This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Hello ladies and gentlemen, thank you for standing by for 36KR Holdings Inc's 3rd Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Yang Li, IR Manager for the company. Please go ahead, Yang.
spk06: Thank you very much. Hello, everyone, and welcome to 66KR Holdings' 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 released by visiting the IR section of our website at ir.66kr.com. Participants on today's call will include our co-chairman, CEO, Mr. Da Gangfeng, and our chief financial officer, 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 interpretation. Ms. Wei will then provide details on the company's financial results before opening the call for your questions. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Legislation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's perspective and other public feelings as well with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that 56KR earnings price release and this conference call include discussion of the audited gap financial measure as well as unaudited non-GAAP financial measures. 56KR's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. And please note that all amount numbers are in RMB. I will now turn the call over to our co-chairman, CEO, Mr. Da Gangfeng. Paul, please go ahead.
spk02: Thank you, everyone. Thank you for participating in our 2021 Taiwan Year 3 Group Evaluation Conference.
spk06: Thank you. Hello, everyone. Thank you for joining our third quarter opening conference call.
spk02: In this quarter, as a prominent brand and pioneering platform dedicated to three new economy participants in China, we witnessed the rise of many new industry segments, including hardcore technologies, new consumptions,
spk06: the dual-carbon economy, and the metaverse are hot topics globally. The world of venture capital is as exciting an experience as ever. In particular, the establishment of the Beijing Stock Exchange has created a more favorable capital-raising environment for small and medium-sized enterprises, especially for the specialized, sophisticated, distinctive, and innovative enterprises in China. Against the backdrop of uncertainties related to COVID-19 resurgence and heavy flooding in some regions of China, we observed many industry leaders actively embracing these changes, quickly adjusting to the challenging micro-environments, and courageously undertaking their cooperative social responsibilities. As we have been for the past 11 years, 56K are more in the thick of it during the quarter. building connections and communications for industry participants, and providing our customers and users with a complete ecosystem of innovative service and content.
spk02: In the third quarter, our network traffic remained at a high level. The network's monthly traffic reached 8.491 times, with a 50% increase. We achieved a growth of 14 consecutive quarters. Once again, we witnessed that our content was continuously recognized by users, and it showed the impact of the brand. From content form to site coverage, from product to service, we are gradually evolving.
spk06: In this quarter, our total user traffic remained at a historically high level, with average monthly PVs dropping to 849 million, up 50% year-over-year. This marks our 14th consecutive quarter of PV growth, a powerful testament to our content's continued user renaissance and our growing brand influence. We have expanded our content presentation formats as well as topic coverage to further broaden our well-rounded platform, with unique innovative products and service offerings. In terms of content strategy, our dual focus on PGC and UGC continue to cater to diverse preference and need more user groups needs across multiple formats, including image, text, audio, short form video, and live streaming. In third quarter, 185 pieces of content published on 56 KRs reach official accounts had each accumulated more than 100,000 views. More excitingly, the number of content pieces with readership exceeding 200,000 views experienced strong growth. Up 124% quarter over quarter.
spk02: We also continue to expand our content matrix during the quarter and launch digital 66K or official WeChat accounts dedicated to digital transformation phenomenon and dynamics. In addition, our WeChat accounts appealing to younger users or youth sported a wide array of
spk06: trending topic content, further diversifying our user group. Recently, China's official media outlets, Global Times, picked up our content for the first time. They excerpted and translated our all-use report, White Paper on Staying Up Late, and published to foreign media, which demonstrated our content's rising influence. As of the end of the quarter, we have expanded our high-quality content offerings, have extended to a wider range of areas. including new consumption, auto, real estate, advanced manufacturing, artificial intelligence, new energy, autonomous driving, enterprise services, medical and healthcare, as well as primary and secondary market-related content, all providing the suitability, readability, quality, and usefulness that cater to users' award needs.
spk02: This video has always been a part of our overall development. We believe that from a commercial point of view or from a user-based point of view, The content of the short video format is our new wave engine. In the third quarter, our short video content reached more than 6 million fans and released dozens of video programs. Among them, the interpretation of the development of the Chinese electronic transport operation industry reached more than 10 million viewers on the whole network. On the Bilibili hot list, it became the hot video set 3 of the intellectual area of Dangzhou. The joint Hulang Research Institute also obtained a very high number of views on the video content about the way of life of the younger generation.
spk06: We have been working tirelessly to develop our short-form video business, which we believe will be a new growth engine for both commercialization and user-based expansion. We published dozens of short-form videos during the third quarter, attracting more than 6 million followers across all around online channels. Particularly, our short-form video on in-depth analysis of China's telecommunications industry demonstrated a standout success. Accumulating 10 million video viewers across all channels. It was among Bilibili's most popular videos overall and one of the top three hottest videos in the knowledge section during the week of its launch. We also created videos in conjunction with all users examining the lifestyles of the young generation that attracted an innumerous number of video viewership and create internet bots.
spk02: We also continue to work hard in the live broadcast field. New live broadcast activities with fast hands are well received by users. We use financial hot spots and capital stories as a starting point. We also continue to make positive progress in live streaming. For instance, our new knowledge program launched in collaboration with Kuaishou features finance and business breaking news as well as capital market stories.
spk06: To this end, we live-streamed expert discussions on the latest developments in industries such as commercial aerospace, new e-commerce, new consumption, film and TV entertainment, which engage a broader user base and generated massive attention. To illustrate, the number of new followers gained from a single live-streaming session of new knowledge program was 30 times higher than our average daily ad of new followers, making us an indispensable pan-commercial content provider on Kuaishou.
spk02: Hi, Policy Content requires omni-channel distribution empowerment. This has been our philosophy from day one. In third quarter, we produced multiple blockbuster content pieces. With our trending topic content on Zhihu accumulating over 10 million PVs,
spk06: During the Mid-Autumn Festival, we collaborated with People Daily, the top official media outlet nationwide, to produce an HTML class piece on web exploration, which garnered 50 million total user exposures. In addition to well-known platforms such as WeChat, Weibo, Zhuhu, Douyin, and Kuaishou, we have also been exploring collaborations with new distribution partners. In the third quarter, we cooperated with renowned mobile phone brands such as Huawei, Xiaomi, Oppo, and Vivo to enhance our presence on their display channels and newsfeeds. We helped the cell phone brands expand pan-commercial content and increase our user exposure among target customers.
spk02: The new products are also in the process of advancing. The second-level market products that we launched in the first half of this year will continue to shine in this quarter. After the new agricultural vehicle industry summit held with Xinyue Renquan, We are also making steady progress with our new products. Our secondary market products launched in the second quarter of 2021 continue to perform well in the third quarter. Following the new Energy Vehicle Industry Summit held in partnership with Industrial Securities,
spk06: We teamed up with Zhenwang Hongyuan Securities to host a forum themed as e-commerce 4.1, the rise of national brands in the age of new consumption. In addition, one of our new products, 56KR Capital Pie, featured notable domestic securities companies such as CICC Industrial Securities and Zhenwang Hongyuan Securities to share their investment insights.
spk02: In addition, in the third quarter, we accelerated the content coverage of YuanYuzhou Corridor, to help users overcome YuanYuzhou, and at the same time, continue to update our content. On November 24th, at Shenzhen, the second headquarters of 36G, we used XR ecosystem industry chain, virtual world new social media, AI and virtual people as a starting point, and held the 36G's first industry conference to deal with the closure of the original universe. We connected a large number of users of the original universe track, especially investors who helped the original universe track to have efficient exchanges with companies. At this conference, we also announced that we will collaborate with Tangxun to launch a limited edition digital product and witness with 1,124 new users on November 24th.
spk06: Furthermore, we accelerated our coverage of Metaverse content in the third quarter. On November 24, 2021, at our dual headquarters in Shenzhen, we held 66KR's fourth Metaverse-focused industry conference, leading with discussions on extended reality, ecosystem, and value chain, new social networking in the virtual world, and AI and virtual beings. The conference attracted a large audience cohort of MatterWorks followers and facilitated connections and communication between MatterWorks investors and companies. At this conference, we also announced that 66KR will launch limited edition digital collectibles in collaboration with Tencent's Guangzhou app. 1,124 Lockheed users will receive a digital collectible to commemorates November 24th, an important milestone in our evolution. Today, we start our journey into the exciting new MetaWorks concept.
spk02: After successfully exiting the Asian market, we will continue to expand our overseas business. In the third quarter, we will successfully enter Europe and Auxin regions, assist more new economies and technology companies to expand the international market, and at the same time help overseas companies enter Asia. On a larger scale, we will promote business cooperation between Asia and overseas regions. After our content was received by Pengbo Central,
spk06: On the international front, we continue to explore overseas business opportunities through our subsidiary 66KR Global. In addition to Southeast Asian markets, 66KR Global made its first foray into Europe, Australia, and New Zealand in the sub-quarter. These horizon expansions are set to facilitate more new economy and tech companies entry into new international markets. It will also help boost overseas companies' access to Asian markets, thus promoting deeper commercial collaboration between Asia and the rest of the world. Moreover, following our proprietary content inclusion on the Bloomberg terminal, 66KR Asia content was also adopted by Dow Jones, a testament to our growing influence beyond China.
spk02: To sum up, Sanliu He has already suggested that Covering the products and services of companies that are developing their lives throughout the week, from the PR exposure of the first companies, to the financing, to the management of the brand after the listing, to the management of the customers, and even the right-of-way connection, and the business out of the sea, we help many unique companies, TMT giants, investment institutions, government, traditional enterprises, and C-level customers, and other six major customer groups, to carry out efficient connections and services. Based on the layout and continuous development of the entire industry chain, we have established a leading position in the field of new and innovative services. The brand influence of Cyanuclid is recognized by the leaders of all industries and industries.
spk06: In summary, we are delighted to see 66KR's product and service offerings have covered the entire enterprise lifecycle, spanning from assisting startups in PR exposure, investment financing, pre-listing consultation, and IPO. Through that follows post-IPO such as raising stock visibility and building shareholder value, supporting customer acquisition, government incentives, and awards expansion. We have helped six major customer communities consisting of unicorn and startups, TNT Giants, investment institutions, local governments, traditional enterprises, and individual clients connect and succeed. On top of our full-scale presence and sustained development efforts, more and more entrepreneurs and industry leaders value our brand influence, and we have firmly established our position as a leading new economy service provider.
spk02: Next, I would like to share with you the latest developments in the industrialization aspect. The three major main businesses continue to perform well. The innovation business is doing well.
spk06: Next, I'd like to share our latest updates with respect to commercialization. During the third quarter, our three major business segments each delivered solid performance, and our innovative business continued making studies rough.
spk02: In the third quarter, our three major business segments each delivered solid performance, and our innovative business continued making studies rough. In the third quarter, our three major business segments each delivered solid performance, and our innovative business continued making studies rough.
spk06: Despite multiple halvings in the third quarter, including COVID-19 resurgence and macroeconomic uncertainty, our advertising business demonstrated its resilience and vitality, achieving solid year-over-year growth in each of the number of advertising customers and average revenue per customer.
spk02: On the one hand, we continue to explore the innovative form of corporate marketing and explore effective ways to improve the number of customers and customer base. For example, in this quarter, we will help Intel promote the Evo platform notebook computer in the form of short videos, so that complex technologies can be exported to the audience in a front-line language and be recognized by the entire Intel team. This collaboration with Intel creates a new record for short video marketing model customer base. I believe that in the future, we will be able to effectively use the short video model to improve our customer base, and we will also cooperate with more international and domestic support platforms.
spk06: We have taken a two-fold approach to our advertising business. First, we leverage our content and brand influence to gain market recognition. Second, we continuously explore innovative forms of company promotion to efficiently increase both the number of advertising customers and average revenue for advertising customers. For instance, in the third quarter, we helped Intel promote its Evo platform-based laptops with smartphone videos. Our short-form video team brought the complex technology to life with simple, easy-to-understand, visible language, earning accolades from Intel's global team. This collaboration with Intel set a record in our average revenue per advertising customer in a stand-alone short-form video marketing campaign. We believe that a short-form video model can support us to raise the uphold and draft commercial collaborations with more prominent international and domestic brands.
spk02: In addition to the short video mode, we have also been actively exploring how to improve the brand's performance through live broadcasts. This quarter, our live broadcast cooperation with Huawei is a new mode of exploration. We will explore the live broadcast show with a sense of variety. We will help C-end users understand the complex and difficult technology through a fun way of discussion. At the same time, Intel will also collaborate with its channel customers to do a live broadcast interview with 36 guests to promote Intel technology in the specific application of the customer company. This innovative live broadcast format will also bring a certain contribution to our commercialization.
spk06: In addition to short-form video, we have also been proactively exploring ways to better empower various brands through live streaming content. Our collaboration with Bobby Froud in the third quarter is a perfect example. By turning a live streaming technical discussion into what looked like a variety show, the new format utilized fun-filled discussions to present complicated and up-core technologies, facilitating better user comprehension. Meanwhile, we cooperated with Intel to add what has its corporate clients' practical applications of its technology via live streaming interviews with its China partners. This innovative form of live streaming in turn boosts our commercialization capabilities.
spk02: We have also completed a number of commercial orders with the Hulang Research Institute, which is a major user of the young generation. For example, we help Zhihu to promote the new program, help iQiyi to spread the concept of a new program, and deepen the brand's appearance to the outside world. Although the Hulang Research Institute has not been established for a long time, it has already begun to produce commercial orders.
spk06: During the third quarter, we also attracted new advertising partners through our all-use WeChat account. For example, we worked with Jewelhood to advertise its new columns and help ITE promote their new video programs, further amplifying each brand's presence in the marketplace. All use is terribly as an advertising partner just shortly after its launch, while it is our Validates that our influence on younger generation has well received and recognized by branded customer. Turn into our enterprise value ID services, we maintain steady performance during the third quarter while making meaningful progress in innovative new service offering.
spk02: Our third quarter offline activities include
spk06: the September China Investor Future Summit, which achieved double success in terms of revenue influence. We invited a distinguished group of mainstream investment institutions to discuss on a set of leading industry sectors, including new consumption, hardcore technology, medical care, carbon neutralization, and enterprise services. We also selected 66 extraordinary investors under the age of 66. Proprietary IP 66 and 66 delay. With our unique IPs, we effectively establish our own VC investor community while also enhancing users' thickness and repurchase rate.
spk02: In this group, we try to break through the past activity type of political service, using the innovation and entrepreneurship competition as the core of the innovation and entrepreneurship service model, deepening the end-of-the-line and industry big companies' top customers. For example, we co-organized the developer innovation competition in Biadi, and created countless smart car related applications,
spk06: We also expanded the boundaries of traditional value-added services with our new innovation and entrepreneurship competition service model targeting government clients and large-scale industry leaders. For example, we collaborated with BYD to optimize its developer innovation context. which attracted numerous applications from talented developers and produced countless new solutions for the smart automobile industry. This contest was BYD's first step in the direction of opening up the innovation process, supporting developers to access BYD's resources and its smart open ecosystem with a vending arrangement.
spk02: On December 13, we will hold a one-year-old WISE New Energy Development Conference in Shanghai. Thank you very much. Thank you very much.
spk06: On December 13th, we will hold our annual WISE New Economic News Conference in Shanghai with era of hot 4 as we've seen. The conference will feature a comprehensive summary and review of the technology and venture capital industry in 2021. With heavyweights from the venture capital world, unicorns, and other well-known companies, At the same time, academia and regulatory authorities will be gathering to share their views. Luckily, we are collaborating exclusively with Douyin to promote this conference. Douyin will provide a high-level full-platform cost promotion resources package and traffic support, including KOL endorsements. With 66KR's leading position in the pan-commercial content industry, our premium content matrix and Douyin's massive traffic We believe that this year's WISE Conference will again be a major industry influencer and enhance our brand's thickness and commercialization capability.
spk02: In addition, the information service is also an important part of the company's increased service. The 36 Research Institute helps B-end and B-end customers to complete customized industry research, and at the same time, according to customer needs, carry out the output of customized solutions. At the company's end, we jointly published a smart travel report with i88, helping the self-driving Xiaomi and other leading companies to complete industry research reports. At the government's end, We provide research reports on recruitment, new area development plans, and provide government with better role support for Chongqing, Shenzhen, Hunan, and other local governments. At the end of November, the 36 Research Institute was successfully joined by the People's Data Institute, Boston Consulting, Kaidu Group, Zhongxin Construction Research Institute, China International Digital Business, Jiliang Engine, etc., and the Sonshu Research Alliance, which fully demonstrates our research capabilities and is recognized by all the specialized institutions.
spk06: In addition to offline events, consulting services is also an important component of our enterprise value-added services. 66KR Research Institute assisted government and corporate clients in targeted industry research and provides customized solutions based on client needs. On the corporate side, we released a smart mobility report in collaboration with Alibaba and helped leading high-tech companies such as Badgance and Xiaomi issue industry research reports. On the garment side, we produce research reports on investment promotion and new development zone construction planning for local garments in Chongqing, Shenzhen, and Hunan, among others, providing enhanced decision-making support. Notably, in late November, our 66KR Research Institute became a member of the Arithmetic Research Alliance, which is composed of the People's Data, Boston Consulting Group, Kenta Group, City Construction Investment Research Institute, China international e-commerce and giant engine. Being part of this alliance is a testimony to our professional research capabilities with recognition from professional authorities.
spk02: Next, I would like to focus on our new business, the latest progress of 36G QiFu rating. Since the launch in August last year, 36G QiFu rating has been a platform for creating the first digital transformation-designed QiFu rating platform. By the end of September, 36G QiFu rating and successfully received nearly 5,000 software applications, further enhancing the platform's full potential.
spk06: Next, I'd like to share the latest updates on our new business, 66K Enterprise Service Review Portal. Since its launch in August 2020, we have made continuous efforts to expand it into China's top enterprise service review platform, tailored to companies' digital transformation needs. As of the end of September 2021, we have grown the platform to cover nearly 5,000 software applications, Greatly broadening its DevOps city and inclusion.
spk02: At the same time, in September, we also completed a new function of full online. The new function of this online makes it possible for business owners to independently manage product information, publish content, check for clue data, and contact with ideal users. As of the third quarter, there have been nearly 400 business owners who have entered the 306G platform. Among them are Tengxun, Jindie, JinShanWenDang, Besson, and other famous manufacturers. The online of the last quarter means that the user from the content manufacturer to the operating platform.
spk06: We also launched new features for the review portal in September, allowing merchants to manage product profiles, publish content, view list data, and contract prospective customers. As of the end of the quarter, close to 400 merchants have established a presence on the enterprise service review portal, including well-known manufacturers such as Tandem, Tundi, King's Soft Office and BayZen, the merchant-oriented features essentially transform us from a content-producing platform to a marketplace platform as more merchants and third-party participants are contributing content to our platform, which is facilitating our seal-up efforts and commercialization.
spk02: From the data table, our Qifu rating platform has an average daily revenue increase of 109%, and an average rating increase of 57%. This is the effective result of our expansion of platform software and rich content products. In the third quarter, we released a research report on the theme of SCRM and marketing design. In the report, the demand for product capital is 10 times higher than the average. Compared to the previous quarter, the average capital transfer rate of Q3 platform was 0.08% and changed to 0.24% and increased by 200%. Now, the accurate cash flow transfer rate of Q4.0 has doubled the traffic flow of the apartment. I believe that with the further improvement of the platform,
spk06: Looking at operating data metrics, average daily active user increased by 109% exponentially, and the number of review comments increased by 57% substantially in this quarter, primarily due to our platform's software expansion and constant metrics enrichment. During the quarter, we published a research report on social customer relationship management private domain traffic operation, and marketing design, which showed that customers of the products covered in our report were an average of 10 times more willing to leave their personal information on the portal than customers of products not covered in our report. In third quarter, the average conversion rate of potential customers that provided their personal information rose from 0.08% to 0.24%, a 200% increase. To date, the conversion rate for leads generated on the review portal is rightly twice than that of leads from public domain traffic. We are convinced that future refinement of the platform will improve customer acquisition efficiency for enterprise and help them better optimize their products based on the growing number of real user reviews.
spk02: Finally, it's our subscription service. As a witness, observer, and server of the new economy development in the 11th year of Shenzhen's new economy industry, we hope that through knowledge supply and deep training, Last but not least, let's turn to our subscription service. Throughout our 11-year history, we have both observed and provided exceptional service when it comes to distance business development.
spk06: Now we hope to leverage our expertise and customized service offerings to Expertise, Entrepreneur's Empowerment. To this end, we continue building our comprehensive training system for enterprises and individual entrepreneurs during the third quarter, recording 52% subscription revenue growth with a 14% year-over-year increase in the number of institutional customers and a 48% year-over-year increase in average revenue per customer.
spk02: Based on our experience in the business field, we have been dealing with more short-term and long-term users and provide a complete knowledge payment and marketing training system. These users can conduct specialized learning in the field of online management, financial, financial, and intellectual property management through the opening class. For the B-level users, we have launched a number of specialized training projects. At the end of October, we strongly promoted the creative class, providing creators with speedy recovery, and helping enterprises become a learning communication platform for industry leaders.
spk06: Harnessing our commercial experience, we have been working tirelessly to refine our training system as well as our premium knowledge content library for institutional and individual subscribers. We offer online courses to individual users to improve their professional expertise in management, personal finance and sales, and career development. We also offer various specialized training programs for institutional subscribers. For example, we launched Venture Capital Class at the end of October to provide a learning platform that accelerates Enterprise Empowerment helps enterprises to become industry frontrunners.
spk02: The change of times is rapid. Even with the impact of the pandemic, the world has never stopped, stopping innovation and growth. As the witness of this era, Sennheiser is very lucky to accompany the growth of many Internet companies. Next, we will continue to witness the arrival of digitalized hard technology and the era of the original universe. The establishment of Sennheiser will provide better capital market environment for these specialized companies in the track. Open a bigger growth channel. In an era of rapid technological change, despite the involving impact of COVID-19, business will never stop innovating and growing. As a witness to this era, CP6KR has been fortunate to accompany a multitude of Internet companies on their development and expansion journey.
spk06: and we will continue to grow alongside them as we bear witness to the advance of the age of digitalization, hardcore technology, and metaverse. The Beijing Stock Exchange will provide a better capital environment for specialized, refined, differentiated, and innovative companies, facilitate their growth with a broader playing field, and raise the ceiling of the new economy service sector. As an outstanding brand and innovative platform serving new economy participants, we believe that 66KR is well-positioned to capitalize on trends in the new era ahead and unlock commercialization potential as we empower more and more new economy enterprises. We are confident that we will help our industry partners ride this wave to future success.
spk02: Next, I will give the floor to our chief financial officer, Wei Lin. He will introduce the main performance of financial aspects.
spk06: We will now turn the call over to our CFO who will discuss our key financial results.
spk05: Please go ahead, Lynn. Thank you, Pell, and hello, everyone. We are very pleased to have achieved another quarter of solid financial results across all of our business segments, despite multiple headwinds, including COVID-19 resurgences and microeconomic challenges. As Pell mentioned earlier, our advertising revenues grew steadily year over year in the third quarter, with increases in both the number of customers and the average revenue per advertising customer. Also, thanks to our relentless efforts to provide customized and innovative enterprise value-added services, revenues from this segment increased by 57% sequentially. Notably, our ongoing subscription product optimization resulted in a strong 52% year-over-year increase in our subscription services revenues in the third quarter. As we continue to shift our resources and focus on higher margin businesses, we saw continuous improvement in both gross profit and gross profit margin, which expanded to 56.1% from 37.9% in the same period of last year. I would also like to highlight that we ended the third quarter with a very strong cash position as we achieved positive cash flow from operations. Going forward, we will continue to solidify our industry presence and expand our monetization approaches to cultivate sustainable long-term growth. Now I will walk you through more details of our third quarter 2021 financial results. Online advertising services revenues increased by 4% to RMB 53.4 million in the third quarter of 2021 from RMB 51.1 million in the same period of 2020. The increase was primarily attributable to more innovative marketing solutions we provided to our customers. The number of advertising customers and the average revenue per advertising customer both achieved growth in the third quarter of 2021. Enterprise value-added services revenue were RMB 22.5 million in the third quarter of 2021 compared to RMB 66.4 million in the same period of 2020. The decrease was primarily due to our continuous shift in focus towards higher margin businesses. Starting from the first quarter of 2021, we ceased to act as a principal in certain low-growth margin businesses and acted solely as an agent. As a result, revenues of such businesses were recognized on a net basis from the first quarter of 2021 onwards. To increase comparability of offering results and help investors better understand our business performance and operating trends, we introduced gross transaction value as a supplemental metric to describe our business. Gross transaction value of enterprise value-added services was RMB 66.3 million in the third quarter of 2021, compared to RMB 66.4 million in the same period of last year. In particular, our consulting services revenues and offline events revenues increased by 14% and 72% year-over-year respectively, reflecting our expansion efforts in enterprise value-added services have gradually paid off. Subscription services revenues were RMB 9 million in the third quarter of 2021, representing 52% growth compared to RMB 6 million in the same period of 2020. The increase was primarily attributable to our continuous efforts to offer high-quality subscription products to our subscribers. Total revenues were RMB 84.9 million in the third quarter of 2021 compared to RMB 123.5 million in the same period of last year. Taking into consideration of the aforementioned change in revenue recognition for our enterprise value-added services, where there was an RMB 43.1 million variance between net revenues and gross transaction value, investors can actually find out that our overall business trend is upward and demonstrated solid year-over-year growth on a comparable basis. Cost of revenues were RMB 37.3 million in the third quarter of 2021, compared to RMB 76.6 million in the same period of 2020. The decrease was primarily due to our continuous shift in focus towards higher margin businesses and recognition of certain revenues on a night basis. Gross profit was RMB 47.6 million in the third quarter of 2021 compared to RMB 46.8 million in the same period of 2020. Gross profit margin was 56.1% in the third quarter of 2021 compared to 37.9% in the same period last year. The increase was again primarily due to our continuous shift in our focus towards higher margin businesses as well as recognition of certain revenues on a net basis. Operating expenses were RMB 80.3 million in the third quarter of 2021 compared to RMB 63.2 million in the same period of 2020. Sales and marketing expenses were RMB 35.5 million in the third quarter of 2021 compared to RMB 31.6 million in the same period of 2020. The increase was primarily attributable to an increase in payroll-related expenses. G&A expenses were RMB 13.9 million in the third quarter of 2021, compared to RMB 20.5 million in the same period last year. The increase was primarily attributable to an increase in the allowance for credit losses and payroll-related expenses, partially offset by the decrease in share-based compensation expenses. Research and development expenses were RMB 13.9 million in the third quarter of 2021, compared to RMB 11.2 million in the same period last year. The increase was primarily attributable to the increase in payroll-related expenses as we bolstered our research and development capabilities. Share-based compensation expenses, recognizing cost of revenues, sales and marketing expenses, research and development expenses, as well as G&A expenses, totaled RMB 4.9 million in the third quarter of 2021, compared to RMB 4.6 million in the same period of 2020. Other income was RMB 1.5 million in the third quarter of 2021, compared to other income of RMB 2.5 million in the same period of 2020. The decrease was primarily attributable to a decrease in the amount of government grant received in the third quarter of 2021. Income tax expenses were RMB 14,000 in the third quarter of 2021 compared to income tax expenses of RMB 21,000 in the same period of last year. Net loss was RMB 31.3 million in the third quarter of 2021 compared to RMB 14 million in the same period of last year. Non-GAAP adjustment net loss was RMB 26.4 million in the third quarter of 2021, compared to RMB 9.3 million in the same period last year. Net loss attributable to 36 KR Holdings owner shareholders was RMB 30.5 million in the third quarter of 2021, compared to RMB 14 million in the same period last year. Basic and diluted net loss per share were both RMB 3 cents in the third quarter of 2021 compared to RMB 1.4 cents in the same period of last year. As of September 30th, 2021, the company had cash equivalents and short-term investments of RMB 178 million compared to RMB 149.6 million as of June 30th, 2021. The increase was mainly attributable to cash inflow from 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 may repurchase up to a total of 1 million of its American depository shares, each representing 25 Class A honorary shares. As of September 30, 2021, the company has repurchased approximately 786,000 ABSs, for approximately RMB 17.5 million under this program. This concludes our prepared remarks today. We will now open the call to questions.
spk03: 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 keypad and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. Once again, it is star followed by 1 on your telephone keypad to ask a question. For the benefit of all participants on today's call, if you wish to ask your question to the management in Chinese, please immediately repeat your question in English. Once again, it is star 1 to ask a question. We have the first question coming from the line of Vincent Yu from Needham & Co. Please go ahead. Our first question comes from the line of Vincent Yu from Needham & Co. Please go ahead. Pardon the interruption. Hi, the line of Vincent Liu. Your line is open. Please ask your question.
spk06: Vincent, we cannot hear you.
spk05: Operator, maybe we go to the next question, please, and we can go back to Vincent later. Thank you.
spk03: Certainly. The next question comes from the line of Jing Cheng from CICC. Please go ahead.
spk07: Hello, can you hear me? Very well. I have two questions here. I'll ask the Chinese first, and then I'll translate it later. My first question is, Enterprise value-added services cover many items. Which one contributes more to the company's revenue and will be the main growth point in the future? And the second question is, under the current macro environment, how is the advertising business in the fourth quarter? Thank you.
spk05: Hi, Changjin. Thank you for your question. This is Lynn. I will answer your first question, and then Mr. Fung will give you more power on the growth strategies and the second question. Yes, you are correct that our enterprise VAS revenues include basically three subcategories, namely integrated marketing, consulting, and offline events. From the third quarter perspective, you can see that our biggest component for this enterprise VAS revenue actually is consulting and followed by offline events. Consulting services and offline event services account for around 60% and 30% of the total enterprise VAS revenue, respectively. And these two revenues also grow on a very fast pace. For example, the consulting services grow actually 14% year over year, and the offline event revenue grew further, even faster, with a 72% year-over-year growth rate. So going forward, I think in the near-term to mid-term, this tool will be the driver for our enterprise VH revenue. And certainly, we have been mentioning that our enterprise service review portal a few times, and this is a new, very innovative and promising service that we have been incubating since last August. And this quarter, as Paul mentioned, this business has achieved a very good performance on all kinds of operating metrics. This business hasn't been really commercialized, only with a very minimal quantization. But in the future, I think once it's ready and once we commercialize this product, it will be another very big and important growth engine for us. And then Mr. Feng will give more color on your second question. Thank you.
spk02: Thank you. Future virtual consultations and current activities are the main driving forces of our corporate services. Corporate services are mainly aimed at the private and government markets. In this direction, we already have a mature business model that can be diversified and developed. Next, I believe we will continue to optimize and innovate, improve the product and unit price, and at the same time increase the number of customers in the industry. In addition, we will play an advantage in the regional companies in the 12 provinces to continue to expand our down-to-earth market. At the same time, we are also continuing to build and optimize our business. I believe the future will be one of the important growth points for our corporate service. This season, our platform already has 15 major categories. So the main growth drivers of our enterprise value ID service will be consulting and offline events. Our main target clients are enterprises and governments, and we already
spk06: a mature and scalable business model. We will continue to optimize and innovate products and service offerings to achieve a higher average revenue per customer. In addition, we will continue to increase the coverage of new industries and new segments to expand our customer base. Our local sites will also play to their regional advantages and penetrate the markets of lower tier cities. It is worth noting that our newly incubated enterprise service review portal is in a process of continuous optimization. We believe it will become one of our growth drivers in enterprise value ID services. As of the end of the third quarter, our portal had 15 major categories and more than 200 segments. Nearly 400 merchants have established a presence on the portal, increased 109% than the second quarter. The portal has showcased nearly 5,000 sub-web applications. The average BAU increased by 109% sequentially, and the number of review comments increased by 50% sequentially in the third quarter. All of these operational statistics demonstrated the influence of our platform.
spk02: The next question is about an advertising business. In the face of this challenging macroeconomic situation, we remain optimistic and optimistic about the fourth quarter. From Q3, the entire advertising industry has undergone a lot of pressure. We have observed that the advertising business of our main products has slowed down or decreased to a different degree in the past quarter. In contrast, the advertising business of our third quarter, whether it is the number of customers or the price of the products, has increased in the same way and in the same way, and has achieved positive growth. Under such a large-scale industry, I think this is enough to show our brand influence and the recognition of our customers.
spk06: Aimed at challenging microeconomic environments, we remain consciously optimistic about the fourth quarter, In the third quarter, the entire advertising industry was under pressure, as evidenced by the varying degrees of slowdown or decline in our competitors' advertising business. In contrast, despite the overall industry slump, our advertising business achieved solid growth year-over-year and quarter-over-quarter in both the number of advertising clients and average revenue per customer, a powerful testament to our brand influence and customer recognition.
spk02: The main growth points of our advertising business will be expanding the customer base and increasing the average revenue per user. We will consistently increase our coverage of new
spk06: industries, and new segments, which will help expand our user base. In addition, we will keep diversifying our content and advertising formats, such as video and live streaming. Well, we will benefit our customers, which also continue to raise the uproar.
spk02: If there is no large-scale
spk06: COVID-19 resurgence by the end of this year. We believe our advertising revenue for the fourth quarter will continue to grow.
spk07: Thank you.
spk03: Thank you. We have the next question coming from the line of Vincent Yu from Needham and Company. Please go ahead.
spk04: Thank you, Mr. Guan. Can you hear me now?
spk06: Yes, we can hear you now.
spk04: Mr. Guan, can you hear me now? Yes, we can hear you now. I don't know why I couldn't hear you just now. Thank you, Mr. Guan, for accepting my question. I'll ask a Chinese question first. My question is basically like this. First, I want to ask Mr. Guan that uh uh As Mr. Wang mentioned, there is a new track. I would like to ask, from the perspective of the construction of the industry, what are the contribution methods? We believe that these contribution methods will provide support for our revenue in the fourth quarter and next year. On the other hand, I would like to ask about the revenue of the Enterprise Value Added Service. Although we feel that the number of users has dropped a bit compared to last year, in terms of the number of users and R2, in fact, in the past three seasons, it has been showing a relatively strong trend. I would like to ask, in the fourth season, do we think that this can maintain such a trend? In fact, in the past three seasons, on average, every season, the number of users can increase by about 20 or 30. Thank you, management, for taking my question. I have two questions. One is, can management share what are our key revenue contributors in terms of industries? As we are seeing that overall the China online advertising are seeing some weakness due to various reasons. What do we think about our revenues? Does the stream come from this quarter and for the next few quarters? And my second question is on the enterprise value added service. So for the number of enterprise value added service customers, even though they are lower than last year, but for the past three quarters, we are seeing they are steadily improving. Can management share Sunlight, what's the driver behind this improvement and what we see these trends in fourth quarter and next year? Thank you.
spk02: Thank you, Vincent. From a general point of view, our top five industries are consumer life, investment institutions, cultural media, e-commerce, and government institutions. These five industries account for about 57% of our revenue. In advertising, the top five industries are consumer life, social media, e-commerce, Uh, uh, But at the same time, we have a considerable amount of revenue coming from world's top 500 companies and traditional companies, such as Intel, Huawei, Mingde, Heil, Ely, and Meidi. Our wide-ranging customer structure is very balanced and healthy. A stage fluctuation of an industry or a platform will not have a huge impact on us. We will also continue to increase the coverage of new industries and new channels. These new economy participants In terms of total revenue, the top five industries were consumption, lifestyle, investment institutions, entertainment and media, e-commerce and government, totally contributed 57% of total revenue.
spk06: The top five industry for our advertising clients are consumption, lifestyle, social networking, hardware, e-commerce, and entertainment and media, which contributed a total of 91% of our revenue. No matter from total revenue side or advertising business side, we have a very healthy mix of customers. When you mentioned your weakness in the overall China internet sector, Not sure if you mean our education sector and online game sector. These two industries are a very small part of our business and have no impact on us. New companies do make up a considerable portion of our customer base, but a significant part of our revenue also comes from Fortune 500 companies and traditional companies such as Intel, Huawei, CATL, Hire, Ailey, and Media. We have a very healthy mix of our advertising clients, The temporary volatility in one sector or industry segment will not have an impact on us. We will consistently increase our coverage of new industries. Demands for new economy companies emerging from promising industries such as high-end manufacturing and healthcare will be strong and sustained. We will also prep new surveys and products such as videos, live streaming, and under-the-space review portal that we mentioned before.
spk05: Hi, Vincent. For your second question, this is Lin. Actually, I will be answering your second question regarding the enterprise VAS revenue. It's understandable that you got a little bit confused on the number of enterprise VAS customers and APU over there. I think if you compare on an over-year basis, it's not exactly an Apple-to-Apple comparison, because if you find out from our prepared remarks, starting from this year, we're actually changed revenue recognition. Last year, we have a big portion of enterprise VAS revenue, namely integrated marketing revenue. Actually, we recognize that on a gross basis. And this year, we recognize on a net basis. And we even introduced the GTV gross transaction value to be a more comparable indicator. But if you see from our earnings release, it's not exactly comparable if you look at the number of customers in our pool. But you are also correct that if you are looking at a sequential basis from Q1 to Q2 and from Q2 to Q3, both numbers have been increasing very obviously. That's because we have been shifting away our focus from integrated marketing business, which is a low growth margin business, to more higher margin business, which namely consulting services and offline events And I just mentioned on my answer to the CICC analyst that consulting services and offline events account for around 60% and 30% respectively of enterprise VMS revenues. And these two also grow very strongly. One, the consulting services grow 14% year-over-year, and the other, the offline event grows 72% year-over-year. So that's why this sector has been very strong, and we put a lot of emphasis on that. If you are asking about the trend in Q4, I understand you are in the States, so you might not be exactly familiar with the situation in China. In Q4, there are some out-surgences of COVID-19 again, so there might be some impact on our offline events. Overall, I think Q4 is our strong season, so we should still expect growth in this category. But if you look at next year, the full year, 2022, that will be very obvious. This category will be an upward trend again, especially with our new businesses enterprise services review portal, once that's been commercialized, there will be additional streams, revenues coming from these new businesses. That will be in the enterprise VAS category as well. I hope this answers your question, Vincent. Thank you.
spk04: Yes, very clear. Thank you.
spk03: Thank you. Once again, ladies and gentlemen, it is star followed by 1 on your telephone keypads if you wish to ask a question. For the benefit of all participants on today's call, if you wish to ask a question to the management in Chinese, please immediately repeat your question in English. Once again, it is star 1 to ask a question. We have the next question coming from the line of Peipei Q from Industrial Securities, please go ahead.
spk08: I would translate my question. Question management gives us more color on the development of the short video and live stream parts. How much do these two new forms contribute to the advertisement sector? and with how much is put now of these two new forms. Thank you.
spk02: Okay, thank you, Peipei. You can say that from the income of the third quarter, our short-term business and live broadcast business have improved a lot compared to the same period last year. And considering the situation of the entire industry, we are still very satisfied. So the short-term business is actually one of the highlights of this quarter. First of all, we helped a number of iconic customers, including Intel, to broadcast short videos and received very good feedback. In fact, its retail price is also more than 200 million yuan. For us, this is a new record of short video sales retail price. So judging by the sub-quarter revenue, our revenue from short-term
spk06: Video and live streaming both achieved year-over-year growth. So given the considerable macroeconomic challenges faced by the entire advertising industry, we are quite satisfied with our performance. Our short video business continued to be a bright spot in the third quarter. So we helped some customers like Intel promote its product with a short form video feedbacks are great and the over 2 million revenue set a record on the short video advertisement average revenue per customer. So also other customers like IBM and financial also start to cooperate with us. So the short video revenue will be higher than the revenue we earn from the WeChat account. So in the future, we will be able to raise our pool with the short-form video model and thus facilitate our penetration among individual customers, also the younger customers, and expand our customer base. So next, we will let our CFO to answer some of the proportion of the short-form video form of the revenue.
spk05: Hi Peipei, this is Linh. I think the short-form video and live streaming new forms of advertising and grow very quickly now. But in terms of revenue scale, because it's very new, even not yet a year since we launched this business. So right now, the accounts are around maybe less than 10% of total advertising revenue. But the growth rate, again, is definitely outperforming the average growth rate of advertising revenue. So in the future, it will grow and will be a bigger percentage of total advertising revenue in Marathon. Thank you.
spk03: Thank you. As there are no further questions, I'd now like to turn the call back to the company for closing remarks.
spk06: Thank you once again for joining us today. If you have further questions, please feel free to contact 56KR Investor Relations through the contact information provided on our website.
spk03: Thank you. This concludes our conference call today. You may now disconnect your line. Thank you.
Disclaimer