Phoenix New Media Ltd Q3 FY2023 Earnings Call

Good day and thank you for standing by. Welcome to Phoenix New Media Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Muzi Guo from Investor Relations Department. Please go ahead.

Thank you, operator. Welcome to Phoenix New Media's earnings conference call for the third quarter of 2023. 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 our quarterly results, followed by a Q&A session. You can find the financial results for the third quarter of 2023 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 RMB. Now I will pass the call over to Mr. Sun, our CEO, for his opening remarks. I will provide the translation.

Hello, everyone. In the second half of the year, we are navigating a macro environment filled with uncertainties. This challenging backdrop has created headwinds in our advertising business. However, in these trying times, it's imperative that we remain faithful to our core values and competencies, and at the same time, we must proactively adapt our decision-making processes and innovation strategies to quickly respond to the ever-evolving market. We need to clarify our core competency, which is news. We will continue to leverage our advantage in news coverage and create an irreplaceable content quality that sets us apart from others, thus better supporting our content marketing efforts. Next, Edward will provide a more detailed rundown of our operation in the third quarter. Edward, please go ahead.

Thank you, Muzi. During the third quarter, we focused on maintaining the quality of our content as a mainstream media outlet. In the current unpredictable global environment, trustworthiness has become crucial for our users. Since the start of the Israel-Palestine conflict, we have published over 100 news updates and articles, positioning ourselves as the primary resource for following the developments of the crisis. Our content has seen significant sharing among users, leading to a considerable increase in traffic, with hot topics accounting for 30% of new visits. We provided live coverage under the title Live from the Israel-Palestine Conflict Zone at the Gaza Border, where our journalist reported from Sderot, the nearest city to the conflict zone, less than one kilometer away. The report focused on the local residents, the city's circumstances, and the on-ground reality, offering valuable insights for our audience. Throughout the Asian Games, we maintained a close watch, gaining extensive exposure and attention on various social media platforms. Our sports and video channels produced nearly 100 short videos, amassing a total of 37 million views. Overall, our Phoenix News accounts on Douyin gained 3.31 million new followers in the third quarter, surpassing a total of 10 million. We are dedicated to maximizing our content dissemination and enhancing our business potential on social media. In the aftermath of the pandemic, individuals are experiencing increased anxiety and fatigue, with users searching for content that provides positivity, especially in a concise and high-quality format. We aim to address these emotional needs by providing positive emotional support. Our original content centers on individual experiences and the expression of personal demand. We are also committed to demonstrating our social responsibility. In October, we successfully held the 2023 Forever Happiness Charity Gala in Vancouver, Canada, in collaboration with the Children's Foundation Canada. The event attracted local overseas Chinese, political and business leaders, philanthropists, celebrities, and media partners. This marked the fifth occasion the gala was held abroad, with attendees including the Consul General of China in Vancouver and other dignitaries. The event raised over RMB2.7 million to support orphans and disadvantaged children. As for advertising, we encountered challenges in the third quarter in a market with peak traffic and slowed growth. Our future growth hinges on our ability to effectively target and engage specific potential audiences. As a recognized mainstream media outlet, we have gained trust from advertisers for our credibility and influence. We excel in creating high-quality content that aligns with our brand identity and are skilled at delivering immersive brand experiences through offline events that foster interaction between brands and consumers. However, we recognize the need for self-reflection and internal innovation. It is crucial to clarify our growth strategy, which involves identifying target industries, key new customers, and understanding their unique marketing needs. Once our goals are established, we must ensure that our company's resources are aligned with these objectives. As we plan for the upcoming year, we are preparing for organizational restructuring to accelerate innovation and improve our content marketing products in response to market changes. By utilizing our extensive media influence and global reach, we are exploring new opportunities in areas like the global market, cultural tourism marketing, and social media platforms. We will make adjustments based on comprehensive, data-driven plans to establish a solid foundation for future operations. In summary, we recognize the urgent need for change in light of the current market challenges. Alongside improving the quality of our content and products, enhancing our media influence and brand value, we are also adjusting our organizational structure and incentive mechanisms to accelerate innovation and upgrade our content marketing products. Our objective is to respond quickly to market demands and achieve our financial goals as soon as possible. Now, I will provide an overview of our financial performance for the third quarter of 2023. Our figures will be in RMB. Our total revenues amounted to RMB153.6 million, compared to RMB194.8 million during the same period last year. Net advertising revenues were RMB134.3 million, down from RMB172.4 million in the previous year, primarily due to decreased advertising spending across certain industries and increased competition. Paid services revenues were RMB19.3 million, compared to RMB22.4 million last year, mainly driven by a decline in e-commerce revenues. Our loss from operations was RMB38.5 million, slightly up from RMB36.5 million in the prior year. The net loss attributable to ifeng was RMB21.5 million, a decline from net income of RMB24.3 million in the previous year. Moving to our balance sheet, as of September 30, 2023, the company's cash and equivalents, term deposits, short-term investments, and restricted cash totaled RMB1.03 billion, or approximately US$141.8 million. Finally, I'd like to share our business outlook for the fourth quarter of 2023. We anticipate total revenues between RMB179.8 million and RMB199.8 million. For net advertising revenues, we are forecasting between RMB169 million and RMB184 million. For paid service revenues, we expect between RMB10.8 million and RMB15.8 million. This forecast represents our current view and is subject to change. This concludes the prepared portion of our call. We're now ready for questions. Please go ahead.

Thank you. Question comes from the line of Alice Tang from First Shanghai. Please ask your question, Alice.

Good morning, management. Thank you for taking my question. My question is that our company had previously announced a stock buyback plan. Could you please provide us with some insight and updates on the buyback transaction? Thank you.

Thank you for the question. Actually, we have confidence in the company's fundamentals and future performance, which is why the Board of Directors approved the buyback plan. Currently, the company has a very strong cash position, providing enough support for the company's future growth for our considerable durable period. Through this buyback, we aim to return some cash to our shareholders from now until the end of February next year. We will execute the plan in compliance with the U.S. securities law and other relevant regulations. The buyback transactions will be conducted in the open market at market prices. We expect to start the buyback transaction shortly after the Q3 earnings release. Thank you, Alice.

Thank you. That's very helpful.

Thank you. And that's all we have for the question-and-answer session. I would now like to turn the conference back to Muzi Guo for any additional closing comments.

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 for joining us today on this call. Have a good day.

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