Phoenix New Media Reports Second Quarter 2013 Unaudited Financial Results

2Q13 Total Revenues Up 28.5% YOY

2Q13 Net Advertising Revenues Up 41.9% YOY

2Q13 Net Income attributable to Phoenix New Media Limited Up 121.1% YOY

Live Conference Call to be Held at 8:00 PM U.S. Eastern Time on August 12

Aug 12, 2013, 17:30 ET from Phoenix New Media Limited

BEIJING, Aug. 12, 2013 /PRNewswire/ -- Phoenix New Media Limited (NYSE: FENG), a leading new media company in China ("Phoenix New Media", "ifeng" or the "Company"), today announced its unaudited financial results for the second quarter ended June 30, 2013.

Second Quarter 2013 Highlights

  • Total revenues increased by 28.5% year-over-year to RMB364.2 million (US$59.3 million), driven by a 41.9% increase in net advertising revenues, and a 14.0% increase in paid service revenues.
  • Net income attributable to Phoenix New Media Limited increased by 121.1% year-over-year to RMB77.4 million (US$12.6 million).
  • Adjusted net income attributable to Phoenix New Media Limited1 increased by 120.4% year-over-year to RMB83.6 million (US$13.6 million).
  • Adjusted net income per diluted ADS2 increased by 130.0% year-over-year to RMB1.08 (US$0.18).

"We are very excited to report a strong quarter with revenues growing by 28.5% year-over-year, exceeding our previous guidance. Moreover, improving operational efficiency from our convergence model helped drive margin expansion which led to net income growth on both a GAAP and non-GAAP basis more than doubling year-over-year," said Mr. Shuang Liu, CEO of Phoenix New Media. "By utilizing our premium content, we have developed product and market solutions across our portal, video and mobile platforms, which further enhanced the synergy effect inherent in our convergence model."

Mr. Liu continued, "Going forward, our focus will be to further enhance the user experience through product improvements and expansion, helping to leverage our diverse platform and generate long-term growth. As media consumption continues to increase on mobile devices, our convergence model and proprietary content are both uniquely positioned to capitalize on this growing trend and provide Chinese internet users with their desired content on any device."

Second Quarter 2013 Financial Results

REVENUES

Total revenues for the second quarter of 2013 increased by 28.5% to RMB364.2 million (US$59.3 million) from RMB283.4 million in the second quarter of 2012.

Net advertising revenues, calculated net of advertising agency service fees, for the second quarter of 2013 increased by 41.9% to RMB209.5 million (US$34.1 million) from RMB147.6 million in the second quarter of 2012, primarily due to an increase in average revenue per advertiser ("ARPA") of 9.2% to RMB710,200 (US$115,700) and an increase in the total number of advertisers of 30.0% to 295.

Paid service revenues3 for the second quarter of 2013 increased by 14.0% to RMB154.7 million (US$25.2 million) from RMB135.8 million in the second quarter of 2012. Mobile value-added services ("MVAS")4 revenues remained stable at RMB131.5 million (US$21.4 million) in the second quarter of 2013, compared with RMB131.0 million in the second quarter of 2012 due to the weak user demand for 2G text message based pay-per-view services. Games and others5 revenues increased by 387.4% to RMB23.2 million (US$3.8 million) in the second quarter of 2013 from RMB4.8 million in the second quarter of 2012, primarily driven by the increase in revenues generated from the web-based games on the Company's game platform.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues for the second quarter of 2013 increased by 10.2% to RMB173.4 million (US$28.3 million) from RMB157.3 million in the second quarter of 2012, primarily due to increase in content and operational costs, bandwidth costs, and sales taxes and surcharges, offset by a decrease in revenue sharing fees. Revenue sharing fees to telecom operators and channel partners decreased to RMB68.0 million (US$11.1 million) in the second quarter of 2013 from RMB72.8 million in the second quarter of 2012, primarily due to the decrease in WVAS revenues. Content and operational costs increased to RMB64.2 million (US$10.5 million) in the second quarter of 2013 from RMB50.5 million in the second quarter of 2012 due to the increase in staff-related costs. Bandwidth costs increased to RMB20.2 million (US$3.3 million) in the second quarter of 2013 from RMB16.7 million in the second quarter of 2012, primarily due to the greater demand for live broadcasting video content and the significant growth in user traffic. Sales taxes and surcharges increased to RMB21.1 million (US$3.4 million) in the second quarter of 2013 from RMB17.3 million in the second quarter of 2012. Share-based compensation expenses included in cost of revenues was RMB1.9 million (US$0.3 million) in the second quarter of 2013 as compared to RMB0.7 million in the second quarter of 2012. The year-over-year increase in share-based compensation expenses was primarily due to the stock options newly granted in 2013.

Gross profit for the second quarter of 2013 increased by 51.4% to RMB190.8 million (US$31.1 million) from RMB126.1 million in the second quarter of 2012. Gross margin for the second quarter of 2013 increased to 52.4% from 44.5% in the second quarter of 2012, mainly due to the increased revenue contribution from advertising, mobile video, mobile games and web-based games. Adjusted gross margin, which excludes share-based compensation expenses, increased to 52.9% in the second quarter of 2013 from 44.7% in the second quarter of 2012.

OPERATING EXPENSES AND INCOME FROM OPERATIONS

Total operating expenses for the second quarter of 2013 increased by 32.0% to RMB120.2 million (US$19.6 million) from RMB91.0 million in the second quarter of 2012. The increase in operating expenses was primarily attributable to the increase in staff-related costs, and expenses associated with the Company's marketing and promotions. Share-based compensation expenses included in operating expenses was RMB4.2 million (US$0.7 million) in the second quarter of 2013 as compared to RMB2.2 million in the second quarter of 2012. The year-over-year increase in share-based compensation expenses was primarily due to the stock options newly granted in 2013.

Income from operations for the second quarter of 2013 increased by 101.5% to RMB70.6 million (US$11.5 million) from RMB35.1 million in the second quarter of 2012. Operating margin for the second quarter of 2013 increased to 19.4% from 12.4% in the second quarter of 2012, mainly due to the increased revenue contribution from advertising, mobile video, mobile games and web-based games.

Adjusted income from operations for the second quarter of 2013, which excludes share-based compensation expenses, increased by 102.3% to RMB76.8 million (US$12.5 million) from RMB38.0 million in the second quarter of 2012. Adjusted operating margin for the second quarter of 2013 increased to 21.1% from 13.4% in the second quarter of 2012.

FOREIGN CURRENCY EXCHANGE (LOSS) GAIN AND INTEREST INCOME

Foreign currency exchange gain for the second quarter of 2013 was RMB10.0 million (US$1.6 million), as compared to an exchange loss of RMB3.5 million in the second quarter of 2012. The foreign currency exchange gain for the second quarter of 2013 was mainly attributable to RMB appreciation against the U.S. dollar during the period. The majority of the proceeds from our IPO has been converted into RMB and is being held by Cayman parent company whose functional currency is U.S. dollar. Interest income for the second quarter of 2013 was RMB7.5 million (US$1.2 million), as compared to RMB8.6 million in the second quarter of 2012.

NET INCOME

Net income attributable to Phoenix New Media Limited for the second quarter of 2013 increased by 121.1% to RMB77.4 million (US$12.6 million) from RMB35.0 million in the second quarter of 2012. Net margin for the second quarter of 2013 increased to 21.3% from 12.4% in second quarter of 2012. Net income per diluted ADS in the second quarter of 2013 increased by 130.7% to RMB1.00 (US$0.16) from RMB0.43 in the second quarter of 2012.

Adjusted net income attributable to Phoenix New Media Limited for the second quarter of 2013, which excludes share-based compensation expenses, increased by 120.4% to RMB83.6 million (US$13.6 million) from RMB37.9 million in the second quarter of 2012. Adjusted net margin for the second quarter of 2013 increased to 23.0% from 13.4% in the second quarter of 2012. Adjusted net income per diluted ADS in the second quarter of 2013 increased by 130.0% to RMB1.08 (US$0.18) from RMB0.47 in the second quarter of 2012.

For the second quarter of 2013, the Company's weighted average number of ADSs used in computing diluted net income per ADS was 77,711,587.

Business Outlook

For the third quarter of 2013, the Company expects its total revenues to be between RMB367 million and RMB382 million. Net advertising revenues are expected to be between RMB207 million and RMB217 million. Paid service revenues are expected to be between RMB160 million and RMB165 million. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Share Repurchase Program

As of July 10, 2013, the Company completed the US$20 million share repurchase program authorized by its board of directors in August 2012. Under the program, the Company repurchased an aggregate of 4,798,269 ADSs at an average price of approximately US$4.14 per ADS.

Conference Call Information

The Company will hold a conference call at 8:00p.m. U.S. Eastern Time on August 12, 2013 (August 13, 2013 at 8:00a.m. Beijing / Hong Kong time) to discuss its second quarter 2013 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: 

22639820

A replay of the call will be available through August 19, 2013 by dialing the following numbers:

International:

+61281990299

Mainland China: 

4001200932

Hong Kong: 

+85230512780

United States: 

+16462543697

Conference ID: 

22639820

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 expenses. Adjusted gross margin is adjusted gross profit divided by total revenues. Adjusted income from operations is income from operations excluding share-based compensation expenses. 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 expenses. 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 adds 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 this non-GAAP financial measure 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 expenses, which have been and will continue to be significant recurring expenses 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 RMB6.1374 to US$1.00, the noon buying rate in effect on June 30, 2013 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 the 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 report 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.

[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" is American Depositary Share. Each ADS represents eight Class A ordinary shares.

[3]

In 2013, the Company adjusted paid service revenues classification from previously mobile Internet value-added services, or MIVAS, and video value-added services, or VVAS, into currently mobile value-added services, or MVAS, and games and others.

[4]

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

[5]

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

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,

June 30,

June 30,

2012

2013

2013

RMB

RMB

US$

Audited*

Unaudited

Unaudited

ASSETS

Current assets:

Cash and cash equivalents

916,169

1,094,951

178,406

Restricted cash

-

1,000

163

Term deposits

235,000

55,608

9,061

Accounts receivable, net

280,987

322,022

52,469

Amounts due from related parties

63,811

145,178

23,655

Prepayment and other current assets

42,557

38,493

6,272

Deferred tax assets

17,504

20,122

3,278

Total current assets

1,556,028

1,677,374

273,304

Non-current assets:

Property and equipment, net

102,547

98,421

16,036

Intangible assets, net

9,488

9,389

1,530

Other non-current assets

13,104

12,240

1,994

Total non-current assets

125,139

120,050

19,560

Total assets

1,681,167

1,797,424

292,864

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

154,637

172,184

28,055

Amounts due to related parties

1,806

19,395

3,160

Advances from customers

5,884

16,125

2,627

Taxes payable

40,156

49,502

8,066

Salary and welfare payable

63,631

69,562

11,334

Accrued expenses and other current liabilities

40,717

52,106

8,490

Total current liabilities

306,831

378,874

61,732

Long-term liabilities

7,996

9,999

1,629

Total liabilities

314,827

388,873

63,361

Shareholders' equity

Class A ordinary shares

19,575

18,597

3,030

Class B ordinary shares

22,053

22,053

3,593

Additional paid-in capital

1,785,597

1,735,772

282,819

Treasury stock

(112)

(9,884)

(1,610)

Statutory reserves

31,985

31,985

5,211

Accumulated deficit

(455,810)

(339,165)

(55,262)

Accumulated other comprehensive loss

(36,948)

(50,807)

(8,278)

Total shareholders' equity

1,366,340

1,408,551

229,503

Total liabilities and shareholders' equity

1,681,167

1,797,424

292,864

* Derived from audited financial statements included in the Company's Form 20-F dated April 26, 2013.

 

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

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2012

2013

2013

2013

2012

2013

2013

RMB

RMB

RMB

US$

RMB

RMB

US$

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Revenues:

  Net advertising revenues

147,603

166,446

209,520

34,138

276,501

375,966

61,258

  Paid service revenues

135,777

114,931

154,728

25,211

245,951

269,659

43,937

Total revenues

283,380

281,377

364,248

59,349

522,452

645,625

105,195

Cost of revenues

(157,313)

(143,854)

(173,422)

(28,257)

(292,337)

(317,276)

(51,696)

Gross profit

126,067

137,523

190,826

31,092

230,115

328,349

53,499

Operating expenses:

  Sales and marketing expenses

(37,218)

(55,092)

(64,406)

(10,494)

(76,700)

(119,498)

(19,470)

  General and administrative expenses

(31,591)

(24,832)

(29,320)

(4,777)

(48,975)

(54,152)

(8,823)

  Technology and product development expenses

(22,208)

(25,625)

(26,457)

(4,311)

(42,199)

(52,082)

(8,487)

Total operating expenses

(91,017)

(105,549)

(120,183)

(19,582)

(167,874)

(225,732)

(36,780)

Income from operations

35,050

31,974

70,643

11,510

62,241

102,617

16,719

Other income:

  Interest income

8,554

6,891

7,502

1,222

17,316

14,393

2,345

  Foreign currency exchange (loss)/gain

(3,474)

2,173

9,969

1,624

(2,716)

12,142

1,978

  Others, net

1,487

3,286

1,368

224

3,014

4,654

759

Income before tax

41,617

44,324

89,482

14,580

79,855

133,806

21,801

  Income tax expense

(6,595)

(5,120)

(12,041)

(1,962)

(11,900)

(17,161)

(2,796)

Net income attributable to Phoenix New Media Limited

35,022

39,204

77,441

12,618

67,955

116,645

19,005

   Other comprehensive income/(loss), net of tax: foreign

      currency translation adjustment

4,712

(2,326)

(11,533)

(1,879)

3,666

(13,859)

(2,258)

Comprehensive income attributable to Phoenix New

   Media Limited

39,734

36,878

65,908

10,739

71,621

102,786

16,747

Net income attributable to Phoenix New Media Limited

35,022

39,204

77,441

12,618

67,955

116,645

19,005

Net income per Class A and Class B ordinary share:

  Basic

0.06

0.06

0.13

0.02

0.11

0.19

0.03

  Diluted

0.05

0.06

0.12

0.02

0.10

0.19

0.03

Net income per ADS (1 ADS represents 8 Class A ordinary shares):

  Basic

0.45

0.51

1.02

0.17

0.87

1.53

0.25

  Diluted

0.43

0.50

1.00

0.16

0.84

1.49

0.24

Weighted average number of Class A and Class B ordinary

      shares used in computing net income per share:

  Basic

627,803,220

615,007,701

608,449,218

608,449,218

626,059,822

611,710,342

611,710,342

  Diluted

648,612,661

630,226,349

621,692,696

621,692,696

648,747,833

625,941,405

625,941,405

 

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 June 30, 2012

Three Months Ended March 31, 2013

Three Months Ended June 30, 2013

Non-GAAP

Non-GAAP

Non-GAAP

GAAP

Adjustments (1)

Non-GAAP

GAAP

Adjustments (1)

Non-GAAP

GAAP

Adjustments (1)

Non-GAAP

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Gross profit

126,067

677

126,744

137,523

606

138,129

190,826

1,931

192,757

Gross margin

44.5%

44.7%

48.9%

49.1%

52.4%

52.9%

Income from operations

35,050

2,903

37,953

31,974

(544)

31,430

70,643

6,156

76,799

Operating margin

12.4%

13.4%

11.4%

11.2%

19.4%

21.1%

Net income attributable     to Phoenix New     Media Limited

35,022

2,903

37,925

39,204

(544)

38,660

77,441

6,156

83,597

Net margin

12.4%

13.4%

13.9%

13.7%

21.3%

23.0%

Net income per  ADS-diluted

0.43

0.47

0.50

0.49

1.00

1.08

Weighted average     number of ADSs used    in computing diluted     net income per ADS

81,076,583

81,076,583

78,778,294

78,778,294

77,711,587

77,711,587

(1) Non-GAAP adjustment is only to exclude share-based compensation expenses.

 

Details of cost of revenues is as follows:

Three Months Ended

June 30,

March 31,

June 30,

June 30,

2012

2013

2013

2013

RMB

RMB

RMB

US$

(Amounts in thousands)

Unaudited

Unaudited

Unaudited

Unaudited

Revenue sharing fees

72,775

49,513

67,962

11,073

Content and operational costs

50,530

57,082

64,172

10,456

Bandwidth costs

16,739

18,442

20,231

3,296

Sales taxes and surcharges

17,269

18,817

21,057

3,432

Total cost of revenues

157,313

143,854

173,422

28,257

 

SOURCE Phoenix New Media Limited



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