Thank you for joining Sohu's Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]. 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 fourth 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 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 to everyone for joining our call. During 2019, China's economy continued to slow down and competition intensified. However, these challenges did not stop us from exploring new opportunities and improving operating efficiencies. As a result, our operating results further improved due to the solid performance of our business and effective cost saving initiatives. For the fourth quarter of 2019, excluding an impairment charge recognized for an investment unrelated to our core businesses, non-GAAP net income attributable to Sohu.com Limited was $7 million profit. Then separately for Sohu Media Portal, we strengthened our position as a mainstream media platform, with high quality original content and various events. And also there is impact for Sohu Video, with the unique and high quality dramas and other shows, we actively searched for diversified monetization sources. And with improved monetization capabilities and strict budget control, Sohu Video was able to further trim its losses in 2019. And for Sogou; search revenue grew faster than the industry average and the revenues from Sogou's recommendation services that leveraged it's Mobile Keyboard, continues to experience robust growth. In 2019, Changyou's online games performed well, and it took a number of steps to enhance its capacity to create new, high-quality games. So before I go into more details of our key financial results, please be reminded that since Changyou's cinema advertising business ceased operations, the results that we will discuss today, only cover continuing operations and exclude the cinema advertising business. So let me look at -- let me go through the fourth quarter 2019 financial results. Total revenues of $490 million, up 5% year-over-year and 2% quarter-over-quarter. On a non-GAAP constant currency basis, total revenues would have been $8 million higher than our reported revenues, which would be -- instead of 5%, it would be 7% improvement year-over-year. Net add of brand advertising revenues, $42 million for the quarter, down 27% year-over-year and 10% quarter-over-quarter. Search and search related advertising revenues, $275 million down 1% year-over-year and 5% quarter-over-quarter. Online game revenues, $132 million up 40% year-over-year and 22% quarter-over-quarter. Excluding an impairment charge of approximately $23 million that we recognized this quarter for an investment unrelated to the company's core businesses, non-GAAP net income attributable to Sohu.com Ltd. was $7 million, which compares with the net loss of $51 million a year ago, Q4 2018. And also compared with third quarter 2019, which is a loss of $17 million in the third quarter 2019. So if we don't consider profit and loss contribution from Sogou and Changyou, excluding the impairment charge, non-GAAP net loss attributable Sohu.com Ltd. was $46 million in Q4 compared with a net loss of $75 million a year ago, in the fourth quarter of 2018, so an improvement of $29 million. And also in Q3, the loss was $53 million, so that is an improvement of $7 million. Now let's look at the full year 2019; total revenues $1.85 billion, up 2% compared with 2018. Brand advertising was $175 million, down 25% compared with 2018. Search and search related advertising revenues $1.07 billion, up 5% compared with 2018. Online game revenue, $441 million, up 13% compared with 2018. Non-GAAP net loss attributable to Sohu Ltd. was a loss of $93 million, that compared with a net loss of $207 million in 2018, cut by more than half. Excluding the profit-loss generated by Sogou and Changyou, the non-GAAP net loss attributable to Sohu.com Ltd. was $246 million compared with a net loss of $326 million in 2018, so a $80 million improvement. So now let me look at -- go through some of the key businesses. First of all, the Media Portal and video businesses; the 2019 -- for Media Portal business we are committed to strengthening our brand influence, by generating integrating and distributing news and premium content, while continuing with -- we continue to attract the focus on hot events. We also proactively produced high quality original content through a series of large events. For the fourth quarter of 2019, we successfully hosted 2019 Finance Annual Conference, AI Conference, Sohu Fashion Awards and others. All these events helped consolidate our competitiveness and enhance the credibility of Sohu media, by reflecting the average unit value of Sohu. Further, we constantly upgraded our products, optimizing the algorithm, and improve the overall quality of the content, which continue to help draw users to our platform and keep them engaged. For Sohu Video, we will continue to push twin engine strategy with long-form and short form content, both original content and short form user generated content, UGC. On the other hand, for the long clip -- long form, we actively enhanced our production strategy with differentiated content, especially related to either romance and criminal themed dramas, and culturally theme reality shows. On the other hand, we continue to improve our feature and social interactions around short-form videos, basically and sort of network of short video clips and the live broadcasting. By encouraging users to post videos and share comments in communities and share their interests. So what we do, is consistently upgrading products recommendation algorithms, basically recommending those -- recommendation algorithm for short videos and also the social network sharing videos and communities, and relogs [ph] and live broadcasting. So these are the initiatives that have successfully increased our user base and overall user environment. So based on the twin-engine strategy, we successfully carried our diversified marketing in the monetizing initiatives and provided advertisers those new advanced solutions embedded in various online and offline brands, for example, the original drama, [indiscernible] Season 2, work with advertisers hosting offline events to further boost advertising efficiency, and embedded advertising in that popular drama. And -- so overall in 2019 with our consistent effort and strict budget controls, Sohu Video was able to further narrow it's losses. In the fourth quarter of 2019, the operating loss was $18 million, which is 40% improvement, compared with the same quarter of 2018. Q3 operating loss for video was $94 million, which is a 33% improvement compared with 2018. So now, if we look at the current quarter of 2020, as we all know that the novel coronavirus broke out and it has inevitably influenced the entire country and the world, our media portal and video businesses were no exception. So as the leading mainstream media platform, we try to live upto the responsibility by releasing real-time special events and launching live broadcast across our core products, including the Sohu News and Sohu Video apps. The news and broadcasters distributed the latest news and information about the epidemic in real-time, we also invited many well-known medical experts and expressed their views and their advice on prevention and encouraged our viewers to comment interactively. To date, we have completed around 200 live broadcasts and press conferences related to the epidemic. And with the outbreak of the novel coronavirus, the overall economic environment and the advertising business, in particular, are experiencing an extremely difficult time. At the same time, we noticed some advertisers actively adjusting their marketing promotion strategies. So we are closely collaborating together with advertisers to go through this challenging time and minimize the inactive users [ph]. Basically, our user bases actually grow and for our news media, but definitely there are advertising business is hit negatively. So next, turning to Sogou. Sogou maintained a steady progress in 2019 driven by the dedication to continuously drive organic traffic growth and unlock the monetization potential. During 2019, Sogou Search remained China's second largest search engine, and the search revenue continues to grow faster than the industry average. Sogou consistently improves colleagues search and services, strengths into their content and service ecosystem. Sogou's mobile keyboard increased it's user base to 464 million DAUs, with 54% more daily voice request on average year-over-year. The revenue from Sogou's recommendation service that leverage the mobile keyboard continue to experience robust growth. Further in 2019, Sogou made great advances across it's core language-sensed AI technologies and the smart hardware business, maintain a healthy momentum. Lastly, it for Changyou. In 2019 Changyou took a number of steps to enhance it's capacity to create new high quality games focusing on it's go of developing top games, prioritize research and develop R&D for mobile game development and continue to work hard on strengthening their existing gaming portfolio. For PC games, the new expansion pack for TLBB PC launched the during the fourth quarter performed well, and it's revenue rose slightly on a sequential basis, which is better than previously expected. The fourth quarter 2018 revenue from Legacy TLBB Mobile increased significantly on a sequential basis. This was mainly attributable to newly introduced content and the promotional events during the fourth quarter. Looking ahead, Changyou will continue to execute these core strategy building top games as future focus will continue to be MMORPG mobile games. They will also seek to make breakthroughs in developed casual and strategic games. So, now let me turn to Joanna who will walk through our financial results. Joanna?

Thank you, Charles. I will walk you through the key financials of our four major segments. For the fourth quarter and full year of 2019, all of the numbers that I will mention are all on a non-GAAP basis. You may find a reconciliation for non-GAAP to GAAP measures on our IR website. For Sohu Media Portal, quarterly revenues were $23 million, quarterly loss was $25 million. For Sohu Video, quarterly revenues were $22 million, and quarterly loss was $18 million. Excluding Sogou and Changyou, non-GAAP net loss was $46 million compared with a net loss of $75 million in the fourth quarter of 2018, and the net loss of $63 million in the third quarter of 2019. For full year 2019, Sohu Media Portal revenues were $95 million, and the full year net loss was $130 million. Sohu Video revenues were $91 million, and the full year net loss was $94 million. Excluding Sogou and Changyou, non-GAAP net loss was $246 million compared with net loss of $326 million in 2018. For Sogou, quarterly revenues were $301 million, up 1% year-over-year and down 4% quarter-over-quarter. Net income was $39 million compared with net income of $27 million in the same quarter last year. For full year 2019, it's total revenues were $1.17 billion, up 4% compared with 2018. Net income was $105 million compared with net income of $130 million in 2018. For Changyou, quarterly revenues were $135 million, up 35% year-over-year and 23% quarter-over-quarter. Changyou posted net income of $63 million compared with net income of $23 million in the same quarter last year. For full year 2019, Changyou's revenues were $465 million, up 1% compared with 2018. Changyou posted net income of $179 million compared with net income of $123 million in 2018. For the first quarter of 2020, we expect total revenues to be between $400 million and $435 million. Brand advertising revenues to be between $25 million and $30 million, this implies annual decrease of 40% to 42%, and a sequential increase of 28% to 40%. Sogou revenues to be between $240 million and $260 million, this implies annual decrease of 5% to annual increase of 3%, and a sequential decrease of 14% to 20%. Online gaming revenue to be between $120 million and $140 million; this implies annual increase of 21% to 31% and a sequential decrease of 1% to 9%. Non-GAAP net loss attributable to Sohu.com Limited to be between $25 million and $35 million. And non-GAAP loss for fully diluted EPS to be between $0.65 and $0.90. GAAP net loss attributable to Sohu.com Limited to be between $28 million and $38 million. And GAAP loss for fully diluted EPS to be between $0.70 and $0.95. Excluding Sogou and Changyou, non-GAAP net loss attributable to Sohu.com Limited to be between $43 million and $48 million. GAAP net loss attributable to Sohu.com Limited to be between $45 million and $50 million. For the first quarter of 2020 guidance, we used a presumed exchange rate of RMB7 to $1 which compares with the actual exchange rate of RMB6.74 to $1 for the first quarter of 2019, and RMB6.03 to $1 for the fourth quarter of 2019. This forecast reflects Sohu's maintenance costs and preliminary review which at present is subject to substantial uncertainty, particularly in view of the potential impact of the COVID-19 virus; the effects of which are difficult to analyze and predict. Lastly, please be reminded that we won't take questions regarding China's privatization proposal in the coming session. And this concludes our prepared remarks. Operator, we would now like to open the call for questions.

Certainly. [Operator Instructions] The first questions will come from Eddie Leung from Bank of America. Please go ahead.

Good evening, guys. Thank you for taking my questions. Could you talk a little bit about the top advertising industries for your news media pieces in the fourth quarter? And then, in the first quarter which advertising industries are seeing a thicker negative impact from the coronavirus outbreak than the others? And then secondly, about the video business, we are not able to see the detailed breakdown of the balance sheets of different business units. So just wondering, if the video business would need a capital raising? And how is the cash flow of the video business doing for -- especially, given the continuous need for production in 2020? Thank you.

In Q4, the top advertising industry is still the auto, right Joanna?

Yes, yes.

Auto and -- I'd say real estate, or what's the -- range in Joanna? What's in Q4 before the coronavirus outbreak?

Internet service.

Internet services and IT, right?

Yes.

Ecommerce; well, it's basically the traditional order you would say, you know, the -- then after the outbreak of the coronavirus, I think the -- I think real estate and auto are all impacted and also the luxury goods -- the -- basically, it's -- basically, nearly all the industry -- all across the board are attracted because there is not a consumption. And also the delivery, logistics, and all these -- so everything; so that's why we see across the board a decline of advertising. But the -- we do see more consumption of video content, long form dramas, so our -- we see us -- our video subscription revenue grow. And also, online game is a mix; online gaming, people are spending more time at home and playing PC games. There is a positive contribution to the game, consuming MMO-RPG [ph], but for the mobile games because of our -- employees are staying home, so that's kind of delayed our development work. So that's contributed negatively; so for online gaming, it's a mix, probably a positive impact but for brand advertising, it's really bad. And for a video game -- online video it's good, it's a lot of more -- revenue grow nicely. Eddie?

Charles, I was wondering long video business, use of cash and kind of like a cash balance for 2020? Thanks.

So, we've been having -- we're having this low budget strategy, basically for each video; for each drama we spend like RMB15 million RMB or RMB20 million at most; RMB20 million apiece, a drama. And through embedded advertising and also subscription and effective marketing on different sort of network platforms, so we -- you know, we try to make it a breakeven, so basically, that's why. And also, we have -- we have limited number of productions, actually in 2019 a lot of the revenues are from our -- basically, our previous past productions, we have a whole library of in-house produced or produced a video, I mean, dramas -- that are generating continued -- generating revenue. And we still have -- we have -- by the way launched a new -- we launched in Q4 -- we're actually to one in the -- the season two of this [indiscernible]. And we still have another three -- two more video -- two more months already basically done, you know, filmed and edited, ready to lease but for any further new drama to be filmed, it needs to be -- to wait for the coronavirus to subside and to -- to people -- you know, basically you can have actress or actors to wear facial mask to play the role, right.

Got that. Thank you, Charles.

So because we're consuming the past production libraries, we're not investing -- spending a lot of money on producing new shows; so that's why you see our subscription business continue to grow, and we -- actually the cost is down.

Thank you.

Thank you for the questions. Next questions comes from the line of Alicia Yap from Citigroup. Please go ahead.

Hi, good evening, Charles, and Joanna. Thanks for taking my questions. I have questions on the guidance for the brand advertising. So unfortunate this outbreak has costing a lot -- a lot of the negative impact; so with your 30% to 40% year-over-year decline; how much of that should we expect for the video to decline and then versus the portal? And then in your view, when do you expect the app sentiment to really recover? And do you expect a full year 2020 to experience massive growth for Brand-X [ph] revenue? Thank you.

I think the -- both the portal and -- the brand on the portal and on the video side are the hit, I think equally; basically, both are affected on this proportionally, same, similarly. But we expect that if the -- you know, if we people get back to work and the economy starts turning, starting again; then we expect an uptick, basically a strong rebound because a lot of our advertisers are ready to spend money because their need -- we have new products, really needed to new markets; so they are ready. And actually, in 2019, you can you see that we cut our loss, right, by -- you know, the Q4, if you compare the Q4 with 2018 Q4, we cut the loss by excluding Sogou and Changyou, the media business and video business, we cut loss by -- how much, that was $30.9 million, right $75 million to $46 million, right. So $29 million cut. So actually we buy -- you know, the cost saving initiatives like spending less money on channels, on all these -- and also on the content, but at same time we are improving our Sogou and other original content, and so actually our user base are holding steady and we're spending less money on marketing but our user base actually grow. And -- but the whole economy is slowing down but we are holding our advertising in 2019, actually already created some momentum. If without the coronavirus, we extract -- you know, we would have expected that our advertising continued to hold on and even to rebound. And then, our cost continue to go down; so it's -- so that is -- so we expect that in later part of Q2, I think the -- we want to regain the momentum that we accumulated in 2019 for the advertising top line. And also to consolidate to the user base growth that we observed in the last two months. During the coronavirus, you know, people staying home have more time and people are watching -- people need to consume not only video games and drama, but people need to get information and reliable information, that's why they turn to Sohu. So the Sohu News actually is more trustworthy brand because it's such a historical -- it's a long -- it's a brand that people trust, because for the years it's -- so, actually we see the news consumption is higher than the industry average compared with some other news portals.

Thank you, Charles. Can I ask one quick follow-up on the Olympics. So given the Summer Olympics is not far away, have you actually got some discussions or the budget commitment from some of the advertisers for the sponsorship that will actually help on the media portal business or perhaps lead a bit onto the video business as well? Thank you.

Yes, it was all planned before the coronavirus because actually, as I said, we meant we can -- and we have some momentum created for advertising, and that includes a lot of events we did in Q4 and Q3. And we planned all those events for 2020 because with events and the people, sponsors -- you know, advertising has sponsored, that includes the Olympics, the Tokyo Olympics. And also, we have this news marathon, we have this talent show for -- all this event are all in the hot, you know, basically still -- so we are -- everything is standing still, basically. We don't know we will -- we don't know when the Olympic will be held, it's -- ROC Japan and also the ROC International has had different opinions, they say that probably end of the year. And then, we'll plan our accordingly; so we don't have any -- we definitely have advertising committed to those events which was very -- all these events we had in 2019 was very successful and people were willing to pay up to advertise. But -- and then all these events are with a lot of uncertainties, whether we can do that, because it's all planned events, a lot of people gathering and that's a great risk of exposure to the virus.

No problem. Thank you, Charles. I hope the virus event go over very, very soon. Thank you.

Thank you. So, many events are -- it's like -- like some of those companies -- some real estate companies or auto companies, the -- now aggressively are exploring these live broadcast marketing, that's why we are actually still getting some advertising in Q1 because some of the car companies and the real estate companies use our live broadcast platform to promote their -- to launch their new products. And that's the -- it will be in 2020 you'll see a lot more things like that happening. People will move all things online.

Okay, great. Thank you. All the best.

Thank you for the questions. Our next question comes from the line of Thomas Chong from Jefferies Please go ahead.

Hi, good evening. Thanks management for taking my questions. I have a question regarding our revenue mix in our portal advertising. What's the contribution for SME? And on that regard, how should we think about the competition from short-form video? Thank you.

You mean the competition from short-form video? What do you mean?

Because we are seeing the short-form video companies grabbing a lot of advertising budget from SME. So just wondering how we should think about our SME advertising trend going forward in light of competition? Thank you, Charles.

Yes. I think maybe Sogou has some -- probably Xiaochuan can answer your question about the SME impact due to you -- like, you're talking about [indiscernible], right, and all those, right? But…

And also, because our Sohu Media News app also has an SME revenue contribution; so just wondering whether our Sohu Media ads or our video SME spending factor…

First of all, the SME income represent a small part of our brand, our advertising revenue or -- and also -- so that part, since it's so small and it's basically remained steady or in 2019, and our focus in 2019 was really on the brand advertising and the brand advertising -- that is very hard to look for those -- to take it away from us because the brand trust and also the unique events that we have and reporting the original content, all these things; so we're not -- we're actually consolidated the brand advertising -- basically that territory that we are consolidated in 2019. So if you look at the whole picture of 2019, why we can have such a cost-saving? Because we cut the channel and the marketing costs, and same time maintain the user base steady, steady stabilizes the user base, and even for the H5 [ph], Sohu -- Sohu H5 portal -- work portal, we actually grow. And also, focus -- really focus on the brand advertising and original reporting, quality content, and also all these events like 5G conference, AI conference, all those conference forum that created the content, and also the Sohu marathon, Sohu fashion show, all these events; those events and it's just -- that we're just in a different category; so the large brand is the advertise. So, we are not affected by the uprising -- I mean, the [indiscernible]. No.

Got it. Thank you, Charles.

Thank you for the questions. [Operator Instructions].

So, if I -- you know, I think you can ask your question but I want to -- in the scripted -- in the part that it's not -- I don't think it's getting the right -- these really, the elements -- it's really about this quarter. The key that after many, many quarters in 2019, we're able to stabilize our advertising revenue, and grow our video subscription and consolidate and stabilize our user base, and even grow in H5 category and then, dramatically cut the cost so that we achieve together with Sogou and Changyou's contribution; we achieved a profitable quarter, non-GAAP, that's the key of this quarter. If without -- if the coronavirus outbreak didn't happen, we'll continue that trend to be continually to be non-GAAP -- Sohu non-GAAP profitable into 2020, that's the key of this quarter results. Because the strategy, we'll continue to execute that strategy, basically to grow our user base which is growing nicely during the last two months and also continue the momentum of brand advertising, and at the same time to develop -- and also the video subscription business. And at the same time we developed our social network products that can -- we hope that we will explore. So that's the strategy but without -- with this coronavirus, in the first quarter our advertising investment, especially this brand advertising that needs a lot of discussion offline to design the kind of events for our advertisers that people cannot meet in person, so our brand advertising definitely impacted but the people still have faith or the goodwill in us. So after if this fades, if this coronavirus fade or actually in China, it seems under control, you know it's turning, it's kind of turning in a good sign; so that in Q2 if the whole business rebounded, I think our -- we'll regain our momentum in our brand advertising and also continue this trend of getting profitable. That's the key of this quarter.

Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for your participations. You may now disconnect your lines.