Phoenix New Media Limited (FENG) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Phoenix New Media Fourth Quarter 2024 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Muzi Guo from Investor Relations. Please go ahead.

Thank you, operator. Welcome to Phoenix New Media's Earnings Conference Call for the Fourth Quarter of 2024. On today's call, we will begin with an overview of our quarter result followed by a Q&A session. You can find our quarterly financial results and the webcast of this conference call on our website at ir.ifeng.com. Before we continue, please note our safe harbor statement included in the earnings press release, which also applies to any forward-looking statements made on this call. Additionally, unless otherwise specified, all figures mentioned are in RMB. Joining me here today are our CEO, Mr. Yusheng Sun; and our CFO, Mr. Edward Lu. Now I will pass the call to Mr. Sun for his opening remarks. I will provide the translation.

[Foreign Language]

[Interpreted] Hello, everyone, and welcome. Over the past year, we remain committed to the professionalism and quality of our content. Thanks to the hard work and close collaboration of our team, we achieved year-on-year revenue growth. In the fourth quarter, we demonstrated both professionalism and speed in our news coverage, earning widespread recognition. Our original content IP continued to innovate. Our events showcase our social responsibility, and our efforts in commercialization also made progress. These achievements have strengthened our influence and laid a solid foundation for our future development. Now I will invite Edward to provide a more detailed summary of our fourth quarter performance on my behalf.

Thank you, Mizu. In the first quarter of 2024, we showcased our professional expertise and innovative spirit across multiple business areas, delivering high-quality content and services to users while staying competitive in the market. Our coverage of major news events showcased our rapid response and professional depth particularly during the U.S. election and South Korea's martial law crisis. In November, we launched a real-time vote count product becoming the first domestic online to announce the U.S. election results. Our swing states only feature and the on-the-ground video series take you inside the U.S. election, garnered millions of views and trended across the Internet. In December, when South Korea declared martial law, we sprung into action immediately. We quickly supplemented event details and continuously compiled edited and interpreted content to provide a fuller picture while integrating live streaming, which attracted over 27 million views across platforms. Our in-depth analysis about South Korea's First Lady in Kim Keon-hee earned praise from peers and gained strong traction online. We also distributed our exclusive interviews with the women who confronted the army across our channels, highlighting FENG's distinct edge in global news reporting. During the quarter, our original columns and IPs delivered both excellent data and widespread praise. Tang Bohu, our in-depth commentary series, broke down the Korean plane crash with technical precision hitting 250 million views on Weibo topics, topping the trending list, a new high for the column. In finance, cover story landed an exclusive chat with XPENG motor's CEO at the Paris Motor Show, racking up 19 million new trending on Douyin, Toutiao and beyond. Our video IP journey shared the inspiring story of a girl who lost her hearing in infancy and made a remarkable journey to become a post-doctoral fellow totaling 67 million views. Meanwhile, the Phoenix leading WeChat account explored Nobel Laureate's Han Kang's achievements in-depth, with the article widely responded and praised by industry peers. This quarter, we also put off several impactful events that reflected our cultural values and the commitment to social good. The 2024 China power person of the year Gala seen the technology for good honored those using tech to better society and boost human well-being. The auction and charity gala seemed the cross-border trust sustainability focused on the needs of underserved communities and the social inclusion with philanthropists from various platforms, sharing ideas and solutions, amplifying our influence in public welfare. Our strength in content, distribution and brand value supported our advertising base, driving our revenue uptick for the year despite tough market conditions. We also pushed in paid services launching a mini program-driven mobile business in Q4 that tapped into Douyin, Kuaishou and WeChat traffic ecosystems fueling rapid growth. Overall, in Q4 2024, we earned recognition from users and industry through the professionalism, speed and the depth of our content while laying the groundwork for future operations through commercial exploration. We understand that a media's online value lies not only in sharing news but also in its commitment to social responsibility. We will continue striving to deliver higher quality content to users, creating sustainable social and commercial value. This concludes our CEO, Mr. Sun's prepared remarks. I will now walk you through our financial performance for the fourth quarter of 2024. All figures mentioned will be in RMB. Our total revenues were CNY 218.1 million, representing a 3% increase year-on-year from CNY 211.8 million. Specifically, net advertising revenues were CNY 189 million compared to CNY 197 million in the same period of last paid services were CNY 29.1 million represents 96.6% increase year-on-year from CNY 14.8 million, primarily driven by revenue generated from our new digital reading services offered through mini-programs on third-party applications. Cost of revenues was CNY 121.1 million, slightly up from CNY 120.5 million year-on-year. Gross margin for the fourth quarter improved to 44.5%, up from 43.1% in the same period of last year. Total operating expenses were CNY 90.3 million, reflecting a 32% increase year-on-year from CNY 68.4 million. This increase was primarily due to higher sales and marketing expenses incurred for the new digital reading services mentioned earlier. Income from operations was CNY 6.7 million compared to CNY 22.9 million in the same period of last year. Net loss attributable to ifeng was CNY 3.6 million. compared to net income attributable to ifeng of CNY 8.1 million in the same period of last year. Moving on to balance sheet. As of December 31, 2024, the company's cash and cash equivalents, term deposits, short-term investments and the restricted cash totaled CNY 1.05 billion or approximately USD 143.3 million. Finally, I'd like to provide our business outlook. For the first quarter of 2025, we forecast total revenues to be between CNY 147 million and CNY 162 million. For net advertising revenues, we project between CNY 112 million and CNY 122 million. While for paid service revenues, we project between CNY 35 million and CNY 40 million, this focus reflects our current and preliminary view, which is subject to change and substantial uncertainties. This concludes the prepared portion of our call. We are now ready for questions. Operator, please go ahead.

[Operator Instructions] First question comes from Xueru Zhang from 86Research.

I have one question regarding the paid service revenue. We have observed substantial increase in this revenue stream during the fourth quarter. Could management please elaborate on the underlying factors contributing to this growth trajectory?

Okay. Actually, the growth in paid services revenue stems from our paid short story novel business launched on third-party platform mini programs Xiaohongshu, tapping into traffic ecosystems like Douyin, Kuaishou and WeChat. This brought in notable revenue gains. Related promotion fees have been recorded under sales and marketing expenses, keeping the overall profit and margin actually very quite modest. As a newly launched venture, although we expect a strong year-over-year growth in the near term, but the business remains small in scale, we will focus its profit contribution and keep evaluating its performance. Thank you.

Next, we have [ Troy Hsu ] from First Shanghai.

My name is [ Troy ] from First Shanghai Group, and I appreciate the opportunity to ask your questions. Over the past, the company saw an increase in advertising revenue despite a broader slowdown in online advertising market. Could you please share the strategies used to attract advertisers?

Actually, overall, it was down to 2 key approach. First, our sales team has shifted to industry-specific divisions. This allowed us on specific sectors to streamline resources allocation and sped up innovation. For example, we achieved growth in the public sector, securing promotional budgets from local tourism and cultural bureaus. In the FMCG sector, an experienced leader led a skilled team using useful trendy content to boost our revenue. Second, we have accelerated the innovation in content sources and upgraded our marketing product to respond more quickly to market shifts. This includes tailoring international marketing strategies for companies expanding overseas and boosting content distribution on short video platforms. Yes. I hope I have answered your question. Thank you.

Thank you. This concludes the Q&A session. I will now hand 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.