Phoenix New Media Ltd (FENG) 2023 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to Phoenix New Media First Quarter 2023 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Muzi Guo from IR Department. Please go ahead.

Thank you, operator. Welcome to Phoenix New Media's First Quarter 2023 Earnings Conference Call. The quarterly financial results and webcast of this conference call are available on our website at ir.ifeng.com. A replay of the call will be available on the website in a few hours. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Please refer to our safe harbor statement in our earnings press release, which applies to this call as well. Also unless otherwise stated, all figures mentioned during the conference call are in RMB.

Joining us on the call today are Mr. Yusheng Sun, Chairman of the Board and Chief Executive Officer; and Mr. Edward Lu, Chief Financial Officer.

Mr. Sun became our CEO at the end of March, and this is his first time participating in the call. He has brought a wealth of experience and expertise to our company, and we are excited to have him leading us.

Without further ado, I will now turn the call over to him to offer his greetings. I will be translating for him afterwards.

(foreign language)

[Interpreted] [I'll be translating for Mr. Sun.] Dear investors and shareholders, greetings to everyone. My name is Yusheng Sun, and it is my pleasure to join Phoenix New Media as CEO and work with this exceptional team. This is my first time participating in the investor conference call, and I am honored to be here. I will do my best to take the company to a new level in the future.

Currently, Phoenix New Media and its industry are facing numerous challenges. We need to analyze the underlying causes, identify breakthroughs, and clarify the direction of our development.

Our goal is to continue to evolve into a world-class Chinese online media platform, with a focus on maximizing content dissemination, influence and profitability. To achieve this, we must sustain our emphasis on creating and curating unique, high-quality content, while expanding revenue streams and exercising fiscal prudence.

As we move forward, we must explore and innovate in areas such as operations, management, talent acquisition, and fostering team enthusiasm and creativity, in order to realize our development objectives. With the collective efforts of everyone in the company, I am confident that Phoenix New Media has a promising future. Thank you for your ongoing support and I look forward to achieving further success together.

And today, I will also like to take the opportunity to thank Mr. Shuang Liu, who took the company public over 10 years ago and also led the company to develop to the current stage as CEO. He resigned from the company for personal reasons at the end of March. And here, we thank him for his contribution over the past years and wish him all the best in his future endeavor. Thank you.

This concludes Mr. Sun's greetings. I will now turn the call over to our CFO, Mr. Edward Lu, who will first read the prepared remarks on behalf of Mr. Sun, and then go through the financial results. After the prepared remarks, we will open the call to questions. Edward, please go ahead.

Thank you, Muzi. In the first quarter of 2023, we continued to demonstrate our leading role in news reporting and hot topics curation. During the government's two-sessions event, our video column, "Dialogues with Delegates", interviewed 26 delegates, and received extensive media exposure and market attention, ranking 20 times on the hot search list on Douyin and Weibo. Our easy-to-share long posters themed "New Journey, New Achievement, New Responsibilities" highlighted the Premier's" press conference, government's work report and popular proposals, and was widely reposted across the Internet.

More importantly, the two sessions are a vital platform for China to communicate with the rest of the world. Topics hotly discussed during this year's two sessions, such as "gender equality", "how to cope with low birth rate and aging population" and "bias against vocational education," are also areas of concern for many countries.

In our signature series, "Dialogues with the World", we delved into the broader implications of these issues. For example, we interviewed the Norwegian Ambassador to China, Sigrid Kaag, during the two sessions, jointly exploring Sino-Norwegian relations and social hot topics, triggering extensive discussions on both domestic and overseas social media platforms.

Additionally, our original columns have provided in-depth and multi-angled commentaries on the key proposals and hot topics discussed during the two sessions, including the proposed increase in the threshold for personal income tax, raising of retirement age and pension reform, and whether the children of criminals should be barred from working in civil service. The commentary published by our opinion column "The Message" on the latter topic, quickly became the top search on nearly all platforms. The article struck a balance between professional depth and public acceptance, offering a systematic analysis of the theme of justice in criminal law.

It was read by tens of millions of people across multiple platforms and reposted by nearly 30 mainstream media accounts leading to countless discussions that continued for about a week, underscoring the value of "The Message" as a content brand. Our reputation for breaking news and event coverage has not only boosted our media influence, but also generated revenue through sponsored content. Our coverage of the two sessions in various formats - interviews, opinion pieces, videos, animations and posters - was all sponsored by advertisers, helping us meet our first-quarter advertising revenue target. In addition to news and hot topics, we also expanded our influence in industry verticals. The "Wutong Night Talk" held by iFeng Finance channel at the Bo'ao Forum for Asia attracted distinguished guests and reinforced our academic characteristics in the finance and economics area. We also hosted two high-profile forums in Macau and Changbaishan with relevant topics appearing on 10 hot searches and nearly 1 billion views on Weibo, highlighting the significant media influence of iFeng Finance. In the automobile vertical, The iFeng Global Auto Ceremony brought together 150 attendees and presented 21 awards covering mainstream Chinese auto makers. We jointly released an industry report, 'Global Automotive Consumer Survey 2023,' with consulting firm Deloitte, further solidifying iFeng Auto's authority and expertise in the industry.

The live broadcast and promotion for this event exceeded 40 million views, with the hashtag topic #Are fuel vehicles really losing the market? stirring heated discussions across various media outlets. We continued to build our video and live broadcasting product pipeline to diversify our premium content offerings and support monetization. "Journey" captured the lives of ordinary people in mini-documentaries, while "The Hero Sports League" invited Olympic champions to join in public welfare initiatives, bringing sports spirit and supplies such as books and clothes to children in rural areas. "Hometown" (inaudible) centered around rural revitalization, while "Cultural Live Room" and "the Cover" explored cultural and financial hot topics in live broadcasting format. These content products provided a variety of custom marketing solutions to our advertisers, catering to diversified brand communication needs.

For our iFeng app, we added a subscription feature to better capture user interests and preferences and customized push notifications according to the patterns of subscriptions. This resulted in a 28% increase in the app's opening rate quarter-over-quarter with 24% of DAU coming from push notifications. For video content recommendations, we optimized the immersive video style and recommendation logic, resulting in a 26% increase in click-through rates of immersive videos, a 25% increase in average plays per person and a 12% increase in playtime quarter-over-quarter. These combined optimizations resulted in a 6% increase in average time spent per user quarter-over-quarter, reaching a new high in recent years.

Moving on to revenue diversification. Our online reading business line continued to partner with other industry players to lease our newly signed books. Our self-made audiobook, "The Opening of the Ming Dynasty" surpassed 1 million plays in just 15 day, along with other works made to the top 100 in the new book list on Himalaya.

In the real estate business, we met our internal target for Q1 revenue and collection of payments. While the property market seeing a rebound, we actively promoted our brand through product promotion events in major cities, demonstrating our value to the industry and our clients. In terms of content, we launched the "Good Housing Reports" action in cooperation with China Quality News, focusing on the completion and the delivery of real properties with emphasis on the improvement of quality, contributing to consumer confidence.

Furthermore, our e-commerce business exceeded the target GMV in Q1. In January and February, we focused on holiday gifts, and shifted to seasonal demand in March, highlighting the category of bedding and clothing. For live broadcasting e-commerce, we have collaborated with major overseas brands that are tailored to the profile of our users on the third-party platforms, to further monetize the value of our accounts and the user base.

In summary, we continued to enrich our content offerings, strengthen our media influence, and enhanced the user experience of our app during the first quarter. Going forward, we will continue to drive operational and monetization efficiency. This will help us to achieve our financial objectives and develop into a more robust, adaptable, and efficient organization. This concludes our CEO, Mr. Sun's prepared remarks.

I will now walk you through our financial performance for the first quarter of 2023. All figures mentioned will be in RMB.

Our total revenues were 146.4 million, as compared to 175.4 million in the same period of last year.

To elaborate, net advertising revenues were 126.2 million compared to 158.4 million in the same period of last year. The decrease was mainly due to the reduction in advertising spending of advertisers in certain industries and the intensified industry-wide competition.

Paid services revenues were 20.2 million, compared to 17 million in the same period of last year. The increase was mainly due to the increase in the revenues from certain IP copyright sales.

Loss from operations was 74.4 million narrowing by 30.3% year-over-year, as a result of strict cost control measures implemented.

Net loss attributable to iFeng was 57.8 million, narrowing by 27.5% year-over-year.

Moving on to our balance sheet. As of March 31, 2023, the Company's cash and cash equivalents, term deposits, short-term investments and restricted cash were RMB 1.13 billion, or approximately USD 164.1 million.

Finally, I'd like to provide our business outlook for the second quarter of 2023. We are forecasting total revenues to be between 160.9 million and 180.9 million. For net advertising revenues, we are forecasting between 148 million and 163 million. For paid service revenues, we are forecasting between 12.9 million and 17.9 million. These forecasts reflect 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 Instructions) Our first question comes from the line of Xueru Zhang from 86Research.

Could you kindly provide insight into the factors contributing to a decline in Q1 net revenues? Additionally, I would appreciate hearing your outlook for the ad business in the coming quarters.

Thank you for your question. Actually, in Q1 2023, the recovery of the overall advertising market was a little bit below expectation. According to market research reports, the overall advertising market declined year-over-year in January and February, and advertisers were also cautious with their spending.

When it comes to industries, the FMCG industry, including food, beverages, and especially alcoholic beverages, remained the driving force of the advertising market. The cosmetics and bathroom products industries also made a comeback in the top-ranking list.

These are the industries we focused on expanding in the first quarter, and we achieved milestone progress by completing some major campaigns or signing framework contracts. Also, with the decline of brand advertising by traditional car makers, we are placing more weight on AI new energy vehicles, domestic brands in general, and especially those who are growing their overseas market, as they are placing more emphasis on branding. Brand advertising has been declining in recent years as short-term growth and sales pressures have been a priority for many. However, as the market returns to normal, the importance of branding has increased. Customers are more focused on building brand value through high-quality media channels, and laying a foundation for long-term brand building in the future.

Actually this is what we are best at - using high-quality content and creativity to convey value. In the first quarter, we attracted sponsorships for our coverage of the two sessions and numerous IP content in finance, public welfare, and other fields. Currently, we are also laying out innovative marketing projects centered around themes such as "Rural Revitalization", "Golden Diplomacy Season", and "Telling the Story of Chinese Enterprises," to create customized brand story series products for our clients.

We are also leveraging our capabilities in organizing large-scale events and integrating resources to serve more to B and to G clients, helping them achieve their marketing goals. That's my answer to your questions, Xueru.

Our next question comes from the line of Alice Tang from First Shanghai.

So we can see that the company's operating income has improved year-over-year. Was this mainly due to cost control? Are there any other plans to cut down costs further?

Actually, this is a very good question. In order to improve operational efficiency, we have done a lot of cost optimization in the past year, including staff costs, selling, G&A and R&D expenses, all of which have seen significant reductions. This was already reflected in the first quarter of this year with operating expenses decreasing by 26.6%. But to be honest, at this stage, there is not much room for further significant cost cut, but we will continue to focus on the return on investment of our expenses, and fine-tuning our cost structure, and make adjustments as needed. Our main goal this year is to strive for more revenue, which is also crucial for returning to breakeven and achieving profitability in the long run. Thank you, Alice.

I am showing no further questions. I would now like to turn the conference back to the management team for closing remarks.

Thank you. We have now come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you again for joining us today on the call. Have a good day.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.