Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's First Quarter 2024 Earnings Conference Call. [Operator Instructions] 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 to discuss Sohu's first quarter 2024 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 are Changyou's CEO, Dewen Chen; and CFO, Yaobin WangConan. 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 annual forward-looking statements. For more information about the 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. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thanks, Huang Pu, and thank you, everyone, for joining our call. In the first quarter of 2024, our top line performance was in line with our expectations and our bottom line performance exceeded our guidance despite the impact of seasonality. For Sohu Media and Sohu Video, we continue to enhance user experience by refining products and optimizing algorithms. We proactively integrated our product matrix and resources to stimulate content generation, consumption and social distribution. Meanwhile, leveraging our unique IPs and differentiated advantages, we continue to host various events and campaigns, which not only stimulated users' interaction and content provision on our platforms, but also help us gain more monetization opportunities. Online games delivered stable performance with well in line with our expectations. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the first quarter of 2024, total revenues were $139 million, down 14% year-over-year and 1% quarter-over-quarter. Brand advertising revenues were $16 million, down 29% year-over-year and 20% quarter-over-quarter. Online game revenues, $118 million, down 9% year-over-year and up 3% quarter-over-quarter. GAAP net loss attributable to Sohu.com Limited was $25 million compared with a net loss of $18 million in the first quarter of last year and a net loss of $13 million in the fourth quarter of last year. Non-GAAP net loss attributable to Sohu.com Limited was $22 million, compared with a loss of $13 million in the first quarter of 2023 and a net loss of $11 million in the fourth quarter of 2023. Now I'll go through our key businesses in more detail. First, Sohu Media and Sohu Video. We continue to improve our products, upgrade algorithms, enhance the user experience during the quarter. We deeply integrated the Sohu News and Sohu Video apps…

Thank you, Charles. I will now walk you through the key financials of our major segments for the first quarter of 2024. 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 and Sohu Video, quarterly revenues were $20 million compared with revenues of $30 million in the same quarter last year. The quarterly operating loss was $74 million, compared with an operating loss of $67 million in the same quarter last year. For Changyou's online game business and the [indiscernible], quarterly revenues $119 million compared with revenue of $131 million in the same quarter last year. Quarterly operating profit was $55 million, flat with the same quarter last year. For the second quarter of 2024, we expect brand advertising revenue to be between $18 million and $20 million. This implies an annual decrease of 16% to 25% and a sequential increase of 12% to 24%. Online game revenues to be between $133 million and $143 million. This implies annual increase of 12% to 21% and a sequential increase of 13% to 21%. Non-GAAP net loss attributable to Sohu.com Limited to be between $27 million and $37 million and the GAAP net loss attributable to Sohu.com Limited to be between $30 million and $40 million. This forecast reflects Sohu's management's 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.

[Operator Instructions] Our first question comes from Thomas Chong from Jefferies.

My first question is about our advertising business. How should we think about advertising segment common quarters? In particular, we have all impact in Q3. Should we expect our advertising back to positive year-on-year growth in the second half? And that's my first question. And then my second question is about our online game guidance in Q2. Should we assume the sequential growth is mainly coming from our new license game? Or can we actually break out the contribution from a license game in Q2 that will be paid for? And then my third question is more about our capital allocation strategy. I think Charles you also mentioned that the aggregate amount that we repurchase is about USD 17 million. Just wanted to get some color with regard to our full year plan. Should we assume that any color about how much share repurchase we will do in the remainder of the year? Or should we think about the 150 million share repurchase program should be fully used up in 2 years' time?

Well, let me answer your third question first, okay? So we've been bought $17 million, and we have $150 million because of the daily volume that we can buy. So our plan is to finish -- I mean finish all the $150 million buyback and probably takes 2 years. So -- and so limited by daily volume -- daily volume trading. And so the first question on advertising, I think the -- well, the macroeconomic situation is still kind of with a lot of uncertainty. So economy -- yes, so there's some recovery in certain sectors in Q2, but not very strong and advertisers spending are kind of cautious. So we do have -- in Q2, we do have a Q-o-Q increase for brand advertising compared with Q1. But compared with last year, I'm not sure we can -- in terms of 2023, we achieved growth or leverage. Yes, still decrease, yes. It all depends on we are able to -- because we need to continue to develop our user base so that we have a scale up our user base. That's the time when we kind of achieve advertising growth. Yes. Then the second question is about online gaming and about whether there's a sequential increase.

[Foreign Language]

The sequential increase of our revenue is mainly from IP Fly High, which we launched in Japan and in South Korea at the end of March and also from New Westward Journey that we launched in May 16th in the Chinese Mainland. And at the same time, there are some -- there will be some decrease of our older games. Thomas, I think I missed the second.

Yes. So the allocation of capital, besides the buyback, we will -- we still need to have the cash level to fight better, right, to market our products and to develop our products.

Our next question comes from the line of Alicia Yap from Citi.

I have a couple of questions follow up. So number one is the follow-up on the guidance. So I understand the sequential growth in the gaming guidance. But however, I think given gaming is a high-margin and profitable business, the sequential increase in revenue and profit from gaming should support overall group profitability and why is your 2Q net loss guidance is actually wider than you delivered for the first quarter? So any color if you can share with us on the expense side, that would be great. And the follow-up questions on the buyback. I just wanted to make sure I got it correct. So I think last quarter, you mentioned you bought back about $12 million as of February -- the end of February and now that you have $17 million. So is that true that you actually executed about $5 million over the last like 3 months or so? And is it just because of the daily volume that is the limitation? Or is there anything on the money transfer or kind of like moving out the money? Is there any restrictions on that?

Just -- I think the last question, it's just the daily limit. We'd like to buy them all, right, buy back the -- to carry out over the $150 million buyback, but we can't because of daily volume limit. So yes, I think your calculation is right, right? The last 2 months, we bought $5 million back, right? Yes, we are trying to -- we hope that in the future, the volume will improve so that we can buy more, so that to finish this $150 million as early as possible. As to the Q3, right?

Because in Q2 net loss guidance is lower than Q1 is because of we spend more on marketing expense for the Changyou's new game.

Yes.

I see. So it's only for the game promotion, but nothing on like a step-up for the Video or the Media business?

We -- a few TV drama, right, that already spent, the money already spent in Q1, right? Yes. So no increase in media side spending.

I see. Okay. Helpful. Maybe can I treat in last question on also to follow up. I think, Charles, you mentioned while the macro kind of remain a little bit uncertain, but you did see a little bit -- some recovery in certain sector in the second quarter. Can you share with us which vertical or industry vertical that you actually see a little bit improvement in the second quarter?

I think FMCG is getting better with beverage and food and yes, and also the electric vehicle, I mean, electric vehicle industry. The competition is very, very intensified and people are -- because of the competition, people are forced to spend some money, although they're spending much less than before, but still there is some spending in the car auto industry, right? And overall, still advertising is still very cautious.

I see. Maybe just a quick follow-up with recent positive policy measure from the government especially on the real estate side. Do you think overall sentiment from advertiser will be improving in -- maybe in the second half?

I think that is -- in particular that is about real estate industry, right? It has nothing to do with other, right, the recent policies about the real estate. And -- but that real estate does not well -- does not reflect any not -- I don't think the people -- consumers income will be improved. So spending -- consumer spending will not be -- will not increase. So that's when consumers are not spending, but they do -- it seems they're spending a lot on traveling. Travel business is becoming -- coming back a little bit. But overall spending willingness is not as strong. So the product -- that means when people are not buying things, then the company's products will not -- you will not expect sales than advertising. So it's not direct. The recent policies does not have a direct impact, positive impact on the advertising market.

Well, I'm showing no further questions. Thank you very much for all of your questions. And with that, we conclude today's conference call. Thank you for participating. You may now disconnect.

Okay. Thank you.