Q1 2022 Zhihu Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the first.
First quarter 2022 financial results conference call.
At this time, all participants are in listen only mode.
After the Speakers' presentation there.
A Q&A session.
Today's conference is being recorded.
At this time I would like to turn the conference over to Chris.
Changing to Hudson.
Mr Relations. Please go ahead ma'am.
Thank you operator.
Hello, everyone welcome to our first quarter 2022 financial results Conference call, John Yesterday, Omnicare Jun Zhang our chairman and C. E O F G and me personally I was CFO.
Before we start we would like to remind you that today's discussion may contain forward looking statements, which involve a number of risks and uncertainties actual 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 this forward looking information.
Except as required by law.
During today's call management will also discuss certain non-GAAP financial measures for comparison purposes, only for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Please see our earnings release issued earlier today.
In addition, a webcast replay of this conference call will be available on our website at IR Docs Yahoo Dot com.
Now I'll turn the call over to Mr. So and the way our CFO .
Okay. Thank.
Thank you I'm pleased to deliver today's opening remarks on behalf of Mr. Julia founder and CEO of <unk>.
Thank you for joining Joe Who's first quarter 2022 earnings call in.
In April we successfully completed our dual primary listing on the Hong Kong stock exchange, marking another key milestone Halloween our listing all the unless he last year.
Our dual primary listing further cement our solid foundation for the sustainable in the long term growth of the company.
In the first quarter aligned with our community ecosystem for Jackie we continue to how would you weight fulfilling content you're aware of this vertical.
I was supposed to have a human approach and algorithms combined with a refined analysis of the need and the characteristics of our core user group has continued to enhance our understanding of users and help us more precisely meet their need.
At the same time, however, ice or we can choose creator operation and our support helps further encourage concentration.
The combined effects of the above you factually work to boost they used to tend the vitality and that.
And the rationale prosperity of our community ecosystem.
During the first quarter, our average and they use grew by 19, 4% year over year to wind up there $1 6 million was over 96% being rolled out and Megan.
Backed by backed by our strategy of creating a better community ecosystem. Starting from January we have continued to improve user experience by optimizing recommendation algorithm.
We have also actively implemented initiatives to better manage content, which is incompatible with our sensor pokemon content standard include.
Including content that is both irrelevance and friendly and a Spanish content.
As a result, and as anticipated we saw a slight pullback in overall user growth in the first quarter compared.
Compared with peak levels in previous quarter.
However at the same time, we witnessed notable growth user engagement and the retention due to the enhanced use of tier of our platform.
Our high quality content, our unique content centric business model have enabled <unk> to achieve increasing Bren brown, Wally and a strong financial performance.
Despite the significant macro headwinds.
Our total revenue reported year over year growth of 55, 4%, reaching RMB 743 million in the first quarter.
Beyond the high end of our revenue guidance.
And our revenue base.
Further diversified evidenced by content commerce solution and the advertising business together contributing 50.
<unk> 59, 8% to total revenue with Tcs willing to be the largest revenue contributor in the quarter.
We believe these achievements also rely on the joint effort of all parties integral community and they support all of our shareholders who share the same wishes.
The board is confident about the company's continued growth in the future.
And announces that we have proposed to obtain a shareholder approval for a share repurchase program of up to 100 million U S. Dollar.
Available for the coming 12 months.
Now allow me to further elaborate on our business from content users and the monetization perspective.
One content.
She has continued to cultivate whereas punting vertical.
Since last year by introducing central fulfillment at the counter assessment standard.
And upgrading our Vermont.
Do you need to affirm it.
We were able to better address users keep consumption needs for high quality content.
By the end of first quarter, the cumulative pieces of content community has reached.
520 million, including 440 million questions and answers.
Representing a year over year increase of 36% and 30% respectively.
Along with the execution of our strategy, we are delighted to see more than a market feeling content coming from high ranking cratered.
High ranking creator learned their status by continued contributions to the community measured by and activity level at least 40% higher than the same period last year.
Among this group of high ranking creator.
Their daily content creation have increased by over 125% year over year.
This increasing activity and a high quality of content creation have been rate. They triple content library is new and a sustainable what's aleksey.
During the first quarter, we how to wages appealing content in there some verticals using a sinagra oriented approach with a focus on number of users in the 18 to 36 years old Democratic or we call eight the second 18 years of life.
Content verticals, such as campus life in it and the education career development business and Internet Science and psychology are highly popular among these users.
To better meet their personalized less personalized demands and insert comments you never oriented question.
With further refine the algorithm to better identify a creator of inches and expertise in topics of high interest and encourage them to create creates more fulfilling content in this area.
Additional popular verticals include postgraduate exam preparation economics.
Our profession and a scientific research.
For example to fulfill users curiosity about artificial intelligence and I encourage those who want to join in the Skus yes.
April we invite you and your own a noted expert in the field to answer questions such as how to systematically learn in machine learning.
And at the time of sharing his thoughts experience.
Experience and insights inspired hundreds of comments in multiple dimensions and won more than thousands of apples just within a couple of hours.
Once these efforts.
We were pleased to see the monthly content creation. The science vertical increased by 61, 3% in March compared with the comparatively this January .
And the number of average daily active users who consume content in these critical has increased by almost 30%.
Uh huh.
In depth discussion on timely content continue to be highly popular amount triple users and help to drive organic user growth and engagements.
That's who we promote rational optimism.
As a social platform and it comes a community. We believe that we have a social responsibility to promote Russian though optimistic and constructive discussions on time and it comes in.
During the first quarter, when the pandemic, which surfaced in Shanghai.
Users expressed their emotional and psychological distress and the rationale is they've got the disruption costs and the potential solution.
Some programmers even shared mini program too as well.
To help with grocery shopping.
Similar no rational discussions were carried out during the tragic loss of the China Eastern Airlines flights.
Seven three pipes in April .
As of the end of the first quarter, but he knows who consumes a timely content remains about 40% among all their use in our community.
And the average PV per user or timely content consumption. Among all Meu's also retained its growth momentum.
Since last year, we have been continually ita, reaching our multimedia strategy in the community.
All the users and the creators to consume creates and interact across multiple content permit.
Video is an indispensable part of our ecosystem and our popular content permits.
The ratio of tier useful consumed we do remain stable.
45% in Q1.
On the supply side, we have firmly crackdown on the improper videos in our community.
And significantly reduce the traffic of the meters, which they didn't meet our popular content standard in the first quarter.
By doing so we made two videos dynamically better integrated to the entire community ecosystem and have received very positive feedback in a regular user tier debate.
Well come to a shared in the firm as all questions and answers and the videos are currently the most frequent so they can see them on our platform. We are also working to broaden and upgraded format option available to users and creator to include sharp on that thought and the longer format such as live streaming.
Expanding the content creation permits available to our creators will further unlock their creativity and continue to diversify our west content library.
A thriving content community like Albert and he's not only growing fulfilling content, but also continuously improve counseling.
Improved community governance and culture.
We are relentless in working to uphold good community compliance and the governance that promotes a healthy community culture.
Towards this end in the first quarter, we began publicizing weekly report in the community that transparency they detail our ongoing progress in dealing with low quality and a noncompliant content.
As well as.
Measures to protect against cyber crime and attacks.
Thanks to our call center, the Isa reach and technical and operational capabilities.
<unk> is able to maintain the healthy in the long term prosperity underpinned by its culture of Oh, sorry, Jay expertise and the respect.
Now, let's move to use our section.
On the user French in the first quarter of 2022 the average M. A use of the dual community reached why haven't they were $1 6 million.
Increasing by 19, 4% year over year.
Or I mean, you the percentage of Ami you from the Yahoo, App continued to increase exceeding 96%.
Along with the execution of a community ecosystem comes first strategy, our users are becoming more interactive with each other.
By the end of March our average monthly engagements per M of use increased by over 18% since the end of last year.
Our user base has also become more balanced.
As of the end of first quarter.
All are among our hour and may use.
Users from second tier and lower tier cities.
Accounted for over 50%.
Users under the age of 30 accounting for 73% of the MAA in the first quarter and the number of users age Thursday on the bulb continues to grow fast.
User growth among these eight.
Page 30 on the bulb is largely driven by the increasing amount of time they content provided in that community.
The percentage of female users stayed relatively flat at 47%.
Female users show a strong preference for lifestyle related content and the premium membership concept.
Now, let's talk about creators.
Who have always been a unique user growth community acting as an important pillar of our ecosystem.
Was all of it with all of these initiatives, we have implemented and factually improve user improve creator experience.
There's been any notable increase in stickiness among high ranking creators on verticals, such as a science and technology and the career.
The number of <unk> within this group of creators increased by more than 45% at the end of the quarter compared to the beginning of the quarter.
For the same period of comparison the number you use among creators in the vertical of business increased by 37, 37%.
So build Oliver stone momentum, we listened to relieve the creator support scheme, namely high implant 4.0 recently.
Our focus is it's all encouraging creators to go deeper into the verticals and they they have deep knowledge or inches.
In particular, we are targeting creators who could be researchers with extensive subject matter knowledge.
Practitioner nurse practitioners with a valuable experience.
<unk> expertise.
Or even heavy hobbyists with deep loss in interest in the area.
We have upgraded our creator sorting system and the matching algorithm to impoverish creators, it's clear direction, how to increase their ranking and channel more traffic towards their content.
In addition, we refined a more comprehensive monetization scheme to better reward creators financially.
Talented creators who may have already earned income through our cheese platform and opinion membership program and I'll also be rewarded for their continuous contribution of noncommercial appealing content.
Through our church your plan this thing literally means salute knowledge.
And we target to make available a total of 100 million RMB, two creators who provides opioid and content through qis platform and a G. G class.
Last year, we had over 30 creators who earn income exceeding 1 million RMB from the paid membership program.
This year, we are determined to identify over 100 creators who kind of are over 1 million RMB under the creator support schemes.
Yeah.
But what's even more.
Gratifying is that the total income earned by jugal creator it through multiple channels for the first quarter of 2022 increased by over 70% compared to the same chair would have last year.
This again proved that our content centric business model provides benefits to participants throughout the ecosystem.
While we will continue to improve creators experience to further enhance product created creator operation and our support services.
Now, let's go to commercialization.
Turning to commercialization in the first quarter of 2022 our total revenue reached RMB $743 million representing year over year growth of 55, 4% amid a challenging macro economy.
At the beginning of this year, we restructured our sales team by industries to better understand and serve the needs of brands on merchant.
This has enabled us to effectively expand the customer base in certain industries and increase their spending by providing a more comprehensive product offering.
We have all we have already seen notable results coming from our I T and three C industry.
Where both the number of customers.
And the average customer spending have increased.
Since March the Kobe 19 resurgence in China has caused multiple supply chain disruptions and the reduced business activities across most industries.
Online vocational trainee Internet services and the gaming.
You know those less affected.
Whereas E Commerce F M C G and other physical goods industries have been more adversely impacted.
While the short term headwinds are expected, we are committed to strengthening commercialization capabilities in our ecosystem.
Adjusting for long term growth.
You're looking for.
Infrastructure improvements such as cheese platform and a tooth like toast and they go shoot are an example of this and are all upgraded on a regular basis to support our brands and merchants.
In the first quarter, the number of commercial content creators, who contributing to Ccs and generating the financial income increased by 96, 5% compared to the same period of last year.
Let's now move to ever membership and vocational 20th services.
By offering abundant high quality content and effectively improving the user experience.
Being able to significantly raise our brand awareness among the users and established closed loop monetization capability.
Okay.
On the supply side with the premium content, we continue to search for talented creators and inspire them with our knowledge of user needs.
And the fast growing financial rewards opportunities.
Total pizza as a premium content exceeded $3 9 million as of the end of our Q1 2022.
The high quality premium content, attracting more team members.
In turn provided more financial rewards to the creator.
As mentioned in the high implant, we had over 30 creators, whose income exceeded 1 billion RMB last year.
Many more creators in the future, we'll be able to join benefits.
From our membership services.
I don't think development sides.
Pretending to ever vocational training services, we are pleased to see that revenue contribution exceeded 5% in the first quarter.
Representing a 12 fold increase compared to the same period last year.
The cost offering for them to buy two core product lines.
Examination and the workplace skills improvements.
I've been a curated to address the needs of users groups H between 18 to 36 by improving their professional skills and enhancing their competitiveness.
Well occasional training is very important to expand our services to users and diversified the commercialization of our ecosystem.
We plan to continue to enhance our technical capabilities and to further expand it well kitchen, a training course offering by utilizing our strong brand awareness strengthening our internal operations.
Carefully evaluating M&A opportunities.
We have already taken meaningful steps in this regard.
<unk> 2021 we completed the acquisition of a vocational training brand specializing in CSA and its yet CPA qualification exam, and a well known brand focusing on English training.
In doing so we added valuable content to better meet user needs.
Our user base and further broadens our CRM capabilities.
In the future we aim to develop an independent of vocational training brand that will be aligned with <unk> core values.
<unk> operates as a natural complement to our operation and the expansion of our of our mission.
In terms of use of Kieran are mostly newer rates remained steady in the first quarter at a six 5%.
We closely monitor this no magic and believe it serves as a working proxy of overall user experience.
Satisfaction.
Moving forward, we will continue to further enhance our infrastructure, including the sales management system and the service delivery to continually improve our use of cheering when it consumption satisfaction.
In closing I firmly believe that on top of these strong business value, we provide to who has the leading social and community based content platform also provides important social value to our users and the greater communities. They serve.
Perhaps now in a time with so many and praised the unprecedented challenges and uncertainty I am calling stuff all this more than ever.
I am proud of the Droege, who can play in the lives of people at this time we.
We will continue to stay true to our founding beliefs and are committed to helping more people who find that their answers.
And in doing so also help relieve anxiety and reduce fear.
This concludes Mr. Chen's remarks, I will now walk you through our Q1 financial performance in a little more detail.
We are delighted to report another solid quarter of performance in Q1, 'twenty two with total revenue up 55, or 55, 4% year over year, reaching RMB 743 million.
Continuing to benefit from our dynamic community ecosystem and increasing concentration.
Revenue structure, but the further optimized and diversified in the first quarter.
Our content Commerce solutions have become our most powerful growth engine and a country beauty, 35% of total revenue.
Mostly followed by paid membership and advertising revenues, which country beauty plenty of nine 8% and 29, 2% to the total revenue respectively.
Well occasional training one of our new initiatives in diversifying and commercialization capabilities.
Has now demonstrated economizing.
Trajectory.
With this quarterly revenue contribution exceeding 5% for the first time.
During the first quarter Ccs continue to gain market share by providing highly efficient marketing solution.
The total revenues of Ccs reached RMB $226 8 million.
Bye.
Seven 7% year over year.
This benefited from both an increased customer base and additional spending by each customers.
The revenue generated from categories, such as vocational training F. M. C. G. I T N three C products and Internet services.
They're more resilient and among the top in terms of a revenue contribution.
Yeah.
Meanwhile, our advertising business, we recorded RMB $217 3 million in revenue, representing a one 7% year over year increase despite of a despite also a softer demand caused by the resurgence of COVID-19.
Our I T and the tree snack brand advertising revenue achieved over 100% increase year over year.
Well top advertisers from F. N D. G e-commerce remains resilient with a double digit growth.
However, as a supply chain disruption began to expense beginning in late March we are anticipating a potential slow down in our advertising revenue in the short short term.
We will continue our investment in advertising infrastructure to improve the efficiency and effectiveness of our products and ultimately deliver greater about it.
Thanks to the continuous efforts in diversifying revenue structure of our revenue generated from other content centric business line.
Our resilient against softer consumer demand.
Our revenue from membership service.
It was RMB $227 million.
<unk> achieved a year over year increase of 75, 1%.
Average monthly paying members in the first quarter reached six one and six.
$6 9 million.
It's a six 8% payout ratio to average Mou.
However, well occasional training business continued its robust growth momentum into what was.
Revenue increased 12 fold year over year.
Contributing over 5% of total revenue for the first time.
Well Christian with training the business, who Owens from natural.
Expansion of our users' needs.
With the acquisition of two companies that's valuable in their respect to a few we have collectively created greater.
Greater synergy.
Going forward, we will continue to expand the coverage and he has the quality of course offering through both self operation and M D.
And it further he has all the infrastructure to improve sales and our CRM management capabilities.
Well, our content centric ecosystem and the business model have been petrified by strong revenue growth.
Please be balanced between investments from for future growth and well managed cost control practice. It's also why til for the long term development.
As we mentioned high and the diverse revenue growth.
Profit margin for the quarter with a 45% the many at a high level relatively to the wider industry.
Following our remarks in the last quarter's conference call in late March we have continued to review our costs and making improvements in our operating efficiency.
As a result, we have controlled the non-GAAP operating expenses for telepresence and reduce its right around 2% since Q4 of last year.
However, in the first quarter, we incurred.
We incurred one off listening fences.
Over 30 million RMB in some G&A related to SBC expenses in the third.
The issue with the Hong Kong IPO.
Consequently, our total operating expenses for Q1 were RMB 900.
84 million and a non-GAAP operating expenses were RMB 743 million.
Going forward, we will continue seeking ways to further improve our operating efficiency.
As a result of all of the above our adjusted net loss, which primarily excludes share based compensation expenses was RMB 306 to 7 million in Q1.
And as of March of.
2021 the company had cash and cash equivalents term deposits restricted cash and short term investments of RMB seven 1 billion.
Lastly, as mentioned by Giulia on April 22nd we successfully listed on the main board of Hong Kong Stock exchange under the Stockholm to 390 is a global offering of 26 million class a ordinary shares.
In compliance with the local regulation and are following the common practice adopted by public companies in the Hong Kong market, we will no longer provide financial guidance on net revenues going forward.
We remain deeply committed to delivering sustainable growth business in the community and driving shareholder value in the long term.
This concludes my remarks on our financial performance and operators are we are ready for a Q&A session. Thank you.
Thank you we will now begin question and answer session.
You ask a question you May press Star then one on your household foam.
Does it mean for your phone we ask you. Please for your program.
And the key is to withdraw your question. Please press Star then two.
Today's first question sure.
Sure.
Whereas you see please go ahead.
And especially about any kind of initial T that I think of MTI. She sang Jin Jiang Zhang good thins out.
Hi, sorry, just watching it and just you shouldn't I E. These are genuine <unk> Salma comes out you can do your own once you show five D shiel at shell shocked by that.
I think Chicago thought you could do it all gets out when they see a show called Hot Yeah, all each and keep that she should stay one could clearly see a bunch of mine have mentioned 10 dominant than Cancun Doyle, who thingyan they should get.
I'll quote the Holdco hopefully you don't find me a nice 18 quote a whole month 10 that I could do they would say John that she should you show churn, yes, just boil off doesn't seem that you're gonna Hussein Jonathan Yeah.
And I will translate myself.
Thanks management for taking my question. My question is about the yogurt goes always the community ecosystem.
First our strategy, we saw side to pull back in average and they use in the breast of Qatar and wasting thing in the first quarter, the vital tongue and most social hot topics may positively post all of those activities. So can management share more color on.
He was there good momentum such as Emilio was that acquisition and then they're talking team and a hot guys I imagine men Stinker offers a user goes chain in the second quarter and what's your target in terms off because of full year 2022.
Thank you.
Hello.
So youll Julien.
Two one.
Oh Gee you know in terms of your zoom with Corona set on yet.
So I'm gonna Cingal, whereas.
Yes.
I know Jay Gould Who's on Oh, well, it's not isolated all women sometimes dita.
Hum.
So unfortunately, but you're doing.
Just often dwell Jade you see Tomatoes show you know when the Dol not dollar general semi was always how Jay Gould Changzhou, Josh in my opinion.
Okay.
Hi, Thank you for the question on the CEO of the company. My name is Julianne, Let me talk about the question or the aspect of growth strategy for the whole year, well as well as for the second quarter in the second half of the year now in terms of Oh, just money in order to fulfill our ecosystem first strategy. We've done a lot of adjustment and we were able.
To actually achieve a lot of our growth target for the first quarter.
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Well the most.
Zimbabwe's a window that you have a gym deal so a phone gondola schilling yeah.
Oldham hundreds or the timing.
One woman Duh took a bundle now as a result.
Zero.
Total so those are the tunnel job you're doing on.
So once it kind of took a whole yeah, unless you should all know chisel.
Women's either to do change indoor garden, each one in Georgia.
So Google Yahoo.
Yeah sure well told you know so its a long let's think about it in the system.
What do you know how does it seemed a little nudge homes, all yeah, Toni Sanzone, it's how long after you Oh.
Sure.
Okay.
So in terms of our ecosystem first strategy, we mainly focus on adjusting to user experience as well as the whole the the ecosystem for our high ranking creators are in their use of the community and as a result, we are able to actually achieved quite a lot for Q1 and also the beginning of Q2 just to give you some idea the act.
The level of how all of our high ranking creative has increased significantly and the quarterly D are you of all high ranking creators has increased by 40% Y O Y and also their daily content creation has increased by over 125% Y O y as well.
Come home at a self familiar she is always hard to see.
So that sounds, Illinois, Oh, God willing women choices on the army I couldn't say.
So you want to stay behind in Savannah.
A couple of hundred visit their Trabocchi see cable it seems here initially.
I'm gonna easier for some.
So until you know it takes them into the store you'll have opposition.
That'd be Charlottetown jumped to southern Australia does your husband a sedan.
<unk>, Yeah, Yeah sure sure Chi.
To the cheese all travelers on the go channel.
Hi, Yeah.
T J B O change, although so I got on just how much vertical Gainesville Hudson, Yeah, Jason Rodrigo since your intelligence Okay.
And also as was mentioned by LSC Oh earlier in the prepared remarks, we just lunch hour 4.0 version of D. A high yen plan for the whole year last week and booked based on the public information you can actually check more details for the high implant, we mainly focus on D adjustment into upgrading of the creator system as well.
As different monetization channels or ways for our content creators and this is part of our tradition of creating a more robust ecosystem for our again creators as well as ours as well as following up on our successful upgrade of our high ranking them our content creators Eagle system. Following in Q1.
So is there some reason that so it's really it's almost sure well more way to go.
Your father, Jake or tweaking the whole biotech total Josh.
Crucial to continue Omi.
So you don't go down just how much of it is yeah. So hubs into essentially would have to go on Paul Cheng.
Jacob.
So gentlemen, great quarter, one which is limited to one kind of okay.
Now what we mean by the high end plan is that we want to achieve our goal of optimizing the whole creator's ecosystem in general as we first powered hoist the upgrading of the ecosystem for our high ranking creators we want to take more experience in gradually expanding the kind of upgraded system and monetize.
Waste for other kind of a lower ranking meet silhouette ranking our content creators in the subsequent quarters of the year.
Okay.
Don I suppose on messenger a good hold over some time now.
Oh, well, that's I don't think it's a new sofa, such a foolish all former easily there Jacob Goldberger Junior box okay.
Now that was about an hour ecosystem and how we prioritize it in the first quarter and what we have achieved so far coming up I would like to talk about the membership growth as well as other traffic growth our strategies going forward.
Hello moved we don't want to go put them on and it will go down.
So you get all the woman shirts, we should've done.
Traditionally no no.
Let me kind of on the table.
So Chicago down the mineral Park I'm sure that you don't want to a notional amount until she couldn't she's shown truly local Dol transitions.
It should be all bunch of digital decision okay.
Now what we mean by that is that we want to Paris, Hi defense of fulfillment for our community participants as well as our content creators. So we actually upgraded our recommendation system. As a result, we are able to see style changes in our high quality content on the platform and that really reflects the long term.
First off I'll use this rather than to short term interest.
You got me women's champion wishing to speak of Belgium, probably assume that youll.
Sure.
You shouldn't think of Guangdong, Shanghai or something of an anomaly.
Sherman, especially the ones that you've asked us if we don't do well.
Well I don't have the other since as long as I said, which is ongoing doorbell portrayed team focuses on the dealing with them from a high level of central HEICO and Cindy I'm, especially now.
How about now with Badger sometime will be also Sundar, maybe also bullish on TV until the gene pool okay.
Now when we talk about the content upgrade we're not really just outlining several guidelines or making some new standards, they're actually the content themselves and also the optimization of our algorithm for the whole community. So that we can continue to powered hoist to use experience for the whole you know the group of users.
On our platform as a result, we can gradually upgrade our user profiling as well as to make the app with a more comprehensive and more capable with wealth and so going forward for the second half of the year, we will continue on and on benefiting the whole ecosystem as a result of the upgrading of our overall.
<unk> as well as the sense of the cheeseman absence of fulfillment priority.
It was also they don't call them you do alone.
Or can you sort of essentially go don't use them now to about all of the kids in biologics.
So all these are shaping to a goldman so.
One of them as soon as you sell machines to this environment.
Propulsion I would take a little more I hope you all join in Gainesville, Georgia.
So Chile. So you tell me in a dream sometime will be all.
Usually people so I'll take I'll take them anytime until he doesn't change your duty to Lynch.
So shouldn't that they'll just digital it's you don't have to sort of show you the insulin Virginia.
You have your line on attrition and unions reliable metric.
And you can go to the pool of social serious so that would put you shouldn't follow you do the more they were supposed to or you've done well.
So without telling me and told him he chabal okay.
Now you can see all of those improvement from all figures from the first quarter of the year basically prioritizing the sense of achievement, allowing us to gain actually the highest level of and next month retention rate of our new users are achieving a eight quarter high and also we are able to opt.
It's the overall experience with our fine tuning of the community governance capability in order to fulfill our ecosystem first strategy and parity and we were able to proactively resolved some of the group conflict amongst the community she participants as well and so since the beginning of the year, we are able to have a.
Well witnessed an increase of the average user interaction by 18% for the first quarter.
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It doesn't make it home in particular sort of the Oh I see.
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So today I'm sure you know we have done the chamber.
It doesn't have to take a sofa.
Just a couple of months of country cool yeah.
This isn't there that you can show realized.
Is that supposed to go through their patent law suit.
So I have to admit that I'm not sure.
Unfortunately on my shoulder.
And those are the ones that are both Adam.
I don't see them.
Demolition can hold times on the dividend.
Shot pins in particular don't shoot the messenger.
Okay.
Now it is true that ever since the beginning of the year, we've experienced a lot of social changes domestically speaking as well as internationally speaking in different kinds of market, including the capital market. So as a result, we were able to actually saw an increase in our overall traffic onto the platform as well as some returning of our.
Oh, Geez Theyre says well however to be honest these kind of a social topics overall have been very neckerchief, you know in terms of their impact on People's psychology in terms of their impact on the whole society and so they have been impacting people's mindset of lots of the mechanism at to the negative direction are intriguing or triggering a law.
Fear narrow mindedness and slow S bias in our minds.
I assume without doing it judiciously.
Tony you Gotta do it at all.
The twist on that Youll hear about Joel.
Also does that trickle danko.
These are the one that probably call it although.
So as I said before cohort no control arm.
I mean, you all kind of stuff.
Second border Silicones are okay.
And so I think all priority right now is really to think about how to help people to discuss a topic in a more positive note as well as in a more rational manner.
As long as any social topic and merit on our top discussion ranks and we believe that that actually matters more.
Band It just getting gaining the traffic as a result of emerging social hot topics are by themselves and so going forward, we're going to actually make more efforts on our community governance in order to achieve a better result, rather than just focusing on the customer or traffic acquisition.
How much of it was on the job, it's RJ, but sometimes you just.
So it's all about memorial Cardinal goes on that those are going to do it wouldn't pull the trigger and golar.
But just on the holiday sometime off without a holiday meal towards his own.
Got you down to a JV, you'll hold on until it goes out.
Is there somebody and they'll go down unless the hunting season.
Oh absolutely.
Got it.
And so under the strategy of ecosystem first we are continuously and very steady delete them moving forward with our efforts and we believe that as long as we uphold this our strategy of ecosystem first we should be able to continue to generate high quality content and as a result, we can get a lot of.
User interests as well as traffic on the platform and at the end of the day, we can generate a profit from it naturally and organically and so we are still very confident about our growth overall for the second half of the year.
Okay, operator, we would like to take the next question.
Absolutely our next question.
Cool.
Goldman Sachs. Please go ahead.
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If you can talk all Joshua logic would suggest to you that you can call them, what's your viewpoint.
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All budget that you.
So what did you find yourself.
Thanks management for taking my questions. My question is on advertisement could management share regarding current tight coda situation or restriction.
Outlook on the second quarter advertising plus the Ccs revenue.
And it would be great. If you could provide us more color by vertical including Overtopped verticals, such as F. M. C. G E Commerce auto education S, whereas unlike games and their performances in the second quarter.
And just wondering given COVID-19 restriction definitely has been legally.
In a couple of weeks and somebody area and as well as the recovery of the logistic have you seen in advertising budget recovery into the end of the me. Thank you.
Oh sure.
Jacob to who the.
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Sure.
What do you mean shelve it.
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I'll do the.
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A woman comes out so you can do well in college BCS jumped to the no opinion. It's also shape the planes that are to eat on which I'm kind of looking at.
Same with young people and so we would take off when the Yodlee, yes right. Okay.
Hi, Thank you for your question I'm, the CFO of the company and my name is Sunday allow me to take your question now since the beginning of 2022 with being able to we actually have observed a lot of the resurgence of the pandemic all over the world as well as in China, and so different provinces in China has adopted quite a titan.
Prevention policy in order to prevent the spread of the pandemic and the viruses and as a result of the supply chain as well as the overall macro economy and customer and consumer consumption has experienced some short term changes and I believe that we are all part of it and I believe that if you are in Shanghai.
Right now you might still be negatively impacted by the lockdown policy, there and definitely it affected our business and we have noticed some changes on our business as well ever since the me too low a mark well mid to late March of the year and it affected mainly our advertising as well as all the Ccs business.
That because they were both D to b side of the business onto our platform and overall I believe that the Q1 impact of performance is still under the impacts of the pandemic and we still are facing some restriction and some constrained as a result of the pandemic an hour to beside of the revenue.
Okay.
So it's not long ago, Chihuahua, you charge, a hole that you go longer logical Oh, yeah. They do that you wanted to chat about Washington, I'm choice out there to eat so in Oakland, all the hunger that you've got sort of like intelligent block.
Hint down because I'm sure you saw the 2 million jobs that you go do cause even though.
No.
Could you go out for Yoshi Pio G go I Chico's I see changing that you should show me that I'm supposed to be doing okay.
And before I go about singing the out or giving you a more expectations about our Q2's growth I would like to actually talk about the impact from the pandemic on our Q1's result at first of all I would like to address at the positive impact and so there are several vehicles on our platform that are impacted positively our including the.
Our mindset is online gaming as low as the I T and D C electronics.
So you can take a long food I kind of don't want kind of losing its evenly.
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Adult even though she and they say yes.
Okay. So it seems that you go and you talk with me about how well they thought she said one of the biggest usually get that because I know that you've got you shouldn't do that.
So I think you're going to you so the other domains should become easier okay.
First about the online service segment am I belief that there are several key segment or sub segments that are doing quite well that are actually overall performed quite well for the first quarter. They are the social services chop show that search and recruitment as well as the education and training now for social services because of the Chinese.
New year Festival, we observed some positive changes and growth and for job search and recruitment because March typically is the peak season for dropped equipment and for education and training are because people are beginning to actually educate themselves and are looking to improve their overall vocational skills give.
The weakening macro economy environment and as a result that stimulating Ah that stimulated the growth of our growth in the segment of education and training.
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Okay.
Now for our online gaming segment. It performed also very well because our game manufacturers or the game platforms are willing to put in more advertisement investment or budgets during the Chinese new year at a time point in time and also for our I T until you see electronics a lot of the cell phone manufacturers are gaining more.
Recognition or giving us more recognition for content oriented content based on our marketing solutions and as a result, our C. C. As are we able to grow quite significantly for the segment of I T and Tracy electronics.
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There were also several segments that alright that hasn't been impacted negatively for example are the logistic and supply chain were impacted very significantly because of the pandemic and so as a result, the E Commerce I E. Commerce vertical has experienced negative growth and also in terms of the household personal care as well as the beauty industry.
Their budget has been a shrinking as a result of the pandemic and we believe that the emerging domestic brands are now entering an adjustment period of consumption weakening.
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So what you can call later on this change that we're seeing how food.
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Okay.
And also that was about our Q1 observation and for Q2, we expect to see some negative impact in the following segments, including E. Commerce lifestyle. This is health care household and personal care products as well as auto.
The whole food chain or somebody lateral well, maybe it was I'm not.
Sure Paul Quadriga, I T with empty Yoshi, which L. P Tucson.
And for it when it sees that we believe still have some growth potential for kill too will be I T and piece of electronics online gaming as well as education and training.
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Wondering if you can show you that we deal.
But I'm not sure Columbia with Macquarie.
Okay.
Just to give you more color on the above mentioned for E. Commerce for example, a big E. Commerce players, we're still a very very cautious about their ad dollars.
So if the pandemic because of the constraint in the supply chain as well as the logistics system and so are we we expect to be able to keep maintain some growth, but it should be while we expected to be impacted by the overall industry development.
Mhm, the wholesale country somewhat you can call it a downward change out food to go cyclical new modality.
How many machines out and then are you hedging while you potential adopting easily in Colorado.
We're glad you could continue to go down a chunk that voucher you Cook with it you got to hold on to that it was on that so you Jacob yes, you'll push without a doubt Asia okay.
Yes.
Now another segment that we just mentioned it would be or is expected to be negatively impacted is our offline services such as daily life service as well as health care service because the majority of those basis rely their operation offline and because of the lockdown policy here and because of the pandemic impacts are some of the.
Clients will have to pause their advertisement in our investment and as a result, the overall development or the whole industry going into Q2 is expected to be impacted.
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Oh, okay.
And also for the verticals of our household and personal care and as well as the auto making industry. We believe that they will still be negatively impacted going into Q2 by the pandemic for big companies such as L'oreal Unilever you know they were seriously and significantly impacted by the Shanghai Lockdown policy and as.
As a result, they have reduced their AD budget and for the auto making industry. You know as a result of the postpone of the Beijing Auto show the overall new product launches in this industry, where postponed as well and also nationally their AD budget were reduced or postponed and we would see that 100.
That our price below 150000 are actually were more impacted by the chip supply shortages and as a result, there at dollar will reduce as well and because of the fact that we were not able to actually visit the clients or the customers face to face offline and or on site, we were not able to.
<unk> greatly improved the marketing conversion rate.
Okay.
Do you feel that you're going to you don't you thought you could hear I keep with them are usually little sheep I think the topic now.
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Darla Jakarta, you cope with harmony a shipyard.
We put a bunch of it so it doesn't get us where it takes longer than usual.
Once you do them as they always have done.
Thank you.
And as I mentioned, there are three segments that we believe have a lot of growth potential, including the I T and threes, the electronics online gaming as well as education and training now for I see up for I T. M. D. C. Electronics, we believe that they were able to maintain some sort of growth for the first quarter of the year. So overall the industry is expected to still our main.
Seeing some degree of growth going into Q2, but for a big players because of the constraint in the supply chain shortages. They were not able to really a release about a lot of the products into the market and so there are budget you know naturally was impacted negatively and with this kind of macro environment.
We're actually playing more placing more focus on short term marketing advertisement brought it in a long time and that definitely pose some challenge to our content base kind of a marketing platform and solution, but overall, we believe that the segment of I T. M. Tuesday electronics is going to still be able to maintain some degree of growth.
Now for the segment of online gaming, we now are seeing the recovery of the market as a result of the ending of the licensing fees of new games, but it will still take some time before the matching of the new product launch and the marketing events and so we are expecting to see some growth for this particular segment going into Q2.
And so the third vertical that we mentioned that we will have a lot of growth potential is the still the education and training as I mentioned because of the pandemic because of the weakening of the overall economy people are beginning to trend into two and inwards and focusing on personal growth and so naturally our education and training will received a lot of.
Our growth drivers and they will actually put in more focus on the.
Short term as well as long term marketing effect and belief that we can benefit from the overall development of the industry.
Okay. It doesn't get lost one a woman a security they suddenly they got us in the <unk>.
Would you buy more linearly Kwan golf with Ccs, So Chiara Heidrick way she's hearing you there can be a trigger to go.
We go out and they spoke about computer comes out which you should just because they are familiar with the heidrick way Pacifico tell maybe a quick one there you go.
Goodbye.
And so overall speaking our expectation for Q2 for our advertising and Ccs solutions I will be still quite cautious and research. We believe that they will gain about double digit growth y O Y for the second quarter, especially for our J, plus which will be expected to maintain.
At quite a fast growth momentum.
Okay safe because you don't do anything without even the ones you see here.
Alright, I hope I am I answering your question. Thank you.
Thank you everybody my portion coming from actually Shah with Credit Suisse. Please go ahead.
It's just you're buying a transitional issue at all with how long has also I want to.
So I think the allocation of doing that.
So it will.
How about that.
Uh huh.
That's a long a market check on our latest progress about regionalization How're you doing.
And also what's our plan for second half for the wrap up thank you.
Uh huh.
Uh huh.
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So I don't want to go ships, you know take a tightness, how Nigel who may well, sometimes you go pickle. Fortunately you fulfill the mission critical stipulations all day long.
So is there something else there simply isn't the barbell sort of wall technology.
Technology, so much long ago, she was shown to us all to the deal with Zynga.
So I feel like needed to address.
Your threshold and so of course, she was actually under the assumption Gulf of Bengal Haynesville. There you go so that's not really something below okay.
So thank you for the question actually a video has become an integral part of Zhu whose content ecosystem and our consumption rate amongst the da you for the first quarter of video has already exceeded 45% at this definitely marks a key developmental milestones on our platform because it tells you. It tells us that we.
We have entered a positive cycle of development for all video content.
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Georgetown and sometimes they get triggered it.
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But I'll tell you what does it go.
Yeah.
Okay.
And so for the first quarter under the strategy of ecosystem first we are able to optimize our overall experience of video for the content creators in terms are including for example, optimize the overall optimizing the overall style off the videos as well as encouraging more original content or original high.
Quality videos from our organic content creators and with some simplification of the products, we're able to make the video creation process easier and also more refined as well and going forward. We will continue to integrate and basically integrate the video together with other content formats on our platform.
So that we can continue to empower our content creators.
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Jay I'll take the decision to sell their shipping the Yugo Jewish iguana.
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And took a took a trip to children. She is doing well shipping yourself isn't sufficient.
Okay.
No. That's what I've mentioned is about the content of videos of themselves is mainly about content creation. However on the consumption side. We also have done a lot of adjustment and upgrade as well for example, we've optimized our agri with them in order to better match, our user's preferences and we'd be able to actually make a lots of customization.
Or individualized recommendation. According to different uses preferences and also we categorize different videos in terms of you know by the quality of the videos and we are have been very very strictly in screening out and cracking down some of the low content and at the low quality V. D S as well and as a result, we are able to cultivate.
Healthy sustainable kind of video consumption habit from users that can be very sustainable and that is definitely their preference space as well and right now a lot of all users are already very used to consuming the videos that we recommend to them based on their preferences and over the last period of time, we have also optima.
D V D O tapped as a function of the platform as well and that didn't really harm or compromise our video consumption.
I mean, if I'm gonna do is something that supposed to go.
Dr. Jim Collins has also shown it goes all the way if I may.
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George how are you.
It was a good time she about geology okay.
And so as you can see you know all of video content has become an integral part of our society of all ecosystem and has been promoting the development of our ecosystem and so back to your question regarding the future developmental strategy of our video content I think I can summarize it as two key words, one is vertical development. The other is.
Original creation, which can be actually reflected in our latest launch a newly launch hydrogen plant or high end projects. So going into the second half I think I'm again, I just want to emphasize that Jim who is a motive format platform that definitely can support the development of the video as well as all our original media.
Format, which is tax and images and today as you can notice a lot of our content creators are actually very versatile. So we're not limited by any format off just for example tax or image or a video in general and they can do either one or any one of those and so we actually do not agree with Dakota, what I categorized.
<unk> of our content creators by format itself by media farm itself. We think what we can do going forward is to integrate everything onto the platform and so that we can actually continue to empower our content creation and what we can do as the as the platform is to differentiate different consumption scenario and to better help and empower.
Our content creators using multiple format.
Sure.
It's true to sort of take a second dose at.
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If you have them intelligently.
So both of them.
You've got all the other guys you got to apologize I'm sorry.
I don't know.
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So that's really going to enjoy the jumbo.
Yeah, that's what I was totally undrawn.
I believe in Pennsylvania.
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To.
I've been playing around with sort of two a ton of them just how much of it is what I show up at all.
I mean, that's how you want it to run towards the board Pablo doesn't mean, they don't sell the whole sometimes doesn't get a whole lot full of the house that it shouldn't Jose Goldman's email says until you get materially since I think the official holiday Yugo Geo cool okay.
Now let me just give you more examples to illustrate how video has become an integral part of our platform. For example, we've done a lot of upgrade on our overall content format, including using our live streaming platforms to upgrade the overall user experience and you can see a lot of the original mm mm.
Original our original content creators that mainly focus on text and images creation will also very good at life streaming and doing video live streaming as well and actually as we speak Tonight at 830 P. M. Tonight, we have we actually have an event that's called round table discussion on algae platform and a lot of.
Content creators was so good at the discussions that they not only were able to focus on the topic with a V. D out did the format of video and live streaming but also they were able to do a lot of outputs afterwards in the format of texts and images as well so that they can continue to distill some of the key ideas being discussed during the roundtable.
Kitchen myself, but I'm not sure.
Thank you I Hope I answer your question I Hope I answered your question.
Sir Hugh I don't know.
Question comes from you was wrong with China Renaissance. Please go ahead.
Of course, I'll watch all of them waiting for what's really going to have quite a mature but since I'm in the prepared remarks somebody with should all thank god, you're improving operational efficiency coupled to hotels Sonic children. So they saw their children theres knock on the IPO Schwarzenegger I shouldn't say Youll Oh, my when I was in Macao.
Thanks for taking my question. So I am Quinto remarks, we made sure we wanted to improve operating efficiency. So can you give that but oh shoot areas such optimization.
Whether that's a headcount optimization alternative market expansive.
Optimization.
So we'd think about market trends.
True.
Okay take a range.
Gentlemen.
Latasha.
That's.
That's what I said.
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Telling us or something else, just how much of a meal or something to get home occasions.
So it's a joke somewhat social which is a year, where someone's a whole lot of sense, so that I thought Jay.
Tell me just how that was going on.
Okay.
Thank you for the question now about cost reduction and efficiency improvement I Wonder if you want to understand that the court of doing that or the final goal of doing that is to upgrade our business as well as our management because only by doing that can we achieve a sustainable way of long term cost reduction and efficiency improvement.
Or walking into the league.
So see you everybody leaves when was the when you do bolt had to do.
You don't watch all key issues assembled.
Yes.
Let me give you. An example in terms of our community development for the first quarter and for and going into the second quarter, we have taken three steps.
So some people are just sort of was a joke occidental. This isn't really the superficial shoes so to lose.
Someone else probably little change.
I know a bus fishing here with the troops.
Pacifico technique, especially you could help me out, but if you want to talk to it.
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So you know take Oh.
God take up when I listen to them. When you go to one stop he also holds a gigolo Michelle.
Okay.
So the first step is to really integrate all video together with the community last year. When we first launch I'll be there for them that it was a in a pilot stage of development and that kind of independent closer development. It was very beneficial for the fast quote about video content and right now for the first quarter, we have already achieved a lot of.
Growth for example, the consumption penetration rate of video has exceeded 45% and that shows that video has already become an integral part of our ecosystem and so we believe that going into the second quarter. After here and also the rest of the year and integration of the video content together with the current with the community will be more empowering.
For the for all of the content creators.
Yeah.
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And the second step is definitely built on the development of the first step and so for the second step our goal is to further integrate the whole community are in different aspects of our daily operation and as a result, we believe that we can greatly enhance the communication efficiency for our operational staff as well as other parts of the business.
Including different the communication between different units and we can actually integrate the data between different units in different parts of our business. So that overall the efficiency of operation and communication can be enhanced.
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So as you know so it'll go up because they're going to go to a phone call.
I don't see that swap how can I say something you should take the time to the true so as Omar so it sounds like all the yugo.
Okay.
And the last step is also based on the development of a second step which is the organization on a restructuring of our organization and so for the third step in the last that's our goal is to better construct or reconstruct our working mechanism. So that we can continue to be driven by our data as well as our products in order.
To achieve a better business.
Sure.
The woman shows or the E R.
Just a question a little woman, Russia, especially younger they're doing the high consciousness over there shortly.
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So just to be honest I go on I mean, this is a heightened interest up with something.
Well Unfortunately, one questions on all of them, but then they go into the field.
I am going to do.
So I'm not sure if you heard that it wasn't the ego.
Got you got told you all saw there okay.
And also while implementing this switched after we're able to really review our head count and really streamline some of the head count that were unnecessary to Apis and so compared to the beginning of the year definitely head count that has changed quite significantly and also in terms of the expenses that we have been spending on different.
<unk> stepped up our business in different parts of our business operation and they have undergone a very stringent review as well and as a result, we are able to achieve a lot of structural upgrades in terms of our overall spending.
Let's talk a little was you're not going to get that right.
To.
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Sure.
Jake Oh Green for you, Mike Jacobsen, but too soon.
Why do you have a joshua young of Janssen.
And gentlemen, those all the time.
In fact turbo with anemia, Michel mid single high single digits.
Okay.
And the other teams and other I'm sort of business unit optimization is very very similar to just over a logic. So I'm not going to elaborate on those right. Now. So that's why we are very confident that in the near future. We can you know really upgrade our profitability and so going into the second quarter as well as the <unk>.
Half of the year, we believe that we will continue to monitor very closely our operation in terms of the operational expenses as well as the cost control and so the cost reduction as well as efficiency improvement will remain our work parity for the rest of the for the remainder of the year as well as for the year of 2023.
Sure Yeah, So I would argue with you.
Thank you I Hope I answer your question answer your question.
Mhm.
Ladies and gentlemen.
A question answer session.
At this time I will turn the conference back to him.
Additional or closing remarks.
Thank you once again for joining us today and if you have any further questions. Please feel free to contact our IR team directly or TPG Investor relations. Thank you.
This concludes today's conference call.
All right.
So if inflation you may now disconnect your lines and have a wonderful day.