Q3 2019 Earnings Call
Ladies and gentlemen, thank you so anybody about capacity Phoenix New media.
Well done.
At this time all participants are you know there.
After the speakers presentation, there will be a question and answer session [laughter] lots of questions session Press Star one telephone.
I must advise you that today's conference is being recorded.
I'm not trying to come from literally all first speaker today Ching Lu. Thank you. Please go ahead.
Thank you operator, welcome to Phoenix, New media circled her to southern lighting earnings Conference call I'm joined here about all the Chief Executive Officer, Mr. Folio, and Chief Financial Officer, amazed that people onto they might be forced to why don't you also called TV Dot and then come back.
Okay a session.
So called her 2019 financially job on what caused Okay conference call Oh, what about our website I thought I phone dotcom a replay of the coal will be available on the website yield few hours before they continue I would like to refer you to all the safe Harbor statements you know <unk> earnings press release.
They apply to this coal costs, we will make whole thing.
Finally, please know that unless otherwise stated all figures mentioned during this conference call all your arm B.
With that I would like to turn.
Mr from Neil our C O.
Thank you Jamie good morning, good evening, everyone. Despite macroeconomic uncertainties that upheld all core values for professional journalism in the digital era.
Our mission is to leverage all distinctive accommodation.
<unk> expertise Oh.
Algorithm to create a warm fulfilling <unk> deals fall users our commitment to the Adams.
Contributed to our solid financial performance, that's total revenue quarter increased by 15.4% year over year to RMB 280.2 minutes.
This growth rate was in line with all previous guidance.
I'd like to operational stress three hours plugging husband increased user stickiness Colton exclusivity.
<unk> IP to argument competitive differentiation on vertical travel investments to enhance all Brent inflows.
First and foremost the operation the operating metrics of our flagship use that iPhone continue to flourish leveraged all smart push augers them with the about death.
Several analytics.
Robert all users potential purpose improve our user for body accuracy that increase all user targeting position.
As a result.
Well, we greatly reduce the number of topics push through users.
Because those topics what tailored to each deal just individual interest Oh user engagement actually increased by 4% retention rate increased by 12.5% sequentially. During this quarter of Plenti 19.
In addition to pull that Youve husband iPhone. We also augmented all exclusivity you delivering we can use I'd, probably refuse thus enhancing our competitive differentiation.
Example October 29, King we produced substantial amounts of exclusive coverage try to 70 anniversary celebration through all access to me.
You talked a little CEO and founder of Phoenix TV.
Oh parent company.
Oh parent company.
Mrs. You, what's the always feel of a major satellite TV network embodied to watch the minutes report rate a tall. Yeah, then lots from.
That's a media that's for me to lose brothers.
Countries.
Uptick center dealing its most important event of the decade wanted him a unique opportunity.
With a number of.
Political luminaries nothing.
Thus gaining us exclusive use insights through life interviews and commentary.
Total we recorded over 22 million views during that event.
Illustrating the substantial demand from viewers for this type of exclusive coverage.
Besides coverage exclusivity also grew all four party I'd be content library, which holds significant growth would have.
A prime example lines Apparels I'll talk show.
We produced in house to showcase summer try this mode.
Accelerated Olympic Gold medal.
Soon.
Oh, Cirrus long haul interviews.
The release of its first season on September 26 became instant success.
Following approximately 8.3 million views on top of 20 million views across the internet.
Let's go sell this program continues to blockbuster our presence in the sport category.
It also provides as we said rare portfolio of called expertise talent that works on the growing fan base to be leveraged coverage upcoming plenty plenty ought to be games.
For example, ball particles and production capability.
He is lost talk show WAPA Ginger.
Investigative reporting serious we produce to expose those dark industry secrets that have significant suicidal impact.
Initial episode titled Secrets behind hidden cameras, well the smashes.
Recording totaled 7.5 million views, Oh, hi, registering approximately 400 million related topics on social media.
Leveraging a team investigative journalist razor sharp focus on causative mind the show expose the behind the scenes insights.
Resonates with the public desire for secretive choose.
I'm masks.
To help us to further solidify our reputation in the future of investigative journalism and hope all competitive differentiation you constant.
Offering.
[noise] besides cult exclusivity with IP expansion, we're supposed to advance our vertical channel development.
As the current microeconomic uncertainty Hudson users attention to financial markets. We have intensified operating focus on the fund has already been.
During the third quarter.
Optimize a cousin management systems.
We aligned our production team personnel.
The result, we shrunk a coverage response time for breaking news you find us hudsons <unk> capacity to produce <unk> bass constant halt find those topics.
And.
Accentuated Oh, Brent cousins.
Johndroe that is highly sought after by Boes all high end users and advertisers for example, our exclusive interview with me so the onto you.
For more chief executive of Hong Kong successfully captivated audience attention joint approximately.
35 million views to all powerful.
Well ever.
Our coverage of the World Economic Forum in July resulted in a series of exclusive media interviews with industry, leading experts attracting 60 million views.
In addition to vertical travel development.
We also continue to be more innovative medicines.
Bolstering our breath inflows.
Advertising capabilities.
<unk> for example.
That was a partnership with I space, the first private Chinese based large company.
To successfully achieve orbit.
This partnership with pioneered a series of creative marketing campaigns for advertisers like maturing payload space.
For the importance on board.
Hyperbola, while the first commercial buckets in China to achieve our.
That's a hyper bowl awad broke free the signs.
I'll be patient pool I began to supplement.
Yeah, the gate the ours appliance products.
He kept is located in the spectacle of a truly unique social moment.
The success default partnership I space for the Industrys ability to develop the fact that marketing solutions I'm Crazy.
Exclusive once in the lifetime advertising opportunities flux lines.
Lastly, let me share with you update about GTN transaction.
Previously stated we enter into a supplemental agreement with the proposed buyer who did on July 20 surged 2019.
As of October 24, 2019, we had already received accumulated payment of 200.
To me the U.S. after transaction.
They pass by P.T.V.'s EG yet.
Consequently, we have transfer 200 million U.S. worth of shares to the buyers. Meanwhile.
They will share the voting rights and act in concert with us and to that pay the food about us.
Carefully aboard considering.
The allocation, but wrong 100 million U.S. to a special dividend payment to reward our shareholders for their support a company by the end of the you.
We'll be short update investors a horse.
The majority of the remaining proceeds from transaction will be allocated to our development of smart augers production of in house I'd be comfortable.
Expansion into lifestyle verticals to few Oh organic growth engine.
In summary during this quarter, we increase our user stickiness, so product enhancement augmented our competitive differentiation suit exclusive cousins within house IP.
Position.
Ourselves well what monetization, so where do you go channel.
Investments.
Despite the cards microeconomic headwinds we have stayed ahead of the curve by aligning.
Business with shifting industry dynamics refining our products.
The mobile era, and managing our cost structure prudently.
We're confident.
Now the combination of <unk> better than working capital professional journalism expertise exclusive information axis [laughter] tighter income producing at a strategic investments.
No hall have for us launch pad to propel us into a renewed close cycle.
With that I'll turn the corner sabbatical, our CFO to go through the financial details.
Thank you saw and thank you all for joining our conference call today [noise].
[laughter].
Oh total revenue.
Oh 20 night team.
Oh, and B 380.2, maybe representing an increase of 15.4%.
From a and B 329 concrete media units into it last year.
Total revenue this quarter included both.
Andy 40.3 median of consolidated revenue from Todd.
And I wouldn't be 80.1 million of consolidated revenues from 10 ball.
I will now provide details on our revenues for the quarter 2019.
Consolidated net advertising revenues for the quarter Uptrend Tonight.
Oh and be 377.6 million.
Representing an increase all 16.4%.
Oh Im B 281 on size I mean, it in the same here, we're not yet.
The increase was primarily attributable to the consolidation of advertising revenues from temple and Todd.
No advertising revenues from our traditional business decreased by 16.2%.
Due to a macroeconomic uncertainty.
Intensified industry competition.
They services revenues for the second quarter, Oh, 2019 increased by 10%.
Well I'm be 52.6 million from RMB 47.8 media in the same last year.
Revenues from paid content, what does that put Oh 20 night team increased by 39.5%.
[noise] it was mainly due to their consolidation hot which was partially offset by a decrease in the company's traditional digital reading business.
Due to the regulatory tightening on digital reading sector in China.
Loss from operations for the quarter.
Oh 20 night team was RMB 10.8 million.
As compared to RMB 50.6, meaning that the quite Oh 2080.
It was mainly due to a gain of a and B 62.1 million a.
Arising from the changes in fair value of financial assets contingent.
Returnable consideration for the quarter.
He.
Which represented the changes in fair value of the company's right to receive the contingent.
Hi, Annabel consideration.
In relation to the acquisition of Todd.
Subject to certain price adjustment mechanism based on how good operating and financial performance in 2019 and 2020 .
Operating margin for the quarter was negative 2.8% as compared to negative 7.2% in the.
What a lot here.
non-GAAP loss from operations for the quarter, 29 team, which exclude share based compensation and changes in fair value of financial <unk> that's contingent.
Turning to both consideration.
Was 67.6 million as compared to RMB 54 million in the quarter 28 cheap.
non-GAAP operating margin.
Ill try to unite team.
Which exclude share based compensation and changes in fair value of financial assets contingent.
Kind of bulk consideration.
Well, it's negative 17.8%.
That's come Pat to negative 16.4%.
Well not here.
Hi, effective tax rate in the third quarter of COVID-19 is mainly attributable to a larger taxable often what a company subsidiary.
As come Pat who does the quota of last year.
After considering the valuation allowance of deferred tax act.
Net income attributable to iPhone for the took what Oh 29 team was RMB five on 9 million as compared to net loss attributable to iPhone Alt, a and B 16.6 million in the same period last year.
non-GAAP net loss attributable to Phoenix, New media, well that's got quota.
Which exclude share based compensation income or loss from equity method investment net of impairment and changes in fair value.
Financial assets contingent returnable consideration.
Well I'll and be 50.8 million.
Compared to RMB 18.28 million in the quarter.
28 team.
Moving to abolish it as of September Thirtyth country night teams are companies cash and cash because at that time deposit short term investments and restricted cash were RMB 2.06 billion all applause.
The U.S. dollar 288.9 million.
Which is good I wouldn't be a Kim <unk> million from Todd do and a and B 171.3 million from 10 ball.
Finally, I took my eye business outlook for the fourth quarter, apparently not team we are forecasting tool revenue.
To be between.
430, 112 million and on beef wanting to 51.2 million.
Representing an increase of 8% to 13% year over year.
Well no advertising revenue.
We are forecasting between RMB 270.9 million and I wouldn't be 385.9 million, representing an increase of 4.2% to 8.4% year over year.
For pace of it.
We are forecasting between a and B 60.3 million and I wouldn't be 65.3 million, representing an increase of 39.4% to 51%.
Despite the backdrop of intensifying competition advertising industry.
Well at the current macro economic slowdown.
We are confident about oh, good trouble pasta.
We continue to lavish oh, so the real content leadership.
By providing most relevant information well use it [noise].
Well.
Hi combination of editorial suggestion and <unk> algorithm.
Meanwhile, we are actively optimizing our cost and expenses structured to maximize Oh I blash shareholder.
We have already reduced over 20% organic DNA call aiming to reduce our net operating loss I hop.
Ultimately, we are hoping to attempt to both within the next few years.
Despite persistent.
Challenging market conditions.
Before we start to any section I would like to say slot So seal center.
Well give you mean.
<unk> opportunity to work for fans for the last six years.
I tendered my resignation as to Seattle, All Phoenix, New media for personal reasons.
Which become effective on November 14, 20 Nike.
It has been a great honor to work with Brent as I called it as Ben.
It is with a heavy hot that I leave such a dynamic and collaborative what please.
Going forward I'm really confident that the company is well positioned for success in coming years.
With that I'm, turning the call back to our C. O song Liu for a few additional work.
[noise] Sentry Patty we're extremely grateful for your house contribution.
Dedication to the company.
Particular outstanding leadership has proven highly valuable to the company.
We believe that the finance accounting structure, you'll have implemented will continue to servers well going forward.
I'll be hub every one that's been X. I wish you all the best you future endeavors.
Meanwhile, I'm pleased to introduce I will leave.
Gee I saw news default with experience, there's managerial positions, but I'll companies things.
2009 Edwards has a comprehensive understanding of both our company on the border media industry.
He's expertise he was olefins confidence, but exactly to the transition process will be variables.
With that word or the funniest home on the supportive team are working well be able to adapt to changing market conditions well.
Listen ourselves foot reviewed cool cycle, well I'll briefly.
Ready to open up the call professors [noise].
[noise], Thank you shop.
Ladies and gentlemen, I'll begin the question and answer session.
I wish I asked the question. Please press star one kind of fun and didn't feel name to be enough. If you wish to cancel a request. Please press the pound.
[noise] [noise]. Your first question comes from the line of Binbin Ding from JP Morgan. Please ask your question.
Hi, Good morning management. Thanks for taking my question first I would like to sank Betty for his help student, possibly isn't a wish her oh the best on the new journey I know its or congrats on automotive or on a new Roe.
I have two quick questions first is the use of cash for the from the selfie investment and second is.
As expected the buyer will pay the remaining part of a.
A condition.
Thank you.
[noise] Hi, <unk>. This is Sean <unk>. Thank you for the question.
No we are well do evaluating the use of proceeds from the Phil.
I think we have to be a their courses both the industry challenges on the investment opportunities ahead of those.
The Chinese media industry is a revolving.
Evolving very rapidly so wouldn't involved with.
First.
So we think we'll continue to invest and product innovation to capture grows options.
Are the same time to mitigate.
Mmm inherent challenges of spending all.
Business, improving all cash flows.
The sustaining organic gross.
We will also continue.
Investing in the improvement overall I I wasn't.
And Oh party constant production chemicals.
But all we plan to achieve about it.
The team capitalizing halkos opportunities soon strategic investments other sustaining.
Organic gross bite refining all core competitive advantage.
So with the easy mine will use the proceeds to secure Bose all future growth prospects, a long term shareholder value.
Horse, but continue to update the markets regarding.
Okay.
As to the remaining Dallas or especially the risk associated with the remaining payments.
We have status, we have signed a concerted party womens and receive a 15 minute deposits from the buyer.
Sure that struck me.
Mitigated.
Uh huh.
To elaborate.
The cost of party agreement.
The voting rights.
We will be shared between us and the buyer after we transfer the 200 million U.S.
Worse off she has to the buyer.
On the buyer will act in concert with ours, if you want the falling three conditions fulfilled number one the buyer pays the entirety of the remaining payments were seeing three to six months after paying the first tranche.
Number two.
The buyer makes a payment 20 minute or the valuation no less than 1.1 committed 1.1 billion U.S. within three months after first tranche in Spain.
And to serve.
The buyer makes a deposit payment.
Certainly we didn't U.S. additions to the original 15 minutes U.S. deposit.
So it's worse to know that you did you currently.
Remains on track to achieve its strategic goals.
So in the worst case scenario.
The buyer walks away from the transaction.
Lets do very competent people.
Capability to consolidate an opinion sufficiently.
Thank you <unk>.
Your next question comes from the line Frank Chen from Macquarie. Please ask your question.
Good morning song zone, but too.
It's worth noting.
I have only one quick question on the margin outlook I think you did very good job in terms of cost controls the corretora.
Do you just mentioned that you are going through half your operating loss sitting today might tend to trend to Cummins, Russia us a detailed.
Oh sure doing bad thank you.
[noise] Hi, Frank This is Betty thanks for your question.
Well actually in this quarter, you'll have noticed that our total traditional at revenue, even though have decreased by 16%, but our mobile ad revenue.
What increased by 5% which is.
<unk>, which is very good as compared to the market, but oh PC and why.
Revenue has been continuing to decline due to that market situation.
And I'm from another perspective, like because <unk> and I'll brand advertising and I mean, he's kind.
For our traditional brand advertising revenue.
It has increased.
Sequentially this quarter.
And is expected to be baton this quarter due to seasonality.
However, I put my magic by advertising, mostly I suddenly.
Has increased significantly year over year due to intensified competition.
Why outbreak advertising decreased lower than the market due to our strong Brent reclamation into market [noise].
Meanwhile, we also plan to optimize how combination of advertising, Nick and native marketing.
This will be achieved by integrating our hot topic coverage, what well classical marketing solutions for both online and offline. Thanks.
We are also who actively exploring other potential innovation, while planning for significant Sofia two events in the coming yes.
Both of which we believe helped to boost all at monetization in 2020 .
However, as for the macroeconomics.
We remain cautiously optimistic in 2020 .
The uncertainty persists.
We expect that I'll advertising budget will be further we do it.
This is on the top line in the bottom line in my script I have mentioned that we had been.
Initiate a lot of.
Cost restructuring measurement.
Including cost savings on probably get cost, which slot mentioned earlier.
And also in quoting on very a straight regulation on our.
Marketing expenses, so Oh, all this initiative, we have already reduced allergenic caused by 20%. So we are going to further.
Looking to.
Go into a cost restructuring initiatives.
By doing so we are hoping that.
Our loss will be for Adobe deal.
As compared with this year and as we mentioned, we're looking for it to be profitable in the next few years.
Right, maybe I can add a few more worst all cost restructuring initiatives.
Basically a life in three areas for use acquisition, we will start limiting our investments in areas with less efficient tough acquisition.
By prioritizing projects on channels with higher ROI as well would reduce our U.S acquisition costs improve the quality of our user base, especially.
For the.
Production of all part a comfortable for example, IP port It will also carefully analyzed our lives.
Adopted stricter item item.
Hi, guys to review process for IP projects.
That produce lower margins.
As part of a border strategy shift to focus on improving profitability over revenue gross would choose not to that project.
On the lower end of the margin spectrum.
Appropriate.
Finally, we have implemented a rigorous review process fault pilot corporate power products.
Underperform, Unlike a strong potential for driving user base, especially on the revenue growth will be event.
So by doing this we're confident that these efforts will significantly reduce our cost in the coming years. That's we're aiming to return to profitability in the coming two to three years.
Thank you Frank.
Great and let's just think Shaw.
How about your wish all the best thing Youre extra there.
Okay. Thank you Frank.
Your next question comes from a line of carbon.
First.
Hi, <unk> question.
Hi.
Okay My question.
Sure.
Oh.
Yeah.
Okay.
Something sounds about right.
Can you think they can continue like Scott.
Tons and tons <unk>.
Yes. Thank you comment let me take your first questions I think the improvement ABTS operating metrics.
It's probably like a resolved so for more effective content management process and the technological advancements.
First we enhanced our capabilities in covering now coming hot topics on other more precisely why stressing the turtle revealing pauses.
Editorial team is not meeting our daily basis.
Who choose the Lady is trending issues and the producing related conference.
Finally, we continue to leverage technology.
Enhance augers them to improve accuracy and relevance.
During the quarter also roll all updates upgrades.
To all iPhone users such as a push.
Okay. The occasion features.
We just improve if I come to the effectiveness in the recommendation for constant to new users.
So as a result of it we are now increasingly April to attract your attention with fewer push notifications.
During the third quarter this improvement.
Probably the two or 4% increase engagement level and the 12.5% increase use it intentionally as I mentioned in my opening remarks.
Finally, we remain committed to striking a balance between keeping our user inform entertainment.
Oh I'm wavering commitment.
Providing users with valuable informative on thought provoking constant we have laid a solid foundation.
<unk> for me the business.
As we continue to upload these values going forward, we're confident that operating metrics, we maintained a healthy gross.
We maintained a healthy growth trajectory.
20 Twond.
So maybe patty and further elaborate on the brunt advertising trends hi common.
Excellent brand advertising well this quarter outran, our traditional brand advertising revenue I have increased sequentially this quarter.
And is expected to do better next quarter.
But over all I'll up brand advertising actually decreased slower than the market due to a strong brand recognition.
We have put a lot of initiate you to boost our advertising revenue.
One one major akshay is to integrate our hot topic coverage with cross platform marketing solutions.
For both online and offline event as we are up.
Doing a lot of keep that into future and we should expect that al cost will be.
As well, but by doing this initiated.
We believe that [noise].
Both of our.
No matter how brand advertising <unk> would be increased in 2020 . However, as I mentioned earlier, because all the and macro economic uncertainties in 2020 . So we are uncertain. If the market is continue to get worse.
If there's just a case, a we expect that I'll ever Tae sik budget would be further reduced.
Okay. Thanks.
Yes.
[noise] once again.
A question. Please press star one time.
<unk>.
[noise] no further questions at this time.
[laughter]. Please continue.
Thank you operator, we have come to the end of five Okay session. An hour conference call. Please feel free to contact cuts. If you have any further questions.
Joining us on this call have a good day.
Thank you. Thank you all.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating all disconnect.