Ladies and gentlemen, thank you standing by and good evening. Thank you for joining Sohu's First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management prepared remarks, there will be a question-and-answer session. Today’s conference call is being recorded. If you have any objection you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Eric Yuan, Investor Relations, Director of Sohu. Please go ahead, sir.

Thanks, operator. And thank you for joining us today to discuss Sohu's first quarter 2015 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang; President and CFO, Carol Yu. Also with us from Changyou is Co-CEO, Dewen Chen, as well as COO of Sogou, Xiaochuan Wang; Vice President of Sohu and COO of Sohu Video, Ye Deng; VP Finance of Sohu, Steven Sim. Before management begins their prepared remarks, I would like to remind here of the company's Safe Harbor statement in connection with today's conference call. Except for 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 containing any forward-looking statement. For more information about the potential risks and uncertainties, please refer to the company's filings with Securities and Exchange Commission including its registration statement and most recent Annual Report on Form 10-K. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thank you. And thanks to everyone for joining our call. I am pleased to report a solid quarter as our group's total revenues reached $455 million, up 25% year-over-year, which exceeded the high end of our prior guidance by $15 million. We saw encouraging trends across all of our key business lines. For Sohu Media Portal, we were proactively expanding the customer base, as our popular mobile news products News App enable us to offer cross screen advertising solutions for both large brand and small SME customers. Sohu Video advertising revenues grew 57% year-over-year, mainly driven by faster mobile monetization. For Sogou, its revenue performance was better than we had expected as mobile search made a greater contribution, and we continued to grow substantially faster than the overall search industry. For Changyou, in the first quarter, both top-line and the bottom-line comfortably topped our prior guidance, as our major games continued to deliver solid performance. Looking ahead, while TLBB PC and 3D mobile games will continue to generate steady cash flows for us, as the current portfolio is gradually maturing, our main focus is to bring out an abundant and diversified mix of new games, especially mobile games to the market. Before I get in more details of our key businesses, let me summarize our financial results for the first quarter of 2015. Total revenue were $455 [ph] million, up 25% year-over-year and down 5% quarter-over-quarter. Net brand advertising revenue $134 million, up 20% year-over-year and down 9% quarter-over-quarter. Of this, revenues of Sohu Media Portal, or Sohu.com ex-video, were $45 million, up 2% year-over-year. Revenues of Sohu Video were $50 million, up 57% year-over-year. Sogou revenues a $116 million, up 66% year-over-year and down 3% quarter-over-quarter. Online game revenues a $185 million, up 13% year-over-year and flat quarter-on-quarter. Non-GAAP…

Thank you, Charles. [Foreign Language] In the first quarter Sogou maintained a solid growth momentum, aggregate the traffic increase by 60% year-over-year and of that mobile goods traffic jumped a 130%. As expected our mobile search traffic rose across PC traffic at some point this year. At the same time, the monthly active users of Sogou Mobile Keyboard grew to $220 million since this mobile APP hit iPhone, in the third quarter of 2014 which have further solidified its leadership position. [Foreign Language] On the product launch, we continue to deepen our cooperation with Tencent to further differentiate our search product, for example we enhanced Weixin Headlines feature to recommend Weixin content that better matches the inter video preferences of users. In addition, we have continuously improved the quality of mobile search. We have been stating as average related to Natural Language Processing and Machine Learning, many of research funding has been applied to optimize search results based on voice, image and location among others. All of this improvement are helping to differentiate our products and improve search quality and prepare for us in mobile search traffic. [Foreign Language] Financially, Sogou's first quarter revenues were $116 million, up 66% year-on-year beating our prior guidance. Mobile search revenues contributed 22% of total search revenues from just over 10% a year ago, driven by healthy growth in both traffic and monetization. We recorded non-GAAP operating income of $16 million compared with only $500,000 in the same period of 2014, improved profitability means that we are financially capable of increasing investments on the mobile front to capture greater market opportunities in 2015. I will now like to turn the call over to our VP of Finance, Steven, who will walk you through the group’s financial result.

Thank you, Xiaochuan. I will walk you through the financials for our key business lines for the first quarter. The profit and loss numbers mentioned below are all on a non-GAAP basis, first brand ad business. In the first quarter net brand advertising revenues were $134 million, up 20% year-over-year and down 9% quarter-over-quarter. Of this, revenues of Sohu Media Portal were $45 million, up 2% year-over-year. The segment posted modest profit which was better than the slight loss from the same period of 2014. Revenues of Sohu Videos were $50 million, up 57% year-over-year with widening new loss as compared to the same period last year due to higher content acquisition and bandwidth cost. Second, Sogou. For the first quarter total revenues were $116 million, up 66% year-over-year and down 3% quarter-over-quarter. Of this, search related revenues were $91 million, up 77% year-over-year and down 3% quarter-over-quarter. Before non-controlling interest, Sogou posted net income of $60 million, as compared to $3 million in the prior year. Third, Changyou. For the first quarter, total revenues including 17173.com were $209 million, up 15% year-over-year, and down 3% quarter-over-quarter. Before non-controlling interest, Changyou posted net income of $52 million versus net loss of $90 million in the prior year. For the group, in the first quarter, total revenues were $455 million, up 25% year-over-year and down 5% quarter-over-quarter. Non-GAAP net loss attributable to Sohu.com Inc. was $25 million or $0.66 loss per fully-diluted share. This compare to our prior guidance of $0.95 to $1.05 loss. The smaller loss was nearly due to better than expected profit contributor from Changyou as its games revenue topped our expectation. Now let me provide our outlook for the second quarter of 2015. We are expecting total revenues to be between $460 million and $490 million. Brand…

Thanks, Steven. In the first quarter, our overall financial performance was better than we had expected. Notably, Sogou continued to deliver robust revenue growth coupled with decent profit. For Sohu Media Portal, we made good progress on developing more small and medium enterprise customers and derive increased revenues from them. For Changyou, TLBB PC and 3D mobile games both performed well and its margin rebounded meaningfully from 2014. For the rest of 2015, we will continue to invest in key initiatives which can drive our long-term growth, while keep a streamlined cost structure. This concludes our prepared remarks. Operator we will now like to open the call to questions.

Certainly, ma’am. [Operator Instructions] Your first question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.

Good evening. Thank you taking my question. I am wondering if Charles could give us an update on his thought on the video industry, both in terms of opportunities and competitive landscape? Thank you.

Well, the video industry at current high cost of content and value [ph] is still at a loss, so I hope that first of all the competition for the head content, especially the TV dramas and domestic variety shows, the competition will you know, loosen up and through that the price will depend – will become favorable to the strategic companies. And also there is new business model emerging, especially the PGC, like the Professional Generated or Video Generated Content which basically its free and also new advertising business model that can actually scale monetize these PGC content. And also for the movies the subscription or paid models emerge. So I think these are the factors that probably will be able to make the video business sustainable because as current type of business it’s not sustainable, because the content is just 320 [ph]

Understood. Thank you.

Thank you. Your next question comes from the line of Alicia Yap from Barclays. Please ask your question.

Hi. Good evening, everyone. Thanks for taking my questions. My question is regarding the search Sogou business. So how much is the percentage of search revenue come from medical and healthcare sector? And just wondering have been able to benefit from any of the disruptions from the Putian incidents at our competitor and also have you seen any advertiser categories to be benefit from our deeper collaborations with Tencent Weixin partnership? Thank you.

[Foreign Language] So the medical industry contributed 20% of search revenues and the Putian development has no impact on Sogou's revenue growth. [Foreign Language] With these Weixin gives a competitive edge as through differentiation, but it has now direct implication on advertising categories and most importantly Weixin has brought a significant run off [ph] to our mobile search traffic.

No, I just wondering because given Weixin, the product, social [ph] graphic will we able to get more advertiser category, maybe from e-commerce or something like that?

[Foreign Language] We have actually started to yes, leverage some users profile, leverage some user data to improve the quality of mobile search and we believe for the long-term we are going benefit to attract more advertisers to our platform.

Okay. Great. Thank you.

Thank you. Your next question comes from the line of [indiscernible] from Credit Suisse. Please ask your question.

Hi. First a quick follow up on the previous question. So for the user traffic, for the mobile search traffic you ratified Weixin, do you guys need to pay any sort of a traffic acquisition cost to Tencent?

No.

So zero cost?

Zero cost, yes.

Thank you. And my second question is on video, is sort of a housekeeping question. And we understand due to the tightening regulation, as the TV drama is and still I am not be able to stream some of your licensed of those TV dramas, such as the Big Bang Theory as previously scheduled…

You mean the US importing dramas, right?

Yes, yes. So…

Imported, okay.

Just wonder from accounting perspective, will you guys need to book any impairment on the licensing rise for those expected TV dramas? Thank you.

No. Because its – so its regulation, so its book accounting. So there is no – so since we are not broadcasting the content yet, so we are not booking revenues. So we are not getting income. So we not paying the – paying the seller.

I see. Thank you.

Thank you. Your next questioncomes from the line ofChi Tsang from HSBC. Please ask your question.

Hi, this is Alex, calling on behalf of Chi. Thank you for taking my question. I have three questions. The first I want to know so who is plan for spin off of Sogou, is there any more color about it. The second question is about video top line for 2015, how much is perched and how much is in-house developed. The last one is a housekeeping question, how many customers are now is in search business? Thank you.

Well, you first question, there is no color on it, so no comments. Second question is, I think though we – that we made some successful in-house production, like Diors Maintenance, but its still - the in-house production is still representing a very small percentage of our content portfolio, on content assemble. Certainly the – what was third…

[Foreign Language] Okay. The number of search advertisers for Sogou is around 3000.

Okay. Thank you very much.

Thank you. Your next question comes from the line of Natalie Wu from CICC. Please ask your question.

Hi. Thanks for taking my question. I had two questions if I may. The first is further related to the – your advertisers profile on PC and mobile. Can you update us especially top three advertiser sectors for your brand ad, as well as search ad, and I am wondering if there is any difference between PC and mobile. And the second is, as you mentioned before the competitions for online video sector is becoming more and more fierce, just wondering will there be any possibility that newer collaborator with some players along the value chain? Thank you.

[Foreign Language]

Yes, its still – so on the portal advertising, is still rent by – the top line is power [ph] [indiscernible] industry and followed by IT, electronics and also e-commerce. Yes, especially e-commerce and so that we are open up to many smaller SMEs or some start up the companies who are promoting their APPs and all these online application products.

And e-commerce, have you also included the e-commerce business, around focus – focused of the end? Your estimate on…

No, e-commerce is basically is like toolbar [ph] this is a source that’s promoting their products, the inventory – inventories on the Sogou portal, especially on the mobile front...

I see. Thank you. And what about the search, and Sogou search ad?

[Foreign Language] So for the search business the top three are sectors on both PC and mobile at [indiscernible] it’s roughly e-commerce, the healthcare and gaming.

Thank you. And about online video?

Online video, what's your question?

Especially on…

I think online video is part of the Sogou group’s media portfolio, I mean, media offerings, so its - I think keep it winning the total group, so that becomes about better reporting…

Okay. Thanks.

Thank you. Your next question comes from the line of Owen Joe [ph] from Morgan Stanley. Please ask your question.

Hi, good evening. Thank you for taking my question. I have two questions. The first one is on the video content budget. We noticed that the first quarter has high rise, high year rise on the video content budget, what should we expect in the remaining quarters. And my second question is on the mobile search monetization moving trend, to what extent of your CPC and RPM, the gap between PC and mobile search? Thank you.

Yes, the common cost of video for Q1 and Q2 are similar, so it’s – yes, and in the second half of the year the cost will be lower. We secured a top content in Q2.

Thank you.

[Foreign Language] So mobile search monetization capability is around 50 to – is around 83% of our PC level and CPC is – has a small gap, with the PC level.

Thank you. Your next question comes from the line of Thomas Chong from Citigroup. Please ask your question.

Hi. Thanks for taking my questions. I have three questions. The first one is about content cost, can management provide some color about the year-on-year increase for your committed content cost for this year. And second question is about the mobile search, can management provide us some color about the source of the traffic, is still maturity comes from Sogou [ph] browser. And thirdly is about the portal business, can management provide us some color about the mobile portal revenue contribution trends?

So the common cost, you mean basically the video content, right?

Yes.

That’s a big part. So compare with last year the video content cost rise 50%. So if you look at even our revenue growth at 57%, but still the cost is also up. So that still add – video business still at a loss. And mobile revenue of the portal business, our portal business is one third, yes.

[Foreign Language] So mobile per traffic is still a majority comes from future mobile browser, but we are also developing our own organic search traffic, which is actually out growing our overall mobile search traffic at Sogou.

I see. Thanks.

Thank you. Your next question comes from the line of Fang Li from Goldman Sachs. Please ask your question.

Hi, Charles, Carol, Steven and Eric, thank you for taking my question. So I have two questions. First one is Sogou Media Portal revenues are up 2% year-on-year this quarter, actually it’s a bit weaker than our expectation. Could the management share with us what reason behind this relative below expectation result, and what's your mind technician plan in the coming quarters? And second one is about Sogou, so the non-GAAP margins trend up very nicely from 8.5% in fiscal year 2014 to 13.8% this quarter. So could management share with us the main reason behind this improved operating leverage? Thank you.

Yes, I think the first of all the reason for the portal business basically are flattish growth, is first of all the last year the quarter was a – you mean the Q2, okay, okay, so Q1. So it’s basically Sogou portal is really in transition. We're looking at is the revenue shift from basically PC to mobile and the mobile revenue growing nicely and also especially the small media enterprises this new build model is start to emerge but at a lower – a smaller base. Well, we see a rapid growth of traffic from mobile side, but we see some decline in the PC traffic. And so that’s – so basically the mobile business is in transition, but it’s moving toward a more healthy mix or a structure of the news model. So we are looking at in Q2 the growth will be more.

[Foreign Language] I think you're right, Sogou's margin is actually trending up and search business is great, has a great business model as long you have more traffic, you have sort of greater monetization capability and revenue it naturally scales up, this gives us a certain operating leverage, that’s why we can grow our profits at a faster pace than revenues.

Yes, I also want to caution our management comment on, so although our company growth is flat 11% about –because it actually, the cost reduction is slightly a better structured or transitioned, you know, are moving into – so actually reduction, the cost is been reduced by 15%, so actually we are making a profit.

Thank you, Charles it’s very helpful.