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spk03: Ladies and gentlemen, thank you for standing by and welcome to Phoenix, New Media, fourth quarter 2020 earnings call. At this time, all participants are in listening mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Ms. Jane Lewis. Thank you. Please go ahead.
spk00: Thank you, operator. Welcome to Phoenix New Media Fourth Quarter 2020 Earnings Conference Call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu, and 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 2020 financial results and webcast of this conference call are available on our website at ir.iphone.com. A replay of the call will be available on the website in a few hours. Before we continue, I would like to refer you to our safe harbor statement in our earnings price release, which apply to this call as we will make forward-looking statements. Finally, please know that unless otherwise stated, all figures mentioned during this conference call are in RMB. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.
spk05: Thank you, Qing. Good morning and good evening, everyone. We delivered encouraging results in the fourth quarter of 2020, despite the ongoing impact of COVID-19 on the macroeconomy and its corresponding effect on China's advertising industry. Meanwhile, quarterly revenues were in line with our previously provided guidance range, reaching RMB 362.2 million for the period. Our success in the face of such uncertainty further demonstrated the capabilities of our authoritative news coverage and established brand influence, our consistent cultivation of iPhone's content ecosystem, and the success of our new business initiatives. In 2020, the escalation of the COVID-19 pandemic significantly affected people's lives and created one of the most challenging social events. During this period of fear and confusion, our professional journalism enabled us to consistently deliver high-quality news coverage, inform the public about effective virus prevention methods, and dispel rumors through professional fact-checks. For example, during the fourth quarter, Tumor Intelligence Agency which is one of our We Media accounts, sheds light on hot topics such as COVID-19 vaccine development progress and the vaccine side effects through a steady flow of timely, in-depth, and scientific analysis reports. Those reports led to not only strong followings from our users, but also frequent republished on other social media platforms and gain additional industry recognition from traditional media outlets. In the meantime, our in-depth and comprehensive coverage of the 2020 U.S. presidential election, which originated from our platform and permitted through the internet, generated record-breaking viewership. Through our official account on Weibo alone, our election-related content garnered over 6 billion views. During the run-up to the election, we leveraged Phoenix TV's exclusive live news reports from its North America station and launched on our platform a second-to-none real-time feature update of ballot counting status, thus accomplishing a viewership of over 10 million on the election day. We provided our users with insightful interpretations of the U.S. election results, as well as their societal and political impacts by hosting exclusive interviews with thought leaders such as Professor Mr. Zheng Yongnian. In addition, through our We Media account, such as Tang Bofu, we carried tick-by-tick coverage of the daily tweets and terms throughout the presidential elections. and published original commentary on Biden's victory, both of which went viral on social media during the most intense period of the election. To further augment our brand influence, we produced a series of high-profile events during the quarter. For example, we hosted the 2020 iPhone Fashion Awards in December and generated over 1 billion views in total. Also, we organized the 2020 iPhone Beautiful Childhood Charity Gala through cooperation with a number of well-known charities and raised more than RMB 10 million in donations from children in need. Since this event's inception 13 years ago, we have helped to raise an accumulative amount of over RMB 227 million. In addition, our 2020 iPhone Finance Summit at the end of 2020 featured a stellar lineup of distinguished speakers, ranging from state-level dignitaries to authority figures in the fields of politics, finance, and academia, such as former Hong Kong Chief Executive Mr. Liang Zhengying, and in 2013, Nobel Prize winner Mr. Robert Shiller. For online reading, By integrating our M4 content library and IP production experience, we further explored several new and innovative opportunities, such as short-form video series. During the quarter, we brought our hit short-form video series, A Deal is a Deal, Yi Zhi Qi Yue, to Kuai Show, one of China's top online short video platforms. The show had accumulated more than $139,000 and 42 million views on Kuaishou by year-end, as we were awarded the Kuaishou's Best Partner of IP in 2020. In addition, for real estate, we leverage our established editorial capabilities and AI algorithm to launch a new real estate media platform, Feng Caixun, through which we provide home buyers and property developers with real-time industry information. in-depth industry reports and detailed data analysis. This platform has shown significant monetization potential to date, generating a total contract value of more than RMB 30 million. Now, turning to our flagship news app, iPhone. We implemented a number of initiatives recently to enhance our content ecosystem, which will serve as our core growth driver going forward. First, Our editorial recommendation and data analysis directed us to enrich our platform content by expanding the number of WeMedia accounts to ensure that the content remains high-quality, differentiated, and appealing to users. Secondly, through a combination of editorial recommendations and algorithm-based user segmentation, we continuously sharpened the quality of our premium content library For example, by allocating more exposure to the Reader's Digest module, we increase users' attainment of high-quality information. Thirdly, by combining our editors' professional journalism with our advanced software algorithms, our team scarred the entire internet to capture the hottest topics, optimizing their aggregation, and distributed the related content through our trending list and satisfy our users' needs of breaking news and trending topics. In addition, we continue to reinforce our exclusive access to Phoenix TV's video content library to expand our own resources of quality video content, solidify our brand influence, and distribute highly sought-after content across the Internet. we steadily improve our distribution strengths for premium content on other social media platforms to bolster our content exposure and channel additional user traffic back to our own products. By 2020, the number of online video users in China has reached 930 million and the overall user time span for online video has also ramped up significantly. Seizing the massive market opportunities emerging from this visualization trend, we have been proactively developing our video offerings with a three-pronged strategy. The first is leveraging Phoenix TV's massive library of evergreen content to better satisfy our core users' needs for differentiated content and set our brand apart from the competition. The second is developing our unique and original video programs in various verticals to further diversify our content productions. The third is identifying talented video content creators who are active in those areas that align with our overall content strategy and brand image. By providing them with the necessary support and assistance, we still improve the content production efficiency and generate more premium content on our platform. By attracting these top content creators with clearly defined goals and responsibilities, we believe that our content ecosystem will harvest the fruitful results in the near future. As we help content producers and short-term video content flourish on iPhone, we have also steadily optimized our AI algorithm and audience segmentation The average user time spent by users on iPhone grew by 30% on year-over-year basis, while its user retention rate grew by 23% in the quarter. Now, I would like to provide everyone with an update on new business initiatives. In November, leveraging our massive base of users who tend to possess advanced education, classic taste, and strong purchasing power, we upgraded our online e-commerce brand and officially launched Phoenix Premium products, Huangjia Shangping, to cater to their lifestyle needs. We have formed a team of professional buyers to select high-end products in categories such as fine culture and creativity, food and wine, and health and fitness. By employing rigorous standards in our selection of best-selling products, we'll not only achieve higher gross margins but also satisfy the demand of China's rising media class for better and healthier lifestyles. The combination of our massive user base, original content production capabilities, and a sophisticated recommendation algorithm have enabled us to reduce our e-commerce customer acquisition costs, enhance our product marketing precision, and boost our user retention rates, as well as transaction conversion rates, as prime A prime example is our best-selling book product, A Brief History of the World on Maps, which overtook the sales of comparable products on other e-commerce platforms and achieved a transaction conversion rate of 43.3%. In 2021, we plan to utilize a live inventory model for e-commerce initiatives, optimize our product selection, strengthen our supply chain management, and improve our transaction conversion rates for our products. With the continuous improvement in our e-commerce initiative's operating efficiency, we should be able to expand its profit margin accordingly. Moreover, by leveraging our unique integration of original content production and e-commerce, we'll continue to explore innovative e-commerce forms such as live broadcasting, and short-form video onto other social media platforms to fuel the momentum of our e-commerce space. In conclusion, as we uphold our professional standards of producing authentic, authoritative, and trustworthy content, we've made meaningful progress in enhancing our content ecosystem, expanding our product offerings, and cultivating new growth initiatives. While we recognize the current difficulty in forecasting for 2021, with the economy gradually recovering in the post-pandemic world, we are well positioned to revitalize our growth engine and generating lasting shareholder value. With that, I will turn the call to Edward, our CFO, to go through the financial results.
spk04: Thank you, Shuang. And thank you all for joining our conference call today. Our total revenues in the first quarter of 2020 were RMB 362.2 million, in line with our previous guidance range, and representing a decrease of 9.5% from RMB 400.4 million in the same period of last year. This decrease was primarily due to the negative impact of the COVID-19 outbreak I will now provide some additional color on our revenues during the fourth quarter of 2020. Night advertising revenues in the fourth quarter of 2020 were RMB $336.7 million, representing a decrease of 7.3% from RMB $363.1 million the same period of last year. This decrease was primarily attributable to the previous stated reason. Paid services revenues in the first quarter of 2020 decreased by 31.4% to RMB 25.5 million from RMB 37.3 million in the same period of last year. Revenues from paid content in the first quarter of 2020 decreased by 46.6% to RMB 11.2 million from RMB 20.9 million in the same period of last year, which was mainly due to the tightening of rules and regulations on digital reading in China and in line with the broader market conditions reflecting the trend towards free online reading. Loss from operations in the fourth quarter of 2020 was RMB 28.8 million. improving from RMB 108.1 million in the same period of last year. Operating margin in the fourth quarter of 2020 was negative 8%, improving from negative 27% in the same period of last year. Non-GAAP loss from operations in the fourth quarter of 2020 was RMB 3.3 million, improving from RMB 104.2 million in the same period of last year. Non-GAAP operating margin in the fourth quarter of 2020 was negative 0.9%, improving from negative 26% in the same period of last year. Net income from continuing operations attributable to iPhone in the fourth quarter of 2020 was RMB $454.8 million, compared to RMB $902.5 million in the same period of last year. Non-GAAP net loss from continuing operations attributable to iPhone in the fourth quarter of 2020 was RMB 8.2 million, improving from non-GAAP net loss from continuing operations attributable to iPhone of RMB 99.2 million in the same period of last year. Moving on to our balance sheet. As of December 31st, 2020, the company's cash and cash equivalents term deposits, short-term investments, and restricted cash, or RMB 1.67 billion, or approximately US dollar 255.8 million. Finally, I'd like to provide our business outlook for the first quarter of 2021. We are forecasting total revenues to be between RMB 210.2 million and RMB 230.2 million. For net advertising revenues, we are forecasting between RMB 192 million and RMB 207 million. For paid service revenues, we are forecasting between RMB 18.2 million and RMB 23.2 million. Looking into 2021, we are actively implementing those measures which can help us to overcome the current macro challenge and recover our growth. We will continue to invest in product offering upgrades, content strategy refinement, revenue stream diversification, and user-based expansion. Our investments in these areas have already enabled us to develop a strong pipeline for new growth initiatives, thereby unlocking more opportunities for us to explore new and effective monetization systems Going forward, our unique combination of content leadership, premium brand equity, and product innovation will continue to serve as key competitive differentiations. As such, we remain confident in our ability to navigate the current industry headwinds and strengthen our position at the forefront of China's new media industry. This concludes the prepared portion of our call. We are now ready for questions. Operator, please go ahead.
spk03: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press bar 1 on your telephone and wait for a name to be announced. If you wish to cancel a request, please press the pound or hash key. Our first question comes from the line of Frank Chen from Macquarie. Please ask your question.
spk06: Hey, good morning. Thank you for taking my question. Actually, I feel very interesting that you mentioned a feel-good near business area in your prepared remarks. Are you going to grow organically or will you stick some sort of M&A to expand your business. So my question is that what's your investment strategy in 2021 and the upcoming M&A should we expect? Thank you.
spk04: Morning, Frank. This is Edward speaking. I will answer your question. Actually, this year we have invested 90 million RMBs, cumulatively, in three industry-leading venture capital funds, such as Wu Yuan Ziben. These funds have extensive investment experience and a proven track record in verticals, such as video platforms, e-commerce, interactive entertainment, et cetera. This investment should not only deliver a handsome return on our investment, but also expand our access to new innovation, obtain more timely insight in the latest industry trends, and of course, enable us to seize new product opportunities in this constantly changing internet market environment. Actually, in verticals such as finance and product reviews, we have made a meaningful progress in developing some innovative content-based products and services to serve a wider range of users. Going forward, we plan to explore more opportunities in additional verticals. Actually, our abundant cash reserve should enable us to upgrade our existing products and construct our content ecosystem and further develop innovative internet products so that we can proactively cultivate growth opportunities for the future. This is my answer. I hope I have answered your question, Frank.
spk06: Yeah, yeah, kind of. Thank you. Thank you, Edward.
spk04: Thank you.
spk03: Our next question comes from the line of Shuweiro Zhang from 86 Research Limited. Please ask your question.
spk02: Good morning, management. Thank you for taking my question. I have a question about the ad industry. So it's good to hear that management comment that the economy is gradually recovering. So I'm wondering if management could elaborate a bit more about the macro outlook and the ad budget from key verticals for 2021. Thank you.
spk04: It's a very good question. Actually, 2020 was definitely a difficult year because of the COVID-19. For the advertising industry, it's very challenging for sure. Although during the second half of 2020, the economy and ad placements started to gradually improve, but many industries still have not fully recovered to their pre-pandemic conditions. When we look at our own advertising income, recent pandemic recurrence in certain locations of China, such as Beijing, has affected our execution of some important offline advertising events. Also, the competitive dynamics in the internet industry is constantly changing, so it's more complex for the advertising business. Our sales of brand advertising should actually benefit from the continued economic recovery during the first quarter of 2021. When we look deeper into various sectors, our brand advertising mainly concentrate in industries such as auto, finance, liquor, and 3C. And those industries should continue to recover. Take the auto industry for example, China's Passenger Union Association reported that auto production and sales rose more than four-fold year-over-year in February 2021. Moreover, we plan to expand our market share in brand advertising for the new consumption sector, Xin Xiao Fei. through cooperating with social media platforms and short video platforms such as Weibo, WeChat, and Bilibili, etc. Those initiatives should lead to increased revenue contribution from the FMCG sector as well. Additionally, as China continues to bring COVID-19 under control, Our offline events, such as the iPhone Food Festival, Meishi Shengdian, will take place as planned. Those events should have very positive impact on the growth of our brand advertising business. Moreover, we will further enhance our content ecosystem and increase our collaboration with Fink's TV so that we can attract more high-end users and the average user time spent of our product will increase. All these efforts should be very helpful to our sales growth and we expect our brand advertising revenue to reach a double digit growth in the first quarter of 2021. And for our programmatic advertising business. Our supply of ads inventory on short video platforms has squeezed the market share of other platforms. Still in the first quarter of 2020, we strengthened our sales and marketing effort related to many business partners' apps. so that we were able to not only offset the market competition pressure on our programmatic advertising, but also expand our opportunities to monetize traffic on other third-party platforms. We expect our revenue from these monetization channels to continue increasing in 2021. At the same time, allocated more resources to innovating and optimizing features on our existing products, created a better community environment, increased user retention, and increased our investment in new product development. The results of our efforts should materialize gradually, lead to an overall improvement in our advertising sales and generate a greater long-term value over time. This is my answer to your question. Thank you.
spk02: Yeah, that's very helpful. Thank you.
spk03: Our next question comes from the line up, from First Shanghai University. Please ask your question.
spk01: Hi, management. Thanks for taking my question. We noticed that the next TV has announced the change of their management team. So I wonder what the impact on phone Hi, thank you.
spk05: This is wrong. Let me answer your question Trinity Phoenix TV global reporting resource and original content capabilities have been well respected in the industry and we believe its potential and is yet to be fully unleashed. As you said, recently, Phoenix TV is sporting new personnel to management team. They have extensive international backgrounds, significant media management insight and experience, and deep government and business contact in mainland China. We are very confident these two executives joined will bring in vigor and more resources to Fenix TV. This will accelerate its evolution into a truly global multi-channel media group and further unleash Fenix TV's brand potential, exemplify Fenix TV's voice on the international media stage and enable Fenix TV to perform a greater role in China's steady integration into the world economy. And we believe as Phoenix TV's media influence expands, its business value should enjoy greater potentials. I hope this will answer your question.
spk01: Yeah, that's very helpful and thanks.
spk05: Thank you.
spk03: Once again, for those who would like to ask questions, please press star 1 on your telephone and wait for your name to be announced. Again, for those who would like to ask questions, please press star 1 on your telephone and wait for your name to be announced. Again, it is star and one to ask your question. There's no more question at this time. I would now like to hand the conference back to today's speakers. Please continue.
spk00: Thank you, operator. We have come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you for joining us on this call. Have a good day.
spk03: Ladies and gentlemen, this concludes this conference call. Thank you for participating. You may now disconnect.
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