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6-K
PHOENIX NEW MEDIA LTD filed this Form 6-K on 03/12/2018
Entire Document
 

Exhibit 99.1

 

Phoenix New Media Reports Fourth Quarter and Fiscal Year 2017 Unaudited Financial Results

 

Live Conference Call to be Held at 9:00 PM U.S. Eastern Time on March 12, 2018

 

BEIJING, China, March 13, 2018 — 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 fourth quarter and fiscal year ended December 31, 2017.

 

“We are very pleased to deliver better-than-expected financial results, and we are especially encouraged by the strong growth in our advertising revenues,” stated Mr. Shuang Liu, CEO of Phoenix New Media, “We appreciate and embrace the new government policies implemented in 2017 against fake and vulgar media content. Such policies match our mission to provide professional journalism, high-quality news, and tasteful content to our customers. As part of our ongoing efforts to further enrich our premium content and create our own IP, we launched an innovative online video mini-series titled A Journey through Literature, which explored Chinese culture and philosophies. During its 6-week broadcast, the show attracted numerous viewers to ifeng and also received praise from the People’s Daily.

 

The unique value proposition offered by our programmatic advertising platform combined with our brand advertising solution enabled us to generate higher-than-expected revenues in the fourth quarter of 2017. While we continue to enhance our existing products, we are also actively developing new products to cultivate future growth engines. During the quarter, we launched Zhizhi, a new Paid Knowledge Sharing product that takes our news app to a more versatile level. In addition, we broadened the content categories of our digital reading business by adding two of the most popular genres with our younger target demographic: chat stories and comics. Going forward, we are confident that our brand equity, credibility, professionalism, and synergies between our business segments will enable us to garner additional market share and solidify our industry-leading position.”

 

Ms. Betty Ho, CFO of Phoenix New Media, further stated, “We are happy to report another solid quarter during which our growth momentum continued. During the fourth quarter of 2017, our total revenues increased by 12.1% year-over-year to RMB461.8 million. In particular, our net advertising revenues increased by 16.3% year-over-year to RMB410.5 million, primarily driven by a 62.6% year-over-year increase in our mobile advertising revenues. The strong growth of the mobile advertising business enabled it to contribute about 60% of our total advertising revenue in 2017. The continued optimization of our ifeng News App drove its users to grow over 30% in the fourth quarter of 2017 as compared to the same quarter of the previous year. Looking forward, we will continue to focus on our content and product improvement to maximize shareholders’ value.”

 

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Fourth Quarter 2017 Financial Results

 

REVENUES

 

Total revenues for the fourth quarter of 2017 increased by 12.1% to RMB461.8 million (US$71.0 million) from RMB411.9 million in the fourth quarter of 2016.

 

Net advertising revenues (net of advertising agency service fees) for the fourth quarter of 2017 increased by 16.3% to RMB410.5 million (US$63.1 million) from RMB353.2 million in the fourth quarter of 2016, which was primarily attributable to a 62.6% year-over-year increase in mobile advertising revenues that was partially offset by a 18.1% year-over-year decrease in PC advertising revenues.

 

Paid services revenues1 for the fourth quarter of 2017 decreased by 12.7% to RMB51.2 million (US$7.9 million) from RMB58.7 million in the fourth quarter of 2016. Revenues from digital entertainment2 for the fourth quarter of 2017 decreased by 12.9% to RMB39.5 million (US$6.1 million) from RMB45.4 million in the fourth quarter of 2016. This was due to a 27.7% decrease in the MVAS revenues mainly resulting from the decline in users’ demand for services provided through telecom operators in China and partially offset by a 19.2% increase of digital reading revenues to RMB17.0 million (US$2.6 million). Revenues from games and others3 for the fourth quarter of 2017 decreased by 12.1% to RMB11.7 million (US$1.8 million) from RMB13.4 million in the fourth 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 fourth quarter of 2017 increased by 1.7% to RMB208.7 million (US$32.1 million) from RMB205.2 million in the fourth quarter of 2016, primarily attributable to the increase in content and operational costs and sales taxes and surcharges and partially offset by the decrease in revenue sharing fees and bandwidth costs.

 

·                  Content and operational costs for the fourth quarter of 2017 increased to RMB143.6 million (US$22.1 million) from RMB138.6 million in the fourth quarter of 2016, primarily attributable to an increase in advertisement-related content production cost.

 

·                  Revenue sharing fees to telecom operators and channel partners for the fourth quarter of 2017 decreased to RMB12.4 million (US$1.9 million) from RMB17.3 million in the fourth quarter of 2016, primarily attributable to a decrease in the sales of MVAS products.

 

·                  Bandwidth costs for the fourth quarter of 2017 decreased to RMB12.8 million (US$2.0 million) from RMB15.2 million in the fourth quarter of 2016, primarily due to the decrease in bandwidth purchase costs as a result of intense competition.

 


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 four 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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·                  Sales taxes and surcharges for the fourth quarter of 2017 increased to RMB39.9 million (US$6.1 million) from RMB34.1 million in the fourth quarter of 2016.

 

·                  Share-based compensation included in cost of revenues was RMB1.2 million (US$0.2 million) in the fourth quarter of 2017 as compared to negative RMB0.9 million in the fourth quarter of 2016 resulting from the increase in estimated forfeiture rate of share-based awards based on the actual forfeiture rate in the quarter.

 

GROSS PROFIT

 

Gross profit for the fourth quarter of 2017 increased by 22.5% to RMB253.1 million (US$38.9 million) from RMB206.7 million in the fourth quarter of 2016. Gross margin for the fourth quarter of 2017 increased to 54.8% from 50.2% in the fourth quarter of 2016. The increase in gross margin was primarily attributable to the increase of revenues and decrease of certain costs 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 fourth quarter of 2017, which excluded share-based compensation, increased to 55.1% from 49.9% in the fourth quarter of 2016.

 

OPERATING EXPENSES AND INCOME/(LOSS) FROM OPERATIONS

 

Total operating expenses for the fourth quarter of 2017 increased by 39.6% to RMB258.5 million (US$39.7 million) from RMB185.2 million in the fourth quarter of 2016, which was primarily attributable to an increase in mobile traffic acquisition expenses. Share-based compensation included in operating expenses was RMB3.5 million (US$0.5 million) in the fourth quarter of 2017 as compared to RMB2.5 million in the fourth quarter of 2016.

 

Loss from operations for the fourth quarter of 2017 was RMB5.4 million (US$0.8 million) as compared to income from operations of RMB21.5 million in the fourth quarter of 2016. Operating margin for the fourth quarter of 2017 was negative 1.2% as compared to 5.2% in the fourth quarter of 2016, which was primarily attributable to the increase in mobile traffic acquisition expenses.

 

Non-GAAP loss from operations for the fourth quarter of 2017, which excluded share-based compensation, was RMB0.8 million (US$0.1 million) as compared to Non-GAAP income from operations of RMB23.0 million in the fourth quarter of 2016. Non-GAAP operating margin for the fourth quarter of 2017, which excluded share-based compensation, was negative 0.2% as compared to 5.6% in the fourth quarter of 2016.

 

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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, net4. Total other income for the fourth quarter of 2017 was RMB19.9 million (US$3.1million) as compared to RMB27.1 million in the fourth quarter of 2016.

 

 

·                  Interest income for the fourth quarter of 2017 increased to RMB13.2 million (US$2.0 million) from RMB10.8 million in the fourth quarter of 2016, which was mainly due to the increase of interest bearing investments and receivables in the fourth quarter of 2017 as compared to that of 2016.

 

·                  Interest expense for the fourth quarter of 2017 decreased slightly to RMB3.7 million (US$0.6 million) from RMB3.8 million in the fourth quarter of 2016.

 

·                  Foreign currency exchange loss for the fourth quarter of 2017 was RMB4.5 million (US$0.7 million) as compared to foreign currency exchange gain of RMB8.5 million in the fourth quarter of 2016, which was mainly caused by the appreciation of Renminbi against US dollars in the fourth quarter of 2017.

 

·                  Gain from equity investments for the fourth quarter of 2017, including impairments, was RMB4.9 million (US$0.7 million) as compared to loss from equity investments of RMB0.03 million in the fourth quarter of 2016.

 

·                  Others, net, for the fourth quarter of 2017 decreased to RMB10.0 million (US$1.5 million) from RMB11.6 million in the fourth quarter of 2016, which was primarily attributable to the decrease of the government subsidies received in the fourth quarter of 2017 as compared to that of 2016.

 

NET INCOME ATTRIBUTABLE TO PHOENIX NEW MEDIA LIMITED

 

Net income attributable to Phoenix New Media Limited for the fourth quarter of 2017 was RMB11.8 million (US$1.8 million) as compared to RMB39.8 million in the fourth quarter of 2016. Net margin for the fourth quarter of 2017 was 2.6%, as compared to 9.7% in the fourth quarter of 2016. Net income per diluted ADS5 in the fourth quarter of 2017 was RMB0.16 (US$0.02) as compared to RMB0.55 in the fourth quarter of 2016.

 

 

Non-GAAP net income attributable to Phoenix New Media Limited for the fourth quarter of 2017, which excluded share-based compensation and gain/(loss) from equity investments, including impairments, was RMB11.6 million (US$1.8 million) as compared to RMB41.4 million in the fourth quarter of 2016. Non-GAAP net margin for the fourth quarter of 2017 was 2.5% as compared to 10.0% in the fourth quarter of 2016. Non-GAAP net income per diluted ADS in the fourth quarter of 2017 was RMB0.16 (US$0.02) as compared to RMB0.57 in the fourth quarter of 2016.

 


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

 

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

 

4



 

For the fourth quarter of 2017, the Company’s weighted average number of ADSs used in the computation of diluted net income per ADS was 73,896,840. As of December 31, 2017, the Company had a total of 577,326,846 ordinary shares outstanding, or the equivalent of 72,165,856 ADSs.

 

CERTAIN BALANCE SHEET ITEMS

 

As of December 31, 2017, the Company’s cash and cash equivalents, term deposits and short term investments and restricted cash were RMB1.44 billion (US$220.9 million). Restricted cash represents deposits placed as security for banking facilities granted to the Company, which are restricted in their withdrawal or usage.

 

Fiscal Year 2017 Financial Results

 

REVENUES

 

Total revenues for fiscal year 2017 increased by 9.0% to RMB1.58 billion (US$242.1 million) from RMB1.44 billion in fiscal year 2016.

 

Net advertising revenues (net of advertising agency service fees) for fiscal year 2017 increased by 9.8% to RMB1.35 billion (US$208.0 million), primarily due to the 46.5% year-over-year growth in mobile advertising revenues, which was partially offset by the decrease in PC advertising revenues.

 

Paid service revenues for fiscal year 2017 increased by 4.2% to RMB221.6 million (US$34.1 million) from RMB212.7 million in fiscal year 2016, which was primarily due to the 51.3% year-over-year increase of digital reading revenues.

 

COST OF REVENUES AND GROSS PROFIT

 

Cost of revenues for fiscal year 2017 increased slightly to RMB727.2 million (US$111.8 million) from RMB726.8 million in fiscal year 2016, which was primarily due to the increase in sales taxes and surcharges and partially offset by the decrease in bandwidth costs. Share-based compensation included in cost of revenues was RMB5.0 million (US$0.8 million) in fiscal year 2017, as compared to negative RMB4.4 million in fiscal year 2016 resulting from the increase of estimated forfeiture rate of share-based awards based on the actual forfeiture rate in 2016.

 

Gross profit for fiscal year 2017 increased to RMB847.9 million (US$130.3 million) from RMB718.1 million in fiscal year 2016. Gross margin for fiscal year 2017 increased to 53.8% from 49.7% in fiscal year 2016, which was primarily due to the increase of revenues as explained above. Non-GAAP gross margin, which excludes share-based compensation, for fiscal year 2017 increased to 54.2% from 49.4% in fiscal year 2016.

 

OPERATING EXPENSES AND INCOME FROM OPERATIONS

 

Total operating expenses for fiscal year 2017 increased to RMB832.9 million (US$128.0 million) from RMB682.7 million in fiscal year 2016. The increase in operating expenses was primarily attributable to the increase in mobile traffic acquisition expenses. Share-based compensation included in operating expenses increased to RMB15.8 million (US$2.4 million) in fiscal year 2017 from RMB6.3 million in fiscal year 2016, which was mainly due to the share-based awards newly granted in 2017 and the Company’s option exchange program implemented in the fourth quarter of 2016 while there was an increase of estimated forfeiture rate of share-based awards based on the actual forfeiture rate in 2016.

 

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Income from operations for fiscal year 2017 was RMB15.0 million (US$2.3 million) as compared to RMB35.4 million in fiscal year 2016. Operating margin for fiscal year 2017 was 1.0%, as compared to 2.4% in fiscal year 2016, which was primarily due to the year-over-year increase in mobile traffic acquisition expenses.

 

Non-GAAP income from operations, which excluded share-based compensation, for fiscal year 2017 decreased by 3.8% to RMB35.8 million (US$5.5 million) from RMB37.3 million in fiscal year 2016. Non-GAAP operating margin for fiscal year 2017 was 2.3%, as compared to 2.6% in fiscal year 2016.

 

NET INCOME ATTRIBUTABLE TO PHOENIX NEW MEDIA LIMITED

 

Net income attributable to Phoenix New Media Limited for fiscal year 2017 was RMB37.5 million (US$5.8 million) as compared to RMB80.6 million in fiscal year 2016. Net margin for fiscal year 2017 was 2.4% as compared to 5.6% in fiscal year 2016. Net income per diluted ADS for fiscal year 2017 was RMB0.51 (US$0.08) as compared to RMB1.12 in fiscal year 2016.

 

Non-GAAP net income attributable to Phoenix New Media Limited for fiscal year 2017, which excluded share-based compensation and gain/(loss) from equity investments, including impairments, was RMB52.0 million (US$8.0 million) as compared to RMB84.3 million in fiscal year 2016. Non-GAAP net margin for fiscal year 2017 was 3.3% as compared to 5.8% in fiscal year 2016. Non-GAAP net income per diluted ADS for fiscal year 2017 was RMB0.70 (US$0.11) as compared to RMB1.17 in fiscal year 2016.

 

Business Outlook

 

Accounting Standard Update - Revenue From Contracts With Customers (Topic 606), or ASC 606, will become effective for the Company’s reporting periods starting from January 1, 2018. Based on ASC 606, for the first quarter of 2018, the Company expects its total revenues to be between RMB272.3 million and RMB287.3 million. Net advertising revenues are expected to be between RMB237.2 million and RMB247.2 million. Paid services revenues are expected to be between RMB35.1 million and RMB40.1 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 March 12, 2018 (March 13, 2018 at 9:00 a.m. Beijing/Hong Kong time) to discuss its fourth quarter and fiscal year 2017 unaudited financial results and operating performance.

 

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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:                                    7295147

 

A replay of the call will be available through March 19, 2018 by using the dial-in numbers and conference ID below:

 

International:                                       +61290034211

Mainland China:                                 4006322162

Hong Kong:                                          +85230512780

United States:                                       +16462543697

Conference ID:                                    7295147

 

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/(loss) 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/(loss) from operations is income/(loss) from operations excluding share-based compensation. Non-GAAP operating margin is non-GAAP income/(loss) 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/(loss) 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 gain/(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/(loss) from operations and net income attributable to Phoenix New Media Limited for the period. In addition, because these non-GAAP financial 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.

 

7



 

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 RMB6.5063 to US$1.00, the noon buying rate in effect on December 29, 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 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.

 

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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,

 

December 31,

 

December 31,

 

 

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

US$

 

 

 

Audited*

 

Unaudited

 

Unaudited

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

202,694

 

362,862

 

55,771

 

Term deposits and short term investments

 

781,298

 

737,657

 

113,376

 

Restricted cash

 

354,602

 

336,700

 

51,750

 

Accounts receivable, net

 

405,033

 

458,744

 

70,508

 

Amounts due from related parties

 

156,260

 

187,214

 

28,774

 

Prepayment and other current assets

 

64,069

 

57,458

 

8,831

 

Convertible debts from a related party

 

104,429

 

102,631

 

15,774

 

Total current assets

 

2,068,385

 

2,243,266

 

344,784

 

Non-current assets:

 

 

 

 

 

 

 

Property and equipment, net

 

72,087

 

64,454

 

9,906

 

Intangible assets, net

 

9,475

 

6,712

 

1,032

 

Available-for-sale investments

 

939,432

 

1,196,330

 

183,873

 

Equity investments, net

 

8,809

 

15,342

 

2,358

 

Deferred tax assets**

 

54,307

 

60,460

 

9,293

 

Other non-current assets

 

16,047

 

12,544

 

1,927

 

Total non-current assets

 

1,100,157

 

1,355,842

 

208,389

 

Total assets

 

3,168,542

 

3,599,108

 

553,173

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term loans

 

358,602

 

330,000

 

50,720

 

Accounts payable

 

260,902

 

262,657

 

40,371

 

Amounts due to related parties

 

18,720

 

14,140

 

2,173

 

Advances from customers

 

27,825

 

65,196

 

10,020

 

Taxes payable

 

75,652

 

92,214

 

14,173

 

Salary and welfare payable

 

130,329

 

134,471

 

20,668

 

Accrued expenses and other current liabilities

 

111,049

 

173,253

 

26,628

 

Total current liabilities

 

983,079

 

1,071,931

 

164,753

 

Non-current liabilities:

 

 

 

 

 

 

 

Deferred tax liabilities

 

1,312

 

1,312

 

202

 

Long-term liabilities

 

21,723

 

24,714

 

3,798

 

Total non-current liabilities

 

23,035

 

26,026

 

4,000

 

Total liabilities

 

1,006,114

 

1,097,957

 

168,753

 

Shareholders’ equity:

 

 

 

 

 

 

 

Phoenix New Media Limited shareholders’equity:

 

 

 

 

 

 

 

Class A ordinary shares

 

16,843

 

17,180

 

2,641

 

Class B ordinary shares

 

22,053

 

22,053

 

3,389

 

Additional paid-in capital

 

1,555,511

 

1,587,575

 

244,006

 

Statutory reserves

 

77,946

 

81,237

 

12,486

 

Retained earnings

 

195,069

 

229,250

 

35,235

 

Accumulated other comprehensive income

 

298,346

 

570,244

 

87,645

 

Total Phoenix New Media Limited shareholders’ equity

 

2,165,768

 

2,507,539

 

385,402

 

Noncontrolling interests

 

(3,340

)

(6,388

)

(982

)

Total shareholders’ equity

 

2,162,428

 

2,501,151

 

384,420

 

Total liabilities and shareholders’ equity

 

3,168,542

 

3,599,108

 

553,173

 

 


*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.

 

10



 

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

 

Twelve Months Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2016

 

2017

 

2017

 

2017

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Audited*

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising revenues

 

353,158

 

363,124

 

410,547

 

63,100

 

1,232,210

 

1,353,480

 

208,026

 

Paid service revenues

 

58,724

 

62,436

 

51,240

 

7,875

 

212,697

 

221,612

 

34,061

 

Total revenues

 

411,882

 

425,560

 

461,787

 

70,975

 

1,444,907

 

1,575,092

 

242,087

 

Cost of revenues

 

(205,204

)

(188,185

)

(208,679

)

(32,073

)

(726,807

)

(727,197

)

(111,768

)

Gross profit

 

206,678

 

237,375

 

253,108

 

38,902

 

718,100

 

847,895

 

130,319

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

(102,386

)

(122,843

)

(156,590

)

(24,067

)

(339,171

)

(493,664

)

(75,875

)

General and administrative expenses

 

(41,150

)

(28,650

)

(50,457

)

(7,755

)

(181,677

)

(146,923

)

(22,582

)

Technology and product development expenses

 

(41,692

)

(50,412

)

(51,494

)

(7,914

)

(161,880

)

(192,325

)

(29,560

)

Total operating expenses

 

(185,228

)

(201,905

)

(258,541

)

(39,736

)

(682,728

)

(832,912

)

(128,017

)

Income/(loss) from operations

 

21,450

 

35,470

 

(5,433

)

(834

)

35,372

 

14,983

 

2,302

 

Other income/(loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

10,785

 

14,922

 

13,213

 

2,031

 

35,113

 

54,286

 

8,344

 

Interest expenses

 

(3,778

)

(5,700

)

(3,746

)

(576

)

(7,061

)

(22,221

)

(3,415

)

Foreign currency exchange gain/(loss)

 

8,486

 

(8,878

)

(4,481

)

(689

)

9,608

 

(23,560

)

(3,621

)

(Loss)/gain from equity investments, including impairments

 

(29

)

968

 

4,865

 

748

 

(1,776

)

6,296

 

968

 

Others, net

 

11,606

 

4,893

 

10,037

 

1,543

 

21,053

 

19,423

 

2,985

 

Income before tax

 

48,520

 

41,675

 

14,455

 

2,223

 

92,309

 

49,207

 

7,563

 

Income tax expense

 

(9,253

)

(9,615

)

(3,294

)

(506

)

(14,089

)

(14,783

)

(2,272

)

Net income

 

39,267

 

32,060

 

11,161

 

1,717

 

78,220

 

34,424

 

5,291

 

Net loss attributable to noncontrolling interests

 

512

 

834

 

660

 

101

 

2,391

 

3,048

 

468

 

Net income attributable to Phoenix New Media Limited

 

39,779

 

32,894

 

11,821

 

1,818

 

80,611

 

37,472

 

5,759

 

Net income

 

39,267

 

32,060

 

11,161

 

1,717

 

78,220

 

34,424

 

5,291

 

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

 

270,303

 

33,832

 

22,227

 

3,416

 

247,336

 

321,538

 

49,419

 

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

 

15,815

 

(18,778

)

(14,609

)

(2,245

)

27,669

 

(49,640

)

(7,630

)

Comprehensive income

 

325,385

 

47,114

 

18,779

 

2,888

 

353,225

 

306,322

 

47,080

 

Comprehensive loss attributable to noncontrolling interests

 

512

 

834

 

660

 

101

 

2,391

 

3,048

 

468

 

Comprehensive income attributable to Phoenix New Media Limited

 

325,897

 

47,948

 

19,439

 

2,989

 

355,616

 

309,370

 

47,548

 

Net income attributable to Phoenix New Media Limited

 

39,779

 

32,894

 

11,821

 

1,818

 

80,611

 

37,472

 

5,759

 

Net income per Class A and Class B ordinary share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

0.07

 

0.06

 

0.02

 

0.00

 

0.14

 

0.07

 

0.01

 

Diluted

 

0.07

 

0.06

 

0.02

 

0.00

 

0.14

 

0.06

 

0.01

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

0.55

 

0.46

 

0.16

 

0.03

 

1.12

 

0.52

 

0.08

 

Diluted

 

0.55

 

0.46

 

0.16

 

0.02

 

1.12

 

0.51

 

0.08

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

574,115,251

 

574,372,716

 

576,851,243

 

576,851,243

 

573,521,536

 

574,786,887

 

574,786,887

 

Diluted

 

577,290,719

 

577,816,213

 

591,174,724

 

591,174,724

 

577,037,906

 

590,433,907

 

590,433,907

 

 


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

 

11



 

Phoenix New Media Limited

Condensed Segments Information

(Amounts in thousands)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2016

 

2017

 

2017

 

2017

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Audited*

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising service

 

353,158

 

363,124

 

410,547

 

63,100

 

1,232,210

 

1,353,480

 

208,026

 

Paid service

 

58,724

 

62,436

 

51,240

 

7,875

 

212,697

 

221,612

 

34,061

 

Total revenues

 

411,882

 

425,560

 

461,787

 

70,975

 

1,444,907

 

1,575,092

 

242,087

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising service

 

174,005

 

149,000

 

181,361

 

27,874

 

598,040

 

602,945

 

92,671

 

Paid service

 

31,199

 

39,185

 

27,318

 

4,199

 

128,767

 

124,252

 

19,097

 

Total cost of revenues

 

205,204

 

188,185

 

208,679

 

32,073

 

726,807

 

727,197

 

111,768

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net advertising service

 

179,153

 

214,124

 

229,186

 

35,226

 

634,170

 

750,535

 

115,355

 

Paid service

 

27,525

 

23,251

 

23,922

 

3,676

 

83,930

 

97,360

 

14,964

 

Total gross profit

 

206,678

 

237,375

 

253,108

 

38,902

 

718,100

 

847,895

 

130,319

 

 


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

 

12



 

Phoenix New Media Limited

Condensed Information of Cost of Revenues

(Amounts in thousands)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2016

 

2017

 

2017

 

2017

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Audited*

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue sharing fees

 

17,340

 

27,891

 

12,350

 

1,898

 

72,027

 

72,613

 

11,160

 

Content and operational costs

 

138,635

 

110,491

 

143,588

 

22,069

 

470,813

 

466,379

 

71,681

 

Bandwidth costs

 

15,160

 

14,085

 

12,830

 

1,972

 

64,200

 

55,050

 

8,461

 

Sales taxes and surcharges

 

34,069

 

35,718

 

39,911

 

6,134

 

119,767

 

133,155

 

20,466

 

Total cost of revenues

 

205,204

 

188,185

 

208,679

 

32,073

 

726,807

 

727,197

 

111,768

 

 


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

 

13



 

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 December 31, 2016

 

Three Months Ended September 30, 2017

 

Three Months Ended December 31, 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

 

206,678

 

(949

)(1)

205,729

 

237,375

 

949

(1)

238,324

 

253,108

 

1,221

(1)

254,329

 

Gross margin

 

50.2

%

 

 

49.9

%

55.8

%

 

 

56.0

%

54.8

%

 

 

55.1

%

Income/(loss) from operations

 

21,450

 

1,542

(1)

22,992

 

35,470

 

2,450

(1)

37,920

 

(5,433

)

4,677

(1)

(756

)

Operating margin

 

5.2

%

 

 

5.6

%

8.3

%

 

 

8.9

%

(1.2

)%

 

 

(0.2

)%

 

 

 

 

1,542

(1)

 

 

 

 

2,450

(1)

 

 

 

 

4,677

(1)

 

 

 

 

 

 

29

(2)

 

 

 

 

(968

)(2)

 

 

 

 

(4,865

)(2)

 

 

Net income attributable to Phoenix New Media Limited

 

39,779

 

1,571

 

41,350

 

32,894

 

1,482

 

34,376

 

11,821

 

(188

)

11,633

 

Net margin

 

9.7

%

 

 

10.0

%

7.7

%

 

 

8.1

%

2.6

%

 

 

2.5

%

Net income per ADS—diluted

 

0.55

 

 

 

0.57

 

0.46

 

 

 

0.48

 

0.16

 

 

 

0.16

 

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

 

72,161,340

 

 

 

72,161,340

 

72,227,027

 

 

 

72,227,027

 

73,896,840

 

 

 

73,896,840

 

 


(1) Share-based compensation

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

 

Non-GAAP to GAAP reconciling items have no income tax effect.

 

14



 

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)

 

 

 

Twelve Months Ended December 31, 2016

 

Twelve Months Ended December 31, 2017

 

 

 

Non-GAAP

 

Non-GAAP

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Gross profit

 

718,100

 

(4,367

)(1)

713,733

 

847,895

 

5,017

(1)

852,912

 

Gross margin

 

49.7

%

 

 

49.4

%

53.8

%

 

 

54.2

%

Income from operations

 

35,372

 

1,890

(1)

37,262

 

14,983

 

20,852

(1)

35,835

 

Operating margin

 

2.4

%

 

 

2.6

%

1.0

%

 

 

2.3

%

 

 

 

 

1,890

(1)

 

 

 

 

20,852

(1)

 

 

 

 

 

 

1,776

(2)

 

 

 

 

(6,296

)(2)

 

 

Net income attributable to Phoenix New Media Limited

 

80,611

 

3,666

 

84,277

 

37,472

 

14,556

 

52,028

 

Net margin

 

5.6

%

 

 

5.8

%

2.4

%

 

 

3.3

%

Net income per ADS—diluted

 

1.12

 

 

 

1.17

 

0.51

 

 

 

0.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

72,129,738

 

 

 

72,129,738

 

73,804,238

 

 

 

73,804,238

 

 


(1) Share-based compensation

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

 

Non-GAAP to GAAP reconciling items have no income tax effect

 

15