Phoenix New Media Q2 2023 Earnings Call Transcript

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August 15, 2023

There are 3 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Phoenix New Media Second Quarter 2023 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. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to Muzi Kuo from Investor Relations department.

Speaker 1

Thank you, operator. Welcome to CMIC's New Media's earnings conference call for the Q2 of 2023. Joining me here today are our CEO, Mr. Yu Shuang Sun and our CFO, Mr. Edward Zhu.

Speaker 1

During this call, our management team will begin by providing an overview of our quarterly results, followed by a Q and A session. You can find the financial results for the Q2 of 2023, 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 statement, which can be found in our earnings press release.

Speaker 1

This statement is important as it 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.

Speaker 1

Hello, everyone. During the past quarter, Phoenix New Media has been relentlessly working towards maximizing content reach and profits. Thanks to our key news awareness, our team effectively covered major news events like the Russia Ukraine war and the Shangri La Dialogue. This resulted in timely and impactful content, widely shared across the Internet. In terms of original content, we have created numerous high quality programs such as The Message, Eye of the Storm, Journey and Extraordinary Path.

Speaker 1

These programs frequently make it to the trending list, struggling discussions across the Internet. This not only enhances the overall impact of our content, but also strengthens our brand advertising sales. The collaboration between Phoenix TV and Phoenix New Media has also become stronger. We've managed to seamlessly integrate major events reporting and sales of integrated marketing resources, amplifying the synergy effect of the collaboration. Looking ahead, we will continue to deepen and refine our coverage of breaking news and major events, while also focusing on differentiation in content dissemination.

Speaker 1

Apart from excelling in current affairs and politics, we will continue to strengthen our position in social trends, legal matters, finance and technology, aiming to secure our competitive advantage in speed and breadth. Even more importantly, we will further embrace and delve into social media channels. By utilizing various social media platforms, we intend to maximize the dissemination of our content and unlock additional business prospects. Next, Edward will provide a more detailed rundown of our operation in the Q2. Edward, please go ahead.

Speaker 2

During the Q2 of 2023, we maintained our commitment to strengthen our media influence by dedicating ourselves to being present at major events. Notably, at the Shangri La Dialogue in Singapore, our frontline reporter engaged in on-site dialogue and delivered several exclusive and groundbreaking reports. We were the first to break the news about the China U. S. Defense Secretary's table dinner.

Speaker 2

The sole Chinese media to question the U. S. Defense Secretary on-site and the first to publish China's response to the U. S. Defense Secretary's speech.

Speaker 2

Our related video content achieved a remarkable total of 77,000,000 views going viral on platforms like Weixin Video and Douyin and earning acclaim from other esteemed media outlets such as Lianke Doubo, Bloomberg, Asahi, Xingu and others. In this June, during the Wagner event, we organized a series of live broadcasts providing comprehensive coverage of the events to help the audience understand its unfolding. This exclusive live broadcast became a defining moment in the coverage of the Russia Ukraine conflict. On the 1st day of the live broadcast, we reached the top 5 on Kuaishou's trending list with nearly 40,000,000 viewers across all platforms and a surge of 251,000 new followers. We also provided real time updates through short video clips for broader audience coverage.

Speaker 2

Our original columns such as Phoenix Reference, and the Tangbo Hu offered insightful analysis of the event, garnering extensive sharing and the comments on social media platforms. In our signature series, Dialogues with the World, we continued to hold conversations with prominent figures. In May, we featured an exclusive interview with Thomas Friedman, 3 time Pulitzer Prize winner, famous American political commentator and author. During the challenging times between China and the United States, resulting in high quality rational conversations that aligned perfectly with Finke's journalistic staff, Friedman himself highly praised Fink's new media for its professional pursuit and the interview content received widespread sharing by influencers on various platforms, the mass, deep and abroad, marking an important step for Finx's dialogue with the world towards global media stage. In Q2, we continued to enrich our commercially supported content resources and expanded our client base.

Speaker 2

In early July, we held the 2023 World City Brand Conference in Macau, aiming to create a world class international forum focused on supporting the development of culture tourism industries and promoting world class destination brands. With our tenants, youth in Chinese culture, global perspective will play a unique and dispensable role in shaping and disseminating city and the culture tourism brands in the future. Additionally, we expanded our marketing services to clients in consumer goods industries, including food and beverages, home improvements and appliances, especially to those venturing into the international markets, leveraging our contracted fixed journalists and KOLs worldwide, along with our global network of resources and highlights. We provided them with compelling overseas content and marketing execution. For instance, through our Think Global Observation team, Chun21, we tailored content in Africa, the Middle East, Japan, the U.

Speaker 2

K, France and other regions for our clients, integrating local hot topic and brand stories. These productions showcase our global content production and the branding capabilities and continue to attract more clients with these needs. We also incorporate AIGC into our content. Our technology vertical launched AI Vanguard, an original program that utilized AI to revolutionize traditional video production, achieving success with 5 episodes produced and a total of 420,000 views. The show employs popular AI tools for topic selection, script generation, image creation and audio and video generation.

Speaker 2

Focusing on cutting edge AI content, it covers everything from news briefs to index analysis, expert industry observations and the trend predictions. AI Vanguard is one of the first programs to fully leverage AI for content generation in the industry. We believe that AI has the potential to generate highly personalized content catering to the unique needs of diverse audiences while increasing our overall productivity. On our flagship iPhone app, we made further progress with AI generated content summaries and AI powered interactive features, making it easier for users to quickly grasp the essence of the content. Users responded positively to these enhancements, evident in a 5% increase in the proportion of logged in users quarter over quarter, a 15% drive in click through rates in the comments section and a 9% increase in daily average common interaction.

Speaker 2

Apart from AI powered enhancements, we optimized the new flash card feature of the app, enabling direct generation of shareable cards from flash news articles, thus facilitating social sharing and dissemination of news content. Furthermore, we introduced a separate recommendation algorithm and channel for Think TV's video content, resulting in a 2 fold increase in exposure and a 10% increase in click through rate for high quality Think TV content. Additionally, we improved the distribution algorithm for hard topics and the focus image, creating more opportunities for exposure to hard content. With these joint optimizations in recommendation algorithms and the content editing, the overall click through rate on our app increased by 12% and the average time spent per user increased by 8% quarter over quarter. In conclusion, during the Q2, we continued to bolster our media influence by covering major events and delivering exclusive reports and original content through our flagship app and across all social platforms.

Speaker 2

We also strengthened our monetization capabilities by upgrading our marketing resources and expanding our client base. As we move forward, our focus will be on aligning resources to strategic business units, thereby solidifying our position as a leading force in the media industry, characterized by both growing media brand value and commercial value. I will now walk you through our financial performance for the Q2 of 2023. All figures mentioned will be in RMB. Our total revenues were 180,200,000 dollars as compared to $191,600,000 in the same period of last year.

Speaker 2

To elaborate, net advertising revenues increased to $161,800,000 compared to $160,500,000 in the same period of last year. Paid services revenues were $18,400,000 compared to $31,100,000 in the same period of last year. The decrease was mainly due to the reduction in the content spending of certain customers and the decline in e commerce revenues. Loss from operations was RMB35.7 million narrowing by 62.4% year over year as a result of increased gross profit and decreased operating expenses. Net loss attributable to Ifeng was $31,300,000 narrowing by 67.3% year over year.

Speaker 2

Moving on to our balance sheet. As of June 30, 2023, the company's cash and cash equivalents, term deposits, short term investments and restricted cash were RMB1.08 billion or approximately $149,000,000 Finally, I'd like to provide our business outlook for the Q3 of 2023. We are forecasting total revenues to be between $158,500,000 $178,500,000 For net advertising revenues, we are forecasting between $148,700,000 160 $3,700,000 For paid service revenues, we are forecasting between $9,800,000 $14,800,000 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.

Speaker 2

Operator, please go

Operator

ahead. Thank you. And our first question is from Xiaoyang with 86 Research.

Speaker 1

Good morning, management. Thank you for taking my question. Can management kindly offer a brief review of the ad business during the first half of the year and share your perspective on the anticipated outlook for the ad market in the second half? Thank you.

Speaker 2

Good morning, Xiaohu. Thank you for the question. Actually, in the Q1, our ad revenue decreased due to the slow economic recovery, but things looked better in the Q2. Overall, the Chinese advertising market showed a moderate recovery trend. In my opinion, it's still facing challenges and advertisers are being cautious with their marketing budgets.

Speaker 2

Having said that, we have identified the possible areas of growth. For instance, after the pandemic, brands are pushing new product developments and promotions. We have actively responded to that demand, increasing marketing services for new product launched in many industries such as automobile, alcoholic beverage, electronics and home improvement sectors. Also a lot of brands want to break through local growth barriers and guide a bigger piece of the global market. We have been working on this for over a year using our brand and content's global appeal to provide advertisers with choose to reach global audiences.

Speaker 2

We are also expanding our share in certain client industries. For example, events like the World City Brand Conference and our cultural tourism related content have helped us attract new heights such as local tourism bureaus, luxury hotel chains, etcetera. In today's market, with tons of different channels and fragmented user attention, advertisers are back to the core of content marketing and they place great emphasis on top tier media. So our game plan is all about boosting our uniqueness and media strength in the content area. At the same time, we are enhancing our marketing resources and capabilities.

Speaker 2

I think our ad revenue will be quite stable in the second half of the year. Thank you.

Operator

One moment for our next question please. It comes from the line of Alice Tang with First Shanghai.

Speaker 1

Good morning. Thank you for taking my question. So the company experienced a noticeable decline in paid services revenue in Q2. So could the management team please shed light on the future plans for the diversified business and the focus of the operation in the future? Thank you.

Speaker 2

Hello, Alice. Before diving into revenue diversification, actually our prime very focus is on ensuring profitability and maintaining steady revenue stream. To achieve this, we need to strategically direct our limited resources towards the most critical parts of our business. So our profit centers and our core media operations is the key part of our business. Regarding our revenue diversification, the main reason why our paid services revenue went down in Q2 is because some parts of our business generated revenue, but they weren't making as much profit as we'd hoped, such as the private label brand for our e commerce sale.

Speaker 2

So we are not continuing with this kind of ventures this year. It's part of our approach to putting profit first. For our core business, we are setting the bar higher for advertising revenue. Our strategy is market focused. We are pinpointing our time and the near marketing needs and setting clear goals.

Speaker 2

We are directing our limited resources toward a project that permits better returns. In addition, we are fostering teamwork across departments to craft a powerful plan and the content that both impress advertisers and make an impact. And on top of that, we are all about increasing productivity and keeping costs in check. These factors are the backbone of our company's healthy operation. Thank you, Alice.

Speaker 1

Thank you.

Operator

Thank you. And with that, we finish our Q and A. And I will turn the call back to Mui Xi Goh for final comments.

Speaker 1

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

Operator

And with that, thank you all for participating. You may now

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Earnings Conference Call
Phoenix New Media Q2 2023
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