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spk02: Hello, ladies and gentlemen. Thank you for standing by for 36KR Holdings' second quarter 2021 earnings conference call. At this time, all participants are in the listen-only mode. After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded. I'd now like to turn the call over to your host, Yang Li, IR Manager of the company. Please go ahead, Jan.
spk03: Thank you very much. Hello, everyone, and welcome to 66KR Holdings' Second Quarter 2021 Earnings Conference Call. The company's financial and operational results were released earlier today and have been made available online. You can also view the earnings price release by visiting the IR section of our website at ir.66kr.com. Participants on today's call will include our co-chairman, the CEO, Mr. Dagan Feng, and our vice president, of Finance and Capital Markets, Ms. Lin Wei. Mr. Feng will start the call by providing an overview of the company and performance highlights of the quarter in Chinese, followed by an English translation. Ms. Wei will then provide details on the company's financial results before opening the call for discussion. Before we continue, please note that today's discussion will contain forward-looking statements made under the State's proper provisions of the U.S. Private Securities Legitimacy Reform Act of 1995. forward-looking statements involved in hearing risk and . As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and is included in the company's and other public as well as the US Act. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that 66KR's earnings price release and this conference call includes discussion of unaudited gap financial measures as well as unaudited non-gap financial measures. 66KR's price release contains a reconsolidation of the unaudited non-gap measures to the unaudited gap measures. Also, please note that all amounts are in RMB. I will now turn the call over to our co-chairman, the CEO, Mr. Da Gongfeng. Paul, please go ahead.
spk05: Thank you. Hello, everyone. Thank you for participating in our 2021 Second Quarter Results Conference Call. In the second quarter of 2021, we continue to enhance common quality and influence while strategically focusing on enterprise services as our growth driver.
spk03: These efforts broadened our new economy-focused content offerings and value-added services, further developing our core competencies and spear-hiding business innovation. We have made robust progress in content arrangement with diversified presentation formats to meet the needs of varied user groups. We are also exploring possibilities for innovative services. Moreover, our progress in products and technologies is paving the way for us to empower the growth of new economic participants as well as the digitalization of traditional industries, creating a compelling value proposition for more customers, users, and investors in this new era of flash opportunities and challenges.
spk05: In the second quarter, our full-network traffic is rising again. Full-network margin traffic reached 8.46 billion times, with a total growth of 70%. This is the increase in full-network traffic in the 13 consecutive quarters, once again proving users' recognition of the high quality content of 36G. The impact of the platform has been further improved. Our second quarter user traffic volume reached a new high of average monthly page views of 846.3 million, up 70% year-over-year.
spk03: The second quarter of 2021 marks our 17th consecutive quarter of PV growth, reaffirming our content's strong user resonance and our growing brand awareness. The rising popularity and recognition of CK6KR's content and platforms largely stems from our continuing innovation in flexible content formats, omni-channel content distribution, and our ingenuity in broadening our horizons. Let me walk you through our progress and our strategy in each of these areas.
spk05: First, the functional development of the content form and coverage platform. We have a strong and professional content asset team. We adhere to the platform structure of PPC and UPC. From traditional image content to audio, short video, and live broadcast, we have a good range of activities.
spk03: First, with respect to content strategy, we present content in various formats across a wide range of business sectors to address the full spectrum of user demand. Our powerful proprietary platform delivers comprehensive reports and insights across both professional and user-generated content for PGC and UGC. In addition to traditional text and image formats, we have expanded our offerings to audio, short video, and live streaming, etc., covering diverse user feedback regarding each of these information dissemination channels has been quite positive.
spk05: In Q2, our WeChat official account has reached 180 posts with 100,000 articles. In terms of audio and video, 316K helps users to use their free time to get the latest information, and helps users to get more information in various application scenarios. In short, we are welcomed by the wide range of users in the community for the output of content such as commercial, real-time, economic, financial, and personal responsibility. In terms of diversity of content, we have 316K Pro, which is more professional in terms of the main number of 316K, and there are also more recent models such as Hulang Research Institute, which is more close to the younger generation.
spk03: We continue to make progress with those traditional and innovative content formats during the second quarter. Notably, the number of articles published on our primary WeChat account with readership of over 100,000 grew to 180, a new record. Other exciting content initiatives include our audio program, PR Walkman, which provides users with the latest business highlights in short segments that just take that take just a few minutes to digest. Meanwhile, our short form video covering various topics including time business, current public affairs, economics and finance, and personal growth, also gain popularity among various groups of consumer and users. In terms of content general diversity, it says our 66K are main accounts. We also have a full scale of content matrix that covers different topics. For example, our KIA Pro column targets professional groups with in-depth industrial insights, and OU targets the younger audience and covers lighter business and more public topics. It's rapidly becoming popular and gaining growth momentum among younger generations.
spk05: After G36 has become a comprehensive streaming platform such as WeChat, Weibo, Headline, and other comprehensive streaming platforms, we have built a powerful head-to-head short video platform in the field of short video, such as the cooperation of Douyin, Bilibili, Kuaishou, Zhihu, Xiaohongshu, WeChat video number, etc., to reach a more diversified C-level user group and provide a variety of content interpretation for the younger group. The layout of short videos and live content is a very important step in the development of our C-level user group.
spk03: Second, we continue to execute our omni-channel distribution strategy. In addition to becoming a top content provider in the finance and economics vertical on WeChat, Weibo, Toutiao, and other comprehensive traffic platforms, 66KR has also been building business corporations with top-tier short video platforms such as Douyin, Bilibili, Taishou, Zhihu, Xiaohongshu, and WeChat channels. I would like to focus on our short video content.
spk05: In August 2020, we started to deploy short videos. It's been exactly a year since then. In this year, our short video content is rapidly developing. The content is based on users and received good reviews. Our Douyin fan base has surpassed 4 million. BiLan's fan base has surpassed 800,000. From fan base, content depth, quality, heat tracking, and other multi-dimensional evaluation, 36g has been included in the total number of short video media in Taiwan. Q2, which was released on Douyin, BiLan, and other platforms, Shenzhou 12's behind-the-scenes analysis and other real-time analysis have been greatly appreciated. We have updated the history of our TikTok account, and we have continuously censored TikTok for the past three days. In recent days, for the economic analysis of the Olympic Games, we have reached a new high, and the total number of downloads of the entire platform has exceeded 100 million. By mid-August 2021, we have completed the annual goal of reaching 2 million followers per year. From these statistics, we can see that the content we have published has been recognized by a wider range of individual user groups, and it has also led to the investment of C-end customers. I believe that in the future,
spk03: Now I'd like to talk more specifically about our show from video content. It has been exactly a year since we embarked on our show from video initiative, and we've seen this rapidly growing popularity across diverse demographics. We are very pleased to see that we have attracted more than 4 million followers in Douyin and more than 800,000 followers on Bilibili, among other platforms. Based on multiple criteria including follower base, content depth, virtual performance, and chat tracking, 66KR has been recognized as one of the top tiers from video business portals across all major social media platforms. We had a notable success in the second quarter with our blockbuster video, The Meaning Behind Change Yourself, which we published on Zoe and several other platforms. This column of fierce content attracts a record-setting viewership of over 13 million total views, occupying hotlights for three consecutive days. We are also excited to share that our recent video clips on interpretation of the Olympic Games economy set new heights, receiving more than 100 million total views and 1.42 million likes, and adding 2,200,000 new followers. By the middle of August 2021, 66K short-form video had already achieved its annual target of gaining 2 million new followers. This astounding number further validates that an increasingly broad individual user community is enjoying and consuming our content, which in turn drives B2C business marketing spending on our platform. Looking forward, we believe our short video content initiatives will continue to attract a wider range of user communities and boost our commercialization capabilities.
spk05: Third, the products of the Asian market are constantly improving. Third, we continue upgrading our product offerings for public equity markets
spk03: Our secondary market products are a natural extension of our rich experience and expertise in serving startup companies over the past 10 years and are quickly gaining traction. For instance, in July, we joined forces with Industrial Securities to host an investor forum covering topics around both the private and secondary markets. We also collaborated with CICC to co-create 56KR Capital Pi, a new program focusing on individual investor education. which greatly enhanced our influence and recognition in both institutional and individual investor circles that worthified our customer base and laid a solid foundation for customer expansion in the secondary market.
spk05: Fourth, we set up the second headquarters in Huanan, Shenzhen, to dig up business opportunities in the Bay Area. Over the past few years, we have found that a number of hard-hitting digital companies have been active in Guangdong, and a large number of investment institutions have set up branch institutions in Shenzhen. Kaiyan Internet, First, we celebrated the grand opening of our new dual headquarters in Shenzhen, a move to capitalize on the opportunities in the Greater Bay Area.
spk03: The Greater Bay Area is drawing attention as a fast developing innovation and technology hub that offers exciting opportunities to start-ups from around the world. We noticed that a multitude of un-neglectable hard and core technology start-ups have emerged in Guangdong province. A considerable number of investment institutions have set up branches in Shenzhen. Given that industrial, internet, and hardware technology are extremely popular and valuable supported by both the government and investment community. Strategically selected for its central location, Shenzhen will service our Hong Kong reach. We can gain access to surrounding start-ups and investment institutions in South China's Greater Bay Area. The establishment of our 66 KR South China headquarters will enable us to better meet the needs of local customers and respond to them more efficiently, further contributing to our commercialization capabilities.
spk05: Last but not least, we are actively building 66K of international presence.
spk03: We are excited to report that Bloomberg Channel began including 66 pairs article in its news space during the second quarter, making our latest coverage available to global readers. At the same time, our overseas business is making steadily progress and gradually become profitable. We have seen a significant increase in revenue during 2021, and our presence in Japan and Singapore has continued growing. We are pleased that 66 pairs' brand influence is gaining traction worldwide.
spk05: Thank you. Now let's take a look at our commercialization progress. Thanks to our calculation in content and products,
spk03: In the second quarter, all of our three business segments achieved strong year-over-year growth on a comparable basis. Let me walk you through each of them. Our advertising revenue increased by 65% year-over-year this quarter. We rose in both the number of advertising customers and average revenue per advertising customer.
spk05: We use short videos to promote our brand in a innovative way and help companies to upgrade their sales. 36H has joined the Chinese public to describe the vision of the future of cars with a new perspective. This time, the public's marketing upgrade greatly improved the efficiency and customer attention of traditional design to reach customers. It is also an important product line plan for the public to transform from a car manufacturer to a travel service provider. This is an effective verification of our continuous widening of the marketing model with the core of content.
spk03: We continue to harness our capability in video content creation to provide customized and innovative short-form video marketing solutions for traditional enterprises, improving their brand image and upgrading their marketing. Take the automobile industry, for example, Volkswagen China joined hands with 66 here and launched a short video titled, What Will the Future Car Look Like? to describe future automobiles from a brand new perspective. This marketing campaign helped FoxLighting effectively reach more potential customers. It was also an important branding and publicity platform for FoxLighting to position itself from a traditional car maker to a mobility service provider, further validating our efforts to broaden and surpass the boundaries of conventional marketing through seamless content integration.
spk05: This video is also an important turning point for our advertising services to be more attractive and flexible for our customers. SurePro Video is also enabling us to develop new marketing solutions and penetrate more into the CN brands and advertising clients.
spk03: For example, we helped Ambershell promote its new product, Amex, with a short-form video that was well-received by younger generations. Ambershell took this opportunity to look away from the stereotype of direct marketing and was very satisfied with its publicity cooperation with 66K era. We believe that by creatively reshaping marketing programs for the future, we can empower more brands with effective P2C solutions.
spk05: In terms of 2G market products, this quarter has already achieved commercialization progress. Our secondary market product has also started initial commercialization this quarter.
spk03: We have entered into cooperation with Alibaba, Trip.com Group, Tongchong Elon, and Zhihu, and we'll provide in-depth analysis from 66KR's unique perspective. showing a holistic, cooperative image for our customers.
spk05: Next, I'd like to share with you some updates in the enterprise service business space. Spored by our high-quality content,
spk03: brand influence, as well as expansion of innovation verticals. Brand transaction value for our enterprise value ID services grew by 66% in the second quarter year-over-year.
spk05: We continue to explore various new operating scenarios and distribution channels for financial content. For example, our audio content cooperates with the future car, New Radio. Our financial, financial, and workplace content cooperates with many banks, including Zhaoshan Bank.
spk03: First, we continue to explore various new application scenarios and distribution channels for our financial content. For example, on the audio content front, we collaborated with NIO to broadcast our podcast program, Care Intelligence, on a new radio playlist. We also cooperate with several financial institutions, including China Merchants Bank, serving as an agent to help them operate their app's content. covering a range of topics such as finance, financial planning, and career-related issues. Through this new partnership, we effectively expand our content distribution and commercialization opportunities.
spk05: ZHANG ZHANG ZHANG ZHANG ZHANG
spk03: In addition, organizing online and offline summits and forums is also an important component of our enterprise value-added services. This quarter, we partnered with Google to create Google.66kr.com website, helping Google host multiple online forums on gaming, brand marketing, and brand transformation of cross-border e-commerce. The dream site also demonstrates the deep bond between Google and 66kr. allowing each company's users to better interact with each other and providing a trendy approach for both companies to attract new users and increase user loyalty. Google's global online activities broke geographical barriers and surpassed time differences, giving participants access to leading industry pioneers' experience and insights at any time from anywhere.
spk05: In terms of current activities, we and our third company jointly organized an unexpected daily activity. On the offline event front, we co-hosted an unknown city of tomorrow event with leading real estate enterprises to building a visionary and imaginative art world.
spk03: The event showcased our capabilities to interact with its users in creative and interesting ways, and further strengthened our brand image among the world's audience, from younger generations to middle-aged groups, as well as other user demographics.
spk05: In addition, the implementation of the new business has established a foundation for the regionalization of 36K. 36K continues to expand its cooperation with the local government. In Q2, we added two local stations in Henan and Guizhou. As of now, we have established 12 local stations. The localization of the operating mode and the brand influence of 316H have established a deep connection with the end-to-end and end-to-end customers, helping both parties to conduct demand connections. In June, 316H joined the Henan-Zhengzhou-si Jin Shui-qu government to hold a crowdfunding conference, attracting positive reports from hundreds of companies such as CCTV and other media. It greatly improved the impact of the crowdfunding in the high-end area, and also demonstrated the strength of 316H in the supply area.
spk03: Moreover, the continuous progress of our enterprise value ID service has laid a solid foundation for 66 CARES regional expansion. We have been working proactively to expand our cooperation with local governments to serve municipalities and regional business. During the second quarter, we opened business branches into two new provinces, Henan and Guizhou, bringing our total regional offices to 12. Building on 66 CARES for influence and local business presence, We help enterprises and governments with deep relationships, connecting both parties' needs and solutions. In June, we hosted Science and Technology Innovation Conference for the governments of Jinshui District in Zhengzhou, Henan Province. The event attracted coverage from more than 100 leading media outlets, including CCTV, and greatly improved visibility of the Jinshui District's innovative science and technology sectors, as well as 66 care capabilities in the enterprise and government service area.
spk05: In addition, we have recently started a commercial operation of the 36G enterprise number. The 36G enterprise number is a high-performance enterprise service product that is a digital enterprise service product. 36G has accompanied entrepreneurs and enterprises to grow together. Now we are using our own brand influence to build and display brands for more excellent enterprises. In the economic growth of the new era, we hope that more excellent enterprises will be seen and recognized by the market.
spk03: 我们很高兴的看到企业号已经产生商业化收入,相信我们的品牌影响力会帮助商业化企业号有更清晰的发展道路。 We also recently started commercialization of our 66K enterprise account service, a self-service product. 66K enterprise account is an efficient introductory window for an enterprise to increase brand awareness, exhibit products, share its business progress with a wider audience, and appeal to economy sectors. As 66K has gone with generations of entrepreneurs and enterprises, we are now leveraging our brand influence to build a platform where a wider range of companies can exhibit their skills, services, and accomplishments. In a new economy era, we hope to empower more high-quality enterprises and help them gain market recognition and acquire customers. We were very pleased to see that 66K enterprise account service begin to generate revenue in August. And we believe that with our brand influence, this new service has a promising future.
spk05: We believe that with our brand influence, this new service has a promising future. We believe that with our brand influence, this new service has a promising future. We believe that with our brand influence, this new service has a promising future. Now, I'd like to particularly introduce our progress in the enterprise service review business.
spk03: In recent years, the government has been actively advocating for the integration of the economy and Internet, as well as digital transformation in various industries. At the same time, the investment community is witnessing a slowdown in the CN market and declining marginal return of customer acquisition. Therefore, we believe the industrial Internet economy with enterprise stories are its core, while soon offering huge development opportunities as new economy enterprises and traditional enterprises have intrinsic needs for digital upgrades and digital transformation respectively.
spk05: In October 2020, 36克 launched the 36克起伏点评平台, which is the first comprehensive起伏 decision-making platform in China. This platform has launched a one-stop platform for platform management, which is based on the high cost of the customer and the cost of the customer. The platform separates from the service layer, the delivery layer, and the data layer to allow customers to make better decisions. The service layer provides customers with one-to-one selection, consultation, self-study, and social interaction services. With this background, in October 2020, 66KLR launched the Enterprise Service Review Portal, the first comprehensive enterprise service procedure and decision-making platform in China.
spk03: It's a one-stop platform solution aiming to facilitate service providers to acquire customers and demand sites to make informed procedure decisions. The platform delivers information emerging from the three layers, service, interaction, and data. On service layer, we provide customer with one-on-one consultation, self-helping learning tools, and social community function. On the interaction layer, we help customers search for and filter information in multiple dimensions with dental comparison services and AP data making reports. As a data layer, we provide customers with industry data and category information, prices, features, real name reviews, and commentaries, as well as successful cases studies and supplier credit information, et cetera.
spk05: 316 has accumulated many advantages and unique values in terms of corporate service. We have more than 200,000 new business database, and have accumulated a large number of head experts, KOLs, who can acquire resources from relevant industry associations and improve users' awareness of the industry and atmosphere through content value. 316 Qifu Point of View is the first Qifu platform in China to provide 10 points of view, and is widely recognized as a must-see point of view. Our awareness level of Qifu software has reached an unprecedented level. Over the past 10 years, 66KER has accumulated in-depth expertise and unique advantages in providing enterprise services.
spk03: For example, supported by proven content capabilities, we have built a database of over 800,000 new economy enterprises and accumulated numerous top export and key opinion leaders, KOLs. We can also help users gain access to relevant industry associations' resources and enhance their understanding of the industry. 66Peer Enterprise Service Review Portal is the first domestic enterprise service platform providing real name comments and is widely recognized as the of the 2B market. Our professional breadth of enterprise service software is far more sophisticated than that of our peer providing similar service. Our detailed classification of the SaaS industry is sorted into a main category and subcategory, which has become the industry benchmark and standard.
spk05: As the first comprehensive SaaS platform, Zynote SaaS has become the most comprehensive, the most comprehensive, and the most standard business decision-making platform in the market. Together with RG Duomo, the SaaS platform has acquired more than 4,000 business software applications, covering 15 major industries and 200 technical software. At the same time, our real-time user reviews have increased to 1,000. invited more than a dozen industry experts to enter the platform to provide opinions and help the consumer to make better judgments. Not only that, we use our own understanding and knowledge of the industry to provide content support for corporate services. Recently, we have begun to try initial commercialization. In May of this year, we helped a large number of service providers in order to improve their sensibility and logic to introduce product optimization. At the same time, we combined online and offline activities and user interaction to help companies obtain accurate marketing clues. The clues are up to 20%. As the first enterprise service review platform in China, 66KR Enterprise Service Review Portal has become the most comprehensive and standardized enterprise interior making platform.
spk03: By the end of the second quarter, the review portal had showcased over 4,000 enterprise service applications covering subwares across 15 industries and 200 categories. Meanwhile, we have received thousands of real user comments in what dozens of industry experts to join the platform offer their opinions to help the demand side make better decisions. Moreover, building on our own in-depth understanding of the industry, we are able to further enhance our enterprise service with rich content support. Recently, we started initial commercialization of the Renew Portal service. In May, by introducing its products in a more expressive and logical way and improving user interaction, we successfully helped a SaaS service provider obtain more sales leads. Estimated conversion rate as high as 20%, while the cost of conversion was greatly reduced. We believe that as we continuously refine our product and run away from retail commercialization, we believe our enterprise service review portal will become a new driver of the company's future growth and will unlock tremendous value on our way to expand the boundary of medium and tap into more enterprise services.
spk05: Finally, I would like to share with you the recent progress of the subscription service. In the second quarter, we have re-designed the business model for the subscription service, and the revenue has increased by 124%. In the future, we will use the two-way combination of the online and offline. Online, we will provide professional skills and improvement services for college students and new employees, and offline, we will provide deep industry analysis services for entrepreneurs of all materials in the form of entrepreneurial new species and cooking class. In the second quarter, we revamped our subscription service model and witnessed a revenue growth of 124% year-over-year.
spk03: Our subscription membership service are available through both online and offline channels. Online subscription will focus on the KR column within our 66KR app, for paid knowledge products and other career training programs, helping college students and new recruits to improve their professional skills. For offline subscription service, we offer membership programs such as Entrepreneur Star and Speedway Star classes, bringing opportunities for practitioners in various fields to engage in deep communication and interaction with industry leaders and experts face-to-face. In the second half of this year, we will continue to expand the breadth and depth of our subscription offerings for our users to better satisfy their needs and for the improved users' business.
spk05: In the second half of this year, we will continue to expand the breadth and depth of our subscription offerings for our users to better satisfy their needs and for the improved users' business. In the second half of this year, we will continue to expand the breadth and depth of our subscription offerings for our users to better satisfy their needs and for the improved users' business. In summary, in the second quarter of 2021, 66KR continued to enhance its influence on new economy-centered content offerings, thereby achieving growth in both user track value and the number of total followers on all platforms. We are pleased to have delivered strong
spk03: financial results in the second quarter, exceeding analysts' expectations on all key financial metrics. Led by our worth, success, devotion, and investment in our enterprise service review business, the company has delivered stellar initial results by innovating and exploring the commercialization opportunities of our new business initiatives. Looking ahead, we believe that 66pera is well poised to capitalize on the rapid rise of real economy. industrial internet, and hard and core technology to create brand new development opportunities.
spk05: Next, I will give the floor to our financial and capital market leader, Wei Lin. She will introduce us to the main performance of the financial sector.
spk03: With that, I will now turn the call over to our VP of Finance at Capital Markets, Ms. Wei, who will discuss our key financial results. Please go ahead, Lin.
spk01: Thank you, Paul, and hello, everyone. We are pleased to have achieved a set of solid financial results in the second quarter of 2021. with a strong year-over-year growth across all of our business segments on a comparable basis. Notably, as Paul Jeff mentioned, our advertising revenues increased by 65.1% this quarter compared to the same period of last year, demonstrating sustained user engagement and customer interest in our premium content and service offerings. Also, thanks to our continued efforts to provide customized and innovative services, Revenues from our enterprise value-added services more than doubled sequentially, and its grant transacted value increased by 35.9% year-over-year. In addition, our commitment to maintaining efficient operations with an increased focus on higher-margin businesses is paying off, with our gross margin expanding to 57.4% from 29% in the same period of last year, and net loss narrowed by 56.8% year-over-year. Looking ahead, we believe we are well positioned to continue on this growth trajectory, serving new economy participants more effectively, and expand our monetization channels to seize the vast opportunities ahead of us. Now I'd like to walk you through more details on our second quarter 2021 financial results. Online advertising services revenue increased by 65.1% to RMB 51.7 million in the second quarter of 2021, from RMB 31.3 million in the same period of last year. The increase was primarily attributable to the strong recovery of market demand, as well as more innovative marketing solutions we provided to our customers. The number of advertising customers and the average revenue per advertising customer both achieved strong growth in the second quarter of 2021. Enterprise value added services revenue for RMB 14.3 million in the second quarter of 2021 compared to RMB 42.6 million in the same period of last year. The decrease was primarily because we continuously shifted our focus towards higher margin businesses and starting from the first quarter of 2021, we ceased to act as a principal in certain low gross margin businesses and only acted as an agent. As a result, revenues of such businesses were recognized on a net basis from the first quarter onward. To increase comparability of operating results and help investors better understand our business performance and operating trends, we introduced the gross transaction value as a supplemental metric to describe our business. Gross transaction value of Enterprise Better Edited Services was RMB $57.9 million in the second quarter of 2021, increased by 35.9% from RMB $42.6 million in the same period of last year. Subscription services revenues increased by 124.1% to RMB 6 million in the second quarter of 2021 from RMB 2.7 million in the same period of last year. The increase was primarily attributable to high quality subscription products we offered to our institutional and individual subscribers. Total revenues for RMB 72.1 million in the second quarter of 2021 compared to RMB 76.7 million in the same period of last year. Taking into consideration of the aforementioned change in revenue recognition for our enterprise value-added services, which involved RMB 43.6 million variance between net revenues and gross transaction value, you will actually find that we maintained our overall upward business trend and demonstrated solid year-over-year growth. Cost of revenues was RMB 30.7 million in the second quarter of 2021, compared to RMB 54.4 million in the same period of last year. The decrease was primarily due to our continuous cost control measures to improve our operational efficiency and our shift of focus towards higher margin businesses, as well as the recognition of certain revenues on a net basis, which we discussed earlier in the end product value added services section. Gross profit increased by 86.1% to RMB 41.4 million in the second quarter of 2021, from RMB 22.2 million in the same period last year. Cross-profit margin was 57.4% in the second quarter of 2021 compared to 29% in the same period last year. Operating expenses were on the 75.3 million in the second quarter of 2021 compared to on the 99.4 million in the same period last year. Sales and marketing expenses were on the 33.4 million in the second quarter of 2021 compared to on the 39 million in the same period last year. The decrease was primarily attributable to the decrease in marketing expenses and share-based compensation expenses. G&A expenses were RMB 29.9 million in the second quarter of 2021 compared to RMB 50.9 million in the same period of last year. The decrease was primarily attributable to the decrease in the allowance for credit losses and share-based compensation expenses. Research and development expenses were RMB 12 million in the second quarter of 2021 compared to RMB 9.6 million in the same period of last year. The increase was primarily attributable to the increase in payroll-related expenses as we beefed up our research and development capabilities. Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses, as well as G&A expenses totaled RMB 3.3 million in the second quarter of 2021 compared to RMB 12.6 million in the same period of last year. Net loss was RMB 34.3 million in the second quarter of 2021 compared to RMB 79.3 million in the same period of last year. Non-GAAP adjusting net loss was RMB 31 million in the second quarter of 2021 compared to RMB 66.7 million in the same period of last year. Mat loss attributable to 36 KR Holdings honorary shareholders was RMB 34.1 million in the second quarter of 2021 compared to RMB 79.5 million in the same period of last year. Basic and diluted mat loss per share were both RMB 3.3 cents in the second quarter of 2021 compared to RMB 7.8 cents in the same period of last year. As of June 30, 2021, the company had cash, cash equivalent, and short-term investments of RMB 149.6 million, compared to RMB 174.1 million as of March 31, 2021. The decrease was mainly attributable to the share repurchase, as well as cash used in operating activities. Lastly, let me provide some updates on our share repurchase program. On May 6, 2020, the company announced that its board of directors authorized a share repurchase program under which the company made repurchase up to a total of 1 million of its American depository shares, each representing 25 Class A ordinary shares. As of June 30, 2021, the company had repurchased approximately 786,000 ADS for approximately RMB 17.5 million under this program. This concludes our prepared remarks today. We will now open the call for questions. Operator, please go ahead.
spk02: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and light for your name to be announced. If you wish to cancel your request, please press the pound or hash key. For the benefit of all participants on today's call, If you wish to ask a question to management in Chinese, please immediately repeat your question in English. Once again, that's style one for questions. Our first question comes from the line of Vincent Yu from Needham & Company. Please go ahead.
spk04: Thanks, management, for taking my question. I have three questions. The first question is, Can management help us understand the impact on our client base as a result of regulatory crackdown on sectors such as online education platforms? My second question is, in terms of our video content initiative, do we see any potential impact also from regulation on our video that could pose negative impacts on our ability to monetize these contents? And third question is, Can management help us break down about top three customers in terms of their respective industries? Thank you.
spk03: Okay, let's answer the second question first, which is about the video.
spk05: Actually, the video, as a form of information, we noticed that the video is getting more and more And then because it greatly reduces the threshold of this content, and then it is more efficient in broadcasting, it can allow users to see a large amount of information in as little time as possible under more scenarios. So we are very much in favor of short videos as a future media form, a future direction. And then we can also use this form to attract more users, and then have higher content and cultivate more new users. And now we see that the monitoring policy related to short videos is mainly to regulate the broadcasting of those irregular content. We embarked on our short video initiative because there is great potential in this market.
spk03: Short-form video enables users to acquire massive amounts of information efficiently across scenarios in a timely manner. This is better received and more popular, especially among young people. Short-form video as an efficient dissemination channel will empower us to extend our speed and user base, distribute high quality content, and improve user mental capabilities. Regulations on short-form video are mainly focused on appropriate content themes, while our short-form video content focuses on finance, business, and personal growth in line with national guidelines. Therefore, regulations on short-form videos have no impact on us. We believe our content will always be vigorously supported by the country. If it triggers supervision, our short-form videos will roll out in the future.
spk05: In the second quarter, our top three customers for
spk03: Our advertising business were in the e-commerce and internet industry, Alibaba, ByteDance, and Baidu. Revenue generated from each of them didn't reflect a significant proportion of the total advertising revenue. And actually, revenues generated from our top 10 customers only accounted for 37% of total revenue. In addition to the internet and e-commerce industries, our customers also include top tier companies in industries such as artificial intelligence, entertainment and media, automobiles and transportation, and consumption and lifestyle industries. Can you repeat your first question?
spk04: Okay. The first question is about the, in terms of the impact from the regulation crackdown on online education platforms.
spk01: Oh, okay. Okay. Thank you, Vincent.
spk05: Here's the thing. The education industry has a certain impact on the advertising industry, but for us, the education industry is very small in terms of our company's advertising revenue. In Q2 of 2020, our education industry was 1.5%. In Q2 of 2021, our education industry was only 0.7%. In other words, in terms of the education industry, the customer's revenue is decreasing, but the advertising revenue of the company is very, very slight.
spk03: So about the education industry impact on our advertising business. Revenue from the education industry represents only a small proportion of our total advertising revenue. The education industry contribution to advertising revenue is 0.7% in the second quarter of 2021. And for 2020 quarter two is 1.5%. Therefore, the fluctuations in the education industry have a limited influence on our overall advertising revenue.
spk04: Okay, thank you.
spk02: Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Shawn from CICC. Please go ahead. Shawn, your line is open. Please go ahead. Shawn, please unmute and go ahead. All right, we are not getting response. I'll move to the next question from Pei Pei Chu from Industrial Security. Please go ahead.
spk03: Hey, can you hear me? My question is mainly about the advertising business. Could you share some of your main strategies or specific approaches to improve your approval of the online advertising business? And how long should we expect approval to return to the pre-COVID level? Thank you.
spk05: Okay, thank you, Fei-Fei. It should be said that today our Q2 wide sales price has increased significantly. Next, we will mainly increase the sales price through two measures. The first is due to our content influence and brand price. Our viewing price should be rising steadily every year. So this is conducive to our overall sales price increase. In the future, we will continue to improve the quality of our content and attract a lot of marine customers, and at the same time improve our customer base. The second point I think is more important is the rise of short videos. It should be said that it has greatly improved our customer base. For example, recently we received a customer from a technology-based enterprise, and then our single short video revenue has reached 2.25 million. This has caused our short video customer base to rise. I remember when we were in the car, we shared with you that our highest The price of short videos should be more than $1 million. This quarter, we have created a new price of more than $2 million. We believe that the price of short videos will quickly exceed the price of WeChat. This trend will help us to quickly increase the price of our videos, and let our brand influence and our sales quality quickly rise to the status of a day ago, or even more than a day ago.
spk03: Actually, the up-pull of our advertising has increased this quarter compared with the same period last year. For the following half year, we may improve up-pull through two ways. First, due to our content influence and brand premium, our publication price is rising steadily every year, which is conducive to improvement of the up-pull. Therefore, we will continue to improve the quality of content and tracks more customers from various industries. Second, the rise of short video has greatly increased the growth potential of our pool. For example, our recent technology enterprise customer ordered a single short video advertisement and cost 2.25 million RMB. And last quarter, we only have an advertisement that cost 1 million RMB. So short-form video content has natural advantages that its customer unit price has matched or even exceeds the commercial value of our reach out feature account in a short time. So in the future, we will continue to use various modes to help customers upgrade and innovate marketing. In that case, the customer output will rise accordingly with the brand influence and marketing quality. and return to the pre-epidemic situation, even higher the level before the epidemic.
spk02: All right, thank you. Once again, ladies and gentlemen, to ask a question, please press R1 on your telephone. Our next question comes from Shan Zhao from CICC. Please go ahead. Thank you, Guan Yichen. Can you hear me now?
spk05: I will translate myself quickly.
spk02: What is the potential monetization space for the new products such as corporate service new products?
spk03: and what are our strategies of this product in this year and in the long term? Thank you.
spk05: Thank you, Xiaoshan. It's been a long time. In 2020, we launched Qifujian in October. It is the first brand of the same type in China. So far, we have acquired more than 4,000 products in a year. We have covered 15 industries and 200 new industries. We have sold more than 1,000 products in a year. In today's market, with the largest amount of coverage and the most complete and standard platform. We expect the business model to be like this. We will divide it into three types of business models. The first type is the chain of sales. This should be the biggest part of our sales. We will form an effective traffic loop in the platform to make the goods more accurate and effectively reduce the cost of the company's goods. We estimate that this cost should at least help customers reduce the cost of goods by 30%. This kind of business model is a bit like the belief of the car industry or the medical industry. The second is that we will help companies to carry out brand sales management. For example, in the management of the company's account on 9.0, the list of reports and fans, management tools, etc. The third is that we will achieve this kind of member service system, including buyer and seller members, so that we can provide this kind of report regularly and the membership fee will be collected in a fixed amount way. So in this Because we started to launch it in October today, and we did the development and the internal testing. Today, in May, we did the first commercialization test in Q2. We should say that this conclusion is very exciting, and we got very good transfer rate data. This transfer rate is 20%, which is the transfer rate from the read to the paid. It should be said that such a transfer rate is a little more than the transfer rate of the same industry we saw. And the cost of obtaining this clue is the cost of the local industry. Next, we will continue to adjust a few key parameters. Then we will try to commercialize this in a relatively short time. But we still believe that our large-scale commercialization may still be in 2022. Okay, thank you.
spk03: In October 2020, we launched our Enterprise Service Review Portal, the first comprehensive SaaS platform in China. As of today, the review portal has showcased over 7 Enterprise Service applications covering softwares across 15 industries and 20 categories. Additionally, we have received thousands of real user comments and invited dozens of industry experts to join the platform. making the industry most comprehensive and standardized enterprise service decision-making platform. We plan to start with three monetization models. The first one takes commission fees from lead generation, which will account for the most significant part of the overall revenue. We believe our enterprise services review platform will provide our traffic funnel that helps acquire customers more profitably. Meanwhile, we expect the cost of customer acquisition to decrease by at least 30%. This recent model is similar to Auto Home of the automobile industry and Suyang of the medical and beauty industry. The second is to provide marketing management services, such as helping manage enterprise accounts, ranking lists, analytical reports, follow-up management tools on our review portal And the third deals the membership service system covering buy-side and sell-side that offers regular research reports. And this will have a fixed membership fee will be charged. And for this May, we already have a try on the commercialization. So we have a SaaS company that gets some leads, and we have a really high conversion rate that is 20%. So this is a really good result for us and it's better than the competitors in the same industry. And also we acquire the customer at least much more cheaper than the others. So we will find the product system or try some better way of the commercialization path. So the real, the true commercialization path is finally will be launched at 2022.
spk02: All right. Thank you. As a reminder, ladies and gentlemen, to ask a question, please press star 1 on your telephone keypad. Our next question comes from Jay Dawn from PH Capital. Please go ahead.
spk00: Thank you, Mr. Guo. And my question is about the next half of the year's financial plan and the impact of the epidemic on offline activities. Congratulations on the strong revenues. How have offline events progressed in the second half of 2021? And how should we think about academic impact on offline events? Thank you.
spk05: Thank you. In fact, in the second half of the year, we will hold more activities. Usually, we will hold in the second half of the year. Now, we have signed a series of current activities. If the epidemic will recur in the second half of the year, it will certainly affect our current activities. But we will use the country's epidemic policy as the primary consideration factor. We will work with the partners to delay if necessary. There is a possibility that the resurgence of Q3 will have a certain stage impact on our Q3 income. We expect that this kind of impact should be a delay rather than a cancellation. So we expect that if it has an impact, its impact should be reflected in Q3 and will not affect our annual income. In addition, we have seen some So in the second half of the year, we will have a lot of the offline events. But we have already signed some collaboration agreements for offline meetings.
spk03: And the epidemic will have a certain impact on the holding of offline activities. We will take national policies and epidemic prevention control as the primary consideration. We will negotiate with our partner for delay. And so this impact of recent epidemic will have a phase impact on the third quarter. And some activities may be delayed to the fourth quarter, but it's not being canceled. So however, from the perspective of the six months or the next half year, the impact will not be that much great. Also, the epidemic will also have some impact on real economic entities to a certain extent. So probably the online advertising revenue will fluctuate a little bit.
spk02: Thank you. As there are no further questions now, I'd like to turn the call back to the company for closing remarks.
spk03: Thank you once again for joining us today. If you have further questions, please feel free to contact 50KR's investor relations through the contact information provided on our website.
spk02: This concludes this conference call. You may disconnect your line now. Thank you.
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