Q4 2019 Earnings Call
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Ladies and gentlemen.
I think by and welcome to see neither does that might be fourth quarter and fiscal year 2018 earnings call.
Besides all but disadvantage and listen only mode. After to speak a presentation. There will be a question answer session, who asked the question. During this session you will need to press star one of your telephone. Please be advised of today's conference maybe recorded I would now like Kinda conference over to your first speaker today Mushing meal.
<unk> director of Investor Relations. Thank you. Please go ahead.
So but in terms will come true Phoenix, New media first called her to show the Nike Inc. earnings Conference call I'm joined here Bauer, Chief Executive Officer, Mr., Sean do an chief Financial Officer, Mr. I'd, all new on today's coal mine Manuel forced provide a review of the coffee readout and then.
Hum that cotulla age session. The first taught her 2019 financial result on what caused of today's conference call. Oh, what people are ripe said I had Dol tiphone dot com a replay of the coal will be available on the watch side you know few hours.
Before they continue I will like to refer you to our Safe Harbor statement <unk> earnings press release wage apply to this coal ash blue make forward looking statement funnily pay snow that unless otherwise stated all figures mentioned during this conference call our RMB way that I would like to turn the call or.
And Mr., Sean will oversee all.
Converging wanting a good evening, everyone in the fourth quarter Cookie nice.
Unique position new media partner helped enable us to consistently outperformed the competition.
Well better than expected topline performance in the fourth quarter of 29 team.
Additionally, all going production engaging exclusive new comp runtastic activities.
Monetization screen.
We continue to own all very proposition with both users and advertisers alike.
I'll use front, we focused heavily on balance accurate coverage major social you've been around the world restaurants, the Hong Kong <unk>.
I'm trying to treat negotiations.
The U.S. China trade negotiations for example, we leveraged our comprehensive coverage unique Vittorio perspectives on state of art recommendation algorithm.
User up to date office tweets on tour event.
In particular.
Coverage for this event was well received final users achieving 15.3 million views in total.
A warm reception of users to this type of call help us to grow all click through rate.
That year over year during the fourth quarter.
Also achieved improvements and other operating metrics, including user conversion rate retention rate.
It was a time span all black you that I call.
Notably our consistent coverage over these high profile social events.
He used to goes both our market leadership on breath inflows and try to new media industry.
Yeah. This into premium news coverage, we also continue to impact as Paul Brown inflows I'm solidifying our leadership.
<unk> verticals off like you better during the quarter.
For example in December we organize all iPhone fashion.
Award Gala Beijing.
The public provisions of multiple top tier celebrities and assessing how else. This eye catching event attracted 860 million portal views I resolved. It doesn't have the highest ranked search topic on social media.
In November we help our annual iPhone fashion.
And you iPhone partner summit in Shanghai.
Talking teams utilize this event to produce a number of expensive report I reach millions of users on line.
Additionally in November we hosted the 29 team iPhone beautiful Chalco Terry.
Oh charity Gallop in cooperation with China Cherokees age Foundation for children on several other Cherokee organizations threes over 32.4 minute RMB inflammation, what children in need.
During the last thing years, we have organized anyway, iPhone beauty, which helps charity gotla.
Eight different cities across three continents to read over 210 million RMB.
Importantly, our ability to leverage these events to provide engaging content to users and deliberate mainly result to advertisers highlights this drawl multinational value proposition.
[laughter] your line of these advantages, we expect our event execution capabilities to continue.
Driving all business expansion going forward.
Well I am I reading would continue to explore those opportunities with attractive monetize monetization potential.
During the fourth quarter, we produced over 200 audio books through up which instantly become smashed.
Popular audio problems there China.
In addition, our comic book business also continues to produce encouraging result, you October for example, we launched a new episodes enemy theorist the performed exceptionally well collecting over 160 million views in less than three months.
Going forward, we plan to replicate the success Formula I produce foreign language comic book English Korean on other languages for more readers around the world.
Although gave me for us.
The administration of PRASM publication issue, a gaming license to golf player Oh fabric pets.
GAAP layer is a highly anticipated game title produced by our subsidiary.
2019.
What convinced that.
Our commitment to developing creative IP, a new channels of monetization.
It was to continue growing.
Our traffic and diversify our revenue stream Laura.
By the end of 2019, we had cash cash equivalence of around 243 minute.
Yes, we are expecting to receive about 200 million U.S. problem. The second payment tranche of are you didn't transaction.
On acquisition front.
While we remain certain of our ability to identify suitable acquisition targets.
Capitalized on these opportunities, we'll continue to exercise a prudent approach the due diligence in order to maximize upcycle Cashel.
With abandon cash reserves.
Healthy cash flows on systematic strategic investments.
I really believe strands about long term growth prospects.
Looking back Oh, Punky 19, we experienced the challenges of involving immediate regulations on macroeconomic headwinds.
However, despite these architects obstacles, we continue to enhance user stickiness in reaching our cotton library.
Most or all Brad inflows in key constant verticals are explore additional monetization opportunities.
I was asking to 2020.
Well spacing unprecedented challenges from one of the most devastating academics [noise] tariff.
For on the virus outbreak.
We always quite ourselves ability to deliver premium reporting to our water.
He was lost we have once again set ourselves apart from our media Internet portal peers by launching various reporting initiatives to lead outbreak coverages.
At all that we lost the first ever domestic as well as international epidemic.
Matt to track the spread of might you real time.
Document.
Confirmed cases.
And categorize cases bye.
Chronology and the geographies.
We also created the first.
Special immediate called dedicated to that checking on the punky outbreak boomers well producing they briefing on a latest up reprints keep our use of import.
Furthermore, we lacked the first engine and why campaign to fight the surge of is that on discrimination toward those at outbreaks.
The center, you Uh huh, but definitely promoting a sabra understanding of the situation.
Hi than public awareness, we leverage our ability to process allies, and deliver informative and engaging you'd come.
Since January 19th Oh, we Mediacom humor intelligence agency.
During the OTI lodging has issue over certain in data analysis pieces.
Outbreaks development.
Helping them to educate the public offer region on transmission mechanism wires, well be mystifying outbreak rumors.
The exclusive coverage of while we media accounts <unk>, who has also received industrywide recognition tracking over 14 million views or capital on producing logical articles that have topped the charts other social media platforms.
Additionally, would publish a number of pieces ordinary Chinese citizens.
Briefly battling against the disease to maintain a sense of normality you know lives are popular we media accounts.
Living right yeah.
These stories receive 5 million views on platforms with the most public lacking.
One is 50 million views across internet.
Notably assets that is easy initiatives continue to illustrate our competitive advantages in professional reporting Helen powerful brand inflows on a global journal team, which is second to now.
Well International <unk> internal operations, we immediately access to protect the health and wellbeing of our employees and maintained efficient daily operations.
Moreover in line with our commitment to social responsibility, we provided additional forms of aid beyond our premium news coverage.
For example, we were part of the first batch of into the company to donate 1 million RMB two the tie the charity, but federation in support of those medical workers on the frontline outbreak.
Also a mild early owners adaptation equipment could help students less developed areas across online learning courses.
To better facility the public access to medical Affairs, we established a platform.
Provides.
Counseling services to those in need of mental health sport.
On an online registry for those puts us back that they may be affected on the on the self imposed pardon me.
Our response to the outbreak has always see a positive reception from the public.
Got it also helped to further arguments all brand inflows and credible [noise].
To date, we have remained at the forefront of the dramatic media industry in terms of breaking news, but quality of confidence.
Going forward, we'll continue to focus on providing audience with the premium news coverage.
It requires you touched times a prices.
In the coming quarter believed that most domestic companies will inevitably be falls to the Abbott.
And.
Have you laid out their marketing strategies I agree mice the advertising budgets.
It's a shift will negatively impact our advertising revenue in the near term.
However, I have mentioned our ability to generate.
Highly relevant hill, please would remain attractive to those advertisers well focus on maximizing their ad ROI.
While operating under budgetary constraints.
Before what is back to the epidemic to impact our business documents in the short term.
However, all consistent delivery of premium new confident and elevated Rand inflows were helped to ensure the grows prospects about advertisement business in the long term.
With that I'll turn the core Edwards, our CFO, who goes through the financial details.
[noise], Thank you, Sean and essentially all for joining our conference call today, I hope I have always well unhealthy.
The total revenues in the fourth quarter of 2019th.
470.9 million, representing an increase of 17.9% from RMB 399.2 minutes in the same period last year.
Our total revenues this quarter included RMB 70.5 million old consolidated revenues from time to on the RMB 83.4 million of consolidated revenues from Kimball I will now provide the details our revenues in the first quarter of 2019.
Consolidated net advertising revenues in the fourth quarter of 2019, or RMB 395.2 million, representing an increase of 11% from RMB 355.9 minutes in the same here last year.
The increase was primarily attributable to the consolidation of both advertising revenues from Kimball and it's hard to.
Neither housing revenues from our traditional business in the first quarter of 2019th decreased by 20.7% due to increasing macro economic uncertainties and the heightened industry competition.
Page services revenues in the fourth quarter. After 2019 increased by 75.1% to RMB 75.7 minutes.
From RMB 43.3 minutes in the same period last year.
Revenues from pay the content in the fourth quarter of 2019 increased by 172.2% to RMB 59.2 million.
From RMB 21.8 minutes in the same period last year.
I really do choose a consolidation of digital reading revenues from time to.
Loss from operations in the fourth quarter of 2019 was RMB 93.5 minute.
Compared to RMB 39 million into some period of last year.
The increase in loss from operations was admitted they do choose a more increase in cost of revenues and operating expenses that you revenue.
Operating margin in the fourth quarter of 2019 was negative nine pinpoint denied per cent compared to negative 9.8% in the same period last year.
Non-GAAP loss from operations in the first quarter of 2019 was RMB 86.8 million compared to RMB 34.4 minutes in the same period last year.
Non-GAAP operating margin in the fourth quarter of 2019 was not give an 18.4% compared to 98.6% in the same period last year.
Net income attributable to thinks new media limited in the fourth quarter of 2019 was RMB 911.8 million compared to a net loss attributable to things New media limited also RMB.
Good day to point streaming in the same here last year.
Non-GAAP net loss attributable to the company in the fourth quarter of 29 team.
RMB 82.7 minutes.
Compared to RMB 77.7 minutes in the same period last year.
Moving on to all our balance sheet.
As of December 31st 2019th.
The company's cash and the cash equivalents some deposit.
Short term investments and the restricted cash or RMB 1.7 billion or approximately U.S. dollar 243.6 minute.
Which included the RMB 30.1 million from time to and RMB 109.7 million from Kimball.
Let me briefly run through as a key figures in fiscal year 2019.
Total revenues in 2019 increased by 11.2% to RMB, One point 53 billion from RMB, One point 38 billion in.
2018.
Now the other rising revenues in 2019 increased by 5.4% to RMB, One point 26 billion from RMB 1.2 billion in 20 agent.
Primarily due to choose a consolidation awful advertising revenues from Kimball and how to.
The company's net advertising revenues from traditional business decreased by 20.4% from 2018 to 2019 due to the same factors that led to the totally secret.
Hey, the services revenues in 2019 increased by 49.4% to RMB 267.6 minutes from RMB 179.1 million in 20 agent.
Primarily attributable to the consolidation of digital reading revenues from Todd.
Non-GAAP loss from operations in 2019 was RMB 347.3 million.
Compared to a non cat loss from operations of RMB 110 million in 2018.
Non-GAAP operating margin in 2019 was negative 22.7 per cent compared to negative its present in 20 agent.
Non-GAAP net margin in 2019 was negative 20.4% compared to negative 4% intend to agent.
Non-GAAP net loss attributable choose a company in 2019 was RMB 211.7 million on non-GAAP net loss of RMB four point 28 per diluted it yet.
Finally, I'd like to provide our business outlook for the first quarter of Twentytwenty.
Well forecasting total revenues to be between RMB 250.8 million and the RMB 272.8, a minute representing a decrease of 4.2% to 11.3% year over year.
For net advertising revenues were forecasting between the RMB 211.8 million and RMB 226.8 million.
Representing a decrease of 1.9% to an increase of.
5% year over year.
Well paid service revenues, we are forecasting between RMB 41 minute and RMB 46 minute.
Representing a decrease of 33 point street per cent, 40.5% year over year.
As Sean mentioned earlier, the cone of errors or break is disrupting all the operation and a affecting our advertising clients budgets in the short term.
However, as we continue to bolster our market pits position by upgrading our content and the enhancing our brand influence.
We remain on track to.
Achieve our long term a financial targets.
For well we continue to you last are you going our revenues were also monitoring our investment returns.
Importantly, going forward, we will remain committed to the refinement of all of our operating efficiency and the optimization of our cost structure.
This is prudent approach well further improve our investment returns as we expand all of our distribution channels and ask you could new business development projects.
More importantly, as a result over the course the country initiatives that we have implemented and all of our consistent streams of revenue.
We have built up.
Abundant supply of cash reserves to assist in our girls during this challenging time.
It's a combination of our prudent investment approach and the strong capital position us well help us to whether it's a current market a headwind returned to profitability.
And the you pull all our positioning to better states market opportunities going forward.
This concludes the prepared a portion of our call.
We are now ready for questions. Operator. Please go ahead.
Certainly ladies and gentlemen, it will now begin the question and answer session. If you wish to answer your question. Please press star one your telephone and waste any day now if you wish to Pennsylvania glass.
Spread that found your hatch tea.
Your first question comes from the line of France Chang. Please ask your question.
Oh, Hello, Sean Zone, that's where to go to open up to and so to have a question on the lowest margin between June I remember last time you.
Talking about it to lower the law.
Oh, the toughest turns you intend to trend to given current situation because they are summed up they own real targets, how should we sprint Cup. The last Sunday last March I intend to trends you think it.
Yeah, Hi, this is a shaw I'd like to.
To answer your question, maybe at work and Uh Huh.
A few more worse.
We believe at weekends significantly narrowing a lousy pretty funny.
First I entered the 2019, we thoroughly reply organization structure.
And also things the startup 20, Twond also systematically optimized Uh huh.
The acquisition.
To control our cotton costs, we review older contracts with our content providers more carefully before signing it so that we can maximize return.
All copyright huh.
To control tenant Cogs.
Taking into <unk>.
The recent both the current market environment user growth strategies.
And your.
There is cost control matters unlimited outstanding.
No channels with less efficient habit acquisition.
Whatever since the outbreak.
Our operating metrics have improved substantially.
The result, our conviction.
Toward maintaining our professional journalism and augmenting our Brett inflows is further strength.
As these core competencies.
Enable us to attract those users with.
Profile desire bought by orbit advertising clients.
We believe we're able to improve.
Probably the bloody efficient manner.
Oh, we remain confident ability to narrow losses substantially.
20 Twond.
Yep.
Thank you.
Thank you.
Your next question.
It's trending in line Carmen exam from fresh Shanghai. Please ask your question.
Oh, Hi management. Thanks for taking my question My question it sounds as though isn't clear on that virus outbreak.
Let me share your thoughts on how to outbreak might impact your replacement [noise].
This is solutions, yeah, I will pegler crescent.
First on maybe later.
I work and cover the impact on advertising business on the other unrelated.
Since the early stage of the Corona virus outbreak.
Oh editorial team has provided comprehensive and in that coverage of academic.
Our reporting performance have been turned significantly enhanced operating metrics, including D.A., you retention rate and click through rate I from you have in addition, our well received news coverage was a health is further enhance our brand reputation.
So this outbreak that provides us with an opportunity to further strengthen the all run inflows and improve our traffic.
We also let the outbreak coverage rates by leverage you finished satellite television news reporting sources, providing.
Original video programs.
Producing is as expert attorneys and distributing roofline academic data.
Yeah, No news coverage will also provide very type of eight to support those affected.
By the Corona Whiners, including as I mentioned in my opening remarks, including the donation from cash on medical supplies to Hebei Province, we initiated several influential social campaigns. For example, we established China's first online registry for Corona virus patients offer tablets to children in poverty.
So they can access unlike class classes.
Unpublished encyclopaedia of protected matters in collaboration with.
Providence Academy for overseas Chinese students.
These initiatives not only.
Provided tangible support to those affected by the epidemic.
I'd also enhance our Brent in preparation, which should improve all brand advertising sales in the future.
Base, all these oh or reasons a practice.
The industry leading quality.
Our news coverage has attracted many new users 12 platform with a healthy level piece would ways of using times down so going forward.
We I think we would.
Continues to focus on needs of those quote users as we optimize our content ecosystem on a high powered content distribution system.
So with this strategic focus in mind, we have we evaluated our user acquisition strategy as well.
We think up when we examined the ROI support those users acquired through our investment in marketing channels.
We figure out that their level of stickiness on engagement as well as their contribution to our AD inventory.
Do you have.
Quite a bit of room to optimize.
So we believe that in 20 funding our traffic acquisition costs.
Should be reduced.
Well at least 50% as we improve our user acquisition efficiencies.
So this epidemic also.
Also.
Let us realize that Oh, we need you really really evaluate adopt new user growth strategy.
<unk> optimized all using fears.
Well, we are expecting user traffic to gradually return to normal levels. After.
After the epidemic the outstanding quality log news coverage do the outbreak has allowed us to further enhance our user stickiness and brought him.
These improvements will remain attractive while brand advertising clients.
After.
Epidemic.
Thanks.
At Port public.
A few moshe advertising on other business. Thanks.
Morning, Herman Linzess outerwear speaking.
Correct.
It's about the impact of barista, all the break or other were tightening business.
Actually the competition you own a other housing market has become increasingly affairs in recent years public short form video platforms our opinion.
An increasing amount of the market share in the user time spend.
Lets people have spend more time alliance, Roger krone barrels or break we have observed that increased a in the overall the supply of advertising inventory.
However, you know at the same time, I mean, any color as a impacting advertisers business as well and the causing them to be more conservative about near AD placement.
And the marketing spending.
From our perspective.
It's a combination of these factors has created a downward pressure on the pricing of all our other it hasn't been for sure.
Especially on the <unk>.
He CPM of performance based as from SMB.
During the other break all of our excellent reporting.
Of the epidemic has resulted in a significant increase in a user traffic.
This improvement that you know enabled us to effectively increase all the other having inventory and themselves.
However in general is over all advertising environment, a well create a serious challenge for.
Our other it hasn't business Twentytwenty.
Especially on the brand advertising south side.
Taking the auto industry as an example, due to the impact of the academic consumer demand for car has dropped to community.
According to recent data released by the China Association also autumn Mobiles manufacturers auto sales in the first the two most of Ah Tony Finicky decreased by.
42%.
In comparison to the same here with a lot.
Oh 2019, as a result of this comic con makers in China well.
Yeah, it'd be forced the to add to reduce their marketing budgets or delay their marketing plan.
Alright, perfect it does that.
Markets well start to recover in the second quarter of 20 to 20 and their manufacturers will also begin to gradually increase their marketing spending.
Another area was mentioning is E commerce.
Oh.
Okay.
Severely impacted but the outbreak.
When you commerce sector enjoy the a 3% year over year increase in cell during the first of the two months of trends you're trending.
Generally speaking since the people avoid you're going outside during this period the epidemic accelerated at the shift of consumption habits from offline to online.
It's really a benefit he does that E commerce industry.
So we expect a significant increase in total income a spending for the full year of 2020.
Our reporting all to epidemic has not sure surge in our loyal user base and the using our AD inventory.
That's a result away should it be able to better serve our ecommerce advertisers going forward.
Overall I think the epidemic has created a challenges for our advertising sales.
He read suppose we have also implemented I feel matters for all our other hedging business.
So example, or we have been shifting some offline Vince to online.
As the surge in Oh ethic should the gave all a advertiser badger brand exposure and a higher sales conversion rates.
Oh.
Three expanding into new verticals, such as study abroad, and the online education to further diversify our client base. Although we are facing the short term headwinds.
Or other was heading into this.
Although our brand that influence and the public recognition to all our in that.
Oh Ridge will bolster our girls in the long term for <unk>.
More of our gaming business.
Our subsidiary no Chole has completed the development over the top player.
On February 10. This game title received a skinny license from the stayed on the nutritional price and the publication weapons and are working closely with leading game producers in China.
To distribute and a lunch the gain in April.
Well for sure update everyone of our progress in this area as you know timely manner going forward.
I hope that answers your questions come it.
Hi, Thanks, that's very helpful.
Your next question comes from the line Vincent.
Yes, that's your question.
Good morning, Matt and thanks for taking my question I wish everyone a healthier yep.
Uh-huh Hollywood question noise shortage antennae attendee, so I think the overall media space in China become they're done it make embedded in two years.
Can you shed some color in terms of your top binges prioritizing anytime D and video Fergus, increasing a ship that you're calling and production how'd you a balance between physician or as a more traditional media problem offering used to.
This is our new rule.
Producer, providing more Irish the content, suggesting that are true a video calling them et cetera.
Second they can quickly update us your investment strategy in trying to get everybody have a lot of cash balance sheet. Thank you.
[noise] I believe this is a strong that's your question Oh.
The first.
Operational challenge. This here is to significantly reduce or operating loss as I mentioned in my previous remarks, or whether you're confident that the after adopting the new user growth strategy or we're going to fiercely cut off.
Marketing budget and the become more focus our for users a further optimize all using computers, though that oh.
The loss will be reduce significantly that's our top operational challenge out of my confidence we can tackle the challenge.
And as to the accountant strategy will.
We are as you got witness in this.
Colin the virus outbreak, where they have the forefront of.
The covering up the girl in the virus were very proud of our.
Our breaking news coverage, our analysts or a high quality professional analysis, our offline or a charity.
Events on campaign and also the very touchy Feely I believe you program targeting people affected by this virus or so were going to continue to seek to offer strategy.
As a constant.
As a top contemplate, especially in the news and news related areas, because I think there's oh, yeah. In this era of uncertainties, there are a high demand for independent or quality.
And.
And professional news coverage of the major you bet that providers, Oh, I'm present, an opportunity to better serve our users to promote traffic.
And also we have unlike other players we have plenty TV backing us a we can leverage their reached a reporting network all of the world. They Oh top notch documentaries to reach our users experience.
As to investment and growth strategy will continue to explore new growth drivers, both organically and through acquisitions.
Notably by combining our operationally fearing that industry.
Expertise.
We have developed a systematic approach to evaluating strategic investment opportunities.
Our current priority is to evaluate acquisition targets with attractive valuations drawn synergistic capabilities.
And the potential to expand our footprint, it's sub sectors healthcare finance and urban lifestyle.
More importantly, we respond to the increasing uncertainties bought off.
Hi.
How that pedantic, we have also adopted more cautious approach tossed with huge investment on M&A strategy.
We believe that we have the right Inc. line plays to accelerate the development of on new business.
Well mitigating potential you factors to ensure long term returns for investors.
As soon as any meaningful progress made on this front.
We'll be shore to update everyone maybe.
Thank you.
Thank you for the color.
[noise] once again, if you wish to answer your question. Please press star one in California.
Dan.
[noise] again I don't see like that's question. Please press star one and your telephone and we've seen in keeping them.
[noise], ladies and gentlemen, any star one aspect question.
[noise] there's no my question at this time I would now like on the conference. That's it did they speakers. Please the team.
[noise] [laughter]. Thank you operator wed have come to the Endo five okay session. Another conference call. Please feel free to contact <unk>. If you have any further questions. Thank you for joining us on this call have a good day.
[noise]. Thank you. Thank you everybody.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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