Phoenix New Media Limited (FENG) Q4 2024 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to Phoenix New Media Fourth Quarter 2024 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 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 fourth quarter results, followed by a Q&A session. You can find our quarterly financial results and a 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, 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] 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 showcased 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.

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 US election and South Korea's martial law crisis. In November, we launched a real-time world count product, becoming the first domestic outlet to announce the US election results. Our swing states only feature and the on-the-ground video series takes you inside the US election, garnered millions of views and trended across the internet. In December, when South Korea declared martial law, we sprang 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, 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. [indiscernible], 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 [indiscernible] CEO at the Paris Motos show, racking up 19 million views 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 post-doctoral fellow, totaling 67 million views. Meanwhile, the FENG's reading WeChat account explored Nobel laureate 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, [indiscernible] technology for good, honored those using tech to better society and boost human well-being. The Action [indiscernible] Charity Gala cross-border trust, sustainability, focused on the needs of underserved communities and social inclusion, with philanthropists from various platforms sharing ideas and solutions, amplifying our influence in public welfare. Our strengths in content distribution and brand value supported our advertising base, driving our revenue uptick for the year despite tough market conditions. We also pushed into paid services, launching a mini program driving novel 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 the industry through the professionalism, speed, and the depth of our content, while laying the groundwork for future operations through commercial exploration. We understand that [indiscernible] 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 RMB 218.1 million. representing a 3% increase year-on-year from RMB 211.8 million. Specifically, net advertising revenues were RMB 189 million compared to RMB 197 million in the same period of last year. Paid services revenues were RMB 29.1 million, representing a 96.6% increase year-on-year RMB 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 RMB 121.1 million, slightly up from RMB 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 $90.3 million, reflecting a 32% increase year-on-year from RMB 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 RMB 6.7 million compared to RMB 22.9 million in the same period of last year. Net loss attributable to IFENG was RMB 3.6 million compared to net income attributable to IFENG of RMB 8.1 million in the same period of last year. Moving on to our balance sheet. As of December 31st, 2024, the company's cash and cash equivalents, term deposits, short-term investments and the restricted cash totaled $1.05 billion or approximately US$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 $147 million and $162 million. For net advertising revenues, we project between RMB 112 million and RMB 122 million. For paid service revenues, we project between RMB 35 million and RMB 40 million. These forecasts reflect 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 services revenue. We have observed a substantial increase in this revenue stream during the fourth quarter. Could management please elaborate on the underlying factors contributing to this growth trajectory?

Actually, the growth in paid services revenue stems from our paid short story novel business launched on a third-party platform, mini programs, [indiscernible], 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 margin actually quite modest. As a newly launched venture, although we expect a strong year-over-year revenue growth in the near term, but the business remains small in scale. We will focus on its profit contribution and keep evaluating its performance.

Next, we have Troy Xiu [ph] from First Shanghai.

My name is Troy from First Shanghai Group. Over the past year, the company saw an increasing advertising revenue despite a broader slowdown in the online advertising market. Could you please share the strategies used to attract advertisers?

Actually, overall, it was done through two key approaches. First, our sales team has shifted to industry-specific divisions. This allowed us to focus on specific sectors, streamlined resource 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 innovation in content resources 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.

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.