Ladies and gentlemen, thank you for standing by, and welcome to the Phoenix New Media Third Quarter 2021 Earnings Call. . I must advise you that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Muzi Quo from Investor Relations. Thank you. Please go ahead.

All right. Thank you, operator. Welcome to Phoenix New Media's Third Quarter 2021 Earnings Conference Call. I'm joined here today by our Chief Executive Officer, Mr. Shuang Liu; and our Chief Financial Officer, Mr. Edward Lu. On today's call, management will first provide a review of the quarterly results and then conduct a Q&A session. The third quarter 2021 financial results and webcast of this conference call are available on our website at ir.ifeng.com. A replay of the call will be available on the website in a few hours. Before we continue, I'd like to refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Finally, please note that unless otherwise stated, all figures mentioned during the conference call are in RMB. With that, I would like to turn the call over to Mr. Shuang Liu, our CEO.

Thank you, Muzi Quo. Hello, everyone. Thank you for joining us on our call today. In the third quarter of 2021, we continue to navigate an uncertain macro environment while remaining committed to content leadership and building our core competitive differentiation in original content production capabilities. We have collaborated more closely with our parent company, Phoenix TV, following its equity restructuring earlier this year. This collaboration strengthens our continued focus on enhancing our content offerings, marketing solutions and industry resources to create a cohesive and innovative media company. We have substantially increased the depth, breadth, inclusivity and credibility of our news coverage by integrating Phoenix TV global network reporters with both our massive online user base and our ubiquitous presence on social media platforms. This deeper collaboration with Phoenix TV also allow us to synergize our resources on client base, creating a richer and more comprehensive suite of marketing solutions for a broader advertiser base. Additionally, increased exposure of our new media elements embedded in Phoenix TV's programming content will help raise our brand awareness with high-end TV audiences. During 2021, in conjunction with Phoenix TV, we reported our various major world news events, receiving widespread acclaim for our coverage both in China and abroad. These reports included coverage during this quarter of 2 major events: The withdrawal of U.S. troops from Afghanistan and in the 20-year long war; and the 24-hour rolling commemoration of the September 11 anniversary. Utilizing Phoenix TV's expertise in live reporting and our highly effective planning and coordination with our frontline reporters, we've demonstrated our unparalleled credibility in live reporting. These coverages involve interviews, dialogues, retrospective clips, a live interaction with our users and were forecasted through a number of media distribution channels, including our iFeng APP, cable and satellite TV. As a result, the…

Thank you, Shuang, and thank you all for joining our conference call today. Our total revenues in the third quarter of 2021 were RMB244.6 million, representing a decrease of 19.3% from RMB303 million in the same period of last year. I will now provide some additional color on revenues during the third quarter of 2021. Net advertising revenues in the third quarter of 2021 were RMB216.6 million, representing a decrease of 23% from RMB281.3 million in the same period of last year, mainly due to the reductions in the advertising spending of advertisers from certain industries in the period. Paid services revenues in the third quarter of 2021 increased by 29% to RMB28 million from RMB21.7 million in the same period of last year. Revenues from paid content in the third quarter of 2021 increased by 69.7% to RMB15.1 million from RMB8.9 million in the same period of last year, mainly due to the increase in revenues from licensing fees related to audio books. Revenues from e-commerce and other in the third quarter of 2021 increased by 0.8% to RMB12.9 million from RMB12.8 million in the same period of 2020. Loss from operations in the third quarter of 2021 was RMB206.3 million compared to loss from operations of RMB28.4 million in the same period of last year. Operating margin in the third quarter of 2021 was negative 84.3% compared to negative 9.4% in the same period of last year. As mentioned earlier, we continue to face increasing challenges from challenging industry landscape as well as the macroeconomic slowdown in the third quarter. These headwinds were particularly strong in the real estate sector, where we incurred RMB140.4 million bad debt expenses from certain debtors. Non-GAAP loss from operations in the third quarter of 2021 was RMB204.8 million compared to non-GAAP loss…

. Your first question comes from Xueru Zhang of 86Research.

I wonder if you could share some color on your business outlook? And also any measures we are going to take to regain the growth momentum?

Xueru, this is Edward speaking. Actually, we do face many challenges with our brand advertising business. There is intense competition, and our advertisers are being affected by macro environment and regulations as well. This all have negative impact on us, but we must face these challenges and thoroughly review our business and analyze our strengths, weakness as well as future opportunities. We have done a thorough analysis on the drivers behind each part of our advertising revenue and set strategic goals and action plans accordingly. Our active users drive our programmatic advertising revenue. We made plans to increase the overall user retention and the time spent in our app. For our targeted user groups, we are upgrading our app to allow more user interactions and increasing the richness of our content. We have to continue to invest efforts in our product to increase its commercial value. In terms of brand advertising, we need to focus on 2 parts: Increasing the number of clients; and increasing our pricing premium. On one hand, we are actively expanding our client base. We are upgrading our marketing resources to tailor to a wider client base. For example, like our project works closely with colleges. It caters to advertisers who are targeting younger markets. Our Phoenix Lab, , helps us reach out to advertisers in the FMCG sector through professional product reviews. We use our expertise in product testing and media influence to endorse and promote our advertisers product. Also, our followers, we have millions of followers on MCN, and third-party platforms provide advertisers with a wider selection of channels for marketing, increasing your exposure through the Internet. Our overseas content creator network helps us to reach customers with globalization needs. Aside from growing our customer base, we also continue to elevate our brand influence as key to our pricing premium. Our brand influence is reflected in our original content and off-line events. We will optimize our resources allocation to get more support to our trademark content and events. By doing so, we hope to maintain and enhance our brand awareness to guarantee our advertisement premiums.

Your next question comes from Alice Tang of First Shanghai.

So this quarter, we saw that the company has built up large amounts of bad debts due to Evergrande's credit risk. So management, could you further explain the impact of Evergrande on your business operations? And also perhaps give us some color on what impact it will have on the company's future business?

Thank you, Alice. You're right. Evergrande's liquidity issue had a big impact on us this quarter. We are paying close attention to the situation. And of course, we will continue to follow up on the overdue balance. But on our financials, to be prudent, we have fully written off our accounts receivable and the notes receivable from Evergrande. The impact on this quarter's operating income was a loss of RMB140 million. So in terms of bad debt, we have always followed relevant accounting standards, and we always work closely with our auditors to ensure we take a sufficient provision. For the first half of the year, actually Evergrande didn't show signs of major default risk. But in the third quarter, we started to see red flags in the market. At the same time, they delayed to pay us on time. Considering there is huge uncertainty in whether we can collect these accounts, we had to take a full provision in this quarter. But on the other hand though, there will be no additional bad debt expense from Evergrande on our financials in the future. As to the impact on our future business, most of our work with Evergrande is advertising on their cost per time mold. Gross margin was relatively good, and we had been receiving payments from them until September this year. Losing this chunk of business means our top and the bottom line might be negatively impacted in the future, and we need to work extra hard to make it up. Our team is now actively expanding our client base with good credit and a relatively healthy balance sheet. Also, we are actively exploring along the upstream and the downstream of the real estate industry chain to take more business opportunities. Alice, I hope I have answered your question.

There are no further questions at this time. I'd now like to hand the conference back to Muzi Quo for closing remarks.

All right. Thank you, operator. We have come to the end of our Q&A session and our conference call. Please feel free to contact us if you have any further questions. Thank you for joining us today on this call. Have a good day.