Phoenix New Media Ltd Brands, Inc. (FENG) Q4 2021 Earnings Call

Phoenix New Media Ltd Brands, Inc. (NYSE:FENG) Q4 2021 Earnings Conference Call March 14, 2022 9:00 PM ET

Company Participants

Shuang Liu - CEO

Edward Lu - CFO

Conference Call Participants

Xueru Zhang - 86Research

Alice Tang - First Shanghai

Operator

Good day and thank you for standing by. Welcome to the Phoenix New Media Fourth Quarter 2021 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. [Operator Instructions]

I would now like to hand the call over to your first speaker today, Ms. Muzi Quo [ph] from IR team. Please go ahead.

Unidentified Company Representative

Thank you, operator. Welcome to Phoenix New Media's fourth quarter 2021 earnings conference call. I'm joined here today by our Chief Executive Officer, Mr. Shuang Liu; and our 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 2021 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'd 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 the conference call are in RMB.

With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.

Shuang Liu

Thank you, Muzi [ph]. Hello everyone and thank you for joining our call today. In the face of growing condition [ph] and macro uncertainties, we stay at the forefront of the media space, thanks to our strong media DNA and our mission to provide high quality and professional news content.

During the past few weeks, the Russia-Ukraine conflict has captured the public's attention. Starting in mid-February. We were the first online media platform to launch full coverage of the conflict. Since then, our multi-dimensional coverage of the crisis consisting of frontline updates from a network of Phoenix TV journalists, discussions, and analysis from experts in international relations, video clips from content creators in Ukraine, ongoing events, live streaming, and more has attracted an average of 15 million daily views across the internet.

Besides breaking news coverage, we continue to emphasize the uniqueness of our content and enhance our user experience. We remain committed to cultivating new business initiatives and expanding our revenue streams. We've successfully held a number of high profile signature events in the fourth quarter to expand our brand influence despite restrictions and challenges related to recent COVID outburst.

Our ability to execute given a difficult situation is a result of our effective teamwork, dedication, and creativity. Several of these events include our iFeng food festival, together with a golden [indiscernible] Chinese restaurant guys launch press conference. [Foreign Language]

Our iFeng Fashion Award [Foreign Language] and the finance, economics plummet [Foreign Language]. We upheld our high standards for event skill, attendee experience, and public rich.

Live events were big success in meeting our demand in clients up flying marketing needs and set a new historical record in commercialization of our events and brand exposure.

In addition to these signature events, we launched an innovative program called Inside Business Schools [Foreign Language]. We invited scholars, business leaders, and nearly a thousand students from leading MBA programs to visit the corporate campus of our clients. The program addressed topics such as corporate development, industry transformation, and tax advances through a series of presentations and roundtable discussions.

The MBA students gained access to business case studies. As we successfully provided our clients with precision marketing solutions to help them attract high net worth customers and assist them in generating product sales. This event is just one of many ways we're able to monetize our media brand value and our broad business network and resources.

While maintaining our offline event presence, we continue to evolve our original content metrics. In the fourth quarter, we rapidly advance our editor segments, our international news column, trends, [Foreign Language], published in-depth commentary and daily headline regarding international relations, issues, and events.

Having optimized the content production process, we saw substantial improvements in both the quality and quantity of articles published for the column, as the performance indicators of the column, including views and click through rates ranked among the top tier news media outlets.

The column is receiving widespread information from journalists, influencers, and the academic community from leading Chinese universities. Also through a joint efforts with other media companies [ph], we distributed global top news to international markets, [technical difficulty] Our brand recognition both at home and abroad.

Meanwhile, our [technical difficulty] commentary column called the message function [ph] is positioned to provide our audience with a deeper insight and understanding of today's complex world by covering modern issues and current events with vivid imagery, intellectual reasoning, and emotional emphasis.

In the fourth quarter, the column reported a wide range of social concerns, including the celebrity social ethics, public administration issues, women's right issues, and evolution of taxation laws.

Since its launch, the column's pageviews, user comments, and new follower counts has all been [indiscernible] with an increasing portion of this articles exceeding the 100,000 paid views. It’s a benchmark for virtual -- for visual popularity and exposure on WeChat.

On IP Conference front, we successfully validated the monetization capability of Your Achievements, an innovative short video series that combines large scale field production with pet [ph] style presentations. The series features several super construction projects and reviewed behind the scene challenges faced by the construction teams and creativity and skills that may lead project profitable.

The production seamlessly aligned it's same presentation of transforming challenges into opportunities with our advertisers' bright image, maximizing its content distribution and reach. During the fourth quarter, Your Achievement reached 22 million views through social media platforms across the internet.

Besides retail series, our IP production also developed livestream show focusing on interviews and discussions of trending cultural topics. For example, we invited guests, such as bestselling authors and production teams of popular drama and movies into our studio to talk about their work. The show acquired a highly engaged user base, as fans of these artistic works are keen to interact with our guests through the medium of live streaming.

The show is live streamed on our iFeng APP, as well as other social media platforms, spreading virally and generating online discussion. Through a combination of our offline events and online content, we have formed a positive feedback loop, which allows both parts of our business to jointly create value, let us offer a high quality multi-channel experience to all our customers.

On the product side, iFeng APP continues to power distribution of our online contents and offline events. During the quarter, we made several updates to further improve the APP's user experience. For example, we improved our algorithm to enhance distribution efficiency for our short reader content, which saw measured increase user reach, penetration rate, and click-through rate.

Compared to last quarter, our short media content average viewing time increased by 14% and penetration rate grew by over 10% during the fourth quarter of 2021. Meanwhile, we're further enhancing the interactive features of our APP, including forums and live chat, which are directly integrated with trending topics.

By encouraging our users to participate in text or audio discussions, after viewing their topic interests, they will spend more time on APP and continue to explore it. This creates a sense of community as well as increase our user engagement and the boost user stickiness. All of our hard work in content creation and improving our technology has laid the foundation for us to make solid progress in diversifying our revenue.

In online reading segments, we continue to monetize our original content IP. We completed the sale of the movie rights of Wheel of Time, [Foreign Language]. One of our original reality theme works of online fiction. In addition, at the end of December 2021, we started laying the groundwork to export our online literature content to overseas markets. As of today, we have built a library of English titles in hundreds, ready to be monetized.

As for e-commerce, we continue to develop products for our private label brands in the health and wellness segments. In the fourth quarter of 2021, we launched nutritious, low calorie meal replacements featuring popular superfood ingredients, making the most of the traffic from third-party live streaming platforms, and own vertical channels.

We drove this product into the top selling lists of this category, among lunch. For culture and creativity, we partner with IP licensing firms to bring carefully crafted art and cultural objects from some of the world's leading museums and gallery to our e-commerce level.

Going forward, we plan to utilize the natural synergies between e-commerce and accountant such as health, fashion, and our newly developed culture, live streaming to integrate content themes with merchandise selection, and capitalize on our user traffic.

Finally, we definitely adapted our realistic vertical to the challenging macro environment despite the market downturn. On one hand, we continue to exercise our media influence in the real estate sector to deliver original content, launch special events. We launched a new column focusing on the industry's movers and shakers, and we held our industry summit in the fourth quarter, featuring hot topics such as urban renew, land supply, sector debt levels, at the governance suite redline policy for real estate developers.

In conjunction with events, we also publish industry-wide papers, specifically regarding ESG development and industry dynamics in the real estate sector. On the other hand, our real estate team reamed active in exploring new business opportunities during the fourth quarter by addressing customer pain points and marketing needs, while applying new monetization models beyond traditional advertising. As a result, we achieve new breakthroughs in customer acquisition and improve our revenue mix.

To summarize, we demonstrated vitality resilience during challenging times in the fourth quarter as we continue to host high profile signature events, create original and exclusive content, enhance our content distribution technologies, and explore new business initiatives.

During the fourth quarter, we continue to monitor and plan for external challenges as we execute our strategy of revenue diversification and business growth. We started 2022 with renewed commitment to overcome near-term challenges and build a thriving business in rapidly changing macro environment.

With that, I'll turn the call to our CFO, Edward Lu to provide a closer look into our quarterly financials.

Edward Lu

Thank you, Shaun and thank you all for joining our conference call today. Our total revenues in the fourth quarter of 2021 were RMB302.9 million as compared to RMB362.2 million in the same period of last year, hitting the high end of our previously announced guidance range.

To provide some additional color on our revenues, net advertising revenues in the fourth quarter of 2021 were RMB279.2 million compared to RMB336.7 million in the same period of last year. The decrease was mainly due to the reduction in advertising spending of advertisers in certain industries. The intensified industry-wide competition and the negative impact of the COVID-19 outbreak in certain regions in China in the fourth quarter.

Paid services revenues in the fourth quarter of 2021 were RMB23.7 million compared to RMB25.5 million in the same period of last year. Revenues from paid content in the fourth quarter of 2021 were RMB7.9 million compared to RMB11.2 million in the same period of last year, mainly due to the reduction in content spending of certain customers.

Revenues from e-commerce and others in the fourth quarter of 2021 increased by 10.5% to RMB15.8 million from RMB14.3 million in the same period of 2020. Loss from operations in the fourth quarter of 2021 was RMB53 million compared to loss from operations of RMB28.8 million in the same period of last year.

Operating margin in the fourth quarter of 2021 was negative 17.5% compared to negative 8% in the same period of last year. Non-GAAP loss from operations in the fourth quarter of 2021 was RMB51 million compared to non-GAAP loss from operations of RMB3.3 million in the same period of last year. Non-GAAP operating margin in the fourth quarter of 2021 was negative 16.8% compared to negative 0.9% in the same period of last year.

Net loss from continuing operations attributable to iFeng in the first quarter of 2021 was RMB35.4 million compared to a net income of RMB434.8 million in the same period of last year. Non-GAAP net loss from continuing operations attributable to iFeng in the fourth quarter of 2021 was RMB33.2 million compared to RMB8.2 million in the same period of last year.

Moving on to our balance sheet, as of December 31st, 2021, the company's cash and cash equivalents, term deposits, short-term investments, and restricted cash were RMB1.51 billion or approximately $237.5 million.

Finally, I'd like to provide our business outlook for the first quarter of 2022. We are forecasting total revenues to be between RMB172 million and RMB187 million. For net advertising revenues, we're forecasting between RMB158.5 million and RMB178.5 million. For paid service revenues, we're forecasting between RMB13.5 million and RMB18.5 million.

In summary, while the uncertainty from the present macro conditions and the changing industry landscape persists, we remain optimistic that green shoots will emerge. We are confident in our content creation and the distribution capabilities and believe that this competitive differentiators will sharpen our market position in the face of ongoing industry-wide competition as we go forward.

Looking ahead, while remaining prudent in our investments, we will investigate new monetization strategies and improve our revenue mix, we are convinced that we are on the path to deliver shareholder returns in the long run.

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]

First questions comes from the line of Xueru Zhang from 86Research. Please go ahead.

Xueru Zhang

Good morning management. Thank you for taking my question. I have one question regarding our business. We know that 2022 is a tough year for the markets. And wondering do you also observe the challenges from macro war regulation on your ad business as well? And is there anything we can do to offset impact? Thank you.

Edward Lu

Hi Xueru, this is Edward. I will answer this question. Actually our brand advertising business revenues did face challenges due to the market downturn in the fourth quarter of 2021. In some industries, such as autos and real estate, clients are very cautious with their advertising spending. Also, we usually hold more offline activities and events in the fourth quarter, which were affected by the nationwide COVID-19 outbreaks.

Even though we overcame many challenges and successfully held our signature events, such as the finance and economic summit, and food festival, we still have some projects being delayed or even canceled, unfortunately.

In 2022, I think the macro environment is still uncertain. However, if we take a look at the trend of marketing demand, advertisers pay more attention to precision marketing. This is because mobile internet traffic growth has picked.

Now, advertisers focus more on comprehensive and IP content than fragmented content and the short-term attention. So, we will continue to strengthen our differentiation in -- I think in the following ways. First, we will continue to enhance our media brand value, through news coverage on signature events, original content and large scale events planning. We will integrate and distribute live content through live streaming video and other forms of media. So, we can create unique marketing resources for our clients.

Also, we have we have unique strengths in providing international marketing solutions. We have a variety of resources, the creator of our [indiscernible] series things global -- observer group, either professional generally located around the world or overseas influencers.

They have successfully created a video content to help domestic advertisers promote their brands globally. Over international IP such as the high end forum, dialogue with the work, [Foreign Language] is widely endorsed by our advertisers. We are also building our influence and distribution capabilities abroad by growing our presence on the overseas social media platforms.

Our -- also our collaboration with Phoenix TV will also allow us to integrate bulk size marketing and advertiser resources and complement each other. This will enable us to create a total marketing solution that covers internet and TV audiences.

Together, we can further reach and attract new clients such as central and the state-owned enterprises. We hope to create greater value for our clients and boost our monetization efficiency through this effort. Thank you, Xueru.

Xueru Zhang

Thank you. That's very helpful.

Edward Lu

Thank you.

Operator

Thank you for your questions. Next questions comes from Alice Tang of First Shanghai. Please go ahead

Alice Tang

I got two questions on my end. So, the first one is, our company has mentioned diverse revenue streams over the past few quarters many times. So, could you please talk about the company's progress in services segments?

Shuang Liu

Hi, I will take this one. Actually on our online reading and e-commerce revenues, both grew in 2021. For online reading, we have reorganized our team and recruit more experienced talent. We also improved the core competency of our IP content and created various monetization channels, including recording and selling audio books, producing and distributing short form video series, and selling film rights. We expect revenues from these segments to continue to grow in the future.

In terms of our reading app, we attract new users by offering free high quality e-books and earn revenue through advertising. We expect its revenue to scale up in the next few years.

For our e-commerce business, we focused on positioning ourselves as the go-to platform for culture and the house product, leveraging third-party platforms such as TikTok, and Crenshaw. Our private label brand has achieved meaningful growth in GMV on these third-party platforms.

I think as we continue to create more original content, our followers and influence on third-party social platforms also grew. We are still working on how to turn our increasing number of followers into our e-commerce users. We hope this growing traffic can boost our e-commerce business growth in future. I hope I have answered your question.

Alice Tang

Yes, thank you very much. So, my next question is so by the end of the year 2021, the company still had about RMB1.5 billion in cash reserves. So, does the company has any investment plans for these cash in the future?

Shuang Liu

Hi, this is Shuang, let me take your question. We are fortunate to have huge amount of cash on hand. It's about RMB1.5 billion, you're right. I think we're lucky to have this amount of cash, especially given the current market condition. It’s a very volatile market, we experienced panic selling last night. This amount of cash will make us more ready, independent and stronger for future challenge and to enable us to navigate the turbulent waters.

Simply because we have this amount of cash does not necessarily mean that we could -- we should be more aggressive to invest. I think at the current stage, we need to be more prudent, more conservative in spending it before we figure out what's happening, before we clearly analyze the concrete impact of these uncertainties will have on our business, our financial prospects perspective. So, in the near future, I think we will be more cautious in making investments. That's it.

Alice Tang

Thank you.

Operator

Thank you for the question. We have no more questions from the line. I would like to hand the call back to the management for closing.

Unidentified Company Representative

Thank you operator. We have come to the end of our Q&A section and our conference call. Please feel free to contact us if you have any further question. Thank you for joining us today on this call. Have a good day.

Operator

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