Phoenix New Media Limited (NYSE:FENG) Q1 2024 Earnings Conference Call May 13, 2024 9:30 PM ET

Company Participants

Muzi Guo - Investor Relations Manager
Yusheng Sun - Chairman and Chief Executive Officer
Edward Lu - Chief Financial Officer

Conference Call Participants

Alice Tang - First Shanghai Securities Limited

Operator

Good day and thank you for standing by. Welcome to Phoenix New Media First 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 hand the call over to, Muzi Guo from IR Department. Thank you. Please go ahead.

Muzi Guo

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 our 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 at ir.ifeng.com. 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'd like to pass the call to Mr. Sun, our CEO, for his opening remarks. I will provide the translation.

Yusheng Sun

[Foreign Language]

Muzi Guo

[Interpreted] And I will provide the translation now. 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 remained committed to our media values, consistently delivering high-quality content to strengthen brand value and influence. We continuously optimized and iterated our content and ad products.

And in advertising sales, we are focused on industry strategies, aligning content with the needs of industry clients. We aim to maintain this positive operational momentum and strive to achieve our annual operational objectives.

Now I will invite Edward to provide a more detailed summary of our first quarter results. Edward, please go ahead.

Edward Lu

In the first quarter of 2024, we made significant progress in extending our media influence thereby driving the successful monetization of our contents. We continue to lead in reporting major news events, achieving excellent audience reach and engagement. During the Taiwan leadership election, without the [sole] mainland-based news app offering real time coverage, excelling in speed distribution, and the 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 affairs provided live coverage from the Munich Security Conference. Our in-depth article titled Munich unfolded in the significant exposure and the readership on our news app and the third-party social media platforms. It had received praise from experts at renowned institutions such as Peking University, the Chinese Academy of Social Sciences, and the Tsinghua University, as well as recognition from other mainstream media outlets such as [indiscernible] and CGTN. This further solidified since media influence in international affairs.

In addition to onsite updates, we published the 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 the 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 economics event, [Chengdu] Mountain Forum was organized in collaboration with regional culture and the tourism bureaus and sponsored by local businesses and corporations.

The event posted distinguished guests from academia, politics, and influential key opinion leaders' sight against the scenic backdrop of Snow Mountains. The forum featured [indiscernible] carnivals and elevated guest experiences. It garnered significant media coverage, serving as a prime example of effective brand marketing in the culture and the tourism industry.

Our original investigative series, Eye of the Storm remained dedicated to delivering high-quality in-depth reporting on trending topic, producing several articles that support 100,000 degrees benchmark on [indiscernible]. Beyond achieving significant traffic, Eye of the Storm earned a claim from its principle stance on contentious issues upholding media ethics and values.

In January, a finance China responsible for producing Eye of the Storm was honored with the Good News Award from the China Banking Association, acknowledging iFeng Finance, positive impact of the financial sector. Our presence on third-party platforms continue to grow in the first quarter. Our fashion 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, explosion in Hebei, our [indiscernible] accounts live streamed the iFeng, drawing over 1 million viewers. In total, this live stream and subsequent short videos garnered 46 million cumulative views and attracted 18,000 new followers, re-enforcing our reputation for being consistently on iFeng for breaking news and enhancing user engagement.

Our content initiatives build 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 diverse sector. We observed a clear industry strategies and enhanced market penetration while the restructuring posted professionalism and the efficiency in market development.

Additionally, year was notable improvement in content support and collaboration, Q1 net advertising revenue exceeded expectations marking our 10% year-on-year increase. Overall, in Q1, we continue to enrich our content offerings, bolster our media influence and strengthen content monetization.

Looking forward, challenges persist in the face of tighter content budgets and the heightened 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 quarter.

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 RMB153 million, representing an increase of 4.5%, RMB146.4 million in the same period of last year. To elaborate, net advertising revenues were RMB138.6 million, representing an increase of 9.8% from RMB126.2 million in the same period of last year.

Paid services revenue were RMB14.4 million compared to RMB20.2 million in the same period of last year. The decrease was mainly due to the decline in the revenues from licensing of certain copyrighted content, and in e-commerce revenues.

Cost of revenues in the first quarter of 2024 decreased by 7.7% to RMB109 million from RMB118.1 million in the same period of last year. And 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 RMB36.5 million compared to loss from operations of RMB74.4 million in the same period of last year. Net loss attributable to ifeng was RMB26 million compared to net loss attributable to ifeng of RMB57.8 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 were RMB1.03 billion or approximately US$143million.

Finally, I'd like to provide our business outlook for the second quarter of 2024. We are forecasting total revenues to be between RMB150.2 million and RMB165.2 million. For net advertising revenues, we are forecasting between RMB141.9 million and RMB151.9 million. For paid services revenues, we are forecasting between RMB8.3 million and RMB13.3 million. This forecast reflects our current and the preliminary view, which are subject to change and the 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

Thank you. [Operator Instructions] Our first question comes from Alice Tang from First Shanghai. Please go ahead.

Alice Tang

Good morning. Thank you for taking my question. So the company achieved revenue growth in the first quarter. So 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.

Edward Lu

Hi, Alice. Thank you for the question. Actually the advertising market showed promising trends in the first quarter of this year. We believe it aligns with the recovery of 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 [indiscernible] 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, which focused more on meeting our clients' industry demands. Specifically, we observed strong growth in the food and beverage industry, especially in alcoholic beverage, entertainment, leisure, online services and electronic products, industries also experienced growth, which is consistent with the overall performance of the advertising market segmented by industry.

It also worth mentioning that we made significant progress on the monetization of our third-party social media accounts. Through a stable fan base and present content marketing, we attracted top new energy vehicle companies that primarily focus on internet marketing. Additionally, we attend many new clients in consumer electronics, food and beverage and cosmetics.

The advertising market in 2024 still holds growth potential. By the way, understand that with macroeconomic change 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, put profits first above all else. Thank you, Alice.

Alice Tang

Thank you, Edward.

Operator

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

Muzi Guo

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.

Operator

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