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Operator: Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu’s First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a Q&A session. 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.

Huang Pu: Thanks, operator. Thank you for joining us to discuss Sohu’s first quarter 2025 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and the 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 common 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 events. 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 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 recently annual report on Form 20-F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Charles Zhang: Thanks, Huang Pu, and thank you, everyone for joining our call. In the first quarter of 2025, both our marketing services revenues, this is formerly known as the brand advertising revenue and non-GAAP bottom line performance reached the high end of our previous guidance, while our online game revenues were well above our expectations. For the Sohu Media platform, in addition to devoting efforts in product requirements and technology improvements, we continue to concentrate on strengthening these distinctive social features, social network features of our platform. Through various unique events, we were able to engage with more users, while promoting vigorous social interactions and distribution on our platform, and generating massive premium content at the same time.

Leveraging our competitive advantage as a mainstream media platform and our unique IPs, we proactively explore greater monetization of opportunities. Online games business also achieved a satisfactory performance, thanks to the high quality content updates and continual improvements to our games. Before going into each business unit in more detail, let me first give you a quick overview of our financial performance. For the first quarter of 2025, total revenues $136 million, down 3% year-over-year and up 1% quarter-over-quarter. Marketing services revenues were $14 million, down 15% year-over-year and 27% quarter-over-quarter. Online game revenues, $117 million flat year-over-year and up 7% quarter-over-quarter. GAAP net income attributable to Sohu.com Limited was $182 million compared with a net loss of $25 million in the first quarter of 2024 and a net loss of $21 million in the fourth quarter of 2024.

In this quarter, the company reversed a tax expense that had been previously recognized as an uncertain tax position and its related accrued interest expense at approximately $199 million. Excluding this, non-GAAP net loss attributable to Sohu.com Limited was $16 million compared with a net loss of $22 million in the first quarter of 2024 and a net loss of $15 million in the fourth quarter of 2024. Now I will go through our key businesses in more detail. First, Sohu Media platform. We continuously optimized our products and with cutting-edge technologies, while further strengthening the social features — social network features. By strategically integrating resources across our platforms and leveraging the synergies created by our unique off-line events, we successfully attracted a wide range of broadcasters, who are also our users from diverse fields and greatly increased their engagement.

These helped to generate more high quality content, further promote online social interaction and distribution and ultimately build a vibrant and dynamic social community on our platform. In April, we successfully hosted the 2025 Spring Convention of the Sohu Video influencers [indiscernible] Haidian, in Beijing, where we gathered hundreds of pop stars, KOLs and broadcasters and users in diverse verticals such as K-pop and Chinese customers handful among others. This event offered a chance not only for enthusiastic participants with similar interest to connect and share in person, but also for them to get to know and interact with those in different fields and thus further boosted the vitality of our platform. This quarter, we also hosted our traditional flagship event, the 17th Sohu News Marathon, Sohu News Marathon in Weihai City.

As an influential cross-border marathon in China, this season’s event continued to be presented through immersive live broadcasting, attracting both online and offline participants — participation. This event not only generated a large amount of content from real-time updates posted by runners during the marathon and other derivative content after the race. They also promoted continuous social disseminations of related content and supported by the active social atmosphere on our platform. And we also — we continue to attract users and audiences as well as advertisers with a distinctive physics class, Charles Physics class IP. In April, I was invited to give a physical — physics lecture at Beijing Planetarium [indiscernible], reflecting a wide recognition of the class of the physics class brand and Sohu’s leading position in popularization of physics sciences.

At the same time, we continue to explore the monetization potential of this IP and its derivatives such as everything has physics — physical principles along with [indiscernible] in various scenarios. For example, we combined the physics class with famous exhibitions such as the 2025 China AWE, the Appliance and Electronics World Expo in Shanghai and also 2025 Shanghai International Auto Industry Exhibition — Automobile Industry Exhibition Shanghai [indiscernible]. In these exhibitions, we provided audiences with live explanations of the physics principles involved in integrating the exhibited products and which effectively build up connections between advertisers and audiences. Through these efforts, we were able to provide advertisers with customized marketing solutions and further demonstrated our unique monetization value.

Besides the content generated from the above events, we also proactively expanded our content library. During the quarter, we released several original dramas and American TV series, while introducing a large number of short dramas, among which Mystic Tales, Bu Si Yi: Zhi Guai and other American TV episodes like Mandalorian were well received by our audiences. Next, turning to our online game business. During the quarter, our online game business performed well with revenues exceeding our prior guidance. In our PC game business, we rolled out various holiday events around Chinese New Year and Valentine’s Day as well as promotional events for regular TLBB PC. In addition to holiday events, we upgraded a character development system for TLBB Vintage to give players a whole new gaming experience.

For Legacy TLBB Mobile, we launched an expansion pack to celebrate the Chinese New Year, featuring a variety of festival theme, the gameplay and rich benefit for players. Thanks to these efforts, both player engagement and revenue for this game remained stable on a sequential basis. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to further keep players engaged. As market competition intensifies and user demand for quality and innovation continues to rise, we will forge ahead with our top game strategy, staying true to our user centric philosophy. We’ll continue to optimize our R&D process and enhance execution to improve efficiency and product success rate. With these efforts, we look to bring more high quality games to the market.

Specifically, in terms of product development, we are actively exploring opportunities to unlock the potential of our TLBB IP. Meanwhile, as we maintain our core competitiveness in MMORPGs, we will diversify our portfolio with multiple types of games, including card-based RPGs, sports games and casual games and expand our portfolio for global markets. Now let me give an update on the ongoing share repurchase program. As of May 15 this year, 2025, Sohu had repurchased 5.5 million ADS for an aggregate cost of approximately $67 million. With that, I will now turn to our CFO, Joanna. Joanna, please.

Joanna Lv: Thank you, Charles. I will now walk you through the key financials of our major segments for the first quarter of 2025. All numbers are on a non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our IR website. For Sohu Media platform, quarterly revenues were $70 million compared with $20 million in the same quarter last year. Quarterly operating loss was $70 million compared with an operating loss of $74 million in the same quarter last year. For Changyou, quarterly revenues $180 million compared with $190 million in the same quarter last year. Quarterly operating profit, $55 million, flat with the same quarter last year. For the second quarter of 2025, we expect marketing services revenues to be between $60 million and $70 million.

This implies annual decrease of 14% to 19% and a sequential increase of 17% to 24%. Online game revenues to be between $96 million and $106 million. This implies an annual decrease of 28% to 35% and a sequential decrease of 10% to 18%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $20 million and $30 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: Thank you, management. [Operator Instructions] First question comes from Thomas Chong of Jefferies. Please go ahead.

Thomas Chong: Hi. Good evening. Thanks, management for taking my questions. My first question is about our marketing services. Can management comment about the recent trend in advertising sentiment? And how is it across different categories such as FMCG, IT, auto, food and electronics and what should — how should we think about the second half advertising outlook? Should we expect a recovery trend in advertising momentum in the second half? And my second question is about AI. Can management comment about how AI benefit our advertising and online games operations? Are we seeing our eCPM or traffic benefits from better recommendation? And also for gaming, we are seeing efficiencies or productivity increase in our gaming business? Thank you.

Charles Zhang: Okay. The first question is about the marketing services, which is formerly called advertising. And in this quarter, the sector-wise, auto is doing better, and yeah, 26% (ph). So auto is doing better and IT services stay stable and FMCG is stable, but luxury goods and alcohol is not — is that the spending is dropping a little bit. So that’s the overall situation. And yeah, so we have auto advertising or marketing services, 26%; and IT services, 17%; and FMCG 16%. For the second half, I think, well, probably similar, right? The economy is still not doing well, and so, we will only expect — look forward to talk to our — the social network platform to have an accelerated growth so that we have a much larger platform so that we can get a larger market share of the advertising market.

Your second question is about the AI impact, right? So first of all, AI and DeepSeek development. So first of all, the — since our platform — media platform now take the social network as our center strategy, and social network is really people-to-people interaction. It has relatively less exposure to AI and large model or DeepSeek — large language model and DeepSeek. Unlike, those information retrieval services like search engines or the recommendations. Yeah, we do have the recommendations on our Sohu News app and the Sohu Video. But now we — those video and news app, the strategy is centered around the social network. So it has less exposure or less impact by this. So, of course, we can take advantage of the AI development or the advent of AI to improve some efficiency, but it’s kind of like generation of content or some abstracts of the articles and also for the live streaming and video tools to do live streaming and the subtitles or the digital image or all those kind of things to help our users to — with better tools, that’s kind of beneficial, but it’s marginal.

It’s not that big. So, what I’m saying is that the AI development pose as kind of a threat or kind of impact to certain companies that mainly depend on information retrieval providing retrieval. But for us, now with the social network strategy, we have less exposure to this kind of threat. Yeah. On online game, I think AI impact, it’s beneficial, right? It’s better, right? It helps.

Huang Pu: [Foreign Language]

Unidentified Company Representative: [Foreign Language]

Huang Pu: [Interpreted] We have largely applied AI technology in terms of art design, art production, UI design, the audio effect design and the material for marketing. It has greatly improved our efficiency. We’ve also achieved some progress in terms of the planning in terms — through the ways to make AI to learn by themselves. Thank you.

Thomas Chong: Thank you.

Operator: Thank you for the questions. One moment for the next question. The next question comes from Alicia Yap of Citigroup. Please go ahead.

Alicia Yap: Hello. Thank you. Good evening, Charles and management. Thanks for taking my questions. I have two, three questions. First is that, I wanted to follow-up on the AI. Just wondering which AI model Sohu is currently integrating or incorporate into your gaming? Are you using DeepSeek or other comparable AI large language model? And then, I understand you mentioned about social network on your media, which is less impacted. But if you were to incorporate that into your search and recommended functions within your Sohu portal, which — again, which AI models or tools that you will be using? I assume you’re not going to develop your own large language model. So this is the first question. Thank you.

Charles Zhang: Yeah. Both in our Sohu Video app and the Sohu News app, both now are social network centered application, but it also has this recommendation channels and also search engine — search box. Both of them are integrating some DeepSeek and also some open — we actually developed — based on some open source language model, we developed ourselves based on some open source language model.

Huang Pu: [Foreign Language]

Unidentified Company Representative: [Foreign Language]

Huang Pu: [Interpreted] For online gaming business, we’ve employed different kinds of AI tools, a lot of different AI large language models to be used in the production of different aspects, for example, for the art design, for the audio or music, for video production. We also developed our own AI agent that can vary conveniently based on our own needs and demand to integrate different AI tools to automatically finish the job.

Alicia Yap: Okay. Thank you. My second question — my second question is, I actually not quite understand the tax reversal. So, can you elaborate again, what is — which business is that is related to that tax reversal that you have to gain this quarter?

Charles Zhang: Tax reversal.

Alicia Yap: The tax gain that you actually have.

Charles Zhang: Okay. Tax, I think it’s accounting issue. So let me let Joanna to expand.

Joanna Lv: This is mainly accounting treatment. The nature is on certain tax method, which is calculated by weighted average basis according to different possibility. Now that the uncertainty is gone. So, in this quarter, we totally reversed the expense.

Alicia Yap: I see. Is that related to the Sohu Media business or it’s the gaming business?

Joanna Lv: Sohu.

Charles Zhang: Sohu company. Sohu Company.

Alicia Yap: Okay. I see.

Charles Zhang: It’s accounting — yes, it’s accounting issue. So, it’s not — just the uncertainty now become a certainty. So, there’s no actually cash flow or real money flowing. So it’s just accounting.

Alicia Yap: I see. Okay. And then last question. I know — I mean, maybe now we have less risk, but obviously, this whole ADR delisting risk is on and off, right, as the headwinds or the noises. Just in the event is that risks go up again, it’s the management or are we thinking about any of the alternatives, like, for example, coming back to Hong Kong for the secondary listing? I appreciate any comment on that.

Charles Zhang: Well, it’s still up in the air, basically, it’s not — we will just — when anything happens, we will have — now we don’t have any — because it’s not happening, right? It’s just a kind of speculation. So…

Alicia Yap: I see. But if there’s really coming, then you obviously have an alternative plan that you actually are already thinking about it.

Charles Zhang: Not thinking about it. So when it happens, we’ll start thinking about it.

Alicia Yap: Okay. All right. Great. Thank you.

Charles Zhang: We always have time, right? We don’t — we are not in — we are not a company that has to be listed, right? We can have a period of time that is not listed, right? So we always have time to think about those things, right?

Alicia Yap: Okay. All right. Okay. Great. Thank you. Thank you so much, Charles. Thank you for the answer.

Operator: Thank you for the questions. [Operator Instructions] There are currently no further questions at this time. That concludes today’s conference call. Thank you all for participating. You may now disconnect your lines.