Phoenix New Media Reports Second Quarter 2016 Unaudited Financial Results

BEIJING, Aug. 9, 2016 /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, 2016.

Second Quarter 2016 Highlights

• Net advertising revenues were RMB297.2 million (US$44.7 million), as compared to RMB311.9 million in the same period last year.
• Paid service revenues were RMB52.8 million (US$8.0 million), as compared to RMB111.0 million in the same period last year.

"For the second quarter of 2016, we are pleased to report a solid financial results which were close to our top end guidance," stated Mr. Shuang Liu, CEO of Phoenix New Media. "In addition, our flagship ifeng news app continues to see strong progress in terms of content enrichment, vertical development and video traffic. This point of confluence firmly places ifeng uniquely at the leading edge of both technology and serious journalism. With mobile devices having become the major gateway for content consumption, we will continue to focus on expanding our user base across our differentiated mobile apps, optimizing our targeting technology and integrating next-generation high-efficiency ad solutions. Looking forward, we will remain cautious on the PC advertising market in China, but are confident that our mobile strategy, recent strategic hires, as well as the continued development of our mobile applications will further strengthen ifeng's growth opportunities and reputation as one of the most diversified news and life-style information providers in China's mobile Internet space."

"As stated in the press release on July 22, 2016," Mr. Ya Li, president of Phoenix New Media, further commented, "the strategic partnership between Yidian, a strategic investment of ifeng, and OPPO, one of world's top 5 mobile handset manufacturers in the second quarter 2016 according to IDC, as well as Yidian's ongoing partnership with Xiaomi, positions Yidian as China's leading personalized content recommendation application with two of China's top smartphone manufacturers as strategic investors. We expect the growth of Yidian's user base to accelerate heading into the second half of 2016 and into 2017. Going forward, with the combined strengths of our differentiated mobile platforms, we are confident that we will further strengthen our competitive position and solidify our leading role in providing Chinese readers the best of both high-quality news and customized content from around the world."

Second Quarter 2016 Financial Results

REVENUES

Total revenues for the second quarter of 2016 were RMB350.1 million (US$52.7 million), as compared to RMB422.9 million in the second quarter of 2015.

Net advertising revenues (net of advertising agency service fees) for the second quarter of 2016 were RMB297.2 million (US$44.7 million), as compared to RMB311.9 million in the second quarter of 2015. The decrease was primarily due to the decline in PC advertising revenues and was partially offset by the growth in mobile advertising revenues.

Paid service revenues for the second quarter of 2016 were RMB52.8 million (US$8.0 million), as compared to RMB111.0 million in the second quarter of 2015, primarily due to the 64.9% year-over-year decrease in mobile value-added services ("MVAS")^[1] revenues to RMB30.9 million (US$4.7 million) from RMB88.1 million in the second quarter of 2015. The decrease in MVAS revenues mainly resulted from the decline in user demand. Revenues from games and others^[2] for the second quarter of 2016 were RMB21.9 million (US$3.3 million), as compared to RMB22.9 million in the second quarter of 2015, primarily due to the decline in revenues generated from PC web-based games.

COST OF REVENUES

Cost of revenues for the second quarter of 2016 decreased by 18.8% to RMB180.5 million (US$27.2 million) from RMB222.4 million in the second quarter of 2015. The decrease in cost of revenues was primarily due to the decrease in revenue sharing fees and bandwidth costs. Revenue sharing fees to telecom operators and channel partners for the second quarter of 2016 decreased to RMB19.3 million (US$2.9 million) from RMB67.3 million in the second quarter of 2015, primarily due to the decreased sales of MVAS products. Content and operational costs for the second quarter of 2016 increased to RMB117.2 million (US$17.6 million) from RMB101.6 million in the second quarter of 2015, which was primarily driven by the increase in content acquisition cost and general operating cost. Bandwidth costs for the second quarter of 2016 decreased to RMB15.3 million (US$2.3 million) from RMB21.3 million in the second quarter of 2015. Sales taxes and surcharges for the second quarter of 2016 decreased to RMB28.8 million (US$4.3 million) from RMB32.2 million in the second quarter of 2015. Share-based compensation included in cost of revenues was RMB0.8 million (US$0.1 million) in the second quarter of 2016, as compared to RMB4.5 million in the second quarter of 2015. The decrease was primarily due to an increase of the estimated forfeiture rate of share-based awards.

GROSS PROFIT

Gross profit for the second quarter of 2016 was RMB169.6 million (US$25.5 million), as compared to RMB200.5 million in the second quarter of 2015. Gross margin for the second quarter of 2016 increased to 48.4% from 47.4% in the second quarter of 2015, mainly due to the reduction of sales from low gross margin products in paid services.

To supplement the financial measures presented in accordance with the United States Generally Accepted Accounting Principles ("GAAP"), the Company has presented certain non-GAAP financial measures in this press release, which excluded the impact of certain non-cash or non-operating items as stated in the "Use of Non-GAAP Financial Measures" section below. 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".

Non-GAAP gross margin, which excludes share-based compensation, for the second quarter of 2016 increased slightly to 48.7% from 48.5% in the second quarter of 2015.

OPERATING EXPENSES AND INCOME / (LOSS) FROM OPERATIONS

Total operating expenses for the second quarter of 2016 increased by 7.4% to RMB186.7 million (US$28.1 million) from RMB173.8 million in the second quarter of 2015. Share-based compensation included in operating expenses decreased to RMB3.6 million (US$0.5 million) in the second quarter of 2016 from RMB9.0 million in the second quarter of 2015, primarily due to an increase of the estimated forfeiture rate of share-based awards.

Loss from operations for the second quarter of 2016 was RMB17.1 million (US$2.6 million), as compared to income from operations of RMB26.7 million in the second quarter of 2015. Operating margin for the second quarter of 2016 was a negative 4.9%, as compared to 6.3% in the second quarter of 2015. The decrease in operating margin was mainly due to the increase in mobile traffic acquisition expenses and bad debt provision.

Non-GAAP loss from operations for the second quarter of 2016, which excludes share-based compensation, was RMB12.7 million (US$1.9 million), as compared to a non-GAAP income from operations of RMB40.2 million in the second quarter of 2015. Non-GAAP operating margin for the second quarter of 2016, which excludes share-based compensation, was a negative 3.6%, as compared to 9.5% in the second quarter of 2015.

OTHER INCOME / (LOSS)

Other income/(loss) reflects interest income, net, foreign currency exchange gain/loss, loss/gain from equity investments, including impairments, gain on disposal of an equity investment and acquisition of available-for-sale investments and others, net^[3]. Total other income for the second quarter of 2016 was RMB12.4 million (US$1.9 million), as compared to RMB4.7 million in the second quarter of 2015. Interest income, net, for the second quarter of 2016 increased to RMB7.3 million (US$1.1 million) from RMB6.5 million in the second quarter of 2015. Foreign currency exchange gain for the second quarter of 2016 was RMB2.4 million (US$0.4 million), as compared to foreign currency exchange loss of RMB2.6 million in the second quarter of 2015. Loss from equity investments, including impairments, for the second quarter of 2016 was RMB1.5 million (US$0.2 million), as compared to RMB9.4 million in the second quarter of 2015. For the second quarter of 2016, there was no gain on disposal of an equity investment and acquisition of available-for-sale investments, as compared to RMB4.6 million in the second quarter of 2015.

NET INCOME/(LOSS) ATTRIBUTABLE TO PHOENIX NEW MEDIA LIMITED

Net loss attributable to Phoenix New Media Limited for the second quarter of 2016 was RMB2.5 million (US$0.4 million), as compared to net income of RMB22.5 million in the second quarter of 2015. Net profit margin for the second quarter of 2016 was a negative 0.7%, as compared to 5.3% in the second quarter of 2015. Net loss per diluted ADS^[4] in the second quarter of 2016 was RMB0.03 (US$0.01), as compared to RMB0.31 in the second quarter of 2015.

Non-GAAP net income attributable to Phoenix New Media Limited for the second quarter of 2016, which excludes share-based compensation ,loss from equity investments, including impairments, gain on disposal of an equity investment and acquisition of available-for-sale investments, was RMB3.5 million (US$0.5 million), as compared to RMB40.7 million in the second quarter of 2015. Non-GAAP net profit margin for the second quarter of 2016 was 1.0%, as compared to 9.6% in the second quarter of 2015. Non-GAAP net income per diluted ADS in the second quarter of 2016 was RMB0.05 (US$0.01), as compared to non-GAAP net income per diluted ADS of RMB0.56 in the second quarter of 2015.

As of June 30, 2016, the Company's cash and cash equivalents, term deposits and short term investments and restricted cash were RMB1.15 billion (US$173.6 million).

For the second quarter of 2016, the Company's weighted average number of ADSs used in the computation of diluted net income per ADS was 71,634,287. As of June 30, 2016, the Company had a total of 571,651,854 ordinary shares outstanding, or the equivalent of 71,456,482 ADSs.

Business Outlook

For the third quarter of 2016, the Company expects its total revenues to be between RMB342 million and RMB362 million. Net advertising revenues are expected to be between RMB301 million and RMB316 million. Paid service revenues are expected to be between RMB41 million and RMB46 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 August 9, 2016 (August 10, 2016 at 9:00 a.m. Beijing / Hong Kong time) to discuss its second quarter 2016 unaudited financial results and operating performance.

To participate in the call, please use the dial-in numbers and conference ID below:

A replay of the call will be available through August 16, 2016 by using the dial-in numbers and conference ID below:

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 non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income attributable to Phoenix New Media Limited, non-GAAP net profit margin and non-GAAP net income per diluted ADS, each of which is a non-GAAP financial measure. Non-GAAP gross profit is gross profit excluding share-based compensation. Non-GAAP gross margin is non-GAAP gross profit divided by total revenues. Non-GAAP income from operations is income from operations excluding share-based compensation. Non-GAAP operating margin is non-GAAP income from operations divided by total revenues. Non-GAAP net income attributable to Phoenix New Media Limited is net income attributable to Phoenix New Media Limited excluding share-based compensation, loss/gain from equity investments, including impairments and gain on disposal of an equity investment and acquisition of available-for-sale investments. Non-GAAP net profit margin is non-GAAP net income attributable to Phoenix New Media Limited divided by total revenues. Non-GAAP net income per diluted ADS is non-GAAP 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, loss/gain from equity investments, including impairments and gain on disposal of an equity investment and acquisition of available-for-sale investments, add clarity to the constituent parts of its performance. The Company reviews non-GAAP 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. 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, non-operating loss/gain from equity investments, including impairments and gain on disposal of an equity investment and acquisition of available-for-sale investments. Share-based compensation and loss/gain from equity investments, including impairments 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 similarly-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 measures prepared in accordance with 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 RMB6.6459 to US$1.00, the noon buying rate in effect on June 30, 2016 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 online and mobile advertising, online video and mobile paid services markets in China; the Company's reliance on online and mobile advertising and MVAS for a majority of its total revenues; the Company's expectations regarding demand for and market acceptance of its services; the Company's expectations regarding maintaining and strengthening 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 services 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: [email protected]

ICR, Inc.
Vera Tang
Tel: +1 (646) 277-1215
Email: [email protected]

SOURCE Phoenix New Media Limited