we put it to a test of a higher number of volumes of users by spending more money to acquire users to prove and to have to -- basically to generate to have -- kind of viral explosive effect or chain reaction effect, that's our strategy. For video, it's similar. For the news, it's really new. It's content news. I mean, for the video, it's a video content, and we will continue with our -- we'll probably have more drama. And then we'll also have the live broadcasting and knowledge-based live casting and the knowledge-based short form video clip with Twin Engine strategy. And also we'll spend more on user acquisitions to prove our -- also the product direction in the last two years -- last two or three years. So we'll spend some money and user acquisition. People may -- you may ask, we have so much cash, so what are we going to do with it? So besides the share repurchase, we'll spend on product and especially on user acquisition to prove to test our products. So on the advertising forecast is that the high end or low end, I think...

Yes, about the overall advertising trend and how we would hit the high end and the low end of the guidance?

The overall -- as we said, that -- there is the macroeconomic situation is not that good. In particular, the real estate industry problem with the various industry and also the auto industry that's due to the lack of chips so that automobile companies have a limited budget for marketing because you don't have -- actually don't have product to roll out. So that's the challenges we face, and we are going to face. So that's why during Q3 and Q4, we had and innovative unique events both in our activities and events are -- have a dual feature. It's content and at the same time it's marketing opportunity. So that's why we have this -- in Q3, we have the mountain -- snow mountaineering -- snow mountain climbing and live broadcasting events, in Q4 we have finance conference and also fashion awards and all those kind of things. We provide a unique -- besides the regular advertising, we have this unique. Other companies don't have that kind of thing. We have these kind of unique marketing opportunities for advertise that's why are were able to achieve. So even amid this sloppiness of the market and decreasing as of [million dollars], we were able to exceed the guidance because we were able to. So in Q1, we will continue to have this. And since -- but in Q1, we'll start our user acquisition process so that we have -- hope that in this coming year, in the next -- in this year we'll have -- we'll see some reasonable or quite some kind of growth or of the user base, which will also help with the advertising. And or hit the high end or low end, I'm not sure today is already mid of the quarter, right? And also the seasonality is similar to last year. But as I said, the sloppy real estate industry and also the lack of chips for auto has an effect on Q1. So that's why we are forecasting a decrease of 15% compared with last year's Q1.

Our next question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Just a follow-up to Thomas' question on the advertising environment. Charles, you mentioned that some of the weaker advertising industries. Could you also talk a little bit about which industry you see relatively stronger for you guys? And also, you mentioned the real estate and auto weakness. When your sales team talked to them for the full year 2022 budget, do you get a sense that they see kind of a bottom out in some time this year, which means are they planning to increase the budget after that?

I think the -- for the auto industry, is I think the chip shortage will bottom out, I think, right? So that's a good news. Actually even in Q4, with that problem because of our unique marketing opportunities because overall our advertisers have now have limited budgets. So the more – the -- like the favor or like more or like those kind of unique marketing activities instead of just spending money on the regular advertising format like banners or those kind of things. So that's why even in Q4, amid this chip shortages, our auto industry, auto revenue, other advertising share of auto companies actually higher than before, right, 29%. So we hope -- I think this year for the auto industry will be -- it should be a better year than last year. But the real estate, I'm not sure, real estate is a problem, yes.

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

I have a few questions. The first one is a follow-up on the advertising guidance. So just wondering these macro weakness that you're seeing, is that more or less in line with your earlier expectation or the macro or this ad sentiment actually gets weaker into 1Q from the 4Q level that you see? And any preliminary view on the overall ad budget sentiment when can that we see a recovery, which quarter we can see the recovery of the ad sentiment. That's my first question.

Okay. So basically in fact we've internalized weakness, right, [Foreign Language], so I think there's not much change in Q4 in terms of preliminary expectation in Q4 and now -- Q4 is already weaker than the last year's Q4, right? So Q1 is similar. And this year, the only difference is that the Chinese New Year happened like two weeks earlier, right and so that similar.

Okay, I see, any view we will that start to see some rebounds of the sentiment in 2Q or will that be in 3Q?

As I said, I think the auto industry should the chip problem -- the chip's problem will not -- will probably will not be later part of this year from my conversation with some of the auto industry advertisers. But so, I think since our advertising total amount of advertising is not that big. So Sohu's case -- I don't think Sohu's case will represent a general industries case. So Sohu's performance will more depend on whether we are able to continue to have very successful marketing activities. And also whether we are able to get really a user uptick right, user base uptick, that's the thing that. So since -- our market share is -- I mean, the share of advertising the dollar is so small, I don't think our advertising dollar, the trend represent the industry trend. It really reflects our own performance so.

And then second question is on the spending. I think last quarter, you mentioned given the cash you have and then now this is the chance that you can higher spend on the user growth. And I saw in 4Q on your sales and marketing, it came in a much higher than the previous quarter, which is at around $55 billion -- I mean, sorry, $55 million. Should we actually use this as more going forward, this will be the quarterly spend that you will be spending into each of this quarter in 2022 or will that be even higher than this number? And then I think that's kind of also related to my questions on your loss guidance, right? It does look like it's from the sequential basis, I know, you know revenues are declining, that the -- it's turned into a loss quarter, right versus last year, I think every quarter, you have a profit quarter. So can you kind of like help us bring the relationship with the sales and marketing spend versus your sequential weakness on the revenue guidance that resulted in the net loss kind guidance?

So you mentioned the $55 million, is that include Changyou or just only Sohu -- includes Changyou. So if you include Changyou then it's hard to say. It's hard to see because Changyou revenue base is so big so that just Sohu's revenue just varied in the numbers. So you have to look at separately the two, right? So I think when we turn from last quarter's profitability or into like the [Technical Difficulty] a quarter, that's largely due to -- Changyou the vintage, right, the benefit of vintage already [Technical Difficulty] and vintage TLBB Vintage and also Raccoon, right. So that's, so you have to look at separately. If you look at the Sohu alone, the media and video, actually in Q4, our actual budget does not increase that much, right. Because you're talking about $55 million, that's because of Changyou spending on the Raccoon right -- Little Raccoon right, we will have the spending. So if you look at Sohu's Media and Sohu News App and Sohu Video, we just slightly increased the marketing in Q4 and we will definitely spend more. Because we're not going to -- we're not going to spend -- we're going to spend wisely and we'll spend very carefully and we'll really look at hard at the ROI because, not because we have a lot of cash -- just spend independently. So we're going to spend really carefully -- we're going to spend money, and we actually in Q4, we did some pilot spending to see how the user acquisition goes, and then we'll continue that and we will definitely spend more in Q4 this year. We'll make sure the user spend money.

That's very helpful. Thanks for clarifying on that, the business difference on the Sohu and the Media and the Video. And then lastly, I think on the share repurchase, I think you guys been, kind of like leveraging opportunity very well. You've bought back half of your authorized program. So in the event, let's say, if you use up the remaining of the buyback program later in the next few months or in a one or two quarters, would the Board consider to authorize a new share buyback program if you use later?

Probably not or we don't know. So let's finish the other half and then we'll see.

Our next question comes from [Jasper Joshua] from [JVD Holdings]. Please ask your question.

I've got two questions. One is in regards to Changyou, where Charles last year said that if the conditions were great, you would consider Shanghai listing. Could you elaborate on how you see the conditions? Secondly, okay, sorry. Second -- my second question is in regards to Sogou. And as I understand, they are leasing 18,000 square meters from Sohu.com. Have you considered selling that property now when Sogou is not a part of the group anymore?

Well, I think in terms of Hong Kong listing, we're not -- we don't have a particular time schedule yet. We will see the opportunity and as opportunity goes. In terms of the leasing, I think we'll continue happily to be the landlord, right, to collect rent, right? So we're not going to sell -- yes. No. Why should we sell a building, we don't need the cash, right? We already have a lot of cash. Why do we sell building?

You can give it to the shareholders. Just curious. Yes.

Right. There are no further questions. So with that, we conclude our conference for today. Thank you for participating. You may now disconnect.