Phoenix New Media Ltd (FENG) 2024 Q2 法說會逐字稿

Good day and thank you for standing by. Welcome to Phoenix New Media second-quarter 2024 earnings call. (Operator Instructions)

Please be advised that today's conference is being recorded. I will now hand the conference over to your first speaker today, Muzi Guo from IR Department. Please go ahead.

Thank you, operator. Welcome to Phoenix New Media's earnings conference call for the second 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 start with an overview of our quarterly results, followed by a Q&A session. You can find the quarterly results as well as the webcast of this conference call on our website at ir.ifeng.com.

Before the management's prepared remarks, I would like to draw your attention to our Safe Harbor statement contained in our earnings press release, which also pertains to our forward-looking statements during this call. Additionally, please note that unless otherwise specified, all figures mentioned throughout this conference call are in RMB.

Now I will pass the call to Mr. Sun, our CEO, for his opening remarks. I will provide the translation.

(spoken in foreign language)

(spoken in foreign language)

Hello, everyone. The year 2024 is already halfway over. Our operations have remained generally stable, and we have achieved our performance targets, significantly reducing losses. In the second quarter, we effectively enhanced Phoenix's media influence through high-quality content and news reporting, coupled with extensive online distribution, laying a solid foundation for commercialization. Simultaneously, we continued to refine our products, optimize user experience, and foster innovation in both content and commercial products. In the second half of the year, we will continue to work with full dedication to achieve our annual operational goals to reduce losses year-over-year.

Now, I will invite Edward to provide a more detailed summary of our second-quarter performance on my behalf. Edward, please go ahead.

Thank you, Ms. Guo.

In the second quarter, we successfully covered a series of major events, achieving extensive reach across the internet. Among the most significant international news stories in the second quarter was the death of the Iranian President in a plane crash. Our detailed reports included a clear timeline and thorough analysis. We quickly produced multiple original pieces, providing exclusive insights into the crash’s cause, analyzing Iran's future political landscape, and discussing the country's military capabilities. Our original series worked well together to offer comprehensive and in-depth perspectives.

Beyond major news events, we consistently produced original programs, ensuring a steady supply of high-quality content that garnered wide distribution and discussion, enhancing our brand's advertising value. The in-depth investigative series “Eye of the Storm” continued to excel in high-quality, in-depth coverage of trending topics. It delivered over 20 original articles with over 100,000 reads on Weixin, and several with over 300,000 reads, earning praise for its commitment to objective and ethical journalism on controversial issues.

Our original video series, “Phoenix Lab,” targeting towards a younger demographic, focused on creating practical consumer guides across various scenarios, addressing consumer concerns, and providing quality oversight. In Q2, “Phoenix Lab” produced 23 original long videos, 72 original short videos, and two major industry event reports. One long video became a hit on Bilibili, with over a million views, and the series achieved a total of 1.7 billion views across platforms. The “Phoenix Lab” Bilibili accounts surpassed 1 million follower milestone in Q2, establishing itself as a leading consumer product review IP.

Quality content requires broad distribution channels and effective user reach. In the second quarter, our followers and influence on third-party social media platforms grew steadily. Our team developed differentiated operational strategies tailored to each platform, enhancing dissemination through trending topics, interactive discussions, and live broadcasts. We now have approximately 170 million active followers across all platforms. We have developed several “key accounts” on different platforms, with rapidly growing follower bases and commercial value. For example, our Douyin account is approaching the 20 million follower milestone. The advertising revenue from these third-party platform accounts also achieved double-digit growth year-on-year.

On the commercial front, we maintained positive momentum in the first half of the year. We expanded our efforts in the public sector beyond traditional cultural and tourism promotions to include local industry bureaus and associations. Our services extended from provincial and city levels to county levels, achieving year-on-year growth. In terms of international marketing, we made significant strides in meeting clients’ needs for overseas expansion. Our successful execution of several oversea campaigns, such as a brand's international sourcing project in New Zealand and various award events, resulted in widely discussed articles and videos on Weibo, Facebook, and Twitter. These efforts effectively communicated the open, confident, and socially responsible image of Chinese brands, garnering widespread recognition from overseas audiences.

In the second half of the year, we will continue to establish ourselves as a leading new media outlet. We will focus on strengthening our team's professional capabilities, producing quality content, refining our products, and optimizing user experience. This is the core of our competitiveness as an internet media company. At the same time, we will focus on further improving our operational efficiency and monetization capabilities to strengthen our position.

This concludes our CEO, Mr. Sun's prepared remarks. I will now walk you through our financial performance for the second quarter of 2024. All figures mentioned will be in RMB.

Our total revenues were 168.3 million, compared to 180.2 million in the same period of last year. Specifically, net advertising revenues were 154.7 million, compared to 161.8 million in the same period of last year. Paid services revenues were 13.6 million, compared to 18.4 million in the same period of last year.

Cost of revenues in the second quarter of 2024 decreased by 17.2% to 102.9 million from 124.3 million in the same period of last year, resulting in an increase in gross margin from 31% to 38.9%.

Loss from operations was 8.9 million, a significant improvement compared to a loss from operations of 35.7 million in the same period of last year, as a result of strict cost control measures implemented.

Net loss attributable to iFeng was 5.5 million, compared to net loss attributable to iFeng of 31.3 million in the same period of last year.

Moving on to our balance sheet. As of June 30, 2024, the Company's cash and cash equivalents, term deposits, short-term investments, and restricted cash were 989.1 million, or approximately USD136.1 million.

Finally, I'd like to provide our business outlook for the third quarter of 2024. We are forecasting total revenues to be between 151.6 million and 166.6 million. For net advertising revenues, we are forecasting between 142.3 million and 152.3 million. For paid service revenues, we are forecasting between 9.3 million and 14.3 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) Alice Tang, First Shanghai.

Hi. Good morning. Thank you for taking my question. So the growth rate of the internet advertising market seems to be slowing down. So could the management please share their views on the forward advertising market and discuss the relevant measures the company is planning on taking to respond to the current market environment, please?

Thank you for the question. Actually, from the market data for the first half of 2024, the overall internet media ad spending has experienced a year-over-year decline. Despite this, our advertising revenue for the first half of the year has remained stable with a slight increase, which is not easy.

Especially in the automotive sector, traditionally one of our strong areas, ad spending has dropped even further. To keep up our revenue, we need to step out of our comfort zone and make breakthroughs in other industry sectors. In the first half of the year, we saw significant growth in key areas like alcoholic beverages, FMCG, and public sector.

Our premium IP content and high-end interviews align well with the branding needs of alcoholic beverage clients, leading to steady, long-term ad spending. In the FMCG sector, we have utilized our specialized team and trendy, youthful content to attract more clients. In the public sector, we have been helping cities and counties showcase their history, culture, and attractions, making them stand out and build strong city brand images.

Looking ahead to the second half of the year, our international marketing efforts also look promising. With the ongoing Paris Olympics, we are working with many brands on overseas event marketing. Our clients appreciate Phoenix's international image, content reach, and ability to execute overseas campaigns, and we are confident we can continue to grow this area.

Of course, we have got challenges too. For the sectors that are declining, we need to keep adjusting our strategies. Plus, with the overall trend of lower per-customer transactions, we need to work hard to bring in more clients and orders to hit our revenue goals.

Thank you, Alice. Thank you again.

Thank you for the questions. I see no further questions at this time. I will now turn the conference back to Muzi.

Thank you. This concludes our Q&A session and conference call. If you have any additional questions, please don't hesitate to reach out to us. Thank you for joining us and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.