Ladies and gentlemen, thank you for standing by. And welcome to Phoenix New Media 2019 Fourth Quarter and Fiscal Year 2019 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. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Ms. Qing Liu. Director of Investor Relations. Thank you. Please go ahead.

Thank you, operator. Welcome to Phoenix New Media Fourth Quarter 2019 Earnings Conference Call. I’m joined here by our Chief Executive Officer, Mr. Shuang Liu; and Chief Financial Officer, Mr. Edward Lu. On today’s call, management will first provide a review of the quarterly results and then conduct a Q&A session. The fourth quarter 2019 financial results and webcast of this conference call are available on our website at ir.ifeng.com. A replay of the call will be available on the website in a few hours. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release which applies 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. In the fourth quarter of 2019, our unique position as a new media pioneer has enabled us to consistently outperform the competition as evidenced by our better than expected top line performance in the fourth quarter of 2019. Additionally, our ongoing production of engaging exclusive new company brand enhancing activities and monetization stream diversification continue to boost our value proposition with both users and advertisers alike, On the news front, we are focused heavily on balanced accurate coverage of major social events around the world, such as a Hong Kong products and US-China Trade negotiations. During the US-China Trade negotiations for example, we leveraged our comprehensive news coverage, unique editorial perspectives and state-of-the-art recommendation algorithm to keep user up-to-date throughout the twists and turns of events. In particular, our coverage of this event was well received by our users achieving 15.3 million views in total. The warm reception of users to this type of content helps us to grow our click-through rate by 8% year-over-year in the fourth quarter. We also achieved improvement in other operating metrics including user conversion rates retention rate and user time spend our flagship news app iPhone. Notably, our consistent coverage of this high profile social event continues to boost both our market leadership and brand influence in China's new media industry. In addition to premium news coverage, we also continue to enhance our brand influence and solidify our leadership in key content verticals to offline events in the quarter. For example, in December, we organized our iPhone Fashion Award Gala in Beijing with the participation of multiple top tier celebrities and in fashion KOLs, this eye catching event attracted 860 million total views and resulted in seven of the highest ranked search topics on social…

Thank you, Shuang. And thank you all for joining our conference call today. I hope everyone is well and healthy. Our total revenues in the fourth quarter of 2019 was RMB470.9 million representing an increase of 17.9% from RMB399.2 million in the same period last year. Our total revenues this quarter included RMB70.5 million of consolidated revenues from Tadu and RMB83.4 million of consolidated revenues from Tianbo. I will now provide the details on our revenues in the fourth quarter of 2019. Consolidated net advertising revenues in the fourth quarter of 2019 were RMB395.2 million representing an increase of 11% from RMB355.9 million in the same period last year. The increase was primarily attributable to the consolidation of both advertising revenues from Tianbo and Tadu. Net advertising revenues from our traditional business in the fourth quarter of 2019 decreased by 20.7% due to increasing macroeconomic uncertainties and the heightened industry competition. Paid services revenues in the first quarter of 2019 increased by 75.1% to RMB75.7 million from RMB43.3 million in the same period last year. Revenues from paid contents in the fourth quarter of 2019 increased by 172.2% to RMB59.2 million from RMB21.8 million in the same period last year, mainly due to the consolidation of digital reading revenues from Tadu. Loss from operations in the fourth quarter of 2019 was RMB93.5 million compared to RMB39 million in the same period last year. The increase in loss from operations was mainly due to the more increase in cost of revenues and the operating expenses than in revenues. Operating margin in the fourth quarter of 2019 was negative 19.9% compared to negative 9.8% in the same period last year. Non-GAAP loss from operations in the first quarter of 2019 was RMB86.8 million compared to RMB34.4 million in the same period last…

[Operator Instructions] Your first question comes from the line of Frank Chen. Please ask your questions.

Hello, Shuang, Edward, Qing. Hope everyone is healthy. I have a question on the loss margin in 2020. I remember last time you were talking about to lower the loss by like 50% in 2020. Given current situation, can you give some update on your target? How should we think of the loss and loss margin in 2020? Thank you.

Yes. Hi. This is Shuang. I like to answer your question maybe Edward can add few more words. We believe that we can significantly narrowing our loss in 2020. First at the end of the 2019, we thoroughly refine our organization structure and also things at the start of 2020 also systematically optimize our content cost and traffic acquisition cost to control our content cost we review all the contracts with our content providers more carefully before planning it so that we can maximize our return, our investments of all copyright contents. To control our channel cost, we have taken into consideration both the current market environment, user growth strategies, implemented a series of serious cost control measures and limited power manage into those channels with less efficient traffic acquisition. Moreover, I think the outbreak of our operating metrics have improved substantially as a result our conviction towards maintaining our professional journalism and augmenting our brand influence is further strengthened as these core competencies enable us to attract those users with profiles desirable by our advertising clients. We believe we're able to improve our profitability in an efficient manner. So we remain confident in our ability to narrow losses substantially in 2020.

Your next question comes from the line of Carmen Zhang from First Shanghai. Please ask your question.

Hi, management. Thanks for taking my question. My question is about the recent coronavirus outbreak. Could management share your thoughts on how the outbreak may impact your business?

This is Shuang. Yes. I will tackle the question first and maybe later Edward can cover the impact on our advertising business and other relatable. I think the early stage of the coronavirus outbreak; our editorial team has provided comprehensive and in-depth coverage of epidemic. Our reporting performance have in turn significantly enhance our operating metrics including DAU retention rate and click-through rate our iPhone news app. In addition, our well received news coverage also helped us further enhance our brand reputation. So this outbreak provides us with an opportunity to further strengthen our brand influence and improve our traffic. We also like that outbreak coverage rates by leveraging Phoenix satellite television news reporting resources providing original video programs producing in-depth expert opinions and distributing real time epidemic data. Beyond our news coverage we also provide various type of aid to support those affected by the coronavirus, including as I mentioned in my opening remarks, including the donation of cash and medical supplies to Hubei province. We initiated several influential social campaigns. For example, we established China's first online registry for coronavirus patients; offer tablets to children in poverty so they can access online classes and publish an encyclopedia of protective measures in collaboration with Providence Academy for overseas Chinese students. These initiatives not only provided tangible support to those affected by the epidemic, but also enhance our branding reputation which will improve our brand advertising sales in the future. Based on these our recent practice, the industry-leading quality of our news coverage has attracted many new users to our platform with a healthy level of click-through rate and user time spent. So going forward we, I think we will continue to focus on the needs of those core users as we optimize our content ecosystem and AI powered content distribution system. So with this strategic focus in mind, we have -- we evaluated our user acquisition strategy as well. We think when we examine the ROI of those users acquired through our investment in marketing channels, we figure out that their level of stickiness and engagement, as well as their contribution to our ad inventory still has quite a bit of room to optimize. So we believe that in 2020 our traffic acquisition cost should be reduced by at least 50% as we improve our user acquisition efficiencies. So this epidemic also let us realize that we need to re-evaluate and without new user growth strategy to optimize our user experience. While we are expecting user traffic to gradually return to normal levels after the epidemic, the outstanding quality of our news coverage during the outbreak has allowed us to further enhance our users' stickiness and brand influence. These improvements will remain attractive for our brand advertising clients after epidemic is contained. Edward probably could have few more words on advertising and other business.

Sure. Thank you, Shuang. Good morning, Carmen. This is Edward speaking. I'd like to talk to about the impact of coronavirus outbreak on our advertising business. Actually the competition the online advertising market has become increasingly fierce in recent years. Top short-form video platforms are gaining an increasing amount of market share and the user time spend as people have spent more time on lines throughout the coronavirus outbreak, we have observed an increase in the overall supply of advertising inventory. However, at the same time the epidemic is impacting advertisers business as well and causing them to be more conservative about your ad placement and the marketing spending. From our perspective, the combination of these factors has created downward pressure on the pricing of our advertisement for sure, especially on the ECPM of performance-based as from SME. During the outbreak, our excellent reporting of the epidemic has resulted in a significant increase in user traffic. This improvement enabled us to effectively increase our advertising inventory and the sales. However, in general overall advertising environment well create a serious challenge for our advertising business in 2020 especially on the brand advertising sales side. Take the auto industry as an example. Due to the impact of the epidemic, consumer demand for cars has dropped significantly. According to recent data released by the China Association of automobile manufacturers, auto sales in the first of the two months of 2020 decreased by 42% in comparison to the same period of 2019. As a result of these, carmakers in China yet to be forced to add or reduce their marketing budgets or delay their marketing plan. However, it is expected that the market will start to recover in the second quarter of 2020 and the manufacturers will also begin to gradually increase their marketing…

Your next question comes from the line of Binbin Ding. Please ask your question.

Good morning, management. Thanks for taking my question. I wish everyone stay healthy and safe. I have a high level question on your strategy in 2020. So I think the overall media space in China become very dynamic and competitive in past two years. Can you share some colors in terms of your top business priorities in 2020? And with your focus increasingly shifted to content production, how do you balance Phoenix position as a more traditional media platform offering news service versus our new role as a content producer providing more English content such as literature, video content, et cetera. Secondly, could you update as your investment strategy in 2020 given you have a lot of cash on the balance sheet. Thank you.

All right, Binbin. This is Shuang. To answer your question; the first operational challenge this year is to significantly reduce our operating loss. As I mentioned in my previous remarks, we are very confident that after adopting the new user grow strategy, we are going to fiercely cut our marketing budget and become more focused on core users for the optimize our user experience. So that the loss will be reduced significantly. That's our top operational challenge and we are confident that we can tackle that challenge. And as to the content strategy, we will -- as you got witnessed in this coronavirus outbreak, we are at the forefront of the covering of the coronavirus. We are very proud of our breaking news coverage, our analysts' high quality professional analysis, our offline charity event and campaign and also the very -- video program targeting at people affected by this virus. So we are going to continue to stick to our core strategy as content -- as a top content player especially in the news and news related areas. Because I think there is -- in this era of uncertainties, the high demand for independent quality and professional news coverage of the major event. That provides us unprecedented opportunity to better serve our users to improve our traffic. And also we have like other players we have Phoenix TV backing us. We can leverage their rich reporting network all over the world. And their topnotch documentaries to enrich our users experience. As to investment and growth strategy, we are continued to explore new growth drivers both organically and through acquisitions. Notably, by combining our operational experience and industry expertise, we have developed a systematic approach to evaluating strategic investment opportunities. Our current priorities are to evaluate acquisition targets with attractive valuation, strong synergistic capabilities and the potential to expand our footprint in such sectors as healthcare, finance and urban lifestyle. And more importantly, in response to the increasing uncertainties brought on by the pandemic, we have also adopted a more cautious approach to our strategic investment and M&A strategy. We believe that we have the right game plan in place to accelerate the development of our new business while mitigating potential use factors to ensure long-term returns for our investors. So as soon as any meaningful progress is made on this front, we will be sure to update everyone maybe. Thank you. End of Q&A

There are no more questions at this time. I'd now like to hand the conference back to today's speaker. Please begin.

Thank you, operator. We have 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 on this call. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.