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Phoenix New Media Reports Third Quarter 2011 Results
Nov 21, 2011 (03:11 PM EST)


3Q11 Total Revenues Up 81.3% YOY

3Q11 Net Advertising Revenues Up 155.8% YOY

3Q11 Net Income Attributable to PNM Up 131.3% YOY

Live Conference Call to be Held at 8:00 PM U.S. Eastern Time, November 21

BEIJING, Nov. 21, 2011 /PRNewswire-Asia/ -- Phoenix New Media Limited (NYSE: FENG), a leading new media company in China ("Phoenix New Media", "PNM" or the "Company"), today announced its unaudited financial results for the third quarter ended September 30, 2011.

Third Quarter 2011 Highlights

  • Total revenues increased by 81.3% year-over-year to RMB270.8 million (US$42.5 million), driven by a 155.8% increase in net advertising revenues and a 44.6% increase in paid service revenues.
  • Net income attributable to Phoenix New Media increased by 131.3% year-over-year to RMB56.8 million (US$8.9 million).
  • Adjusted net income attributable to Phoenix New Media(1) increased by 109.7% year-over-year to RMB61.5 million (US$9.6 million).
  • Net income per diluted ADS(2) was RMB0.70 (US$0.11).
  • Adjusted net income attributable to Phoenix New Media per diluted ADS was RMB0.76 (US$0.12).

Mr. Shuang Liu, CEO of Phoenix New Media, stated that, "We are very excited to achieve another strong quarter of growth in our financial and operational metrics. As the media gateway of choice for Chinese Internet users, we continue to experience significant user growth across each of our platforms.  According to the Company's data, the number of daily unique visitors to our website increased by 71% year-over-year to 18.7 million in September 2011. This growth continues to demonstrate the robust demand for our content. In addition, the number of daily page views to our mobile platform expanded to over 160 million in September 2011. Our continuing rapid growth in both traffic and profit again demonstrates the advantages of our convergence model from both cost and revenue synergies across our organization and business lines. We believe that our user base and advertising revenue will continue to rapidly increase because of our strong capabilities of attracting China's increasingly sophisticated Internet users searching for differentiated and premium content."

Third Quarter 2011 Financial Results

REVENUES

Total revenues for the third quarter of 2011 increased by 81.3% to RMB270.8 million (US$42.5 million) from RMB149.4 million in the third quarter of 2010. Total revenues exceeded the top end of management's earlier guidance range of RMB236 million to RMB245 million.

Net advertising revenues, calculated net of advertising agency service fees, for the third quarter of 2011 increased by 155.8% to RMB126.2 million (US$19.8 million) from RMB49.3 million in the third quarter of 2010.  Net advertising revenues exceeded the top end of management's guidance range of RMB121 million to RMB 125 million.  This increase was still driven by two key drivers: number of advertisers, which grew by 23.7% to 292 in the third quarter of 2011 from 236 in the third quarter of 2010, and average revenue per advertiser ("ARPA"), which increased by 106.7% to RMB432,000 (US$67,700) in the third quarter of 2011 from RMB209,000 in the third quarter of 2010.  This significant increase was primarily due to the increased spending by the Company's advertising clients on the Company's website and mobile portal.

Paid service revenues for the third quarter of 2011 increased by 44.6% to RMB144.6 million (US$22.7 million) from RMB100.0 million in the third quarter of 2010.  Paid service revenues also exceeded the top end of management's guidance range of RMB115 million to RMB120 million.  Paid service revenues consist of revenues from two major business sub-segments: mobile Internet and value-added services ("MIVAS")(3), and video value-added services ("video VAS").  The significant growth in paid service revenues was primarily due to greater than expected revenue growth in wireless value-added services ("WVAS") which are included in MIVAS.  MIVAS increased by 44.6% to RMB134.9 million (US$21.1 million) in the third quarter of 2011 from RMB93.3 million in the third quarter of 2010.  Video VAS increased by 43.8% to RMB9.7 million (US$1.5 million) in the third quarter of 2011 from RMB6.7 million in the third quarter of 2010.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues for the third quarter of 2011 increased to RMB151.9 million (US$23.8 million) from RMB83.9 million in the third quarter of 2010, in line with revenue growth. Revenue sharing fees paid to telecom operators and channel partners increased to RMB89.1 million (US$14.0 million) in the third quarter of 2011 from RMB48.7 million in the third quarter of 2010 primarily due to MIVAS revenue growth. Content and operational costs in the third quarter of 2011 grew to RMB37.9 million (US$5.9 million) from RMB22.8 million in the third quarter of 2010.  This growth was primarily due to an increase in headcount for content production and advertising sales support.  Bandwidth costs increased to RMB9.5 million (US$1.5 million) in the third quarter of 2011 from RMB4.9 million in the third quarter of 2010 primarily due to the Company's user traffic growth.  Share-based compensation expense included in cost of revenues was RMB1.2 million (US$0.2 million) in the third quarter of 2011.

Gross profit for the third quarter of 2011 increased by 81.6% to RMB118.9 million (US$18.6 million) from RMB65.4 million in the third quarter of 2010. Gross margin remained stable at 43.9% in the third quarter of 2011, compared with 43.8% in the third quarter of 2010. Adjusted gross margin, which excludes the impact of share-based compensation expense, also remained stable at 44.3% in the third quarter of 2011, as compared with 44.1% in the third quarter of 2010.

OPERATING EXPENSES AND INCOME FROM OPERATIONS

Total operating expenses for the third quarter of 2011 increased to RMB74.3 million (US$11.7 million) from RMB38.5 million in the third quarter of 2010. This increase was attributable to the general growth in the Company's overall business, as well as investment in the Company's continued platform expansion efforts such as Kuaibo, WeiShiTong and mobile advertising solutions. Share-based compensation expense included in operating expenses were RMB3.5 million (US$0.5 million) in the third quarter of 2011.

Income from operations for the third quarter of 2011 increased by 65.1% to RMB44.5 million (US$7.0 million) from RMB27.0 million in the third quarter of 2010. Operating income margin was 16.4% for the third quarter of 2011, as compared with 18.1% in the third quarter of 2010.  This decrease in operating margin was mainly due to the abovementioned increase in platform expansion investments.

Adjusted income from operations, which excludes the impact of share-based compensation expense, for the third quarter of 2011 increased by 55.1% to RMB49.2 million (US$7.7 million) from RMB31.7 million in the third quarter of 2010.  Adjusted operating income margin was 18.2% for the third quarter of 2011, as compared with 21.2% in the third quarter of 2010.

FOREIGN CURRENCY EXCHANGE GAIN AND INTEREST INCOME

Foreign currency exchange gain for the third quarter of 2011 increased to RMB13.8 million (US$2.2 million) from RMB0.2 million in the third quarter of 2010. The foreign currency exchange gain for the third quarter of 2011 was mainly attributable to RMB appreciation during the period. The majority of the proceeds from our IPO has been converted into RMB and is being held by Cayman parent company whose functional currency is U.S. dollar. Interest income for the third quarter of 2011 was RMB3.8 million (US$0.6 million) in the third quarter of 2011, compared with RMB0.2 million in the third quarter of 2010. The significant year-over-year increase was also primarily due to the higher deposit levels resulting from our IPO proceeds.

NET INCOME

Net income attributable to Phoenix New Media for the third quarter of 2011 increased by 131.3% to RMB56.8 million (US$8.9 million) from RMB24.6 million in the third quarter of 2010. Net income increased, as a result of the increase in income from operations, as well as a currency gain mentioned above.

Net income attributable to ordinary shareholders for the third quarter of 2011 was RMB56.8 million (US$8.9 million), compared to a net loss attributable to ordinary shareholders of RMB62.7 million in the third quarter of 2010. Net income per diluted ADS in the third quarter of 2011 was RMB0.70 (US$0.11) as compared with a net loss per diluted ADS of RMB1.54 in the third quarter of 2010.

Adjusted net income attributable to Phoenix New Media for the third quarter of 2011, which excludes share-based compensation expenses, increased by 109.7% to RMB61.5 million (US$9.6 million) from RMB29.3 million in the third quarter of 2010. Adjusted net margin for the third quarter of 2011 increased to 22.7% from 19.6% in the third quarter of 2010.  Adjusted net income attributable to Phoenix New Media per diluted ADS was RMB0.76 (US$0.12) in the third quarter of 2011, which increased by 67.0% as compared to RMB0.45 in the third quarter of 2010.

In the third quarter of 2011, the Company's weighted average number of ADS used in computing diluted income per ADS was 81,047,510.

(1) An explanation of the Company’s non-GAAP financial measures is included in the section entitled “Use of Non-GAAP Financial Measures” below, and the related reconciliations to GAAP financial measures are presented in the accompanying financial statements.

(2) “ADS” is American Depositary Share. Each ADS represents eight ordinary shares.

(3) MIVAS includes Internet VAS, which was previously a separate component of MIVAS.



Business Outlook

For the fourth quarter of 2011, the Company expects its total revenues to be between RMB247 million and RMB264 million, representing a year-over-year growth of approximately 56% to 67%.  Net advertising revenues are expected to continue growing year-over-year by approximately 80% to 93%, or between RMB135 million and RMB145 million.  Paid service revenues are expected to be between RMB112 million and RMB119 million, which represents a year-over-year growth of approximately 35% to 43%.  As a result, for the full year 2011, the Company expects its total revenues to grow 73% to 77%, or between RMB917 million and RMB934 million as compared to year 2010. 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. Eastern Time on November 21, 2011 (November 22, 2011 at 9:00 a.m. Beijing / Hong Kong time) to discuss its third quarter 2011 financial results and operating performance.

To participate in the call, please dial the following numbers:

International:

+6567239385

China:

4001200654

Hong Kong:

+85230512745

United States:

+16462543515

United States Toll Free:

+18555008701

Conference ID:

26227986



A replay of the call will be available through November 28, 2011 by dialing the following numbers:

International:

+61282355000         

China:

4006920026            

United States:

+17183541232          

United States Toll Free:

+18662145335          

Conference ID:

26227986



A live and archived webcast of the conference call will also be available at the Company's IR website at http://ir.ifeng.com or http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=242799&eventID=4241008.

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 uses adjusted net income attributable to Phoenix New Media, adjusted net income attributable to Phoenix New Media per diluted ADS, adjusted gross margin, adjusted income from operations, adjusted operating income margin and adjusted net margin, each of which is a non-GAAP financial measure. Adjusted net income attributable to Phoenix New Media is net income/(loss) attributable to Phoenix New Media excluding share-based compensation expenses. Adjusted gross margin is gross profit with share-based compensation expenses added back, divided by total revenues. Adjusted income from operations is income from operations excluding share-based compensation expenses.  Adjusted operating income margin is adjusted income from operations divided by total revenues; and adjusted net margin is adjusted net income attributable to Phoenix New Media divided by total revenues. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation adds clarity to the constituent parts of its performance. The Company reviews adjusted net income together with net income/(loss) to obtain a better understanding of its operating performance. It uses this non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that using multiple measures to evaluate its business allows both management and investors to assess the company's performance against its competitors and ultimately monitor its capacity to generate returns for its investors. The Company also believes that non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation expenses, which have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures have material limitations as an analytical tools. 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/(loss) for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

Exchange Rate

The reporting currency of the Company is Renminbi ("RMB") but, for the convenience of the reader, the amounts for the three months ended September 30, 2011 are presented in U.S. dollars ("USD"). Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB6.3780 to US$1.00, the noon buying rate in effect on September 30, 2011 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

About Phoenix New Media Limited

Phoenix New Media Limited (NYSE: FENG) is the leading new media company providing premium content on an integrated platform across Internet, mobile and TV channels in China.  Having originated from a leading global Chinese language TV network based in Hong Kong, Phoenix TV, PNM enables consumers to access professional news and other quality information and share user-generated content on the Internet and through their mobile devices. PNM's platform includes its ifeng.com channel, consisting of its ifeng.com website, its video channel, comprised of its dedicated video vertical and video services and applications, and its mobile channel, including its mobile Internet website and mobile Internet and value-added services ("MIVAS").

Safe Harbor Statement

This announcement contains forward−looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward−looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Phoenix New Media's strategic and operational plans, contain forward−looking statements. Phoenix New Media may also make written or oral forward−looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC") on Forms 20−F and 6−K in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Phoenix New Media's beliefs and expectations, are forward−looking statements. Forward−looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward−looking statement, including but not limited to the following: the Company's goals and strategies; the Company's future business development, financial condition and results of operations; the expected growth of the online and mobile advertising, online video and mobile paid service markets in China; the Company's reliance on online advertising and MIVAS for the majority of its total revenues; the Company's expectations regarding demand for and market acceptance of its services; the Company's expectations regarding the retention and strengthening of its relationships with advertisers, partners and customers; fluctuations in the Company's quarterly operating results; the Company's plans to enhance its user experience, infrastructure and service offerings; the Company's reliance on mobile operators in China to provide most of its MIVAS; changes by mobile operators in China to the their policies for MIVAS; 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 its registration statement on Form F−1, as amended, filed with the SEC. 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
Tel: +86(10)8445-8883
Email: ir@ifeng.com

ICR, Inc.
Jeremy Peruski
Tel: +1 (646) 405-4883
Email: Jeremy.peruski@icrinc.com

Phoenix New Media Limited

Unaudited Condensed Consolidated Balance Sheets

(Amounts in thousands)




December 31,


September 30,


September 30,


2010

2011


2011



RMB


RMB


US$









ASSETS










Current assets:










Cash and cash equivalents



287,173



412,683



64,704

Term deposit



-



775,980



121,665

Accounts receivable, net



77,043



172,191



26,998

Amounts due from related parties



16,487



58,293



9,140

Prepayment and other current assets



19,389



32,607



5,112

Deferred tax assets



613



10,727



1,682

Total current assets



400,705



1,462,481



229,301

Non current assets:










Property and equipment, net



24,111



36,034



5,650

Intangible assets, net



2,363



4,516



708

Note receivable



17,600



2,470



387

Other non-current assets



2,483



2,990



469

Total non-current assets



46,557



46,010



7,214

Total assets



447,262



1,508,491



236,515











LIABILITIES AND SHAREHOLDERS’ EQUITY










Current liabilities:










Accounts payable



54,115



103,895



16,290

Amounts due to related parties



43,477



26,960



4,227

Advances from customers



7,781



10,427



1,635

Taxes payable



9,970



23,311



3,655

Salary and welfare payable



26,064



48,925



7,671

Accrued expenses and other current liabilities



7,147



32,276



5,061

Total current liabilities



148,554



245,794



38,539

Long-term liabilities



3,483



5,391



845

Total liabilities



152,037



251,185



39,384











Mezzanine equity




















Series A convertible redeemable preferred shares



390,183



-



-











Shareholders’ equity/(deficit):










Ordinary shares



25,140



41,826



6,558

Additional paid-in capital



-



1,802,359



282,590

Statutory reserves



10,314



10,314



1,617

Accumulated deficit



(129,411)



(577,137)



(90,489)

Accumulated other comprehensive loss



(1,001)



(20,056)



(3,145)

Total shareholders’ equity/(deficit)



(94,958)



1,257,306



197,131

Total liabilities, mezzanine equity and shareholders’ equity


447,262



1,508,491



236,515



Phoenix New Media Limited

Unaudited Condensed Consolidated Statements of Operations

(Amounts in thousands, except for number of shares and ADS and per share and per ADS data)



For the three months ended


For the nine months ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2010


2011


2011


2011


2010


2011


2011



RMB


RMB


RMB


US$ 


RMB


RMB


US$ 
















Revenues:






















  Net advertising revenues



49,326



113,985



126,172



19,782



129,335



315,387



49,449

  Paid service revenues



100,028



113,646



144,599



22,672



241,089



354,753



55,621

Total revenues



149,354



227,631



270,771



42,454



370,424



670,140



105,070

Cost of revenues



(83,920)



(123,653)



(151,912)



(23,818)



(204,227)



(390,440)



(61,217)

Gross profit



65,434



103,978



118,859



18,636



166,197



279,700



43,853

Operating expenses:






















  Sales and marketing expenses



(21,717)



(34,285)



(36,890)



(5,784)



(50,770)



(113,166)



(17,743)

  General and administrative expenses



(8,237)



(16,640)



(19,716)



(3,091)



(24,792)



(55,679)



(8,730)

  Technology and product development expenses



(8,519)



(13,590)



(17,732)



(2,780)



(21,457)



(51,114)



(8,014)

Total operating expenses



(38,473)



(64,515)



(74,338)



(11,655)



(97,019)



(219,959)



(34,487)

Income from operations



26,961



39,463



44,521



6,981



69,178



59,741



9,366

Other income/(expenses):






















  Interest income



207



712



3,766



590



416



4,699



737

  Foreign currency exchange gain/(loss)



185



(223)



13,812



2,166



177



13,418



2,104

  Others, net



497



314



1,010



158



706



1,967



308

Net income before tax



27,850



40,266



63,109



9,895



70,477



79,825



12,515

  Income taxes expenses



(3,278)



(4,033)



(6,271)



(983)



(7,875)



(12,989)



(2,037)

Net income attributable to 
  Phoenix New Media



24,572



36,233



56,838



8,912



62,602



66,836



10,478

  Accretion to convertible redeemable preferred 
     share redemption value



(76,557)



(380,665)



-



-



(185,328)



(943,268)



(147,894)

  Income allocation to participating  preferred shares



(10,764)



(6,172)



-



-



(28,519)



(6,172)



(968)

Net income/(loss) attributable to 
  ordinary shareholders



(62,749)



(350,604)



56,838



8,912



(151,245)



(882,604)



(138,384)

Net income/(loss) per ordinary share—basic



(0.19)



(0.73)



0.09



0.01



(0.46)



(1.81)



(0.28)

Net income/(loss) per ordinary share—diluted



(0.19)



(0.73)



0.09



0.01



(0.46)



(1.81)



(0.28)

Weighted average number of ordinary shares used 
   in computing basic income/(loss) per share



325,351,289



483,260,125



610,872,332



610,872,332



325,318,258



487,159,760



487,159,760

Weighted average number of ordinary shares used 
   in computing diluted income/(loss) per share



325,351,289



483,260,125



648,380,080



648,380,080



325,318,258



487,159,760



487,159,760

Net income/(loss) per ADS—basic



(1.54)



(5.80)



0.74



0.12



(3.72)



(14.49)



(2.27)

Net income/(loss) per ADS—diluted



(1.54)



(5.80)



0.70



0.11



(3.72)



(14.49)



(2.27)

Weighted average number of ADS used in
    computing basic income/(loss) per ADS



40,668,911



60,407,516



76,359,042



76,359,042



40,664,782



60,894,970



60,894,970

Weighted average number of ADS used in 
   computing diluted income/(loss) per ADS



40,668,911



60,407,516



81,047,510



81,047,510



40,664,782



60,894,970



60,894,970



Reconciliations from net income/(loss) attributable to PNM to adjusted net income attributable to PNM (non-GAAP), adjusted net margin (non-GAAP) and adjusted net income attributable
to PNM per diluted ADS (non-GAAP)



For the three months ended  


For the nine months ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2010


2011


2011


2011


2010


2011


2011



RMB


RMB


RMB


US$


RMB


RMB


US$

(Amounts in thousands)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Net income attributable to PNM 



24,572



36,233



56,838



8,912



62,602



66,836



10,478

Add back: Share-based compensation expenses



4,749



8,604



4,651



729



9,644



61,289



9,609

Adjusted net income attributable to PNM (non-GAAP)



29,321



44,837



61,489



9,641



72,246



128,125



20,087

Adjusted net margin (non-GAAP)



19.6%



19.7%



22.7%



22.7%



19.5%



19.1%



19.1%

Adjusted net income attributable to PNM per ADS
   (non-GAAP)—diluted



0.45



0.61



0.76



0.12



1.12



1.74



0.27

Weighted average number of ADS used in 
   computing diluted income per ADS (non-GAAP)



64,526,135



73,676,015



81,047,510



81,047,510



64,785,561



73,834,490



73,834,490























Share-based compensation expenses included in:



For the three months ended  


For the nine months ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2010


2011


2011


2011


2010


2011


2011



RMB


RMB


RMB


US$


RMB


RMB


US$

(Amounts in thousands)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Cost of revenues



366



1,679



1,188



186



694



18,503



2,900

Sales and marketing expenses



2,667



1,417



1,156



181



3,747



16,996



2,665

General and administrative expenses



1,507



4,814



1,678



263



4,684



15,540



2,437

Technology and product development expenses



209



694



629



99



519



10,250



1,607

Total share-based compensation expenses



4,749



8,604



4,651



729



9,644



61,289



9,609























Details of cost of revenue is as follows:



For the three months ended  


For the nine months ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2010


2011


2011


2011


2010


2011


2011



RMB


RMB


RMB


US$


RMB


RMB


US$

(Amounts in thousands)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Revenue sharing fees



48,657



65,462



89,100



13,970



109,228



207,414



32,520

Content and operational costs



22,751



35,731



37,920



5,945



62,682



118,322



18,552

Bandwidth costs



4,929



7,879



9,489



1,488



13,282



25,118



3,938

Business tax and surcharages



7,583



14,581



15,403



2,415



19,035



39,586



6,207

Total cost of revenue



83,920



123,653



151,912



23,818



204,227



390,440



61,217



SOURCE Phoenix New Media Limited