Phoenix New Media Reports First Quarter 2014 Unaudited Financial Results

1Q14 Total Revenues Up 26.9% YOY

1Q14 Net Advertising Revenues Up 41.1% YOY

1Q14 Net Income Attributable to PNM Up 58.6% YOY

1Q14 Adjusted Net Income Attributable to PNM Up 47.2% YOY

Live Conference Call to be Held at 9:00 PM U.S. Eastern Time on May 12

May 12, 2014, 17:00 ET from Phoenix New Media Limited

BEIJING, May 12, 2014 /PRNewswire/ -- Phoenix New Media Limited (NYSE: FENG), a leading new media company in China ("Phoenix New Media", "PNM", "ifeng" or the "Company"), today announced its unaudited financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Highlights

  • Total revenues increased by 26.9% year-over-year to RMB357.1 million (US$57.5 million), driven by a 41.1% increase in net advertising revenues, and a 6.3% increase in paid service revenues.
  • Net income attributable to Phoenix New Media Limited increased by 58.6% year-over-year to RMB62.2 million (US$10.0 million). Adjusted net income attributable to Phoenix New Media Limited[1] increased by 47.2% year-over-year to RMB56.9 million (US$9.2 million).
  • Net income per diluted ADS[2] increased by 60.6% year-over-year to RMB0.80 (US$0.13). Adjusted net income per diluted ADS increased by 49.1% year-over-year to RMB0.73 (US$0.12).

[1]   

An explanation of the Company's non-GAAP financial measures is included in the section entitled "Use of Non-GAAP Financial Measures" below, and the related reconciliations to GAAP financial measures are presented in the accompanying "Reconciliations of Non-GAAP Results of Operation Measures to the Nearest Comparable GAAP Measures".

[2]

"ADS" means American Depositary Share of the Company. Each ADS represents eight Class A ordinary shares of the Company.

Mr. Shuang Liu, CEO of Phoenix New Media, stated, "We are very pleased with our first quarter financial results which exceeded both consensus estimates and our prior guidance, providing us with a strong start in 2014. The incremental revenue growth and margin improvement was fueled by the expansion of our mobile and video offerings as well as the strong performance of several of our verticals, such as the fashion vertical, which remained the top fashion channel in China, in terms of daily unique users according to iResearch. Our net advertising revenues grew by over 40% year-over-year, reflecting the rapid growth of brand advertising across our PC, video and mobile platforms, as well as demonstrating our progress in creating unique advertiser solutions on our converged media platforms."

Mr. Liu continued, "The first quarter, being a very eventful period in China from a news perspective, allowed us the opportunity to attract many first time users through providing comprehensive, in-depth coverage across our multiple platforms. The strategic partnerships we established with telecom carriers, handset providers and internet TV companies further demonstrate our commitment to remain ahead of technology trends and shifts in the nature of information consumption. Tapping into the Chinese main stream users' demands, ifeng has evolved from a main stream user preferred portal into a multi-screen media platform with diversified content and services offerings, including current affairs, finance, fashion, technology, entertainment and over 40 vertical channels, playing an indispensable role in China's media environment."

First Quarter 2014 Financial Results

REVENUES

Total revenues for the first quarter of 2014 increased by 26.9% to RMB357.1 million (US$57.5 million) from RMB281.4 million in the first quarter of 2013.

Net advertising revenues (net of advertising agency service fees), for the first quarter of 2014 increased by 41.1% to RMB234.9 million (US$37.8 million) from RMB166.4 million in the first quarter of 2013, primarily due to an increase in average revenue per advertiser ("ARPA") of 34.4% to RMB0.9 million (US$0.1 million) and an increase in the total number of advertisers of 5.0% to 253.

Paid service revenues for the first quarter of 2014 increased by 6.3% to RMB122.2 million (US$19.7 million) from RMB114.9 million in the first quarter of 2013. Mobile value-added services ("MVAS")[3] revenues increased by 2.4% to RMB98.2 million (US$15.8 million) in the first quarter of 2014 from RMB95.9 million in the first quarter of 2013. Games and others[4] revenues increased by 26.4% to RMB24.0 million (US$3.9 million) in the first quarter of 2014 from RMB19.0 million in the first quarter of 2013, primarily driven by the increase in revenues generated from web-based games on the Company's game platform.

[3]   

MVAS includes wireless value-added services, or WVAS, mobile video, mobile digital reading, mobile games and other paid services through China's three telecom operators' platforms.

[4]

Games and others include web-based games, content sales, and other online and mobile paid services through the Company's own platforms.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues for the first quarter of 2014 increased by 20.9% to RMB173.9 million (US$28.0 million) from RMB143.9 million in the first quarter of 2013, primarily due to an increase in content and operational costs and sales taxes and surcharges. Content and operational costs increased to RMB74.1 million (US$11.9 million) in the first quarter of 2014 from RMB57.1 million in the first quarter of 2013, due to an increase in staff-related costs. Sales taxes and surcharges increased to RMB25.3 million (US$4.1 million) in the first quarter of 2014 from RMB18.8 million in the first quarter of 2013 due to the increase of net advertising revenues. Revenue sharing fees to telecom operators and channel partners increased to RMB53.7 million (US$8.6 million) in the first quarter of 2014 from RMB49.5 million in the first quarter of 2013, primarily due to an increase in MVAS revenues. Bandwidth costs increased to RMB20.8 million (US$3.3 million) in the first quarter of 2014 from RMB18.4 million in the first quarter of 2013, primarily due to the increase in the Company's user traffic. Share-based compensation included in cost of revenues was RMB3.0 million (US$0.5 million) in the first quarter of 2014, compared to RMB0.6 million in the first quarter of 2013. The year-over-year increase in share-based compensation was primarily due to the newly granted stock options in 2013.

Gross profit for the first quarter of 2014 increased by 33.3% to RMB183.3 million (US$29.5 million) from RMB137.5 million in the first quarter of 2013. Gross margin for the first quarter of 2014 increased to 51.3% from 48.9% in the first quarter of 2013, mainly due to the increased revenue contribution from advertising. Adjusted gross margin, which excludes share-based compensation, for the first quarter of 2014 increased to 52.1% from 49.1% in the first quarter of 2013.

OPERATING EXPENSESAND INCOME FROM OPERATIONS

Total operating expenses for the first quarter of 2014 increased by 32.9% to RMB140.2 million (US$22.6 million) from RMB105.5 million in the first quarter of 2013. The increase in operating expenses was primarily attributable to the increase in staff-related costs and expenses associated with the Company's marketing and promotional initiatives. Share-based compensation included in operating expenses was RMB7.9 million (US$1.3 million) in the first quarter of 2014, compared to negative RMB1.2 million in the first quarter of 2013. The year-over-year increase in share-based compensation was primarily due to newly granted stock options in 2013.

Income from operations for the first quarter of 2014 increased by 34.7% to RMB43.1 million (US$6.9 million) from RMB32.0 million in the first quarter of 2013. Operating margin for the first quarter of 2014 increased to 12.1% from 11.4% in the first quarter of 2013, mainly due to increased revenue contribution from advertising.

Adjusted income from operations, which excludes share-based compensation, for the first quarter of 2014 increased by 71.7% to RMB54.0 million (US$8.7 million) from RMB31.4 million in the first quarter of 2013.Adjusted operating margin for the first quarter of 2014 increased to 15.1% from 11.2% in the first quarter of 2013.

OTHER INCOME

Other income reflects interest income, foreign currency exchange gain or loss, gain on disposition of a subsidiary and acquisition of equity investment, loss from equity investment, and others, net. "Others, net" primarily consists of government subsidies.

Interest income for the first quarter of 2014 increased to RMB12.0 million (US$1.9 million) from RMB6.9 million in the first quarter of 2013. Foreign currency exchange loss for the first quarter of 2014 was RMB6.9 million (US$1.1 million), as compared to foreign currency exchange gain of RMB2.2 million in the first quarter of 2013. The foreign currency exchange loss for the first quarter of 2014 was mainly attributable to RMB depreciation against the U.S. dollar during the period.

In March 2014, IDG-Accel China Growth Fund III L.P. and IDG-Accel China III Investors L.P. ("IDG-Accel Funds") acquired US$3.0 million convertible preferred shares of Phoenix FM Limited, previously a subsidiary of the Company, to accelerate development of the ifeng FM application business. Despite holding 100% of Phoenix FM Limited's ordinary shares, the Company accounts for its investment in Phoenix FM Limited as an equity investment since the Company does not control Phoenix FM Limited due to substantive participating rights that have been provided to IDG-Accel Funds. As of March, 31, 2014, the Company recognized a gain of RMB17.7 million (US$2.8 million) arising from the disposition of a subsidiary and an acquisition of the same by way of the equity method for investee companies. As a result, there was a loss from equity investment of the Company's share of RMB1.5 million (US$0.2 million) arising from Phoenix FM Limited's operations loss for the first quarter of 2014.

NET INCOME ATTRIBUTABLE TO PHOENIX NEW MEDIA LIMITED

Net income attributable to Phoenix New Media Limited for the first quarter of 2014 increased by 58.6% to RMB62.2 million (US$10.0 million) from RMB39.2 million in the first quarter of 2013. Net margin for the first quarter of 2014 was 17.4%, compared to 13.9% in first quarter of 2013.Net income per diluted ADS in the first quarter of 2014 increased by 60.6% to RMB0.80 (US$0.13) from RMB0.50 in the first quarter of 2013.

Adjusted net income attributable to Phoenix New Media Limited, which excludes share-based compensation, gain on disposition of a subsidiary and acquisition of equity investment, and loss from equity investment, for the first quarter of 2014 increased by 47.2% to RMB56.9 million (US$9.2 million) from RMB38.7 million in the first quarter of 2013. Adjusted net margin for the first quarter of 2014 increased to 15.9% from 13.7% in the first quarter of 2013. Adjusted net income per diluted ADS in the first quarter of 2014 increased by 49.1% to RMB0.73 (US$0.12) from RMB0.49 in the first quarter of 2013.

For the first quarter of 2014, the Company's weighted average number of ADSs used in the computation of diluted net income per ADS was 77,759,176. As of March 31, 2014, the Company had a total of 601,340,285 ordinary shares outstanding, or the equivalent of 75,167,536 ADSs.

Business Outlook

For the second quarter of 2014, the Company expects its total revenues to be between RMB405 million and RMB418 million. Net advertising revenues are expected to be between RMB290 million and RMB298 million. Paid service revenues are expected to be between RMB115 million and RMB120 million. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Conference Call Information

The Company will hold a conference call at 9:00 p.m. U.S. Eastern Time on May 12, 2014 (May 13, 2014 at 9:00 a.m. Beijing / Hong Kong time) to discuss its first quarter 2014 unaudited financial results and operating performance.

To participate in the call, please dial the following numbers:

International:   

+6567239385

Mainland China:  

4001200654

Hong Kong:

+85230512745

United States:  

+18456750438

Conference ID: 

33941477

A replay of the call will be available through May 20, 2014 by dialing the following numbers:

International:    

+61290034211

Mainland China:  

4006322162

Hong Kong: 

+85230512780

United States: 

+16462543697

Conference ID:   

33941477

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.ifeng.com

Use of Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with the United States Generally Accepted Accounting Principles ("GAAP"), Phoenix New Media Limited uses adjusted gross profit, adjusted gross margin, adjusted income from operations, adjusted operating margin, adjusted net income attributable to Phoenix New Media Limited, adjusted net margin and adjusted net income per diluted ADS, each of which is a non-GAAP financial measure. Adjusted gross profit is gross profit excluding share-based compensation. Adjusted gross margin is adjusted gross profit divided by total revenues. Adjusted income from operations is income from operations excluding share-based compensation. Adjusted operating margin is adjusted income from operations divided by total revenues. Adjusted net income attributable to Phoenix New Media Limited is net income attributable to Phoenix New Media Limited excluding share-based compensation, gain on disposition of a subsidiary and acquisition of equity investment, and loss from equity investment. Adjusted net margin is adjusted net income attributable to Phoenix New Media Limited divided by total revenues. Adjusted net income per diluted ADS is adjusted net income attributable to Phoenix New Media Limited divided by weighted average number of diluted ADSs. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation, gain on disposition of a subsidiary and acquisition of equity investment, and loss from equity investment add clarity to the constituent parts of its performance. The Company reviews adjusted net income together with net income to obtain a better understanding of its operating performance. It uses these non-GAAP financial measures for planning, forecasting and measuring results against the forecast. The Company believes that using multiple measures to evaluate its business allows both management and investors to assess the Company's performance against its competitors and ultimately monitor its capacity to generate returns for its investors. The Company also believes that non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation, gain on disposition of a subsidiary and acquisition of equity investment, and loss from equity investment. Share-based compensation and loss from equity investment have been and will continue to be significant and recurring in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

Exchange Rate

This announcement contains translations of certain RMB amounts into U.S. dollars ("USD") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB6.2164 to US$1.00, the noon buying rate in effect on March 31, 2014 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

About Phoenix New Media Limited

Phoenix New Media Limited (NYSE: FENG) is a leading new media company providing premium content on an integrated platform across Internet, mobile and TV channels in China. Having originated from a leading global Chinese language TV network based in Hong Kong, Phoenix TV, the Company enables consumers to access professional news and other quality information and share user-generated content on the Internet and through their mobile devices. Phoenix New Media's platform includes its ifeng.com channel, consisting of its ifeng.com website and web-based game platform, its video channel, comprised of its dedicated video vertical and mobile video services, and its mobile channel, including its mobile Internet website, mobile applications and mobile value-added services.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Phoenix New Media's strategic and operational plans, contain forward-looking statements. Phoenix New Media may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC") on Forms 20-F and 6-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Phoenix New Media's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's goals and strategies; the Company's future business development, financial condition and results of operations; the expected growth of the online and mobile advertising, online video and mobile paid service markets in China; the Company's reliance on online advertising and MVAS for the majority of its total revenues; the Company's expectations regarding demand for and market acceptance of its services; the Company's expectations regarding the retention and strengthening of its relationships with advertisers, partners and customers; fluctuations in the Company's quarterly operating results; the Company's plans to enhance its user experience, infrastructure and service offerings; the Company's reliance on mobile operators in China to provide most of its MVAS; changes by mobile operators in China to their policies for MVAS; competition in its industry in China; and relevant government policies and regulations relating to the Company. Further information regarding these and other risks is included in the Company's filings with the SEC, including its registration statement on Form F-1, as amended, and its annual reports on Form 20-F. All information provided in this press release and in the attachments is as of the date of this press release, and Phoenix New Media does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries please contact:

Phoenix New Media Limited Matthew Zhao Email: investorrelations@ifeng.com 

ICR, Inc. Jeremy Peruski Tel: +1 (646) 405-4883 Email: investorrelations@ifeng.com  

Phoenix New Media Limited

Condensed Consolidated Balance Sheets

(Amounts in thousands)

December 31,

2013

March 31,

2014

March 31,

2014

RMB

RMB

US$

Audited*

Unaudited

Unaudited

ASSETS

Current assets:

Cash and cash equivalents

1,308,138

1,256,462

202,121

Restricted cash

10,000

-

-

Term deposits

93,672

137,123

22,058

Accounts receivable, net

353,379

374,020

60,167

Amounts due from related parties

125,158

165,221

26,578

Prepayment and other current assets

27,911

58,084

9,343

Deferred tax assets

22,779

22,434

3,609

Total current assets

1,941,037

2,013,344

323,876

Non-current assets:

Property and equipment, net

95,126

93,984

15,119

Intangible assets, net

7,919

8,508

1,369

Equity investments

-

16,152

2,598

Other non-current assets

12,678

14,113

2,270

Total non-current assets

115,723

132,757

21,356

Total assets

2,056,760

2,146,101

345,232

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

218,604

231,700

37,272

Amounts due to related parties

21,034

22,330

3,592

Advances from customers

10,732

13,488

2,170

Taxes payable

58,140

46,455

7,473

Salary and welfare payable

98,831

70,097

11,276

Accrued expenses and other current liabilities

62,153

90,898

14,623

Total current liabilities

469,494

474,968

76,406

Long-term liabilities

12,231

13,652

2,196

Total liabilities

481,725

488,620

78,602

Shareholders' equity

Phoenix New Media Limited shareholders' equity

Class A ordinary shares

18,530

18,617

2,995

Class B ordinary shares

22,053

22,053

3,548

Additional paid-in capital

1,734,993

1,748,643

281,295

Statutory reserves

50,330

50,330

8,096

Accumulated deficit

(194,601)

(132,440)

(21,305)

Accumulated other comprehensive loss

(60,127)

(52,976)

(8,522)

Total Phoenix New Media Limited shareholders' equity

1,571,178

1,654,227

266,107

Noncontrolling interests

3,857

3,254

523

Total shareholders' equity

1,575,035

1,657,481

266,630

Total liabilities and shareholders' equity

2,056,760

2,146,101

345,232

* Derived from audited financial statements included in the Company's Form 20-F dated April 25, 2014.

 

 

Phoenix New Media Limited

Condensed Consolidated Statements of Comprehensive Income

(Amounts in thousands, except for number of shares and per share (or ADS) data)

Three Months Ended

March 31,

2013

December 31,

2013

March 31,

2014

March 31,

2014

RMB

RMB

RMB

US$

Unaudited

Unaudited

Unaudited

Unaudited

Revenues:

  Net advertising revenues

166,446

263,940

234,925

37,791

  Paid service revenues

114,931

136,169

122,224

19,662

Total revenues

281,377

400,109

357,149

57,453

Cost of revenues

(143,854)

(184,645)

(173,871)

(27,970)

Gross profit

137,523

215,464

183,278

29,483

Operating expenses:

  Sales and marketing expenses

(55,092)

(88,062)

(76,733)

(12,343)

  General and administrative expenses

(24,832)

(27,093)

(32,702)

(5,261)

  Technology and product development expenses

(25,625)

(29,377)

(30,787)

(4,953)

Total operating expenses

(105,549)

(144,532)

(140,222)

(22,557)

Income from operations

31,974

70,932

43,056

6,926

Other income:

  Interest income

6,891

9,522

12,025

1,935

  Foreign currency exchange gain/(loss)

2,173

4,537

(6,868)

(1,105)

  Gain on disposition of a subsidiary and

        acquisition of equity investment

-

-

17,693

2,846

  Loss from equity investment

-

-

(1,541)

(248)

  Others, net

3,286

7,537

5,790

932

Income before tax

44,324

92,528

70,155

11,286

  Income tax expense

(5,120)

(11,192)

(8,597)

(1,383)

Net income

39,204

81,336

61,558

9,903

  Net loss attributable to noncontrolling interests

-

1,531

603

97

Net income attributable to Phoenix New Media

     Limited

39,204

82,867

62,161

10,000

Net income

39,204

81,336

61,558

9,903

  Other comprehensive loss, net of tax: foreign            currency translation adjustment

(2,326)

(5,598)

7,151

1,150

Comprehensive income

36,878

75,738

68,709

11,053

  Comprehensive loss attributable to

        noncontrolling interests

-

1,531

603

97

Comprehensive income attributable to Phoenix

     New Media Limited

36,878

77,269

69,312

11,150

Net income attributable to Phoenix New Media

     Limited

39,204

82,867

62,161

10,000

Net income per Class A and Class B ordinary

    share:

    Basic

0.06

0.14

0.10

0.02

    Diluted

0.06

0.13

0.10

0.02

Net income per ADS (1 ADS represents 8 Class

    A ordinary shares):

    Basic

0.51

1.10

0.83

0.13

    Diluted

0.50

1.07

0.80

0.13

Weighted average number of Class A and Class B

    ordinary shares used in computing net income

    per share:

    Basic

615,007,701

601,035,630

601,939,197

601,939,197

    Diluted

630,226,349

620,196,981

622,073,409

622,073,409

 

 

Reconciliations of Non-GAAP Results of Operations Measures to the Nearest Comparable GAAP Measures

(Amounts in thousands, except for number of ADSs and per ADS data)

Three Months Ended March 31, 2013

Three Months Ended December 31, 2013

Three Months Ended March 31, 2014

GAAP

Non-GAAP

Adjustments

Non-GAAP

GAAP

Non-GAAP

Adjustments

Non-GAAP

GAAP

Non-GAAP

Adjustments

Non-GAAP

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Gross profit

137,523

606

(1)

138,129

215,464

2,827

(1)

218,291

183,278

2,971

(1)

186,249

Gross margin

48.9%

49.1%

53.9%

54.6%

51.3%

52.1%

Income from

    operations

31,974

(544)

(1)

31,430

70,932

9,138

(1)

80,070

43,056

10,894

(1)

53,950

Operating margin

11.4%

11.2%

17.7%

20.0%

12.1%

15.1%

10,894

(1)

1,541

(2)

(544)

(1)

9,138

(1)

(17,693)

(3)

Net income

    attributable to

    Phoenix New

    Media Limited

39,204

(544)

38,660

82,867

9,138

92,005

62,161

(5,258)

56,903

Net margin

13.9%

13.7%

20.7%

23.0%

17.4%

15.9%

Net income per ADS—diluted

0.50

0.49

1.07

1.19

0.80

0.73

Weighted average

    number of ADSs

    used in computing

    diluted net income

    per ADS

78,778,294

78,778,294

77,524,623

77,524,623

77,759,176

77,759,176

(1) Excludes share-based compensation or (reversal) of share-based compensation.

(2) Excludes loss from equity investment

(3) Excludes gain on disposition of a subsidiary and acquisition of equity investment

Details of cost of revenues are as follows:

Three Months Ended

March 31,

2013

December 31,

2013

March 31,

2014

March 31,

2014

RMB

RMB

RMB

US$

(Amounts in thousands)

Unaudited

Unaudited

Unaudited

Unaudited

Revenue sharing fees

49,513

56,140

53,680

8,635

Content and operational costs

57,082

80,246

74,079

11,917

Bandwidth costs

18,442

19,579

20,791

3,345

Sales taxes and surcharges

18,817

28,680

25,321

4,073

Total cost of revenues

143,854

184,645

173,871

27,970

SOURCE Phoenix New Media Limited



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