3Q14 Net Advertising Revenues Up 45.5% YoY

3Q14 Income from Operations was RMB70.1 million

3Q14 Adjusted Income from Operations Up 14.8% YOY to RMB87.9 million

3Q14 Diluted EPS was RMB0.90

3Q14 Adjusted Diluted EPS Up 13.6% YOY to RMB1.21

Live Conference Call to be Held at 7:00 PM U.S. Eastern Time on November 13

BEIJING, November 14, 2014 /PRNewswire/ — Phoenix New Media Limited (NYSE: FENG), a leading new media company in China (“Phoenix New Media”, “PNM”, “ifeng” or the “Company”), today announced its unaudited financial results for the third quarter ended September 30, 2014.

Third Quarter 2014 Highlights

  • Net advertising revenues increased by 45.5% year over year to RMB325.8 million (US$53.1 million).
  • Income from operations was RMB70.1 million (US$11.4 million). Adjusted income from operations[1] increased by 14.8% year over year to RMB87.9 million (US$14.3 million).
  • Net income attributable to Phoenix New Media Limited was RMB69.6 million (US$11.3 million). Adjusted net income attributable to Phoenix New Media Limited increased by 13.7% year over year to RMB93.3 million (US$15.2 million).
  • Net income per diluted ADS[2] was RMB0.90 (US$0.15). Adjusted net income per diluted ADS increased by 13.6% year over year to RMB1.21 (US$0.20).

[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 “Reconciliations of Non-GAAP Results of Operation Measures to the Nearest Comparable GAAP Measures”.

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

“We are very pleased with our strong financial performance in the third quarter,” stated Mr. Shuang Liu, CEO of Phoenix New Media. “We are particularly proud of the significant progress ifeng continues to achieve with regards to new advertising initiatives and the growth of our in-house video content production capabilities. On the native advertising side, we partnered with some well-known international brands on innovative native advertisement projects which have turned out to be immensely successful in terms of viewership and revenue contributions. As we expand in the native advertising arena, we are also exploring personalized marketing, as characterized by our strategic investment in the personalized news-feed mobile app, Yidian Zixun. Looking ahead, as we continue to improve our mobile product development and content generation capabilities, we are confident in our ability to remain firmly ahead of the curve in capitalizing on emerging trends in order to continuously expand our user base, strengthen monetization efforts and in turn deliver long-term value to our shareholders. “

Mr. Ya Li, President of Phoenix New Media, stated, “In the third quarter, the incremental revenue growth and operating margin improvement were largely supported by the strong 45.5% year-over-year growth in net advertising revenues. As we have strengthened our advertising capabilities, we continue to invest in our platform by enhancing our mobile product offering and supporting the steady growth of our verticals. Our auto, real estate, fashion, finance, and sports verticals have continued to pick up momentum in attracting new users, serving to further elevate our brand recognition and provide us with future monetization opportunities. Furthermore, on the video side, the ongoing success of several of our in-house productions, which are co-developed with Phoenix TV, continues to demonstrate the strong potential of our convergence strategy and has enabled us to implement multiple monetization strategies that aim to diversify and streamline the content distribution process.”

Third Quarter 2014 Financial Results

REVENUES

Total revenues for the third quarter of 2014 increased by 14.0% to RMB431.8 million (US$70.3 million) from RMB378.7 million in the same period last year.

Net advertising revenues (net of advertising agency service fees), for the third quarter of 2014 increased by 45.5% to RMB325.8 million (US$53.1 million) from RMB223.8 million in the same period last year, primarily due to an increase in average revenue per advertiser (“ARPA”) of 36.6% year over year to RMB0.9 million (US$0.1 million) and an increase in the total number of advertisers of 6.5% year over year to 358.

Paid service revenues for the third quarter of 2014 decreased by 31.6% to RMB106.0 million (US$17.3 million) from RMB154.9 million in the same period last year. Mobile value-added services (“MVAS”)[3] revenues for the third quarter of 2014 decreased by 41.2% to RMB77.9 million (US$12.7 million) from RMB132.4 million in the same period last year, primarily due to a decrease in revenues generated from wireless value-added services with telecom operators. Games and others[4] revenues for the third quarter of 2014 increased by 25.2% to RMB28.1 million (US$4.6 million) from RMB22.5 million in the same period last year, due to the increase of non-recurring content sales.

[3] MVAS includes wireless value-added services, or WVAS, mobile video, mobile digital reading, mobile games and other paid services through China’s three telecom operators’ platforms.

[4] Games and others include web-based games, content sales, and other online and mobile paid services through the Company’s own platforms.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues for the third quarter of 2014 increased by 4.3% to RMB202.9 million (US$33.1 million) from RMB194.4 million in the same period last year, primarily due to an increase in content and operational costs and sales taxes and surcharges, offset by a decrease in revenue sharing fees. Content and operational costs for the third quarter of 2014 increased to RMB104.3 million (US$17.0 million) from RMB75.5 million in the same period last year, primarily due to an increase in staff-related costs and advertisement-related content production costs. Revenue sharing fees to telecom operators and channel partners for the third quarter of 2014 decreased to RMB43.9 million (US$7.1 million) from RMB76.2 million in the same period last year, primarily due to a decrease in MVAS revenues. Sales taxes and surcharges for the third quarter of 2014 increased to RMB33.9 million (US$5.5 million) from RMB24.4 million in the same period last year due to the growth in net advertising revenues. Bandwidth costs for the third quarter of 2014 increased to RMB20.8 million (US$3.4 million) from RMB18.3 million in the same period last year, primarily due to traffic growth over both PC and mobile platforms. Share-based compensation included in cost of revenues for the third quarter of 2014 was RMB5.7 million (US$0.9 million), compared to RMB1.9 million in the same period last year. The year-over-year increase in share-based compensation was primarily due to newly granted stock options in the last 12 months.

Gross profit for the third quarter of 2014 increased by 24.2% to RMB228.9 million (US$37.3 million) from RMB184.3 million in the same period last year. Gross margin for the third quarter of 2014 increased to 53.0% from 48.7% in the same period last year, mainly due to the less contribution to total revenues from relatively lower margin paid services revenues. Adjusted gross margin, which excludes share-based compensation, for the third quarter of 2014 increased to 54.3% from 49.2% in the same period last year.

OPERATING EXPENSES AND INCOME FROM OPERATIONS

Total operating expenses for the third quarter of 2014 increased by 44.8% to RMB158.8 million (US$25.9 million) from RMB109.7 million in the same period last year. The increase in operating expenses was primarily attributable to the increase in expenses associated with the Company’s marketing and promotional initiatives and staff-related expenses relating to technology and product development. Share-based compensation included in operating expenses for the third quarter of 2014 was RMB12.2 million (US$2.0 million), compared to RMB0.04 million in the same period last year. The year-over-year increase in share-based compensation was primarily due to newly granted stock options in the last 12 months.

Income from operations for the third quarter of 2014 was RMB70.1 million (US$11.4 million), compared to RMB74.6 million in the same period last year, due to the increase in expenses associated with the Company’s marketing and promotional initiatives, staff-related expenses relating to technology and product development and share-based compensation, also partially offset by the increase in the Company’s gross profit. Operating margin for the third quarter of 2014 was 16.2%, compared to 19.7% in the same period last year.

Adjusted income from operations, which excludes share-based compensation, for the third quarter of 2014 increased by 14.8% to RMB87.9 million (US$14.3 million) from RMB76.6 million in the same period last year.Adjusted operating margin for the third quarter of 2014 increased to 20.4% from 20.2% in the same period last year.

OTHER INCOME

Other income reflects interest income, foreign currency exchange gain or loss, gain on disposition of subsidiaries and acquisition of equity investments, loss from equity investments, and others, net[5]. Interest income for the third quarter of 2014 increased to RMB12.4 million (US$2.0 million) from RMB8.9 million in the same period last year. Foreign currency exchange loss for the third quarter of 2014 was RMB0.2 million (US$0.04 million), compared to foreign currency exchange gain of RMB3.0 million in the same period last year.

[5] “Others, net” primarily consists of government subsidies.

NET INCOME ATTRIBUTABLE TO PHOENIX NEW MEDIA LIMITED

Net income attributable to Phoenix New Media Limited for the third quarter of 2014 was RMB69.6 million (US$11.3 million), compared to RMB80.0 million in the same period last year, due to the decrease in income from operations which stated above and the increase in the loss from equity investments. Net margin for the third quarter of 2014 was 16.1%, compared to 21.1% in third quarter of 2013.Net income per diluted ADS in the third quarter of 2014 was RMB0.90 (US$0.15), compared to RMB1.04 in the same period last year.

Adjusted net income attributable to Phoenix New Media Limited, which excludes share-based compensation, gain on disposition of subsidiaries and acquisition of equity investments, and loss from equity investments, for the third quarter of 2014 increased by 13.7% to RMB93.3 million (US$15.2 million) from RMB82.0 million in the same period last year. The total amount of share-based compensation, gain on disposition of subsidiaries and acquisition of equity investments, and loss from equity investments for the third quarter of 2014 was RMB23.7 million (US$3.9 million), compared to RMB 2.0 million in the same period last year. Adjusted net margin for the third quarter of 2014 was 21.6%, compared to 21.7% in the same period last year. Adjusted net income per diluted ADS in the third quarter of 2014 increased by 13.6% to RMB1.21 (US$0.20) from RMB1.06 in the same period last year.

As of September 30, 2014, the Company’s cash and cash equivalents and term deposits and short term investments were RMB1.36 billion (US$222.2 million).

For the third quarter of 2014, the Company’s weighted average number of ADSs used in the computation of diluted net income per ADS was 77,318,496. As of September 30, 2014, the Company had a total of 604,695,029 ordinary shares outstanding, or the equivalent of 75,586,879 ADSs.

Business Outlook

For the fourth quarter of 2014, the Company expects its total revenues to be between RMB439 million and RMB459 million. Net advertising revenues are expected to be between RMB329 million and RMB339 million. Paid service revenues are expected to be between RMB110 million and RMB120 million. These forecasts reflect the Company’s current and preliminary view on the market and operational conditions, which are subject to change.

Share Repurchase Program

As of September 30, 2014, the Company had repurchased an aggregate amount of 1,844,059 American Depositary Shares (“ADSs”) at an aggregate cost of approximately US$18.7 million on the open market, pursuant to the share repurchase program approved by the board in May 2014. Under the share repurchase program, the Company has been authorized to repurchase up to US$50 million of its outstanding ADSs over a period not exceeding twelve (12) months beginning on May 14, 2014, the effective date of the program. The Company expects to continue to implement its share repurchase program in a manner consistent with market conditions and the interest of its shareholders, subject to the restrictions relating to volume, price and timing under applicable law.

Conference Call Information

The Company will hold a conference call at 7:00 p.m. U.S. Eastern Time on November 13, 2014 (November 14, 2014 at 8:00 a.m. Beijing / Hong Kong time) to discuss its third quarter 2014 unaudited financial results and operating performance.

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

International:

+6567239385

Mainland China:

4001200654

Hong Kong:

+85230186776

United States:

+18456750438

Conference ID:

25806247

A replay of the call will be available through November 20, 2014 by dialing the following numbers:

International:

+61290034211

Mainland China:

4006322162

Hong Kong:

+85230512780

United States:

+16462543697

Conference ID:

25806247

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 adjusted gross profit, adjusted gross margin, adjusted income from operations, adjusted operating margin, adjusted net income attributable to Phoenix New Media Limited, adjusted net margin and adjusted net income per diluted ADS, each of which is a non-GAAP financial measure. Adjusted gross profit is gross profit excluding share-based compensation. Adjusted gross margin is adjusted gross profit divided by total revenues. Adjusted income from operations is income from operations excluding share-based compensation. Adjusted operating margin is adjusted income from operations divided by total revenues. Adjusted net income attributable to Phoenix New Media Limited is net income attributable to Phoenix New Media Limited excluding share-based compensation, gain on disposition of subsidiaries and acquisition of equity investments, and loss from equity investments. Adjusted net margin is adjusted net income attributable to Phoenix New Media Limited divided by total revenues. Adjusted net income per diluted ADS is adjusted 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 non-cash impact of share-based compensation, gain on disposition of subsidiaries and acquisition of equity investments, and loss from equity investments add clarity to the constituent parts of its performance. The Company reviews adjusted net income together with net income 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 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, gain on disposition of subsidiaries and acquisition of equity investments, and loss from equity investments. Share-based compensation and loss from equity investments have been and will continue to be significant and recurring in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. 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 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

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 RMB6.1380 to US$1.00, the noon buying rate in effect on September 30, 2014 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 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, the Company enables consumers to access professional news and other quality information and share user-generated content on the Internet and through their mobile devices. Phoenix New Media’s platform includes its ifeng.com channel, consisting of its ifeng.com website and web-based game platform, its video channel, comprised of its dedicated video vertical and mobile video services, and its mobile channel, including its mobile Internet website, mobile applications and 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 the online and mobile advertising, online video and mobile paid service markets in China; the Company’s reliance on online advertising and MVAS 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 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
Matthew Zhao
Email: investorrelations@ifeng.com

ICR, Inc.
In Beijing, China: Jeremy Peruski
In New York City: Katherine Knight
Tel: +1 (646) 277-1276
Email: investorrelations@ifeng.com

Phoenix New Media Limited

Condensed Consolidated Balance Sheets

(Amounts in thousands)

December 31,

September 30,

September 30,

2013

2014

2014

RMB

RMB

US$

Revised

Unaudited

Unaudited

ASSETS

Current assets:

Cash and cash equivalents

845,138

613,025

99,874

Restricted cash

10,000

Term deposits and short term investments

556,672

750,801

122,320

Accounts receivable, net

353,379

496,883

80,952

Amounts due from related parties

125,158

198,838

32,395

Prepayment and other current assets

27,911

101,555

16,545

Deferred tax assets

22,779

24,056

3,919

Total current assets

1,941,037

2,185,158

356,005

Non-current assets:

Property and equipment, net

95,126

92,967

15,146

Intangible assets, net

7,919

7,079

1,153

Equity investments

19,435

3,166

Other non-current assets

12,678

15,292

2,492

Total non-current assets

115,723

134,773

21,957

Total assets

2,056,760

2,319,931

377,962

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

218,604

259,321

42,248

Amounts due to related parties

21,034

25,105

4,090

Advances from customers

10,732

20,537

3,346

Taxes payable

58,140

87,582

14,269

Salary and welfare payable

98,831

97,467

15,879

Accrued expenses and other current liabilities

62,153

86,936

14,164

Total current liabilities

469,494

576,948

93,996

Long-term liabilities

12,231

16,116

2,626

Total liabilities

481,725

593,064

96,622

Shareholders’ equity

Phoenix New Media Limited shareholders’ equity

Class A ordinary shares

18,530

18,824

3,067

Class B ordinary shares

22,053

22,053

3,593

Additional paid-in capital

1,734,993

1,772,633

288,797

Treasury stock

(107,642)

(17,537)

Statutory reserves

50,330

50,330

8,200

Retained earnings/(Accumulated deficit)

(194,601)

21,583

3,516

Accumulated other comprehensive loss

(60,127)

(53,780)

(8,762)

Total Phoenix New Media Limited shareholders’ equity

1,571,178

1,724,001

280,874

Noncontrolling interests

3,857

2,866

466

Total shareholders’ equity

1,575,035

1,726,867

281,340

Total liabilities and shareholders’ equity

2,056,760

2,319,931

377,962

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,

2013

2014

2014

2014

2013

2014

2014

RMB

RMB

RMB

US$

RMB

RMB

US$

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Revenues:

Net advertising revenues

223,831

290,968

325,756

53,072

599,797

851,649

138,750

Paid service revenues

154,910

119,905

106,017

17,272

424,569

348,146

56,720

Total revenues

378,741

410,873

431,773

70,344

1,024,366

1,199,795

195,470

Cost of revenues

(194,434)

(197,501)

(202,889)

(33,054)

(511,710)

(574,261)

(93,558)

Gross profit

184,307

213,372

228,884

37,290

512,656

625,534

101,912

Operating expenses:

Sales and marketing expenses

(65,839)

(72,823)

(80,541)

(13,122)

(185,337)

(230,097)

(37,487)

General and administrative expenses

(16,604)

(26,436)

(36,933)

(6,017)

(70,756)

(96,071)

(15,652)

Technology and product development expenses

(27,224)

(33,045)

(41,345)

(6,736)

(79,306)

(105,177)

(17,135)

Total operating expenses

(109,667)

(132,304)

(158,819)

(25,875)

(335,399)

(431,345)

(70,274)

Income from operations

74,640

81,068

70,065

11,415

177,257

194,189

31,638

Other income:

Interest income

8,860

12,617

12,428

2,025

23,253

37,070

6,039

Foreign currency exchange gain/(loss)

3,008

139

(231)

(38)

15,150

(6,960)

(1,134)

Gain on disposition of subsidiaries and acquisition of equity investments

4,658

22,351

3,641

Loss from equity investments

(4,026)

(5,855)

(954)

(11,422)

(1,861)

Others, net

2,769

6,577

5,681

926

7,423

18,048

2,940

Income before tax

89,277

101,033

82,088

13,374

223,083

253,276

41,263

Income tax expense

(9,235)

(15,941)

(13,545)

(2,207)

(26,396)

(38,083)

(6,204)

Net income

80,042

85,092

68,543

11,167

196,687

215,193

35,059

Net loss/(income) attributable to noncontrolling interests

(630)

1,018

166

991

161

Net income attributable to Phoenix New Media Limited

80,042

84,462

69,561

11,333

196,687

216,184

35,220

Net income

80,042

85,092

68,543

11,167

196,687

215,193

35,059

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

(3,722)

(784)

(20)

(3)

(17,581)

6,347

1,034

Comprehensive income

76,320

84,308

68,523

11,164

179,106

221,540

36,093

Comprehensive
loss/(income) attributable to noncontrolling interests

(630)

1,018

166

991

161

Comprehensive income attributable to Phoenix
New Media Limited

76,320

83,678

69,541

11,330

179,106

222,531

36,254

Net income attributable to Phoenix New Media
Limited

80,042

84,462

69,561

11,333

196,687

216,184

35,220

Net income per Class A and Class B ordinary share:

Basic

0.13

0.14

0.12

0.02

0.32

0.36

0.06

Diluted

0.13

0.14

0.11

0.02

0.32

0.35

0.06

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

Basic

1.07

1.12

0.92

0.15

2.59

2.87

0.47

Diluted

1.04

1.09

0.90

0.15

2.52

2.79

0.45

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

Basic

599,683,858

604,231,733

602,442,619

602,442,619

607,657,461

602,873,027

602,873,027

Diluted

617,788,630

622,050,594

618,547,971

618,547,971

623,179,760

620,892,502

620,892,502

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, 2013

Three Months Ended June 30, 2014

Three Months Ended September 30, 2014

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

184,307

1,929

(1)

186,236

213,372

2,439

(1)

215,811

228,884

5,660

(1)

234,544

Gross margin

48.7%

49.2%

51.9%

52.5%

53.0%

54.3%

Income from operations

74,640

1,973

(1)

76,613

81,068

8,443

(1)

89,511

70,065

17,872

(1)

87,937

Operating margin

19.7%

20.2%

19.7%

21.8%

16.2%

20.4%

8,443

(1)

4,026

(2)

17,872

(1)

1,973

(1)

(4,658)

(3)

5,855

(2)

Net income attributable to Phoenix New Media Limited

80,042

1,973

82,015

84,462

7,811

92,273

69,561

23,727

93,288

Net margin

21.1%

21.7%

20.6%

22.5%

16.1%

21.6%

Net income per
ADS — diluted

1.04

1.06

1.09

1.19

0.90

1.21

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

77,223,579

77,223,579

77,756,324

77,756,324

77,318,496

77,318,496

(1) Excludes share-based compensation

(2) Excludes loss from equity investments

(3) Excludes gain on disposition of a subsidiary and acquisition of equity investment

Details of cost of revenues are as follows:

Three Months Ended

September 30,

June 30,

September 30,

September 30,

2013

2014

2014

2014

RMB

RMB

RMB

US$

(Amounts in thousands)

Unaudited

Unaudited

Unaudited

Unaudited

Revenue sharing fees

76,182

59,210

43,882

7,149

Content and operational costs

75,538

83,729

104,347

17,000

Bandwidth costs

18,331

19,933

20,771

3,384

Sales taxes and surcharges

24,383

34,629

33,889

5,521

Total cost of revenues

194,434

197,501

202,889

33,054