Phoenix New Media - Q1 2024

Transcript

Operator (participant)

Good day and thank you for standing by. Welcome to Phoenix New Media First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the call over to Muzi Guo from IR Department. Thank you. Please go ahead.

Muzi Guo (Investor Relations Manager)

Thank you, Operator. Welcome to Phoenix New Media's Earnings Conference Call for the first quarter of 2024. Joining me here today are our CEO, Mr. Yusheng Sun, and our CFO, Mr. Edward Lu. During this call, our management team will begin by providing an overview of quarterly results, followed by a Q&A session. You can find the financial results for the first quarter of 2024 as well as the webcast of this conference call on our website at ir.ifeng.com. A replay of this call will also be made available on the website within the next few hours. Before we proceed, I would like to draw your attention to our Safe Harbor Statement, which can be found in our earnings press release. This statement is important as it pertains to our forward-looking statements during the call.

Additionally, please note that unless otherwise specified, all figures mentioned throughout this conference call are in our. Now I would like to pass the call to Mr. Sun, our CEO, for his opening remarks. I will provide a translation. Sun Zong.

Yusheng Sun (CEO)

[Foreign language] 好。各位投资人大家好，很高兴今天向大家汇报公司24年第一季度的经营进展，并与各位交流大家关心的问题。2024年第一季度开局良好，虽然宏观环境仍然充满不确定性，但从第一季度的结果看，团队克服了很多困难，完成了业绩目标。内容方面，我们坚守媒体定位，持续输出优质内容，巩固品牌价值和影响力。产品方面，我们积极更新迭代；广告销售方面，我们聚焦行业策略，将内容与行业客户需求更好地匹配。我们希望保持良好的运行态势，努力实现全年的经营目标。下面请吕靖带我做更详细的第一季度经营总结。

Muzi Guo (Investor Relations Manager)

[Foreign language] 好的，谢谢孙总。 I will provide the translation now. Hello everyone, I'm pleased to report on the company's operational progress in the first quarter of 2024 and engage in discussions on topics of interest. The first quarter of 2024 started off well. Despite the ongoing macroeconomic uncertainties, the team overcame many challenges and achieved our performance targets. On the content front, we remained committed to our media values, consistently delivering high-quality content to strengthen brand value and influence. We continuously optimized and iterated our content and ad products. In advertising sales, we focused on industry strategies, aligning content with the needs of industry clients. We aim to maintain this positive operational momentum and strive to achieve our annual operational objectives. Now I will invite Edward to provide a more detailed summary of our first quarter results. Edward, please go ahead.

Edward Lu (CFO)

In the first quarter of 2024, we made significant progress in extending our media influence, thereby driving the successful monetization of our content. We continue to lead in reporting major news events, achieving excellent audience reach and engagement. During the Taiwan leadership election, we stood out as the sole mainland-based news app offering real-time coverage, excelling in speed distribution and content quality. We collaborated with contributors from various perspectives, and our comprehensive articles were widely republished by major mainland and Taiwanese media outlets. In February, our journalists in international affairs provided live coverage from the Munich Security Conference. Our in-depth article titled "Munich Unfolded" gained significant exposure and readership on our news app and third-party social media platforms.

It received praise from experts at renowned institutions such as Peking University, the Chinese Academy of Social Sciences, and Tsinghua University, as well as recognition from other mainstream media outlets such as Sanlian Life Weekly, Caixin, and CGTN. This further solidified Phoenix Media's influence in international affairs. In addition to on-site updates, we published the same short videos on third-party video platforms, garnering over 3 million views and tens of millions of exposures through media reports. In the growing sector of culture and tourism, we persisted in enhancing our content product offerings through collaboration with local authorities, capitalizing on our content creation and event management expertise. The second finance and economics event, Changbai Mountain Forum, was organized in collaboration with regional culture and tourism bureaus and sponsored by local businesses and corporations.

The event boasted distinguished guests from academia, politics, and influential key opinion leaders set against the scenic backdrop of snow mountains. The forum featured skiing carnivals and elevated guest experiences. It garnered significant media coverage, serving as a prime example of effective brand marketing in the culture and tourism industry. Our original investigative series, "Eye of the Storm," remained dedicated to delivering high-quality, in-depth reporting on trending topics, producing several articles that surpassed the 100,000 views benchmark on WeChat. Beyond achieving significant traffic, "Eye of the Storm" earned acclaim from its principled stance on contentious issues, upholding media ethics and values. In January, the finance channel responsible for producing "Eye of the Storm" was honored with the Good News Award from the China Banking Association, acknowledging Phoenix Finance's positive impact on the financial sector. Our presence on third-party platforms continued to grow in the first quarter.

Our WeChat video platform account gained 400,000 new followers, surpassing 3 million in total, reflecting our commitment to producing captivating content for a broader reach. During the March explosion in Hebei, our Douyin account livestreamed the scene, drawing in over 1 million viewers. In total, this livestream and the subsequent short videos garnered 46 million cumulative views and attracted 18,000 new followers, reinforcing our reputation for being consistent on the scene for breaking news and enhancing user engagement. Our content initiatives yield tangible business outcomes in Q1, following the restructuring of our sales department last year. Sales and content strategies were better attuned to industry needs, resulting in growth across diverse sectors. We observed clear industry strategies and enhanced market penetration. While the restructuring boosted professionalism and efficiency in market development, additionally, there was notable improvement in content support and collaboration.

Q1 net advertising revenue exceeded expectations, marking a 10% year-on-year increase. Overall, in Q1, we continue to enrich our content offerings, bolster our media influence, and strengthen content monetization. Looking forward, challenges persist. In the face of tighter client budgets and heightened competition, cost control throughout project execution is paramount to ensure profitability. Nevertheless, we are confident in our ability to enhance operational and commercial efficiency and achieve our business objectives in the upcoming quarter. This concludes our CEO, Mr. Sun's prepared remarks. I will now walk you through our financial performance for the first quarter of 2024. All figures mentioned will be in RMB. Our total revenues were RMB 153 million, representing an increase of 4.5%, RMB 146.4 million in the same period of last year. To elaborate, net advertising revenues were RMB 138.6 million, representing an increase of 9.8% from RMB 126.2 million in the same period of last year.

Paid services revenue were RMB 14.4 million compared to RMB 20.2 million in the same period of last year. The decrease was mainly due to the decline in the revenues from licensing of certain copyrighted content and in e-commerce revenues. Cost of revenues in the first quarter of 2024 decreased by 7.7% to RMB 109 million from RMB 118.1 million in the same period of last year. The gross margin in the first quarter of 2024 increased to 28.8% from 19.3% as a result of strict cost control measures implemented. Loss from operations was RMB 36.5 million compared to loss from operations of RMB 74.4 million in the same period of last year. Net loss attributable to Ifeng was RMB 26 million compared to net loss attributable to Ifeng of RMB 57.8 million in the same period of last year. Moving on to our balance sheet.

As of March 31st, 2024, the company's cash and cash equivalent term deposits, short-term investments, and restricted cash were RMB 1.03 billion, or approximately $143 million. Finally, I'd like to provide our business outlook for the second quarter of 2024. We are forecasting total revenues to be between RMB 150.2 million-RMB 165.2 million. For net advertising revenues, we are forecasting between RMB 141.9 million and RMB 151.9 million. For paid service revenues, we are forecasting between RMB 8.3 million and RMB 13.3 million. This forecast reflects our current and preliminary view, which are subject to changes and substantial uncertainties. This concludes the prepared portion of our call. We are now ready for questions. Operator, please go ahead.

Operator (participant)

Thank you. As a reminder to ask questions, please press star 11 and wait for a name to be announced. One moment for the first question. Our first question comes from Alice Tang from First Shanghai. Please go ahead.

Alice Tang (Equity Research Analyst)

Good morning. Thank you for taking my question. The company achieved revenue growth in the first quarter. Could management please discuss your views on the current advertising market in the first quarter, as well as the opportunities and challenges for company revenue and expectations for the second quarter, please? Thank you.

Edward Lu (CFO)

Hi, Alice. Thank you for the question. Actually, the advertising market showed a promising trend in the first quarter of this year. We believe it aligns with the recovery of economic environment with a slight year-on-year increase. However, according to third-party industry data, the growth was mainly concentrated in offline advertising, such as elevators and train stations. Internet advertising, on the other hand, experienced a significant double-digit decline in such a market environment. Achieving year-on-year growth was particularly challenging for us. Our Q1 results showed that our organizational restructuring last year was quite effective, which focused more on meeting our clients' industry demands. Specifically, we observed strong growth in the food and beverage industry, especially in alcoholic beverages. Entertainment, leisure, online services, and electronic products industries also experienced growth, which is consistent with the overall performance of the advertising market segmented by industry.

It also was mentioned that we made significant progress on the monetization of our third-party social media accounts. Through a stable fan base and precise content marketing, we attracted top new energy vehicle companies that primarily focus on internet marketing. Additionally, we attracted many new clients in consumer electronics, food and beverage, and cosmetics. The advertising market in 2024 still holds growth potential, but we understand that with macroeconomic changes and increased competition, advertisers may manage advertising budgets more cautiously. We need to accurately grasp advertisers' needs and adjust our strategies. Also, I think we need to ensure the company's cost efficiency puts profits first above all else. Thank you, Alice.

Alice Tang (Equity Research Analyst)

Thank you, Edward.

Operator (participant)

Thank you for the questions. There are no more questions from the line. I would like to hand the call back to Muzi Guo for closing remarks.

Muzi Guo (Investor Relations Manager)

Thank you. That concludes our earnings conference call. Please feel free to contact us if you have any further questions. Thank you for joining us today on this conference call. Have a good day.

Operator (participant)

That does conclude today's conference. You may now disconnect. Thank you for all your participation.