Phoenix New Media Limited (FENG), a leading new media company in China, reported its financial results for the second quarter of 2024, demonstrating a significant reduction in net losses and a stable performance in line with the company's performance targets. The company's CEO, Mr. Yusheng Sun, and CFO, Mr. Edward Lu, discussed the quarterly results, highlighting the success of their high-quality content and news reporting, which laid a solid foundation for commercialization. Despite a challenging advertising market, Phoenix New Media managed to maintain stable advertising revenue with slight increases and improved operational efficiency.
Key Takeaways
- Phoenix New Media reported a decrease in total revenues to RMB 168.3 million, down from RMB 180.2 million year-over-year.
- Net advertising revenues decreased slightly to RMB 154.7 million, compared to RMB 161.8 million in the previous year.
- Paid services revenues saw a decline to RMB 13.6 million from RMB 18.4 million year-over-year.
- The company significantly reduced its net loss to RMB 5.5 million from RMB 31.3 million in the same quarter last year.
- Gross margin improved from 31% to 38.9% due to decreased costs of revenues.
- Phoenix New Media's followers on third-party social media platforms grew to approximately 170 million.
- The company provided a business outlook for Q3 2024 with total revenues expected to be between RMB 151.6 million and RMB 166.6 million.
Company Outlook
- Phoenix New Media forecasts Q3 2024 total revenues between RMB 151.6 million and RMB 166.6 million.
- The company aims to strengthen its professional capabilities, content quality, product refinement, and user experience.
- Phoenix New Media is focusing on improving operational efficiency and monetization to strengthen its market position.
Bearish Highlights
- The overall internet advertising market has experienced a year-over-year decline in the first half of 2024.
- Phoenix New Media's total revenues and net advertising revenues have decreased compared to the same period last year.
Bullish Highlights
- Phoenix New Media has maintained stable advertising revenue with a slight increase despite the market downturn.
- The company's gross margin improved due to effective cost control measures.
Misses
- Paid services revenues saw a decline from the same period last year.
Q&A Highlights
- In response to a question about the slowing growth rate of the internet advertising market, CFO Edward Lu highlighted the company's stable advertising revenue and growth in key areas despite the overall decline.
- Phoenix New Media has seen significant growth in the alcoholic beverage, FMCG, and public sector advertising, with promising international marketing efforts, particularly with the ongoing Paris Olympics.
Phoenix New Media's second quarter performance reflects its resilience in a tough market environment. The company's focus on producing high-quality content and expanding its influence across various social media platforms has helped maintain its advertising value. With a continued commitment to innovation and efficiency, Phoenix New Media is poised to navigate the challenges and opportunities that lie ahead.
InvestingPro Insights
Phoenix New Media Limited's (FENG) second quarter performance in 2024 has shown a determined effort to navigate through a tough advertising market. The company's financials and operational strategies are reflected in some key metrics and insights from InvestingPro. As of the last twelve months leading up to Q1 2024, FENG's Market Cap stands at a modest 40.84 million USD, which is reflective of its position in the market.
A notable InvestingPro Tip is that FENG holds more cash than debt on its balance sheet, which suggests a degree of financial stability and flexibility. This could be a reassuring sign for investors concerned about the company's ability to manage its finances amidst a challenging revenue environment.
Another critical InvestingPro Tip is that the stock is trading at a low Price / Book multiple of 0.24, indicating that the stock may be undervalued relative to the company's book value. This could represent a potential opportunity for value investors who are looking for assets that may be trading below their intrinsic value.
In terms of performance metrics, the company's Price / Earnings (P/E) Ratio stands at -3.05, and when adjusted for the last twelve months as of Q1 2024, it's at -4.16. The negative P/E ratio reflects the company's current lack of profitability, aligning with the InvestingPro Tip that FENG has not been profitable over the last twelve months. However, the company's focus on operational efficiency and content quality, as mentioned in the article, is a strategy aimed at turning this around.
InvestingPro offers many more tips that could provide deeper insights into Phoenix New Media's financial health and stock performance. There are currently 10 additional tips listed on InvestingPro, which could be valuable for investors looking to make a more informed decision regarding FENG.
These selected metrics and tips are directly relevant to the article's discussion of Phoenix New Media's financial results and strategic outlook, offering readers a concise yet comprehensive view of the company's current market position and potential investment considerations.
Full transcript - Phoenix New Media Ltd (FENG) Q2 2024:
Operator: Good day and thank you for standing by. Welcome to Phoenix New Media Second Quarter 2024 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. [Operator Instructions] Please be advised that today's conference is being recorded. I will now hand the conference over to your first speaker today, Muzi Guo from IR Department. Please go ahead.
Muzi Guo: Thank you, operator. Welcome to Phoenix New Media's earnings conference call for the second quarter of 2024. Joining me here today are our CEO, Mr. Yusheng Sun; and our CFO, Mr. Edward Lu. During this call, our management team will start with an overview of our quarterly results, followed by a Q&A session. You can find the quarterly results as well as the webcast of this conference call on our website at ir.ifeng.com. Before the management's prepared remarks, I would like to draw your attention to our safe harbor statement contained in our earnings press release, which also 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. [Foreign Language]
Yusheng Sun: [Foreign Language] Hello, everyone. Year 2024 is already halfway over. Our operations have remained generally stable, and we have achieved our performance targets, significantly reducing losses. In the second quarter, we effectively enhanced Phoenix's media influence through high-quality content and news reporting, coupled with extensive online distribution, laying a solid foundation for commercialization. Simultaneously, we continue to refine our products, optimize user experience and foster innovation in both content and commercial products. In the second half of the year, we will continue to work with full dedication to achieve our annual operating goals to reduce losses year-over-year. Now I will invite Edward to provide a more detailed summary of our second quarter performance on my behalf. Edward, please go ahead.
Edward Lu: Thank you, Ms. Guo. In the second quarter, we successfully covered a series of major events, achieving extensive reach across the Internet. Among the most significant international news stories in the second quarter was the death of the Iranian president in plane crash. Our detailed reports included a clear time line and a thorough analysis. We quickly produced multiple original pieces, providing exclusive insights into the crash’s cause, analyzing Iran's future political landscape and discussing the country's military capabilities. Our original series worked well together to offer comprehensive and in-depth perspectives. Beyond major news events, we consistently produced original programs, ensuring a steady supply of high-quality content that garnered wide distribution and discussion, enhancing our brand's advertising value. The in-depth investigative series, Eye of the Storm, continue to excel in high-quality, in-depth coverage of trending topics. It delivered over 20 original articles with over 100,000 reads on Weixin and several with over 300,000 reads, earning praise for its commitment to objective and ethical journalism on controversial issues. Our original video service, Phoenix Lab, targeting towards a younger demographic focused on creating practical consumer guides across various scenarios are driving consumer concerns and providing quality oversight. In Q2, Phoenix Lab produced 23 original long videos, 72 original short videos and two major industry event reports. One long video became a hit on BiliBili with over 1 million views, and the series achieved a total of 1.7 billion views across platforms. The Phoenix Lab BiliBili accounts surpassed 1 million follower milestone in Q2, establishing itself as a leading consumer product review IP. Quality content requires broad distribution channels and effective user reach. In the second quarter, our followers and influence on third-party social media platforms grew steadily. Our team developed differentiated operational strategies tailored to each platform, enhancing transformation through trending topics, interactive discussions and live broadcast. We now have approximately 170 million active user – followers across all platforms. We have developed several key accounts on different platforms with rapidly growing follower base and commercial value. For example, our Douyin account is approaching the 20 million follower milestone. The advertising revenue from these third-party platform accounts also achieved double-digit growth year-over-year. On the commercial front, we maintained positive momentum in the first half of the year. We expanded our efforts in the public sector beyond traditional culture and tourism promotions to include local industry bureaus and associations. Our services extended from provincial and city levels to county levels, achieving year-on-year growth. In terms of international marketing, we made significant strides in meeting client needs for overseas expansion. Our successful execution of several overseas campaigns such as our brand’s international sourcing project in New Zealand and the various award events result in widely discussed articles and videos on Weibo (NASDAQ:WB), Facebook (NASDAQ:META) and Twitter. This effort effectively communicated the open confidence and socially responsible image of Chinese spreads, garnering widespread recognition from overseas audiences. In the second quarter of the year, we will continue to establish ourselves as a leading new media online. We will focus on strengthening our team’s professional capabilities, producing quality content, refining our product and optimizing user experience. This is the core of our competitiveness as an internet media company. At the same time, we will focus on further improving our operational efficiency and monetization capabilities to strengthen our position. This concludes our CEO, Mr. Sun’s prepared remarks. I will now walk you through our financial performance for the second quarter of 2024. All figures mentioned will be in RMB. Our total revenues were RMB168.3 million compared to RMB180.2 million in the same period of last year. Specifically, net advertising revenues were RMB154.7 million compared to RMB161.8 million in the same period of last year. Paid services revenues were RMB13.6 million compared to RMB18.4 million in the same period of last year. Cost of revenues in the second quarter of 2024 decreased by 17.2% to RMB102.9 million from RMB124.3 million in the same period of last year, resulting in an increase in gross margin from 31% to 38.9%. Loss from operations was RMB8.9 million, a significant improvement compared to a loss from operations of RMB35.7 million in the same period of last year as a result of strict cost control measures implemented. Net loss attributable to ifeng was RMB5.5 million compared to net loss attributable to ifeng of RMB31.3 million in the same period of last year. Moving on to our balance sheet. As of June 30, 2024, the company’s cash and cash equivalents, term deposits, short-term investments and restricted cash were RMB989.1 million or approximately US$136.1 million. Finally, I’d like to provide our business outlook for the third quarter of 2024. We are forecasting total revenues to be between RMB151.6 million and RMB166.6 million. For net advertising revenues, we are forecasting between RMB142.3 million and RMB152.3 million. For paid service revenues, we are forecasting between RMB9.3 million and RMB14.3 million. 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. Operator, please go ahead.
Operator: [Operator Instructions] Our first question comes from the line of Alice Tang of First Shanghai. Please go ahead.
Alice Tang: Good morning. Thank you for taking my question. So the growth rate of the internet advertising market seems to be slowing down. So could the management please share their views on the forward advertising market and discuss the relevant measures the company is planning on taking to respond to the current market environment, please?
Edward Lu: Good morning. Thank you for the question. Actually, from the market data from the first half of 2024, the overall internet media ad spending has experienced a year-over-year decline. Despite this, our advertising revenue for the first half of the year has remained stable with a slight increase, which is not easy. Especially in the automotive sector, traditional one of our strong areas, ad spending has dropped even further. To keep up our revenue, we need to step out of our comfort zone and make breakthroughs in other industry sectors. In the first half of the year, we saw a significant growth in key areas like alcoholic beverage, FMCG and public sector. Our premium IP content and high-end interviews align well with the branding needs of alcoholic beverage clients, leading to steady long-term ad spending. In the FMCG sector, we have utilized our specialized team and trendy, useful content to attract more clients. In the public sector, we have been helping cities and counties showcase their history, culture and attraction, making them stand-out and build strong city brand images. Looking ahead to the second half of the year, our international marketing efforts also look promising with the ongoing Paris Olympics. We are working with many brands on overseas event marketing. Our clients appreciate Phoenix international image, content reach and ability to execute overseas campaigns, and we are confident we can continue to grow in this area. Of course, we have our challenges, too. For the sectors that are dying, we need to keep adjusting our strategies. Plus with the overall trend of lower customer transaction, we need to work hard to bring in more clients and orders to hit our revenue growth. Thank you, Alice. Thank you again.
Operator: Thank you. Thank you for the questions. I see no further questions at this time. I will now turn the conference back to Muzi.
Muzi Guo: Thank you. This concludes our Q&A session and conference call. If you have any additional questions, please don’t hesitate to reach out to us. Thank you for joining us, and have a great day.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
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