Ladies and gentlemen, thank you for standing by, and welcome to today's Phoenix New Media 2018 Fourth Quarter and Fiscal Year 2018 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Qing Liu. Thank you. Please go ahead.

Thank you, Operator. Thank you, and welcome to Phoenix New Media Fourth Quarter 2018 Earnings Conference Call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu; and Chief Financial Officer, Ms. Betty Ho. For today's agenda, management will provide us with a review on the quarter and also include a Q&A session after the management's prepared remarks. The fourth quarter 2018 financial results and webcast on this conference call are available at ir.ifeng.com. A replay of the call will be available on the website in a few hours. Before we continue, I refer you to our safe harbor statement in our earnings press release, which apply to this call as we will make forward-looking statements. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.

Thank you, Qing. Good morning, and good evening, everyone. Our fourth quarter results were marked by resilience, recovery and progress. First and foremost, our fourth quarter financial results beat the high end of our previous guidance despite the myriad of challenges we encountered throughout 2018. As you all are aware, regulations governing online companies are becoming increasingly stringent. We believe that proper regulations help foster a healthy Internet environment and promote a harmonious Chinese society. As a leading news media company, we have adapted to and continued to evolve with the new regulatory environment. We're happy to report that user activities across all of our platforms have recovered almost to the level prior to the temporary setback we experienced between late September and early October. Most notably, by the end of December, our ifeng news app daily active user count has recovered to pre-sanction levels. The velocity at which our user data has recovered once again demonstrates our high products business and the loyalty shown to our brand from our user base. Our successful recovery and our resilience in the face of macro challenges is a testament to our unwavering commitment to high quality and differentiated content as well as our prudent diversification into lifestyle verticals. As for our content strategy, we continue to differentiate ourselves from our peers by focusing on enhancing our brand influence through nationwide events, producing proprietary video content based on our own IP and refining our We-media operations. Regarding our branding initiatives, we remain committed to our long-term efforts in poverty, relief and charity. In the fourth quarter, we organized our annual ifeng Beautiful Childhood Charity Gala, which raised over RMB33.6 million for our partner foundations. Others, such as the 40th Anniversary of Reform and Opening-Up 2018 Financial Summit. Our coverage of the summit, especially…

Thank you, Shuang, and thank you all for joining our conference call today. Before I update you on the financial details, I would like to elaborate on the impact of the newly adopted accounting standard ASC 606, namely, revenues from contracts with customers which took effect from January 1, 2018. By applying the modified retrospective method under the new standard, some charges which were previously presented as a component of cost of revenues are now presented as a reduction item of revenues. Some advertising for advertising partner transactions, which were previously not recognized as revenues, are now recognized as revenues. For comparative purposes, here, we will provide our financial highlights under the prior accounting standard, ASC 605. For the amount and ratios under the new accounting standard, ASC 606, please refer to our earning release where we have provided financial items under both the prior accounting standard and the new accounting standard. Now let me take you through our financial highlights for the fourth quarter of 2018. The amounts mentioned here are all in RMB, unless otherwise noted. The differences between GAAP and non-GAAP consist of share-based compensation and income or loss from equity method investment net of impairments. Ifeng's total revenue for the fourth quarter 2018 were RMB434.1 million, representing a decrease of 6% from RMB661.8 million in the same period last year. Non-GAAP net loss attributable to Phoenix New Media Limited for the fourth quarter of 2018 was RMB36.2 million as compared to non-GAAP net income attributable to Phoenix New Media of RMB11.6 million in the same period last year. Non-GAAP net loss per diluted ADS in the fourth quarter was RMB0.5 as compared to non-GAAP net income per diluted ADS of RMB0.16 in the same period last year. First, I will provide details on our revenues for…

[Operator Instructions]. And our first question comes from the line of Frank Chan from Macquarie.

Congratulations on realizing the investment return on Yidian. I have a couple of questions now. And the first one is on the proceeds. Could management share with us more color on your plan with the proceeds from disposing Yidian? And the second one is for our core portal business. What's the strategy, especially on your mobile app, ifeng mobile app? And how should we think of completion? And to the -- Betty mentioned that we are expecting a 20% year-over-year increase in revenue. Could management also share some outlook on the portal advertising revenue in 2019? And the third one is for online reading. We noticed that there are several emerging players in this industry like Meituan, Dalian Shang we're growing very fast in 2018. They offer free online reading service and monetized through advertising. China Literature is going to launch their free product in the second quarter. And I wonder if management could share some thoughts on our online reading business and our strategy and business model going forward? The last question is on the lifestyle initiative. Could management share with us more color on the user base on this lifestyle verticals? How many DAUs or MAUs do we have on the entertainment or food verticals and to the [indiscernible] the user growth? That's all my questions.

Yes, you did ask a lot of questions. Let me try to address your questions. First, regarding the use of the proceeds of the -- of Yidian. Yes, as you said, we have entered into a letter of intent with the potential investors. Yidian has proven to be one of the most successful investments we have made in the past several years. We are especially proud of generating a handsome return on investment within that three years. So as for dividend policies, we believe that this -- 10% of all trans inter-companies have paid dividends in the past. Those who adopt a dividend policy are mostly engaged in the gaming business and are profitable. For us, we're still in a transition period and expect to continue generating loss in the near future. So when we think about the use of proceeds and also dividends, on one hand, we want to share the return on investments with our investors and shareholders. But more importantly, we are thinking about the best ways that we can utilize the capital to strengthen our core competence. The key areas that we are focusing on includes enhancing our AI capabilities, expanding our content library, accelerating our user base, hence, improving the monetization capabilities of our app, strengthening our brand influence and also exploring more investment opportunities in new markets, in a similar fashion to our investment in Yidian, which are also complementary to our brand and existing business. So in fact, we already have identified a few key targets, and we'll definitely keep our investor updated on our progress. So this about Yidian, the use of proceeds on Yidian investors. Your second question is about our new media apps. Our goal is to make our app one of the leading news app in China. I think…

Yes, Frank, this is Betty. With regards to your question on online reading strategy, we understand that the online reading market is very competitive with the competitors that you mentioned earlier. Our strategy is not to going to be -- to have a head on competition with them. Our positioning is to operate as a closed loop IP ecosystem. By combining the Tadu and our own mobile application, Fanyue, we believe that we will create synergies between two. Tadu, as mentioned earlier, is -- their strength is in technology and distribution; and our own Fanyue's product strength is on brand and content. So by combining these two, we are confident that we can create a closed loop of the IP operations. Meaning, that for Fanyue, we are going to attract very quality -- a lot of quality writers, and then through Tadu, we can distribute to our users. And on the other hand, in terms of IP extension, we are -- we have already extended to providing film and TV series to audiobooks, through comics, et cetera. So these are all -- this will create a closed loop for our own ecosystem, which what we are positioning at the moment. And in fact, our Fanyue applications has increased by 2x in terms of revenue in 2018, and our IP operation's revenue has increased by 3x in 2018. And by combining Tadu's distribution and technology, we believe that in the coming years, we are going to have a very strong growth period.

Our next question comes from the line of Chuck Li from First Shanghai Securities.

This is Carmen on behalf of Chuck. My question is regarding your original video. Could you elaborate the strategy and focus on how much are you going to invest and how should we expect the revenue from it?

This is a Shuang. Let me answer your question. The demand for video content from online users is enormous and the competition to produce successful online original series and variety shows is very -- obviously very intense. So the hypercompetitive environment forced us to adopt a video strategy that differentiates us from the competition. In the past, we have accumulated extensive experience in producing history, culture and interview shows. I think we will still leverage this experience to implement the format of variety shows into our culture-related shows and celebrity interviews to create more online series based on our own IP. And also, we will engage in constant communication with our advertisement sponsors during every step of our content production process. We'll not proceed with any capital-intensive production without first securing a sure endorsement from advertisers. So in terms of capital spending, we take a relatively cautious approach. We are sensitive to ROI. The core -- we believe the core competitiveness of our original video content production originated from our AV team with both industry-leading talents such as the former Executive Director from Phoenix Satellite TV, Liu Changle, and the primary producer of award-winning live interview program, [Foreign Language]. We also accumulated an extensive network of resources in the domestic television space and evaluate insights into the development of live interviews and hiking reality shows. I think we will strive to achieve breakthroughs in media content with our ability to create and present videos in innovative ways which we believe will differentiate us from our peers and the competition. But from a competitive point of view, we, at the present day, we cannot qualify too much out. Thank you.

[Operator Instructions]. And our next question comes from the line of Justin Neville From Calyx Advisors [ph].

So just to clarify from what Shuang said before, did you guys -- did he say that you are definitely not planning on issuing any kind of onetime special dividend from the sale of Yidian?

No, no, we didn't say that, we didn't say that. We did not say that. I said we are still -- our primary focus will be on -- because we are -- in the next two years, we're going to still generate loss and we're going to expand our AI capability and content library, and we're still looking at some other investment opportunities. But we definitely want to share our investment return with our investors. That's for sure.

So you are considering a dividend?

We are considering it. We are considering it, yes.

Okay. Okay. I mean, because I think the way I look at it and I guess the way other shareholders probably look at it, your job as CEO and the board to be proper stewards of capital and make some proper capital allocation decisions, I'm sure you agree.

Yes.

And as it stands right now, you have about 600-and-something-million dollars after this deal closes. I don't think you need anywhere near that much capital to run your business and invest for growth. So even if you considered half or less than that just for a onetime dividend, it seems to me that it would make sense, especially given that the market doesn't seem to be giving you guys any benefit of the doubt or value for your current operations, right?

Okay. Thank you. Yes. We are -- yes, we are -- we definitely are considering issuing special dividends, but we are also striking a balance between our future strategic investments and the operating challenges and also the need to share our investment return with our shareholders. That's for sure.

[Operator Instructions]. All right, and our next question comes from the line of Binbin Ding from JPMorgan.

I have a question on your digital reading strategy. I'm not sure this question being asked or not. Because generally, there's a lot of debate on the paid reading and free reading business models, and we've seen a lot of the new players entering the digital reading market. So can you just elaborate on the increased hours spent in Tadu and I would like to share your thoughts on your strategies on how to monetize Tadu in the mid to long run.

Binbin, this is Betty. Actually, Frank just asked that and I have answered it. But in short that be rest assured that we are not going to have a head-on competition with those big players in the market. Our positioning is to be operated as a closed loop IP ecosystem. We're riding on the brand and content capabilities of ifeng itself and also Tadu's strength on distribution and technology, we believe we are able to attract a lot of -- a lot more quality writers, and then based on their distribution technology, we are able to expand our original content to not only books, but also to films, TV series, audiobooks and also comics. By diversifying into those products, we are going to operate as a closed loop IP ecosystem. In this way, we believe that we can -- that will sustain our growth in the future. In fact, our own mobile app from our Fanyue application, the revenue has been increased by 2x in 2018 and our IP operations has been increased by 3x, and we believe that it will continue.

There are no further question at this time. Please continue. Thank you.

Thank you.

Thank you, all.

And that does conclude our conference for today. Thank you for participating. You may all disconnect.