Phoenix New Media Ltd Q1 FY2024 Earnings Call

Good day, and thank you for standing by. Welcome to Phoenix New Media First Quarter 2024 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the call over to Muzi Guo from the IR department. Thank you. Please go ahead.

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. 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 statements, 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 would like to pass the call to Mr. Sun, our CEO, for his opening remarks. I will provide the translation. Sun?

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 remain committed to our media value by consistently delivering high-quality content to strengthen brand value and influence. We continuously optimize and iterate our content ad products. In advertising sales, we focused on industry strategies that align content with the needs of industry clients. We aim to maintain this positive operational momentum and strive to achieve our annual operational objectives.

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 lines provided live coverage from the Munich Security Conference. Our in-depth article titled, 'Munich Unfolded', gained significant exposure and leadership on our news app and third-party social media platforms. It has received praise from experts at renowned institutions. This further solidified our media influence in international affairs. In addition to on-site updates, we published 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 the Economics event, the Changbai Mountain Forum, was organized in collaboration with regional cultural 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-capped mountains, the forum featured carnival scenes 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 service, 'Eye of the Storm', remained dedicated to delivering high-quality in-depth reporting and trending topics, producing several articles that surpassed a 100,000 reader benchmark. 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, acknowledging our positive impact on the financial sector. Our presence on third-party platforms continued to grow in the first quarter. Our video platform accounts gained 400,000 new followers, surpassing 3 million in total, reflecting our commitment to producing captivating content for a broader reach. During the March exposition in Hubei, our Douyin accounts live-streamed the event, attracting over 1 million viewers. In total, this live stream and subsequent short videos garnered 46 million cumulative views and attracted 18,000 new followers, reinforcing our reputation for being consistently on the scene for breaking news and enhancing user engagement. Our content initiatives built 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 various sectors. We observed clear industry strategies and enhanced market penetration, while the restructuring boasted professionalism and efficiency in market developments. 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 continued to enrich our content offering, bolster our media influence, and strengthen content monetization. Looking forward, challenges persist. In the face of tighter client budgets and increased 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 quarters.

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 CNY 153 million, representing an increase of 4.5% from CNY 146.4 million in the same period of last year. To elaborate, net advertising revenues were CNY 138.6 million, representing an increase of 9.8% from CNY 126.2 million in the same period of last year. Paid services revenue were CNY 14.4 million compared to CNY 20.2 million in the same period of last year. The decrease was mainly due to the decline in the revenues from licensing certain copyrighted content and e-commerce revenues. Cost of revenues in the first quarter of 2024 decreased by 7.7% to CNY 109 million from CNY 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 CNY 36.5 million compared to a loss from operations of CNY 74.4 million in the same period of last year. Net loss attributable to our company was CNY 26 million compared to a net loss of CNY 57.8 million in the same period of last year. Moving on to our balance sheet. As of March 31, 2024, the company's cash and cash equivalents, term deposits, short-term investments, and restricted cash totaled RMB 1.03 billion or approximately USD 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 CNY 150.2 million and CNY 165.2 million. For net advertising revenues, we are forecasting between CNY 141.9 million and CNY 151.9 million. For paid service revenues, we are forecasting between CNY 8.3 million and CNY 13.3 million. This forecast 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.

Our first question comes from Alice Tang from First Shanghai.

So 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 for the question. Actually, the advertising market showed permissive trends in the first quarter of this year. We believe it's aligned with the recovery of the 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, focusing more on meeting our clients' industry demands. Specifically, we observed strong growth in the food and beverage industry, especially in alcoholic beverage. Internet, leisure, online services, and electronic product industries also experienced growth, consistent with the overall performance of the advertising market segmented by industry. It's also worth mentioning that we made significant progress on the monetization of our third-party social media accounts through stable funding bases and engaging content marketing, attracting top new energy vehicle companies that primarily focus on internet marketing. Additionally, we attended 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 and put profits first above all else. Thank you, Alice.

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

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.

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