Phoenix New Media Limited — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the provided filing text does not give a clear standalone Q4 financial summary. Financial statements are prepared under U.S. GAAP. Amounts below are RMB unless otherwise stated.
Business context
Phoenix New Media operates a Chinese-language digital media platform across PC, mobile and third-party channels, earning revenue primarily from advertising and, to a lesser extent, paid services. The Cayman Islands parent conducts operations through PRC subsidiaries and contractual arrangements with variable interest entities (VIEs); it does not own the VIEs’ equity. VIEs and their subsidiaries contributed 44.5% of FY2022 revenue.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | RMB785.7 million (US$113.9 million) | RMB1,030.3 million |
| Net advertising revenue | RMB696.7 million | RMB930.0 million |
| Paid services revenue | RMB89.0 million | RMB100.3 million |
| Gross profit / margin | RMB237.2 million / 30.2% | RMB432.9 million / 42.0% |
| Operating loss | RMB191.4 million | RMB336.1 million |
| Net loss attributable to Phoenix New Media Limited | RMB109.7 million | RMB205.7 million |
| Net cash used in operating activities | RMB312.4 million | RMB142.8 million |
- Advertising supplied 88.7% of revenue; paid services supplied 11.3%. Mobile generated 73.3% of net advertising revenue.
- Operating expenses fell 44.3% to RMB428.6 million, including general and administrative expense declining to RMB91.8 million from RMB334.2 million. Management cited lower credit-loss expense, a reversal of allowance and cost controls.
- At year-end, cash, cash equivalents and restricted cash totaled RMB105.0 million; term deposits and short-term investments totaled RMB1,049.6 million. Current assets were RMB1,661.7 million and current liabilities RMB664.3 million. Total liabilities were RMB765.6 million; shareholders’ equity was RMB1,265.2 million. The filing reports no material capital or other commitments beyond those disclosed, but does not provide a clear separate total for conventional borrowings.
- Investing activities provided RMB228.7 million, mainly reflecting net maturities of term deposits and short-term investments. Financing cash flow was nil. Cash, cash equivalents and restricted cash decreased RMB99.6 million, including the effect of exchange rates.
- Management said operating cash flows, cash balances and term deposits/short-term investments should meet anticipated cash needs for at least 12 months from the filing date. Planned 2023 capital expenditures were approximately RMB19.7 million.
Changes versus comparable periods and unusual items
- Revenue fell 23.7% year over year. Advertising revenue declined 25.1%, which management attributed to reduced advertiser spending in certain industries, industry competition and COVID-19 outbreaks in China. Paid services revenue decreased 11.3%, mainly due to lower paid-content spending by certain customers.
- Cost of revenue declined 8.2%, but more slowly than revenue; gross margin consequently fell 11.8 percentage points. Operating losses narrowed, while operating cash use more than doubled.
- Other income shifted from RMB83.6 million of income in 2021 to a RMB4.7 million loss in 2022, reflecting foreign-exchange losses, lower interest income and losses from equity-method investments. RMB depreciated against the U.S. dollar during 2022.
- The FY2022 income tax benefit was RMB70.4 million, including a RMB64.4 million benefit from the difference between withholding tax paid on the prior Particle investment disposal and the amount previously accrued. The annual filing reports no 2022 disposal gain; it revises a RMB64.4 million gain reported in the March 2023 results release to nil and presents the amount as a tax benefit.
- The company restated FY2020 presentation of its Particle disposal gain and related withholding tax: the gain was presented gross and the tax as income tax expense. The restatement did not change FY2020 net income.
- Headcount declined to 893 from 1,245, which the company attributed to cost controls and workforce optimization. The CEO changed in March 2023.
Outlook, risks and contingencies
- No specific revenue, profit or margin guidance is provided. Management identifies advertising dependence, mobile monetization, user traffic, competition and China’s economic and regulatory environment as important business factors.
- The company has not obtained an Internet news license or an Internet audio-visual program transmission license for relevant operations; its Network Publication Service License for digital reading had expired and renewal was being sought. Management warns that restrictions or suspension of affected services could materially harm operations. It says approximately 87.1% of FY2022 revenue came from Internet information services and services relying on third-party Internet access.
- The VIE structure creates risks around enforceability of contractual control, PRC regulatory interpretation and access to VIE assets and cash. PRC dividend, reserve and foreign-exchange restrictions may limit transfers to the offshore parent. No subsidiary dividends or distributions to the parent were made in 2020–2022; the company has no present plan to pay cash dividends in the foreseeable future.
- Phoenix TV controls the company through Class B shares with 1.3 votes per share and licenses important content and trademarks. A three-year content agreement signed in 2021 requires annual fees of RMB45 million; the company also relies on Phoenix TV brand and content rights.
- Accounts receivable gross balance was RMB740.6 million and the allowance for credit losses RMB312.2 million at year-end. Evergrande Group represented 21.8% of gross receivables. Management reversed RMB23.8 million of credit-loss allowance in 2022, mainly following collection of some aged receivables. The auditor identified the allowance estimate as a critical audit matter.
- From January 2022 through March 2023, the company was party to 271 PRC cases, 146 concluded; damages and settlements paid totaled RMB3.5 million. A previously adjudicated copyright case with approximately RMB1.0 million paid remained subject to a possible retrial. Management says provisions were recorded for probable, reasonably estimable losses.
- The auditor issued an unqualified opinion on the financial statements but concluded internal control over financial reporting was ineffective due to a material weakness involving accounting for unusual or infrequent transactions. The weakness led to a FY2022 audit adjustment and FY2020 financial-statement errors. Management plans to enhance review controls and use internal or external expertise.
- The PCAOB vacated its prior determination restricting inspection of the company’s auditor in December 2022; the company said it did not expect to be identified again under the HFCA Act after filing. Future inspection access and U.S. listing risk remain subject to change.
Important facts for investors to verify
- Whether revenue declines and weaker gross margins continued after FY2022, particularly in advertising and mobile monetization.
- Collections, aging and recoverability of receivables, especially Evergrande exposure, and the basis for the 2022 allowance reversal.
- Cash burn, availability and maturity profile of deposits and short-term investments, and whether operating liquidity supports management’s 12-month assessment.
- Status and renewal of material PRC operating licenses, and any regulatory action affecting news, video or digital-reading services.
- Remediation and auditor assessment of the material weakness, along with the accounting and tax treatment of unusual transactions and the FY2020 restatement.
- Terms and continued availability of Phoenix TV content and trademark licenses, VIE contractual enforceability, and actual ability to move cash from China to the parent.