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spk01: Good day and thank you for standing by. Welcome to Phoenix New Media 4th Quarter 2021 Earnings Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the call over to your first speaker today, Ms. Mo Zi Guo from IR Team. Please go ahead.
spk00: Thank you, operator. Welcome to Phoenix New Media's fourth quarter 2021 earnings conference call. I'm joined here by our Chief Executive Officer, Mr. Shuang Liu, and our Chief Financial Officer, Mr. Edward Liu. 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.iphone.com. A replay of this 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.
spk03: Thank you, Mu Zi. Hello, everyone, and thank you for joining our call today. In the face of growing competition 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. In the past few weeks, the Russia-Ukraine conflict has captured the public's attention, starting in mid-February was the first online media platform to launch full coverage of the conflict. Since then, a multi-dimensional coverage of the crisis, consisting of front-line 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 50 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 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 outbreaks. Our ability to execute, given the difficult situation, is a result of our effective teamwork, dedication, and creativity. Several of these events include our iPhone Food Festival, together with the Golden Buttonwood Chinese Restaurant Guide, lunch, press conference, 2021 Fenghuang Meishi Shengdian, Jinwutong, China restaurant, our iPhone Fashion Award Gala, and the Finance and Economics Summit. We upheld our high standards for event skill, attendee experience, and public reach. These events were a big success in meeting our demanding clients' offline 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 走进商学院. 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 tech advances through a series of presentations and roundtable discussions. The MBA students gained access to business case studies. 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 are able to monetize our media brand value. and a broad business network of resources. While maintaining our offline event presence, we continue to involve our original content metrics. During the fourth quarter, we rapidly advance our editorial segments, our international news column, Trend, Fengxiang, publish in-depth commentary and daily headlines 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, rank 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 our joint efforts with other leading companies, we distributed global top news to international markets, weekly raising our brand recognition both at home and abroad. Meanwhile, our index commentary column called the message function 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. During the fourth quarter, the column reported a wide range of social concerns, including celebrity social ethics, public administration issues, women's rights issues, and evolution of taxation laws. Since its launch, the column's pageviews, user comments, and new follower counts have all been on a steady climb with an increasing proportion of its articles exceeding the 100,000 pageviews through Benchmark for visual popularity and exposure on WeChat. On the IP content front, We successfully validated the monetization capability of Your Achievements, an innovative short video series that combines large-scale field production with TED Talk-style presentations. The series featured several super construction projects and reviewed behind-the-scenes challenges faced by the construction teams and creativity and skills that made these projects possible. The production seamlessly align its theme presentation of transforming challenges into opportunities with our advertiser's bright image, maximizing its content distribution and reach. In the fourth quarter, your achievement reached 22 million views through social media platforms across the Internet. Besides media series, our IP production also developed a live-screened show focusing on interviews, and discussions of trending cultural topics. For example, we invited guests such as outstanding 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 iPhone app as well as on 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 and let us offer a high-quality multi-channel experience to all our customers. On the product side, our iPhone 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 video content, which saw a major increase in user reach. penetration rate, and click-through rate. Compared to last quarter, our short video content's 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 chats, which are directly integrated with trending topics. by encouraging our users to participate in text or audio discussions after viewing their topic of interest. They will spend more time on our app and continue to explore it. This creates a sense of community and thus increases our user engagement and boosts user stickiness. All of our hard work in constant creation and improving our technology has laid the foundation for us to make solid progress in diversifying our revenue. In the online reading segment, we continued to monetize our original content IP. We completed the sale of the movie rights of Wheel of Time , one of our original reality scene 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 the hundreds ready to be monetized. As for e-commerce, we continue to develop products for our private label brand in the health and wellness segments. In the fourth quarter of 2021, we'll launch a nutritious low calorie meal replacement series featuring popular superfood ingredients, making the most of the traffic from third-party live streaming platforms and their own vertical channels. We drove this product into the top-selling list of its category among lunch. For culture and creativity, we partnered with IP licensing firms to bring carefully crafted art and cultural objects from some of the world's leading museums and galleries to our e-commerce platform. Going forward, we plan to utilize the natural synergies between e-commerce and accountants, 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 rural sector to deliver original content and 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, and the government's three red lines policy for real estate developers. In conjunction with events, we also published industry-wide papers, specifically regarding ESG development and industry dynamics in the real estate sector. On the other hand, our real estate team remained 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 achieved new breakthroughs in customer acquisition and improved our revenue mix. To summarize, we demonstrated vitality and 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 will turn the call to our CFO, Edward Lutz. to provide a closer look into our quarter financials.
spk02: Thank you, Sean, and thank you all for joining our conference call today. Our total revenues in the first quarter of 2021 were RMB 302.9 million as compared to RMB 362.2 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 first quarter of 2021 were RMB 279.2 million compared to RMB 336.7 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 RMB 23.7 million compared to RMB 25.5 million in the same period of last year. Revenues from paid content in the fourth quarter of 2021 were RMB 7.9 million compared to RMB 11.2 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 RMB 15.8 million from RMB 14.3 million in the same period of 2020. Loss from operations in the fourth quarter of 2021 was RMB 53 million compared to loss from operations of RMB 28.8 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 RMB 51 million compared to non-GAAP loss from operations of RMB 3.3 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 iPhone in the fourth quarter of 2021 was RMB 35.4 million compared to a net income of RMB 454.8 million in the same period of last year. Non-GAAP net loss from continuing operations attributable to iPhone in the fourth quarter of 2021 was RMB 33.2 million compared to RMB 8.2 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 the restricted cash, or RMB 1.51 billion, or approximately US dollar 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 RMB 172 million and RMB 197 million. For net advertising revenues, we are forecasting between RMB 158.5 million and RMB 178.5 million. For paid service revenues, we are forecasting between RMB 13.5 million and RMB 18.5 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 distribution capabilities and believe that these 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 stream 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.
spk01: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your questions, please press power or hash key. Please stand by while we compile the Q&A roster. First question comes from the line of Sheru Zhang from 86 Research. Please go ahead.
spk05: Good morning, Benjamin. Thank you for taking my question. I have one question regarding ad business. We know that 2022 is the top year for the market. I'm wondering, do you also observe the challenges from macro law regulation on your ad business as well? And is there anything we can do to offset the impact? Thank you.
spk02: Hi, Xue Ru. This is Edward. I will answer this question. Actually, no. Our brand advertising business revenues did face challenges due to the market downturn the first 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 first 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 the 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 pre-session marketing. This is because mobile internet traffic growth has peaked. Now advertisers focus more on comprehensive and IP content than fragmented content and short-term attention. So we will continue to strengthen our differentiation 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 this content through live streaming video and other forms of media. so we can create unique marketing resources for our clients. Also, we have unique strengths in providing international marketing solutions. We have a variety of resources. The creator of our MCN series, Things Global Observer Group, either professional journalists located around the world or overseas influencers. They have successfully created a video content to help domestic advertisers promote their brands globally. Our international themed IP, such as the high-end forum, dialogue with the world, 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. Also, our collaboration with Fink's TV will also allow us to integrate both sites' 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 state-owned enterprises. We hope to create greater value for our clients and boost our monetization efficiency through this effort. Thank you, Sheru.
spk05: Thank you. That's very helpful.
spk01: Thank you for the questions. Next question comes from the line of Alice Tang of First Shanghai. Please go ahead.
spk04: I have 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 the services segment?
spk02: Hi. I will take this one. Actually, our online reading and e-commerce revenues both grew in 2021. For online reading, we have reorganized our team and recruited more experienced talents. We also improved the co-competency of our IP content and created various monetization channels, including recording and selling audiobooks, producing and distributing short-form video series, and selling film rights. We expect revenues from this segment to continue to grow in the future. In terms of our reading app, we attract users by offering free, high-quality e-books and earn revenues 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 health products, leveraging third-party platforms such as TikTok and Kuaishou. 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.
spk04: Yes, thank you very much. So my next question is, by the end of the year 2021, the company still had about 1.5 billion RMB in cash reserves. So does the company have any investment plans for these cash in the future?
spk03: Hi, this is Huang. Let me take your question. We are very fortunate to have a huge amount of cash in our hands. It's about 1.5 billion RMB. 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 water. Simply because we have this amount of cash does not necessarily mean that we should be more aggressive in investment. 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 impacts of these uncertainties we'll have on our business, our financial perspectives. So in the near future, I think we will be more cautious in making investments. That's it.
spk04: I think I answered your question.
spk01: Thank you for the questions. There are no more questions from the line. I would like to hand the call back to the management for closing.
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 today on this call. Have a good day.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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