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spk07: Ladies and gentlemen, this is the conference operator. The conference will commence shortly. Please continue to hold. Thank you. Thank you. Hello, ladies and gentlemen. Thank you for staying by. For 36KR Holdings, Inc., first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After management's remarks, there'll be a question and answer section. Today's conference call is being recorded. I'd now like to turn the conference over to your host, Xiaoquan Yan, RR manager of the company. Please go ahead, Xiaoquan.
spk04: Thank you very much.
spk05: Hello, everyone, and welcome to 36KR Holdings' first quarter 2023 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 press release by visiting the IR section on our website at ir.36kr.com. Participants on today's call will include our co-chairman and CEO, Mr. Da Gang Feng, and our CFO, 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 Promotion of the U.S. Private Securities Litigation 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 these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under ethical law. Please note that 36KR's earnings press release and its conference call include discussions of unaudited gap financial measures as well as unaudited non-gap financial measures. 36KR's earnings press release contains a reconciliation of the unaudited non-gap measures to the unaudited gap measures. And please note that all amount numbers are in RMB. I will now turn the call over to our co-chairman and CEO, Mr. Da Gangfeng, Kyle, please go ahead.
spk01: 谢谢,大家好,欢迎大家参加我们2023年第一季度的业绩电话会议。 Thank you, hello everyone, thank you for joining our first quarter 2023 earnings conference.
spk05: As the pandemic's impact faded away, we are delighted to report stellar financial results, delivering double-digit revenue growth in the first quarter of 2023. Our total revenue reached R&D 55.5 million, up 12% year-over-year, with expansive growth across all three of our primary business segments.
spk01: Among them, advertising revenue reached 4,188,000 yuan, which is 11% higher than the previous year, and corporate promotion service revenue reached 1,002,000 yuan, which is 7% higher than the previous year. For our segments, our advertising revenue reached RMB 41.9 million of 11% year-over-year. Our enterprise value-added services delivered revenue of RMB 10.0 million of 7% year-over-year.
spk05: and revenue from our subscription services jumped 36 year-over-year. These achievements across the board are the direct results of our consistent effort in forging ahead with content, products, and technologies, ushering in a new phase of high-quality business growth.
spk01: First, in terms of content, Xandriq continues to strengthen the attention of leading enterprises in the industry and the exclusive coverage of major news events. It provides users with full-fledged professional content. Our number of published articles is also continuing to rise. In this quarter, the number of articles with a reading of 100,000 plus is about 160. Among them, there are a lot of super-headlines with a higher reading rate. For example, how TikTok and Zhou Shouzi face the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in Can we start with content?
spk05: As we expanded our content coverage to new industries, we also continue to direct more attention to leading enterprises and major events, while stepping up our output of exclusive reports, offering users a holistic and insightful professional content experience. The number of our blockbuster articles is on the rise. In the first quarter, we had a around 160 articles with pd's exceeding a hundred and thousand many of which covered heated topics and react have more than 200 000 page views including a story fishing founder baidu an article on tick tock ceo shows the truth fist off with the u.s congress and the piece covering the 24 hours after silicon valley bank collapsed is shaking over 200 000 page views These thought-provoking articles, among others, showcased 36K's leading insights and industry influence. Our enhanced content influence also contributed to significant growth in our user base. As of the end of the first quarter, we had more than 29 million followers, up 22% year-over-year.
spk01: Since the beginning of 2023, we have focused on the development dynamics of the emerging industries such as AI and large-scale models, and quickly launched a new public account, Smart Lens. Since the beginning of 2023, we have been closely following the latest developments in booming industries, including generative AI and large language models.
spk05: In response to current trends, we soon launched a new WeChat account, The Emergence of Intelligence, to provide in-depth coverage on the AI era's transformation across multiple industries. In the first quarter, we also rolled out Power On, a WeChat account focusing on the evolution of the auto industry, enabled by intellectualization and new energy techs. These two sub-verticals have laid a solid foundation for us to advance our ongoing initiative in AI and the EV sector, further enhancing our growth potential. In addition, many long-anticipated industry events are finally underway. 36KR has been on the frontlines, covering the latest developments on-site through multiple channels, such as breaking news, photo galleries, and on-site video reports. Notable examples from the first quarter include CES, MWC, and AWE.
spk01: In April, at Shanghai International Railway Station, we used the first perspective to compare the station, the scene, the vehicle type, the central and external vehicle, the traditional and civilian vehicle, and the driver. Specifically, we leveraged our first-hand perspective of the Shanghai Auto Expo to deliver comprehensive in-depth reports on the exhibition,
spk05: as well as new car model comparisons, various auto enterprises from Holland and abroad, the differentiation between traditional vehicles and EVs, and a broad cohort of industry VIPs. We also took this opportunity to roll out and upgrade to 36KR's auto content matrix with our power-on WeChat account, future auto daily WeChat account, and a WeChat video account titled 36KR Auto. These channels not only deliver rich, insightful content to users, but also allows us to tap into the EV market's strong growth momentum and massive market potential, accelerating our electric vehicle industry coverage to ultimately generate greater revenue upside.
spk01: What is worth mentioning is that in the first quarter of 2023, our short video business continued to grow rapidly with excellent content creation and high-quality production capabilities, and the number of users grew rapidly. The number of fans has surpassed 8 million and has increased by 42%. 36G has also become the pioneer in the entire network, using AI technology to open e-commerce stores. Among them, our AI Taobao store, Lu Wei Mi, has opened. In the hot sale of AI-designed related products, 36G highlights the sensitivity and simplicity of AI technology. In the original video, I used AI to open a Taobao store, showing 36G in the industry, the key parts of pre-application of AI real operations to complete Taobao's opening, including store name, store construction, product design, picture production, and security monitoring, etc. We have greatly improved I also want to highlight our short video business. In the first quarter of 2023, we built upon an outstanding content generating and production capabilities, driving a huge surge in user numbers.
spk05: Our number of short video followers exceeded 8 million, a remarkable 42% year-over-year increase. 36KR became the first ever industry pioneer in using AI technologies to create an e-commerce store throughout the whole process. Its AI top-off store, Lumavik, is in operation now and the AI-designed products are popular. These are convincing demonstrations of our AI tech sensitivity and foresight. For instance, our original video, I opened a Taobao store with AI robots, which features the key steps of 36KS experimental opening of a Taobao store using AI technologies, including naming and establishing the store, product design, image generation, and copywriting. The AI technologies greatly improved efficiency while reducing costs of the store's operations. This original video was listed as hot and trendy by Bilibili, Weibo, and Xiaohongshu, and attracted over 35 million clicks and more than 80,000 likes. It also triggered continued official follow-ups on this topic by Taobao. The organic combination of know-how, expertise, and AI technologies diversified our revenue-generating channels, unlocking more value for our company.
spk01: At the same time, we have made an important step in making video content.
spk05: In addition, we have made major strides in long video content production and recently launched our first talk show, Foreseeing 2033. In the first season, I conducted in-depth interviews with industry consultants, including Robin Li, founder of Baidu, Shi Wang, founder of China Bunker, James Liang, co-founder of Crypto.com Group, Jiang Mingzhu, founder of LeadMoto, and Zheng Yuyou, founder of Dedao, captivating audiences with fascinating insights into the future. Forthin2033 was simultaneously live-streamed on Youku, Beijing Radio and Television Station, and Henan Broadcasting System, marking our success in building a full-coverage content dissemination network with long video platforms and TV channels. These add to our established and growing reach across social media outlets, expanding our content landscape and closed-loop ecosystem, which further enrich the 36KF content ecosystem and encourage synergies among our diverse formats, including long and short-form videos, as well as text, graphics, and audio mediums, unlocking our further growth potential.
spk01: In terms of the product, Zangshui and the creative platform have further improved the notification and outreach capabilities of entrepreneurs and investors, as well as the comprehensive upgrade of our micro-channel programs. It has increased the performance and recommendation of high-tech companies such as專精特新 and other high-tech projects, as well as the operation and promotion of elite projects. Our contact number, number of active competitors, the number of new entrepreneurs, and the key indicators such as platform flow have all been greatly improved. This quarter, Cylindroke's creative platform has also successfully helped more than 5,000 innovative technology companies achieve efficient co-operative financing and provided important support for their status.
spk05: In terms of products, we further improved the 36KR venture capital platform's ability to notify and approach end users, including entrepreneurs and investors in the first quarter. In addition, we fully upgraded its BCHAT mini program by enhancing the operations and recommendations in highly specialized and innovative enterprises, popular deals, and curated portfolios. The platform's key indicators also potentially increased. including matching frequency, number of active investors, and new entrepreneurs, as well as platform traffic. In the first quarter of 2023, the 36KR Venture Capital Platform efficiently connected over 5,000 tech startups with founding investors, providing valuable support for their growth.
spk01: Xiangzhouke has always paid attention to the development of cutting-edge technology. With the rapid development of AIGC technology and its natural compatibility with the content production industry, We actively apply AI technology to our business and integrate it with our content ecosystem and product development. Our focus is to generate images, translate text, and organize information, as well as AI development, which we just mentioned. We actively incorporate AIGC technology, which greatly improves our production efficiency, reduces operating costs, and expands our revenue. The Q5.0 platform also quickly applied AIGC technology to provide users with more accurate and efficient product scenario information and decision support, and through intelligent customer service, effectively realized interaction and communication with users.
spk05: Before I move on to commercialization, let me briefly update you on our AIGC initiative. Over the years, 36KR has always paid close attention to the most advanced frontiers of tech development. As AIGC technologies evolved, we leveraged its natural fit with content production and actively applied generative AI techs to our business, integrating these technologies with our content ecosystem and product R&D. We focused on actively integrating AI text into image generation, text translation, data collection, and other areas, as well as leveraging AI text to open the Taobao store, as I just mentioned, for higher production efficiency, lower operation costs, and revenue increase. The enterprise service revenue platform also quickly adopted AIGC text to provide our users with more precise and efficient overall product information and decision-making support and we implemented chatbot technology for smart, efficient customer service.
spk01: In summary, we fortified our content ecosystem, accumulated product advantages, and equipped our systems with AI techs during the quarter.
spk05: These advances consistently boosted our commercialization capabilities and have enabled our steady revenue growth. Next, I'd like to share the details of our commercialization progress. In the first quarter of 2023, our total revenue increased by 12% year-over-year to RMD 55.5 million, and we achieved growth across all three of our primary business segments. Notably, our advertising revenue reached RMD 41.9 million, up 11% year-over-year. The number of advertising customers grew to 147, up 9% year-over-year. with Apple increasing to R&D 285,000, up 2.3% year-over-year.
spk01: In the first quarter, we continued to win many well-known Internet giants and 500 companies' annual contracts, and the number of small and medium-sized enterprises has also been increasing. Not only that, we also won RUJAMAX, MITA, and Tesla's overseas giants. For example, in cooperation with Meta, we invited experts in the industry's shipping industry, in a way of independent speech and conversation, to discuss the relevant topics related to brand shipping with companies, to connect overseas platforms with domestic companies, and to increase the volume of both brands. In addition, we also continue to strengthen the extension and expansion of the new industry, and the first cooperation with Glee has opened up a space for us to increase the volume of the home industry. In addition, we have also obtained the resupply of famous companies such as Samsung, Haier, Meidi, and Jiuyang. The achievement of these achievements the professional capabilities of TCS36H in advertising and marketing business, and the outstanding capabilities in expanding and deepening customer cooperation.
spk05: Leveraging our deep understanding of customer brand positioning at target audiences, 36KR offers one-stop marketing solutions centered on branding and efficacy. In the first quarter, many tech giants and global 500 companies renewed their annual service contracts with us. At the same time, we also expanded our customer base among small and medium-sized enterprises. On top of that, we received recognition from global giants such as Amazon, Meta, and Tesla for the notable results they achieved from improved brand communications based on our Fortune Brand Globalization Initiative count. For instance, for Meta, we invited experts in global business expansion to conduct speeches and interviews with companies to exchange ideas about brand globalization and connect Chinese companies with overseas platforms lending both sides a bigger voice in brand communications. In addition, we ventured into new industries and joined hands with Glee, creating potential revenue upside in the home appliance industry. We also renewed contracts with top brands, including Samsung, Haier, Medi, and Zhouyang. These achievements confirmed our advertising and marketing expertise, while also demonstrating our strong capabilities in expanding and enhancing constructive partnerships.
spk01: Our short video business has still been outstanding, creating a series of highly popular works, covering ordinary topics and fields, such as technology innovation, business insight, and lifestyle, and receiving the trust and recognition of all industry advertisers. For example, this quarter's short video customers include HuiPu, Huawei, Intel, JingJiu, etc. Among them, in cooperation with Qualcomm, we use behind-the-scenes story digging, G-mini QoL linkage, and many other forms to help customers realize the wonderful presentation, interpretation, and transmission of products, and promote our customer base price to a new high.
spk05: Our short video business also delivered another quarter of stellar results. We launched an array of popular programs covering diverse topics, including technological innovation, business insights, and lifestyle. These programs drew us both praise and recognition from advertisers in various sectors, including our first quarter short video customers, such as Hewlett Packard, Huawei, Intel, and China Jingzhou. Among these programs, we partnered with Hong Kong to help them fully showcase and disseminate Snapdragon products while compelling communication, including behind-the-scenes story and KOL marketing, boosting our contract size to another new record high.
spk01: In terms of business service, as the epidemic ends this week, our offline activities are gradually becoming more and more normal, with a total income of 10.2 million yuan, which is 7% of the total profit. With the promotion of our AI model, With respect to enterprise value-added services, we experienced a rally in various businesses, including offline events and activities as the pandemic receded.
spk05: driving revenue up 7% year-over-year to RMB 10.0 million during the first quarter. Also, to capitalize on the rise of AI large language models, we hosted the all-new WISE 2023 AIGC Summit, sharing ideas with various AI industry giants, including Microsoft, iFlightTech, Baidu, SenseTime, and other leading enterprises, to explore the road ahead for the AIGC industry as next-generation technologies take hold. further enhancing 36KR's industry influence and delivering positive commercialization results.
spk01: In terms of comprehensive marketing services, this quarter, we continue to expand our services, covering original public number, original video platform, KOC business, and other diversified service forms, promoting the continuous growth of the customer community, and gaining revenue from the cooperation orders of well-known companies such as Yati Motors and Huatai Securities.
spk05: On integrated marketing side, in the first quarter, we continue to expand our service content, providing diversified offerings, including agency service operations for both original WeChat accounts and original video platforms, as well as KOC businesses. These new features facilitated the continuous expansion of our customer base. We also entered into cooperation agreements with renowned companies, including Yati and Huatai Securities. spurring an increase in our integrated marketing revenue. As for subscription services, we continue to optimize our membership system and subscription products, potentially increasing our revenue scale by 36% year-over-year. We paid particular attention to the optimization of 36KR Business School, actively developing growth-oriented entrepreneurship courses by improving course design and training programs. while increasing cross-frequency, which roughly raised the approval of our individual subscription services to R&D by 150,000.
spk01: Finally, I would like to introduce the latest progress of the 36G starting point evaluation platform. In this quarter, we continue to improve and optimize the product, supplementing product cases, product pricing, product parameters, and other basic information. In addition, we have completed the product certification of nine core areas such as SCRM, new sales, e-commerce system, and so on, and increased the classification accuracy to more than 95%. In the meantime, we have significantly modified the interface of PC and mobile devices. Through the further optimization of the search function of the reading module, we have improved the convenience and usability of the product in all aspects, and the flow rate of the platform visit has been increased by nearly one times. In addition, we have also used AIGC technology to achieve the automatic production of product introduction and user questions, while increasing the user experience, and increasing the overall operating efficiency by more than 10 times.
spk05: I'd like to share an update on the 36KR Enterprise Services Review Platform. In the first quarter of 2020, we continue to improve and optimize its product library, adding basic information such as product reference cases, pricing, and parameters. We also completed product mapping in nine core areas, including FCRM, new retail, and e-commerce, increasing our product classification accuracy rate to over 95%. Furthermore, while optimizing the platform's functions, we revamped the interfaces of both PC and mobile devices. By further improving the reading module and search function, we made the product more accessible and easier to use. As a result, the conversion rate from platform visits to more profile creation nearly doubled year over year. In addition, we adopted AIGC text to automatically generate product descriptions and responses to user inquiries. With this support in enhancing user experience, our platform's operational efficiency increased by over 10 times year-over-year.
spk01: Through the continuous improvement of product functions, ZANZHE and QIFU rating platforms have been improved in terms of versatility, efficiency, and intelligence. Our all-round data has achieved rapid growth. As of the first quarter of 2023, the number of rating platforms accumulated over 60,000, which increased by 198% in the same period last year. The total number of online products accumulated is nearly 9,000, The number of business owners is more than 1,200, which is twice as much as the increase. On the commercialization level, the 3.6G TIF platform has achieved the stage of the business model in this quarter. Based on the past brand promotion and content marketing, it has further increased its integrated service capability, and formed a new business model that includes clue payment and distribution, and continues to support corporate customers and select decision-making. Our new business model has been realized and has received a refund of 12 large companies. In short, our ongoing product function enhancements have comprehensively improved the convenience, efficiency, and intelligence level of the 36KR Enterprise Services Review Platform, reflected by rapid growth in its operating matrix across the board.
spk05: As of the first quarter of 2023, the cumulative number of reviews exceeded 60,000, up 198% year-over-year. The cumulative number of products on the platform reached nearly 9,000, up 55% year-over-year. And the number of merchants on the platform topped 1,200, doubling year-over-year. In terms of commercialization, this quarter we implemented our next iteration of commercialization For the 36KR Enterprise Services Review Platform, building upon the existing offerings of brand promotion and content marketing, we reinforced our integrated service capabilities and successfully built an all-new business model featuring lead generation and commission-based services, further empowering enterprise customer acquisition and decision-making support. Our new profit-generating model has begun to bear fruit as we have received payments from 12 SaaS enterprises. Going forward, we will further enhance the platform's service capabilities and provide enterprise customers with more secure, efficient services, transforming corporate decision-making by enhancing corporate digital awareness and realizing smartification of the decision-making process.
spk01: In 2023, we will continue to work hard AI, big languages, models, and other advanced technologies are developing and bringing new opportunities for new technologies. 3.6G, with its fine-tuning and forward-looking insight, will directly benefit from this historical development mechanism and achieve three major main businesses in the growth of content, products, and commercialization. As a leading platform for services and renewable energy, 3.6G will continue to focus on the long-term development of core businesses, strengthen the output of high-quality content, and continuously expand the commercial version, explore product innovation, and use new technologies such as AIGC to catch up.
spk05: As we embark on our new journey in 2023, we are excited to welcome a new era of growth and development. The latest wave of AI large language models and rapid development of next-generation innovative technologies provide us with significant catalysts for growth in the new economy sector. As a business database platform focusing visionary insights, 36KR will directly benefit from this historical opportunity and deliver disruptive growth across our three core business segments in content, product, and commercialization. As a prominent brand and a pioneering platform dedicated to serving new economy participants in China, they are gearing up for more impressive growth in our core business segments. We are committed to stepping up our capabilities in the creation of high-quality content, further expanding the depth and breadth of our business, and actively exploring product innovation. We will also tap into new opportunities to advance and apply innovative technologies, such as AIGC, drive revenue growth and enhance our profitability, thereby generating long-term sustainable value for shareholders, customers, and society as a whole. I will now turn the call over to our CFO, Ms. Lin Wei, who will discuss our key financial results. Please go ahead, Lin.
spk16: Thank you, Pao. Now I'd like to walk you through more details of our first quarter 2023 financial results. Please note all amount numbers are in RMB, unless otherwise stated. Total revenues were $55.5 million in the first quarter of 2023. an increase of 12% compared to 49.6 million in the same period of last year. Online advertising services revenue increased 11% year-over-year to 41.9 million in the first quarter of 2023. The increase was primarily attributable to more innovative marketing solutions as well as a gradual recovery of market demand in the first quarter of 2023. Enterprise value-added services revenue increased 7% year-over-year to 10 million in the first quarter of 2023 as we continuously developed various proactive enterprise-level services for our customers. Subscription services revenues increased 36% year-over-year to 3.6 million in the first quarter of 2023. The increase was primarily attributable to our continuous efforts in high-quality subscription models to our subscribers. Cost of revenues was 32.4 million in the first quarter of 2023, compared to 23.9 million in the same period of last year. The increase was primarily attributable to higher fulfillment costs and compound costs. Gross profit was $23.1 million in the first quarter of 2023 compared to $25.7 million in the same period of last year. Gross profit margin was 42% in the first quarter of 2023 compared to 52% in the same period of last year. The decrease was primarily attributable to the resumption of offline events and offline training courses in this quarter, which occurred higher fulfillment costs as well as the cost of some new content we produced this quarter, such as video program for seeing 2033 and so on. We believe this is more of a one-off scenario, and we expect gross profit margin to rebound back to the 50% range as commercialization of this new content kicks in and revenues continue to grow in the coming quarters. Operating expenses were 63.3%. 6 million in the first quarter of 2023, compared to 33.4 million in the same period of last year. Sales and marketing expenses were 31 million in the first quarter of 2023, compared to 29.7 million in the same period of last year. The increase was primarily attributable to the increase in payroll related expenses, partially offset by the decrease in marketing related expenses. P&A expenses were $17.2 million in the first quarter of 2023 compared to negative $10 million in the same period of last year. The fluctuation was primarily attributable to the release of allowance for credit losses of $32.9 million in the same period of last year, which was mainly due to the cash collection from account receivables fully impaired in previous year. Excluding such financial items impact our G&A expenses actually went down by approximately 25% year-over-year, thanks to various cost control measures we rolled out. Research and development expenses were $15.5 million in the first quarter of 2023, compared to $13.8 million in the same period of last year. The increase was primarily attributable to the increase in payroll-related expenses. Share-based compensation expenses recognized in cost of revenues sales and marketing expenses, G&A expenses, as well as R&D expenses totaled 1.9 million in the first quarter of 2023 compared to 4.1 million in the same period of last year. Other income was 1.2 million in the first quarter of 2023 compared to 40.3 million in the same period of last year. The decrease was primarily because the company recognized approximately 38 million of gain arising from disposal of a subsidiary in the same period of last year. Net loss was $39 million in the first quarter of 2023 compared to net income of $32.6 million in the same period of last year. Non-GAAP adjusted net loss was $37.1 million in the first quarter of 2023 compared to non-GAAP net income of $36.7 million in the same period of last year. Net loss attributable to 36 payouts ordinary shareholders was $38.4 million in the first quarter of 2023 compared to net income attributable to 36 PR's honorary shareholders of 33 million in the same period of last year. Basic and diluted net loss per ADS was 92 cents in the first quarter of 2023, compared to net income per ADS of 80 cents in the same period of last year. As of March 31st, 2023, the company had cash, cash equivalents, restricted cash, and short-term investments of $170 million compared to $185 million as of December 31, 2022. The decrease was mainly attributable to the payment of year-end employee bonuses and benefits, as well as small-sized investments were made in the new economy startup company in the first quarter of 2023. This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.
spk07: Thank you. If you wish to ask a question, please press dial 1 on your telephone and wait for a name to be announced. If you wish to cancel your request, please press dial 2. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask questions to management in Chinese, please immediately repeat your question in English. Your first question comes from Jing Tang from CICC. Please go ahead.
spk06: Hello, Ms. Zhang. I would like to ask two questions. First, I would like to ask about the advertising side. Because the 2G group, including 618, is actually looking forward to the advertising business. There may be a further warm-up. I would like to ask about the current recovery of the advertising business. and how does the company look forward to the future of advertising, including the pace of further promotion of the company's advertising business? This is the first question. Then the second question, I would like to ask, in fact, I can see that the previous short video business has been very strong. I would like to ask about the potential for further opening up of short video. What are our plans? At the same time, I also saw that the company has launched a long video for the first time in recent years. How do you see the future content of the company? Thank you. Thank you for taking my questions. I have two questions. The first is how is the advertising business recovering in the second quarter and the 618 e-commerce festival? What is the outlook for the recovery of advertising market and the company's advertising business? And my second question is what are the plans to further develop the growth potential of short video business given its strong growth in the past? And we see we also launch long video content. And how do you consider the exploration of diversified content formats? Thank you.
spk01: Okay, thank you. This year, our online business, I should say, still has a relatively good recovery. So we see that the data is only 11% higher than before. And the number of customers and uptrends are only double growth. With the market warming up, we see that the demand for online is gradually warming up. At the same time, our comprehensive advertising solution has gained the trust and support of more and more customers, and has achieved steady growth in business. For the large-scale advertising business of 618, we feel that it is slightly better than last year. For example, Taobao, Jingdong, and other leading e-commerce companies are also investing on our platform. 618 is mainly an investment policy directed at GMV. Advertisers may prefer to have more traffic platforms, and Sunriker, as an important brand, will invest in certain brands that match. Currently, the e-commerce industry is the third largest industry distributed by our advertisers. As for the second quarter and the current entire advertising industry, we have a cautious and optimistic attitude. We observed that although there is a recovery after the first quarter, the recovery speed is not as fast as we thought. It takes some time to observe. But we believe that 36K, as a participant in the new economy, has unique advantages in this market environment. For example, we saw a stable growth in demand for fast delivery, 3C, and overseas enterprises. We will provide more attractive and differentiated advertising products and services based on the new economy industry
spk05: In the first quarter, we were delighted to see that our advertising business was on the road to recovery, with revenue increasing by 11% year-over-year, delivering growth in both number of customers and our pool. As the market began to pick up, demand for advertising gradually increased. Moreover, our advertising solutions centered on branding and efficacy, earned us the continuous trust and support of our customers, and we delivered steady growth business growth. This year's advertising business was the 618 Grand Promotion, fared better than 2022. For example, e-commerce giants, including Taobao and JD.com, placed advertisements on our platform, as 618 Grand Promotion advertising is mainly GMV-oriented. Some advertisers prefer to utilize platforms with more heavily concentrated traffic. However, as an important brand marketing platform, we successfully channeled the third in our advertising industry. We remain cautiously optimistic about the broader advertising industry in the second quarter and full year 2023. The post-pandemic recovery was not as rapid as expected and needs more time to observe. But for 36KR, as part of the new economy sector, we are uniquely positioned to benefit from our advantages in this market environment. For instance, we observe steady growth in demand from FMCG, 3C companies, and Chinese enterprises expanding overseas. We will provide more appealing, differentiated advertising products and services to support the booming new economy sector. including further enhancing our short video offerings. We believe 2023 presents both opportunities and challenges, and that our advertising business remains on track to achieve solid growth.
spk01: Regarding the second question, regarding our short video business, we have continued to introduce a series of original short video content that covers different topics and fields, such as innovation in technology, business innovation, and lifestyle, to stimulate the interest and resonance of the audience. Our number of fans has surpassed 8 million, which refers to the number of fans of the video. At the same time, we are constantly innovating in the form. Recently, we launched a long video column, See2033. This is an interview program between me and Hanyu. We started a new field of long video platforms and TV broadcast channels. In terms of commercialization cooperation, we provide the brand with innovative solutions. We have received recognition from many Hanyu customers such as Gaotong, Huipu, Huawei, Intel, Jingqiu, etc. One of them is the cooperation with Gaotong. It is also our customer price that is rising again. YICC technology provides the company's content Thank you. You launched a series of original short videos that cover diverse topics, including technological innovation, business insights, and lifestyle, with the goal of fully engaging our users
spk05: By the end of the first quarter, we had over 8 million short video followers. At the same time, we kept launching innovative offerings. Recently, we launched our long video program for SYN2033, a show featuring in-depth interviews with industry tycoons. This was a milestone for us in building a brand new full coverage content dissemination network with long video platforms and TV programs. Regarding our commercial cooperation agreements for creative brand marketing, our work was recognized by high-profile customers from various sectors, such as Qualcomm, Hewlett Packard, Huawei, Intel, and Chinatown. The success of our program supported deeper collaboration with some of our partners, including Qualcomm, Snapdragon, with whom we secured another new record high in terms of contract size. AIGC technology provides us with an excellent opportunity for the company's further diversified exploration of content forms. 36KR applies AIGC technology, such as text generation from graphs, graph generation from text, and video generation from text, and et cetera, which greatly promotes the enrichment of content agency service. As a platform empowering the new economy, 30-page KR will directly benefit from this technological advancement. We will explore diversified revenue generation channels while exploring content ecosystems.
spk17: That's the end of the question.
spk07: Thank you. Your next question comes from? Ling Yin Zhao from SWS Research. Please go ahead.
spk09: 大家好,林姐好。 感谢各位36科的管理层接受我的提问。 我是深蓝会员赵灵一。 那我想针对一个财务问题提问题啊, 就是我们看到公司在QE的毛利率, 同比环比都略有下滑, 那我们怎么理解一季度这个毛利率的变化情况以及 我们怎么去看待这个指标长期的趋势和变化? 我翻译一下。 36 克, first quarter GP margin decreased year-on-year and quarterly. How should we understand that the changes in margin this quarter? And could you share some outlook of long-term changes in GP margin? Thank you.
spk16: Thank you, Ling Yi. That's a really good question. This is Ling. I will address this question. I think there are several reasons resulting in a gross margin fluctuation. First of all, as you know, as the pandemic receded, we are resuming a lot of offline businesses, including offline events and offline training courses. So, obviously, there will occur more offline costs such as hotel venue fees and onsite setup fees and things like that. So, compared to a year ago, there will be more offline costs. As we introduced in our prepared remarks, we also produced some new content columns, namely, you know, foreseeing 2033, the video program, as well as the new EV content metrics, such as power on, et cetera. So those content production also occurs cost where those costs are mostly recognized immediately in this quarter rather than amortized over the year. So, I think as we gradually the commercialization of those new content kick in, the growth margin will definitely come back. And there's another reason, too. The third reason is Q1 usually is our lowest seasonality during the year. So, if you look at our previous years, Q1 to Q4, our revenue will consecutively go up. So, you know, at the coming quarters in the year, as our commercialization kicks in, I think the growth margin will come back to the 50% range level. I think more long-term with our new initiatives, like the long-form video, as well as our 36-year enterprise review platform, et cetera, I think that growth margin will continue to improve in the long-term. So, to sum up, I think the Q1 growth margin is really a one-off scenario rather than a recurring growth margin level. In the coming quarter, that will rebound back. I think this helps to answer your question, Lingyi. Thank you.
spk07: Thank you. Your next question comes from Ruoyin from Sealant Securities. Please go ahead.
spk08: I will translate myself. What measures are we taking to enhance customer sickness or increase customer payment rates? Thank you. Thanks, Ray. I will briefly answer your question.
spk16: In terms of the number of clients and also the customer engagement, we mainly have three major measures rolled out to address that. First of all, our content is our major competence. We continue to expand our service content including our in-depth coverage of top players and advancing the breadth of exclusive reports. Our distinct content covers extensive areas, including AI and hardcore technologies, as well as highly specialized and innovative enterprises, those small and medium enterprises, health care and new energies. So with the content category can continue to expand, our customer base will naturally expand as well. That's number one. And number two, on the product side, we are really very proactive on the production side For example, our short form video as well as our newly launched long form video has become a key component of our product metrics. Those metrics have helped us to not only grow our advertising customer portfolio but also our enterprise services client pool. On the enterprise value added services side, we not only have IP events like WISE, AIGC conferences, things like that, but also we have integrated marketing as well as some other new initiatives including our business school project. We launched some individually high pool training courses and programs in the first quarter. If you look at our individual subscriptions, approval level that has increased significantly to close to 150,000. That's a very remarkable growth. And the third category is we are also expanding geographically and on the sector side. For geographic expansion, we now not only have headquarters in Beijing, but also in headquarters in South China, namely Shenzhen. On top of that, we have 12 regional offices in all major cities in China, like Hangzhou, Chongqing, Hefei, Qingdao, Jiangsu, and those areas. We are actively penetrating into low-tier cities and expand to those markets. Our clients in those areas not only cover the business side, but also on the government side. We work with a lot of local governments to expand their local business. That will grow again our relationship with the government as well as local key accounts there. So that's the three major solutions we're looking at to grow our customer base as well as customer engagement. Thank you for your question again, Yiren.
spk13: Thank you.
spk07: Your next question comes from Pei Pei Chi from Industrial Securities. Please go ahead.
spk03: Hello, Ms. Da. I'm Pei Pei Chi from Industrial Securities. Thank you for accepting my question. My question is related to the layout of AI. I would translate the question. Could you give us more detail about your strategy or plan of using AI? And are you already using any large model in daily content production? And what kind of financial benefits could we expect from this application? Thank you.
spk01: Thank you, Peipei. Today, we have been in extensive contact with various large models, including Baidu's large model and Xunfei's large model. We are applying them in depth. And we are also doing internal integration to integrate all the large models are all combined together to be used by the internal staff. Among them, the things we are already doing, for example, are related to sales. For example, the production of the pictures we made, the translation of our scripts, and the collection and collection of our skills. These aspects have greatly reduced our costs. For example, in terms of increase, I think there are about two levels. The first level is that we are on our main business, including our content production. In fact, we are trying to use the content to assist the interview, If we can succeed in this matter, I think our entire production process will be greatly improved. In addition, after using AIDC, we use it to optimize our customer experience and improve our interaction with users, including our customer questions. In this question, using AIDC has increased our efficiency by more than 10 times. Finally, there are some other applications. For example, we are using AI on Taobao. This is a very influential broadcast content. It's on Weibo's hot search. It's also a very good trial. I think it will have a direct impact on our production and our revenue in several aspects. I believe the media will be more sensitive to ITC itself. At the same time, because of ITC's ability today, OK, thank you. So on the platform, there's a general question on the economy sector. The natural state technology.
spk05: supported by the emergence of intelligent large language models. We are benefited in various ways by seamlessly integrating AIGC technologies with a variety of our business areas. AIGC tech enhances efficiency of our content production while saving costs across the board. For instance, as we integrated AIGC tech into image generation, text translation, consulting, and data collection. We saved on cost, manual effort, and time. Moreover, we were able to provide more personalized fees and user engagement. We achieved overall cost reduction and enhanced the efficiency of our business. 36KR became the first ever industry pioneering using AI tech to create an e-commerce store throughout the whole process. Its AI Taobao store, LumiLink, is in operation now, and the AI design products are available. These are convincing demonstrations of our AI tech sensitivity and foresight. Our original video, I opened a Taobao store with AI robots, which features the key steps of 36KR's experimental opening of a store using AI tech including naming and establishing the store, product design, image generation, and copywriting. This original video also triggered continued official follow-ups on this topic by Taobao. The organic combination of know-how, expertise, and AI tech diversified our revenue-generating channels. The large language models have been the most disruptive technological revelation in recent years, and it may trigger the most extensive industrial innovation ever since mobile Internet. has brought new opportunities and growth momentum to the new economy sector. As a prominent brand and a pioneering platform dedicated to serving new economy participants in China, we will directly benefit from this new evolution. Going forward, we will continue to provide users with high-quality content driven by advanced AIGC technologies and more thoroughly integrate AIGC techs with content production. Thank you.
spk02: That's my question. That's my answer.
spk07: Thank you. Your next question comes from Xiao Kang Chen from Global Securities. Please go ahead. Hello.
spk10: I have a question. I would like to ask about the recovery of the company's online business. Thank you. Since August 3, 2016,
spk05: Going into 2023, we were able to resume hosting offline events and activities as before, in summit forums and fireside chats. A key point is our recently launched all-new summit IP, the WISE 2023 AIGC Summit. As COVID fades away, we managed to optimize our B-School course design and training programs through organizing offline B-School courses Our pool of individual subscription services increased potentially to R&D 150,000. Thank you.
spk07: Thank you. If there are no further questions, I would now like to turn the call back over to the company for closing remarks.
spk16: Okay, thank you all for participating in today's call. If you have any further questions, please feel free to contact our investor relations team. Thank you again.
spk07: This concludes this conference today. You may now disconnect your line. Thank you. you you Thank you. Thank you. you Bye. music music Hello, ladies and gentlemen. Thank you for staying by for 36KR Holdings Inc. First Quarter 2023 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 section. Today's conference call is being recorded. I would now like to turn the conference over to your host, Xiaoquan Yan, RR Manager of the company. Please go ahead, Xiaoquan.
spk04: Thank you very much.
spk05: Hello everyone and welcome to 36KR Holdings' first quarter 2023 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 press release by visiting the IR section on our website at ir.36kr.com. Participants on today's call will include our co-chairman and CEO, Mr. Da Gang Feng, and our CFO, 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 Convention of the U.S. Private Securities Litigation 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 these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under ethical law. Please note that 36KR's earnings press release and its conference call include discussions of unaudited gap financial measures as well as unaudited non-gap financial measures. 36KR's earnings press release contains a reconciliation of the unaudited non-gap measures to the unaudited gap measures. And please note that all amount numbers are in RMB. I will now turn the call over to our co-chairman and CEO, Mr. Da Gangfeng. Kyle, please go ahead.
spk01: 谢谢,大家好。 欢迎大家参加我们2023年第一季度的业绩电话会议。 Thank you. Hello, everyone. Thank you for joining our first quarter 2023 earnings conference.
spk05: As the pandemic's impact faded away, we are delighted to report stellar financial results, delivering double-digit revenue growth in the first quarter of 2023. Our total revenue reached R&D 55.5 million, up 12% year-over-year, with expansive growth across all three of our primary business segments.
spk01: Among them, the advertising revenue reached 4,188 million yuan, which is 11% higher than before. The company's increased service has achieved a revenue of 10.2 million yuan, which is 7% higher than before. For our segments, our advertising revenue reached R&D 41.9 million of 11% year-over-year. Our enterprise value-added services delivered revenue of R&D 10.0 million of 7% year-over-year.
spk05: and revenue from our subscription services jumped 36 year-over-year. These achievements across the board are the direct results of our consistent effort in forging ahead with content, product, and technologies, ushering in a new phase of high-quality business.
spk01: First of all, in terms of content, at the same time as Sinovac covers the circuit, Sinovac continues to strengthen its exclusive coverage of the industry's leading companies and major news events. Sinovac provides full-fledged professional content. Our number of published articles continues to rise. This quarter, the number of articles with a reading of 100,000 plus is estimated to be 160. Among them, there are a lot of super top-notch content with a higher reading rate. For example, how TikTok and Zhou Shouzi faced the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in the face of the U.S. Congress in Can we start with content?
spk05: As we expanded our content coverage to new industries, we also continue to direct more attention to leading enterprises and major events, while stepping up our output of exclusive reports, offering users a holistic and insightful professional content experience. The number of our blockbuster articles is on the rise. In the first quarter, we had a around 160 articles with pd's exceeding a hundred and thousand many of which covered heated topics and reacts have more than 200 000 page views including a story fishing founder baidu an article on tick tock ceo shows the truth fist off with the u.s congress and the piece covering the 24 hours after silicon valley bank collapsed is shaking over 200 000 page views These thought-provoking articles, among others, showcased 36K of leading insights and industry influence. Our enhanced content influence also contributed to significant growth in our user base. As of the end of the first quarter, we had more than 29 million followers, up 22% year-over-year.
spk01: Since the beginning of 2023, we have been focusing on the development dynamics of the emerging industries, such as AI and large-scale models, and we have also launched a new public account, Since the beginning of 2023, we have been closely following the latest developments in booming industries, including generative AI and large language models.
spk05: In response to current trends, we soon launched a new WeChat account, the Emergence Intelligence, to provide in-depth coverage on the AI era's transformation across multiple industries. In the first quarter, we also rolled out Power On, a WeChat account focusing on the evolution of the auto industry, enabled by intellectualization and new energy techs. These two sub-verticals have laid a solid foundation for us to advance our ongoing initiative AI and the EV sector, further enhancing our growth potential. In addition, many long-anticipated industry events are finally underway. 36KR has been on the frontlines, covering the latest developments on-site through multiple channels, such as breaking news, photo galleries, and on-site video reports. Notable examples from the first quarter include CES, MWC, and AW.
spk01: In April, at the Shanghai International Railway Station, we first looked at the station, the scene, the traffic, the central and outer traffic, the traditional and civilian traffic, and the drivers. Specifically, we leveraged our first-hand perspective of the Shanghai Auto Expo to deliver comprehensive in-depth reports on the exhibition.
spk05: as well as new car model comparisons, various auto enterprises from Holland and abroad, the differentiation between traditional vehicles and EVs, and a broad cohort of industry VIPs. We also took this opportunity to roll out and upgrade to 36KR's auto content matrix with our power-on WeChat account, future auto daily WeChat account, and a WeChat video account titled 36KR Auto. These channels not only deliver rich, insightful content to users, but also allows us to tap into the EV market's strong growth momentum and massive market potential, accelerating our electric vehicle industry coverage to ultimately generate greater revenue upside. 实在一提的是,2023年第一季度,我们的短视频业务继续凭借出色的内容原创和优质的制作能力,用户数快速增长,粉丝数量已突破800万,同比增长42%。
spk01: 36G has also become the first to use AI technology throughout the entire network to open e-commerce stores. Among them, our AI Taobao store, RUWEMI, has opened. AI-designed related products are popular, highlighting the sensitivity and simplicity of 36G to AI technology. In the original video, I used AI to open a Taobao store, showing 36G in the industry, first applying AI real operations to complete the key part of Taobao's opening, including store name, store construction, product design, picture production, and security analysis, etc. I also want to highlight our short video business. In the first quarter of 2023, we built upon an outstanding content generating and production capabilities, driving huge surge in user numbers.
spk05: Our number of short video followers exceeded 8 million, a remarkable 42% year-over-year increase. 36KR became the first ever industry pioneer in using AI technologies to create an e-commerce store throughout the whole process. Its AI top-off store, Lumavik, is in operation now, and the AI design products are popular. These are convincing demonstrations of our AI tech sensitivity and foresight. For instance, our original video, I opened a Taobao store with AI robots, which features the key steps of 36KS experimental opening of a Taobao store using AI technologies, including naming and establishing the store, product design, image generation, and copywriting. The AI technologies greatly improved efficiency while reducing cost of the store's operations. This original video was listed as hot and trendy by Bilibili, Weibo, and Xiaohongshu, and attracted over 35 million clicks and more than 80,000 likes. It also triggered continued official follow-ups on this topic by Taobao. The organic combination of know-how, expertise, and AI technologies diversified our revenue-generating channels, unlocking more value for our company.
spk01: At the same time, we made an important step in the production of video content. Thank you. In addition, we have made major strides in long video content production and recently launched our first talk show for Scene 2033.
spk05: In the first season, I conducted in-depth interviews with industry consultants, including , founder of , founder of , James Liang, co-founder of Group, , founder of , founder of captivating audiences with fascinating insights into the future. Foreseeing 2033 was simultaneously live-streamed on , Beijing Radio and Television Station and Henan Broadcasting System, marking our success in building a full coverage content dissemination network with long video platforms and TV channels. These add to our established and growing reach across social media outlets, expanding our content landscape and closed-loop ecosystem, which further enriches 36K's content ecosystem and encourage synergies among our diverse formats, including long and short-form videos, as well as text, graphics, and audio media, unlocking our further growth potential.
spk01: In terms of production, the Sinovac Creative Platform has further improved the notification and outreach capabilities of entrepreneurs and investors in this quarter. At the same time, our micro-channel programs have been fully upgraded, and we have increased the operational and recommendation efforts of high-tech companies such as專精特心 and other high-tech companies. We have achieved significant growth in the number of contacts, the number of active participants, the number of new entrepreneurs, and the key indicators such as platform flow. This quarter, the Sinovac Creative Platform has successfully helped more than 5,000 innovative technology companies achieve efficient investment connections.
spk05: In terms of products, we further improved the 36KR Venture Capital Platform's ability to notify and approach end users including entrepreneurs and investors in the first quarter. In addition, we fully upgraded its VCHAT mini program by enhancing the operations and recommendations in highly specialized and innovative enterprises, popular deals, and curated portfolios. The platform's key indicators also potentially increased, including matching frequency, number of active investors, and new entrepreneurs, as well as platform traffic. In the first quarter of 2023, the 36KR Venture Capital Platform efficiently connected over 5,000 tech startups with founding investors, providing valuable support for their growth.
spk01: We continue to pay attention to the development of cutting-edge technology. With the rapid development of AIGC technology and the natural compatibility with the content production industry, we will actively apply AI technology to the business and integrate it with our content ecology and product development. Our focus is on image generation, text translation, and information organization, as well as the AI development that we just mentioned. We actively integrate AIGC technology, which greatly improves our production efficiency, reduces operating costs, and expands the creation. The Q5.0 platform also quickly applied AIGC technology. Before I move on to commercialization, let me briefly update you on our AIGC initiative. Over the years, 36KR has always paid close attention to the most advanced frontiers of tech development.
spk05: As AIGC technologies evolve, We leveraged its natural fit with content production and actively applied generative AI techs to our business, integrating these technologies with our content ecosystem and product R&D. We focused on actively integrating AI techs into image generation, text translation, data collection, and other areas, as well as leveraging AI techs to open the Taobao store, as I just mentioned, for higher production efficiency, lower operation costs, and revenue increase. The enterprise service revenue platform also quickly adopted AIGC techs to provide our users with more precise and efficient overall product information and decision-making support, and we implemented chatbot technology for smart, efficient customer service.
spk01: 从上,内容生态的丰富,产品智能积累, AI技术的赋能使得我们的商业化能力持续加强, 从而带来稳健的营收增长。 下面我就来具体回顾一下2023年第一季度。
spk05: 我们在商业化方面取得的进展。 In summary, we fortified our content ecosystem, accumulated product advantages, and equipped ourselves with AI techs during the quarter. These advances consistently boosted our commercialization capabilities and have enabled our steady revenue growth. Next, I'd like to share the details of our commercialization progress. 本季度,我们总收入同比增长12%,达到5553万元。
spk01: In the first quarter of 2023, our total revenue increased by 12% year-on-year to RMB 55.5 million, and we achieved growth across all three of our primary business segments.
spk05: Notably, our advertising revenue reached R&D 41.9 million, up 11% year-over-year. The number of advertising customers grew to 147, up 9% year-over-year, with ARPU increasing to R&D 285,000, up 2.3% year-over-year. In the first quarter,
spk01: We continue to win the annual contracts of many well-known Internet giants and over 500 companies in the world, and the number of small and medium-sized enterprises is also growing. Not only that, we also gained the favor of Rojamaxin, Meta, and Katsura overseas giants by creating a brand out of the sea. For example, in cooperation with Meta, we invited experts in the field of business out of the sea in a way of independent speech and conversation to discuss related topics related to the brand out of the sea with the companies. Connecting overseas platforms with domestic companies increases the volume of the brand of both parties. In addition, Leveraging our deep understanding of customers' brand positioning and target audiences, 36KR offers one-stop marketing solutions centered on branding and efficacy.
spk05: In the first quarter, many tech giants and global 500 companies renewed their annual service contracts with us. At the same time, we also expanded our customer base among small and medium-sized enterprises. On top of that, we received recognition from global giants such as Amazon, Meta, and Tesla for the notable results they achieved from improved grant communications based on our Fortune Grant Globalization Initiative count. For instance, for Meta, we invited experts in global business expansion to conduct speeches and interviews with companies to exchange ideas about brand globalization and connect Chinese companies with overseas platforms, lending both sides a bigger voice in brand communication. In addition, we ventured into new industries and joined hands with Glee, creating potential revenue upside in the home appliance industry. We also renewed contracts with top brands including Samsung, Haier, Meidi, and Zhoyang. These achievements confirmed our advertising and marketing expertise while also demonstrating our strong capabilities in expanding and enhancing constructive partnerships.
spk01: Our short video business has still shown its brilliance, creating a series of popular works that cover different topics and fields, such as innovation in technology, business insight, and lifestyle, Our strong video business also delivered another quarter of stellar results.
spk05: We launched an array of popular programs covering diverse topics, including technological innovation, business insights, and lifestyle. These programs drew us both praise and recognition from advertisers in various sectors, including our first quarter short video customers, such as Hewlett Packard, Huawei, Intel, and China Xinjiao. Among these programs, we partnered with Qualcomm's Snapdragon to help them fully showcase and disseminate Snapdragon products. while compelling communication, including behind-the-scenes stories and KOL marketing, boosting our contract size to another new record high.
spk01: In terms of corporate service, as the pandemic ends this quarter, our offline activities are gradually becoming more and more normal. Our total revenue has reached 10.2 million yuan, which is 7% of the total profit. We have launched a new IP summit, the AIGC Industry Development Summit, with Microsoft, Kata Xunfei, With respect to enterprise value-added services, we experienced a rally in various businesses, including offline events and activities as the pandemic receded, driving revenue up 7% year-over-year to RMB 10.0 million during the first quarter.
spk05: Also, to capitalize on the rise of AI large language models, we hosted the all-new WISE 2023 AIGC Summit, sharing ideas with various AI industry giants, including Microsoft, iFlightTech, Baidu, SenseTime, and other leading enterprises, to explore the road ahead for the AIGC industry as next-generation technologies take hold. further enhancing 36KR's industry influence and delivering positive commercialization results.
spk01: In terms of comprehensive marketing services, this quarter, we will continue to expand our service network, covering original public number service, original video platform service, KOC business, and other diversified service forms, promoting the continuous growth of the customer community, and gaining revenue from the cooperation orders of well-known companies such as Yadi Motors and Huatai Securities.
spk05: On integrated marketing side, in the first quarter, we continue to expand our service content, providing diversified offerings, including agency service operations for both original WeChat accounts and original video platforms, as well as KOC businesses. These new features facilitated the continuous expansion of our customer base. We also entered into cooperation agreements with renowned companies, including Yati and Huatai Securities. spurring an increase in our integrated marketing revenue. As for subscription services, we continue to optimize our membership system and subscription products, potentially increasing our revenue scale by 36% year-over-year. We paid particular attention to the optimization of 66KR Business School, actively developing growth-oriented entrepreneurship courses by improving course design and training programs. while increasing cross-frequency, which roughly raised the approval of our individual subscription services to R&D by 150,000. Finally, I would like to introduce the latest progress of the 36G starting point evaluation platform.
spk01: In this quarter, we continue to improve and optimize products, including product cases, product pricing, product parameters, and other basic information. In addition, we have completed product certification in nine core areas, such as RTC-RM, new sales, e-commerce system, and so on, and increased the classification accuracy to more than 95%. At the same time, we have significantly modified the interface of PC and mobile devices. Through the further optimization of the search function of the reading module, we have improved the convenience and usability of the product in all aspects, and the flow rate of the platform visit has been increased by nearly one times. In addition, we have also used AIGC technology to achieve the automatic production of product introduction and user questions. At the same time as improving the user experience, the overall operating efficiency has been increased by more than 10 times.
spk05: I'd like to share an update on the 36KR Enterprise Services Review Platform. In the first quarter of 2020, we continued to improve and optimize its product library, adding basic information such as product reference cases, pricing, and parameters. We also completed product mapping in nine core areas, including FCRM, new retail, and e-commerce, increasing our product classification accuracy rate to over 95%. Furthermore, by optimizing the platform's functions, we revamped the interfaces of both PC and mobile devices. By further improving the reading module and search function, we made the product more accessible and easier to use. As a result, the conversion rate from platform visits to customer profile creation nearly doubled year over year. In addition, we adopted AIGC text to automatically generate product descriptions and responses to user inquiries. With their support in enhancing user experience, our platform's operational efficiency increased by over 10 times year-over-year.
spk01: With the continuous improvement of product functions, Zanzibar and Qifu's rating platform has been improved in terms of versatility, efficiency, and intelligence. Our various business data has also gained rapid growth. As of the first quarter of 2023, the number of rating platforms has increased by more than 60,000, which increased by 198% in the same period last year. The total number of online products has increased by nearly 9,000, which has increased by 55%. With more than 1,200 new business owners, the growth has doubled. In terms of commercialization, the 3.6G TIF platform has achieved a change in the business model in this quarter. Based on the past brand promotion and content marketing, it has further increased its integrated service capability, and formed a new business model that includes clue payment and distribution, and continues to help entrepreneurs and selectors make decisions. Our new business model has been realized, and has received a refund of 12 large companies. In the future, TIF platform will continue to improve the platform service system,
spk05: In short, our ongoing product function enhancements have comprehensively improved the convenience, efficiency, and intelligence level of the 36KR Enterprise Services Review Platform, reflected by rapid growth in its operating matrix across the board. As of the first quarter of 2023, the cumulative number of reviews exceeded 60,000 of 198% year-over-year. The cumulative number of products on the platform reached nearly 9,000 of 55% year-over-year, and the number of merchants on the platform topped 1,200, doubling year-over-year. In terms of commercialization, this quarter we implemented our next iteration of commercialization for the 36KR Enterprise Services Review Platform. Building upon the existing offerings of brand promotion and content marketing, we reinforced our integrated service capabilities and successfully built an all-new business model featuring lead generation and commission-based services, further empowering enterprise customer acquisition and decision-making support. Our new profit-generating model has begun to bear fruit as we have received payments from 12 SaaS enterprises. Going forward, we will further enhance the platform's service capabilities and provide enterprise customers with more secure, efficient services, transforming corporate decision-making by enhancing corporate digital awareness and realizing smartification of the decision-making process.
spk01: In 2023, the development of AI languages, models, and other field technologies is a new opportunity for the new field. 3.6G will directly remember the historical development mechanism and achieve three major main businesses in content, products, and commercialization. As a leading platform for service and renewable energy, 3.6G will continue to focus on the long-term development of core businesses, strengthen the output of high-quality content, and continuously expand the commercial version, explore product innovation, and use new technologies such as AIGC to catch up, promote revenue growth, and improve profitability.
spk05: As we embark on our new journey in 2023, we are excited to welcome a new era of growth and development. The latest wave of AI large language models and rapid development of next-generation innovative technologies provide us with significant catalysts for growth in the new economy sector. As a business database platform focusing visionary insights, 36KR will directly benefit from this historic opportunity and deliver disruptive growth across our three core business segments in content, product, and commercialization. As a prominent brand and a pioneering platform dedicated to serving new economy participants in China, we are gearing up for more impressive growth in our core business segments. We are committed to stepping up our capabilities in the creation of high-quality content, further expanding the depth and breadth of our business and actively exploring product innovation. We will also tap into new opportunities to advance and apply innovative technologies, such as AIGC, drive revenue growth and enhance our profitability, thereby generating long-term sustainable value for shareholders, customers, and society as a whole.
spk01: Next, I will give the floor to our CFO, Wei Lin. She will introduce our main financial performance.
spk05: With that, I will now turn the call over to our CFO, Ms. Lin Wei, who will discuss our key financial results. Please go ahead, Lin.
spk16: Thank you, Pao. Now I'd like to walk you through more details of our first quarter 2023 financial results. Please note all amount numbers are in RMB, unless otherwise stated. Total revenues were $55.5 million in the first quarter of 2023, an increase of 12% compared to $49.6 million in the same period of last year. Online advertising services revenue increased 11% year-over-year to 41.9 million in the first quarter of 2023. The increase was primarily attributable to more innovative marketing solutions as well as a gradual recovery of market demand in the first quarter of 2023. Enterprise value-added services revenue increased 7% year-over-year to 10 million in the first quarter of 2023 as we continuously developed various proactive enterprise-level services for our customers. subscription services revenues increased 36% year-over-year to $3.6 million in the first quarter of 2023. The increase was primarily attributable to our continuous efforts in high-quality subscription models to our subscribers. Cost of revenues was $32.4 million in the first quarter of 2023 compared to $23.9 million in the same period of last year. The increase was primarily attributable to higher fulfillment costs and content costs Gross profit was $23.1 million in the first quarter of 2023 compared to $25.7 million in the same period of last year. Gross profit margin was 42% in the first quarter of 2023 compared to 52% in the same period of last year. The decrease was primarily attributable to the resumption of offline events and offline training courses in this quarter, which occurred higher fulfillment costs. as well as the cost of some new content we produced this quarter, such as video program for seeing 2033 and so on. We believe this is more of a one-off scenario, and we expect gross profit margin to rebound back to the 50% range as commercialization of this new content kicks in and revenues continue to grow in the coming quarters. Operating expenses were 63.3%. $6 million in the first quarter of 2023 compared to $33.4 million in the same period of last year. Sales and marketing expenses were $31 million in the first quarter of 2023 compared to $29.7 million in the same period of last year. The increase was primarily attributable to the increase in payroll-related expenses, partially offset by the decrease in marketing-related expenses. E&A expenses were $17.2 million in the first quarter of 2023 compared to negative 10 million in the same period of last year. The fluctuation was primarily attributable to the release of allowance for credit losses of 32.9 million in the same period of last year, which was mainly due to the cash collection from account receivables fully impaired in previous year. Excluding such financial items impact, our G&A expenses actually went down by approximately 25% year over year, thanks to various cost control measures we rolled out. Research and development expenses were $15.5 million in the first quarter of 2023, compared to $13.8 million in the same period of last year. The increase was primarily attributable to the increase in payroll related expenses. Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, G&A expenses, as well as R&D expenses, totaled $1.9 million in the first quarter of 2023, compared to $4.1 million in the same period of last year. Other income was $1.2 million in the first quarter of 2023 compared to $40.3 million in the same period of last year. The decrease was primarily because the company recognized approximately $38 million of gain arising from disposal of a subsidiary in the same period of last year. Net loss was $39 million in the first quarter of 2023 compared to net income of $32.6 million in the same period of last year. Non-GAAP adjusted net loss was $37.1 million in the first quarter of 2023 compared to non-GAAP net income of $36.7 million in the same period of last year. Net loss attributable to 36 PR's ordinary shareholders was $38.4 million in the first quarter of 2023 compared to net income attributable to 36 PR's ordinary shareholders of $33 million in the same period of last year. Basic and diluted net loss per ABS were both 92 cents in the first quarter of 2023 compared to net income per ADS of 80 cents in the same period of last year. As of March 31, 2023, the company had cash, cash equivalents, restricted cash, and short-term investments of $170 million compared to $185 million as of December 31, 2022. The decrease was mainly attributable to the payment of year-end employee bonuses and benefits as well as a small-sized investment were made in a new economy startup company in the first quarter of 2023. This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.
spk07: Thank you. If you wish to ask a question, please press that one on your telephone and wait for the name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask question to management in Chinese, please immediately repeat your question in English. Your first question comes from Jing Tang from CICC. Please go ahead. Hello, Mr. Zhang.
spk06: I would like to ask two questions. First, I would like to ask about advertising. Because the second quarter, including 618, everyone is looking forward to the advertising business. There may be further warm-up. I would like to ask about the recovery of the current advertising business. And how does the company look forward to the future of advertising? Including the pace of further recovery of the company's advertising business. This is the first question. Thank you for taking my questions. I have two questions. The first is, how is the advertising business recovering in the second quarter and the 618 e-commerce festival? What is the outlook for the recovery of the advertising market and the company's advertising business? And my second question is, what are the plans to further develop the growth potential of short video business, given its strong growth in the past? And we also launched long video content. And how do you consider the exploration of diversified content formats? Thank you.
spk01: Thank you. such as Taobao, Jingdong, etc., will also be invested on our platform. We are focusing on the investment policy of GMV. Advertisers may prefer to invest in more mobile platforms. As an important platform, we will invest in a matching platform. Currently, the e-commerce industry is the third largest industry for our advertisers. As for the second quarter and the entire advertising industry, we have a cautious and optimistic attitude. Although we observed a recovery after the epidemic, the recovery speed was not as fast as we thought. We need to observe it for a while. But we believe that Sennheiser, as a participant in the new economy, has unique advantages in this market environment. For example, we see a stable growth in demand for fast delivery, CNC, and overseas enterprises. We will continue to strengthen our business layout in the short-term economy by providing new products and services that are attractive and differentiated based on the new economy industry that is developing at the same time. We believe that 2023 will be a year full of opportunities and challenges. The business of advertising will still achieve a stable development. Thank you.
spk05: In the first quarter, we were delighted to see that our advertising business was on the road to recovery, with revenue increasing by 11% year-over-year, delivering growth in both number of customers and our pool. As the market began to pick up, demand for advertising gradually increased. Moreover, our advertising solutions centered on branding and efficacy earned us the continuous trust and support of our customers, and we delivered steady growth business growth. This year's advertising business, with the 618 grant promotion, fared better than 2022. For example, e-commerce giants, including Taobao and JD.com, placed advertisements on our platform, as 618 grant promotion advertising is mainly GMB-oriented. Some advertisers prefer to utilize platforms with more heavily concentrated traffic, however, as an important brand marketing platform. We successfully channeled that we now run the third in our advertising industry. We remain cautiously optimistic about the broader advertising industry in the second quarter and full year 2023. The post-pandemic recovery was not as rapid as expected and needs more time to observe. But for 36KR, as part of the new economy sector, We are uniquely positioned to benefit from our advantages in this market environment. For instance, we observe steady growth in demand from FMCG, 3C companies, and Chinese enterprises expanding overseas. We will provide more appealing, differentiated advertising products and services to support the booming new economy sector, including further enhancing our short video offerings. We believe 2023 presents both opportunities and challenges, and that our advertising business remains on track to achieve solid growth.
spk01: Regarding the second question, regarding our short-term business, we have continued to introduce a series of original short-term content, covering different topics and fields, such as technological innovation, business insight, and lifestyle, which also arouses the interest and resonance of the audience. Our number of fans has exceeded 8 million, which means that In addition, we are constantly innovating in our operations, such as recently launching the long video column, See2033. This is an interview program between me and Hanyu Big Car, which opens up a new field of long video platform and TV broadcasting channels. In terms of commercialization cooperation, we provide innovative marketing solutions to the brand, and are recognized by many Hanyu customers such as Gaotong, Huipu, Huawei, Intel, Jinqiu, etc. One of them is the cooperation with Gaotong School, which is also a new height for our customer base. AI technology has provided a great opportunity for further exploration of the company's content form, Thank you. You launched a series of original short videos that cover diverse topics, including technological innovation, business insights, and lifestyle, with the goal of fully engaging our users.
spk05: By the end of the first quarter, we had over 8 million short video followers. At the same time, we kept launching innovative offerings. Recently, we launched our long video program for SYN2033, a show featuring in-depth interviews with industry tycoons. This was a milestone for us in building a brand new full coverage content dissemination network with long video platforms and TV programs. Regarding our commercial cooperation agreements for creative brand marketing, our work was recognized by high-profile customers from various sectors, such as Qualcomm, Hewlett-Packard, Huawei, Intel, and China. The success of our program supported deeper collaboration with some of our partners, including Qualcomm, Snapdragon, with whom we secured another new record high in terms of contract size. AIGC technology provides us with an excellent opportunity for the company's further diversified exploration of content forms. 36KR applies AIGC technology, such as text generation from graphs, graph generation from text, and video generation from text, and et cetera, which greatly promotes the enrichment of content agency service. As a platform empowering the new economy, So this HKR will directly benefit from this technological advancement. We will explore diversified revenue generation channels while exploring content ecosystems.
spk17: That's the end of the question.
spk07: Thank you. Your next question comes from? Ling Yin Zhao from SWS Research. Please go ahead.
spk09: Hello, Ms. Dai. Hello, Ms. Ling. Thank you to all 36 managers for accepting my questions. I am Zhao Ling Yi from SWS. I would like to ask a question about a financial problem. We see that the company's interest rate in Q1 has dropped slightly in the same ratio and in the same ratio. How do we understand the change in the interest rate in the first quarter and the 我们怎么去看待这个指标长期的趋势和变化? 我翻译一下。 36 克, first quarter GP margin decreased year-on-year and quarterly. How should we understand the changes in margin this quarter? And could you share some outlook of long-term changes in GP margin? Thank you.
spk16: Thank you, Ling Yi. That's a really good question. This is Ling. I will address this question. I think there are several reasons resulting in a gross margin fluctuation. First of all, as you know, as the pandemic receded, we are resuming a lot of offline businesses, including offline events and offline training courses. So, obviously, there will occur more offline costs such as hotel venue fees and on-site setup fees and things like that. So, compared to a year ago, there will be more offline costs. And secondly, as we introduced in our prepared remarks, we also produced some new content columns, namely, you know, foreseeing 2033, the video program, as well as the new EV content metrics such as power on, et cetera. So those content production also occurs cost where those costs are mostly recognized immediately in this quarter rather than amortized over the year. So I think as we gradually the commercialization of those new content kick in, the growth margin will definitely come back. There's another reason, too. The third reason is Q1 usually is our lowest seasonality during the year. If you look at our previous years, Q1 to Q4, our revenue will consecutively go up. The coming quarters in the year, as our commercialization kicks in, I think the growth margin will come back to the 50% range level. I think more long-term with our new initiatives like the long-form video as well as our 36-year enterprise review platform, et cetera, I think that growth margin will continue to improve in the long-term. So to sum up, I think the Q1 growth margin is really a one-off scenario rather than recurring. gross margin level. In the coming quarter, that will rebound back. I think this helps to answer your question, Lingyi. Thank you.
spk07: Thank you. Your next question comes from Ray Yin from Sealant Securities. Please go ahead.
spk08: I will translate myself. What measures are we taking to enhance customer sickness or increase customer payment rates? Thank you. Thanks, Ray. I will briefly answer your question.
spk16: In terms of the number of clients and also the customer engagement, we mainly have three major measures rolled out to address that. First of all, our content is our major competence. We continue to expand our service content including our in-depth coverage of top players and advancing the breadth of exclusive reports. Our distinct content covers extensive areas including AI and hardcore technologies as well as highly specialized and innovative enterprises, those small and medium enterprises, healthcare and new energies. So with the content category can continue to expand our customer base will naturally expand as well. That's number one. And number two, on the product side, we are really very proactive on the production side For example, our short form video as well as our newly launched long form video has become a key component of our product metrics. Those metrics have helped us to not only grow our advertising customer portfolio but also our enterprise services client pool. On the enterprise services side, we not only have IP events like WISE, AIGC conferences, things like that, but also we have integrated marketing as well as some other new initiatives, including our business school project. We launched some individually high pool training courses and programs in the first quarter. If you look at our individual subscriptions, our pool level, that has increased significantly to close to 150,000. That's a very remarkable growth. And the third category is we are also expanding geographically and on the sector side. For geographic expansion, we now not only have headquarters in Beijing, but also a headquarters in South China, namely Shenzhen. On top of that, we have 12 regional offices in all major cities in China like Hangzhou, So we are actively penetrating into low-tier cities and expand to those markets. And our clients in those areas not only cover the business side but also on the government side. We work with a lot of local governments to expand their local business. That will grow again our relationship with the government as well as local key accounts there. So that's the three major, you know, solutions we looking at our, grow our customer base as well as customer engagement. Thank you for your question. Again, Yinrui.
spk13: Thank you.
spk07: Your next question comes from Peipei Xu from Industrial Securities. Please go ahead.
spk03: Hello, Mr. Da. Hello, Lin. I'm Qiu Peipei from Xinyue Securities. Thank you for accepting my question. My question is related to the layout of AI. I would like to ask if there are any more specific things that the company can share with us about AI, such as the layout of content. Are we using AI tools or models in our daily content production? 那是不是比较快的我们能够去看到在产物端的影响? I will translate the question. Could you give us more detail about your strategy or plan of using AI? And are you already using any large model in daily content production? And what kind of financial benefits could we expect from this application? Thank you.
spk01: the translation of the script, and the collection of our skills. These aspects have greatly reduced our costs. Then, for example, in terms of increase, I think there are about two levels. The first level is that we are in our main business, including our content production. In fact, we are trying to use content to assist interviews and assist in publishing. If this matter is still in the experimental stage, if it succeeds, I think it will directly improve our entire production process. In addition, we use AITC to optimize our search experience and to improve our interaction with users, including our customer questions. In this question, we use AITC to increase our efficiency by more than 10 times. Finally, we use AI on Taobao. This is a very influential broadcast content. It is also a very good Thank you.
spk05: Okay, thank you. So, on the platform that generally is caught in the economy sector, there's a natural fit between services in AI and AIGC technologies, supported by the emergence of intelligent, large language models. We are benefited in various ways by seamlessly integrating AIGC technologies with a variety of our business areas. AIGC techs enhance the efficiency of our content production while saving costs across the board. For instance, as we integrated AIGC techs into image generation, text translation, consulting, and data collection. We saved on cost, manual effort, and time. Moreover, we were able to provide more personalized fees and user engagement. We achieved overall cost reduction and enhanced the efficiency of our business. 36KR became the first ever industry pioneering using AI tech to create an e-commerce store throughout the whole process. It's AI Taobao store LumiLink is in operation now and the AI design products are available. These are convincing demonstrations of our AI tech sensitivity and foresight. Our original video, I opened the Taobao store with AI robots, which features the key steps of 36KR's experimental opening of a store using AI tech including naming and establishing the store, product design, image generation, and copywriting. This original video also triggered continued official follow-ups on this topic by Taobao. The organic combination of know-how, expertise, and AI techs diversified our revenue-generating channels. The large language models have been the most disruptive technology for revelation in recent years, and it may trigger the most extensive industrial innovation ever since mobile Internet. It brought new opportunities and growth momentum to the new economy sector. As a prominent brand and a pioneering platform dedicated to serving new economy participants in China, we will directly benefit from this new evolution. Going forward, we will continue to provide users with high-quality content driven by advanced AIGC technologies and more thoroughly integrate AIGC techs with content production. Thank you.
spk02: That's my question. That's my answer.
spk07: Thank you. Your next question comes from Xiao Kang Chen from Global Securities. Please go ahead. Hello.
spk10: I have a question. I would like to ask about the recovery of the company's online business. Thank you. Since August 3rd, the company's online business
spk05: Going into 2023, we were able to resume hosting offline events and activities as before, in summits, forums, and fireside chats. A key point is our recently launched all-new summit IP, the WISE 2023 AIGC Summit. As COVID fades away, we managed to optimize our B-School course design and training programs through organizing offline B-School courses Our pool of individual subscription services increased substantially to R&D by 153,000. Thank you.
spk07: Thank you. If there are no further questions, I would now like to turn the call back over to the company for closing remarks.
spk16: Okay. Thank you all for participating in today's call. If you have any further questions, please feel free to contact our investor relations team. Thank you again. This concludes this conference today. You may now disconnect your line.
spk07: Thank you.
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