Phoenix New Media Limited (NYSE:FENG) Q2 2024 Earnings Conference Call August 14, 2024 10:30 AM ET

Company Participants

Muzi Guo – Investor Relations
Yusheng Sun – Chief Executive Officer
Edward Lu – Chief Financial Officer

Conference Call Participants

Alice Tang – First Shanghai

Operator

Good day and thank you for standing by. Welcome to Phoenix New Media Second 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 will now hand the conference over to your first speaker today, Muzi Guo from IR Department. Please go ahead.

Muzi Guo

Thank you, operator. Welcome to Phoenix New Media's earnings conference call for the second 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 start with an overview of our quarterly results, followed by a Q&A session. You can find the quarterly results as well as the webcast of this conference call on our website at ir.ifeng.com.

Before the management's prepared remarks, I would like to draw your attention to our safe harbor statement contained in our earnings press release, which also pertains to our forward-looking statements during this call. Additionally, please note that unless otherwise specified, all figures mentioned throughout this conference call are in RMB.

Now I will pass the call to Mr. Sun, our CEO, for his opening remarks. I will provide the translation. [Foreign Language]

Yusheng Sun

[Foreign Language] Hello, everyone. Year 2024 is already halfway over. Our operations have remained generally stable, and we have achieved our performance targets, significantly reducing losses. In the second quarter, we effectively enhanced Phoenix's media influence through high-quality content and news reporting, coupled with extensive online distribution, laying a solid foundation for commercialization.

Simultaneously, we continue to refine our products, optimize user experience and foster innovation in both content and commercial products. In the second half of the year, we will continue to work with full dedication to achieve our annual operating goals to reduce losses year-over-year.

Now I will invite Edward to provide a more detailed summary of our second quarter performance on my behalf. Edward, please go ahead.

Edward Lu

Thank you, Ms. Guo. In the second quarter, we successfully covered a series of major events, achieving extensive reach across the Internet. Among the most significant international news stories in the second quarter was the death of the Iranian president in plane crash. Our detailed reports included a clear time line and a thorough analysis. We quickly produced multiple original pieces, providing exclusive insights into the crash’s cause, analyzing Iran's future political landscape and discussing the country's military capabilities.

Our original series worked well together to offer comprehensive and in-depth perspectives. Beyond major news events, we consistently produced original programs, ensuring a steady supply of high-quality content that garnered wide distribution and discussion, enhancing our brand's advertising value.

The in-depth investigative series, Eye of the Storm, continue to excel in high-quality, in-depth coverage of trending topics. It delivered over 20 original articles with over 100,000 reads on Weixin and several with over 300,000 reads, earning praise for its commitment to objective and ethical journalism on controversial issues.

Our original video service, Phoenix Lab, targeting towards a younger demographic focused on creating practical consumer guides across various scenarios are driving consumer concerns and providing quality oversight. In Q2, Phoenix Lab produced 23 original long videos, 72 original short videos and two major industry event reports. One long video became a hit on BiliBili with over 1 million views, and the series achieved a total of 1.7 billion views across platforms. The Phoenix Lab BiliBili accounts surpassed 1 million follower milestone in Q2, establishing itself as a leading consumer product review IP.

Quality content requires broad distribution channels and effective user reach. In the second quarter, our followers and influence on third-party social media platforms grew steadily. Our team developed differentiated operational strategies tailored to each platform, enhancing transformation through trending topics, interactive discussions and live broadcast. We now have approximately 170 million active user – followers across all platforms. We have developed several key accounts on different platforms with rapidly growing follower base and commercial value. For example, our Douyin account is approaching the 20 million follower milestone.

The advertising revenue from these third-party platform accounts also achieved double-digit growth year-over-year. On the commercial front, we maintained positive momentum in the first half of the year. We expanded our efforts in the public sector beyond traditional culture and tourism promotions to include local industry bureaus and associations. Our services extended from provincial and city levels to county levels, achieving year-on-year growth.

In terms of international marketing, we made significant strides in meeting client needs for overseas expansion. Our successful execution of several overseas campaigns such as our brand’s international sourcing project in New Zealand and the various award events result in widely discussed articles and videos on Weibo, Facebook and Twitter. This effort effectively communicated the open confidence and socially responsible image of Chinese spreads, garnering widespread recognition from overseas audiences.

In the second quarter of the year, we will continue to establish ourselves as a leading new media online. We will focus on strengthening our team’s professional capabilities, producing quality content, refining our product and optimizing user experience. This is the core of our competitiveness as an internet media company. At the same time, we will focus on further improving our operational efficiency and monetization capabilities to strengthen our position.

This concludes our CEO, Mr. Sun’s prepared remarks. I will now walk you through our financial performance for the second quarter of 2024. All figures mentioned will be in RMB.

Our total revenues were RMB168.3 million compared to RMB180.2 million in the same period of last year. Specifically, net advertising revenues were RMB154.7 million compared to RMB161.8 million in the same period of last year. Paid services revenues were RMB13.6 million compared to RMB18.4 million in the same period of last year.

Cost of revenues in the second quarter of 2024 decreased by 17.2% to RMB102.9 million from RMB124.3 million in the same period of last year, resulting in an increase in gross margin from 31% to 38.9%. Loss from operations was RMB8.9 million, a significant improvement compared to a loss from operations of RMB35.7 million in the same period of last year as a result of strict cost control measures implemented. Net loss attributable to ifeng was RMB5.5 million compared to net loss attributable to ifeng of RMB31.3 million in the same period of last year.

Moving on to our balance sheet. As of June 30, 2024, the company’s cash and cash equivalents, term deposits, short-term investments and restricted cash were RMB989.1 million or approximately US$136.1 million.

Finally, I’d like to provide our business outlook for the third quarter of 2024. We are forecasting total revenues to be between RMB151.6 million and RMB166.6 million. For net advertising revenues, we are forecasting between RMB142.3 million and RMB152.3 million. For paid service revenues, we are forecasting between RMB9.3 million and RMB14.3 million. This forecast reflects our current and preliminary view, which are subject to change and substantial uncertainties.

This concludes the prepared portion of our call. We are now ready for questions. Operator, please go ahead.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Alice Tang of First Shanghai. Please go ahead.

Alice Tang

Good morning. Thank you for taking my question. So the growth rate of the internet advertising market seems to be slowing down. So could the management please share their views on the forward advertising market and discuss the relevant measures the company is planning on taking to respond to the current market environment, please?

Edward Lu

Good morning. Thank you for the question. Actually, from the market data from the first half of 2024, the overall internet media ad spending has experienced a year-over-year decline. Despite this, our advertising revenue for the first half of the year has remained stable with a slight increase, which is not easy. Especially in the automotive sector, traditional one of our strong areas, ad spending has dropped even further. To keep up our revenue, we need to step out of our comfort zone and make breakthroughs in other industry sectors.

In the first half of the year, we saw a significant growth in key areas like alcoholic beverage, FMCG and public sector. Our premium IP content and high-end interviews align well with the branding needs of alcoholic beverage clients, leading to steady long-term ad spending. In the FMCG sector, we have utilized our specialized team and trendy, useful content to attract more clients. In the public sector, we have been helping cities and counties showcase their history, culture and attraction, making them stand-out and build strong city brand images.

Looking ahead to the second half of the year, our international marketing efforts also look promising with the ongoing Paris Olympics. We are working with many brands on overseas event marketing. Our clients appreciate Phoenix international image, content reach and ability to execute overseas campaigns, and we are confident we can continue to grow in this area. Of course, we have our challenges, too. For the sectors that are dying, we need to keep adjusting our strategies. Plus with the overall trend of lower customer transaction, we need to work hard to bring in more clients and orders to hit our revenue growth. Thank you, Alice. Thank you again.

Operator

Thank you. Thank you for the questions. I see no further questions at this time. I will now turn the conference back to Muzi.

Muzi Guo

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.

Operator

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