EX-99.1 2 a17-26489_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Phoenix New Media Reports Third Quarter 2017 Unaudited Financial Results

 

Live Conference Call to be Held at 8:00 PM U.S. Eastern Time on November 13, 2017

 

BEIJING, China, November 14, 2017 — Phoenix New Media Limited (NYSE: FENG) (“Phoenix New Media”, “ifeng” or the “Company”), a leading new media company in China, today announced its unaudited financial results for the third quarter ended September 30, 2017.

 

“In the third quarter of 2017, we not only delivered solid financial and operating performance, but also achieved several important milestones,” stated Mr. Shuang Liu, CEO of Phoenix New Media. “Among others, Yidian, a company in which we invested and accounted for as available-for-sale investments, received the License for Internet News Information Service, which is the first license  issued by the Cyberspace Administration of China that covers PC, mobile and we-media platforms since new regulations in China came into effect on June 1, 2017. This license will allow Yidian to differentiate and gain competitive advantages over its peers, especially on content acquisition on its we-media platform Yidianhao (“一点号”). The license also fulfills a prerequisite for an equity investment in Yidian by Long De Cheng Zhang Culture Communication (Tianjin) Co., Ltd., which together with the other two investors that we discussed in the second quarter, are expected to invest approximately US$112.1 million in total at an estimated transaction valuation of Yidian of about US$1.0 billion. We are very pleased to have finalized this round of investments as certain major terms, including the valuation, were negotiated late last year.

 

We also further executed our content strategy during the third quarter. We continued to be a leading news distributor in China of major current affairs around the world. According to a report from iResearch, during the 19th National Congress of the Communist Party of China, the growth rate of weekly active users of our iFeng News App surpassed all of our peers and we also ranked first on the PC platform based on the number of page views of featured stories.

 

Looking ahead, we will remain focused on market share expansion. By leveraging our professional journalism, cutting-edge technology, extensive partnership resources as well as our branding power, we believe we can maintain our leading position in the highly competitive market.

 

Ms. Betty Ho, CFO of Phoenix New Media, further stated, “We are delighted to have strong financial results this quarter. Net advertising revenues increased by 17.0% year-over-year to RMB363.1 million, primarily driven by a 50.0% year-over-year increase in our mobile advertising revenues. In particular, revenues from our programmatic advertising showed robust year-over-year growth of 106.0% to RMB142.1 million during the third quarter, mainly resulted from our strong operations and product optimization. Non-GAAP net income attributable to Phoenix New Media increased by 38.9% year-over-year to RMB34.4 million. We are very pleased with the results we achieved during the third quarter and expect our mobile advertising business will continue to grow in line with the industry trend. On the other hand, in order to expand our market share, we need to further invest in traffic acquisition while adopting strict cost control measures and closely monitoring the investment return of our products.”

 

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Third Quarter 2017 Financial Results

 

REVENUES

 

Total revenues for the third quarter of 2017 increased by 18.2% to RMB425.6 million (US$64.0 million) from RMB360.0 million in the third quarter of 2016.

 

Net advertising revenues (net of advertising agency service fees) for the third quarter of 2017 increased by 17.0% to RMB363.1 million (US$54.6 million) from RMB310.4 million in the third quarter of 2016, which was primarily attributable to a 50.0% year-over-year increase in mobile advertising revenues and partially offset by a 11.8% year-over-year decrease in PC advertising revenues.

 

Paid services revenues(1) for the third quarter of 2017 increased by 25.9% to RMB62.4 million (US$9.4 million) from RMB49.6 million in the third quarter of 2016. Revenues from digital entertainment(2) for the third quarter of 2017 increased by 41.8% to RMB52.6 million (US$7.9 million) from RMB37.1 million in the third quarter of 2016. The increase was due to a 51.5% increase in digital reading revenue to RMB 17.2 million (US$2.6 million), which mainly resulted from stronger demand and the Company’s strategic expansion efforts, and a 37.5% increase in the MVAS revenues related to certain short-term new business with telecom operators. Revenues from games and others(3) for the third quarter of 2017 decreased by 21.3% to RMB9.8 million (US$1.5 million) from RMB12.5 million in the third quarter of 2016, which was primarily attributable to a decrease in revenues generated from web-based games operated on the Company’s own platform.

 

COST OF REVENUES

 

Cost of revenues for the third quarter of 2017 increased by 2.9% to RMB188.2 million (US$28.3 million) from RMB182.9 million in the third quarter of 2016, primarily attributable to an increase in revenue sharing fees and sales taxes and surcharges.

 

·                  Content and operational costs for the third quarter of 2017 decreased to RMB110.5 million (US$16.6 million) from RMB119.5 million in the third quarter of 2016, primarily attributable to a decrease in advertisement-related content production cost and the Company’s strict control of general operation costs.

 


(1)  Prior to 2016, the Company’s paid services revenues comprised mainly of revenues generated from MVAS and games and others. Digital reading was previously classified under “games and others.” In order to align with the Company’s overall strategies, digital reading was re-classified from “games and others”, and digital reading together with MVAS was determined as “digital entertainment” starting from the financial statements as of and for the year ended December 31, 2016. Accordingly, the revenues from digital entertainment and the revenues from games and others for the first three quarters of 2016 have been reclassified.

 

(2)  Digital entertainment includes mobile value-added services delivered through telecom operators’ platforms, or MVAS, and digital reading.

 

(3)  Games and others include web-based and mobile games, and other online and mobile paid services through the Company’s own platforms.

 

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·                  Revenue sharing fees to telecom operators and channel partners for the third quarter of 2017 increased to RMB27.9 million (US$4.2 million) from RMB16.6 million in the third quarter of 2016, primarily attributable to an increase in the sales of MVAS products.

 

·                  Bandwidth costs for the third quarter of 2017 decreased to RMB14.1 million (US$2.1 million) from RMB16.4 million in the third quarter of 2016, primarily due to the decrease in bandwidth purchase price as a result of intense competition.

 

·                  Sales taxes and surcharges for the third quarter of 2017 increased to RMB35.7 million (US$5.4 million) from RMB30.4 million in the third quarter of 2016.

 

·                  Share-based compensation included in cost of revenues was RMB0.9 million (US$0.1 million) in the third quarter of 2017, as compared to negative RMB5.1 million in the third quarter of 2016 resulting from the increase of estimated forfeiture rate of share-based awards based on the actual forfeiture rate in the quarter.

 

GROSS PROFIT

 

Gross profit for the third quarter of 2017 increased by 34.0% to RMB237.4 million (US$35.7 million) from RMB177.1 million in the third quarter of 2016. Gross margin for the third quarter of 2017 increased to 55.8% from 49.2% in the third quarter of 2016. The increase in gross margin was primarily attributable to the increase of revenues and decrease of certain cost of revenues as explained above.

 

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 reconciling 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 for the third quarter of 2017, which excluded share-based compensation, increased to 56.0% from 47.8% in the third quarter of 2016.

 

OPERATING EXPENSES AND INCOME FROM OPERATIONS

 

Total operating expenses for the third quarter of 2017 increased by 34.7% to RMB201.9 million (US$30.3 million) from RMB149.9 million in the third quarter of 2016, primarily attributable to an increase in mobile traffic acquisition expenses, which was partially offset by a decrease in bad debt provision primarily due to the collection of RMB8.3 million of previously fully-reserved receivables in the third quarter of 2017. Share-based compensation included in operating expenses was RMB1.5 million (US$0.2 million) in the third quarter of 2017, as compared to negative RMB3.1 million in the third quarter of 2016. The increase in share-based compensation was primarily due to negative share-based compensation expense recognized in the third quarter of 2016 reflecting an increase of estimated forfeiture rate of share-based awards based on the actual forfeiture rate in that quarter.

 

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Income from operations for the third quarter of 2017 increased by 30.3% to RMB35.5 million (US$5.3 million) from RMB27.2 million in the third quarter of 2016. Operating margin for the third quarter of 2017 increased to 8.3% from 7.6% in the third quarter of 2016, which was primarily attributable to the increase in gross profit and partially offset by the increase in mobile traffic acquisition expenses.

 

Non-GAAP income from operations for the third quarter of 2017, which excluded share-based compensation, increased by 99.1% to RMB37.9 million (US$5.7 million) from RMB19.0 million in the third quarter of 2016. Non-GAAP operating margin for the third quarter of 2017, which excluded share-based compensation, increased to 8.9% from 5.3% in the third quarter of 2016.

 

OTHER INCOME/(LOSS)

 

Other income/(loss) reflects interest income, interest expense, foreign currency exchange gain/(loss), gain/(loss) from equity investments, including impairments, and others, net(4). Total other income for the third quarter of 2017 was RMB6.2 million (US$0.9 million), as compared to RMB6.7 million in the third quarter of 2016.

 

·                  Interest income for the third quarter of 2017 increased to RMB14.9 million (US$2.2 million) from RMB7.9 million in the third quarter of 2016, which was mainly due to the increase of interest bearing investments and receivables in the third quarter of 2017 as compared to that of 2016.

 

·                  Interest expense for the third quarter of 2017 increased to RMB5.7 million (US$0.9 million), from RMB1.6 million in the third quarter of 2016, which was primarily due to the increase in outstanding short-term bank loans in the third quarter of 2017 as compared to that of 2016.

 

·                  Foreign currency exchange loss for the third quarter of 2017 was RMB8.9 million (US$1.3 million), as compared to foreign currency exchange gain of RMB0.6 million in the third quarter of 2016, which was mainly caused by the appreciation of Renminbi against US dollars in the third quarter of 2017.

 

·                  Gain from equity investments for the third quarter of 2017, including impairments, was RMB1.0 million (US$0.1 million), as compared to loss from equity investments of RMB1.2 million in the third quarter of 2016.

 

·                  Others, net, for the third quarter of 2017 increased to RMB4.9 million (US$0.7 million), from RMB1.0 million in the third quarter of 2016, which was primarily attributable to the government subsidies received in the third quarter of 2017.

 

NET INCOME ATTRIBUTABLE TO PHOENIX NEW MEDIA LIMITED

 

Net income attributable to Phoenix New Media Limited for the third quarter of 2017 increased by 3.8 % to RMB32.9 million (US$4.9 million) from RMB31.7 million in the third quarter of 2016. Net margin for the third quarter of 2017 decreased to 7.7% from 8.8% in the third quarter of 2016. Net income

 


(4)  “Others, net” primarily consists of government subsidies.

 

4



 

per diluted ADS(5) in the third quarter of 2017 increased 3.7% to RMB0.46 (US$0.07) from RMB0.44 in the third quarter of 2016.

 

Non-GAAP net income attributable to Phoenix New Media Limited for the third quarter of 2017, which excluded share-based compensation and gain/(loss) from equity investments, including impairments, increased by 38.9% to RMB34.4 million (US$5.2 million) from RMB24.8 million in the third quarter of 2016. Non-GAAP net margin for the third quarter of 2017 increased to 8.1% from 6.9% in the third quarter of 2016. Non-GAAP net income per diluted ADS in the third quarter of 2017 increased by 38.8% to RMB0.48 (US$0.07) from RMB0.34 in the third quarter of 2016.

 

For the third quarter of 2017, the Company’s weighted average number of ADSs used in the computation of diluted net income per ADS was 72,227,027. As of September 30, 2017, the Company had a total of 573,879,193 ordinary shares outstanding, or the equivalent of 71,734,899 ADSs.

 

CERTAIN BALANCE SHEET ITEMS

 

As of September 30, 2017, the Company’s cash and cash equivalents, term deposits and short term investments and restricted cash were RMB1.28 billion (US$191.9 million). Restricted cash represents deposits placed as security for banking facilities granted to the Company, which are restricted in their withdrawal or usage.

 

Business Outlook

 

For the fourth quarter of 2017, the Company expects its total revenues to be between RMB433.0 million and RMB448.0 million. Net advertising revenues are expected to be between RMB386.2 million and RMB396.2 million. Paid services revenues are expected to be between RMB46.8 million and RMB51.8 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 8:00 p.m. U.S. Eastern Time on November 13, 2017 (November 14, 2017 at 9:00 a.m. Beijing/Hong Kong time) to discuss its third quarter 2017 unaudited financial results and operating performance.

 

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

 

International:

+6567135440

Mainland China:

4001200654

Hong Kong:

+85230186776

United States:

+18456750438

Conference ID:

7682549

 


(5)  “ADS” means American Depositary Share of the Company. Each ADS represents eight Class A ordinary shares of the Company.

 

5



 

A replay of the call will be available through November 20, 2017 by using the dial-in numbers and conference ID below:

 

International:

+61290034211

Mainland China:

4006322162

Hong Kong:

+85230512780

United States:

+16462543697

Conference ID:

7682549

 

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 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 and gain from equity investments, including impairments. Non-GAAP net 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 aforementioned non-GAAP to GAAP reconciling items add clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with the related GAAP financial measures 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 these non-GAAP financial 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 investors. The Company also believes that these non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of items like share-based compensation and loss from equity investments, including impairments, which have been and will continue to be significant and recurring in its business. However, the use of these non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using these non-GAAP financial measures is that they do not include all items that impact the Company’s gross profit, income from operations and net income attributable to Phoenix New Media Limited for the period. In addition, because these non-GAAP financial

 

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measures are not calculated 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 these non-GAAP financial measures 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 RMB6.6533 to US$1.00, the noon buying rate in effect on September 30, 2017 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 Internet platform, including PC and mobile, 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 through their PCs and mobile devices. Phoenix New Media’s platform includes its PC channel, consisting of ifeng.com website, which comprises interest-based verticals and interactive services; its mobile channel, consisting of mobile news applications, mobile video application, digital reading application, fashion application and mobile Internet website; and its operations with the telecom operators that provides 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

 

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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

Nicole Shan

Email: investorrelations@ifeng.com

 

ICR, Inc.

Rose Zu

Tel: +1 (646) 405-4883

Email: investorrelations@ifeng.com

 

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Phoenix New Media Limited

Condensed Consolidated Balance Sheets

(Amounts in thousands)

 

 

 

December 31,

 

September 30,

 

September 30,

 

 

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

US$

 

 

 

Audited*

 

Unaudited

 

Unaudited

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

202,694

 

337,696

 

50,756

 

Term deposits and short term investments

 

781,298

 

574,799

 

86,393

 

Restricted cash

 

354,602

 

364,167

 

54,735

 

Accounts receivable, net

 

405,033

 

401,762

 

60,385

 

Amounts due from related parties

 

156,260

 

281,959

 

42,379

 

Prepayment and other current assets

 

64,069

 

70,733

 

10,631

 

Convertible loans due from a related party

 

104,429

 

103,152

 

15,504

 

Total current assets

 

2,068,385

 

2,134,268

 

320,783

 

Non-current assets:

 

 

 

 

 

 

 

Property and equipment, net

 

72,087

 

69,590

 

10,459

 

Intangible assets, net

 

9,475

 

7,507

 

1,128

 

Available-for-sale investments

 

939,432

 

1,192,556

 

179,243

 

Equity investments, net

 

8,809

 

10,477

 

1,575

 

Deferred tax assets**

 

54,307

 

59,448

 

8,935

 

Other non-current assets

 

16,047

 

12,874

 

1,935

 

Total non-current assets

 

1,100,157

 

1,352,452

 

203,275

 

Total assets

 

3,168,542

 

3,486,720

 

524,058

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term bank loans

 

358,602

 

357,954

 

53,801

 

Accounts payable

 

260,902

 

231,150

 

34,742

 

Amounts due to related parties

 

18,720

 

21,970

 

3,302

 

Advances from customers

 

27,825

 

69,316

 

10,417

 

Taxes payable

 

75,652

 

82,131

 

12,344

 

Salary and welfare payable

 

130,329

 

126,765

 

19,053

 

Accrued expenses and other current liabilities

 

111,049

 

103,383

 

15,540

 

Total current liabilities

 

983,079

 

992,669

 

149,199

 

Non-current liabilities:

 

 

 

 

 

 

 

Deferred tax liabilities

 

1,312

 

1,312

 

197

 

Long-term liabilities

 

21,723

 

22,004

 

3,307

 

Total non-current liabilities

 

23,035

 

23,316

 

3,504

 

Total liabilities

 

1,006,114

 

1,015,985

 

152,703

 

Shareholders’ equity:

 

 

 

 

 

 

 

Phoenix New Media Limited shareholders’ equity:

 

 

 

 

 

 

 

Class A ordinary shares

 

16,843

 

16,952

 

2,548

 

Class B ordinary shares

 

22,053

 

22,053

 

3,315

 

Additional paid-in capital

 

1,555,511

 

1,576,166

 

236,900

 

Statutory reserves

 

77,946

 

77,946

 

11,715

 

Retained earnings

 

195,069

 

220,720

 

33,175

 

Accumulated other comprehensive income

 

298,346

 

562,626

 

84,563

 

Total Phoenix New Media Limited shareholders’ equity

 

2,165,768

 

2,476,463

 

372,216

 

Noncontrolling interests

 

(3,340

)

(5,728

)

(861

)

Total shareholders’ equity

 

2,162,428

 

2,470,735

 

371,355

 

Total liabilities and shareholders’ equity

 

3,168,542

 

3,486,720

 

524,058

 

 


* Derived from audited financial statements included in the Company’s Form 20-F dated April 28, 2017.

** In 2017, the Company adopted the guidance of ASU 2015-17 issued by FASB in November 2015, which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. Pursuant to the guidance, the Company retrospectively reclassified RMB54.3 million of deferred tax assets from current assets to noncurrent assets in the balance sheets as of December 31, 2016.

 

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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

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2016

 

2017

 

2017

 

2017

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising revenues

 

310,439

 

338,725

 

363,124

 

54,578

 

879,052

 

942,933

 

141,724

 

Paid service revenues

 

49,583

 

54,541

 

62,436

 

9,384

 

153,973

 

170,372

 

25,607

 

Total revenues

 

360,022

 

393,266

 

425,560

 

63,962

 

1,033,025

 

1,113,305

 

167,331

 

Cost of revenues

 

(182,927

)

(167,844

)

(188,185

)

(28,284

)

(521,603

)

(518,518

)

(77,934

)

Gross profit

 

177,095

 

225,422

 

237,375

 

35,678

 

511,422

 

594,787

 

89,397

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

(74,210

)

(118,769

)

(122,843

)

(18,463

)

(236,785

)

(337,074

)

(50,663

)

General and administrative expenses

 

(37,897

)

(35,865

)

(28,650

)

(4,306

)

(140,527

)

(96,466

)

(14,499

)

Technology and product development expenses

 

(37,756

)

(45,791

)

(50,412

)

(7,577

)

(120,188

)

(140,831

)

(21,167

)

Total operating expenses

 

(149,863

)

(200,425

)

(201,905

)

(30,346

)

(497,500

)

(574,371

)

(86,329

)

Income from operations

 

27,232

 

24,997

 

35,470

 

5,332

 

13,922

 

20,416

 

3,068

 

Other income/(loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

7,943

 

13,493

 

14,922

 

2,243

 

24,328

 

41,073

 

6,173

 

Interest expense

 

(1,554

)

(6,426

)

(5,700

)

(857

)

(3,283

)

(18,475

)

(2,777

)

Foreign currency exchange gain/(loss)

 

575

 

(7,890

)

(8,878

)

(1,334

)

1,122

 

(19,079

)

(2,868

)

(Loss)/gain from equity investments, including impairments

 

(1,242

)

1,127

 

968

 

145

 

(1,747

)

1,431

 

215

 

Others, net

 

1,021

 

3,066

 

4,893

 

735

 

9,447

 

9,386

 

1,411

 

Income before tax

 

33,975

 

28,367

 

41,675

 

6,264

 

43,789

 

34,752

 

5,222

 

Income tax expense

 

(2,879

)

(4,215

)

(9,615

)

(1,445

)

(4,836

)

(11,489

)

(1,727

)

Net income

 

31,096

 

24,152

 

32,060

 

4,819

 

38,953

 

23,263

 

3,495

 

Net loss attributable to noncontrolling interests

 

599

 

779

 

834

 

125

 

1,879

 

2,388

 

359

 

Net income attributable to Phoenix New Media Limited

 

31,695

 

24,931

 

32,894

 

4,944

 

40,832

 

25,651

 

3,854

 

Net income

 

31,096

 

24,152

 

32,060

 

4,819

 

38,953

 

23,263

 

3,495

 

Other comprehensive (loss)/income, net of tax: fair value remeasurement for available-for-sale investments

 

(39,610

)

256,588

 

33,832

 

5,085

 

(22,967

)

299,311

 

44,987

 

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

 

2,920

 

(12,486

)

(18,778

)

(2,822

)

11,854

 

(35,031

)

(5,265

)

Comprehensive (loss)/income

 

(5,594

)

268,254

 

47,114

 

7,082

 

27,840

 

287,543

 

43,217

 

Comprehensive loss attributable to noncontrolling interests

 

599

 

779

 

834

 

125

 

1,879

 

2,388

 

359

 

Comprehensive (loss)/income attributable to Phoenix New Media Limited

 

(4,995

)

269,033

 

47,948

 

7,207

 

29,719

 

289,931

 

43,576

 

Net income attributable to Phoenix New Media Limited

 

31,695

 

24,931

 

32,894

 

4,944

 

40,832

 

25,651

 

3,854

 

Net income per Class A and Class B ordinary share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

0.06

 

0.04

 

0.06

 

0.01

 

0.07

 

0.04

 

0.01

 

Diluted

 

0.05

 

0.04

 

0.06

 

0.01

 

0.07

 

0.04

 

0.01

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

0.44

 

0.35

 

0.46

 

0.07

 

0.57

 

0.36

 

0.05

 

Diluted

 

0.44

 

0.35

 

0.46

 

0.07

 

0.57

 

0.36

 

0.05

 

Weighted average number of Class A and Class B ordinary shares used in computing net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

574,124,546

 

573,948,891

 

574,372,716

 

574,372,716

 

573,401,254

 

574,091,207

 

574,091,207

 

Diluted

 

577,432,460

 

576,815,588

 

577,816,213

 

577,816,213

 

577,056,594

 

577,578,429

 

577,578,429

 

 

10



 

Phoenix New Media Limited

Condensed Segments Information

(Amounts in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2016

 

2017

 

2017

 

2017

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising service

 

310,439

 

338,725

 

363,124

 

54,578

 

879,052

 

942,933

 

141,724

 

Paid service

 

49,583

 

54,541

 

62,436

 

9,384

 

153,973

 

170,372

 

25,607

 

Total revenues

 

360,022

 

393,266

 

425,560

 

63,962

 

1,033,025

 

1,113,305

 

167,331

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising service

 

151,770

 

141,459

 

149,000

 

22,395

 

424,035

 

421,584

 

63,365

 

Paid service

 

31,157

 

26,385

 

39,185

 

5,889

 

97,568

 

96,934

 

14,569

 

Total cost of revenues

 

182,927

 

167,844

 

188,185

 

28,284

 

521,603

 

518,518

 

77,934

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising service

 

158,669

 

197,266

 

214,124

 

32,183

 

455,017

 

521,349

 

78,359

 

Paid service

 

18,426

 

28,156

 

23,251

 

3,495

 

56,405

 

73,438

 

11,038

 

Total gross profit

 

177,095

 

225,422

 

237,375

 

35,678

 

511,422

 

594,787

 

89,397

 

 

11



 

Phoenix New Media Limited

Condensed Information of Cost of Revenues

(Amounts in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2016

 

2017

 

2017

 

2017

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue sharing fees

 

16,559

 

15,052

 

27,891

 

4,192

 

54,687

 

60,263

 

9,058

 

Content and operational costs

 

119,538

 

105,984

 

110,491

 

16,607

 

332,178

 

322,791

 

48,515

 

Bandwidth costs

 

16,404

 

13,607

 

14,085

 

2,117

 

49,041

 

42,220

 

6,346

 

Sales taxes and surcharges

 

30,426

 

33,201

 

35,718

 

5,368

 

85,697

 

93,244

 

14,015

 

Total cost of revenues

 

182,927

 

167,844

 

188,185

 

28,284

 

521,603

 

518,518

 

77,934

 

 

12



 

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 September 30, 2016

 

Three Months Ended June 30, 2017

 

Three Months Ended September 30, 2017

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Non-GAAP

 

 

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Gross profit

 

177,095

 

(5,115

)(1)

171,980

 

225,422

 

1,224

(1)

226,646

 

237,375

 

949

(1)

238,324

 

Gross margin

 

49.2

%

 

 

47.8

%

57.3

%

 

 

57.6

%

55.8

%

 

 

56.0

%

Income from operations

 

27,232

 

(8,186

)(1)

19,046

 

24,997

 

5,460

(1)

30,457

 

35,470

 

2,450

(1)

37,920

 

Operating margin

 

7.6

%

 

 

5.3

%

6.4

%

 

 

7.7

%

8.3

%

 

 

8.9

%

 

 

 

 

(8,186

)(1)

 

 

 

 

5,460

(1)

 

 

 

 

2,450

(1)

 

 

 

 

 

 

1,242

(2)

 

 

 

 

(1,127

)(2)

 

 

 

 

(968

)(2)

 

 

Net income attributable to Phoenix New Media Limited

 

31,695

 

(6,944

)

24,751

 

24,931

 

4,333

 

29,264

 

32,894

 

1,482

 

34,376

 

Net margin

 

8.8

%

 

 

6.9

%

6.3

%

 

 

7.4

%

7.7

%

 

 

8.1

%

Net income per ADS—diluted

 

0.44

 

 

 

0.34

 

0.35

 

 

 

0.41

 

0.46

 

 

 

0.48

 

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

 

72,179,058

 

 

 

72,179,058

 

72,101,949

 

 

 

72,101,949

 

72,227,027

 

 

 

72,227,027

 

 


(1) Share-based compensation

(2) Loss/(gain) from equity investments, including impairments

 

13