Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd 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 to discuss Sohu's fourth quarter 2022 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and Vice President of Finance, James Deng. Also with us 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 on this 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 statements. For more information about the potential risks and uncertainties, please refer to the conference filings with the Securities and Exchange Commission, including the 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 Pu. Thank you, everyone, for joining our call. In the fourth quarter and full-year of 2022, we continue to refine our products and optimize operating efficiency with strict budget control, despite the negative impact of COVID-19 and the macroeconomic challenges, thanks to our efforts, brand advertising revenue and bottom line performance both exceeded our prior guidance for the fourth quarter of 2022. At Sohu Media Portal, we continued to dedicate ourselves to improving user experience by providing rich premium content and making significant improvements in both product and technology. At Sohu Video, based on our 'Twin Engine strategy, we continued to develop both original content and science-based live broadcasting with our advanced live broadcasting technology. Meanwhile, we proactively explored a range of monetization opportunities with our differentiated content marketing campaigns. Online games delivered stable performance, with revenues in-line with our prior guidance. I'll go into detail about each of this business in the moment, but first, a quick overview of our financial performance for the fourth quarter of the year 2022. Total revenues $160 million, down 17% year-over-year and 13% quarter-over-quarter. Brand advertising revenues were $29 million, down 14% year-over-year, and up 12% quarter-over-quarter. Online game revenues $121 million, down 16% year-over-year; and 18% quarter-over-quarter. GAAP net loss attributable to Sohu.com Limited was $7 million, compared with a net income of $4 million in the fourth quarter of 2021 and net loss of $22 million in the third quarter of 2022. Non-GAAP net loss attributable to Sohu.com Limited was $2 million compared with a net income of $0.2 million in the fourth quarter of 2021 and a net loss of $17 million in the third quarter of 2022. For the full-year of 2022, total revenues $734 million, down 12% compared with 2021. Brand advertising revenues, $103 million down…

Thank you, Charles. I will now walk you through the key financials of our major segments for the fourth quarter and full-year of 2022. All the numbers on a non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our IR website. For Sohu Media Portal, quarterly revenues were $16 million, down 16% year-over-year and up 9% quarter-over-quarter. The quarterly operating loss was $32 million, compared with an operating loss of $38 million in the same quarter last year. For the full-year 2022, Sohu Media Portal revenues were $61 million, down 19% compared with 2020. The full-year operating loss was $156 million, compared with an operating loss of $134 million in 2021. For Sohu Video, quarterly revenues were $16 million, down 28% year-over-year, and up 1% quarter-over-quarter. Quarterly operating loss was $21 million, compared with an operating loss of $11 million in the same quarter last year. For the full-year 2022, Sohu Video revenues were $63 million, down 28% compared with 2021. Full-year operating loss was $99 million, compared with an operating loss of $47 million in 2021. For Changyou's online game business and 17173, quarterly revenues, $122 million, down [16%] [ph] year-over-year and 18% quarter-over-quarter. Quarterly operating profit was $54 million, compared with an operating profit of $55 million in the same quarter last year. For the full-year 2022, Changyou's total revenues were $592 million, down 9%, compared with 2021. The full-year operating profit, $282 million, compared with an operating profit of $310 million in 2021. For the first quarter of 2023, we expect brand advertising revenues to be between $20 million and $23 million. This implies annual decrease of 3% to 16% and a sequential decrease of 20% to 31%. Online games revenue to be between $121 million and $131 million. This implies annual decrease of 70% to 23% and a sequential increase of nil to 8%. Non-GAAP net loss attributable to Sohu.com Limited to be between [$15 million] and $25 million and GAAP net loss attributable to Sohu.com Limited to be between $20 million and $30 million. Our guidance reflects our current and preliminary view, which is subject to substantial uncertainty. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

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

Hi, good evening. Thanks management for taking my questions. My first question is about the overall advertising industry outlook in 2023. Can management comment about the sentiment so far? And on Sohu, how should we should think about the advertising spending among auto, FMCG, Internet services? And my second question is more about the use of cash and our investment strategies for this year. And finally, may I also get some color for management about our thoughts on the recent [indiscernible] and how we shape the Internet sector? Thank you.

Okay. So, the first overall advertising market after the – basically, the lift of the lockup and after the COVID-19, I think the economy is picking up in the first quarter. So, we are seeing an outlook of, kind of optimistic about the overall advertising market, compared with the last year 2022 because companies are starting to spend – start marketing events – spending money to market their products and brand – in brand building. In terms of the industry, specific industry, I think auto is the first [indiscernible], right? Auto and followed by FMCG, right? Interim service in Q4 is – yes. Actually, for both part of Q4, we're still in [lockdown era] [ph], right? So – but because of our – some live broadcasting activities, we were – we have growth, right, improving advertising up, right? Improvement of 12% in Q4. But that was still during the lockup years. So 2023, we're kind of optimistic. We see the economy is picking up and the company is starting to spend money now. And the investment strategy, I think first of all, we will have – we will continue to invest in the products – refining our products and building the – and also the networks and also to spend on user acquisition with the products ready and with its features with improving stickiness. We're going to spend money use the acquisition. As we did in 2022 online video – on video, Sohu Video, spending more than before on Sohu Video. That's why you see the loss of video business widening, right, in last year. So, this year, we'll spend both on video on the Sohu News, Sohu Media Portal. It separates Sohu News App. When we believe that our product is ready and with stickiness and to acquire users and make sure they come and they stay. In terms of more investment, probably with AI technology and ChatGPT and we'll – actually, our news premium count – our news recommendation algorithms is a deep [adaptation] [ph] of AI technology like deep learning and all these algorithms or AI. But for – to have the whole ChatGPT type of open-AI services, it's – since we already [indiscernible] this need to have the whole, develop the whole algorithm from [indiscernible] really need the kind of company with a search engine background. Now, we already Sogou. So, right now, we are not able to develop the whole open AI system, but we can outsource the fundamental layers of those algorithms and to some other companies and then to just use the applications apply them to our – for our social network because it's about questioning and answering and interactivity. So, it fits well with our social network strategy. Well, I hope I answered your question.

Thank you, Charles. Thanks for the detail.

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

Good evening, guys. Just two questions. The first one is about gains. Just wondering if that one has any, I won't say guidance, but any outlook on the potential launch time of some of the new games [Technical Difficulty] buyback or even dividend? Thank you. [Foreign Language]

Currently, we plan to launch new TLBB in third quarter this year.

Got that. Thank you.

So, we will not exclude the possibility of share buybacks this year. Yes, it's possible.

Understood Charles. Thank you.

Thank you. Our next question comes from the line of Alicia Yap from Citi. Please ask you question, Alicia.

Hi, can you hear me?

Yes.

Good evening management. Thanks for taking my questions. I have a couple of questions. First, on a follow-up on the gaming business. So, the driver for your sequential improvement for your gaming business that you've guided for first quarter, is that mainly on some of the expansion packs that has released and been doing well. So, that's – you guided slight improvement on the gaming for 1Q. That's the first question within the gaming. And then a follow up on the new TLBB launch because we also know there is another similar title, which is called TLBB 2 by Perfect World. So, would that be – can you comment, would there be any confusions or any cannibalization effect from this similar title? And then for advertising business, can you also elaborate a little bit in terms of the first quarter guidance? Do you think this is actually considering an improving trend? Because it does look like your guidance on a year-over-year basis is still a negative growth, despite the entire year already having declined, and – but is it because of the Chinese New Year in first quarter? So, would you expect second quarter on [indiscernible] we should start to get positive year-over-year growth? So, yeah, thank you.

[Foreign Language] Because we launched some promotional activities for our existing games in the first quarter around Chinese New Year. [Foreign Language] Yes. First of all, we are aware of that new TLBB and TLBB 2 are made for mobile games, and we're sure there will be some kind of impact, but from our past experiences, especially like legacy TLBB mobile or TLBB [indiscernible], when they launch to the market, there was some kind of positive impact to the existing TLBB franchise games. So, we can only see the results by them after the games [indiscernible] launch.

All right. In terms of advertising, so the first quarter of 2022 is basically before it's prior – it's before the real lockdown that happened in Q2, right? So, it's relatively a more normal quarter, right, Q1. But this quarter, the Q1 of 2023 is – Q4, we already pick up some [indiscernible], but it's due to some of our potential unique offering of the [indiscernible]. But Q1, first of all, it's a slow season, but it's also a – it's still restoring, right? It's resuming, but still not fully to its prior guidance prior lockdown quarter, right? That's why it's kind of decrease. Did I answer your question?

Yes, I see what you mean. In terms of the year-over-year…

Q2 is in terms of pick-up speed, yes. I'm sure Q2 will definitely be [better than] [ph] Q2 in 2022. I think Q2 and Q3 of 2022 were worst, right, because the lockdown is in the lockdown, in Shanghai and then – so this Q1 is, we already see some hope, right? So, it's picking up, but it's still not fully resumed or...

Thank you, Charles and also thank you Dewen for the answer. I just have one very quick follow-up. In terms of the Sohu Media and Sohu Video, do we have any plans or target to narrow the loss this year?

Actually, the answer is no, because we're going to spend, as you ask – you were asking the question about how do we spend – we have a good cash balance, right? So, that's why we need a [indiscernible] to really develop in order to have ultimately have the profitable platform. We have to have a larger user base. You have to have the scale, scale of the user base. And that's the only way for a platform to make money, right? So – but to reach that, you need to spend. That's why we're into this year, as I said, when we have – when we believe that the kind of products that we are designing or we have been perfecting or developing are ready, have the right, kind of stickiness and so to make the user stay then where we spend. As we did in – on Video, kind of spending a little more on Video in 2022, and we see the user base actually grow quite well. So, we're going to spend both on Video and News App.

I see. Okay. Alright. Thank you for your answer Charles. Thank you.

[Operator Instructions] All right. I am showing no further questions. And with that, we conclude today's conference call. Thank you for participating. You may now disconnect.