Phoenix New Media Limited (FENG)

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Phoenix New Media's (FENG)

Q2 2013 Earnings Call

August 12, 2013 08:00 PM ET

Executives

Matthew Zhao - Director, IR

Shuang Liu - CEO

Ya Li - COO and Interim CFO

Analysts

Alan Hellawell - Deutsche Bank

George Meng - Macquarie

Gillian Chung - Morgan Stanley

Alex Yao - JP Morgan

Alicia Yap - Barclays

Jialong Shi - CLSA Ltd

David Lee - Daewoo Securities

Eric Qiu - Guosen Securities

Haofei Chen - CICC

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Phoenix New Media Second Quarter and 2013 Earnings Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, August 13, 2013.

I would now like to hand the conference over to your host today, Investor Relations Director, Mr. Matthew Zhao. Thank you. Please go ahead, sir.

Matthew Zhao

Thank you, operator. And thank you and welcome to Phoenix New Media second quarter and 2013 earnings conference call. I am joined here by our Chief Executive Officer, Mr. Shuang Liu; our Chief Operating Officer and acting Chief Financial Officer, Mr. Ya Li.

For today’s agenda, management will provide us with a review on the quarter and also include a Q&A session after the management’s prepared remarks. The second quarter 2013 financial results and the webcast of this conference call are available at the Investor Relations sections of www.ifeng.com. A replay of the call will be available on the website in a few hours.

Before we continue, I refer you to our Safe Harbor statements in our earnings press release, which applies to this call, as we will make forward-looking statements. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in Renminbi.

With that, I would like to turn the call over to Mr. Liu Shuang, our CEO.

Shuang Liu

Thank you Matthew. Good morning and good evening everyone. We're very excited to report a strong second quarter with revenues growing by almost 30% year over year significantly exceeding our guidance on three percentage (ph). In particular, this outperformance was driven by a 169 million percent year over year increase in mobile advertising and a 42% increase in overall net advertising revenues.

Additionally strong gains in operational efficiency, derived from our convergence model helped drive margin expansion which led to net income of course on non GAAP basis more than doubling year-over-year. In today's continuously evolving media world, we believe that our strong performance is bolstered by two key strategic engines of growth. First our core media DNA of delivering high impact, differentiated content that matters most to our audiences and second, our media convergence model that continuously deliver us cost synergies.

Before I start explaining our media value, let me first share with you a few user traffic metrics. In June 2013, the DAUs and MAUs on ipeng.com increased by 44% and 21% year over year respectively according to iresearch. Those figures are well above the average growth rate for the top 10 internet portals in China which was only 11% of DAUs and 10% for MAUs during the same period.

Not only did we again significantly outpace our peers, we also achieved phenomenal growth relative to other internet portals which have seen slower growth in recent years dues to the challenges of the social media and the mobile internet. Reflecting on this achievement we recognize that content offering is what drives user traffic and engagement.

Now let me talk about the first engine of our growth. The strategy is rooted essentially in our media DNA, a persistent pursuit of fierce journalism. One of the questions we have frequently ask ourselves to validate is how can we continue to deliver users sales journalism that is relevant and valid, as users are increasingly flooded with fragmented media formats and a proliferation of user generated content.

Despite the prevalence of information free of charge, we have consistently pounced and our strong user growth members support this. That there is significant and there is fundamental demand for or serious journalism content, that is both quality and valuable to our audiences.

We believe that our journalist practice of re-filtering the information, re-verifying the news sources, re-editing the articles with ifeng's objectives and a balanced fashion and which uphold truth and the journalistic ethics as well as respect to audit level of intelligence is still capable of providing a high level of thought and realizing of the value.

To give you a few examples of the uniqueness of our news coverage during the quarter; in June, we partnered with our parent company Phoenix Satellite TV to provide the future reports for the 2013 Shanghai Lujiazui Financial Forum, which was sponsored by the Agricultural Bank of China. We invited Phoenix TV's anchorman to hold the breakfast for the news that’s also been broadcasted through Phoenix TV’s new program globally.

These sorts of collaborations demonstrate our strong synergies in our convergence model and whole hearted efforts providing higher ROIs for our advertising clients. We’re proud to see our journalistic undertaking of systematic and intelligent reporting has redefined news coverage and challenged the status quo practices of traditional media and other Internet media outlets in China.

Underpinned by our strong content production capabilities, we continue to provide big idea, advertising strategies further driving the creativity, imagination and the productivity on the commercial side of our operation. This achievement is evidenced by solid growth in our online advertising business, which was driven by the 30% year-over-year increase in the number of advertising clients and 9% increase in EBIT revenue for advertiser to over several hundred (inaudible).

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