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spk03: Good day and thank you for standing by. Welcome to Phoenix New Media First Quarter 2022 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 the 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 conference over to your host today, Ms. Muzi Guo from IR Team. Thank you. Please go ahead.
spk00: Thank you, Operator. Welcome to Phoenix New Media's first quarter 2022 earnings conference call. I'm joined here today by our Chief Executive Officer, Mr. Shuang Liu, and Chief Financial Officer, Mr. Edward Liu. On today's call, management will first provide a review of the quarter results and then conduct a Q&A session. The first quarter 2022 financial results and webcast of this conference call are available on our website at ir.iphone.com. A replay of the call will also 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.
spk05: Thank you, Mu Zi. Hello, everyone, and thank you for joining our call today. In the first quarter, the nationwide COVID resurgence continued to impact the execution of some of our advertising services. Our advertising revenues were also negatively affected as many advertisers reduced their budgets in response to macroeconomic uncertainties. Nevertheless, this quarter was eventful in terms of news and events. We sharpened our competitive edge in reporting and distributing original content and were able to maximize our brand influence through key events. At the same time, we continue to expand and elevate our monetization capability across all channels. In the first quarter, our coverage of a number of significant news events once again received extensive media exposure. and market attention, highlighting our team's professionalism, our leading position in news reporting. These events included the two sessions, the Winter Olympics, the Russian-Ukraine War, COVID resurgence, the stock market slump, and the major aviation accidents, to name just a few. From the onset of the Russian-Ukraine War, we have been reporting the events through live streaming from the front line by leveraging our local connections with Finnish TV correspondents, Chinese actors in Ukraine, and local Ukrainian residents. We launched the first channel in China to report on the latest developments in the military conflict and designated a special segment to dispel rumors and misinformation regarding the conflict. To enhance our user online news viewing experience, we adopted timeline format in our news presentation, which tracks the real-time development of the wall. It became the all-in-one place for users to follow events. In addition, we distributed tailored content catering to diverse individual user needs by offering slow live-streaming, short videos, and reporting from frontline correspondents. We interviewed experts in military affairs and international relations who provided their professional opinions and shared their interpretation of the situation in Ukraine. Our live streaming coverage of the war garnered 250 million views on our own platform and over 1 billion accumulated views on third-party platforms including Douyin, Kuaishou and WeChat Video. We reported the event from multiple angles in capital, person, history, humanity, and economics. Our original in-depth news stories generated 3 million accumulated views through our WeChat official accounts. In addition to our breaking news coverage, we also continue to expand the monetization capabilities of our original content production. In the first quarter of 2022, our documentary series titled MAGA Projects demonstrated unique commercial values as we focus on developing high-quality content related to the renewable energy industry. A number of well-known automotive companies collaborated with us and sponsored the series as it is in alignment with the corporate strategies to reduce their carbon footprint. For the remainder of 2022, we plan to dive deeper into the topic of carbon neutrality and clean energy and assist our advertisers to demonstrate their transformation to low-carbon business models. For our multi-channel network, MCN platform, we build further on the success of the Finnish Global Observer Group series launched in 2021. Such series engaged our tech company Phoenix TV's global network of reporters, and generated globalized content. We employed social media as its main distribution channel, helping to broaden our audience reach. With our globally-themed product offerings, we are exploring additional avenues for commercialization. In the first quarter of 2022, we achieved a breakthrough in commercialization, by partnering with clients in the banking and automated industries to launch a number of original content series that support their globalization initiatives. For example, in conjunction with our content creators around the globe, we tailor-made a short video series for a major band featuring Chinese people around the world celebrating the Spring Festival. This series was very effective in promoting the bank's coarse border brand image and helping it to expand its global output. In addition to developing original content, we continue to explore the live streaming format while further enhancing our distribution and monetization capabilities. There are many styles of content in live streaming, and our differentiation is in live interview format, which maximizes synergies between our professional media DNA content production capabilities, and extensive contact network. For example, for our coverage of the Russian-Ukraine war, we interviewed over 50 commentators and specialists, delivering a variety of authoritative opinions to audiences. On the financial news front, we conducted live interviews with a number of renowned economists, analysts, and business executives who shared their thoughts on global stock market trends and related financial topics. Moreover, we brought many popular writers, performers, and artists to our live streaming channel to discuss culture and artistic topics. To assure the highest possible quality of our interviews, we meticulously drafted discussion topics and interview questions. During our interview, we interacted with our viewers and received high youth engagement and views. After live streaming sessions, the video recordings are edited into short clips, text, and images. This content is then distributed over across our app and third-party platforms for further circulation. This, in turn, expanded our audience reach our number of followers on social platforms. For example, our interview with a popular writer in our Culture Lightroom program, 文化直播间, became an immediate hit upon its launch. It attracted nearly a million viewers during live streaming sessions, received over 1.3 million playbacks. Of course, the Internet has also exceeded the milestone of 10,000 paid views for viral sharing and exposure on WeChat, which added $40,000 to our official account. To keep this traffic momentum, not only do we need to focus on the consistent production of the live shows, we also need to build viewers' anticipation through active promotion, such as social media announcements, live stream alerts, and teaser videos. As we attract it and grow our fan base on certified platforms, we should be able to further strengthen our advertising distribution capabilities and increase our monetization potential. On the user app side, we continue to roll out upgrades to improve our interactive features. Specifically, we improve our iPhone apps, live chat, and community forum features. For our live chat features, we mainly offer professionally generated content with a focus on military affairs and trending topics in various content verticals. By integrating core content production with user interactions, we attracted more users to join our live chats to discuss the topics of interest with the guest hosts, thus enhancing our user retention as well as lengthening users' time span in the app. For our community forum feature, we aim to create a friendly and engaging discussion community for all trending topics and content verticals. With many other online communities featuring user-generated content ecosystem, we must face the challenge of recruiting the top-tier content creators and generating high quality and more interactive content for our users. We have recruited a number of influencers who are popular with our younger user cohorts, and we are continuing to evaluate our user feedback and the usage data, aiming to attract more younger users to our platform. Next, let's turn to our progress in revenue diversification. We continue to develop our online reading segment during the quarter, collaborated with a few more online reading platforms to monetize our premium IP content, and further expanded our original content IP library to lay the groundwork for developing new revenue growth drivers. As for our real estate vertical, the industry is facing headwinds from the current nationwide COVID resurgence and lingering effect of the stringent industry regulations implemented in 2021. During this challenging period, our team continued to increase our media influence in the real estate sector by delivering a recent content event campaigns. For example, for World Consumer Rights Day, we interviewed 350 home buyers, published quality reports on a number of real estate developments, and collaborated with developers, industry associations, and law firms to produce multi-dimensional coverage of industry pain points. Meanwhile, our team has taken proactive measures to navigate through the uncertainties. and explore new business opportunities. In summary, during the first quarter, we worked tirelessly to overcome the negative impact of macro uncertainties on advertiser demand and our own offline operations. We continue to enrich our content offerings, refine our live streaming capabilities, and enhance the user experience of our app. Looking ahead, in the face of macro headwinds, we will prudently manage our business operations and coarsely execute our new business initiatives while maintaining our focus on business development and areas of emerging growth. With that, I will now turn the call to our CFO, Edward Liu, to provide a closer look into our quarterly financials.
spk04: Thank you, Shuang. and thank you all for joining our conference call today. Our total revenues in the first quarter of 2022 were RMB 175.4 million as compared to RMB 226.1 million in the same period of last year. To elaborate, net advertising revenues in the first quarter of 2022 were RMB 158.4 million compared to RMB 201.3 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 first quarter. Paid services revenues in the first quarter of 2020 or RMB 17 million compared to RMB 24.8 million in the same period of last year Revenues from paid content in the first quarter of 2022 or RMB 4.6 million compared to RMB 10.5 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 first quarter of 2022 were RMB 12.4 million compared to RMB 14.3 million in the same period of 2021. Loss from operations in the first quarter of 2022 was RMB 106.8 million compared to RMB 41.9 million in the same period of last year. Operating margin in the first quarter of 2022 was negative 60.9% compared to negative 18.6% in the same period of last year. Non-GAAP loss from operations in the first quarter of 2022 was RMB 106.1 million compared to RMB 40.7 million in the same period of last year. Non-GAAP operating margin in the first quarter of 2022 was negative 60.5% compared to negative 18% in the same period of last year. Net loss attributable to iPhone in the first quarter of 2022 was RMB 79.7 million compared to RMB 29.2 million in the same period of last year. Non-GAAP net loss attributable to iPhone in the first quarter of 2022 was RMB 79.6 million compared to RMB 27.8 million in the same period of last year. Moving on to our balance sheet, as of March 31, 2022, the company's cash and cash equivalents, term deposits, short-term investments, and restricted cash, or RMB, 1.41 billion or approximately US dollar 222.8 million. Finally, we are still at too early of a stage to quantify the lasting impact of the nationwide COVID resurgence. Nevertheless, I would like to provide some color on the outlook. For the second quarter, we are forecasting total revenues to be between RMB 198.6 million and RMB 218.6 million. For net advertising revenues, we are forecasting between RMB 167 million and RMB 182 million. For paid service revenues, we are forecasting between RMB 31.6 million and RMB 36.6 million. These forecasts reflect our current and preliminary view, which are subject to change and substantial uncertainties. In summary, we experienced significant volatilities from the macro environment in the first quarter, while challenges from industry-wide competition remain. As we continue to expand our presence through news coverage and original content production, and monetization, and in order to minimize the negative impact on our bottom line, we are taking necessary steps to adjust our operational strategy and have made greater efforts on cost control and reducing expenditures. We believe that our ongoing efforts will prepare us to achieve a better margin recovery in the quarters to come. This concludes the prepared portion of our call. We are now ready for questions.
spk03: Operator, please go ahead. Thank you. At this time, if you'd like to ask questions, please press star 1 on your telephone. To withdraw your question, please press the pound or hash key. First question comes from the line of Xue Ru Zhang from 86 Research. Please go ahead.
spk01: Good morning, management. Thank you for taking my question. I have one question about your ad business. So could you please elaborate more on how the Omicron pandemic impacting the ad business in Q1 and Q2, and how should we look at the growth outlook for the rest of the year? Thank you.
spk04: Good morning, Sheru. This is Edward speaking. Thank you for your question. Indeed, the nationwide COVID resurgence this year already has had a large impact on our revenues. Our advertising business relies heavily on execution, and our offline activities and executions were affected by the lockdowns. On top of that, the overall consumption is weak. due to the difficult situation caused by the outbreak of COVID-19. Many industries are facing downward pressure and our clients in those industries are also cutting back advertising and brand marketing budgets. Hopefully, the situation will get better in the second half of the year, but no one has a crystal ball. In light of these external challenges, we are committed to enhancing our business fundamentals in the advertising sector. Content-wise, we further improved our original content to grow our influence across various sectors. elevated brand image will increase our brand value and drive sustainable growth to our advertising business in the future. We also increased cooperation between our content production and monetization team. Monetization now serves as the primary goal that drives our content production development. Also in the meantime, in order to create an engaging community for users and increase our user retention rate, we allocated more resources to upgrade product features and try to enhance social interactions on our iPhone app. These efforts should boost our advertising sales and grow enterprise value in the long term. Thank you, Xueru.
spk01: Thank you. That's very helpful.
spk03: Thank you for the questions. The next question comes from the line of Alice Tang from First Shanghai. Please go ahead.
spk02: Hi, management. Thank you for taking my question. I have one question regarding company financials and outlook. So given macro circumstances, could you please share some views on the current profitability and when we expect to break even or become profitable? Thank you.
spk05: Thank you, Ellie. This is Shuang. As we previously mentioned, we are facing challenges and a decrease in advertising revenue. It's the main cause. of the extended loss this quarter. As Edward has mentioned in his part, we are trying our best to boost our advertising revenues. While our top line growth remains our focus, we also determined that we need to constantly review our cost structure, reduce our loss as much as we can, and support business development with that effective cost structure. We have already set detailed cost management goals and conducted a comprehensive evaluation of return on investments. We will streamline the process and reduce viable costs, including project execution costs, while maintaining our service standards. We also actively manage our fixed costs, including optimizing our employee structure. Through effective cost management measures, we should make significant improvements in overall operating efficiency. Our goal is to bring our core portal business, which is still our online news and content provided through our PC, mobile app, and third party platforms, to break even in the next two or three years. and to make many big profits with our new initiatives, including online reading, e-commerce, and so on. That's our future goal, to break even and become .
spk03: Thank you for the questions. As there are no more questions from the phone line, I would like to hand the call back to Ms. Mitsuko for closing remarks. Please go ahead.
spk00: Thank you. We have come to the end of our Q&A session and our conference call. If you have any further questions, please feel free to contact us. Thank you for joining us today. Have a good day.
spk03: This concludes today's conference call. Thank you for participating. You may now disconnect.
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