Kuaishou Technology B

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Kuaishou Technology's second course learning from 2022 Financial Results Conference Call. Please note that English simultaneous interpretation will be provided for management of their remarks, and this English line will be listened only mode.

And now, I'm going to turn the call over to Miphala Diwu, Director of Investor Relations at Kuaishou Technology.

Thank you, Operator. Good evening and good morning to everyone. Welcome to our second quarter and interim 2022 Financial Results Conference Call. Joining us today are Mr. Chongyi Xiao, Co-founder, Executive Director, and CEO, Mr. Jing Bing, Chief Financial Officer. Before we start, we would like to remind you that today's discussion may contain poor-looking statements, which involve a number of risks and uncertainties. Ex-results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update any forward-looking information except as required by law. During today's call, management will disclose certain non-iFIRS measures and for comparison purposes only. For a definition of non-iFIRS financial measures and reconciliation of iFIRS to non-iFIRS financial results, Please refer to our results announcement for the second quarter, an interim report ended June 30, 2022, issued earlier today. For today's call, management will use Chinese as the main language. A third-party interpreter will provide simultaneous English interpretation in a prepared remark session and a conceptive interpretation during a Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prevail. I will now hand the call over to Isha. Hello, everyone. Welcome to the question of the second quarter of 2022, Earliest Conference Call. In the second quarter of 2022, we continue to overcome challenges and achieve significant business breakthroughs. Though the pandemic was sporadic and also macroeconomically volatile, we remain steadfast in the commitment to creating more values for users and society while also consistently enhancing our operation efficiency. Our domestic DA use in the second quarter of 2022 reached $347 million, achieving better than average seasonal performance and setting a new record. Meanwhile, our domestic business segment made breakthroughs progress, delivering quarterly, operating profit two quarters ahead of plan, which clearly shows the health and sustainability of our business model. as well as the executive and also efficiency potential to our organization and teams. We launched EquatIO Express in the second half of 2019 and have made considerable investment in growing users while paying attention to acquisition efficiency. The group's adjusted EBITDA turned positive for the first time in nearly a year. I would like to discuss the progress we made with several aspects of our business in the second quarter. First, let's talk about the user metrics and also traffic. In the second quarter of 2022, we committed to achieve high-quality and efficient user growth through optimizing our strategies, algorithms, content operation, etc. We delivered a record high TAUs of 347 million and an accelerated growth of 18.5% year-over-year with a low acquisition and maintenance cost per TAU. Our average MAUs reached 587 million, up by 15.9% year-on-year. And an average GAUs-to-average MAUs ratio also hit a historical high at 59.2%, reflecting QISO's growing user-stickiness and vibrancy of our user community. Furthermore, our average daily time span per GAU reached 125.2 minutes in the second quarter of 2022, up by 17.1% year-on-year. Our total time span also grew a rapid pace of 38.7% year-on-year. More specifically, our user acquisition size, we continue to explore efficient channel and effectively expand existing channels in a target manner. At the same time, we actively manage the operation according to our traffic strategy and improve our very unique session. And also, at the same time, we're improving efficiency. And also, our channel strategy is also iterative. And also, we are improving our economic management manner At the same time, we actively manage operating according to our traffic strategy and also improve the kind of best operation method. And also, at the same time, by having seasonal iteration, we are also focusing on our strategy and also efficiency. At the same time, with a lower cost, we have also, you know, which also had a significant improvement in both quantity and quality of user growth. And also, user experience is key for retaining user and increasing time span. Through algorithm operation, We have made more accurate and differentiated recommendations of high-quality content, particularly mixed and long-tail content, thereby enriching user consumption and improving user experience. In the second quarter, the year-on-year growth of our video views even outpaced the growth of total user time spent. Meanwhile, we developed a new perspective on user retention, iterated our simple user labels into a more comprehensive user health index. This enhancement has made our incentive model more refined and efficient. improving our system iteration frequency from database to minute base, and also putting us a generation ahead of our peers in terms of efficiency. Our highly effective user retention strategy also serves as a powerful tool for ongoing control of user-related costs. With optimization in content algorithms, operations, and more, we further increase the proportion of unsubsidized and minimized subsidized users in our base. In the second quarter, our DAO growth rate and decrease in retention costs per DAO showed a healthy divergence, and our first-year ROI of new users continued to increase quarter-over-quarter. This accomplishment boosted our confidence and enabled us to strive forward to our 400 million DAO user target. In addition to improving efficiency, we're so here to our growth gratitude of creating the greatest social platform and user mindset with meaningful results in the second quarter of 2022. Tens of mutual followers of Kuaishou App grew 66% year-on-year, reaching more than 20 billion per MECD, with average following per MAU continuing to increase more than 300, with reflective of strengthening social sickness and also user mindset. On the content side, we continue to strengthen operations in our advantageous verticals while conducting more proactive screenings and or co-operations of blockbuster content. Quiet Playlist has always been a benchmark content vertical in the second quarter of 2022. We further accelerated the growth of our short play content and achieved meaningful results by adding new categories, including family and documentary, and exploring new duration formats, such as five-minute episodes. Our strategy is to place great emphasis on content and less on production, particularly on the scripting stage. This strategy has consistently produced blockbusters. Short plays have also contributed significantly to user acquisition and user activity, especially among young and female users. With key insights into blockbuster content and also stronger operational capability, we recently created several blockbuster entertainment content. Quasar uses its own strategy of providing entertainment content with high interactions and bringing user experience. We organized and hosted Jackie Chan's first global live streaming event and J-Dog, highly anticipated new album live streaming event. Jackie Chan's spectacular live streaming event was enjoyed by fans worldwide, joining more than 130 million viewers, including question and answer notices users. JJ's live streaming had over 110 million viewers and over 450 million interactions and also reservations exceeding 10 million, which is actually a historical high in the history of internet. As of June of 2022, Kuaishou had more than 2,000 celebrity accounts, which together had 870 million followers. Another primary focus of Kuaishou has been to improve the monetization efficiency, and we have continued to implement an optimization measures across our ecosystem, product technology, and service capabilities among the experts of our business. Like most inventors here in China, we felt pressure from challenging microenvironment and also research of pandemic in the first half of the year. For a fifth time, we have the annexation of Google BenQ, the fully unleashed of our improved monetization capabilities in the short term, which are outperforming the industry across our business segments and conditionally market share. In the second quarter of 2022, revenue from our online marketing service increased by 10.5% year-on-year to €11 billion. Against a weak economic environment and advertisers' conservative budgeting, we have been more proactively deepening our relationships with advertisers to increase the number of active consumers and also boost overall advertising demand. In the second quarter, the number of active advertisers increased by more than 90% year-over-year, Meanwhile, advertiser retention rates further improved, reflecting our ad performance and product capabilities. We have also recently implemented several toxic optimization measures. For example, we introduced light versions of our products to medium and small customers, making advertising easier and more convenient. In addition, regarding ad performance, we adopted more refined and frequent monitoring and operations and minimized the ROI for advertisers. Through algorithm operations, we were able to improve toxic intelligence, We allowed it to help the advertisers with budget allocation and bidding strategy management to actually improve matching and conversion efficiency. In the second quarter, over-advertising CTR and advertisers' satisfaction rate also improved. Growth advertising from our native e-commerce business also rebounded during the second quarter, and our e-commerce business started to recover after the pandemic surged. In the second quarter, we focused more on building comprehensive e-commerce marketing service capabilities while continuing improving the basic service quality. We further capitalized our dual engine of short video plus live streaming to attract incremental advertising business through the short video e-commerce advertising while improving management conversion rate. We also guided the merchants to conduct combined promotions and operations in both public and private domains to further unlock the value of our closed-loop e-commerce platform. The average ROI for native advertisers continued to improve in the second quarter. In terms of the brand advertising, we have also expanded our ad spaces and also add constantly the innovating new promotion solutions. For example, for KOLs, we launched a wheat plant innovation platform approach linking platform plus KOL plus brand. We selected 100 high-quality KOLs based on our content quality and commercial value and jointly launched various combinations for brands to fulfill their KOL marketing needs in different scenarios, empowering brands to grow their business use. The year-over-year growth of our brand advertising in the second quarter of 2022 outpaced that of the overall online marketing services. Our e-commerce business was also affected by the pandemic during the second quarter. Nevertheless, we outperformed the industry thanks to our differentiated advantages in traffic efficiency and e-commerce experience. E-commerce GMB increased by 31.5% year-on-year to $191.2 billion, with live streaming e-commerce gaining a larger share in the e-commerce market in the second quarter. On the merchant side, more sellers have come to recognize live streaming e-commerce's advantage in traffic efficiency and customer acquisition, as well as the growing number of successful cases. Hence, more merchants are joining KWAIS's live streaming e-commerce ecosystem, adopting our promotion strategies, which has helped to enrich our merchant supply. For the first half of 2022, the monthly new merchant number increased notably again, same period last year, near doubled. ending the second quarter number of multi-active coin brand merchants by more than a third quarter of a quarter, and number of multi-active brand merchants grew by more than 200% year-over-year. Voting on our dominant traffic and enriched merchant content We maintain close attention to improve the transaction efficiency. To optimize algorithms starting from this year, we have focused on improving accuracy of the buyers, seller, and product management. Regarding users, we have actually set up the experts in exploring our personalized needs to continue to refine the user label and have a better understanding of our users. On the product front, we made significant investments in building a product database and have kept perfecting product descriptions that we can better understand our products. The efforts, significantly half the GPM of e-commerce live streaming in the second quarter, of new merchants that are starting up stage, we've spent and invested additional resources on service providers to boost their startup efficiency and help them to speed up growth. In the second quarter of 2022, over 2,000 merchants saw their revenues climb in leaps and bounds through service provider empowerment. Meanwhile, we consistently fortify our trust-based e-commerce ecosystem. In the second quarter, our industry-leading market repeat purchase rate continues to increase year-over-year and quarter-to-quarter, and our trust-based economy further reinforce consumers' purchase market thickness. compared with the shelf-based e-commerce, live-streaming e-commerce engaged in the earlier stage in the consumer decision-making process. With ongoing upgrades of content matching and merchandise supply, we optimized the browsing part of the shopping experience, creating a virtual cycle. In the second quarter, our monthly active e-payers actually penetration rate remained in growth momentum reaching over 15%. And also another highlight of our second quarter performance for live-streaming businesses in revenue grew at an accelerated pace of 19.1% year-over-year to 8.56 billion, particularly due to following the practice move. First, the strategy adjustments that we made on the content supply since the second half of last year produced excellent results. Through strengthening collaborations with talent agencies and also empowered content operations of existing streamers on Kuaisha while also onboarding the more external professional streamers, we have achieved more achievement improvements in overall content quality as well as operational capabilities for our live streaming business. In the second quarter of 2022, the number of our monthly active streamers exceeded 10 million, almost a number of high-quality active streamers with over 100,000 followers saw double-digit growth year-over-year. In the second quarter, We made more explorations in live streaming production and operations to launch mobile interactive features and new scenarios-based user consumption motivations, such as the multi-person live streaming function, driven by dual improvement in content diversity and quality, are proposed also rose further among users, evidenced by accelerated year-over-year growth in user time span on live streaming, and also the significantly optimized revenue efficiency in our live streaming traffic. As for the algorithms, through real-time management of live streaming content, we improved our live streaming conversion rates, effectively penetration rates, and also paying the ratio, establishing a more efficient and smooth live streaming payment funnel. In the second quarter, the average MPUs for live streaming rose 21.8% year-over-year to $54 million.