Q4 2020 Earnings Call Transcript

Published: 16 Mar 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to Phoenix New Media Fourth Quarter 2020 Earnings Call. . I would now like to hand the conference over to your first speaker today, Ms. Qing Liu. Thank you. Please go ahead.

[Qing Liu:]

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.ifeng.com. A replay of the call will be available on the website in a few hours.

[Shuang Liu:]

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 macro economy and its corresponding effect on China's advertising industry. Meanwhile, quarterly revenues were in line with our previously provided guidance range, reaching RMB362.2 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 ifeng'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, Human Intelligence Agency, which is one of our We-media account, shed 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 frequently published on other social media platforms and gained additional industry recognition from traditional media outlets. In the meantime, our in-depth and comprehensive coverage of 2020 U.S. presidential election, which originated from our platform and permitted throughout the internet, generated record-breaking viewership. Through our official account of We Vote 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. Also, we provided our users with insightful interpretations of U.S. election results as well as their societal and political impacts by hosting exclusive interviews with thought leaders such as Professor -- Mr. Zhang Yong Yang . In addition, through our We-media accounts such as , we carried tick-by-tick coverage of the daily twists and turns throughout the presidential election and published original commentatory on Biden's victory, both of which went viral on social media during the most intense period of elections.

[Edward Lu:]

Thank you, Shuang, and thank you all for joining our conference call today. Our total revenues in the fourth quarter of 2020 were RMB362.2 million, in line with our previous guidance range and representing a decrease of 9.5% from RMB400.4 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. Net advertising revenues in the fourth quarter of 2020 were RMB336.7 million, representing a decrease of 7.3% from RMB363.1 million in the same period of last year. This decrease was primarily attributable to the previous stated reason. Paid services revenues in the fourth quarter of 2020 decreased by 31.4% to RMB25.5 million from RMB37.3 million in the same period of last year. Revenues from paid content in the fourth quarter of 2020 decreased by 46.6% to RMB11.2 million from RMB20.9 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.

[Operator:]

[Zhenyu Chen:]

Actually, I feel very interesting that you mentioned a few good new business area in your prepared remarks. Are you going to grow organically? Or will you take some sort of M&A to expand your business? So my question is that what's your investment strategy in 2021? Any upcoming M&A should we expect?

[Edward Lu:]

This is Edward speaking. I will answer your question. Actually, this year, we have invested RMB90 million cumulatively in 3 industry-leading venture capital funds such as . These funds have an 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, offering more timely insight in the latest industry trends; and of course, enable us to seek new product opportunities in this constantly changing internet market environment. Actually, in verticals such as finance and product reviews, we have made 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. I -- this is my answer. I hope I have answered your question, Frank.

[Zhenyu Chen:]

Yes.

[Operator:]

Our next question comes from the line of Xueru Zhang from 86Research Limited.

[Xueru Zhang:]

I have a question about the ad industry. So it's good to hear that -- management comment that economy is gradually recovering. So I'm wondering if managing group elaborate a bit more about the macro outlook and ad budget from key verticals for 2021.

[Edward Lu:]

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, mainly -- but many industries still have not fully recovered to the prepandemic 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 off-line 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 of 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 the sales lost more than like fourfold year-over-year in February 2021. Moreover, we plan to extend our market share in brand advertising for the new consumption sector through cooperating with social media platforms and short video platforms such as Weibo or WeChat and Bilibili, et cetera. 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 off-line events such as the ifeng Food Festival, , 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 Phoenix TV so that we can attract more high-end users, and the average user time spent on our products 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, oversupply of ads inventory on short video platforms has squeezed the market share of other platforms. Still, in the fourth quarter of 2020, we strengthened our sales and marketing efforts related to mainly 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, we allocated more resources to innovating and optimizing features of our existing products, created a better community environment to increase user retention and increase our investment in new product development. The results of our efforts should materialize gradually, leading to an overall improvement in our advertising sales and generate greater long-term value over time. This is my answer to your question.

[Operator:]

Our next question comes from the line of Carmen Zhang from First Shanghai Securities.

[Carmen Zhang:]

We noticed that Phoenix TV has announced the change of their management team. So I wonder what's the impact of those.

[Shuang Liu:]

Thank you. This is Shuang. Let me answer your question. Phoenix TV's global reporting resource and original content capabilities have been well respected in the industry, and we believe its potential is yet to be fully unleashed. As you said, recently, Phoenix TV has boarded new personnel to management team. They have extensive international background, 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 Phoenix TV. This will accelerate its evolution into a truly global multichannel media group and further unleash Phoenix TV's brand potential, exemplify Phoenix TV's voice on the international media stage and enable Phoenix 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 potential. I hope this will answer your question.

[Carmen Zhang:]

Yes.

[Operator:]

. There's no more question at this time. I would now like to hand the conference back to today's speakers. Please continue.

[Qing Liu:]

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.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.